Belden Inc. Q1 FY2026 Earnings Call

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

Good morning, everyone, and thank you for joining us for Belden's First Quarter 2026 Earnings Conference Call. With me today are Belden's President and CEO, Ashish Chand; and Executive Vice President and CFO, Jeremy Parks. Ashish will provide an overview of our first quarter results before turning to a discussion on today's announcement that Belden has entered into a definitive agreement to acquire Ruckus Networks from Vistance Networks. Jeremy will discuss the financing aspects of the transaction and our immediate deleveraging plans. We issued press releases related to our earnings and this transaction announcement earlier this morning and have prepared slide decks for both announcements. These materials and a transcript of our prepared remarks are currently available online at investor.belden.com. Please note that the presentation used during today's call is the transaction announcement presentation. The regular earnings presentation is loaded to our website for your reference. Turning to Slide 2. I'd like to remind everyone that today's call will include forward-looking statements, which are subject to risks and uncertainties as detailed in our press releases and most recent Form 10-K. We will also reference certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in the appendix to our presentation and on our website. And now to Ashish.

Thank you, Aaron, and good morning, everyone. This is a significant day for Belden, and we appreciate you joining us. Today, we announced an important step in our solutions journey, an agreement to acquire Ruckus Networks, a market-leading provider of Wi-Fi and enterprise switching solutions. This transaction directly accelerates our evolution into a full-stack IT/OT networking solutions provider. Ruckus brings industry-leading wireless and switching technology that our customers in hospitality, education and health care are actively demanding and that we soon will be empowered to deliver as part of a complete end-to-end networking solution. Equally important, these same capabilities create a compelling opportunity to bring high-performance wireless and switching to our industrial customers who are increasingly looking to converge their IT and OT environments. Together, Belden and Ruckus will offer something no single competitor can match, a complete active and passive networking solution spanning the industrial edge to the enterprise campus. We're excited about what this means for our customers, our partners and our shareholders, and we look forward to sharing more details on the transaction today. Before we do that, let me cover the highlights of our first quarter results on Slide 4. In short, we had a strong start to the year in the first quarter. Our team executed well, and we continue to build on our momentum with healthy year-over-year organic growth in key verticals. For the first quarter, both revenue and adjusted earnings per share exceeded the high end of our guidance range. Revenue totaled $696 million, up 11% compared to the prior year, and adjusted EPS came in at $1.77, also up 11% compared to the prior year, demonstrating the earnings power of our growing solutions portfolio. Revenue for the quarter increased 7% organically year-over-year with growth across all our markets in major regions. The Americas were particularly strong with the U.S. up high single digits year-over-year. Across our market categories, automation delivered solid mid-single-digit organic growth with broad-based gains in key verticals, including discrete and energy. Smart buildings grew double digits organically, propelled by momentum in our priority verticals and accelerating solution adoption. Broadband rounded out the quarter with mid-single-digit organic growth during a seasonally slower period. Our profitability continues to strengthen. Adjusted EBITDA was $118 million, up 14% year-over-year, and adjusted EBITDA margins expanded 40 basis points to 17%, reflecting our growing solutions mix and continued operational leverage across the business. As we discussed last quarter, we continue to pass through copper and tariff-related costs, which modestly diluted our reported margin percentages. Excluding these pass-throughs, adjusted gross margins were flat and adjusted EBITDA margins expanded approximately 100 basis points year-over-year. Incremental EBITDA margins once again aligned with our target range, underscoring the operating leverage in our model. At the same time, we are continuing to invest in the foundation of the business, putting capital into capacity, footprint optimization and our back-end systems to scale solutions delivery and support long-term growth. Turning briefly to guidance. Assuming a continuation of current market conditions, we expect second quarter revenue of $735 million to $750 million, GAAP EPS of $1.53 to $1.63 and adjusted EPS of $1.95 to $2.05. Underlying demand signals remain encouraging, though near-term visibility is limited and the macro environment remains fluid. Our outlook reflects a balanced, measured view consistent with typical seasonal patterns. This guidance is provided on a stand-alone basis and excludes any contribution from the proposed Ruckus acquisition. Taken together, these results reflect the momentum in our solution strategy. Customer demand for integrated IT and OT networking solutions is accelerating, and we are well positioned to capture that opportunity. This was another quarter of consistent execution, reinforcing our confidence in our outlook and long-term strategy. Turning to Slide 5. I want to take a moment to reflect on the journey that has brought us to today's announcement because context here is important. When we began our solutions transformation early in 2020, we made a clear commitment to investors that we would systematically transform Belden from a product-centric company into a solutions-driven provider of integrated networking infrastructure, and we would do it in a measured, disciplined way that created lasting value for our shareholders. The results speak for themselves across four clear objectives. First, we said we would deliver consistent financial results with healthy growth, and we have. Since 2019, we have grown revenue at a 5% CAGR to a record $2.7 billion in 2025. At the same time, we grew adjusted EPS at a 12% CAGR to a record $7.54 in 2025. Second, we said we would advance our solutions offerings to transform the business. Solutions reached 15% of total revenue in 2025, on track to achieve and even exceed our 2028 target, a target that today's announcement accelerates meaningfully. Third, we said we would expand profitability while continuing to invest in growth. Adjusted EBITDA margins continue to expand with incremental margins consistently in the 25% to 30% range, demonstrating the operating leverage embedded in our business model. And fourth, we said we will deploy capital with discipline and purpose. Throughout this journey, we have repurchased over $700 million of outstanding shares while simultaneously executing multiple strategic acquisitions to build out our solutions portfolio. Each of these steps has been deliberate and interconnected. The solutions mix growth drives margin expansion. Margin expansion generates cash flow. The cash flow enables disciplined capital deployment. And finally, capital deployment, including today's announcement, further accelerates the transformation. This is what executing on a multiyear solution strategy looks like. And today's announcement is a logical next step as we look to strengthen our solutions offerings with active products that have a strong market presence in our priority enterprise verticals. Now please turn to Slide 6. Before I walk through the details of the Ruckus transaction, I want to be clear about something important. Our strategy has not changed. What you see on the slide is exactly what we committed to on our last Investor Day, and it is exactly what we are executing against today. Four pillars: growing our portfolio of best-in-class networking and data products, advancing our solutions capabilities, enhancing growth with selective M&A and delivering long-term earnings and free cash flow growth. Each of these is progressing. Our product portfolio continues to strengthen. We are seeing increasing adoption of our integrated offerings and our solutions pipeline is growing as customers look for more comprehensive end-to-end capabilities. Our margin profile remains solid, supported by favorable mix and continued operating leverage even as we invest in innovation and go-to-market capabilities. And on Pillar three, selective M&A. This morning's announcement is a direct and deliberate expression of that commitment. As we've shared previously, our M&A pipeline has been focused on closing key gaps in our technology stack that strengthens our solutions offerings, including wireless capabilities, expanding access to customers pursuing IT/OT convergence and enhancing our software platform. Ruckus advances all three. The Ruckus acquisition is not a departure from our strategy. It is our strategy executed at scale. It fills a critical gap in wireless and enterprise switching capabilities, expands our addressable market and accelerates our ability to deliver the end-to-end IT solutions our customers are asking for. Taken together, these four pillars reinforce that our transformation is on track, our execution is consistent and that we are building a stronger, more durable business. With that foundation in mind, let me now turn to the details of the Ruckus transaction. Now please turn to Slide 8. This morning, we announced that we are acquiring Ruckus Networks from Vistance Networks for approximately $1.85 billion in cash. Simply put, this is a pivotal acquisition for Belden and is a major step towards building the most complete IT/OT networking platform in the market. Ruckus Networks is a market leader in enterprise Wi-Fi and switching with 48,000 customers globally across many of our existing target verticals. Ruckus immediately strengthens our financial profile and puts us on a trajectory to exceed our 2028 solutions mix target. The combination creates a unified platform that is well positioned to take advantage of customer demands as IT and OT continue to converge. Now on to Slide 9. Ruckus is a market leader, and that leadership is what drew us to them. Their technology portfolio is best-in-class, first to market with enterprise Wi-Fi 7, a leading enterprise switching portfolio and unified wired and wireless management offerings. These are not incremental capabilities. They are differentiated and they're exactly what our customers are asking for. Their vertical presence is equally compelling. Hospitality, education, health care, warehousing and manufacturing are also core Belden verticals and align nicely with our existing footprint. Ruckus has deep roots with 48,000 customers globally and strong channel partnerships built over many years. That installed base represents an enormous opportunity for Belden. And the financial profile speaks for itself. $687 million in revenue last year with gross margins above 60%. That is immediately and structurally accretive to Belden's margin profile and earnings power. Finally, Ruckus has a strong experienced team of over 1,700 employees. I've gotten to know their leadership well, and I look forward to combining our teams to deliver an even more compelling offering for our customers. Turning to Slide 10. The most powerful long-term driver of this transaction is IT/OT convergence. Today, customers increasingly operate in environments where enterprise and industrial networks must seamlessly work together, and they are looking for partners who can deliver across both worlds. The combination of Belden and Ruckus positions us to do exactly that, creating value in several important ways. First, Ruckus is a significant growth catalyst that meaningfully expands our addressable market. Their industry-leading Wi-Fi and enterprise switching strengthen our solutions momentum across priority enterprise verticals, including hospitality, education and health care, whilst bringing world-class active networking in markets where Belden already has deep customer relationships and trusted brand presence. Second, it extends Ruckus' high-performance platform into our industrial base where demand for converged IT and OT connectivity, including edge capabilities and the enablement of physical AI at scale is accelerating rapidly. And finally, it creates an immediately compelling financial profile with accretion to gross margins, EBITDA margins and adjusted EPS, a meaningful step-up that advances our progress against our long-term financial framework. Please turn to Slide 11. And I want to spend a moment here because this slide tells you exactly why we believe this is the right transaction. At a high level, the two product portfolios are highly complementary. Where Belden is strong, passive infrastructure, OT wireless and industrial switching, Ruckus has minimal presence. And where Ruckus leads in enterprise wireless and enterprise switching, we have been actively looking for complementary capabilities to round out our portfolio. This is not an overlap story. It is a completion story. Our customers in hospitality, health care and education have been clear about what they need, a single trusted partner capable of delivering both the physical infrastructure and the high-performance wireless and switching layer on top of it. Ruckus gives us exactly that capability. Their Wi-Fi and enterprise switching platform is purpose-built for these high-density mission-critical environments, and it maps directly to the customers we've been working to win. The opportunity runs in both directions. Ruckus' technology can also be extended into our extensive industrial customer base, customers who are actively converging their IT/OT environments and need exactly this kind of high-performance wireless capability. Combined, we deliver a complete higher-value end-to-end active networking solution spanning enterprise campuses, high-density public venues and industrial facilities. Now turning to Slide 12. Why Ruckus and why now? The answer starts with Ruckus itself. As of deliberate investment in sales, technology and go-to-market are now translating into accelerating commercial momentum. Their Wi-Fi leadership positions them at the forefront of a multiyear upgrade cycle across both enterprise and industrial environments. And their AI-driven cloud networking capabilities are increasingly what customers demand. Ruckus is at an inflection point, and we intend to capture it. The strategic fit is equally compelling. Customers today require secure, interoperable solutions that span both IT and OT environments. Together, Belden and Ruckus deliver exactly that, a complete wired, wireless and software networking solution. As the economics are attractive, we are acquiring a high-growth, high-margin asset at a disciplined entry point, and Jeremy will walk through the financial details in a moment. We are excited about the significant growth opportunity this acquisition provides us with and look forward to closing the transaction in the second half of the year. With that, I'll turn it over to Jeremy to provide insight into the financial aspects of the transaction.

Thanks, Ashish. Turning to Slide 14. This is a disciplined and financially compelling transaction. We are acquiring Ruckus for approximately $1.85 billion in cash, representing 13x projected 2026 adjusted EBITDA. This is an attractive entry point given the company's growth profile and margin structure. Ruckus operates with gross margins of approximately 60%, which are significantly higher than Belden's current margins, reflecting their highly differentiated active product portfolio. This provides an immediate uplift to our consolidated margin profile. The transaction accelerates growth, expands margins and is accretive to adjusted EPS immediately following close. We will share additional details on our expectations at a later date. To finance the acquisition, Belden has obtained fully committed debt financing from JPMorgan, which provides flexibility to optimize our permanent capital structure between signing and closing based upon market conditions. This transaction has been approved by both Boards of Directors. And as Ashish mentioned, we expect to close in the second half of 2026, subject to customary closing conditions and regulatory approvals. Finally, I want to be clear about our capital allocation priorities post-close. Deleveraging will be our top priority. We have a clear path to rapid reduction in our leverage, which I will walk through when we get to Slide 16. Turning to Slide 15. The strategic and financial impact of this transaction is significant. And most importantly, it is a leap forward in our solutions transformation. Together, Belden and Ruckus will deliver high-value differentiated solutions that strengthen our existing offerings and meaningfully expand our addressable market. On a 2025 pro forma basis, Ruckus represents approximately 20% of combined revenue and importantly, takes our solutions mix from 15% to over 20% of the business, accelerating our progress against our 2028 solutions mix target. Financially, Ruckus brings a high-quality profile to the combined company with high single-digit revenue growth, gross margins above 60% and EBITDA margins of 20% in the first full year of ownership, each meaningfully above Belden's current profile. As a result, the transaction is expected to be immediately accretive to earnings per share. The combination is a stronger, more differentiated solutions platform that meaningfully strengthens our financial profile. Now let's discuss the financing behind this transaction and our plan to delever with Slide 16. As I mentioned earlier, our debt financing is fully committed by JPMorgan. We have a clear and well-defined path to bringing net leverage to approximately 2.9x by year-end 2027 and back to our long-term target of approximately 1.5x by year-end 2029, as illustrated in the chart at the bottom of the slide. That path starts with a strong cash generation profile. The combined business will have an adjusted EBITDA base of approximately $650 million, complemented by Ruckus' low capital intensity, which maximizes free cash flow conversion. Together, these drive a pro forma unlevered free cash flow base of more than $360 million, providing substantial capacity to pay down debt quickly. As we prioritize delevering, we intend to temporarily pause both share repurchases and strategic M&A until leverage returns closer to our long-term target. Throughout this period, our priorities are clear: disciplined execution of our combined business, continued investment in organic growth and rapid delevering to return to our long-term target capital structure. With that, I'll turn the call back to Ashish for closing remarks.

Thank you, Jeremy. To summarize, we are highly confident in this transaction and the way it accelerates Belden's evolution into a full-stack IT/OT networking solutions provider across our target verticals and industries. We have strong conviction in our capability to successfully integrate Ruckus into our portfolio and believe that this transaction will create lasting value for our shareholders. I would like to thank the leadership teams at Vistance and Ruckus for their partnership throughout this process. Ruckus' people are central to the value of this business, and we are excited about what we can build together. I look forward to welcoming their more than 1,700 talented employees to the Belden family. Before we open the line for Q&A, I want to thank our entire team for their hard work and dedication to improving Belden every day. Today's announcement would not have been possible without their commitment to our solutions transformation and their continued execution at the highest level. Thank you all for joining us today. We appreciate your continued interest in Belden. With that, operator, please open the line for questions.

(Operator provided instructions.) We'll take our first question from Rob Jamieson with Vertical Research Partners.

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

Sure. And you're right, Rob. It certainly accelerates our strategy in terms of the enterprise markets, but I think it's equally compelling on the industrial side or the overall automation side. The way to think about this is that our vision is to provide our customers with the most comprehensive network solutions that can take them all the way from basic digitization all the way to autonomy. It's digitization followed by harmonization, followed by convergence and then you get to autonomy. Convergence actually has a few aspects. There's obviously the IT/OT convergence we talk about, which is the kind of big theme. But within that, there is a wired-wireless convergence and there's also embedded security. Today's announcement really positions us to be a leader in terms of that IT/OT convergence plus the wired-wireless aspect of it. It's a fairly comprehensive solution. I don't think there's really anybody else in the market that has that full stack, the way we do. Obviously, the vertical markets Ruckus focuses on and Belden focuses on are complementary, which makes it more complete. From a customer's perspective, they are really looking for one single — I'm going to say a single pane of glass, but one single system all the way from the industrial edge to their IT data center. That's the opportunity. It's really taking Belden to a different level in those conversations. And finally, it's the simplification. A lot of our customers don't have the expertise to deal with the complexity that comes from more velocity, variety and volume of data across many different parts of the network. Getting it all together makes it simple, reduces total cost of ownership. So multiple reasons why this comprehensive IT/OT strategy will work for us.

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

Yes. So on the first question, Rob, we'd articulated a goal of over 20% by 2028 in terms of solutions mix. We were already — even pre-Ruckus, we were already on track to get there. As you know, we did 15% in 2025. I think in the medium term, it's more the 30-ish percent number that you mentioned. I think that's the right framework to keep in mind. That's what gets us excited about this opportunity. In terms of the software, there are three aspects. First, as you move from traditional Wi-Fi 6 to Wi-Fi 7 and beyond, the technology has to become more deterministic and you need AI optimization to manage complexity. Ruckus is advanced in how they are doing AI-driven optimization for wireless, which we didn't have previously. Second, Ruckus has a single, Horizon-like approach with a software platform that does unified wired and wireless management. This is a great opportunity for us to combine that platform with Belden Horizon eventually. Horizon has certain vertical-specific capabilities; Ruckus is more horizontally simplified. Combined, they can become more powerful. Third, Ruckus has a Network-as-a-Service offering and is more advanced in that area than Belden today. That's also a capability that complements our early-stage efforts in service offerings. So those are the three main software synergies we see.

(Operator provided instructions.) We'll take our next question from William Stein with Truist Securities.

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

Will, we've admired Ruckus for some time. As you know, we've talked about three areas where we need to build capability: edge, wireless and cybersecurity. In that framework, we've always had a well-developed funnel. We've liked Ruckus for quite some time. This did not originate through a bank process. Really, at the right time there was a mutual discussion. I obviously won't go into too much detail on specifics, but we saw the benefits of how this could be a highly complementary acquisition for us. At the same time, the leadership at Vistance realized that Belden would be a good home. That conversation progressed well, matured in a relatively short period of time, and then we started this process. So it was more a mutual understanding of what we could bring to each other rather than a broad auction.

Okay. As a follow-up, I would expect that Ruckus might have been a customer of your passive portfolio, and by extension I would assume Ruckus' competitors are also customers. Is that correct? Does that create some sort of channel conflict with customers who are competitors to Ruckus? Any clarity you can provide on that would help.

No. If you think of Ruckus' core offerings—enterprise switching and wireless systems and the related software—Ruckus is not actually buying much, if anything, from Belden at scale. It's possible that some installers deploying Ruckus products may use Belden passive cabling in specific projects, but that's determined project to project by the systems integrator and installer. So, it is not a structural conflict. Ruckus' competitors don't typically buy significant passive networking from us in a way that creates channel conflict. We sometimes interact in standards bodies and other industry forums, but overall the relationship is pretty clean from that perspective.

(Operator provided instructions.) We'll take our next question from Mark Delaney with Goldman Sachs.

CommScope previously owned Ruckus and CommScope also historically had a presence in markets including structured cabling as well as broadband. I'm hoping to understand if there are synergies available to Belden that weren't there for CommScope, or more broadly, why you think the portfolio will perform better with Belden than it did in the past with CommScope before they sold some of their business lines. I think similar to Slide 11 and some of your prepared comments, but if you could speak more on this topic, it would be helpful. My other question was just on the existing Belden business. You mentioned positive underlying demand signals, but also somewhat limited visibility. I think your guidance is for relatively typical seasonality as you characterized it. Maybe if you could just speak a little bit more on the demand signals you're seeing in the current business and on balance if it's strengthened or weakened over the last 90 days.

Mark, that's an interesting question. I think it has more to do with the maturation of the market and trends that are emerging now, especially around the more complex demands of Wi-Fi 7, Wi-Fi 8 and physical AI. Three to five years ago, different buying processes and less convergence limited synergy potential. Over the last 18 to 24 months, convergence has accelerated as customers demand integrated solutions to support autonomy and advanced applications. Also, Belden invested earlier in solutions selling, so we may be better positioned to benefit from complementarity between passive and active networking than some competitors were. So I would characterize it as more market-driven and timing-based rather than any specific inherent weakness of prior ownership.

Mark, yes. We're forecasting a quarter that looks a lot like Q1, just with typical seasonality. We're a relatively short-cycle business. Generally, trends in each of our businesses have been positive up to this point. Industrial continues to show strength; PMIs are moving in the right direction. Smart buildings has been growing now for the last five quarters organically at a solid pace—it was up double digits year-over-year in the first quarter—and we expect it to have a pretty good second quarter. Broadband should improve as we move through the year. The good news is all three businesses were up at least mid-single digits organically in the first quarter, and I would expect a similar pace in Q2. We're always cautious given macro volatility, but as we sit here today, we feel good about the second quarter.

(Operator provided instructions.) We'll go back to William Stein from Truist Securities.

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

Yes. We see AI data centers as one of our top growth opportunities over the next few years, and it's linked with physical AI. As you get more AI data center capacity, it enables more physical AI in the field. Our AI data center business had good growth this quarter; data centers as a category were up double digits. Customers are asking for converged solutions in AI data centers—they don't want to buy pieces and pull them together. This is one reason we integrated OptiCool into our offering to bring advanced cooling straight to the rack for AI workloads. We're approaching AI data centers with a converged design-and-build approach rather than just supplying passive networks. Apart from the one large win we've previously disclosed, we've had consistent midsized wins every quarter. On physical AI, we enable closed-loop physical AI systems in collaboration with companies like Accenture and NVIDIA and other OT technologies, combining vision, digital twins, real-time orchestration and deterministic, secured networking. We're running a number of pilots in this area now, many in the U.S. focused on reshoring manufacturing. So between physical AI and AI data centers, we expect this to become one of our top growth opportunities.

(Operator provided instructions.) We'll go next back to Mark Delaney with Goldman Sachs.

On Ruckus, are you able to share a bit more on the end market exposure specifically for that business? I imagine a lot of it is enterprise for Belden, but to what extent are they also selling into factories and industrial markets? To what extent is there an opportunity for Belden to accelerate the growth of the Ruckus portfolio into industrial and factory settings?

Mark, from a vertical market standpoint, Ruckus is primarily focused on enterprise segments—hospitality and education are the two biggest verticals, but they sell into many other enterprise verticals as well. They do have some exposure today into industrial markets, primarily automated warehouses and material handling, where we also play, but that's the only significant area of overlap. From our perspective, there's substantial opportunity to bring their products into some of our legacy industrial markets and to combine their products with our passive infrastructure on the enterprise side.

If I can add, the short- to medium-term opportunity we see is in discrete manufacturing. Today, the majority of machine data is transmitted over wireline, not wireless, but that's expected to shift over the next three to five years toward much more wireless use. Many discrete customers are planning for that change and need a blueprint. Right now, they struggle to find a single company that can provide that comprehensive blueprint. That's an opportunity where Ruckus' wireless capabilities combined with Belden's expertise can be very powerful.

Helpful. And then just circling back to the existing Belden business. Maybe you can clarify how much revenue exposure you think Belden has via distribution or network to the Middle East and if that's something you factored into your outlook. Given the uncertainty there, was that part of the thought process with guidance? If you could be a bit more specific around your exposure and what's included in guidance relative to that region? And then lastly on supply chain, it's been difficult globally to manage components, especially certain semiconductors and memory. Can you speak to Belden's ability to get materials to support the business and your confidence in passing on higher costs and sustaining margin objectives?

Mark, our Middle East exposure is relatively small—less than 5% of total revenue. It's primarily on the enterprise side, smart buildings, selling into the UAE and a few other countries. We have that business roughly flat sequentially in our guidance, so we don't view it as a significant risk for Q2 given the size. On supply chain, we've generally been able to pass through true market inflation. Our main exposures are commodities—metals, plastics and oil-based compounds—and we do have some electronic component exposure. We've been successful in passing cost increases through pricing over the past several years and expect to continue to do so. The legacy Belden business hasn't had major exposure to recent memory price moves, so it hasn't been a major issue for us to date.

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

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