CommScope Company (COMM) Q1 2025 Earnings Call May 01, 2025 08:30 AM ET Company Participants Massimo Disabato - VP, IRCharles Treadway - President and Chief Executive OfficerKyle Lorentzen - EVP & CFOSamik Chatterjee - Managing DirectorSimon Leopold - Managing Director Conference Call Participants Meta Marshall - AnalystMatt Niknam - AnalystMichael Fisher - Analyst Operator day, ladies and gentlemen, and thank you for standing by. Welcome to the CommScope First Quarter twenty twenty five Earnings Conference ...

Financial Performance - Net sales increased to $1.112 billion, a 23% increase year-over-year[9, 10] - Core adjusted EBITDA improved to $245 million, a 159% increase year-over-year[9, 10] - Adjusted EBITDA margin increased to 22%, a 1,150 bps increase[10] - The company confirms 2025 Core adjusted EBITDA guideposts between $1.0 and $1.05 billion[8] Segment Highlights - Connectivity and Cable Solutions (CCS) net sales increased by 20% year-over-year to $724 million, with adjusted EBITDA increasing by 87%[11] - Networking, Intelligent Cellular and Security Solutions (NICS) net sales increased by 51% year-over-year to $163 million[11] - Access Network Solutions (ANS) net sales increased by 20% year-over-year to $225 million, with adjusted EBITDA increasing by 177%[11] Liquidity and Debt - The company ended the quarter with available liquidity over $856 million[20] - Net leverage was 7.8x as of March 31, 2025[20] - The company paid off 2026 maturities in Q1 2025[20] Cash Flow - GAAP Cash Flow from Operations was $(187) million in Q1 2025[14] - Free Cash Flow was $(202.4) million in Q1 2025[14, 54]

CommScope Company (COMM) Q1 2025 Earnings Call May 01, 2025 08:30 AM ET Speaker0 day, ladies and gentlemen, and thank you for standing by. Welcome to the CommScope First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. As a reminder, this conference call is being recorded. At this time, I would like to turn the conference over to Massimo DeSabato. Sir, please begin. Sp ...

Financial Performance - Net sales for Q1 2025 were $1.11 billion, representing a 23.5% increase year-over-year from $900.9 million in Q1 2024[5] - GAAP income from continuing operations was $289.7 million, compared to a loss of $(242.9) million in the prior year, marking a significant turnaround[11] - Core non-GAAP adjusted EBITDA increased by 159.2% to $245.2 million, with a margin of 22.0% of net sales, up from 10.5% in the prior year[12] - Net income for Q1 2025 was $784.0 million, a significant improvement from a net loss of $333.7 million in Q1 2024[37] - Net income attributable to common stockholders for Q1 2025 was $767.1 million, compared to a loss of $349.7 million in Q1 2024[33] - Earnings per share for Q1 2025 were $3.55, compared to a loss of $1.65 per share in Q1 2024[33] - Gross profit for Q1 2025 was $468.6 million, compared to $295.1 million in Q1 2024, reflecting a significant improvement[33] - Operating income for Q1 2025 was $134.0 million, a turnaround from an operating loss of $54.7 million in Q1 2024[33] Segment Performance - The Connectivity and Cable Solutions (CCS) segment reported net sales of $724.1 million, a 19.7% increase, driven by growth in the Enterprise business[20] - The Networking, Intelligent Cellular and Security Solutions (NICS) segment saw net sales rise by 50.7% to $163.1 million, primarily due to increases in Ruckus and Small Cell[20] - The Access Network Solutions (ANS) segment achieved net sales of $225.0 million, reflecting a 19.7% increase driven by Access Technologies and BNS[20] - The CCS segment reported net sales of $724.1 million in Q1 2025, reflecting a 19.7% increase from $604.7 million in Q1 2024[46] Cash Flow and Liquidity - Free cash flow for Q1 2025 was $(202.4) million, after accounting for $15.5 million in capital expenditures[20] - The company ended the quarter with $493.3 million in cash and cash equivalents and total liquidity of approximately $856.5 million[20] - Cash and cash equivalents decreased to $493.3 million from $564.9 million at the end of 2024[35] - The cash and cash equivalents at the end of Q1 2025 were $493.3 million, down from $663.3 million at the beginning of the period[37] Debt and Assets - Total assets decreased to $7,507.4 million as of March 31, 2025, down from $8,747.5 million at the end of 2024[35] - Long-term debt was reduced to $7,244.7 million as of March 31, 2025, compared to $9,238.4 million at the end of 2024[35] - Long-term debt repayment in Q1 2025 amounted to $2,049.0 million, compared to $8.0 million in Q1 2024[37] Guidance and Outlook - CommScope confirmed its 2025 Core adjusted EBITDA guidance of $1.00 to $1.05 billion, indicating confidence in continued growth[7] - The outlook for adjusted EBITDA in 2025 ranges from $995 million to $1,045 million, showing a positive growth trajectory[59] - Core adjusted EBITDA for 2025 is projected to be between $1,000 million and $1,050 million, excluding certain segments[60] - Operating income for 2025 is expected to be between $624 million and $660 million, indicating a strong operational performance[59] - Total adjustments to operating income for 2025 are estimated to be between $371 million and $385 million, reflecting ongoing restructuring and transformation efforts[59] Restructuring and Risks - The company anticipates additional restructuring activities and costs, which may impact actual results, indicating a proactive approach to managing operational challenges[61] - CommScope continues to face various risks, including dependence on customer capital spending and potential impacts from economic downturns[29] Shareholder Actions - The Board of Directors approved a share repurchase plan authorizing up to $50 million of common stock repurchases[21]

Financial Performance - Net sales for the three months ended March 31, 2025, increased by $211.3 million, or 23.5%, to $1,112.2 million compared to $900.9 million in the prior year period, driven by increased sales volumes and favorable product mix [149]. - Gross profit for the same period rose by $173.5 million, or 58.8%, to $468.6 million, representing 42.1% of net sales, up from 32.8% [151]. - Operating income improved significantly to $134.0 million from a loss of $54.7 million in the prior year, marking a change of $188.7 million [147]. - Non-GAAP adjusted EBITDA increased by $156.2 million, or 185.7%, to $240.3 million compared to $84.1 million in the previous year [147]. - The company experienced a net income of $784.0 million for the three months ended March 31, 2025, compared to a net loss of $(333.7) million in the same period of 2024 [188]. - Non-GAAP adjusted EBITDA for the twelve months ended March 31, 2025, was $700.2 million, reflecting a significant increase from $84.1 million in the prior year [199]. - Income from continuing operations for Q1 2025 was $289.7 million, a significant improvement compared to a loss of $242.9 million in Q1 2024 [199]. Segment Performance - The Connectivity and Cable Solutions (CCS) segment reported a 19.7% increase in net sales to $724.1 million, driven by higher sales volumes in the Enterprise business [170]. - The Networking, Intelligent Cellular and Security Solutions (NICS) segment net sales increased by 50.7% to $163.1 million, primarily due to higher sales volumes of Ruckus products [173]. - The Access Network Solutions (ANS) segment net sales increased by $37.0 million, or 19.7%, to $225.0 million, attributed to higher sales volumes [175]. - The CCS segment reported operating income of $134.8 million, a 122.8% increase from $60.5 million in the prior year [168]. - Adjusted EBITDA for the CCS segment rose by 87.0% to $182.1 million from $97.4 million year-over-year [168]. - The Networking, Intelligent Cellular and Security Solutions Segment reported an adjusted EBITDA of $24.9 million in Q1 2025, recovering from a loss of $16.6 million in Q1 2024 [202]. - The Access Network Solutions Segment achieved an adjusted EBITDA of $38.2 million in Q1 2025, up from $13.8 million in Q1 2024 [203]. Costs and Expenses - Selling, general and administrative (SG&A) expenses increased by $19.1 million, primarily due to higher transaction and integration costs related to ongoing CommScope NEXT initiatives [154]. - Research and development (R&D) expenses remained relatively stable at $83.9 million, reflecting ongoing efforts to meet evolving technological needs [155]. - Interest expense increased by $6.0 million, or 3.6%, to $173.7 million for the three months ended March 31, 2025, primarily due to increased variable interest rates [162]. - The company incurred $11.2 million and $30.6 million in net restructuring costs during the three months ended March 31, 2025, and 2024, respectively, primarily related to the CommScope NEXT initiatives [138]. - The ANS segment operating loss decreased, and adjusted EBITDA increased due to higher sales volumes, with restructuring costs reduced by $20.6 million, amortization expense by $13.0 million, and transaction costs by $3.9 million [176]. Cash Flow and Liquidity - Cash and cash equivalents decreased by $170.0 million, or 25.6%, to $493.3 million as of March 31, 2025, compared to $663.3 million at December 31, 2024 [177]. - For the three months ended March 31, 2025, net cash used in operating activities was $(186.9) million, a 5.2% increase compared to $(177.7) million in the same period of 2024 [187]. - Net cash generated by investing activities was $2,019.0 million for the three months ended March 31, 2025, driven by net proceeds of $2,034.5 million from the sale of the OWN segment and DAS business unit [190]. - The company repurchased $299.0 million of its 2029 Secured Notes and fully repurchased $1,500.0 million of its 2026 Secured Notes during the three months ended March 31, 2025 [191]. - Long-term debt decreased by $1,993.7 million, or 21.6%, to $7,244.7 million as of March 31, 2025, compared to $9,238.4 million at December 31, 2024 [177]. - As of March 31, 2025, working capital was $1,240.3 million, an increase from $1,142.6 million as of December 31, 2024, primarily due to higher accounts receivable and inventory [186]. Strategic Initiatives and Risks - The sale of the Outdoor Wireless Networks segment and the Distributed Antenna Systems business unit was completed for approximately $2.0 billion on January 31, 2025, marking a strategic shift in operations [139]. - The company anticipates continued growth driven by the CommScope NEXT initiatives, focusing on cost-saving measures and operational efficiencies [204]. - The company faces various risks including dependence on customer capital spending and potential impacts from economic downturns and inflation [205]. - The company is facing risks related to customer capital spending, inflation, and competition, which could impact future performance [205]. - The company plans to enhance product innovation and market expansion to retain customers and improve financial performance [206].

Core Viewpoint - CommScope Holding Company, Inc. is set to report its first-quarter 2025 earnings, with revenue and earnings estimates showing a decline in expectations over the past 60 days [1][2]. Earnings Estimates - The Zacks Consensus Estimate for Q1 2025 revenues is $1.11 billion and earnings at 8 cents per share [1]. - Earnings estimates for 2025 have decreased from 89 cents to 87 cents per share, and for 2026 from $1.14 to $1.09 per share [1][2]. - The earnings surprise history shows an average surprise of 73% over the last four quarters, with a notable 350% surprise in the last reported quarter [2]. Earnings Whispers - The current Earnings ESP for CommScope is 0.00%, and it holds a Zacks Rank of 3 (Hold), indicating no prediction for an earnings beat [3]. Factors Influencing Results - CommScope has partnered with the National Content & Technology Cooperative to enhance broadband access in remote areas, which may positively impact revenue [4]. - The launch of the Propel XFrame solution aims to meet the demands of data centers and high-performance computing, likely contributing to incremental revenues [5]. - The divestiture of the Outdoor Wireless Networks and Distributed Antenna Systems businesses has allowed CommScope to focus on core operations and repay outstanding debts [6]. Price Performance - Over the past year, CommScope's stock has increased by 340.7%, significantly outperforming the industry growth of 35.3% and competitors like Bandwidth Inc. and Anterix Inc. [7]. Valuation Metrics - CommScope's shares are trading at a price/sales ratio of 0.17, which is lower than the industry average of 0.52 and the company's historical mean of 0.20, indicating a relatively cheaper valuation [10]. Investment Considerations - The company is focusing on cost-cutting measures and core operations while pursuing inorganic growth to enhance its portfolio [11]. - CommScope is developing solutions for wireline and wireless network convergence, which is crucial for the success of 5G technology [12]. - Despite the attractive valuation metrics, decreasing earnings estimates have led to negative investor sentiment [13].

CommScope Holding Company, Inc. (COMM) and Corning Incorporated (GLW) are major players in the communication infrastructure industry. CommScope is a premier provider of infrastructure solutions, including wireless and fiber optic solutions, for the core, access and edge layers of communication networks. The company has created a niche market for itself, helping customers scale network capacity, delivering better network response time and performance, and simplifying technology migration.Corning’s competitiv ...

Financial Data and Key Metrics Changes - In Q4 2024, CommScope reported core net sales of $1.17 billion, a year-over-year increase of 27%, and core adjusted EBITDA of $240 million, a year-over-year increase of 69% [7][34] - For the full year 2024, core CommScope delivered net sales of $4.21 billion, a decrease of 8% from the prior year, with core adjusted EBITDA of $756 million, flat compared to the prior year [8][31] - The company ended the year exceeding its provided core adjusted EBITDA range of $700 million to $750 million [9] Business Line Data and Key Metrics Changes - The CCS segment saw a revenue growth of 36% in Q4, with adjusted EBITDA increasing by 110% [13][37] - The core NICS segment's revenue was up 13% in Q4, with adjusted EBITDA increasing by 285% [20][41] - ANS segment net sales increased by 12% in Q4, but adjusted EBITDA decreased by 27% due to lower software revenue and unfavorable product mix [43][44] Market Data and Key Metrics Changes - The enterprise fiber business within CCS grew 73% year-over-year, representing 22% of CCS revenue in 2024 [14][39] - The data center market is projected to grow at over 30% annually, driven by demand for AI-focused data centers [15][39] - The company expects strong growth in broadband and structured cabling as customer inventory normalizes [18][19] Company Strategy and Development Direction - CommScope is focused on business growth, free cash flow generation, and deleveraging following the sale of its OWN and DAS businesses [11] - The company is investing in new capacity and product development to meet projected market growth, particularly in the data center segment [16][19] - The strategy includes enhancing market share through new product launches and improved customer support [28][60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in recovery, citing sequential quarterly improvements and positive customer conversations [66][67] - The company anticipates a strong rebound in 2025, with projected core adjusted EBITDA in the range of $1.0 billion to $1.05 billion [10][55] - Management acknowledged challenges in the ANS segment but remains optimistic about upcoming upgrade cycles and product launches [24][45] Other Important Information - The company generated $278 million from cash flow from operations in Q4, with free cash flow of $271 million [47] - CommScope ended the quarter with $663 million in cash and total available liquidity of approximately $1.1 billion [49][50] - The net leverage ratio improved to 7.8x, down from 9.1x in the prior quarter [52] Q&A Session Summary Question: Guidance on core adjusted EBITDA for next year - Management indicated confidence in the recovery, with expectations of over $950 million adjusted EBITDA going forward, driven by data center business and FDX launch [66][67] Question: Market share gains in enterprise fiber business - Management highlighted strong growth in the enterprise fiber business, driven by new products and market demand, with expectations of continued share gains [71][74] Question: Data center business split between hyperscale and traditional enterprise - The data center business is weighted towards hyperscalers, but growth is also coming from other cloud data center customers [82][83] Question: Anticipated rollout of FDX amplifiers - Management expects to ship approximately $300 million worth of FDX amplifiers in 2025, with a significant ramp-up expected in Q2 and Q3 [97][99] Question: Strategic activity post-OWN and DAS sale - Management is focused on running the business and capitalizing on growth opportunities in the data center market and new product launches [103]