Q1 2021 CommScope Holding Company Inc Earnings Call

May 6, 2021

[music].

Yeah.

Good day, Thank you for standing by welcome to the Commscope first quarter 2021 results call.

At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

Ask a question during the session you May press star one on your telephone keypad.

If you require any price for assistance. Please press star Zero I would now like to turn today's call over to Russell Johnson, Vice President Treasurer Investor Relations. Please go ahead Sir.

Good morning, and thank you for joining us today to discuss the Commscope first quarter of 2021 results with me on today's call are Chuck Treadway, President and CEO, Alex Pease Executive Vice President and CFO, Morgan Kurk Executive Vice President and CTO and segment leader for broadband.

Networks, and Budweiser <unk> chairman of the board you.

One is already shaping up to be a very exciting year progress of Commscope.

We're putting in place of broad transformational agenda and are beginning to feel the impact of these efforts on our results.

This morning, we released our results for the first quarter of 2021 and I am pleased to report that are consolidated business showed strong performance led by sustained momentum and our broadband network segment.

And our core business segments that will remain after the separation of home networks business sales were up of 11% year over year and adjusted EBITDA was up 25%.

And just one month ago, we announced too critical components of our Commscope next initiative.

That we intend to spend off our home networks business into an independent publicly traded company.

And second that we've had that we've taken the initial steps to optimize our company's cost profile and free up resources to reinvest in growth.

Today, I will provide you with more insights into our broader plans for transforming commscope until the growth oriented profitable technology leader and I hope that you will share our excitement about the company's future.

The first I would like to provide more detail on our first quarter results.

I am now turning the slide three.

On the consolidated basis during the first quarter of 2021 revenue grew on those 2% year over year, and we achieved adjusted EBITDA of $290 million, a 25% increase over the first quarter last year.

And the Corps post spinoff business segments of Commscope, namely broadband networks outdoor wireless networks and venue on campus networks are broadband segments stood out with very impressive revenue and profit performance during the quarter up.

Of 29% of 93% respectively.

The broadband segment has benefited from a number of of industry trends such as the continued notes splitting activity of cable operators to relief uplink pressure on their networks and.

And the accelerating trend of fiber deeper.

That we see in service provider network upgrades and government spending on rural broadband.

In addition, the segment has been investing for future growth.

We are developing cutting edge of technologies, such as remote Mac phy and advanced optical networking as well as making significant fiber cable and connectivity capacity investments that will benefit commscope per year to come.

And our outdoor wireless segment as we expected the first quarter got up to the slower start, especially with compared to the strong first half of 2020.

By way of reminder, several north American operators invested heavily in the most recent C band auction and are actively planning their investments and deployment strategies for this newly acquired by the spectrum.

While this <unk> transition has resulted in lower current spending by these operators as compared to last year.

Demand for the key macro components.

The unit during the first quarter.

Additional tailwind include continued strong pipeline of Hyperscale datacenter projects.

As well as sustained interest among venue operators of airports casinos and hotels and upgrading their in building and venue license and unlicensed coverage through our next generation are a dash platform, one cell and ruckus product portfolios.

Finally, an update on our home networks business.

We're running on the scheduled towards the target date of completing the spin off by the end of Q1 2022.

With the team, making excellent progress on the work required to cleanly separate this business from our core businesses.

Against the backdrop of that work and despite healthy demand for my home network products during the quarter our ability to supply in recent recent months has been severely constrained by the semiconductor chip shortages that of made global headlines this year.

While it is difficult to forecast when the supply constraints will be resolved. This is of transitory issue.

Because demand during the quarter exceeded our ability to ship products home network products and of the first quarter with more than $1 billion backlog.

Which is more than twice our average in 2020.

We also secured kiosk key customer wins and DOCSIS three one gateways eyepiece Dreamers and international video set top boxes and of made significant progress on our Wi Fi six E on and low latency technology development.

Despite the transitory supply challenges the significant size of the home networks backlog combined with the proactive cost management steps, we have taken in the segment bode well for the future profitability performance of the home networks.

Segment once silicon supply of normalizes.

Before I finished my remarks on the quarter I would also note the commscope like many of the global companies as begun experiencing significant price increases across the variety of inputs and components, including copper steel, rather and sprays and semiconductor chips.

I want the emphasized that as the company will be working hard to utilize all available levers to offset the impact of these inflationary forces on our business.

Now turning the slide four.

I'd like to shift gears and provide you with some additional context around where we are and where we're heading with our Commscope next initiative.

As I've communicated before Commscope next is about three vectors of performance improvement.

Growth cost efficiency and portfolio optimization.

I want to emphasize of these three vectors are not separate efforts, but are interrelated and mutually reinforcing.

As we repositioned the company to fully realize the growth potential inherent in our core markets. We're looking for opportunities to invest in both underpenetrated regions and customers as well as high potential vertical markets and technologies.

Doing this investment will be a portion of the resources, we liberate by streamlining inefficient processes cutting unproductive spending eliminating redundant processes and realizing manufacturing efficiencies.

As the team we are aligned around the set of near an intermediate term priorities and we're already beginning to see some early progress, which I will describe later.

As we get the flywheel emotion the drive EBITDA improvement, we will continue to reinvest ultimately driving the shareholders returns that are more in line with our true potential.

Now turning to slide five.

I'll share some details about actions, we're taking the free of growth capital true cost efficiency.

After taking the cost of actions that we communicated to you in April we are now of course to widen the atmosphere to include areas such as procurement and operations.

The focus on just one example.

That of indirect procurement Commscope annual spend in this area is approximately $1.2 billion more than half of which is discretionary but we are not enjoying the full benefits that can accrue to a large scale focus purchaser as evidenced by the fact of 20% of our indirect spend it's inefficiently dispersed across more than 13.

Vendors.

We are undertaking of multifaceted effort to attack this opportunity and one facet that we kicked office just yesterday as a pilot approach is the new pilot program of cost control towers at our Claremont and Kitab of North Carolina manufacturing facilities.

Cost control towers are of proven method for empowering employees with an owner's mindset. So rigorously challenge every dollar in the budget.

Once proven out the Claremont and could tablets.

We will implement this program broadly to reduce non critical spending on a company wide basis.

In addition to our efforts around cost we've recently kicked off the first phase of Commscope next growth agenda.

Critics applications, the developed tailored and vertical market solutions.

Sales teams to offer to their customers.

These are just some of the ways in which Commscope next will drive a new level of efficiency and growth and growth for our company.

Taken together, we expect these actions to deliver an annual run rate of at least $500 million and adjusted EBITDA improvement within the next three years.

Split roughly equally between incremental growth and cost efficiency.

As the plant against the crystallized and results materialized through our financial performance in future quarters, we will share the success stories with you.

In addition at our planned Investor Day later this year, we will be prepared to lay out more detail regarding our expectations about the timing results being reflected in our financial performance as well as our timeline for getting leverage much closer to our long term target.

Although we are just getting started on this multiyear journey and we still have much hard work ahead of us our views around the potential benefits that we can drive through Commscope next are starting to take shape.

With the clear and ambitious roadmap laid out our entire team is energized by the opportunities in front of us now.

Now I'd like to turn the call over to Alex to provide further details on our first quarter results Alex.

Thanks, Chuck and good morning, everyone on.

I'll start with a review of our consolidated financial results for the quarter on slide seven during.

During the first quarter net sales increased 2% to 2.07 billion led by another quarter of impressive performance from our broadband network segment.

Orders for the quarter were very strong at $2 83 billion, yielding a book to bill ratio of 137, which represents a significant increase over the Q1 2020 ratio and demonstrates the robust demand we are seeing in many parts of our business.

While the high backlog gives us confidence about our revenue prospects throughout the balance of 2021 I would caution everyone that we are experiencing many of the same supply constraints as other technology and manufacturing company.

We're also seeing relatively sharp increases for a range of important inputs and components, including copper steel and resins semiconductor chips and freight.

That said, we're working very hard every day to source the inputs and components that we need to meet both rising demand and our customers' expectations. We're also committed to using all available levers to offset as much of the inflationary impact of possible in order to maintain strong margin performance.

Adjusted EBITDA of $290 million increased 25%.

Adjusted EBITDA margins of 14% improved 260 basis points and adjusted EPS of <unk> 36 per share increased 200%. This.

The significant improvement in profitability was driven largely by of volume increase at broadband networks, but also by continued cost actions designed to preserve profit margins on our home network segment.

As you know.

Earlier this month, we announced our intent to spin off of our home networks business by the end of Q1 2022. Once the spin has been executed Commscope remain co will consist of three core business segments broadband networks outdoor wireless networks and venue and campus networks.

In light of the spin off announcement I would also like to provide you with additional perspective of how these three core business segments performed during the first quarter on a consolidated basis and ex home networks.

Core Commscope net sales increased 11% during the quarter to $1 five 8 billion.

Core adjusted EBITDA increased 25% to $273 million and adjusted EBITDA margin of 17, 3% improved 200 basis points from the prior year.

Orders for core Commscope were also strong totaling $1 $88 billion and yielding a book to bill of 118.

It's extremely strong performance in our core remain co business clearly shows the potential of the spin off to drive the new level of shareholder value of Commscope. It also underscores the post spin Commscope will consist of a cohesive and well integrated set of businesses with magnified exposure to powerful technology trends such as five G broadband architecture evolution.

Wi Fi six in fixed fee indoor LTE coverage in private networks.

Turning to slide eight I'll move to our segment highlights.

Beginning with our broadband network segment net.

Net sales of $791 million grew 29%, primarily driven by the strength in North America in all international regions, except for Europe.

Within the segment, our network cabling and connectivity business saw significant increased demand for fiber cable and closures and our access technology business also experienced strong sales of optical node and head end optics adjust.

Adjusted EBITDA of $179 million grew 93% over the prior period, driven primarily by the significant increase in sales volume.

Based on the quarter's results as well as our forward looking view, we continue to see very favorable momentum for the major product lines within our broadband network segment.

With five G fast, becoming a reality service providers are investing to drive fiber deeper into their networks not only to serve today's burgeoning customer demand for speed and capacity, but also to prepare for the next wave of NSO and telco competition for existing and new home subscribers.

Likewise, we're benefiting from multiyear government backed programs to bridge the digital divide such as the rural digital opportunity fund and we are closely tracking the discussions within the by the administration to allocate additional stimulus funding for expanded broadband access.

In addition, our cable operator customers are contending with shifting consumer usage patterns that have generated unprecedented pressure on the upstream portions of the hybrid fiber coaxial networks.

During the quarter operators worked to relieve the pressure through continued node splitting activity and upgrades to head and the optics.

We believe that our new network upgrades in the DOCSIS network inclusive of the A&P and tap amps and taps.

Which will also drive business in the future and our video systems business benefited from yet another five <unk> related tailwind during the first quarter as we scored significant new project wins for C band spectrum reclamation.

To take advantage of the favorable demand environment.

We have been actively investing in our broadband network of seven and we will continue to do so through the balance of this year and into next we will bring be bringing on new production lines for fiber cabling and connector products with the anticipated payback on some of these investments being a shortage of six to nine months, our broadband segment is experiencing periodic tight.

Supply of certain inputs components and raw materials, but Fortunately this segment has less natural exposure to the most highly challenged supply chain such as that for semiconductor chips and to date, we have managed the periodic supply of stress is relatively well.

Turning to slide nine for our venue and campus networks segment.

Net sales of $470 million were essentially flat from the prior period.

As declines in North America were offset by growth in nearly all of our international markets.

Within the segment strong growth within Ruckus was offset by moderate declines from the remaining product lines.

Adjusted EBITDA of $20 million declined 47%, primarily due to unfavorable mix and the impact of input cost inflation, mainly copper.

While we have been able to pass the significant amount of copper price increases through the enterprise customers. There's some degree of lag in this process that is unavoidable nonetheless.

Nonetheless, we expect these inflationary impacts to be more normalized in future quarters.

While our venue and campus segment came under pressure during 2020 due to COVID-19 impact on commercial real estate during the first quarter. The situation improved as developers resumed construction activity on many suspended projects.

While this trend is encouraging and it helped our venue and campus segment ended the first quarter with substantial backlog. There is still significant uncertainty on the scope and timing of the full recovery and Newbuild real estate activity.

Our Ruckus business also benefited during the quarter from continued strong federal spending on E rate in health care programs to bring broadband services and networking equipment to schools and medical facilities, our AI cloud and analytics offerings are also gaining traction with enterprise customers and we expect continued momentum in the ruckus businesses of COVID-19 vaccination rates.

The increase and as enterprise clients begin to bring employees back to their offices.

During the first quarter, our das and small cell business declined and our Hyperscale fiber business was modestly weaker year over year as both of these business lines faced the tough comparison against the first quarter of last year, when some larger venue upgrade and data center projects were underway.

Both of these business lines can experience some quarter to quarter Lumpiness driven by major product project timing. However, we are continuing to see a strong pipeline of new venues and data center projects coming up for bid, which gives us confidence for the remainder of 2021 and beyond.

We continue to see our era das one cell and Wi Fi portfolios as critical components of future enterprise and carrier networks as five day spectrum utilization increases and the need for integrated indoor coverage solutions growth.

Turning to slide 10 for our outdoor wireless networks segment.

Net sales of $323 million declined 8%, driven primarily by North America, and the Middle East and Africa, partially offset by growth in all other international regions.

Within the segment sales declined in both our macro tower of Metro layer solutions.

The softness was expected and largely timing driven as our outdoor wireless sales were more first half weighted in 2020, which should be more second half weighted during 2021 due to the expected ramp of five G macro tower spending later this year.

Adjusted EBITDA of $74 million declined, 17%, primarily driven by lower volumes.

During the first quarter Commscope saw continued strength in five day related orders from T. Mobile as this important customer continues to move aggressively to deploy at 600 megahertz and two five gigahertz spectrum.

We anticipate C band related <unk> spending on Commscope products by other major North American carriers to accelerate later this year and thereafter, however in the shorter term, we're seeing lower spending levels from these carriers than we experienced during the first half of 2020.

As the race to <unk> progresses, Commscope offers a broad portfolio of solutions products and solutions that carriers will need to support comprehensive upgrades to the macro tower infrastructure.

So carriers recognize commscope is a leading provider of everything on the macro tower accept radios. This does not include only base station antennas supporting <unk> frequencies, but also a wide range of complementary products and solutions that will be critical to operators as they manage the added complexity of <unk> tower configurations.

These solutions include Healy ex coaxial and fiber cabling power shift of power management cabinets, and steel reinforcements, which together with our passive and active antenna solutions provide a complete toolkit for <unk> tower upgrades.

Commscope also continues to innovate around <unk> use cases as demonstrated by our integrated active passive antenna solution in partnership with Nokia. We now have over a dozen trials of this product ongoing with the European Middle Eastern and Latin American customers and we anticipate that this hybrid solution will gain interest among U S carriers as the unique.

<unk> and cost efficient tool for managing the <unk> to <unk> transition.

I would add net after several quarters of softness our metro cell business is starting to pick up as municipalities begin to clear some of the COVID-19 related backlog of zoning and permitting applications for the metro layer of Densification projects that will also be required to provide seamless <unk> connectivity.

Turning to slide 11 for our home network segment.

Net sales of $489 million declined 19% and across most regions.

Quite healthy demand for both video and broadband gateway products during the quarter. The home networks revenue decline was driven almost exclusively by an acute shortage of semiconductor chips.

Adjusted EBITDA of $16 million of increased 38% from the prior year. Despite this top line decline.

This improvement in profitability was primarily driven by the significant cost optimization actions taken over the past 18 months to better align the segments cost structure to its recent revenue performance.

The combination of strong demand and constrained ability to ship products led to a sharp growth in backlog during the quarter, which has driven risen to more than two times historical averages the highest level since we acquired the business in 2019, we.

We believe that the supply chain difficulties are transitory and that we will eventually convert this backlog into sales. However, our current view is that we may not see of returned to a fully normalized silicon supply environment until early 2022.

Given the we've been very proactive in taking costs out of the home networks business. We're confident that the segment will show improved financial results once the silicon shortage subsides.

Within the video business unit home networks continued to score wins with new and innovative IP. Each team of products. This is particularly true in the international markets, where we've had success during the first quarter with new orders for streaming devices in Europe and zapper boxes.

In the age of Asia Pacific region, as well as traditional set top wins in key eastern European countries.

For the broadband Gateway business home continues to build on multiple DOCSIS three one gateway wins in the highly strategic Latin American market and is also gaining traction for the XD seven platform with North American syndication players.

Turning to slide 12 for an update on our cash flow.

For the first quarter cash flow from operations was a use of $124 million and adjusted free cash flow was the use of $135 million.

As a reminder of the first quarter is typically our weakest cash flow performance quarter due to multiple seasonal factors.

Comparing to the prior year cash flow was impacted most notably by higher annual bonus payout for Commscope employees as well as increased tax and interest payments during the first quarter of 2021.

Working capital was the net use of cash of approximately $123 million during the quarter, primarily driven by increased accounts receivable and inventory.

However for the full year, we expect net working capital the capital to be a source of cash for the company as the first quarter's AR and inventory build converts to cash and as we continue to find additional efficiencies within inventory and extend the vendor payment terms.

Turning to slide 13 for an overview of our liquidity and capital structure.

During the first quarter on cash and liquidity remains strong as it had been throughout the year.

We ended the quarter with $326 million in cash and no outstanding draws under our ABL, our total available liquidity for the quarter was over $1 billion.

Given that the first quarter is seasonally our weakest cash flow quarter of the year, we did not repay any debt during the quarter beyond the $8 million of required term loan amortization.

With the year over year growth in first quarter adjusted EBITDA.

The company ended the first quarter with the net leverage of six seven times, a significant improvement from the seven one times at the end of the year note that of partial driver of this leverage improvement was our inclusion in pro forma adjusted EBITDA of significant additional projected cost savings related to our Commscope next cost efficiency initiatives.

Inclusion of these cost savings, reflecting cost cost actions already taken as well as specific planned future actions is also in line with our loan compliance reporting practices.

We remain committed to our longer term goal of significantly reducing leverage and expect to provide additional insight into our path and timetable towards this goal as we further refine our commscope next strategy around cost efficiency and growth.

Finishing up on slide 11 for an update on 2021 demand trends on our end markets.

Per our broadband network segment, the trends of operators driving fiber and fiber cable and connectivity deeper into their networks is showing considerable staying power for the balance of 2021 and beyond and addressing pressure on uplink capacity and downlink throughput through node splits and the access layer continues to be critical in network performance.

Because of the customer demand in our converged network solutions unit is holding steady and we're seeing continued opportunities for our video systems business portion in areas such as the reclamation of C band spectrum and AD insertion.

Expanding our capacity to produce fiber optic cable and fiber connectivity remains of top priority for us.

And we are committed to directing additional capital investments were necessary to meet the high and growing demand.

And as previously mentioned, we expect our broadband segment to benefit significantly from stimulus spending under the rural digital opportunity fund in the second half of this year.

Within our outdoor wireless segment, we maintain our expectation that the release of new mid band spectrum through the C band auction will drive significant five day spending by the major U S. Telco carriers, the upgrade thousands of macro cell towers across the U S.

We expect continued good business with T mobile spending for five day deployments and we believe that <unk> build outs by other major U S carriers will expand from an initial focus on OEM radios and active antennas to a more balanced procurement strategy, including pass of antennas on ancillary power equipment.

Areas of strength for Commscope all of the starting later in 2021.

Meanwhile, our funnel of international opportunities, particularly for our integrated active and passive antenna solutions in collaboration with Nokia is showing considerable promise and will be a significant focus as we rollout the international growth component of Commscope next.

Our venue and campus business is showing encouraging signs of returning to growth and generating meaningful profit as commercial real estate developers regain confidence and as structured cabling market stabilize from last year's steep declines.

The constraints to have of material impact on home networks revenues throughout the about throughout 2021 and potentially end of 2022.

As we work through these transitory supply chain issues, our goal will be to continue to optimize the cost profile of the home business as well as to move forward rapidly with our plan to spinoff home networks into a standalone publicly traded technology leader.

Before turning the call over for Q&A I, just want the Echo chucks earlier comments about the longer term potential of Commscope next is.

It is the goal of Commscope next to transform our company into a higher growth and more profitable enterprise with the tightly focused technology portfolio.

We're energized by our vision of adding at least $500 million of the annual run rate adjusted EBITDA from cost efficiency and growth and we believe that our employees and our shareholders should be as well while.

While the hard work of this goal is just beginning you should know that we of the management team have no greater priority than being successful on this operation.

And with that we'll open the line for Q&A operator.

At the time, if you'd like to ask a question.

On one side telephone keypad.

Again, if you'd like to asking audio question on one.

The policy just a moment took a part of the Q&A last year.

Yes. My question comes from the line of meat of Marcia with the Morgan Stanley.

<unk>.

Great. Thanks, and congrats on the corner Uhm I guess, a couple of questions for me.

You know can you give us sent on the supply chain shortages your scene and just whether it's giving you more visibility from customers for the year and just how that frames kind of of your outlook for how the ear develops and then just maybe more context on the ability to pass some of the cost increases that you're seeing on the customers does it kind of <unk>.

Very meaningful a by product just any contact the that would be helpful. Thanks.

Okay in terms of the supply chain shortages the <unk> the <unk>.

When we were experienced in the in the home business with our silicone of products and we actually have to.

Work with our customers there and obviously, there's there's allocations and there's opportunities expedite and we're working with our customers to help pay per that and we're we're communicating directly with them on those types of of opportunities.

To make sure we get the supply there uhm, if you think about the other businesses.

It's kind of the start start and stop I mean, we think we seem to have a problem in the on the day and we'd get it resolved in the next day.

We were able to work on it was pretty well we have a pretty large supply bass, we are seeing some inflationary effects.

The price increases the day would be interesting to kind of see what that inflation. The component is the translating into in terms of the EBITDA of the business.

Yeah.

It really depends on what all of it here on you're looking at.

In the semiconductor space, it's sort of in the mid single digits.

In terms of percent.

Right is probably quite a bit higher than that.

Ocean freight it.

Close to 70%.

Inflation, airfreight, a little bit less than sort of the 14 per cent zone.

Copper, obviously seen substantial increases in and copper prices.

Which you can tell if you just look at the the.

The <unk> index Similarly, with steel so it really depends I think one of the things that.

Is important to consider is that a.

The number of of our products have a fairly while the commodity input is important it's a lower percentage of the overall value out of the of the.

So it's not wouldn't be fair to say that.

The price of our product is going to increase directly in line with the price of whatever the underlying commodity is and that's really the negotiation that Morgan was talking about is helping our customers.

Understand what these inflationary effects are working with them to mitigate those through a combination of.

Road activity actions and pricing and preserving our margins. So that's sort of how we're how we're managing the profitability texture.

Got it okay, but I assume when you roll it up there is a negative net impact on EBITDA is that fair to say.

We're we're going on these impacts Georgia impacting every single player not only in the technology space, but in the broader manufacturing space and.

Both of our competitors know that as well as our.

As well as our customers and I think we have every expectation that we'll be able to offset the pressure.

Great. Thank you very much.

Your next question and answer any line of jet Cabal well.

Good morning, and thanks for taking the question I would like to delve into the the.

The U conn stripes around the cost reduction plans and the EBITDA growth what kind of.

I'm wondering if you can help us screen.

There you are measuring that $500 million from.

Over how long should we should we get it or what.

And what stages, you'll be get it.

And are we going to see all of it or should we expect to be on your.

Invest some of that 500 million and so the.

Overall, even though isn't gonna be part of it even higher by the end of the three years, but okay.

Some of the less.

Sure just saw of let me, let me check it off and then on.

Others on the team may want to pile and sort of start with.

Commscope next is $500 million, what we've said because of at least $500 million of the EBITDA improvement.

50 per cent of that coming from growth 50 per cent of that coming from costs. So.

To the extent, we have greater cost savings and that $250 million, we may choose to reinvest those and incremental growth through we may choose to to bring those to the bottom line. The those decisions haven't been made but we are committing to $250 million on cost related EBITDA, unproven and $250 million and growth related EBITDA on.

<unk>.

The savings or net of of headwinds so the way to think about modeling. It is if you take our our TTM.

Our TTM EBITDA you back out of the.

The the impact of.

The home networks actions that we've taken.

AG of 500 million on top of that that gets you to a new run right and then over and above that we do expect some cyclical recovery and the market. So this is these are actions that we take above and beyond just normal market recovery. The hopefully that gets hit you on EBITDA number and then in terms of timing.

What we've said is this is the three year of three year aspiration and obviously the the cost of actions. We started in April. So those are already in flight, there's more actions the Chuck referred to around procurement on both on the indirect side of the direct site, there's actions being taken on many.

The facts on efficiency and then the investments that we're making in growth both of the new markets and in vehicles will will likely be farther out in that three year time horizon. So.

Maybe I'll I'll pass on the fifth Chuck would like to add anything on top of that and ask you of that answered your question.

I think he said everything.

Let me follow up briefly just to say do you have a sense of.

What your one of your two might look like like the.

Of the cost reductions might be heavily weighted to the front end of your timeline for example.

We have not we have not provided and we're not undertaking to provide that level of detail of at this point I think it's reasonable to expect when we get.

When we get to our Investor day at the end of the year that will give you some indication on on kind of the velocity of how that's that's materializes in the P&L, but we're not we're not at that level of right now.

Thank you all.

I'm, sorry can come though.

It's okay, operator, I thought Jeff had a follow up question I didn't care.

The next question is from some meat channel D. J P. Morgan.

Hi, This is Joe Crinose on for Sonic.

The the decline in mentioned so our metro on the macro some solutions, which is not much of it doesn't give much surprise given the reasons you highlighted however accused of here. If you can provide the additional color around the how that opportunity and wireless plays out in the second half of the year and what your large customers of communicated to you and.

Terms of the deployments there. Thank you.

Yeah, So I'll, let the Morgan pile on.

Of what we said we said this last at the end of last year is.

The or two north American operators in particular, that's been.

Heavily on Subban spectrum, we we anticipated that and it actually exceeded our expectations. There is a natural pause.

Right now as those operators basically are developing their strategies for how to light up that spectrum and again, we we fully expected that that's what they communicated to us and the.

In fact, what we're seeing we expect that they're spending will ramp and in fact, we're seeing a lot of their.

Orders coming in now already on the second quarter. So that spending is ramping just just as anticipated and we do expect the stronger second half or outgrow. It wireless then then we saw on the first half the.

The couple of other points that I would make the first is one of the reasons that the year over year comp is difficult is because we saw exactly the opposite trend in 2020, where the the operator spending was actually a very front end weighted because they were trying to get their investments behind them to focus on C band So.

You are lapping of tougher comp of 2020, and then the last point I would make last two points. The the one is on the margin. The reason the margin picture of it looks the way. It does is because of the North America mix of.

Some of the rest of the world, where we actually did see growth and.

And then finally I think it's really important for those on the call the understand within the outdoor wireless networks is much more than just base station antennas. So as as the spectrum gets deployed there is need for new power solutions. There is need for reinforcing the the infrastructure with steel there's need for new cabinet solutions all of that.

Is products that we provide in the space.

So I'll just add on to.

Alex's comments, so we do have a E BTR strategy everything, but the radio the met applies between the two five year as well as the did the <unk>.

In the rest of the world. The Midband spectrum has been available for a longer period of time. So the the various startups of of spectrum usage dense urban area of coverage and then moving out of toward toward less dense areas has occurred. So we have a pretty good roadmap of what's going to happen in the United States and we're very comfortable.

With the product portfolios, we have on of going forward basis that we will be able to take advantage of about both by integrating the active antennas, where they are being used with pops of independence in an effort to improve the.

Ability of putting things on powers reduce weight look weak wind loading et cetera.

As well as for for the non active on tunnels, which we expect will be a significant portion of of the market.

So from our perspective this was going along.

According to plan in terms of the mattress so market specifically.

That was caused the.

There was a.

A decrease in in the new site builds last year do the permanent and other events and we expect that that to show the mitigate as the years go go on and we will we will continue to take advantage of that market as well.

Got it and then from the second question you mentioned the benefits from our of materializing of the day after day too.

Here, but just curious to hear of your thoughts around your positioning for doesn't government's stimulus plan to the other regions of the world like kind of the UK or the European Commission and what are your expectations around the scaling tightening around his thank you.

Yeah, So I'll take that one as well so the.

The funding in the United States his brother significant.

It's meaningful and the rest of the world, but not of the same scale. However, we are positioned in a similar similar position. These these are the fundings of really for us based on providing fiber connectivity.

To the various places that the that they are improving.

In Europe, the replaces such as U K and Germany that are building out much more heavily than the places that have already built out say, Spain.

As an example of that.

And we believe we're well positioned for all of the things that you need to build this network.

That is not be active gear the moment, we'd really don't participate in the act of gear portion of the <unk>. This is a network in terms of when this is happening it is an ongoing piece of business.

And it's more of a fragmented than in the United States. So.

So you won't see a an enormous burst, but you'll see a specific country or specific customer that will go on a major build and in fact, we're seeing one of them right now.

I appreciate the color and things for the question.

Thank you.

Your next question is from the line of Whitehall The Goldman Sachs.

Yeah. Thanks for the question on I have to do for you. One is on the the cash flow of the working capital Alex I just noticed your accounts receivables up a lot I guess that's related to the backlog, but I'm curious whether that is likely to be of drag on cash flow as we look forward or is this kind of of <unk>.

One off of adjustment to the.

New normal level of receivables. So one of you could comment on that and then I have a follow up okay.

So our cash flow of typically.

Week in the first quarter, it's it actually strengthens as we go through.

And just to be clear on the.

Just the jump in is quite a bit weaker the normal seasonality. That's why I asked the question.

So it's typically week in the first quarter and yet there is some of some type of thing related impact on on a are just related to collections activity. So there's nothing nothing unusual other than just the timing of collections the.

Of the thing that typically happens in the first.

The first quarter as we have cash taxes and then we also have.

Bonus payouts, so so bonus payments for our annual incentive plan of this year, we're quite a bit larger than.

Then they have been in the last couple of years, which is creating creating a bit of of headwind and then the final issue.

Is around inventory so.

Because of the the.

Significant backlog as well as some of the components shortages, we have much more of kind of and in the process inventory and then on on the frame because.

Because there's been some bottlenecks and the and the ocean supply chain, we've got a little bit more.

A little bit more.

And process inventory on the ocean, but.

In general what I would say and you actually kind of mentioned this the fact that we're seeing working capital growth is completely reflective of of significant demand environment, which as we work through the backlog and as we deliver the product that's going to go on to convert into EBITDA in Alto.

The end of cash.

Do you think I mean, it feels like the lot of this was one of the nature of though and probably doesn't I.

I mean, we shouldn't expect continued increases or or do you think we should be kind of anticipating a little bit of the early in the year and then it right. The itself later in the year, how do we think about trajectory here. Yeah. So so you will see cash flow ramp fairly significantly through the remaining quarters. So so we don't anticipate.

Being being of use of cash for any of the remaining quarters that being said, we are seeing a strong demand environment, particularly in the broadband network segment and.

As I think Chuck mentioned in his remarks.

We do believe this of sustainable demand and and part of the beginning of of <unk> relate.

Related spending as well as cable msos upgrading their networks. So I wouldn't say the demand environment is more of of one time of the I think we do see that as as sustained but certainly the.

The bump in inventory and the the collection of activity is more one time of nature.

Okay, and then I just wanted to ask on millimeter weighted deployment.

In Europe, what you guys are seeing can you give us any color on you.

No.

Just kind of of what you're seeing there how much you would expect in the next year and so on.

Okay.

Sure I'll take that on a.

A moment of right side of the World I think the answer is not much.

Most of the operators in Europe of really focus more on on the Midtown spectrum than any sort of high band spectrum, and we expect that will continue.

Okay, great. Thanks Marie.

Welcome.

Your next question is from the line of send me battery acquaintance Smith.

Hi, Thank you.

I'm Gonna go back.

The Commscope net strategy on the on the Morrow.

How can the thinking about timing.

It's gonna be following over three years or is this going to be.

Weighted.

Or even often just put on the stand.

Yeah.

Right, we had a similar question earlier.

What I would say I'll take this one instead of Alex but I would say is what we're doing right now is we're building the plans.

We have a clear line of sight on what we want to go and where we're going to target of.

Now we're building the plans to do that and obviously, we did take some cost out.

In April that we shared with you in our in our last call.

But in addition of that we have to build all the plans up and then we have to of execution plants.

To implement them and as we're building them by.

By the time, we get to our earnings let's say.

Our Investor day, we'll be able to share with you more details on how those will will allow in time, but right now of those plans are still being built and.

We're looking forward to sharing with Ya later in the year on that during an investor day.

And then one of the follow up on this.

Called out of art off benefits on your broadband networks appointment on.

The benefits into other segments as well.

So yes, they do.

Less direct than the broadband segment, but certainly are the funding has been used not just for providing of fixed line to rural homes, but being able to provide this via.

By the wireless so there is an opportunity therefore us as well of amount of patches in a lot of cases too to the fiber.

And part of art on funding went to satellite as well and after the satellite skip the the ground there is some opportunity for us to.

Take those signals and play there as well. So this is a very important program for commscope throughout and impacts all of our businesses.

Okay.

Your next question, what's going on the line of Simon Leopold Raymond James.

Thanks for taking the question first maybe maybe a quick one and then then more of of trending on in terms of quick question.

Lot of questions earlier that were qualitative around input cause I guess the simply what do you expect your gross margin in the June quarter will be higher or lower than what you just reported in March when you. When you net all of these factors and then I've got a follow up.

Yeah look on.

There are a lot of things that go on to gross margin at the rest of the stating the obvious we do see.

Demand and an outdoor wireless which will drive of favorable in North America, which will drive favorable mix we have.

Substantial volume and continued network cable on connectivity on access technologies deployment, which will drive.

Scale on the broadband segment to improve margins, we're seeing strong growth and rockets through through education hospitality.

Healthcare that has substantial gross margins and rockets so that flows through.

Quite nicely so the the mix impact has a has a significant.

Effect on margin.

I tried to be as clear as day I can be in the public setting that we're going to work to the offset.

Absolutely as much as the of the inflationary impact as we can and so I think it's reasonable to expect that that gross margin would be consistent with what we've seen in the past.

I think that's probably about as much detail as I can get given our guidance strategy.

Okay I appreciate I had to try to.

So on the training that question.

I wanted to see if we could talk a little bit about how how five G wireless architectures might all the different business specifically.

The the increase in massive mimo and integrated antennas I certainly heard you in terms of your your partnership in and work with with Nokia. So I'm not ignoring that but just wondering how the mix of increased integrated antenna as in massive mimo can affect commscope everything, but the radio straw.

<unk>. Thank you.

Yeah, So I think I'll take that Simon so.

With every generation of wireless there is the continued pushed to to integrate we saw that's an <unk>. Some some of the Oems products that did this and they participated in the early days the market and bye.

Mid days of the decade, those products when when kind of out of favor.

We think this is different this time that the active antennas are an important portion of of of.

The <unk> rollout.

However, it is not the only portion of the network and many of the problems of putting an active on 10 on of power very similar to the problems of cricket past of antenna on the tower, namely when loading and wait and we we are critical to doing that.

We are critical to to putting the various antennas behind the other end tenants or within the other end how does that exist on the tower and so while we will participate in some portion of the actual active on kind of itself and we are trying to participate with more Oems, we will participate with many of the off of.

Waiters and integrating the past of on the active solutions together in a way that makes it possible to roll these out to all of the cell sites, but they are going on the.

In addition to the antenna itself, which we tend to focus on a lot they're on.

Our advantages to Commscope when you do go to these active antennas on on.

Just give you a very simple one inactivate kind of consumes a lot more energy than its predecessor, because it has many many more transceivers and its predecessor that power needs to come from somewhere and for example of our power strip technology becomes almost mandatory enactive antenna networking system.

Versus a half of antenna and a traditional radio where it is not required at all so there's additional business opportunity went active and tenants are used or commscope. So we think there'll be a mix both active and passive antennas and five G. We think it will be different from <unk> and the thing we think will participate in all of the.

The faces of this.

Great. That's very helpful. Thank you.

You're welcome. Thanks, Donna operator, we probably of time for one more question if there's any more on the queue and then the curtain or we can take everything offline.

Yes, Sir final question comes from the line of of <unk> with the Evercore.

Yep, Thanks, a lot of the line.

I have the two.

Two questions I'll ask them both of you at the same time of 500 million costs without some kind of like a cool thing.

The $120 million of Bob B U C will use the also the whole network spin and the remainder of <unk> Qualcomm's hope is that the <unk> and tossed by the name of it before Commscope and then secondly, you touched on procurement optimization. The just starting to undertake is that will be the local news type 250 million savings or is it more things like E.

<unk> in real estate optimization, you can do to.

To get to the numbers of just more detailed what is right and the 250 million piece of course on from the basic.

I'll start with your cough cost optimization piece of this direct and indirect material.

Will be will be a significant part of it but obviously, we also had a reduction of course, it was announced where we said we would cover.

We would cover the cost.

We would cover the reduction of EBITDA on the whole networks business with that plus allow us to invest.

With this month so.

Do you think about the cost it's the rash.

Indirect.

And structure and I would also think there's going to be opportunities to on.

Lock more savings through of operations, we're working with our teams the start of grassroots effort to look at the opportunities to improve productivity.

To increase capacity because the demand continues to grow and we're hoping that we're going to get some leverage on that so.

That's also another piece of it.

So I guess your first question was more related to.

You're kind of broke up a little bit in the beginning of it because yeah.

No.

On the 500 million kind of of.

EBITDA expansion plan right do I think of it is 120 million will offset the whole network spin and T 80 flow to do to go commscope or.

Is it also comes with like so so so just to clarify.

What we said so we said that the 502 50 is net and so the way to think about it.

We also said that we are going into more than offset the loss on EBITDA from home, which is what Chuck mentioned.

Instead of the way to think about just doing the math is take are trailing 12 months and.

And then you can subtract the home networks.

Trailing 12 months EBITDA then you can at 215 cost you can add $2 50 and growth and then you can assume some level of just cyclical market recovery above and beyond above and beyond that and that should give you a waterfall to what exactly were saying.

Perfect. Thank you very much.

Perfect.

Charles chips cause up with some some closing remarks, yes.

We'll keep everybody. Thank you so much for your interest in Commscope. We appreciate your.

Questions and your support you look forward to talk to you again soon thank you.

This concludes the sales call. Thank you for joining you may now disconnect your lines.

Would you just please hold.

[music].

Good day, Thank you for standing by welcome to the Commscope first quarter of 2021 results call.

The time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. So on.

Ask the question during the session you May press Star one on your telephone keypad.

If you require any further assistance. Please press star Zero I will now let me turn todays call over to Russell Johnson, Vice President Treasurer Investor Relations. Please go ahead Sir.

Good morning, and thank you for joining us today to discuss the Commscope in the first quarter 2021 results with me on today's call are Chuck Treadway, President and CEO, Alex Pease Executive Vice President and CFO Morgan Kurk Executive Vice President of GTO and segment leader for broadband.

On networks and Budweiser as chairman of the board.

You can find the slides that accompany this report on our Investor Relations website. Please note that some of our comments today will contain forward looking statements based on our current view of our business and actual future results may differ materially. Please.

Please see our recent SEC filings, which identify the principal risks and uncertainties that could affect future performance.

Before I turn the call over to Chuck I have a few housekeeping items to review today, we will discuss certain adjusted or non-GAAP financial measures, which are described in more detail on this morning's earnings materials.

<unk> of non-GAAP financial measures and other associated disclosures are contained in our earnings materials and posted on our website.

All references during today's discussion will be to our adjusted results all of quarterly growth rates described during today's presentation are on a year over year basis, unless otherwise noted I will now turn the call over to our president and CEO, Jeff Treadway Chuck.

Thank you Russell and good morning, everyone.

2021 is already shaping up to be a very exciting year progress at Commscope.

We're putting in place abroad transformational agenda and are beginning to feel the impact of these efforts on our results.

This morning, we released our results for the first quarter of 2021 and I'm pleased to report that our consolidated business showed strong performance led by sustained momentum in our broadband networks segment.

In our core business segments that will remain after the separation on home networks business sales were up 11% year over year and adjusted EBITDA was up 25%.

And just one month ago, we announced two critical components of our Commscope next initiative.

The first that we intend to spin off of our home networks business into an independent publicly traded company and.

And second that we've had debt we've taken initial steps to optimize our company's cost profile and free up resources to reinvest in growth.

Today, I will provide you with more insights into our broader plans for transforming commscope and so the growth oriented profitable technology leader and I hope that you will share our excitement about the company's future.

The first I'd like to provide more detail on our first quarter results.

I'll now turn to slide three.

Sure.

On a consolidated basis during the first quarter of 2021 revenue grew almost 2% year over year, and we achieved adjusted EBITDA of $290 million, a 25% increase over the first quarter of last year.

And the core post spinoff business segments of Commscope, namely broadband networks outdoor wireless networks and venue and campus networks. Our broadband segment stood out with very impressive revenue and profit performance during the quarter.

Up 29% of 93% respectively.

The broadband segment has benefited from a number of industry trends such as the continued node splitting activity of cable operators to relief uplink pressure on their networks and.

And the accelerating trend of fiber deeper.

That we see in service provider network upgrades and government spending on rural broadband.

In addition, the segment has been investing for future growth.

We are developing cutting edge technology, such as remote Mac phy and advanced optical networking as well as making significant fiber cable and connectivity capacity investments that will benefit commscope for years to come.

In our outdoor wireless segment as we expected the first quarter got off to a slower start, especially when compared to the strong first half of 2020.

By way of reminder, several north American operators invested heavily in the most recent C band auction and are actively planning our investments and deployment strategies for this newly acquired <unk> spectrum.

While this <unk> to five day transition has resulted in lower current spending by these operators as compared to last year.

The demand for the key macro components supplied by Commscope should increase in the future as <unk> rollouts expand and benefit our outdoor wireless segment.

We are also making traction in Europe with operator trials for our new integrated passive asset active passive active antenna technology that is an ideal solution for managing the transition of <unk>.

In addition, Europe and Asia Pacific saw outdoor wireless sales growth of almost 29% and more than a 100% respectively. During the first quarter.

Our venue and campus segment continues to feel the effects of the COVID-19 pandemic during the first quarter due to the exit of exposure to commercial real estate and ongoing secular declines in our in building copper portfolio.

In addition, our GAAP and small cell business was soft during the quarter as some large public venue projects that occurred in 2020 did not repeat.

Even with these headwinds.

Segment performance during the first quarter was steady versus the prior year with particular strength in ruckus growing more than 15%.

As we look forward, we are not yet seeing full a full rebound in newbuild real estate activity, but we are encouraged by the signs that the rising level of COVID-19, vaccinations is freeing up enterprise network spending in our copper business has largely stabilized.

Relative to the double digit declines we experienced in 2020.

In addition, we are seeing significant stimulus dollars continuing to flow into education, and healthcare both of which benefited our ruckus business unit during the first quarter.

Additional tailwind is include continued strong pipeline of Hyperscale data center projects as.

As well as sustained interest among venue operators of airports casinos and hotels and upgrading their in building and venue licensed and unlicensed coverage through our next generation <unk> SaaS platform, one cell and ruckus product portfolios.

Finally, an update on our home networks business.

We are running on the scheduled towards our target date of completing the spin off by the end of Q1 2022.

With the team, making excellent progress on the work required to cleanly separate this business from our core businesses.

Against the backdrop of that work and despite healthy demand from our home network products during the quarter, our ability to supply and reach the recent months has been severely constrained by the semiconductor chip shortages that have made global headlines this year.

While it is difficult to forecast when the supply constraints will be resolved. This is the transitory issue.

Because of demand during the quarter exceeded our ability to ship products home network products ended the first quarter with more than $1 billion in backlog.

Which is more than twice our average in 2020.

We also secured key us key customer wins in DOCSIS, three one gateways IP streamers and international video set top boxes and have made significant progress on our Wi Fi six E on and low latency technology development.

Segment, one silicon supply normalizes.

Before I finish my remarks on the quarter I would also note the commscope like many other global companies as began experiencing significant price increases across the variety of inputs and components, including copper steel and resins freight and semiconductor chips.

I want to emphasize that as the company will be working hard to utilize all available levers to offset the impact of these inflationary forces on our business.

Now turning to slide four.

I'd like to shift gears and provide you with some additional context around where we are and where we're heading with our Commscope next initiative.

As I've communicated before Commscope <unk> is about three vectors of performance improvement.

Growth cost efficiency and portfolio optimization.

I want to emphasize that these three vectors are not separate efforts, but are interrelated and mutually reinforcing.

As we reposition the company to fully realize the growth potential inherent in our core markets. We are looking for opportunities to invest in both underpenetrated regions and customers as well as high potential vertical markets and technologies.

Fueling this investment will be a portion of the resources, we liberate by streamlining inefficient processes cutting unproductive spending eliminating redundant processes and realizing manufacturing efficiencies.

The team we are aligned around a set of near and intermediate term priorities and we are already beginning to see some early progress, which I will describe later.

As we get the flywheel of motion to drive EBITDA improvement, we will continue to reinvest ultimately driving the shareholder returns that are more in line with our true potential.

Now turning to slide five.

I'll share some details about actions, we're taking the free of growth capital through cost efficiency.

After taking the cost actions that we communicated to you in April we are now flow is to widen the aperture to include areas such as procurement and operations.

The focus on just one example.

That of indirect procurement Commscope annual spend on this area is approximately $1 2 billion more.

More than half of which is discretionary but we are not enjoying the full benefits that can accrue to of large scale of focus purchaser as evidenced by the fact of 20% of our indirect spend it's inefficiently dispersed across more than 13000 vendors.

We are undertaking of multifaceted effort to attack this opportunity and one facet that we kicked off this just yesterday is the pilot is a new pilot program of cost control towers at our Clermont anchor type of North Carolina manufacturing facilities.

Cost control towers of our proven method for empowering employees with an owner's mindset to rigorously challenge every dollar in the budget.

Once proven out the Claremont and could tablets.

We will implement this program broadly to reduce non critical spending on a company wide basis.

In addition to our efforts around cost we have recently kicked off the first phase of Commscope next growth agenda.

After working on Commscope for just the short time it was clear to me. The Commscope has a long history of acquiring businesses, but has struggled to achieve consistent organic growth.

This has to change.

To turbocharge, our growth efforts, we must be GAAP, we must become a market driven company and get closer to our existing customers and expand our existing customer base. So that their voice of needs directly inform our strategies and portfolio decisions.

The first step we are taking for our course of App for our core spend for our coast or spend businesses.

The transfer most of our sales and marketing resources directly into broadband outdoor wireless and venue and campus business segments. This.

This will give every core segment of dedicated go to market team equipped with an end to end sales toolkit, including marketing pricing partner engagement and sales training and enablement.

And it will create an environment where segment level decisions around R&D and product development are directly linked to the customer value chain.

Our new sales structure will also include a key account manager component that will allow us to expand our deep relationships with existing distributors and large service providers.

Our key account managers will also broaden our reach to include many untapped service provider markets outside the United States.

We will also refocus our sales efforts on select verticals, such as education, healthcare and hospitality, where we know that our networking products and our solutions offer unique value to our customers.

And we will use our most innovative technologies such as our one cell radio access point, and our Ruckus cloud and analytics applications. The developed tailored and vertical market solutions for the sales teams to offer to their customers.

These are just some of the ways in which Commscope next will drive a new level of efficiency and growth and growth for our company.

Taken together, we expect these actions to deliver an annual run rate of at least $500 million and adjusted EBITDA improvement within the next three years split roughly equally between incremental growth and cost efficiency.

As the planned against the crystallized and results materialized through our financial performance in future quarters, we will share the success stories with you.

With a clear and ambitious roadmap laid out our entire team is energized by the opportunities in front of us.

I'd now like to turn the call over to Alex to provide further details on our first quarter results Alex.

Thanks, Chuck and good morning, everyone.

I'll start with the review of our consolidated financial results for the quarter on slide seven during.

During the first quarter net sales increased 2% to 2.07 billion led by another quarter of impressive performance from our broadband network segment.

Orders for the quarter were very strong at $2 $83 billion yields.

Yielding a book to Bill ratio of 137, which represents the significant increase over the Q1 2020 ratio and demonstrates the robust demand we are seeing in many parts of our business.

We're also seeing relatively sharp increases for a range of important inputs and components, including copper steel and resins semiconductor chips and freight.

That said, we're working very hard every day to source the inputs and components of renamed to meet both rising demand and our customers' expectations. We're also committed to using all available levers to offset as much of the inflationary impact of possible in order to maintain strong margin performance.

Adjusted EBITDA of $290 million increased 25% adjusted EBITDA margins of 14% improved 260 basis points and adjusted EPS of <unk> 36 per share increased 200%.

As you know.

Earlier this month, we announced our intent the spinoff of our home networks business by the end of Q1 of 2022. Once the spend has been executed Commscope remain co will consist of three core business segments broadband networks outdoor wireless networks and venue on campus networks.

Core of Commscope net sales increased 11% during the quarter to $1 five 8 billion.

Core adjusted EBITDA increased 25% to $273 million and adjusted EBITDA margin of 17, 3% improved 200 basis points from the prior year.

Orders for core Commscope were also strong totaling $1 $88 billion and yielding a book to bill of 118.

As the extremely strong performance in our core remain co business clearly shows the potential of the spinoff to drive a new level of shareholder value of Commscope. It also underscores the post spin Commscope will consist of a cohesive and well integrated set of businesses with magnified exposure to powerful technology trends, such as <unk> broadband architecture evolution.

Wi Fi six in fixed fee indoor LTE coverage in private networks.

Turning to slide eight I'll move to our segment versus the highlights.

Beginning with our broadband network segment net sales of $791 million grew 29%, primarily driven by the strength in North America in all international regions, except for Europe.

Within the segment, our network cabling and connectivity business saw significant increased demand for fiber cable on closures and our access technology business also experienced strong sales of optical node and head end optics adjusted.

The adjusted EBITDA of $179 million grew 93% over the prior period, driven primarily by the significant increase in sales volume.

Based on the quarter's results as well as our forward looking view, we continue to see very favorable momentum for the major product lines within our broadband network segment.

With five G fast, becoming a reality service providers are investing to drive fiber deeper into their networks not only to serve todays virgin and customer demand for speed and capacity, but also to prepare for the next wave of NSO and telco competition for existing and new home subscribers.

Likewise, we're benefiting from multiyear government backed programs to bridge the digital divide such as the rural digital opportunity fund and we are closely tracking discussions within the by the administration to allocate additional stimulus funding for expanded broadband access.

In addition, our cable operator customers are contending with shifting consumer usage pattern that of generated unprecedented pressure on the upstream portions of the hybrid fiber coaxial networks.

During the quarter operators work to relieve the pressure through continued node splitting activity and upgrades to head and optics.

We believe that our new network upgrades in the DOCSIS network inclusive of the A&P and tap amps and taps.

Which will also drive his business in the future and our video systems business benefited from yet another five <unk> related tailwind during the first quarter as we scored significant new project wins for C band spectrum reclamation.

To take advantage of the favorable demand environment.

Supply of certain inputs components and raw materials, but Fortunately this segment has less natural exposure to the most highly challenged supply chains, such as that for semiconductor chips and to date, we have managed the periodic supply of stresses relatively well.

Turning to slide nine for our venue and campus networks segment.

Net sales of $470 million were essentially flat from the prior period.

As declines in North America were offset by growth in nearly all of our international markets.

Within the segment strong growth within Ruckus was offset by moderate declines from the remaining product lines.

Adjusted EBITDA of $20 million declined 47%, primarily due to unfavorable mix and the impact of input cost inflation, mainly copper.

While we have been able to pass the significant amount of copper price increases through the enterprise customers. There is some degree of lag in this process that is unavoidable nonetheless.

Nonetheless, we expect these inflationary impacts to be more normalized in future quarters.

While our venue and campus segment came under pressure during 2020 due to COVID-19 impacts on commercial real estate during the first quarter. The situation improved as developers resumed construction activity on many suspended projects.

While this trend is encouraging and it helped our venue and campus segment and the first quarter with substantial backlog. There is still significant uncertainty on the scope and timing of the full recovery and Newbuild real estate activity.

Our Ruckus business also benefited during the quarter from continued strong federal spending on E rate in health care programs to bring broadband services and networking equipment to schools and medical facilities, our AI cloud and analytics offerings are also gaining traction with enterprise customers and we expect continued momentum and the rapid businesses COVID-19 vaccination rates.

The increase and as enterprise clients begin to bring employees back to their offices.

During the first quarter, our das and small cell business declined and our Hyperscale fiber business was modestly weaker year over year as both of these business lines faced the tough comparison against the first quarter of last year when some larger venue upgrade on data center projects were underway.

Turning to slide 10 for our outdoor wireless networks segment.

Net sales of $323 million declined 8%, driven primarily by North America, and the Middle East and Africa, partially offset by growth in all other international regions.

Within the segment sales declined in both our macro tower of Metro layer solutions.

Adjusted EBITDA of $74 million declined, 17%, primarily driven by lower volumes.

We anticipate C band related <unk> spending on Commscope products by other major North American carriers to accelerate later this year and thereafter, however on the shorter term, we're seeing lower spending levels from these carriers than we experienced during the first half of 2020.

As the rates of <unk> progresses, Commscope offers a broad portfolio of solutions products and solutions that carriers will need to support comprehensive upgrades to their macro tower infrastructure.

Telco carriers recognize commscope is a leading provider of everything on the macro tower, except radios. This does not include only base station antennas supporting <unk> frequencies, but also a wide range of complementary products and solutions that will be critical to operators as they manage the added complexity of <unk> tower configurations of <unk>.

<unk> include <unk> coaxial on fiber cabling.

Of our shift of power management cabinets, and steel reinforcement, which together with our passive and active antenna solutions provide a complete toolkit for five day tower upgrades.

Cost efficient tool for managing the <unk> transition.

I would add net after several quarters of softness our metro cell business is starting to pick up as municipalities begin to clear some of the COVID-19 related backlog on the zoning and permitting applications for the metro layer Densification projects that will also be required to provide seamless <unk> connectivity.

Turning to slide 11 for our home network segment.

Net sales of $489 million declined 19% and across most regions. Despite healthy demand for both video and broadband gateway products during the quarter. The home networks revenue decline was driven almost exclusively by an acute shortage of semiconductor chips.

Adjusted EBITDA of $16 million of increased 38% from the prior year. Despite this top line decline.

We believe that the supply chain difficulties are transitory and that we will eventually convert this backlog in the sales. However, our current view is that we may not see of returned to a fully normalized silicon supply environment until early 2022.

Given that we have been very proactive in taking costs out of the home networks business. We're confident that the segment will show improved financial results once the silicon shortage subsides.

Within the video business unit home networks continued to score wins with new and innovative IP stream of products. This is particularly true in international markets, where we've had success during the first quarter with new orders for streaming devices in Europe and zapper boxes.

And the age of Asia Pacific region, as well as traditional set top wins in key eastern European countries.

The the broadband gateway business home continues to build on multiple DOCSIS three one gateway wins in the highly strategic Latin American market and is also gaining traction for the XD seven platform with North American syndication players.

Turning to slide 12 for an update on our cash flow.

For the first quarter cash flow from operations was the use of $124 million on adjusted free cash flow was the use of $135 million as.

As a reminder of the first quarter is typically our weakest cash flow performance quarter due to multiple seasonal factors.

Comparing to the prior year cash flow was impacted most notably by higher annual bonus payout for Commscope employees as well as increased tax and interest payments during the first quarter of 2021.

Working capital was the net use of cash of approximately $123 million during the quarter, primarily driven by increased accounts receivable and inventory.

However for the full year, we expect net working capital the capital to be a source of cash for the company as the first quarter's AAR on inventory build converts to cash and as we continue to find additional efficiencies within inventory and extend the vendor payment terms.

Turning to slide 13 for an overview of our liquidity and capital structure.

During the first quarter on cash and liquidity remains strong as it had been throughout the year.

We ended the quarter with $326 million in cash and no outstanding draws under our ABL. Our total available liquidity for the quarter was over $1 billion given that the first quarter is seasonally our weakest cash flow quarter of the year, we did not repay any debt during the quarter beyond the $8 million of required term loan amortization.

With the year over year growth in first quarter adjusted EBITDA.

Inclusion of these cost savings, reflecting cost cost actions already taken as well as specific planned future actions is also in line with our loan compliance reporting practices.

We remain committed to our longer term goal of significantly reducing leverage and expect to provide additional insight into our path on timetable toward this goal as we further refine our commscope next strategy around cost efficiency and growth.

Finishing up on slide 11 for an update on 2021 demand trends in our end markets.

Of our broadband networks segment, the trends of operators driving fiber and fiber cable and connectivity deeper into their networks is showing considerable staying power for the balance of 2021 and beyond and addressing pressure on uplink capacity on downlink throughput through node splits and the access layer continues to be critical in network performance.

Customer demand in our converged network solutions unit is holding steady and we're seeing continued opportunities for our video systems business portion in areas such as of the reclamation of C band spectrum and AD insertion.

Expanding our capacity to produce fiber optic cable and fiber connectivity remains of top priority for us.

And we are committed to directing additional capital investments were necessary to meet the high and growing demand.

And as previously mentioned, we expect our broadband segment to benefit significantly from stimulus spending under the rural digital opportunity fund in the second half of this year.

Within our outdoor wireless segment, we maintain our expectation that the release of new mid band spectrum through the C band auction will drive significant <unk> spending by the major U S. Telco carriers to upgrade thousands of macro cell towers across the U S.

Areas of strength for Commscope all of the starting later in 2021.

Meanwhile, our funnel of international opportunities, particularly for our integrated active and passive antenna solutions in collaboration with Nokia is showing considerable promise and will be a significant focus as we rollout of the international growth component of Commscope next.

Our venue and campus business is showing encouraging signs of returning to growth and generating meaningful profit as commercial real estate developers regain confidence and has structured cabling market stabilize from last year's steep declines.

It is still too early to forecast the full scale of recovery in Newbuild real estate activity by the end of 2021.

We're confident that government spending on education, and health care will support momentum and Ruckus sales during the balance of the year Ruckus orders were stronger in the first quarter and we see this trend of continuing for the remainder of 2021 through Commscope next we're pivoting to refocus the venue and campus segment on key vertical markets, such as education health care of federal.

And hospitality, where our connectivity and networking solutions provide a uniquely compelling value proposition and we expect these efforts to begin showing results by the end of 2021.

While we did not win large scale projects for data center fiber and our large venue upgrades utilizing our das and small cell solutions during the first quarter.

We continue to see a healthy pipeline on the smaller projects coming up for bid that should benefit of these businesses during the balance of 2021.

Wrapping up with our home networks business we.

We have seen of helping resurgence of customer demand for this segment's video and broadband products. However, as we noted we expect silicon supply constraints to have a material impact on home networks revenues throughout the balance throughout 2021 and potentially into 2022.

As we work through these transitory supply chain issues, our goal will be to continue to optimize the cost profile of the home business as well as to move forward rapidly with our plan to spin off home networks into a standalone publicly traded technology leader.

Before turning the call over for Q&A I, just wanted to Echo Chuck's earlier comments about the longer term potential of Commscope Max it.

It is the goal of Commscope Max to transform our company into a higher growth and more profitable enterprise, where the tightly focused technology portfolio. We are energized by our vision of adding at least $500 million of annual run rate adjusted EBITDA through cost efficiency and growth and we believe that our employees and our shareholders should be as well.

While the hard work of this goal is just beginning you should know that we as the management team have no greater priority.

Then being successful on this operation.

And with that we'll open the line for Q&A operator.

At this time, if you'd like to ask a question.

The next job one of the telephone keypad.

Again, if you would like to asking audio question, Chris Dot one we'll pause for just the moment to compile the Q&A roster.

Your first question comes from the line of meta Marshall with Morgan Stanley.

Great Thanks, and congrats on the quarter.

I guess a couple of questions for me.

Yeah.

Can you give a sense on the supply chain shortages youre seeing and just whether it's giving you more visibility from customers for the year on just how that frames kind of your outlook for how the year develops.

And then just maybe more context on the ability to pass some of the cost increases that youre seeing on the customers does it kind of vary meaningfully by product just any context, there would be helpful. Thanks.

Okay.

In terms of the supply chain shortages of the main one that we're experiencing is in the home business with our silicon products and we actually have to.

The work with our customers there and obviously, there's there's allocations and there's opportunities to expedite and we're working with our customers to to help pay for that and then what we're communicating directly with them on those types of opportunities.

Make sure we get the supply there if you think about the other businesses.

<unk>.

It's kind of the start starting on stock I mean, we see we seem to have a problem on the day and we get it resolved in the next day.

We were able to work through it pretty well, we have a pretty large of supply base, but we are seeing some inflationary effects.

And.

But I would say, we're not really the shutdown by any component shortages other than other than silicon and I wouldn't even say we've shut down. It's just we're just not getting the supply we need.

And in terms of in terms of inflationary effects on the other products.

Many of our customers, we have contracts for relationships, where there is formulaic.

Formulaic.

Opportunities to raise price dipped.

Depending on what's going on with the with the inflationary.

<unk> of the product.

The only other thing I'd add.

Chuck Obviously mentioned the semiconductor issue I mentioned in my remarks on capacity constraints within our fiber cable and fiber connectivity those are the internal constraints and we're making investments in the factory that will begin to come on line in the later part of the year and that those investments really are meeting the significant increases in demand that we are.

<unk> that we're seeing so that's the only other supply chain issue that I've mentioned, but that's obviously fully within our control on work taking steps to on market.

Okay, Great I guess I was asking more from my perspective on.

One of your customers kind of shared or the trajectory over the year to ensure that you have of supply chain.

So.

Yes, some of our customers have worked with us to give us a longer range output of some case cases actual orders to follow for or some of these the more critical components.

As an industry. We're also trying to project out what those things will be and manage the supply chain.

Appropriately so I think it's.

The work in progress, but certainly we've gotten closer to worth of our customers on the.

Great. Thanks.

Your next question is from the line of George Notter with Jefferies.

Hi, guys. Thanks, a lot.

Maybe.

Maybe just to kind of expand upon the prior question is there is there.

Do you of any sense for how much.

Cost inflation youre seeing in the business is there a dollar value you can kind of put on that in and then how much of that are you able to offset with price increases the it'd be interesting to kind of see what the inflation. The component is the translating into in terms of the EBITDA of the business.

Yes.

It really depends on what element here and Youre looking at the.

The semiconductor space, it's sort of in the mid single digits.

In terms of percent.

Freight is probably quite a bit higher than that.

Ocean freight.

Close to 70%.

Inflation air freight a little bit of less than sort of the 14% zone.

Copper, obviously, you've seen substantial increases in non and copper prices.

Which you can tell if you just look at that.

The LMA index Similarly with steel.

Really depends I think one of the things debt.

It is important to consider as debt.

A number of our products have a fairly while the commodity input is important it's a lower percentage of the overall value out of the of the <unk>.

Products, so it's not wouldn't be fair to say that.

The price of our product is going to increase directly in line with the price of whatever the underlying commodities and thats really the negotiation that Morgan was talking about is helping our customers understand what these inflationary effects are working with them to mitigate those through a combination of productivity actions and pricing.

And preserving our margins so that's sort of how we are how we're managing the profitability picture.

Got it okay I assume when you roll it up there is a negative net impact on EBITDA is that fair to say.

Where we're going to these impacts George are impacting the every single player not only on the technology space, but in the broader manufacturing space in.

Both of our competitors know that as well as our.

As well as our customers and I think we have every expectation that we'll be able to offset the pressure.

Great. Thank you very much.

Your next question is on the line of Jeff <unk> with Wolfe Research.

Good morning, and thank you for taking the question.

I'd like to delve into the the.

The new.

Current drugs around the cost reduction plans in the EBITDA growth forecast.

I'm wondering if you can help us screen, where you are measuring that 500 million from.

Over how long should we should we get it or as you are and what stages should we get it.

Are we going to see all of it or should we expect that youll reinvest some of that 500 volume.

Overall, EBITDA isn't going to be five days on hire by the end of the three years of bids.

But some of US sure Jess I'll, let me, let me kick it off and then.

Others on the team may want to pile on so to start with.

The Commscope Max is $500 million on what we've said is of at least $500 million of EBITDA improvement.

50% of that coming from growth of 50% of that coming from cost. So.

To the extent, we have greater cost savings in that $250 million, we may choose to reinvest those and incremental growth of and we may choose to to bring those to the bottom line. Those decisions haven't been made but we are committing to $250 million in costs related EBITDA improvement in $250 million and growth related EBITDA.

<unk>.

Those savings are net of of.

Of headwinds so the way to think about modeling it as if you take our our TTM.

Our TTM EBITDA you back out the.

The impact of.

On the home networks actions that we've taken.

AG of 500 million on top of that that gets you to a new run rate and then over and above that we do expect some cyclical recovery.

The market. So this is these are actions that we take above and beyond just normal market recovery. The hopefully that gets you to on EBITDA number and then in terms of timing. What we've said is this is a three year of three year aspiration and obviously the.

The cost actions we started in April so those are already in flight theres more actions that Jeff referred to around procurement.

Both on the indirect side on the direct side there is actions being taken on manufacturing efficiency and then the investments that we're making in growth both in new markets and verticals will will likely be.

Further out in that three year time horizon. So.

Maybe I'll pause the fifth Chuck would like to add anything on top of that and ask you of that answered your question.

I think you said everything.

Let me follow up briefly.

Do you have a sense of what.

What year, one of the year two might look like.

The.

On the cost reductions might be heavily weighted to the front end of your timeline for example.

We have not we've not provided and we are not undertaking to provide that level of detail at this point I think it's reasonable to expect when we get.

When we get to our Investor day at the end of the year debt will give you some indication on on kind of the velocity of how thats. This materializes in the P&L, but we're not we're not at that level right now.

Thank you all.

Okay.

I'm sorry can consult.

Okay, operator, I thought Jeff had a follow up question I didn't hear.

Your next question is from some meat chat of JV with J P. Morgan.

Hi, This is Joe Cardoso on for Sonic.

Yeah.

And the decline in mentioned so our metro on macro cell solutions, which is not much of it doesn't give much surprise given the reasons you highlighted however, here's two years you can provide any additional color around how that opportunity in wireless plays out in the second half of the year and what your large customers of communicated to you in terms of the.

Sir Thank you.

Yes, so I'll, let Morgan pile on.

What we've said we said the flat at the end of last year.

There are two north American operators in particular that spend.

Heavily on C band spectrum, we we anticipated that and it actually exceeded our expectations. There is a natural pause.

Right now as those operators basically are developing their strategies for how to light up that spectrum and again, we fully expect that thats, what they communicated to us.

And that's in fact, what we're seeing we expect that their spending will ramp and in fact, we're seeing a lot of there.

Orders coming in now already in the second quarter. So that spending is ramping just just as anticipated and we do expect the stronger second half for outdoor wireless then than we saw on the first half.

The couple of other points that I'd make the first is about one of the reasons that the year over year comp is difficult is because we saw exactly the opposite trend in 2020, where the the operator spending was actually a very front end weighted because they were trying to get their investments behind them to focus on C band.

You are lapping of tougher comp of 2020, and then the last point I would make last two points. The one is on the margin. The reason the margin picture looks the way. It does is because of this north America mix.

Versus some of the rest of the world, where we actually did see growth.

And then finally I think it's really important for those on the call to understand within the outdoor wireless networks is much more than just base station antennas. So as as the spectrum gets deployed there is need for new power solutions. There is need for reinforcing the the infrastructure with steel there is need for new cabinet solutions all of that.

As is product that we provide in the space.

So I'll just add onto to Alex's comments, so we do have.

BTR strategy everything, but the radio and then applies between.

To <unk> as well as the <unk>.

In the rest of the world. The mid band spectrum has been available for a longer period of time. So the the various startups of of spectrum usage dense urban area of coverage and then moving on toward toward less dense areas has occurred. So we have a pretty good roadmap of what's going to happen in the United States and we're very comfortable.

Rule of the product portfolios, we have on a going forward basis that we will be able to take advantage of that both by integrating the active antennas, where they are being used with passive antennas in an effort to improve the.

Ability of putting things on towers reduced weight weak wind loading et cetera.

As well as for for the non active antennas, which we expect will be a significant portion of the market.

So from our perspective this is going along okay.

Turning to plan in terms of the Metro <unk> market specifically.

That was caused the.

There was a.

A decrease in in the new site builds last year due to permitting and other events and we expected that to show so mitigated as the years go on and we will we will continue to take advantage of that market as well.

Got it and then for my second question you mentioned the benefits from our of materializing in the debt.

This year, but just curious to hear your thoughts around your positioning for the government stimulus plans in other regions of the world.

UK of the European Commission and what are your expectations around the scale and timing around this thank you.

Yeah, So I'll take that one as well so.

The R&R funding in the United States as for other significant.

It's meaningful in the rest of the world, but not of the same scale. However, we are positioned in a similar similar position. These these art of fundings of really for us based on providing fiber connectivity.

To the various places that the.

But they are improving.

In Europe, the replaces such as UK and Germany that are building out much more heavily in places that are already built out say, Spain.

As an example of that.

And we believe we're well positioned for all of the things that you need to build this network.

Not the active gear the moment, we'd really don't participate in the active gear portion of this this is the network in terms of when this is happening it is an ongoing piece of business.

And it's more fragmented than in the United States.

So you won't see an enormous burst, but youll see a specific country or specific customer that will go on a major build and in fact, we're seeing one of them right now.

I appreciate the color on things for the question.

Thank you.

Your next question is from the line of Rod Hall with Goldman Sachs.

Yes. Thanks for the question I have two for you.

One is on the cash flow of the working capital Alex I, just I noticed your <unk>.

Counts receivables up a lot I guess thats related to the backlog, but I am curious whether the.

That is likely to be a drag on cash flow as we look forward or is this kind of a one off adjustment to this.

A new normal level of receivables. So one of if you could comment on that and then I have a follow up.

Okay.

So our cash flow is typically weak in the first quarter it actually strengthens as we go through.

And just to be clear on the.

Just to jump in it's quite a bit weaker than normal seasonality. That's why I asked the question.

So it is typically weak in the first quarter and yes. If there is some of some timing related impacts on.

Just related to collections activity. So there is nothing nothing unusual other than just the timing of collections the.

The thing that typically happens in the first.

The first quarter as we have cash taxes and then we also have.

Bonus payouts, so so bonus payments for our annual incentive plan. This year, we're quite a bit larger than.

And then they have been in the last couple of years, which is creating creating a bit of a headwind and then the final issue.

Is around inventory.

No.

Because of the the.

The significant backlog as well as some of the components shortages, we have much more of kind of in process inventory and then on on freight because.

Because there's been some bottlenecks in the.

And the Ocean supply chain, we've got a little bit more.

Sure.

A little bit more.

In process inventory on the ocean, but.

In general what I would say and you actually kind of mentioned that the fact that we are seeing working capital growth is completely reflective of a significant demand environment, which as we work through the backlog and as we deliver the product.

That's going to going to convert into EBITDA and <unk>.

Ultimately in the cash.

So do you think I mean, it feels like a lot of this was one off the nature of though and probably doesn't.

Yes, I mean, we Shouldnt expect continued increases or.

Do you think we should be kind of anticipating a little bit of the early in the year and then it writes itself later in the year or how do we think about the trajectory here. Yes. So so you will see cash flow ramp fairly significantly through the remaining quarters. So so we don't anticipate.

Being being of use of cash for any of the remaining quarters that being said, we are seeing a strong demand environment, particularly in the broadband network segment.

As I think Chuck mentioned in his remarks.

We do believe that the sustainable demand in and part of the beginning of of <unk>.

Related spending as well as cable msos upgrading their networks. So I wouldn't say the demand environment is more of a one time of that I think we do see that as as sustained by the certainly.

On the bump in inventory in the collections activity as more onetime in nature.

Okay, and then I just wanted to ask on millimeter wave deployments in Europe. What you guys are seeing can you give us any color on.

No.

Just kind of what Youre seeing there how much you would expect in the next year and so on.

Thanks.

Sure I'll take that on <unk>.

Element of right side of the world, but I think the.

The answer is not much.

Most of the operators in Europe of really focused more on on that mid band spectrum than any sort of high band spectrum, and we expect that will continue.

Okay, great. Thanks Laurie.

Welcome.

Your next question is from the line of Sami Badri with credit Suisse.

Alright, thank you.

I just wanted to go back to.

On the Commscope next strategy on the five and the more volume of EBITDA, how should we thinking about timing that's going on.

The following over three years or is this kind of the.

Weighted upfronts or even the Bakken just to understand how are we going ahead and company.

Yes.

Right, we had a similar question earlier.

What I would say.

Take this one instead of Alex what I would say is what we're doing right. Now is we're building. The plans we have a clear line of sight on what we want to go and where we're going to target of now we're building the plans to do that and obviously, we did take some cost out.

On April that we shared with you on our in our last call.

But in addition of that we have to build all of the plans up and then we have to have execution plans.

To implement them and as we are building them by the time, we get to our earnings let's say.

Our Investor day, we'll be able to share with you more details on how those will rollout.

But right now of those plans are still being built and the.

We're looking forward to sharing with you later in the year on that during an Investor day.

Got it and then one of the follow up.

Many of you called out hard off benefits on your broadband networks. The moment that does auto company puts into other segments as well.

Yeah.

So yes, they do.

Less direct than the broadband segment, but certainly art of funding has been used not just for providing of fixed line two to rural homes, but being able to provide this via.

By wireless so there is an opportunity there for us as well on that attaches and a lot of cases to to the fiber.

And part of our funding went to satellite as well and after the satellite skipped the ground there is some opportunity for us to.

To take those signals and play there as well. So yes. This is a very important program for commscope throughout and impacts all of our businesses.

Thank you.

Your next question is from the line of Simon Leopold with Raymond James.

Thanks for taking the question first maybe maybe a quick one and then more of a trending on in terms of the quick question there of <unk>.

Lot of questions earlier that were qualitative around input costs I guess, just simply do you expect your gross margin in the June quarter will be higher or lower than what you just reported in March when you. When you net all of these factors and then I've got a follow up.

Yes look.

There are a lot of things that go into gross margin of the retro stating the obvious we do see.

Demand in an outdoor wireless which will drive of favorable in North America, which will drive favorable mix we have.

Substantial volume and continued network cable and connectivity and access technologies deployment, which will drive scale on the broadband segment to improve margins.

We're seeing strong growth in rockets through through education hospitality.

Health care that has substantial gross margins and ruckus, so that flows through.

Nicely. So the mix impact has it has a significant.

Effect on margin items.

I tried to be as clear as I can be in a public setting that we're going to work to.

The offset.

Absolutely as much as did of the inflationary impact as we can and so I think it's reasonable to expect debt that gross margin would be consistent with what we've seen in the past.

I think thats, probably about as much detail of that can give given our guidance strategy.

Okay I appreciate it I had to try to so the trend on that question.

I wanted to see if we could talk a little bit about how health <unk> wireless of architectures.

All the different business specifically.

The increase in massive mimo and integrated antennas I certainly heard you in terms of your partnership and work with Nokia So I'm not ignoring that but just wondering how the mix of increased the integrated antennas in massive mimo.

Commscope everything, but the radio strategy. Thank you.

Yes, so I think I'll take that Simon so.

With every generation of wireless there is the continued push to the integrated we saw the us in <unk>. Some some of the Oems hub product that did this and they participated in the early days of the market.

Okay.

The mid days of the decade, those products when kind of out of favor.

We think this is different this time that the active antennas are an important portion of of.

The <unk> rollout.

However, it is not the only portion of the network.

Many of the problems of putting an active antenna on a tower of very similar to the problems of greater passive antenna on the tower, namely wind loading and weight and.

We are critical to doing that were critical to putting the various antennas behind the other antennas or within the other antennas that exist on the tower and so while we will participate in some portion of the actual active antenna itself and we are trying to participate with more Oems we.

Will participate with many of the operators and integrating the past of in the active solutions together in a way that makes it possible to roll these out to all of the cell sites, but theyre going on.

In addition to the antenna itself, which we tend to focus on a lot.

There are advantages the commscope when you do go to these active antennas on I'll just give you a very simple one and active antenna consumes a lot more energy than its predecessor, because it has many many more transceivers and its predecessor, the power needs to come from somewhere and for example, our power chip technology.

Comes almost mandatory in an active antenna.

Net working system.

Versus a passive antenna.

The traditional radio where it is not required at all so there's additional business opportunity went active antennas are used for commscope. So we think there'll be a mix of both active and passive antennas on five G. We think it will be different from <unk> and the thing we think will participate in all of the phases of this.

Great. That's very helpful. Thank you.

You're welcome. Thanks, Shannon operator, we probably have time for one more question. If there is any more on the queue with omnicare, forming can take everything offline.

Yes, Sir your final question comes from the line of Amit <unk> with Evercore.

Thanks, a lot of the Lions.

Chuck.

The two questions I'll answer both of you at the same time, the 500 million cost reduction and finally, we'll see yes.

$120 million of Bob called the Houston will be used the also the whole network spin and the remainder of the core Commscope is that the <unk> 500, political core Commscope and then secondly, you touched on the procurement optimization that you're starting to undertake is not what we resolved. The main part of 250 million savings of more things like the ERP.

And real estate optimization, you can do.

Do you get to that number so just more detail on what is driving the $250 million piece of the call customer base.

I'll start with your cost cost optimization piece of this direct and indirect material.

We will be will be a significant part of it but obviously, we also had a.

The reduction of <unk> was announced where we said we would cover.

We would cover the cost.

We would cover the reduction of EBITDA from the home networks business with that plus allow us to invest.

With this month so.

Do you think about the cost it's direct indirect.

And the structure and I would also think theres going to be opportunities to bundle.

A lot.

More savings through our operations, we're working with our teams the start of grassroots effort to look at opportunities to improve productivity.

The increased capacity because of the demand continues to grow and we're hoping that we're going to get some leverage from that so.

Sort of also another piece of it.

So I guess your first question was more related to.

You kind of broke up a little bit in the beginning of it because yes it could.

Yes.

The 500 million kind of.

The EBITDA expansion plan right do I think of it as $120 million will offset the whole network spin and <unk> flow through.

The core commscope or.

Is it all from telecoms of like Sofa.

So just to clarify.

What we said so we said that the $502 50, and $2 50 is net and so the way to think about it.

We also said that we are going to more than offset the loss on EBITDA from home, which is what Chuck mentioned.

And so the way to think about just doing the math is take our trailing 12 months and.

And then you can subtract the home networks.

Trailing 12 months EBITDA, then you can add $2 15 cost you can add $2 50 on growth and then you can assume some level of.

Just cyclical market recovery above and beyond above and beyond that and that should give you a waterfall to what exactly we are saying.

Perfect. Thank you very much.

Perfect.

I'll, let Chuck just close up with some closing remarks, yes.

We will keep everybody. Thank you so much for your interest in Commscope. We appreciate your.

The questions and your support we look forward to talking to you again soon thank you.

This concludes today's call. Thank you for joining you may now disconnect your lines.

Q1 2021 CommScope Holding Company Inc Earnings Call

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