Q3 2022 CommScope Holding Company Inc Earnings Call
Good day and thank you for standing by welcome to the Commscope third quarter 2022 earnings Conference 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 will need to press star one one on your telephone you will then hear an automated message by saying that you had this race.
Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your first speaker for today, Mr. Mick Mccloskey head of Investor Relations. Please go ahead.
Good morning, and thank you for joining us today to discuss Commscope 2022 third quarter results.
I admit mccluskey head of Investor Relations for Commscope and with me on today's call are Chuck <unk>, President and CEO and Karl <unk> Executive Vice President and CFO 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 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 in this morning's earnings materials reconciliations 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 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 Chuck Treadway.
Thank you, Mike and good morning, everyone I'll begin on slide two.
For the third quarter of 2022 core Commscope delivered net sales of $1 $99 billion and.
<unk> adjusted EBITDA of $353 million, the highest on record since the Arris acquisition.
For consolidated Commscope, which includes home networks, we reported net sales of $2 $38 billion.
And adjusted EBITDA of $348 million.
Our third quarter results represent strong execution by the Commscope team and driving growth and efficiencies through our Commscope next transformation.
In addition, our results reflect the continued progress and working to offset inflationary impacts to our margins.
We are reaffirming the core commscope business to deliver adjusted EBITDA in the range of 105 to one 5 billion.
Our net leverage between the range of six eight times to seven two times.
As we've continued to indicate I am encouraged by our performance as we close out the remainder of 2022.
We are pleased with our performance in our Ccs OWS and <unk> segments.
As indicated in our previous earnings call consistent with our expectations are Nick's team delivered strong revenue and EBITDA growth for the quarter as our renewed strategy is paying significant dividends.
As we move toward the end of the year, we continue to monitor the macro environment and how potential recession scenarios may impact commscope.
In Q3, we started to see some project delays and inventory adjustments slowing demand.
With current visibility, we expect to see some spillover of these impacts into 2023.
As we predicted and some of our businesses whether through increased capacity are better supply some of our lead times are beginning to come down.
Despite backlog reduction our backlog is very healthy and represents approximately six months of trailing 12 month revenue.
Our Ccs business continues to capitalize on healthy end market demand and the capacity we have installed the survey.
Ccs segment sales grew 28% from the prior year as we continued to leverage our capacity investments and a growing demand environment and offset input cost inflation through price.
Similar to last quarter, our most notable growth within this segment was driven by fiber cable and connectivity growing 47% from the prior year.
We are very proud of this accomplishment as it equates to an approximate $900 million in annualized growth.
We remain very bullish for the medium and long term in our Ccs end markets.
And we are now looking at the next round of capacity expansions.
Recently, we approved capital to expand our fiber connectivity injection molding capacity to service immediate demand.
Overall backlog within Ccs remained strong with more than two times historical levels at approximately $1 7 billion.
But as expected with a significant portion of our capacity brought online and lead times coming in we maintain our expectation for this to modestly normalize overtime.
Turning to profitability in the quarter Ccs adjusted EBITDA grew 55% from the prior year as expected, we continued to drive price to offset inflation, while driving operating efficiencies throughout the business.
In our manufacturing plants, we are driving operating leverage as capacity ramps.
Additionally, we're making significant progress in our Commscope next efficiency plans as we generate savings from better material utilization and throughput improvements.
<unk> delivered an impressive quarter of topline growth growing the business approximately 25% both annually and sequentially.
Mixed growth was led by Ruckus as they delivered their highest quarterly revenue on record.
Strong execution in our product design and procurement processes enabled the business to deliver product in spite of a challenging chip environment.
Market demand remains strong overall.
While lead times are beginning to come down the business still maintained a backlog of nearly $820 million up 100% from the prior year.
Importantly, as we indicated on our second quarter earnings call mixed delivered a substantial improvement in profitability. Turning this segment's adjusted EBITDA from a loss in the first and second quarters to a positive EBITDA in the third quarter.
I'm now turn into slide three for some additional perspective on the third quarter and an update on my priorities were commscope.
Overall, our team continues to execute well in a challenging environment. We are working hard to continue driving price to offset inflation and are starting to deliver efficiency through our general manager model.
Our general manager model is enabling better alignment throughout the Commscope portfolio.
And the enhanced visibility accountability speed and workflow improvements are starting to contribute to our bottom line.
All while we are continuing to invest heavily in R&D and new product introductions.
As colonized stared in August we expected or increased volumes pricing offset and efficiency actions to continue driving overall corps EBITDA margin expansion through the back half of the year.
Execution on this front as evidenced by evidence and the 240 basis points sequential improvement and core EBITDA margins during the quarter.
And this sequential improvement in profitability was most impactful in our next segment, which grew overall adjusted EBITDA by $40 million quarter over quarter.
Beforehand, the call over to Kyle I would like to provide an update on home networks as well as my priorities for the remainder of the year and into 2023.
Turning to home networks.
Home continues to be challenged with chip constraints demand in negative impacts from foreign exchange rates.
In response to this we are implementing a transformation plan specific to home to help improve performance.
And finishing with court commscope.
Our organization remains intently focused on driving organic growth initiatives and becoming more operationally efficient in every way we do business.
This includes innovation and new technologies that will support our customers and creating the future of wireless and wireline networks.
Additionally, our Commscope next priorities are driving incremental profitability.
Our business leaders are directly aligned with sales operations supply chain planning and engineering functions to reduce waste in the system challenge costs drive better material utilization and boost overall productivity.
We believe our actions are continuing to make great progress.
And will enable us to deliver significant incremental shareholder value.
With that I will now turn the call over to Kyle to talk more about the quarter.
Thank you Chuck and good morning, everyone.
I will start with an overview of our third quarter results on slide four.
For the third quarter consolidated Commscope reported net sales of $2.38 billion, an increase of 13% from the prior year driven by an increase in all core segments and partially offset by a decline in home networks.
Growth in top line includes approximately $53 million or 2.5% headwind associated with the year over year change and FX right.
Adjusted EBITDA of $348 million increased 34% as a result of our volume growth pricing actions to offset inflation and operational efficiencies through our Commscope next actions.
Adjusted EPS was 50 per share increasing 72% from prior year.
For core Commscope net sales of $199 billion grew 18% and adjusted EBITDA of $353 million grew 29% from prior year.
I would also highlight the 23% sequential improvement and core adjusted EBITDA.
As we've mentioned throughout the year, we expect to see a larger favorable impact on the P&L from our pricing actions to offset inflation during the second half of this year a.
A trend that will continue into the fourth quarter.
In addition, as Chuck mentioned, we are continuing to drive efficiencies within our core businesses through our Commscope next actions aided by the enhanced focus on flexibility unlock with the implementation of our general manager model.
Consistent with our expectations as we indicated on our previous call with our increases in capacity modest improvement in supply availability and overall lead times coming down core Commscope backlog declined 4% from the previous quarter ending it over $3.6 billion.
This represents a 62% increase from the third quarter of last year.
For core Commscope, the third quarter yielded a book to Bill of 93.
Turning to our segment highlights on slide five.
Starting with Ccs net sales of $1.01 billion increased 28% from the prior year <unk>.
Growth in fiber drove the overall segment performance, increasing 47% from the prior year driven by strong demand for fiber products and our pricing initiatives.
R capital investments and fiber have paid significant dividends and we will continue to invest in new capacity.
Ccs adjusted EBITDA of $188 million grew 55% as the segment benefited from the increase in volume price to offset inflation and operational efficiencies.
With pricing growth and efficiency actions Ccf's EBITDA margins have returned to more normalized historical levels.
Looking forward, we are expecting fourth quarter net sales to be below the third quarter driven by typical seasonality project delays in inventory investments.
Next <unk>.
Net sales of $258 million grew 25% from the prior year growth was driven by our Ruckus business, which is Chuck stated delivered its highest sales quarter on record.
Nick's adjusted EBITDA of $25 million grew $33 million from the prior year driven by volume growth in price, representing strong execution and a challenging chips supply market.
This also represents a 40 million dollar adjusted EBITDA improvement from the prior quarter. Despite our continued aggressive investment and rockets on one cell to drive future growth.
We expect their strong performance to continue through the end of the year.
O W. N net sales of $382 million grew 7% from the prior year, primarily driven by price and strength in the integrated solutions and Helios businesses.
Oh W. An adjusted EBITDA of $82 million grew 36% from the prior year, driven bride price to offset inflation higher volumes and improve regional and product mix.
Consistent with our prior OWS commentary, we expect the top line environment to moderate in the fourth quarter given the speed of carrier deployments earlier, this year and typical weather related seasonality.
<unk> net sales of $342 million increase 1% from the prior year driven by an increase in our access technology businesses.
And as adjusted EBITDA of $58 million declined 43% from the prior year driven by the mix changed the lower margin hardware centric products found on the network edge.
Looking forward, we expect Anr sequential EBITDA improvement in the fourth quarter through a combination of increasing material flow internal production ramping and project timing.
Finishing up our segment performance with home networks.
Home networks net sales of $391 million declined 6% from the prior year driven by declines in our broadband gateway business.
All networks delivered an adjusted EBITDA loss of $5 million for the quarter.
This was an improvement of approximately $11 million from the prior year. However, I would remind you that the prior year included a significant bad that expense and the third and fourth quarters that should be considered an annual comparisons.
As mentioned home continues to be our most significantly impacted segment from a chip supply perspective.
In addition, the business was negatively impacted by changes in foreign exchange rates as the majority of their cost basis price in U S dollars, while a higher percentage of customer revenues are derived in local currencies.
Ultimately, we believe in the strategic rationale to separate the home business from core Commscope.
However, given the current performance we are implementing transformational improvement plans that will take time to produce results.
Turning to slide six for an update on cash flow.
For the third quarter cash from operations was of use of $88 million and adjusted free cash flow was the use of $91 million as.
As indicated on our queue to call during the quarter working capital continued to be a significant use of cash as a result of increasing revenues and quarter and timing of payables.
While inventory balances remained elevated to build moderated during the quarter and we continue to view inventory as a lever to drive improved cash performance at the end of the year.
Looking forward, given or improve profitability, an opportunity to work down elevated inventory balances, we expect a substantial improvement in free cash flow during the fourth quarter.
This will drive the company to a positive free cash flow on a full year basis and.
And to provide further context as of this week, we are fully repaid $105 million over our ABL that was drawn at the end of September .
Turning to slide seven for an update on our liquidity and capital structure.
During the third quarter cash and liquidity remains strong we ended the quarter with $146 million in global cash <unk>.
Total cash and liquidity for the quarter was approximately $925 million a modest improvement from the prior quarter.
As I just mentioned a moment ago, while we ended the quarter with 105 million outstanding on our ABL revolver as of as of this week that amount was fully repaid as our cash flow generation has begun to pick up.
In addition, as you may have seen from R. K filed a few weeks ago, we have successfully extended the maturity of our ABL an additional three years to September 2000, 2007, while adding an additional flexibility for a European based crunch if needed in the future and increasing the underlying asked.
That's included in our borrowing base.
During the quarter, we made no incremental debt repayments beyond the required $8 million term loan amortization.
The company ended the quarter with net leverage of seven eight times, an improvement from the $8 one times at the end of the second quarter.
And as mentioned earlier. This morning, we remain committed to meeting our year end target of net leverage within the range of 68272 times.
I will now turn it over to Chuck to provide some closing comments in perspective on 2023.
Thank you call now on slide eight.
As I mentioned in my earlier remarks, we've.
We believe by strong execution will allow score commscope to deliver adjusted EBITDA for the full year 2022 within our provided range.
I'd also like to give you some early perspective in the 2023.
Despite conditions for some level of moderate recessionary headwinds and our results.
We still believe there is enough offset through our Commscope next organic growth and efficiency levers to maintain our existing expectations.
Specifically with current line of sight, we are reaffirming the expectations that we shared with you on our December of 2021 Investor day of a core adjusted EBITDA in the range of $135 billion to $1.5 billion in net leveraged target of $5 five times to $6 five times for the full year 2023.
In addition, again with current line of sight. We are also reaffirming our 2024 guide post of one $6 billion to $1.8 billion of core adjusted EBITDA and net leverage in the range of four to five times.
I would like to thank you for your interest in supporting Commscope and belief in our ability to drive transformative change.
Which we believe will continue to unlock significant value for our shareholders.
And with that we will now open the lines for questions.
As a reminder to ask a question.
Star One line on your telephone keypad.
Oh.
Candy roster.
Your first question.
A semi.
From J P Morgan and your line is open.
Okay, well, thanks for taking my questions and congrats on the struggle brain I guess.
Coupled with the stock with Chuck definitely sounds like you've seen.
<unk> indications of customers hesitating in thumbs up their outlooks, just given Neil commented on the session any sort of impact on your business.
Wondering if you can shed more than sights and sounds of what you're hearing from your customer then, particularly which segments of your business are you seeing some of those discussions setup pick up with your customers follow up thank you.
Yes, I would say we are seeing some project delays.
An inventory adjustments I'd say, primarily in the Ccf's business.
And maybe an OWS by the electronics shortages also we're still out there, but although I would say that is improving but I would say submit that we're very bullish.
Medium and long term for both Ccs and our next businesses.
So we're very confident about where this is gone.
Okay, and then just to follow up.
Seeing strong sequential improvement in margins.
On account of the price increases that they would be able to drive.
Where are we in films so they can see that sequential improvement driven by price increases.
You also have a big backlog, obviously back probably delayed.
For the price increases the pig, but.
Are we set up and thumbs up for Q in relation to the pricing for the piano, though is that multiple come in pain 23, when we look at the value of the mistake improvement ingrained 93.
Yes, I think I think because we had we had talked about earlier.
Earlier in the year and even late last year.
The price increases through we'd have to work them through the backlog I think at this point in time.
All of our pricing is in the backlog now.
And I think we'll see we'll see a little bit of bump in queue for related to pricing.
But I think we're starting to get to get to the peak as we exit 22.
With having all of those inflationary price increases in our backlog in now hitting the P&L.
Alright. Thank you thanks for taking my questions.
Your next question comes from the line of semi Buzzy from Credit Suisse. Your line is open.
Hi, Thank you very much. The first question I really had was if we want to kind of put your economic slowdown comment into some context here if.
If you actually look at any kind of project that is.
Benefiting from federal funds in stimulus are you seeing any of those projects from our <unk> our path.
Kind of federal program are those projects seeing any kind of slow downs. So maybe I wanted to just clarify that peace and maybe compare and contrast that to the other parts of your business that are not seeing direct federal funds flows and then the other question I had is it sounds like I think I heard this correctly.
The next segment has $820 million a backlog and if I just look at the model and I look at where you came in and <unk> 22 does that mean that the.
The revenue that you guys are willing to recognize and that segment needs to be comparable to the three Q22 margin profile and it looks like you have about 12 months of runway and that segment from a backlog perspective, and and I think a lot of a lot of analysts actually have margins lower in 2023 versus what you just reported in <unk>.
So it is giving us some context around.
That number the margin profile what to expect would be helpful.
Yeah.
I'll take the second question, so I think on Nick's clearly as we indicated.
Back in Q2.
We've seen the business go from a negative EBITDA to positive EBITDA and.
A lot of that has to do with the top line growth has to do with a little bit of pricey and it has to do with US working the chip side and getting a little bit better availability I think as we think about the next business.
We think that there may be some mixed within the business because the ruckus business in our our ICM business are a little bit different and margin profile, but not a lot I think we feel like moving forward the margin profile that you're seeing in queue in Q3.
Is no margin profile that we can sort of maintain moving forward.
So on the <unk> on your first part of the question.
We still remained very very bullish on the government's spending we don't see any slowdown in all in fact, that's all like a big machine and process. They are starting to figure out which states get money, how that's going to happen we're very.
Very bullish on that.
In terms of how that compares to other pieces of business outside of government I would say.
In my view, it's really looks more like installation capacity and maybe a little bit of planning, but as.
I think long term, we're very positive about where all this has gone it's going to happen we are going to close the digital divide and they've gotta put stuff on the ground to make that happen and being in telecom infrastructure I think is.
I mean fairly positive in terms of our.
Or muted effects that we see from the recession.
Alright. Thank you on both of those and I just had a free cash flow question and I want a tie and kind of your inventory level. There was a reference made earlier on the call regarding inventory being one of the strategic components of a free cash flow wasn't it wasn't phrased that way, but I guess I'm kind of reading between the lines here.
If you're not.
I guess I wanted to know is how much of your inventory today could you just convert to cash flow and free up your balance sheet right because inventories have been going up for a long time, and we're reaching a point now where things technically in the supply chain, they're supposed to be eating so just how much control do you have as a company or.
On.
Relieving or releasing inventory levels to generate significant casual if you guys wanted to do it.
I mean, I mean, I think I mean.
Inventory is a function of how we see demands and how we're planning the demand and the supply clearly as we've gone through.
The supply chain challenges that we have.
It's clearly.
Just because of those factors has sort of generated.
Higher inventory levels, because we may have a shortage somewhere and we bought other parts to try to complete.
To complete a product.
And then the other thing is lead times are a little bit longer, particularly on the ocean side. So that I think there's some some some general <unk>.
Factors that have caused our inventory to build a little bit but as we have moderated. This inventory I mean, I think how I think how I would answer your question, which may be a little bit different than what you asked.
I think we feel like there's a couple of hundred million dollars of inventory that we should be able to work out of the system over the next few quarters as we think about.
Managing.
Just our our planning process.
Better, particularly as the supply chain situation gets a little bit better because hey, the reality of it is we are also are holding things that hey, we may have ordered a little bit more because of the uncertainty in the supply chain.
Got it. Thank you congrats on a solid.
Thank you.
Your next question comes from the lineup Steven Fox Fox advisers to your line is now open.
Hey, good morning, everyone had two questions first of all in terms of catching up on price, obviously inflation is a moving.
Target and you guys have been at this for awhile.
So how do you how do you think about going forward, what should we expect from the company.
Are worse in terms of passing on higher costs, which are so possible to customers. As you go into next year and then in terms of Chuck just reaffirming over the long term targets for EBITDA for next year and 24 can you talk about any kind of moving pieces within that things that may be now you are a little bit more optimistic.
Realizing things that maybe we'll take a little bit longer et cetera. Thanks.
Sure. Thanks, so much David I will take the price peace in cow can take the guidance piece.
I would say on price.
What we've really put in place and the company is tools and mechanisms to understand what's going on with commodities and what's going on with each of our product lines and so I think we're in a much better position now to understand what's going on and.
Using those muscles to be able to talk to our sales team and our customers about what's going on.
I think we're in a much better position than we were in the past. So I feel good about that and we're going to continue to monitor that monitor that as we go forward. This is not something that we're going to stop.
And I would say as of right now prices continue to.
I would say over last year, but I would say they are stabilizing.
And as we just have to watch them and see what's going on and be in constant dialogue with our customers.
And on those.
EBITDA Yep, yeah. So on the Eve at this item and I think.
The when we think about.
The twenty-three guide post that we've provided.
I think the thing that moves it is just what's going to go on with the economy and how that impacts.
Markets.
I think in our guideposts, we've provided that we've assume that there's some modest recessionary impact on there and say the reality of it is if if there is a deeper recession those numbers probably come down if there is a shallow recession we.
We do better than those numbers.
So I think as we sit here, we feel like that's really the driving factor because we feel very confident about.
Our initiatives and our plans. It's just the things that we can't control that are the things that we believe will move.
2000, 2003 numbers up or down.
I think the one thing we would also say is regardless of what happens in those scenarios, we are going to be well positioned to take take advantage of those so pay a bitch.
We have capacity that we can continue to grow the business against.
So.
Even though those may be the plans, we definitely are positioning ourselves to make sure that we can take advantage of if there are some upside to that.
That's helpful. I guess, what I was getting at is there anything under in terms of the Controllables now that you've been at this for awhile on a project by project basis, where you are realizing benefits sooner than expected those things are taking longer any other color on just sort of the project progress of your own plan is what I was curious though.
Yeah, I collect all at Chuck Karla, but I'll comment first of all I think just like any plan there's things that.
I think there's things that work better than you expect and things that don't Pan out we spend a lot of time.
As a as a company is a leadership team.
Trying to improve.
We're we're we're placing bets.
And I think as we get deeper under the Commscope next process I think we're doing a better job of improving our hit right on making sure that we're focusing on the right initiatives and a lot of that is driven from.
You know, what the market is telling us or or something else.
May not necessarily be in our control.
What I would add to that Steve is just the whole general manager model and business unit leaders.
We we meet with them once a month.
We're working with them individually as their team, helping them identify opportunities or are just listening opportunities across our business and trying to build a let's say a winning mindset, where regardless of what happens in the market. We can control we have a lot more control than we think we do.
And I believe these initiatives and everything we do have in places, what's allowing us to have the confidence to hold the numbers that we that we said.
In 2021 in December so I think the team is continuing to improve our X matrix.
R. R Commscope next initiatives.
Our mindset change thinking that we can control our destiny. This whole winning mindset I think is what's helping helping us have that confidence.
That's very helpful. Thank you.
Your next question is from charge not from Jeff face Your line is open.
Hello can you guys hear me.
Yes, we can.
Hi, Thanks, a lot sorry about that [laughter], alright, I guess I wanted to ask about.
The Ccs business.
3% sequential growth I realized that might be nitpicking here given how much growth you guys have delivered on a year on year basis, but I guess I would've thought Ccs could've gone a little bit more on sequential terms, given the new manufacturing capacity coming online, giving some of the price.
Coming into the model.
I just love to understand kind of what you guys are seeing there right now and then and then also on on that note you guys talked about I think it down sequential compare and Ccs in queue for I know that Corning. Your key competitor. There's also looking at a down sequential compare can you talk about what you're seeing in.
In that business for key for thanks.
I'll I'll hit the down sequential and I think what we're really talking about there is there's some there's some seasonality going on anyway, and I would say there is just.
As I talked a little bit before I think they are they're just have a lot of capacity in there in there.
They have a lot of material that they just haven't been able to install as fast they wanted to and I think they planned a little bit higher.
Planning called for a little bit more than they can take on but we believe this is going to continue to moderate and we're going to be better at that they're going to be better at that and I think it's a small bump but as I said, we were very bullish medium and long term on that.
I would just add I think in Q3.
We talked about some of the project delays in inventory adjustments.
I think we saw that at the tail end of Q3, we saw some of that sneak into Q3.
We expect to see a little bit about in Q4.
Got it and then the manufacturing.
The only other thing I would comment on that is.
R. R fiber growth was extremely healthy right. I mean, we were we were in the 47% growth and our fiber.
So the fiber side of the business continues to be extremely extremely strong.
On a on a year over year basis.
The other thing I would add to that Georges on the on the inside plant stuff.
A lot of our components connect into active products that have electronics in them and when that electronics loosens up and those people can get those parts that are stuffed connects to I think that's going to unlock as well.
Got it that's helpful. And then also the manufacturing expansion in Mexico, I think you guys talked about $350 million to $400 million and 100 million and EBITDA, where are you right now in terms of the contribution from that facility.
And where are you in terms of its ramp.
Yeah, and I think that as we get in Q3 most of that is ramped up.
All of that is in fiber so.
That fiber growth that we talked about year over year. It's all a lot of that is coming from from the plant in Mexico. So.
From a pier utilization standpoint, I'm thinking that we're probably.
Three quarters of capacity utilization in that plant right now so I mean, we're depth.
I dunno.
<unk>.
Using a lot of that capacity in Q3, as we talked about adding capacity.
Paucity in the facility itself.
Great. Thank you guys.
Thank you.
Okay. Our next question is from the line is Diane 19 from Evercore Your line.
Thanks for taking my question about two as well.
Maybe the stock with on the free cash flow performance.
At least September quarter came until we had model continued to expand on.
This industry what drove that in September but more importantly, how do you think about free cash flow performance in December quoted in to come to 23.
Yeah, I mean, I think we indicated back on the queue to call, we sort of recognized that Q3 was going to be.
<unk>.
Challenging on the cash side is a large interest quarter for US plus is the business was growing we were making some additional investments in accounts receivable.
So.
What's happened in Q3, I don't think it was unexpected and I think we sort of indicated that on the on the <unk>.
To call I think moving forward.
As we sat on the call we feel like.
We're on track to really start.
Generating the cash.
We talked about.
Being able to pay down our ABL that was drawn at the end of September at $105 million, we paid that off in the month of October . So I think we're on track to deliver that year.
Year over year positive cash flow and 22.
So I think as we move into twenty-three.
I think it becomes more of a normalized.
Cash year, where we're going to see some cash outflow in the first quarter and then we'll build up during the year Q.
Q1, historically as our week cash <unk>.
Quarter because of interest payment timing as well as you know we pay a lot of our incentives in Q1.
[noise] got it and then.
When I think about all this kind of segment performance metrics that you're sharing the expectations of December up.
How should we think about aggregate revenues in December .
Be it a little bit up and down last few years, but is it fair to think it's gonna be down low <unk> low to materialism sequentially are you a different way to think about that so that would be really helpful them to some hasty about aggregate revenues into December and if I could also just sneak one more and given all the product delays with the macro worries if talked about.
How confident you think causes you feel about the price increases are implemented getting hold or does it have to reverse back and <unk>. Thank you.
I'll take the I'll take the price one first and I think it really depends on supply and demand.
And and I think that that's really what's going to drive it is going to be input cost driven.
And there's just till a ton of demand out there.
Product.
So I don't see anything really slowing down from that side at least for the first quarter. So.
Yeah, I think on the on the queue for revenue side.
I think we talked a little bit about Ccs, which is pretty big driver of the business being down sequentially I think our our queue for revenues are going to be sort of.
Flat to slightly down overall.
Perfect. Thank you.
Your next question is from the line assignment.
Changed your line is now open.
Thanks, guys do you hear me okay.
Yep Yep yeah.
I got cut off.
They took the question.
Appreciate that I wanted to see if we could get an update.
Of what you are seeing going on in the cable television side.
Decided that business on the networks not not not the home side. It does sound like there has been some shifts in some architectural choices away from Mac phy into remote fine I think you've talked about the fact that you support all options I'm just wondering what you're thinking about these potential shifts and.
What if anything they mean to your business.
Quick follow up.
Sure look as we shared with everyone. It SVT.
We are the largest in the game and have very large investments in R&D, which allow us to support whatever technologies customers choose.
R. E 6000 can act as an E core actually to drive remote Fi if that's what people want to use we also have a virtual CMT S. <unk>.
With the remote <unk> that works that we sell a lot too very large customers today.
And then we have a remote Mac by which media Com just chose to do I know there are still lots of questions on the technology path.
But I think our history and installed base gives us a very strong knowledge position over the competition as we understand their networks, both both the hardware and the software and puts us in a great position to to be their partner.
Thanks, and just as a follow up with the the change in maturity on the get I just wanted to see if you could update us on.
Wow.
Next year quarterly interest expenses.
I'm sorry repeat the question.
You had moved the majorities of your dad out.
Just wondering.
Or caffeine.
It changes your quarterly interest expense yeah. So the only the only thing that we we pushed out was the ABL.
So we pushed the ABL out.
27.
The rest of the the rest of the debt.
Remains the same with the same.
With the same interest payment profile.
Okay. Thank you.
The next question is from the line this matter Marshalls for Morgan Stanley . Your line is now open.
I was just wondering you know I know what the question has been asked a couple of times, but just on and and some of the fiber digestion period or <unk>.
Labour bottleneck carriers Arsene have they given you a sense of duration of some of these pauses and that's it.
Just kind of normal seasonality digestion at the winter months or something more extended and then maybe the second question just on the home initiatives.
How should we consider the timing of when we.
Could see.
Some of the improvements on the home business and does that impact.
The timing of when you think you would potentially spend it or it's still largely.
Changing driven.
Thanks.
Okay, I'll take I'll take the first one.
Probably both of them actually when I think about the.
What we're hearing from our customers I get the sense that it's it's just it's not a long term thing it's more of a short term thing.
And we continue to get orders and it's just about.
Which customer there is some that actually you are taking everything fine and installing everything fine there's others that have you know maybe.
May be planning some planning challenges.
That just have to work get work through.
But that's that's how I would see it.
Related to home.
We have we have monthly operating reviews with each of the businesses and we're just going to spend some time with them specifically on building a plan on how we can get this thing.
On the right track, while we wait for components in and figure out our next steps.
But to your point the business has to be in a healthier position before we before we make a move.
Great. Thank you.
Next question is from the line of <unk> Bank. Your line is open.
Hi, Thank you. So much just wondering you mentioned that you pay down the ABL, which is great to hear the <unk>.
Changing interest rate environment.
Does that impact the interest expense. It you have to pay or anything like that or is everything locked in could you just kind of updated faster. So we are reminded about the changing interesting.
Environment and your company interest payments.
Yes.
Of our debt about $3 billion of our debt is variable.
So the.
The changes that you see.
And the.
And the library rates would have an impact on $3 billion worth of our debt.
Okay got to sneak in my life, and then can you update that you're making some product.
Slippage or delays.
Is that due to like lots of reasons, it could be like funding or political elections coming up or customers uncertain with there.
Roadmaps or component shortages or kind of bucket, what symbol reasons or for someone who had delays. Thank you.
Yeah, I think it's a combination of.
Of of May be planning, an installation time. In addition to seasonality I mean, Noah really long lead times and concerns for materials I think people ordered maybe more than they needed just.
To make sure they had product.
All this is flowing in now they have to install it and put it out and you got normal seasonality you might have you might have some products that are connecting to electronics that.
That are waiting on electronic components.
But.
I mean, I would say these these or what's going on there.
Great. Thank you so much for the details.
There are no further questions at this time I would now like to turn the conference back to Mister <unk> tried to basic closing remarks.
Well, we really appreciate your support and Commscope and thank you very much for the call today and your question.
This concludes today's conference call. Thank you dance or participating in you may not.
Okay.
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