Q2 2023 CommScope Holding Company Inc Earnings Call
Okay.
Good morning, and thank you for joining us today to discuss Commscope is 2023 second quarter results.
Multifamily Vice President of Investor Relations for Commscope and we.
With me on today's call are Chuck <unk>, President and CEO .
And Colleran 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.
Yeah.
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.
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 Scott correctly.
Massimo and good morning, everyone I'll begin on slide two.
Commscope delivered core net sales of $1 $5 89 billion.
<unk> adjusted EBITDA of $263 million for the second quarter of 2023.
Our second quarter in Ccs and OWS was impacted by larger than expected customer inventory corrections customer capex reductions and the macro environment.
We're consolidated Commscope, which includes our home networks business, we reported net sales of 191 $8 billion down.
Down 17%.
And adjusted EBITDA for $260 million.
Down 13%.
Two of our most significant achievements, thus far in 2023 for cost efficiencies and mix performance.
This resulted in an annualized cost savings of more than $150 million.
This will position us well when demand returns to normal levels. As these reductions are permanent and will not be needed as volume returns.
Additionally, we continue to drive performance in our next segment, where we achieved another record quarter of EBITDA of $75 million up $90 million year over year.
The team continues to drive substantial growth and value in our niche segments.
Before I talk about market outlook, let me talk about the progress of each of our businesses.
As we indicated in previous calls we believe Ccs has strong long term market tailwind, including significant spending commitments to improve United States broadband infrastructure. In addition to other country programs around the world.
Although our orders are down we continue to manage what we can control in this business, including investing in new product and capacity ahead of market recovery.
During this downturn in demand we are working on our efficiencies, including Debottlenecking efforts to improve throughput when volumes return.
In addition to operational improvements, we continue to invest in new product development.
We continue to move forward with the launch of our <unk> product line that will offer customers a modular approach to connectivity, resulting in decreased installation cost for our customers.
On some of the future investment we are working on.
We are working with the state of North Carolina for funding.
Recently, we announced a grant from the state to support several future growth projects.
We have aggressively invested in our internal capacity to enable commscope to take full advantage of future carrier footprint expansion driving fiber deeper.
In addition to the state Grant I had the honor and privilege to attend President <unk> announcement of his business Internet for all initiatives.
This is an exciting announcements as it indicates the beginning of the $42 billion of bead funding.
As demand for our products return.
We are well positioned to deliver against significantly higher demand with an improved cost structure.
Turning to <unk> the business continues to perform very well our first half EBITDA of $133 million is up a $162 million over the first half of 2022.
The next segment is on an annualized EBITDA run rate of $266 million.
Backlog ended the quarter above $550 million.
Based on current visibility, we expect second half EBITDA to be stronger than the first half.
I am extremely proud of the <unk> team as they had significantly transformed the business over the last 24 months.
We are well positioned for continued growth as we invest in new services and software as part of the segments transformation and growth strategy.
Through our next Commscope next plan, we have been able to improve all areas of the business, including growth new products and cost.
The niche segment has successfully leveraged the existing cost structure to dramatically improve profitability and cash generation.
We expect continued growth in this segment driven by new hardware and software products as well as cost management.
Recently, we announced the <unk> one platform that is being sold with a network as a service option.
This one is an AI driven cloud native platform delivering network assurance.
Service delivery.
And business intelligence and a unified dashboard.
It simplifies converged network management across.
Multi access public and private networks.
In addition to Ruckus, one we are a leader in the development of Wi Fi seven we expect to be one of the first in the market. When we launched our Wi Fi seven product in the fourth quarter of 2023.
I am extremely excited about the future of next as the business has been a large benefactor of our Commscope next program.
We have created substantial value in this segment over the last two years and expect to create more moving forward.
And <unk> as we mentioned in previous calls we fully contemplated the decline in U S carrier capital spent.
While this presents headwinds for 2023 revenue and adjusted EBITDA performance in the business, we continue to position the business for long term growth.
As we have done in our Ccs segment, we are using the slower demand to focus on new products and efficiencies.
We continue to further develop the mosaic and Tanner to provide a unique solution to active passive requirements.
We now expect <unk> to make major in roads as the market demand returns.
In addition to new products and positioning for growth.
We are working aggressively on our cost structure, including operations.
We're implementing several projects that will improve our cost and throughput in our factories in future periods.
Finishing with US as we have discussed this segment has made a very successful transition to a leading supplier of edge related products, including note amplifiers and RPG RMB module.
Although we remain a strong supplier of our legacy MTS technology we.
We continue to grow our <unk> business as we are in the early phases of the DOCSIS four <unk> upgrades.
We continue to work with all of the major cable operators on edge product.
As previously discussed we announced that we are working with Comcast on a next generation <unk> amplifier.
Sps is a key driver for their upgrade to <unk>.
In addition to our position on amplifiers, we are well positioned in RPE RMB modules, where we are selling significant quantities to large cable operators.
Finally, we continued store commercialized our virtual <unk> solution and are actively testing in cable operator labs.
Overall I am extremely excited about our position in E&S as DOCSIS four <unk> upgrades are in early phases.
We are the only supplier that can provide all of the products required for an upgrade including virtual MTS nodes amplifiers that module.
We are also finding success and the conversion of our legacy <unk> technology to a virtualized system that can compete.
With the existing Virtualized solution.
We continued to invest heavily in the future and we see 2023 is an inflection point moving forward.
Finally, as we've discussed previously.
<unk> is a bit more of a project based business than our other segments.
Revenue timing, it's driven by projects and licenses.
In 2023, we would expect to see stronger second half than the first half as is project timing is weighted to the second half and edge continues to ramp.
Now, let me address the market environment and what we're hearing in our discussions with our customers.
Our near term market challenges, our Ccs and OWS related.
Starting with OEM.
We're highly exposed to the three major carriers in the U S going into 2023.
We expected to see a decline in capital expenditures as indicated by the carriers.
This decline was included in our 2023 core adjusted EBITDA Guide posts.
135 to $1 5 billion.
During the second quarter carriers indicated a downward shift on 2023 demand as they continue to cut Capex and managed 23 cash flows.
Other than the demand picking up because some customers have normalized inventories in the first half we expect these decreased demand levels to remain.
Through the rest of 2023.
We will continue to monitor the major carrier Capex plans for 2024 as they get developed.
As it relates to Ccs market conditions.
A significant short term uncertainty in the market today.
At this point it is clear that there are three major items driving softness in Ccs orders inventory.
Inventory adjustments capital expenditures and the macroeconomic backdrop.
Let me start with market conditions.
We're seeing short term pauses as spending on the fiber side is down.
Several major customers are managing their cash after two years of significant investment in fiber buildout.
Our conversations with customers continue to leave us with medium and long term optimism for substantial spending.
The conversations are also pointing to the additional large be government funding programs going into effect in the second half of 2024.
In addition to lower market demand customers clearly purchased more material than they needed in 2022.
This had a significant impact on our demand in the first half as customers started to normalize inventory levels.
The magnitude of these inventory builds was greater than we expected.
We feel that we may have benefited more than our competition on the customer inventory builds.
And speaking with our customers, we said that their inventory positions have improved.
However, there is still too much inventory in the system and it will continue to impact demand in the second half of 2023.
We expect that we will see further improvement in 2024 as expense picked up again.
Based on the above challenges, we have revised our EBITDA guide close down.
We now expect full year 2023 core adjusted EBITDA to be in the range of one five to $1 5 billion.
It is important to note that this downward adjustment is based purely on current depressed market conditions. We believe that we are maintaining our market share and that our view of medium and long term demand remains unchanged.
And with that I'd like to turn things over to Carl to talk more about our second quarter results.
Thank you Chuck and good morning, everyone.
I will start with an overview of our second quarter 2023 results on slide three.
For the second quarter consolidated Commscope reported net sales of $1 919 billion, a decrease of 17% from the prior year driven by declines in Ccs, though WLAN 10 home, but partially offset by strong next growth.
Adjusted EBITDA of $260 million decreased by 13%.
Adjusted EPS was <unk> 19 per share decreasing 54% from prior year.
This was below our expectations as we experienced significantly lower demand in our Ccs and OWS segment as customers more aggressively normalized inventory levels and manage their capital spending.
For core Commscope net sales of $1 $589 billion declined 15% from the prior year and adjusted EBITDA of $263 million decreased 8%.
The adjusted EBITDA held up a bit better than our revenue as we continue to drive our Commscope next initiative plan, including reducing our fixed costs.
In addition, EBITDA performance was helped by continued improvement in our <unk> segment.
Driven by lower order rates, particularly in Ccs and OWS core Commscope backlog continued to decrease and ended the quarter at $1 9 billion.
A decrease of 20% versus the end of Q1.
The lower order rates has had an impact on our backlog and.
In our Ccs and OWS businesses, our backlogs are back to normalized levels pre supply chain challenges.
This has allowed us to significantly reduced customer lead times.
Turning now to our segment highlights on slide four.
Starting with Ccs net sales of $699 million decreased 29% from the prior year.
The decline was more attributable to our building and data center business than our network connectivity and cabling business.
This result was below our expectations as discussed earlier.
Order.
Order rates remain challenged and we have seen only a modest increase in order rates in the latter part of the second quarter and early in the third quarter as.
As mentioned Tcs customer conversations remain bullish on medium and long term growth.
The short term demand profile remains very uncertain as customers continue to manage inventory and cash.
Ccs adjusted EBITDA of $80 million was a decrease of 53% from the prior year driven primarily by the drop in revenue.
Next net sales of $328 million increased by 59% from a business unit perspective, Ruckus led the way increasing 60%.
<unk> adjusted EBITDA of $75 million improved from negative $15 million from the prior year.
$90 million change, primarily driven by stronger demand and operational improvements.
The next segment LTM, adjusted EBITDA was $214 million, an improvement of $245 million versus LTM a year ago.
As discussed on previous calls the team is focused on driving growth and profitability in the next segment.
We have seen the benefits of this focus over the last several quarters.
We are very excited about the growth opportunities in mix as we continue invest heavily in R&D.
Our new product development, including Ruckus, one clearly provides a strong platform for growth, we would expect to see a stronger second half than first half and mix.
Congratulations to the team for delivering another record quarterly performance.
<unk> net sales of $229 million decreased 41% from the prior year and across most business units.
The decline was expected as major carriers indicated lower 2023 capital spending versus 2020 to the magnitude of the decline was greater than we expected.
Carriers took aggressive steps to manage cash, including managing managing inventory down and lowering spend in general, including one carrier unexpectedly stopping all deliveries of our products for 60 days.
Our near term outlook remains uncertain.
<unk> adjusted EBITDA of $42 million declined 45% from the prior year.
And OWS, we continue to manage costs and invest in new product development. Our mosaic antenna continues to gain traction and is well positioned when the market recovers.
<unk> net sales of $333 million increased 14% from the prior year due to project timing.
Aam's adjusted EBITDA of $66 million increased 15%, primarily driven by improved revenue.
<unk> continues to position itself to take advantage of the DOCSIS four <unk> upgrade cycle.
We're the only supplier that can supply all the products from amplifiers nodes modules and see MTS, including virtual San MTS.
We are winning business at all major customers and are well positioned for future growth.
Based on project timing, a key driver of the E&S business quarter over quarter performance, we expect a stronger second half than first half.
Finally home continues to be faced with challenging market conditions home net sales were $330 million declining 22% from the prior year essentially across all business units driven by customer inventory adjustments and lower demand.
Paul Mcgeough did EBITDA of negative $3 million declined from $13 million versus prior year as a result of the lower revenue.
Home not unlike core businesses with expected experiencing customer inventory adjustments and low recessionary demand.
The home business has seen further deterioration of the market in the second quarter.
Although we expect EBITDA to improve in the second half there will be modest and highly dependent on the market. We continue.
To implement our transformational initiatives and are winning new business.
We'll continue to manage the business as we look for prudent separation alternatives.
Turning to slide five for an update on cash flow.
During the quarter, we generated cash from operations of $137 million.
During the quarter, we reduced inventory driven by a decline in revenue as well as improved management of inventory.
As previously discussed we are still holding excess inventory driven by the supply constraints in 2021 and 2022, we are beginning to unlock some of this value, but there is still a long way to go.
Just on the revenue and EBITDA challenges, we are revising our 2023 adjusted free cash flow forecast down to $250 million to $350 million.
Turning to slide six for an update on our liquidity and capital structure.
During the second quarter, our cash and liquidity remains strong we ended the quarter with $418 million in global cash and total available cash and liquidity of over $1 billion.
During the quarter, we increased our cash balance by $91 million.
We did not draw on our ABL revolver during the second quarter, and therefore ended the quarter with no outstanding balance.
Okay.
In the second quarter, we continue to execute our debt buyback program and repurchased $28 million of our long term debt for cash consideration of $25 million.
To add more detail, we repurchased $10 million of the 825% senior notes due 2027 and $18 million of the 6% senior notes due 2025.
Stilwell position to take advantage of the expected strong fibre demand over the medium and long term however, timing of a meaningful recovery is highly uncertain.
We will continue to monitor and assess.
As Chuck mentioned, we have implemented additional cost actions, including accelerating certain commscope next efficiency initiatives as we have gone through this exercise we are excited with the opportunities. We have found and implemented we feel that a significant portion of the cost actions. We're taking now are permanent in nature and.
Total these cost actions represent more than $150 million of impact.
Pawn recovery of the demand, we should be well positioned to drive strong profitable performance.
Finally, I would like to address our debt position.
Pacifically, our nearest term maturity in 2025.
We are evaluating our options to address this maturity proactively.
We have several options available to us and we plan to share more on this topic no later than our next earnings call and with that I'd like to give the floor back to shop for some closing remarks.
Thank you call.
As I mentioned earlier, we are focused on what we can't control.
I feel we're making nice progress as we continue to drive improvement and the positioning of our business for success.
Points of our recent focus on cost that will pay off in the short and long term.
Unfortunately, we are dealing with market demand issues that are both more severe than we anticipated and challenging to overcome in the short term.
Specifically in C. C S N O W N.
There's.
A significant near term uncertainty in our markets, including macroeconomic challenges.
Visibility over the next several quarters is limited.
We continue to be bullish on medium and long term demand as investments in broadband and wireless infrastructure will be significant.
And we will be in a great position when Marcus rebounds.
I'd like to thank you for your interest in supporting Commscope and belief in our ability to continue to drive transformative change, which we believe will unlock significant value for our shareholders over the long term.
And with that will now open the line for questions.
Thank you again, ladies and gentlemen, if you like to ask a question. Please press star one on your telephone again to ask a question. Please press Star 111 moment for our first question. Our first question comes from the line of George not our Jeffries. Your line is open.
Hi, guys. Thanks, very much I guess I'd like to start by asking you about the next business I assume that some of the improved performance. There is coming from better availability of components I think certainly component train the Wifi side is unlocked across the marketplace.
Can you talk about what's happened in backlog in next are you getting some benefit from that releases componentry.
And what type of EBITDA run right would you guys be generating there if you're only shipping against a more natural right of of and market consumption.
Yeah, I'll I'll start off and lifestyle finished thanks.
Thanks for the question George when.
When I look at Commscope next initiatives I mean focused on growth and profitability I would say the next team performed very very well I mean, we got caught leverage we get a lot of cost Leverages. We grow the business look we have detailed plans and initiatives to continue to grow the business, especially with the launch a ruckus, one and more software as a service.
In terms of inventory and stuff are distributors are are digesting, a fair amount of inventory as a supply chain constraints improved and I would say, we're catching up on backlog.
What I would say is the clothes and when rates continue to be strong in our business.
There is still some constraints and our distributors for significant order rates because you know they would have you know the.
The majority of the products for the for the for the customer a solution, but not all and these.
These constraints are starting to Olivier alleviate in the second half.
And as those chips come in and we start to get slow to them, we expect order rates to improve as well and then the inventory will be taken down with the distributors to allow them to have more flexibility. There you know one of the advantages we have is where a smaller player on the market and we feel we're well positioned to grow.
With I'd say modest market share gains.
I don't know cause he wanted to talk about the yeah I think on the trip side, you know substantially better than where we were you know a year ago and then the second half of last year.
To chops point, there's a there's a few areas where we still have constraints, but we would expect those to work their way out in the second half and by the time, we get to the end of the year. We feel like you know what we've got until a normalized physician on on on trips supply.
Got it and then you said with the backlog was in next but can you give us a backlog in next for the March quarter.
Remind us on that number.
Ah them.
It was about 700.
Okay.
Sorry, I'll pass amounts thanks, very much guys.
Okay. Thank you.
One moment please.
Our next question comes from the line of meta Marshall Ah Morgan Stanley . Your line is open.
Alright, great. Thank you just wanted to get kinda more detail of where the additional $150 million.
That you announced is kind of coming out of them and then.
The N S business you know you go.
I've had some struggles in that business.
Kind of a converted to more lightweight devices.
Kind of sound more optimistic there do you feel like you've kind of anniversaried something about pain of of that transition.
Yeah I'll I'll.
Take the first one.
Cost of $150 million of cost clearly.
Part of that cost reduction is we're reacting too you know.
The lower demand here in the short term.
So we've gone back in.
Taking a more aggressive view on cost. An addition on that $150 million as part of our Commscope next plan.
We had the cost initiatives.
That you know in some cases, we hadn't implemented them all and we've just accelerated those plans.
So it's sort of a combination of.
Sort of new things that we came up and then there's a portion of it that's just.
US going more aggressively after some of the things that were still available to us as part of Commscope next.
And then it related to your <unk> question I would say.
Performing very well I mean, we made a shift in leadership there.
We made a shift in strategy strategic direction, we doubled down on some investments and R&D specifically on amplifiers I would say that the teams performing very well.
And we're getting share in most of the upgrades that are going on right now.
And as I've shared with you all before where the only supplier that provides all the products to virtually tncs. The CMT US note modules and amplifiers and I would say that you know our team to using the knowledge and the strong knowledge of our customer networks through our legacy products.
In private.
Across the breadth of our product line and we're really excited about R. F. D X amplifier work with Comcast and I would also say that we're very pleased with our virtual tncs progress, which is now in custody and a customer lab for testing. So we feel pretty good about where we were in the changes we've made in the investments we've made in that business.
Alright, thank you.
Thank you.
One moment please.
Our next question comes from the line of tiny I.
Bank of America. Your line is open.
Hello can you hear me.
Yep, we come.
Oh perfect.
When things come back one one of the concerns we have is that what we're seeing now is has a few components one of the components. His inventory correction as you mentioned in <unk>, but on the other hand, the environment is not supposed to go back to where we seen in the last two years because of the cycle is.
He's down substantially it's kind of over in certain cases so.
The question is when you look at your growth this year and you're looking at your projections for the next few years do you think that these kind of environment.
Segments are related to contacts.
Do you think that they can grow if you'd neutralize the correction that we're seeing now do you think they can grow into the next two years given the spending plans of carriers.
Yeah, I would start by saying that obviously visibilities limited, but that being said in the Ccs business.
We are seeing inventory start to normalize and we believe would be normalized in the second half.
And we.
We think that you know as customers are talking to us about the mid and long term, they're positive about what they're seeing and suggested grow up there but in addition to that we're going to be helped by the bead funding and we see that beep funding coming through in the second half of 24 and 25.
So I think in the Ccs cable and connectivity are fiber business I I I see positives there.
In terms of.
The OWS business and telcos.
We see a lot of aggressive managing of cash it could take several quarters to recover in there I'm not seeing like you know some big pickup, but I do I I am more optimistic on the fiber fiber connectivity side.
Got it.
Shifting to something else if I can ask another question one of the things that is impacting your stock is of course that that position and I know you said you would provide.
More clarity.
In the next until the next call but.
Can you share with us kind of the way you consider you you you know in this on the slide you have the next five years.
<unk>.
Lumpkin plan with maturities what what are you trying you know how much do you think you can pay down and then what is the general what are the possibilities in front of you to refinance and improved a balance sheet situations. Thanks.
Already focused on the 25 maturities you know I think when we think about the 25 maturities I mean, we definitely have alternatives.
And I think.
Get some more clarity on that as we move through the third quarter.
To deal with the twenty-five maturities.
You know as we think about the longer that stock I mean, you know I think we still cause his truck mentioned on like the CCF business I think we feel like the short term is not reflective of what we see in the medium and long term and we feel like we're well positioned as the market's come back to drive the EBITDA.
And the cash flow that we've talked about previously on calls.
Okay. Thank you.
Thank you one moment please.
Our next question comes from the line of Matt Knickman.
Deutsche Bank in line is okay.
Hey, Thanks for taking the questions just two if I could first on orders if you can speak to maybe the cadence and what you saw in terms of.
The progression over the course of the quarter, how that trend did did it deteriorate and.
And how was July compared thus far I think you mentioned, maybe a little bit of moderation a modest improvement, but I'm just curious to get a little bit more on packing in terms of what you've seen the last four months and then just one O W. N.
Just the double double.
Double click there you mentioned there was one carrier unexpectedly stopping delivery of products for 60 days just wondering if that's resumed or if there's any additional contacts you can provide their thanks.
Yeah. So on the OWS side, you know that was just a temporary adjustment by our customer but.
But you know I think clearly as we've talked about a no W. N <unk>.
We expected.
Coming into the year of decline as a reduction of capital spending and we've definitely seen the carriers picked a more aggressive stance there is there.
Managing their own balance sheet and cash flows.
As it relates to order rates.
And I will make time I'm not gonna go into east specific segment in business, but I think in general we saw an improvement from Q1 into.
I think what we saw in Q2 was you know.
And in the second half of the quarter I think as we moved into Q3 and we've looked at July .
Seen another uptick in order rates, but you know I.
I wouldn't I wouldn't classify those upticks that we've seen as material in nature. You know these are you know.
Sort of small improvements, it's not anything that you know as I said from an uncertainty and visibility standpoint.
These are major moves that would get us back to where we what we were staying in 2022, but we actually have seen imp.
Improvement just not to the magnitude that we needed to achieve.
Our Guy posted we are talked about in Q1.
In our queue one call as you as you remember we talked about in order to have those.
Those guideposts, we needed to see a strong recovery and order raped and we we just at this point in time, although we've seen a recovery not to the magnitude that we need.
And call if I could just follow up on cash flow I think you know with a guy for 250 to 350, I think you've done a little over 100 Mil already is there a seasonal I think there's a little bit of extra interest expense typically hits in three Q with a bigger step up and cash flow and four Q is that appropriate in terms of framing the trajectory. The next few quarters are there.
And I've Gotta crack R Q3, we got a little bit of a higher interest bump.
You know so I think as we think about cash.
We'll get a little bit of benefit from working capital as you know.
This is gonna is gonna be down Unfortunately, that's gonna be offset with some higher restructuring costs, we talk about the $150 million there's a.
There's a price to pay to get that out which will impact twenty-three.
And then obviously the the EBITDA, there's gonna be down so yeah that trajectory, we'll see you know.
A little bit more weakness just over the interest payment in Q3, and then probably a little bit more built in Q4.
Thank you.
Thank you.
One moment please.
Our next question comes from the lineup Shannon Cross of Credit Suisse. Your line is open.
Okay Shannon Cross your line is open.
Hello are you able to hear me.
Yes, Hi, Sharon.
Hi, yes, Okay. Just a couple of questions. One have you heard anything from the carriers regarding the lead cabling issue and the potential of that you know that overhang might play into some of their capex dot.
I I know, it's early I'm, just curious if they mentioned anything.
No no we haven't heard anything at primarily because we don't make you know led shooting cable and.
What they're talking about is completely different.
Yeah Yeah.
But we we haven't heard from them in terms of any bills back or buy something they wanna buy from us and we haven't heard anything like that yet.
Yeah, No I I understand it with copper I just was wondering cause it is theoretically a large overhang.
And then I guess my other question is just where they're going to be can you talk us through how that funding rolls through from that's added to the state.
Carriers.
Give us an idea of of timing and how it works. So he can feel more confident that it don't really start flying through in second half of 24. Thank you yes.
Yeah sure I you know as you may be aware I I've been very involved in the bead funding process.
Had several meetings with the Secretary of Commerce Secretary reminder.
And we feel confident in the funding.
The way, it's gonna work as the money is expected to start flowing through the states at the beginning of 2024 once it gets to the state we anticipate there'll be another six to 12 months before they decide on vendors and where it's going to go so the beta impact for US is probably 12 to 18 months away, but I'd say again.
Well positioned with capacity that we've already put in place and capacity plans that we are putting in place.
As these things start to to come in.
Thank you one moment please.
One moment please.
Next question comes from the line of some meat Saturday.
J P. Morgan M I was hoping.
Yep. Thank you thanks for taking my questions.
Maybe if I can start with a clarification on the golf Steve's comment that you made a an extra reading some of the golf season.
Million number a few times just wondering is that all for you.
<unk>.
23 or is that more trained 24 contribution given the focus from investors on your train training.
You're looking to sort of clarify.
How much of a step up in the contribution from those calls seems are you expecting going from Duane Duane Duane ready for.
Yeah.
The $150 million a annualized number.
And we would expect to see about 60% of that number.
Actually.
Our our financials in 2023.
Okay.
And for a follow up just wondering reach them to be detrimental margins for seeing or deep some margin.
Six years sequence you need it seems like you sort of gave up about hundred striking more than 100 million of revenue with those 70 million feels funny, but I'm just wondering what's.
What's going on.
True does it sort of moderate as we go forward, even if revenues to sort of continue to move down sequencing.
Yeah, I think the you know and see see us.
You know with the with the volumes being down I mean.
We're we're all aware adjusting our factory costs, there's a little bit of them absorption hip we have I think the other thing that we see in the P. C S.
As you know, there's a fair amount of mix and Ccs.
Know what I would generally say is particularly on our broadband business, our cable business is down less than our connectivity business.
Our connectivity business has a little bit higher margins than cable. So some of the margin changes yeah, you've got an impact because you're volumes are down and you're taking a little bit of a fixed cost absorption.
But you also are seeing you know within the C. C. S business. Some of the myths changes I mean, I don't think there's anything as this thing normalizes back on a on a volume basis. You know I don't think there's anything that would say that the profile of margins that we saw on 22 that you know I think those those would be the margins.
We can get back to you and then you know as we continue to drive.
Efficiency programs, we would expect to get you know improvement against those margins you know as we continue to move forward.
Thank you thanks for taking my questions.
Thank you one moment planes.
Our next question comes from the line of Simon Leopold I've Raymond James Your line is open.
Great. Thank you for taking the question.
First one is I I do appreciate that your typical seasonality is quite different than.
Some other Oems that sell into the the operators.
Seasonality is sort of wacky.
<unk> for for this sort of post pandemic environment, but if I think about.
What are they the others were exposed to similar customers, whether it's in mobility or fiber to the home.
They've talked about flattish.
Quentin trends in September and then.
Sort of strong seasonal.
Upticks in December .
I I I I'm trying to do a little bit of a compare and contrast to those guys and I'm. Just wondering how you sort of think about the the cadence for the balance of the year.
But I think I think as we think I mean, clearly we've got a fairly substantial mixed on our business right cause cause you know businesses like Inf's I think as we mentioned our prepared remarks.
[noise] euro or outside and that you know there there is some seasonality with that you know as we get projects coming through as we get some license revenue that can have an impact and I think we feel like that he was going to have an impact positively for like the a and that's business I think when we.
When we think about the other businesses.
I think the way that maybe we can characterize our forecast is.
If we see order rates continue to pick up.
We will be on the high end of our guidance, if we see order rates stabilize it Q2 levels were gonna be at the lower end.
So I don't know if that answers your question, but I think as you think about the rest of the year and R. R. R Guy posts that we provided.
I think that's that's how we're thinking about it hey, we see some recovery here, we can get to that high end of the range. If we don't and we see this thing stabilize out it will be at the lower end.
Just to give a little more color.
Some we typically do see Ah December pickup because normally they're trying to spend capex right at the end of the year. So that's not unusual.
Great and then just as as my follow up on the campus related products that the rockets brand.
It's a bit puzzling and that I think almost every single participant in the industry with one teeny exception sounds very upbeat and so we know not everybody can gain share and the market has been good for it for some time and we're getting through correction.
So I I I'm hearing more and more concerns about slowing in 2024 or wireless plan and and campus sort of posted.
Catch up on backlog.
How were you thinking about that business.
Maintaining this kind of momentum into the next year. Thanks.
Sure. Thank you.
It's really about the I would say the R&D and the and the vertical market strategies that we have.
Specifically with R&D are.
A ruckus one solution with AI as getting launched we're gonna have a wifi seven launching at the end of this year and we're also going to have more software as a service that we've really invested heavily in that business and we're going to start to see the benefits of those things. Additionally, we have a very targeted approach, where we're very well known.
And several different segments.
So as we add you know as we add.
Like we have five verticals, we might add one vertical year, but we began pretty hard there. So that's why we see the initiatives and the girls plants coming from.
Thanks for taking the question.
You think you're welcome Sir Thank you.
Thank you and it looks like we're out of time for questions I'd like to turn the call over to check traveling for any closing remarks.
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