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CommScope Reports Third Quarter 2023 Results

#financial--CommScope Holding Company, Inc. (NASDAQ: COMM), a global leader in network connectivity solutions, today reported results for the quarter ended September 30, 2023. Summary of Consolidate...

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Third Quarter Highlights

  • Net sales of $1.600 billion
  • Core net sales of $1.350 billion*
  • GAAP net loss of $828.7 million, including asset impairments of $895.1 million
  • Non-GAAP adjusted EBITDA of $248.6 million
  • Core adjusted EBITDA of $245.5 million*
  • Cash flow generated by operations of $138.8 million and non-GAAP adjusted free cash flow of $181.7 million

* References to certain supplementary “Core” financial measures reflect the results of the Connectivity and Cable Solutions (CCS), Networking, Intelligent Cellular and Security Solutions (NICS), Outdoor Wireless Networks (OWN) and Access Network Solutions segments (ANS), in the aggregate. Core financial measures exclude the results and performance of the Home Networks (Home) segment. See the third quarter segment comparison tables below showing the aggregation of the Core financial measures.

CLAREMONT, N.C.: #financial--CommScope Holding Company, Inc. (NASDAQ: COMM), a global leader in network connectivity solutions, today reported results for the quarter ended September 30, 2023.

Summary of Consolidated Results

 

 

 

Q3

 

 

Q3

 

 

% Change

 

 

 

2023

 

 

2022

 

 

YOY

 

 

 

(in millions, except per share amounts)

 

Net sales

 

$

1,599.5

 

 

$

2,381.4

 

 

 

(32.8

)%

Core net sales (1)

 

 

1,350.1

 

 

 

1,990.0

 

 

 

(32.2

)

GAAP net income (loss)

 

 

(828.7

)

 

 

22.9

 

 

 

(3,718.8

)

GAAP net income (loss) per share

 

 

(3.98

)

 

 

0.04

 

 

 

(10,050.0

)

Non-GAAP adjusted EBITDA (2)

 

 

248.6

 

 

 

347.6

 

 

 

(28.5

)

Core adjusted EBITDA (1)

 

 

245.5

 

 

 

352.9

 

 

 

(30.4

)

Non-GAAP adjusted net income per diluted share (2)

 

 

0.13

 

 

 

0.50

 

 

 

(74.0

)

NM – Not meaningful

(1) “Core” financial measures reflect the results of the CCS, NICS, OWN and ANS segments, in the aggregate, and exclude the results of the Home segment. See the third quarter segment comparison tables below showing the aggregation of the Core financial measures.

(2) See “Non-GAAP Financial Measures” and “Reconciliation of GAAP Measures to Non-GAAP Adjusted Measures” below.

“In the third quarter, CommScope net sales declined 33% from the prior year to $1.600 billion and adjusted EBITDA declined 28% to $249 million. As discussed previously, our CCS and OWN businesses have been experiencing lower order rates since the beginning of the year and we have seen no meaningful recovery in the third quarter. In addition to the challenges we have been experiencing in CCS and OWN, we have started to see similar adjustments in ANS. We expect these difficult market conditions to continue over the next few quarters as customers manage inventories and cash. We continue to manage what we can control including costs. We are targeting an additional $100 million cost savings by the end of Q1 2024. Our cost actions this year will better position the Company when demand returns to more normalized levels,” said Chuck Treadway, President and Chief Executive Officer.

“Based on current visibility driven by a weaker demand outlook for the remainder of 2023, we reduced our Core adjusted EBITDA guideposts to a range of $1.00 to $1.05 billion. We continued to de-lever as we repurchased and retired $26 million of our long-term debt for cash consideration of $17 million bringing the total debt repurchases to $111 million since the beginning of the year. We finished the quarter with a net leverage ratio of 6.7x. Liquidity remained strong at more than $1.29 billion including cash at quarter end of $519 million,” said Kyle Lorentzen, Chief Financial Officer.

Impacts of Current Economic Conditions

Macroeconomic factors such as higher interest rates, inflation and concerns about a global economic slow-down have softened demand for CommScope’s products, with certain customers reducing purchases as they right-size their inventories and others pausing capital spending. This has negatively impacted the Company’s net sales in certain segments during the first three quarters of 2023 and may continue to negatively impact net sales during the remainder of 2023 and into the first half of 2024. Conversely, in some of CommScope’s segments, the Company has seen higher demand and favorable pricing impacts that have partially offset the impact of lower demand in its other segments. CommScope is also seeing lower input costs and has proactively implemented cost savings initiatives that have favorably impacted its profitability in 2023.

Third Quarter Results and Comparisons

Net sales in the third quarter of 2023 decreased 32.8% year-over-year to $1.600 billion. Core net sales decreased 32.2% year-over-year due to lower net sales in the CCS, OWN and ANS segments, partially offset by stronger sales in the NICS segment. Net sales decreased across all regions in the third quarter of 2023.

Net loss attributable to common stockholders of $844.2 million, or $(3.98) per share, in the third quarter of 2023, decreased compared to the prior year period's net income attributable to common stockholders of $8.0 million, or $0.04 per share. In the third quarter of 2023, the Company recorded a goodwill impairment charge of $425.9 million related to the ANS reporting unit in the ANS segment and an intangible assets impairment charge of $469.2 million related to the Home segment. Asset impairment charges are not reflected in non-GAAP adjusted results. Non-GAAP adjusted net income for the third quarter of 2023 was $34.0 million, or $0.13 per share, versus $124.6 million, or $0.50 per share, in the third quarter of 2022.

Non-GAAP adjusted EBITDA decreased 28.5% to $248.6 million in the third quarter of 2023 compared to the same period last year. Non-GAAP adjusted EBITDA as a percentage of net sales increased to 15.5% in the third quarter of 2023 compared to 14.6% in the same prior year period. Core segment adjusted EBITDA decreased 30.4% to $245.5 million in the third quarter of 2023 compared to the same prior year period. Core segment adjusted EBITDA as a percentage of net sales increased to 18.2% in the third quarter of 2023 compared to 17.7% in the same prior year period.

Reconciliations of the reported GAAP results to non-GAAP adjusted results are included below.

Third Quarter Comparisons

Sales by Region

 

 

 

 

 

% Change

 

 

Q3 2023

 

 

Q3 2022

 

 

YOY

United States

 

$

957.4

 

 

$

1,495.1

 

 

 

(36.0

)%

Europe, Middle East and Africa

 

 

297.8

 

 

 

396.0

 

 

 

(24.8

)

Asia Pacific

 

 

172.2

 

 

 

210.9

 

 

 

(18.3

)

Caribbean and Latin America

 

 

74.9

 

 

 

148.6

 

 

 

(49.6

)

Canada

 

 

97.2

 

 

 

130.8

 

 

 

(25.7

)

Total net sales

 

$

1,599.5

 

 

$

2,381.4

 

 

 

(32.8

)%

Segment Net Sales

 

 

 

 

 

 

 

 

% Change

 

 

Q3 2023

 

 

Q3 2022

 

 

YOY

CCS

 

$

632.5

 

 

$

1,007.7

 

 

 

(37.2

)%

NICS

 

 

289.0

 

 

 

257.9

 

 

 

12.1

 

OWN

 

 

210.3

 

 

 

382.1

 

 

 

(45.0

)

ANS

 

 

218.3

 

 

 

342.3

 

 

 

(36.2

)

Core net sales

 

 

1,350.1

 

 

 

1,990.0

 

 

 

(32.2

)

Home

 

 

249.4

 

 

 

391.4

 

 

 

(36.3

)

Total net sales

 

$

1,599.5

 

 

$

2,381.4

 

 

 

(32.8

)%

Segment Operating Income (Loss)

 

 

 

 

 

 

 

 

% Change

 

 

Q3 2023

 

 

Q3 2022

 

 

YOY

CCS

 

$

23.6

 

 

$

143.2

 

 

 

(83.5

)%

NICS

 

 

43.9

 

 

 

1.2

 

 

 

3,558.3

 

OWN

 

 

34.0

 

 

 

66.7

 

 

 

(49.0

)

ANS

 

 

(427.1

)

 

 

(15.8

)

 

 

2,603.2

 

Core operating income (loss)

 

 

(325.6

)

 

 

195.3

 

 

 

(266.7

)

Home

 

 

(500.2

)

 

 

(39.7

)

 

 

1,159.9

 

Total operating income (loss)

 

$

(825.8

)

 

$

155.6

 

 

 

(630.7

)%

Segment Adjusted EBITDA (See "Non-GAAP Financial Measures," below)

 

 

 

 

 

 

 

 

% Change

 

 

Q3 2023

 

 

Q3 2022

 

 

YOY

CCS

 

$

78.7

 

 

$

188.2

 

 

 

(58.2

)%

NICS

 

 

63.0

 

 

 

24.7

 

 

 

155.1

 

OWN

 

 

45.3

 

 

 

82.2

 

 

 

(44.9

)

ANS

 

 

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