Q4 2023 CommScope Holding Co Inc Earnings Call

Operator: Good day, and thank you for standing by. Welcome to CommScope's 2023 full year and fourth quarter results 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. To ask a question during the session, you'll need to press star 11 on your telephone.

Good day, and thank you for standing by walk into Commscope 2023 full year at fourth quarter results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session I'll need to press star one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please.

Operator: You will then hear an automated message device when your hand is raised. To withdraw your question, please press star 11 again. Please be advised, today's conference is being recorded. I would like to hand the conference over to your speaker today, Massimo DiSabato, Vice President, Investor Relations. Please go ahead.

Speaker Change: Spread star wouldn't want again, please be advised today's conference is being recorded I would like to send the cops over the speaker today must motor Saboteur, Vice President Investor Relations. Please go ahead.

Massimo DiSabato: Good morning, and thank you for joining us today to discuss CommScope's 2023 full year and fourth quarter results. I'm Massimo DiSabato, Vice President of Investor Relations for CommScope, and with me on today's call are Chuck Treadway, President and CEO, and Kyle Lorentzen, Executive Vice President and CFO. You can find the slides that accompany this report on our investor relations website.

Speaker Change: Good morning, and thank you for joining us today to discuss Commscope 2023 full year in fourth quarter results.

Saboteur: <unk> is having a vice president of Investor Relations for Commscope and with me on today's call are trapped treadway, President and CEO and <unk> Executive Vice President and CFO.

Saboteur: You can find the slides that accompany this report on an Investor Relations website.

Massimo DiSabato: Please note that some of our comments today will contain forward-looking statements based on our current view of the business and Actual Future Results Made Different Materials. Please see our recent SEC filings, which identify the principal risks and uncertainties that could affect our future results. Before I turn the call over to Chuck, I have a few housekeeping items to review.

Saboteur: Please note that some of our comments today will contain forward looking statements based on our current view of the business.

Saboteur: An actual future results may differ materially.

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

Speaker Change: Before I turn the call over to Chuck I have a few housekeeping items to review.

Massimo DiSabato: Today we will discuss certain adjusted and non-GAAP financial measures, which are described in more detail in this morning's earnings. 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 full year and quarterly growth rates described during today's presentation are on a year-over-year basis unless otherwise noted. I'll now turn the call over to our President and CEO, Chuck Tripp. Thank you, Massimo. Good morning, everyone.

Chuck: Today, we will discuss certain adjusted and non-GAAP financial measures, which are described in more detail in this morning's earnings materials.

Chuck: Reconciliations of non-GAAP financial measures and other associated disclosures are contained in our earnings materials and posted on our website.

Chuck: All references during today's discussion will be to our adjusted results.

Chuck: All full year in quarterly growth rates described during today's presentation around a year over year basis, unless otherwise noted.

Chuck: I will now turn the call over to our President and CEO Chuck Tranqully.

Charles L. Treadway: Thank you <unk> good morning, everyone I'll be beginning on slide too.

Charles L. Treadway: I'll be beginning on slide two. Before getting into details of our quarter, I want to address the current state of our business and changes since our last call. The business continues to be under significant pressure as demand remains low, and we continue to have minimal visibility into when a recovery will occur.

Charles L. Treadway: Before getting in the details of our quarter I want to address the current state of our business and changes since our last call the.

Charles L. Treadway: The business continues to be under significant pressure as demand remains low.

Charles L. Treadway: We continue to have minimal visibility to winter recovery will occur.

Charles L. Treadway: During the quarter, we also experienced unexpected significant downward pressure on our NICS and ANS businesses. We're now in a position where all of our segments are dealing with market demand challenges. Although we have seen some slight uptick in demand in our OWN and CCS segments, we expect a very difficult first half and specifically first quarter.

Charles L. Treadway: During the quarter, we also experienced unexpected significant downward pressure and our next <unk> businesses.

Charles L. Treadway: We are now in a position where all of our segments are dealing with market demand challenges.

Although we have seen some slight uptick in demand in our <unk> and Ccs segment.

Charles L. Treadway: We expect a very difficult first half and specifically first quarter.

Charles L. Treadway: We expect the first quarter revenue and adjusted EBITDA to be substantially lower than the fourth quarter of 2023. Starting with annual results, CORE CommScope delivered net sales of $5.79 billion, decreasing 23% from the prior year. The decline in revenue resulted in core adjusted EBITDA of $1.02 billion, a decrease of 18% from the prior year, meeting our previously provided $1.00 to $1.05 billion core adjusted EBITDA range provided on our last call. Moving to the fourth quarter.

Charles L. Treadway: We expect the first quarter revenue and adjusted EBITDA to be substantially lower than the fourth quarter of 2023.

Charles L. Treadway: Starting with annual results core Commscope delivered net sales of $579 billion.

Charles L. Treadway: Increasing 23% from the prior year.

Charles L. Treadway: The decline in revenue resulted in core adjusted EBITDA of $1.02 billion, a decrease of 18% from the prior year.

Charles L. Treadway: Meeting or previously provided 1.00 to 1.05 billion dollar core adjusted EBITDA range provided on our last call.

Charles L. Treadway: Shifting to the fourth quarter.

Charles L. Treadway: CommScope delivered core net sales of $1.186 billion and core adjusted EBITDA of $199 million for the fourth quarter of 2023. Our fourth quarter continued to be impacted by lower customer orders driven by lower market demand and a larger than expected customer inventory buildup. As I've mentioned in past calls, we continue to control what we can control. We're the market leader in most of our businesses, with capacity in place to meet expected future demand. This capacity, as well as our new product offerings, positions us well for when demand does recover. In addition, as referenced on our third-quarter call, we are managing our cost structure, including a plan to take out $100 million of annual costs.

Charles L. Treadway: Sounds scope delivered coordinate sales of 118 $6 billion in core adjusted EBITDA of $199 million for the fourth quarter of 2023.

Charles L. Treadway: Our fourth quarter continued to be impacted by lower customer orders, driven by lower market demand and larger than expected customer inventory buildup.

Charles L. Treadway: As I mentioned in past cause we continue to control what we can control.

Charles L. Treadway: We are the market leader and most of our businesses with capacity in place to meet expected future demand.

Charles L. Treadway: This capacity as well as our new product offerings physicians as well for when the demand does recover.

Charles L. Treadway: In addition, as referenced on our third quarter call. We are managing our cost structure, including a plan to take out $100 million of annual cost.

Charles L. Treadway: Now I'd like to give you an update on each of our businesses. As we indicated in previous calls, CCS has strong long-term market tailwinds, including significant spending commitments expected to start late in 2024 and into 2025, driven by the continued build-out of fiber networks and data centers. We have seen some small but inconsistent upticks in order rates in some product lines as customers are reaching normalized inventory levels. I don't think we're ready to declare this as the beginning of a recovery, but these small indicators give us some evidence of a potentially stronger second half of 2024 and a return to growth. As we turn our focus to helping our customers meet the objectives of connecting the United States with reliable broadband connectivity, we have developed a series of products and solutions focused on rural broadband architectures, meeting the needs of Build America, Buy America requirements, or otherwise known as BABA.

Charles L. Treadway: Now I'd like to give you an update on each of our businesses.

As we indicated in previous calls Ccs as strong long term market tailwinds, including significant spending commitments expected to start late in 2024 and into 2025, driven by continued buildout, a fiber networks and data centers.

Charles L. Treadway: We are seeing some small but inconsistent upticks.

Charles L. Treadway: An order rates and some product lines as customers are reaching normalised inventory levels.

Charles L. Treadway: I don't think we're ready to declare this is the beginning of a recovery, but these small indicators give us some evidence of a potentially stronger second half of 2024 and returned to growth.

Charles L. Treadway: As we turn our focus to helping our customers meet the objectives of connect in the United States with reliable broadband connectivity.

Charles L. Treadway: We have developed a series of products and solutions focused on rural broadband architectures meeting the needs of build America by America requirements or otherwise known as Barbara.

Charles L. Treadway: Outside of the broadband investments were also encouraged by developments in our building a data center portion of our Ccas business.

Charles L. Treadway: Supporting our enterprise customers.

Charles L. Treadway: As you're aware significant momentum is occurring on the cloud and AI side of data centers.

Charles L. Treadway: We have also seen a boost in our hyperscale and cloud business as a result.

Charles L. Treadway: Sporting investments and Jen AI projects with key customers.

Charles L. Treadway: As we invest in new products and technologies, we are well positioned to take advantage of growth in this market.

Charles L. Treadway: Outside of the broadband investments, we are also encouraged by developments in our building and data center portion of our CCS business, supporting our enterprise customers. As you are aware, significant momentum is occurring on the cloud and AI side of data centers. We have also seen a boost in our hyperscale and cloud business as a result. Supporting Investments in Gen AI Projects with Key Customers

Charles L. Treadway: We have also found some new momentum with our innovation of our system X 2.0 structured cable solutions offering new products for in building solutions.

Charles L. Treadway: And Ccs, we continue to be aggressive with our cost structure, we're looking.

Charles L. Treadway: At additional opportunities to drive efficiency.

Charles L. Treadway: There are still value that we can drive on the cost side.

Charles L. Treadway: We remain bullish on Ccs as a result of the long term market Tailwinds and our strong position in this market.

Ccs will recover is just a matter of timing and degree.

Charles L. Treadway: Turning to Nix the business had a standout year, even after the slower than predicted fourth quarter.

Charles L. Treadway: As we invest in new products and technologies, we are well-positioned to take advantage of growth in this market. We have also found some new momentum with our innovation of our Systemax 2.0 Structured Table Solutions, offering new products for in-building solutions. In CCS, we continue to be aggressive with our cost structure, and we are looking at additional opportunities to drive efficiency.

Charles L. Treadway: The team worked extremely hard to introduce new products and solutions to the market.

Charles L. Treadway: The wreckage team was one of the first to market the new Wifi seven enterprise grade access point and nearly doubled the tax rate of a ruckus, one and rockets AI solutions.

Charles L. Treadway: Our full year 2023, adjusted EBITDA in next $225 million is up $173 million over prior year.

Charles L. Treadway: Our Commscope next initiatives program is supported the improvement in this business.

Charles L. Treadway: There's still value that we can drive on the cost side. We remain bullish on CCS as a result of the long-term market tailwinds and our strong position in this market. CCS will recover. It's just a matter of timing and degree.

Charles L. Treadway: We're not done as we continue to evaluate every aspect of this business for incremental opportunities, including investing in the next generation of products solutions and sauce.

Charles L. Treadway: A ruckus, one sweet and Wifi seven enterprise class access point products are also contributing to the new technology refresh.

Charles L. Treadway: Turning to next, the business had a standout year even after the slower than predicted fourth quarter. The team worked extremely hard to introduce new products and solutions to the market. The Ruckus team was one of the first to market the new Wi-Fi 7 enterprise-grade access point and nearly doubled the attach rate of our Ruckus 1 and Ruckus AI solutions.

Charles L. Treadway: That is in the early phases.

Charles L. Treadway: Our next business was also supported by the strong ICM performance led by the desk business, providing in building five G connectivity.

Charles L. Treadway: With that said our next segment and specifically Ruckus is under substantial short term pressure as demand significantly declined in the last quarter driven by too much inventory in the system and slower demand.

Charles L. Treadway: The level of this demand adjustment is much more severe than what we had expected and are leading indicators identified.

Charles L. Treadway: Our full year 2023 adjusted EBITDA in NICS of $225 million is up $173 million over the prior year. Our CommScope Next Initiatives Program has supported the improvement in this business. We're not done, as we continue to evaluate every aspect of this business for incremental opportunities, including investing in the next generation of product solutions and SaaS. Our Ruckus One Suite and Wi-Fi 7 Enterprise Class Access Point products are also contributing to the new technology refresh, which is in the early phases.

Charles L. Treadway: Although our final remains strong purchasing decisions are being pushed to future periods.

Charles L. Treadway: We expect the lower demand will continue throughout the first half of this year.

Charles L. Treadway: As inventory as suggested in demand drivers reset.

The results of the reduced demand for Ruckus product will be a key contributor to our overall sequential decline from the fourth quarter of 2023 to the first quarter of 2024.

Charles L. Treadway: And <unk> and as we mentioned in previous calls 2023 saw a decline in the U S carrier capital spent.

Charles L. Treadway: As with Ccs visibility remains limited.

Charles L. Treadway: During the fourth quarter and early in the first quarter, we have seen some slight recovery and order rates.

Charles L. Treadway: Our NICS business was also supported by the strong ICM performance led by the DAS business providing in-building 5G connectivity. With that said, our next segment, and specifically Ruckus, is under substantial short-term pressure, as demand significantly declined in the last quarter, driven by too much inventory in the system and slower demand. The level of this demand adjustment is much more severe than what we had expected and what our leading indicators identified.

Charles L. Treadway: We're not calling this a recovery, but it is a start.

Charles L. Treadway: Based on our conversations with customers 2024 will continue to be a challenging year.

Charles L. Treadway: We would expect the 2024 will look similar to what we saw in 2023, but with a stronger second half of the year.

Charles L. Treadway: Again as previously stated we continue to focus on what we can control and will be ready to support our customers when they are ready.

In addition, we continue to develop and commercialize new products.

Charles L. Treadway: We have discussed the mosaic antanas solution in the past and are seeing increased traction around the world.

Charles L. Treadway: Although our funnel remains strong, purchasing decisions are being pushed to future periods. We expect lower demand will continue throughout the first half of this year as inventory is digested and demand drivers reset. The results of the reduced demand for Ruckus products will be a key contributor to our overall sequential decline from the fourth quarter of 2023 to the first quarter of 2024. In OWN, as we mentioned in previous calls, 2023 saw a decline in U.S. carrier capital spend. As with CCS, visibility remains limited.

Charles L. Treadway: We have also introduced our new seed base station antenna solution aimed at delivering 15% greater efficiency at a fixed power level.

Charles L. Treadway: Again like we are in Ccs, we are well positioned in the market and feel like we will benefit when the market recovers.

Finishing with an S. As we have discussed in 2000 twenty-three. This segment is made a successful transition to a leading supplier edge related products, including nodes amplifiers, RPG and R&D modules and remote loyalties for note part.

Charles L. Treadway: We have done this while continuing to support our large installed base of cmt's products across multiple architectures.

Charles L. Treadway: We introduced the first <unk> amplifier made.

Charles L. Treadway: During the fourth quarter and early in the first quarter, we saw some slight recovery in order rates. We're not calling this a recovery, but it is a start. Based on our conversations with customers, 2024 will continue to be a challenging year. We would expect that 2024 will look similar to what we saw in 2023, but with a stronger second half of the year.

Charles L. Treadway: Made headway with our virtual C NTS solution and.

Charles L. Treadway: And paid the transitional paths of DOCSIS 4.0 architecture.

Charles L. Treadway: We also launched our DOCSIS $3, one enhanced solution, enabling operators to offer services between five and eight gigabit per second through the use of new N home DOCSIS CPE.

Charles L. Treadway: Along with enhanced E 6000 software.

Charles L. Treadway: We are bullish on DOCSIS 4.0 upgrades and we will likely see increased momentum in the latter part of 2024.

Charles L. Treadway: Again, as previously stated, we continue to focus on what we can control, and we'll be ready to support our customers when they are ready. In addition, we continue to develop and commercialize new products. We have discussed the Mosaic Antenna Solution in the past and are seeing increased traction around the world. We have also introduced our new SEED Base Station Antenna Solution, aimed at delivering 15% greater efficiency at a fixed power level.

Charles L. Treadway: On both DOCSIS three one E and virtual CMT S. We have trials under way with major Msos.

Charles L. Treadway: Over in the quarter as expected our customers were faced with larger than expected inventory and adjusted shipments to right size their inventory.

Charles L. Treadway: In addition, some of our customers have announced slower than expected ramps on their doctors 4.0 upgrade projects.

Charles L. Treadway: As a result of these two issues order rates and revenues will be negatively impacted and the first few quarters.

Charles L. Treadway: This impact will be a key contributor to our overall sequential decline from the fourth quarter of 2023 for the first quarter of 2024.

Charles L. Treadway: Again, like we are in CCS, we are well positioned in the market and feel like we will benefit when the market recovers. Finishing with ANS, as we've discussed, in 2023, the segment will make a successful transition to a leading supplier of edge-related products, including nodes, amplifiers, RPD and RMB modules, and remote OLTs for node PONs. We have done this while continuing to support our large installed base of CMTS products across multiple architectures. We introduced the first FDX amplifier, made headway with our virtual CMTF solution, and paved the transitional path to DOCSIS 4.0.

Charles L. Treadway: We understand that our message is not ideal as we navigate through the challenging market conditions a capital structure.

Charles L. Treadway: We are well positioned for a market recovery and a recovery will occur.

Charles L. Treadway: The timing and intensity of that recovery continues to be uncertain.

Charles L. Treadway: Although we are in regular dialogue with our customers and evaluate market data and projections understanding demand drivers has been difficult for us and our competitors.

Charles L. Treadway: In most cases projections have been incorrect.

Charles L. Treadway: The uncertainty is not optimal as we continue to manage cash and capital structure.

Charles L. Treadway: And we will continue to control what we can.

Charles L. Treadway: And with that I'd like to turn things over to Kyle to talk more about our fourth quarter results.

Kyle: Thank you Chuck and good morning, everyone.

Charles L. Treadway: We also launched our DOCSIS 3.1 enhanced solution, enabling operators to offer services between 5 and 8 gigabits per second through the use of new in-home DOCSIS CPE, along with enhanced E6000 software. We are bullish on DOCSIS 4.0 upgrades, and we will likely see increased momentum in the latter part of 2024. On both DOCSIS 3.1e and virtual CMTS, we have trials underway with major MSOs.

Kyle: Start with an overview.

Of our full year 2023 results on slide three.

Kyle: For the full year consolidated Commscope reported net sales of $5.79 billion, a decrease of 23% from the prior year.

Kyle: This performance was driven by a decline in all businesses with the exception of next.

It should be noted that due to the home transaction Ulm is now being reported as discontinued operations.

Consolidated adjusted EBITDA of $999 million decreased 18% from the prior year.

Charles L. Treadway: However, in the quarter, as expected, our customers were faced with larger-than-expected inventory and adjusted shipments to right-size their inventory. In addition, some of our customers announced slower-than-expected ramps on their DOCSIS 4.0 upgrade projects. As a result of these two issues, order rates and revenues will be negatively impacted in the first few quarters. This impact will be a key contributor to our overall sequential decline from the fourth quarter of 2023 to the first quarter of 2024. We understand that our message is not ideal as we navigate through challenging market conditions and capital structure. However, we are well positioned for a market recovery, and a recovery will occur. The timing and intensity of that recovery continue to be uncertain.

Kyle: Adjusted EBITDA declined for the full year across all segments with the exception of next.

Kyle: Justin earnings per share of 64 <unk>.

Kyle: Increased by 61% from the prior year as.

Kyle: As a result of our annual goodwill impairment testing, we recorded $145 for.

Kyle: 4 million dollar impairment charge during the fourth quarter, which is excluded from the adjuster earnings per share calculation.

Kyle: For the full year core Commscope reported net sales are $579 billion, a decrease of 23% from the prior year.

Kyle: Net sales decline was led by a significant year over year decrease in Ccs followed by O W. N.

Kyle: While partially offset by growth in next.

Kyle: Or adjusted EBITDA for the full year was $102 billion, a decrease of 18% from the prior year and look are expected rain.

Charles L. Treadway: Although we are in regular dialogue with our customers and evaluate market data and projections, understanding demand drivers has been difficult for us and our competitors. In most cases, projections have been incorrect.

Kyle: Range for the full year 2023 that we provided in our third quarter call.

Kyle: Similar to net sales core adjusted EBITDA decline was driven by decreases in Ccs O W. L and an S. While being partially offset by an increase in next.

Kyle D. Lorentzen: The uncertainty is not optimal as we continue to manage cash and capital structure, and we will continue to control what we can. And with that, I'd like to turn things over to Kyle to talk more about our fourth quarter results. Thank you, Chuck, and good morning, everyone.

Kyle: Now turning to slide four.

Kyle: For the fourth quarter consolidated Commscope reported net sales of 118 $6 billion, a decrease of 38% from the prior year.

Kyle: By declines in all segments.

Kyle D. Lorentzen: I'll start with an overview of our full year 2023 results on slide three. For the full year, Consolidated CommScope reported net sales of $5.79 billion, a decrease of 23% from the prior year. This performance was driven by a decline in all businesses, with the exception of Nick. It should be noted that due to the HOME transaction, HOME is now being reported as a discontinued operation. Consolidated adjusted EBITDA of $999 million decreased 18% from the prior year. Adjusted EBITDA decline for the full year across all segments, with the exception of NIT. Adjusted earnings per share of 64 cents decreased by 61% from the prior year. As a result of our annual goodwill impairment testing, we recorded a $145.4 million impairment charge during the fourth quarter, which is excluded from the Adjusted Earnings Per Share calculation.

Kyle: Suggested EBITDA of $191 million decreased by 49%.

Kyle: Adjusted EPS was negative two cents per share.

Kyle: We experienced lower revenue driven by our customers continuing to manage inventory and overall lower market demand.

Kyle: Customers continue to manage their capital spend including pushing out some network upgrades.

Kyle: A core Commscope net sales of 118 $6 billion declined 38% from the prior year and adjusted EBITDA of $199 million decreased 48%.

Kyle: As we have experienced lower orders core commscope backlog continued to decrease and ended the quarter at $1.152 billion.

Kyle: A decrease of 26% versus the end of the third quarter.

Kyle: And all of our businesses, we're back to normalize backlog levels.

Kyle: As a result of the normalized backlogs order rates are going to be the direct driver of revenue as we move into 2024.

Kyle: Turning now to our fourth quarter segment highlights on slide five.

Kyle D. Lorentzen: For the full year, Core CommScope reported net sales of $5.79 billion, a decrease of 23% from the prior year. The net sales decline was led by a significant year-over-year decrease in CCS, followed by OWN, and ANS, while partially offset by growth. Core Adjusted EBITDA for the full year was $1.02 billion, a decrease of 18% from the prior year and in line with our expected range for the full year 2023 that we provided in our third quarter call. Similar to net sales, the core adjusted EBITDA decline was driven by decreases in CCS, OWN, and ANS, while being partially offset by an increase in net income. Now turning to slide four. For the fourth quarter, Consolidated CommScope reported net sales of $1.186 billion, a decrease of 38% from the prior year, driven by declines in all segments. Adjusted EBITDA of $191 million decreased by 49%. Adjusted EPS was negative two cents per share.

Kyle: Starting with Ccs net sales of $556 million decreased 42% from the prior year.

Kyle: Ccs adjusted EBITDA of $84 million was a decrease of 55% from the prior year driven primarily by the drop in revenue.

Kyle: We saw some slight increases in order rates during the quarter.

Kyle: However, these orders rates still remained low relative to historical levels.

Kyle: Although ccf's customer conversations remain bullish on medium and long term growth.

Kyle: The short term demand profile remains very uncertain.

Kyle: Based on current visibility, we expect to see lower Ccf's EBITDA in the first quarter of 2024 that we realized in the fourth quarter of 2023.

Next net sales of $217 million decreased by 25% versus the fourth quarter of 2022.

Kyle: From a business unit perspective, raucous led the way decreasing 35% and ICM decreased 6%.

Kyle: Next adjusted EBITDA of $29 million decreased 48% from the prior year.

Kyle: 27 million dollar change primarily driven by.

Kyle D. Lorentzen: We experience lower revenue driven by our customers continuing to manage inventory and overall lower market demand. Additionally, customers continue to manage their capital spend, including pushing out some network upgrades. For CoreCommScope, net sales of $1.186 billion declined 38% from the prior year, and adjusted EBITDA of $199 million decreased 48%.

Kyle: Klein and rockets revenue.

Kyle: The next segment full year 2023 adjusted EBITDA.

Kyle: It's $225 million, an improvement of $173 million versus prior year.

Kyle: And raucous as we have worked through supply chain constraints and release product out a backlog order rates have declined as channel partners Digest inventory.

Kyle: This is a temporary situation and we expect order rates to return in the second half of 2024.

Kyle D. Lorentzen: As we have experienced lower orders, Core CommScope backlog continued to decrease and ended the quarter at $1.152 billion, a decrease of 26% versus the end of the third quarter. In all of our businesses, we're back to normalized backlog life. As a result of the normalized backlogs, order rates are going to be the direct driver of revenue as we move into 2025. Turning now to our fourth quarter segment highlights on slide five. Starting with CCS, net sales of $556 million decreased 42% from the prior year.

Kyle: All of our other leading indicators point to continued strong demand for our products. However.

Kyle: However, customers are pushing demand out.

Kyle: Based on latest market information the raucous market will decline in 2024.

Kyle: We are excited about our continued product development, specifically are raucous, one and Wi Fi seven products.

Kyle: We feel that we are well positioned to continue to take market share and the medium and long term.

Kyle: Overall and next we expect significant pressure.

Kyle: An adjusted EBITDA in the first quarter of 2024 versus the fourth quarter of 2023.

Kyle: However, we are expecting to recovery in the second half of 2024 is the market Digest inventory built in the second and third quarters of 2023.

Kyle D. Lorentzen: CCS's adjusted EBITDA of $84 million was a decrease of 55% from the prior year, driven primarily by the drop in revenue. We saw some slight increases in order rates during the quarter. However, these order rates still remain low relative to historical.

Kyle: O W. N net sales of $183 million decreased 40% from the prior year and across the majority of the business units.

Kyle: Similar to Ccs customers indicated a stronger second half that did not materialize.

Kyle D. Lorentzen: Although CCS customer conversations remain bullish on medium and long-term growth, the short-term demand profile remains very uncertain. Based on current visibility, we expect to see lower CCS EBITDA in the first quarter of 2024 than we realized in the fourth quarter of 2020. Nick's net sales of $217 million decreased by 25% versus the fourth quarter of 2022. From a business unit perspective, Ruckus led the way, decreasing 35%, and ICN decreased 6%. Nick Suggested EBITDA of $29 million decreased 48% from the prior year.

The manned in this segment remains soft with limited visibility.

Kyle: Numerous continue to limit new bills and are working down inflated inventories.

Kyle: Although we have aggressively manage costs.

Kyle: <unk> adjusted EBITDA of $31 million declined 24% from the prior year.

Call in the fourth quarter of 2022, we had a 21 million dollar bad depth charge related to one specific O W. One customer.

Kyle: In early 2024, we have seen some pick up an R. O W. N order rates, we expect first quarter revenue and adjusted EBITDA to be in line with fourth quarter 2023.

Kyle: <unk> net sales of $231 million decreased 38% from the prior year due to customer inventory adjustment and project delays.

Kyle D. Lorentzen: $27 million change, primarily driven by Klein and Ruckus revenue. The next segment, full year 2023 adjusted EBITDA. $225 million, an improvement of $173 million versus the prior year, in ruckus as we have worked through supply chain constraints and released product out of the bat. Order rates have declined as channel partners Digest and, This is a temporary situation, and we expect order rates to return in the second half of 2025. All of our other leading indicators point to continued strong demand for our products. However, customers are driving demand. Based on the latest market information, the ruckus market will decline in 2024.

Kyle: And asked adjusted EBITDA of $54 million was down $41 million or 43% from the prior year driven by lower revenue.

Kyle: As mentioned on previous calls several of our large customers approached us about lowering order rates as they dealt with higher inventory levels and delayed timing on upgrades.

Kyle: Had an impact on our fourth quarter revenues.

Kyle: Also we expect these adjustments to have a significant impact on the first half of 2024.

Kyle: Despite the short term challenges and continues to position itself to take advantage of the docks is 4.0 upgrade cycle.

Kyle: We are the only supplier that can supply all the products from amplifiers nodes modules and see MTS, including virtual crts.

Kyle D. Lorentzen: We are excited about our continued product development, specifically our Ruckus 1 and Wi-Fi 7 products. We feel that we are well positioned to continue to gain market share in the medium and long term. Overall, on NICS, we expect significant pressure on adjusted EBITDA in the first quarter of 2024 versus the fourth quarter of 2022. However, we are expecting a recovery in the second half of 2024 as the Market Digest Inventory built in the second and third quarters of 2023. OWN net sales of $183 million decreased by 40% from the prior year and across the majority of the business.

Kyle: Finally during the quarter we.

Kyle: We made progress on the divestiture of our home business to Vancouver that finalized in early January 2024.

Kyle: Feel this combination best positions the business for success in a challenging market.

Kyle: Feel this is the best outcome for our customers and shareholders are.

Kyle: Ownership position in van Taylor will allow us to take advantage of the combined scale of the two businesses as well as a substantial synergies the combination will deliver.

Kyle: All net sales were $294 million declining twenty-five percent from the prior year essentially across all business units driven by customer inventory adjustments and lower demand.

Kyle: <unk> EBITDA of negative $46 million decreased from negative $5 million versus prior year as a result of a one time charge related to the sale.

Kyle D. Lorentzen: Similar to CCS, customers indicated a stronger second half that did not materialize. Demand in this segment remains soft with limited visibility. Customers continue to limit new builds and are working down inflated inventory. Although we have aggressively managed costs, OWN adjusted EBITDA of $31 million declined 24% from the prior year.

Kyle: Turning to slide six for an update on cash flow.

Kyle: During the quarter, we generated cash from operations of $60 million.

Kyle: We continue to reduce inventory.

Kyle: As previously discussed we're still holding excess inventory driven by the supply chain constraints in 2021 and 2022.

Kyle: As revenue declines it delays our ability to monetize this excess inventory.

Kyle: Despite the revenue and EBITDA challenges, we delivered 2023 adjusted free cash flow of $382 million, which was above the 300 or 350 million dollar range provided on the third quarter earnings call.

Kyle D. Lorentzen: Recall, in the fourth quarter of 2022, we had a $21 million bad debt charge related to one specific OWN customer. In early 2024, we have seen some pickup in OWN order rates. We expect first quarter revenue and adjusted EBITDA to be in line with fourth quarter 2020. ANF net sales of $231 million decreased 38% from the prior year due to customer inventory adjustment and project delay.

Based on the lack of visibility we are not providing cash flow guideposts I would highlight that historically first quarter as a quarter was significant use of cash driven.

Kyle: Driven by a high cash interest payment quarter and incentive payouts.

Kyle: This coupled with our lower EBITDA is going to result in a significant use of cash in the first quarter.

Kyle: Turning to slide seven for an update on our liquidity and capital structure.

Kyle: During the fourth quarter or cash and liquidity remains strong we ended the quarter with $544 million in global cache and total available cash and liquidity of over $1.2 billion.

Kyle D. Lorentzen: ANS adjusted EBITDA of $54 million was down $41 million, or 43% from the prior year, driven by lower revenue. As mentioned on previous calls, several of our large customers approached us about lowering order rates as they dealt with higher inventory levels and delayed timing on upsells. This had an impact on our fourth quarter revenue. Also, we expect these adjustments to have a significant impact on the first half of 2024. Despite the short-term challenges, ANS continues to position itself to take advantage of the DOCSIS 4.0 upgrade cycle. We are the only supplier that can supply all the products from amplifiers, nodes, modules, and CMTS, including virtual, finally, during the quarter.

Kyle: During the quarter, we increased our cash balance by $25 million we.

Kyle: We did not draw on our ABL revolver during the fourth quarter, and therefore ended the quarter with no outstanding balance.

Kyle: It should be noted that we lost approximately $125 million of liquidity on our ABL with the home divestiture in early 202004.

Kyle: And the fourth quarter, we continued to execute our debt buyback program and repurchased $106 million of our long term debt for cash considerations of $51 million <unk>.

Kyle: To add more detail, we repurchase $52 million of the 8% to 5% senior notes do 2027 and.

Kyle: $54 million of the 712, 5% senior notes do 2028.

Kyle D. Lorentzen: We made progress on the divestiture of our home business to Vantiva, which finalized in early January 2024. We feel this combination best positions the business for success in a challenging market. We feel this is the best outcome for our customers and shareholders. Our ownership position in Vantiva will allow us to take advantage of the combined scale of the two businesses, as well as the substantial synergies the combination will deliver. Home net sales were $294 million, declining 25% from the prior year, essentially across all business units, driven by customer inventory adjustments and lower demand. Home Adjusted EBITDA of negative $46 million decreased from negative $5 million versus the prior year as a result of a one-time charge related.

Kyle: Since the beginning of 2023, we have repurchase $217 million of debt.

Kyle: During the quarter, we also pay the required $8 million a term loan amortization.

The company ended the quarter with net leverage ratio of 8.0.

Kyle: Going forward, we intend to use cash opportunistically to buy back securities across the breadth of our capital structure.

Kyle: Now turning to slide eight or I will conclude my prepared remarks, with some commentary around our expectations for 2024.

Kyle: Based on the lack of visibility to a market recovery, we are not providing updated annual guide posts.

Kyle: Current order rates remain historically low as we are dealing with lower market demand.

Kyle: Visibility to the first quarter indicates a very difficult quarter from a revenue adjusted EBITDA and cash perspective.

Kyle: <unk> continues to be challenged as many of our large customers are adjusting inventory and delaying upgrades.

Kyle: Nick saw significant reset a demand from our channel partners as we release backlog in the middle of 2023.

Kyle D. Lorentzen: Turning to slide six for an update on cash, during the quarter, we generated cash from operations of $60 million and continued to reduce inventory. As previously discussed, we are still holding excess inventory driven by supply chain constraints in 2021 and 2022. As revenue declines, it delays our ability to monetize this excess inventory. Despite the revenue and EBITDA challenges, we delivered 2023 adjusted free cash flow of $382 million, which was above the $300 to $350 million range provided in the third quarter earnings. Based on the lack of visibility, we are not providing cash flow guideposts.

Kyle: Although we expect some impact of the rockets backlog release, the magnitude and length of this adjustment was unexpected.

Kyle: Are leading indicators continue to point to strong demand for roughest products.

Kyle: All of our customers are pushing out this demand more aggressively than we have seen in the past.

Kyle: All of our businesses are dealing with depress demand as a result of these challenges our first quarter adjusted EBITDA will be in the 100 to 125 million dollar range.

Kyle: Based on conversations with customers, we expect to see a revenue pick up in the second half of the year. We have seen some increase in ccf's, an O W and order rates.

Kyle: Although it is too early to determine the staying power of these increases it does provide some indication that demand may be returning.

Kyle: The state the obvious however, if we don't see a meaningful recovery in the second half we should be prepared for 2024 adjusted EBITDA in cash flow to be significantly lower than 2023, adjusted EBITDA in cash flow.

Kyle D. Lorentzen: I would highlight that historically, the first quarter is a quarter with a significant use of cash driven by a high cash interest payment quarter and incentive payout. This, coupled with our lower EBITDA, is going to result in a significant use of cash in the first quarter. Turning to slide seven for an update on our liquidity and capital structure, during the fourth quarter, our cash and liquidity remained strong. We ended the quarter with $544 million in global cash and total available cash and liquidity of over $1.2 billion. During the quarter, we increased our cash balance by $25 million.

Kyle: In summary, we are in a passive telcom cable and hardware recession as mentioned previously the challenge with the current position is the lack of visibility.

Kyle: Even despite some visibility into customer inventories customer short term build plans remain uncertain.

Kyle: The market will recover the question remains when at what level.

Kyle: We are still bullish on medium and long term growth. However.

Kyle: However, short term challenges are significant.

Kyle: We continue to control, what we can control, including implementing the $100 million of annual cost reductions discussed on our prior call.

Kyle: With this cost action and the cost actions, we have already taken on recovery of the demand, we should be well positioned to drive strong profitability.

Speaker Change: Finally, I would like to address our capital structure and specifically our upcoming maturities <unk>.

Speaker Change: Continue to evaluate alternatives, including asset sales to address the 2025 maturity.

Kyle D. Lorentzen: We did not draw on our ABL revolver during the fourth quarter, and therefore, at the end of the quarter with no outstanding ballots, it should be noted that we lost approximately $125 million of liquidity on our ABL with the home divestiture in early 2009. In the fourth quarter, we continued to execute our debt buyback program and repurchased $106 million of our long-term debt for cash considerations of $51 million. To add more detail, we repurchased $52 million of the 8.25% senior notes due 2027 and $54 million of the 7.125% senior notes due 2028. Since the beginning of 2023, we have repurchased $217 million of debt. During the quarter, we also paid the required $8 million of term loan amortization.

Speaker Change: <unk> cause we have discussed divestitures as potential elements of our plans to address our capital structure.

Speaker Change: We formulated those plans before it became apparent how deep the industry recession was going to be.

Speaker Change: Not surprisingly given the negative market implications on near term revenue and profit of our potential divestiture candidates as well as the negative financial impacts on certain potential strategic buyers, we have not thus far been successful in achieving valuations that makes sense to us.

Speaker Change: While there are some continuing divestiture discussions there is no guarantee that we can transact values that make sense.

Speaker Change: Our businesses have strong market positions, we do not intend to sell assets on the cheap or.

Speaker Change: A credit agreement documents are very flexible and we will use this flexibility to optimize our capital structure, including dealing with the 2025 maturity.

Kyle D. Lorentzen: The company ended the quarter with a net leverage ratio of 8.0. Going forward, we intend to use cash opportunistically to buy back securities across the breadth of our capital structure. I'm now turning to slide eight, where I will conclude my prepared remarks with some commentary around our expectations for 2018. Based on the lack of visibility into a market recovery, we are not providing updated annual guidance. Current order rates remain historically low as we are dealing with lower market demand.

Speaker Change: For today's call, we will not be making further comment with respect to our capital structure. However, we will provide updates as appropriate.

Speaker Change: And with that I'd like to give before back to shop for some closing remarks.

Speaker Change: You cough.

Speaker Change: As mentioned we are faced with significant challenges is all of our markets if not cooperated in.

Shop: And the visibility to the timing of that recovery is limited.

Speaker Change: We are not alone as the entire industry is facing similar challenges.

Speaker Change: Although we continue to manage what we can't control and aggressively managed cause it is not enough to fully offset the market challenges we are experiencing.

Kyle D. Lorentzen: Visibility to the first quarter indicates a very difficult quarter from a revenue, adjusted EBITDA, and cash perspective. ANS continues to be challenged as many of our large customers are adjusting inventory and delaying upgrades. Nick saw a significant reset of demand from our channel partners as we released backlog in the middle of 2023. Although we expected some impact of the Ruckus backlog release, the magnitude and length of this adjustment were unexpected.

Speaker Change: Although we are bullish on a recovery it as a matter of when and how much.

Speaker Change: We are well positioned for the expected recovery as we are a leader and most of our businesses and have invested in future growth with capacity of new products.

Speaker Change: Over the longer the demand remains low the more challenges we face.

Speaker Change: We have optimism that the second half of 2024 will show some meaningful recovery.

Speaker Change: The uptick in the Ccas and O WN order rates early in 2024 is a positive trend toward that recovery.

Speaker Change: With that said, we just can't predict with any confidence when a recovery will occur.

Kyle D. Lorentzen: Our leading indicators continue to point to strong demand for Ruckus products. However, customers are pushing this demand more aggressively than we have seen in the past. Meanwhile, all of our businesses are dealing with depressed demand.

Speaker Change: In addition to managing the businesses.

Speaker Change: Cutely aware of our capital structure and liquidity.

Speaker Change: We will continue to work on managing these aggressively.

Kyle D. Lorentzen: As a result of these challenges, our first quarter adjusted EBITDA will be in the 100 to 125 million dollar range. Based on conversations with customers, we expect to see a revenue pickup in the second half of the year. We have seen some increase in CCS and OWN order rates. Although it is too early to determine the staying power of these increases, it does provide some indication that demand may be returning. To state the obvious, however, if we don't see a meaningful recovery in the second half, we should be prepared for 2024 Adjusted EBITDA in cash flow to be significantly lower than 2023. In summary, we are in a passive telecom, cable, and hardware recession. As mentioned previously, the challenge with the current position is the lack of visibility. Even despite some visibility into customer inventories, customer short-term build plans remain uncertain. The market will recover. The question remains when and at what level.

Speaker Change: We appreciate your continued support and patience and.

Speaker Change: And with that will now open the lines of questions.

Speaker Change: Thank you ladies and gentlemen, if you have a question of a communist. This time. Please press star one one on your telephone. If your question has been answered he wished to move yourself from the queue. Please press star wouldn't want again, we will pause for a moment, while we compiled our to you in a roster.

Speaker Change: Our first question comes from separate charging with J P. Morgan Your line is open.

Sapphire: Hi, guys. Thank you for taking my question does is M. P. <unk> can you please take deep into the issue.

Sapphire: And next business, particularly.

Sephora: The billing purchasing decisions being delayed relative to some customers or it's a broadbased trend across all the customers and what you believe in and check.

Separate Charging: Second half of the year, Thank you and I have a follow up.

Speaker Change: Yeah, I would say I would say it's broad based.

Speaker Change: And when you talk about the next business overall, just a little bit of color.

Speaker Change: Although we don't like the way the year finished you know.

Speaker Change: Even with the challenges we had over the last two years that the Knicks EBITDA has grown from you know from negative $15 million plus $240 million and we believe we've gained share over this time and we believe are well positioned to continue to gain share in the future I think what really happened is we underestimated the impact of the channel inventories and.

Speaker Change: And again to be specific to your question.

Speaker Change: I think it was across the board.

Kyle D. Lorentzen: We are still bullish on medium and long-term growth. However, short-term challenges are significant. We continue to control what we can control, including implementing the $100 million of annual cost reductions discussed on our prior call. With this cost action and the cost actions we have already taken on recovery of demand, we should be well positioned to drive strong profitability. Finally, I would like to address our capital structure and, specifically, our upcoming maturity. We continue to evaluate alternatives, including asset sales, to address the 2025 maturity. In previous calls, we discussed divestitures as potential elements of our plans to address our capital structure. We formulated those plans before it became apparent how deep the industry recession was going to be.

Speaker Change: And this coupled with I would say macro uncertainty Israeli when the supply chain constraints reversed we were able to ship out all of our we will ship out a major part of our backlog and I think that inventory buildup and the channel is what what's affecting us right now.

Speaker Change: When we look at our leading indicators.

Speaker Change: Like our final they remained strong and but we do see that orders are being pushed out if we think two to three quarters.

Speaker Change: And.

Speaker Change: I would say that we do expect the second half balance because of what we are seeing in our final as well as <unk>.

Speaker Change: Indications from our customers with the channel inventory.

Speaker Change: Thank you my fallopian regarding beat funding. So can you. Please slowly for any Coleman programs like B, how much of the how much of a percentage of spending is awards I'll expand towards.

Mental product categories that you solved and how old material can it be in terms of the company database expected. Thank you.

Speaker Change: Well, let's start with what's going on with beads as the states are starting to award money.

Kyle D. Lorentzen: Not surprisingly, given the negative market implications on near-term revenue and profit of our potential divestiture candidates, as well as the negative financial impacts on certain potential strategic buyers, we have not thus far been successful in achieving valuations that make sense to us. While there are some continuing divestiture discussions, there is no guarantee that we can transact at values that make sense.

Speaker Change: We are expecting to see spending start late in 2024.

Speaker Change: But a significant pick up in 2025, I think it's important to note that we will be compliant with all of the Barber rules.

Speaker Change: That turns back on and we think about the total available market for us we're calling it like about $4 billion I'd say, that's over like a four to five year period.

Speaker Change: Thank you one moment for our next question.

Kyle D. Lorentzen: Our businesses have strong market positions. We do not intend to sell assets on the market. Credit Agreement documents are very flexible. We will use this flexibility to optimize our capital structure, including dealing with the 2025. For today's call, we will not be making further comments with respect to our capital structure. However, we will provide updates as appropriate. And with that, I'd like to give the floor back to Chuck for some closing remarks. Thank you, Kyle.

Speaker Change: Our next question comes from George Notter with Jefferies. Your line is open.

George Charles Notter: Hi, guys. Thanks, very much I wanted to ask about the N S business.

George Charles Notter: I think in the monologue, you mentioned that some significant customers who come forward and uhm.

George Charles Notter: Yeah, I think either pushed orders or or demonstrated you know.

George Charles Notter: Softness in terms of their their pacing of network upgrades is that something that's new from you guys. In the last few months or is that something that you've already seen.

George Charles Notter: <unk> Q4.

Charles L. Treadway: As mentioned, we are faced with significant challenges as all of our markets have not cooperated, and the visibility to the timing of the recovery is limited. However, we are not alone, as the entire industry is facing similar challenges. Although we continue to manage what we can control and aggressively manage costs, it is not enough to fully offset the market challenges we are experiencing. Although we are bullish on a recovery, it is a matter of when and how much. We are well positioned for the expected recovery as we are a leader in most of our businesses and have invested in future growth through capacity and new products. However, the longer demand remains low, the more challenges we face.

George Charles Notter: I would say, we got real indications of that and we got the orders.

George Charles Notter: Pushed out in the fourth quarter of last year. So that's when it really started happening. We had is Cobb mentioned I think it is remarks that we got contacted by customers that they said they wanted to push out.

George Charles Notter: You know, obviously for us that businesses depending on upgrades.

George Charles Notter: And what we can see is that the customers are leaning forward with upgrades, but it's just they're expecting to start getting more product from us in the second half of the year is what they're talking about Sars and one of the positives pieces for us and that businesses is yep Dx product line that we expect to start seeing significant ship.

Charles L. Treadway: We have optimism that the second half of 2024 will show some meaningful recovery. The uptick in the CCS and OWN order rates early in 2024 is a positive trend toward that recovery. With that said, we just can't predict with any confidence when that recovery will occur.

George Charles Notter: <unk> and the second half of this year.

Speaker Change: Got it Okay, and then uhm.

Speaker Change: I can tell you about the the core product progress fair with customers trials any anything to report.

Speaker Change: We have several trials going on with our virtual crts product hopefully we'll have some more positive news in our next earnings call on them.

Speaker Change: Okay, and then uhm. The last question is just on input cost.

Operator: In addition to managing the businesses, we are acutely aware of our capital structure and liquidity. We will continue to work on managing these aggressive, We appreciate your continued support and patience. And with that, we'll now open the line for questions. Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1 1 on your telephone. If your question has been answered, and you wish to move yourself from the queue, please press star 1 1 again.

Speaker Change: Yeah, if you look at the business.

Speaker Change: Is there.

Speaker Change: Are you seeing any benefits on input costs any any kind of.

Speaker Change: Come out of benefits that would be great.

Speaker Change: Yeah, I think just in general as you.

Speaker Change: Can imagine things are things go up and down and we buy lots of material and inputs.

Speaker Change: I think.

Speaker Change: Generally across the board, we haven't we haven't seen either significant increase or or any reduction.

Speaker Change: Since we saw the you know.

Speaker Change: The big Spike because we went through 2022.

Speaker Change: We've mentioned in a previous calls the one input costs come down since done this for a for a little bit but generally other than that <unk>.

Operator: We'll pause for a moment while we compile our Q&A. Unknown Speaker 0, Our first question comes from Samik Chatterjee with JP Morgan. Your line is open. Hi guys.

Speaker Change: Most of the materials are on the net.

Speaker Change: That basis, probably pretty neutral.

Speaker Change: Okay, Great I'll pass it on and thank God. Thank you. Thank you one moment for our next question.

Unknown Speaker: .., for the was, or it's a broad-based trend across all, And what leads you to believe in recovery in the second? Yeah, I would say I would say it's a broad base.

Speaker Change: Our next question comes from Sobbingly opposed with Raymond James Your line is open.

Victor Chewy: Hey, guys. This is Victor chewy for Simon vehicle that I wanted to follow up.

Charles L. Treadway: Um, and you know, when you talk about the next business overall, just a little bit of color, you know, although we don't like the way the year finished. Even with the challenges we had over the last two years, NICS's EBITDA has grown from negative $15 million to plus $240 million, and we believe we've gained share over this time, and we believe we're well-positioned to continue to gain share in the future. I think what really happened is that we underestimated the impact of channel inventories. And again, to be specific to your question, I think it was across the board.

Victor Chewy: Next results. This quote just maybe can you help us understand how we should think about normalised growth when we kind of look past inventory congestion.

Victor Chewy: Come back to 122 2023 levels.

Victor Chewy: Giving a deterioration in your visibility indicators here, what you know kind of what gives you confidence that the structural kind of demand remains intact.

Speaker Change: Yeah, let's start with our structural demand and why we believe that stays intact and that's because of our funnel and we have a lot of projects. There. We have a closed one list that we keep track of we continue to wind projects. So we feel good about that if you look at the del Oro report I think they're calling out for.

Charles L. Treadway: And this, coupled with, I would say, macro uncertainty, is really when the supply chain constraints reversed. We were able to ship out all of our shipments. We were able to ship out a major part of our backlog, and I think that inventory buildup in the channel is what's affecting us right now. When we look at our leading indicators, like our funnel, they remain strong, but we do see that orders are being pushed out, we think, two to three quarters. I would say that, you know, we do expect the second half bounce because of what we are seeing in our funnel, as well as indications from our customers with channel in. Follow up is regarding BEIT funding. So can you please let us know, like, the Comment Program? How much of the... Spending is awards are like spend, Equipment, or Product Categories that you and how material can it be? http://TheBusinessProfessor.com, Yep.

Speaker Change: A lower.

Speaker Change: 24, Ah, but if you think back going forward.

Speaker Change: If you look at that report going forward, they're talking about like a 5% <unk> over the.

Speaker Change: The next five years or so after this so I do think we're going to have a couple of.

Speaker Change: Bumpy quarters as you've heard from many of our competitors kind of said the same thing.

Speaker Change: But we think the second half will come back and and I think that's a combination of the inventory adjustments people shipping out what we have Ah plus the funnel that we have for.

For the bouncer that'll help us with our bounce back.

Speaker Change: Okay great.

Speaker Change:

Just on the Oh there'll be one second.

Speaker Change: Can you help us.

Speaker Change: You'll get the ship the open ran in the U as in Europe. You know have you guys considered have that effects.

Charles L. Treadway: Well, I'd start with what's going on with these is that the states are starting to award money. We are expecting to see spending start late in 2024, but a significant pickup in 2025. I think it's important to note that we will be compliant with all of the BABA rules when that turns back on. And when we think about a total available market for us, we're calling it like about $4 billion. And I'd say that it was over a four to five year period.

Speaker Change: <unk> felt any of that into your assumptions.

Speaker Change: I would say.

Speaker Change: Related to open ran we are we are supportive of our customer base wherever they want to work with and then with that technology. We are working together with them, but I would say you know we're not seeing that much in terms of our plans, we looking at more passive antanas, our mosaic product refresh that they have.

Speaker Change: Going on in their networks and how we support the lower frequencies. We are positive about what's going to happen in the rural areas. We think that there's a larger chance for us to do with <unk>, which will be also positive for us.

Operator: Thank you. One moment for our next question. Our next question comes from George Notter with Jeffries. Your line is open. Hi, guys. Thanks very much.

Speaker Change: Versus a massive mimo everywhere. So that's also a positive thing for us.

Speaker Change: Okay, I'll <unk> I'll I'll get back into <unk>. Thank you.

Speaker Change: One moment for our next question.

George Charles Notter: I wanted to ask about the ANS business. I think in the monologue, you mentioned that, you know, some significant customers had come forward and, you know, I think either placed orders or demonstrated, you know, softness in terms of their pacing of network upgrades. Is that something that's new from you guys in the last few months? Or is that something that you're already seeing, you know, saying, you know, in Q3 or the early part of Q4? I would say we got real indications of that, and we got the orders pushed out in the fourth quarter of last year. So that's when it really started happening.

Speaker Change: Our next question comes from Stephen Fox with Fox advise US your line is open.

Steven Bryant Fox: Hi, Good morning, a couple of questions for me if I could first off.

Steven Bryant Fox: Chuck given the recessionary environment at describing can you talk about competition, how it's impacting pricing and maybe.

Steven Bryant Fox: Smaller competitors.

Steven Bryant Fox: May have may be struggling to make it to the other side of this downturn.

Charles L. Treadway: Yeah, I would say.

Charles L. Treadway: Up to this point I think we're all looking at the situation as as we as you just heard one of the questions. We got asked what's going on with inventory incoming material cost and those are flat I think our customers understand our volume situations. So we're not getting that much on pricing pressure I think you know.

Charles L. Treadway: We had, as Kyle mentioned, I think in his remarks that, you know, we got contacted by customers that said they wanted to push out. You know, obviously, for us, that business is dependent on upgrades. And what we can see is that the customers are leaning forward with upgrades, but it's just they're expecting to start getting more product from us in the second half of the year. And one of the positive pieces for us in that business is the FDX product line that we expect to start seeing, you know, significant shipments in the second half of the year. Okay. Anything you can say about the vCore products, progress there with customers, trials, anything to report? We have several trials going on with our virtual CMTS product.

Charles L. Treadway: What I would hope is that we all work together to this downtime and behave appropriately.

Charles L. Treadway: I would say we need to work together as a small small small firms out there right now I think they are going to be in a much deeper situate much deeper much challenge more challenging situation than us.

Charles L. Treadway: But I think what we all have to do is held together right now and get through this.

Speaker Change: That's that's helpful. And then just in terms of the cash flows going forward I know, you're not providing guidance, but like anything else you can add from a color standpoint, depending on what we all come up with EBITDA.

Speaker Change: What else do you think you can do this just sort of January cashflows from working capital standpoint, and also from an active production standpoint, any more and more following up facilities for the time being things that could layoffs et cetera anything else that you would consider doing just to preserve the balance sheet. Thanks.

Charles L. Treadway: Hopefully, we'll have some more positive news on our next earnings call. Okay. And then the last question was just on input costs.

Kyle D. Lorentzen: You know, if you look at the business on balances there, are you seeing any benefits on input costs? Any, you know, any kind of, you know, incremental benefits there would be great. Yeah, I think just in general, you know, as you can imagine, things are, you know, things go up and down, and we buy lots of material and inputs. I think, you know, generally, across the board, we haven't seen either a significant increase or any reduction since we saw the sort of the big spike as we went through 2022. I think we've mentioned on previous calls, you know, the one input cost that's come down a little bit since 9-4-8. You know, I think, generally, other than that. Most of the materials are, you know, on that basis, probably pretty neutral.

Speaker Change: Yeah, I think on the on the cash side, we've talked a little bit about the fact that we as.

Speaker Change: As a result of some of the challenges that are 22 with supply, we're holding a little bit more inventory that we would like to although with the with the demand <unk>.

Speaker Change: Continuing to sort of push out it's a little bit harder to monetize that but I think you know as well.

Speaker Change: We think about areas of opportunity I think inventories this place.

Speaker Change: We feel like there's some opportunity so.

Speaker Change: So I think that's.

Speaker Change: That's definitely an area I think as as we think about the cost side of our business.

Speaker Change: We were talking about.

Speaker Change: Implementing this hundred million dollar plan I think that sort of goes across the organization as to where we're gonna get that hundred billion from and as you would expect.

Speaker Change: Not just the just not just because of our current situation and the demand profile, which is ongoing I mean, I think we're always looking for opportunities to optimize.

George Charles Notter: Great, I'll pass it on. Thanks, guys. Thank you. Thank you. One moment for our next question. Our next question comes from Simon Leopold with Raymond James. Your line is open. Hey guys, this is Victor Chui on behalf of Simon Leopold.

Speaker Change: That's just.

Speaker Change: That's across all of our functional areas, including them, including operations.

Speaker Change: That's helpful. Thank you.

Speaker Change: One moment for our next question.

Meta A. Marshall: Our next question comes from metal Marshall with Morgan Stanley. Your line is open.

Simon Matthew Leopold: I wanted to follow up on the NICS results this quarter, just, you know, maybe you could help us understand how we should think about normalized growth when we kind of look past the inventory of ingestion, you know, does growth come back to 2022, 2023 levels, you know, and, you know, given the deterioration in your visibility and your indicators here, what kind of gives you confidence that the structural kind of demand remains intact? Yeah, I would start with our structural demand and why we believe that it stays intact. And that's because of our funnel. And, you know, we have a lot of projects there. We have a closed list that we keep track of.

Meta A. Marshall: Great. Thanks.

Meta A. Marshall: I know.

Meta A. Marshall: Question is to ask a variety of different ways that you guys have just kind of underground I'm pretty decent overhaul of the portfolio you know whether it be mosaic are some of the work that you guys have that on rock S. N N. The M S portfolio. So just.

And where do you feel like the share gain opportunities are the greatest.

Meta A. Marshall: As demand comes back.

Speaker Change: And then just maybe a second question.

Speaker Change: Just in terms of.

Speaker Change: What.

Speaker Change: Understand named kind of how you've laid out about O O W. I N N. A N S. Looking our scene seems to be asking some signs of kind of demand improvement early signs of demand improvement, but it does any contacts in terms of you know is that largely at the ads are just like wear with them than that.

Charles L. Treadway: We continue to win projects, so we feel good about that. If you look at the Dell ORO report, I think they're calling out for a lower 2024.

Charles L. Treadway: But if you think back going forward, if you look at that report going forward, they're talking about like a 5% CAGR over the next five years or so after this. So I do think we're going to have a couple of bumpy quarters, as you've heard from many of our competitors kind of saying the same thing. But we think the second half will come back.

Speaker Change: <unk>, you're seeing that kind of take what that does business areas.

Speaker Change: Thanks <unk>.

Speaker Change: Where I think we have the most opportunity.

Speaker Change: For sure game I would say it would be.

Speaker Change: With our next business I mean, we came back with the <unk>. We just launched our Wifi seven were the first to market with that product.

Charles L. Treadway: And I think that's a combination of the inventory adjustments, you know, people shipping out what we have, plus the funnel that we have for the bounce. That'll help us with our bounce back. Great, that's helpful. And just on the OWN segment, can you help us think about, you know, the shift to open RAN in the US and Europe? You know, have you guys considered how that affects the OWN segment if you kind of built any of that into your assumption?

Speaker Change: And I think that's gonna be very well received already as we've already won orders in that space and I think the market's come back I think that's gonna be very positive for us.

Speaker Change: As you mentioned.

Speaker Change: The second one the second one I would say as an S where we we have revamped as you mentioned, we have revamped our product family to be.

Speaker Change: One of the leaders on the edge of the leader at the edge of the networks.

Speaker Change: And I do believe our customers are leaning forward with upgrades and.

Speaker Change: And we have the products for them and so I think that's that's gonna be a nice opportunity for us.

Speaker Change: Especially products like F D X.

Simon Matthew Leopold: I would say related to Open RAN, we are supportive of our customer base, wherever they want to work with that technology; we're working together with them. But I would say, you know, we're not seeing that much in terms of our plans. We're looking at more passive antennas, our Mosaic product, the refresh that they have going on in their networks, and how we support the lower frequencies. We are positive about what's going to happen in rural areas. We think that there's a larger chance for us to do so with AT8R, which would also be positive for us versus the massive MIMO everywhere. So that's also positive. Great. That's very helpful. I'll get back in the queue.

Speaker Change: And our virtual CMT assets as we talked about before.

Speaker Change: With Ccs.

Speaker Change: <unk> what happened there as we were ahead of the curve, we put in the capacity in place in 2021 and 2022.

Speaker Change: And I believe we have gained share in that space I think we have given some back.

Speaker Change: But I don't believe we have lost any sure there, but I do think that.

Speaker Change: When the markets come back all the capacity, we put in place we're going to be very well positioned for that and also in our BDC business, which is R. Structured cable business. We've revamped system. Max we now have our system acts 2.0, we're gonna be launching a product every quarter.

Steven Bryant Fox: Thank you. One moment for our next question. Our next question comes from Steven Fox with Fox Advisors. Your line is open. Hi, good morning. I have a couple questions for you, if I could.

Speaker Change: And we're seeing really positive feedback from.

Speaker Change: From our customer base on that and of course, what's going on with Hyperscalers Jen AI.

Speaker Change: Our product families. There are also very positively being very positively received in the marketplace.

Charles L. Treadway: First off, Chuck, given the recessionary environment you're describing, can you talk about competition, how it's impacting pricing, and maybe smaller competitors that may be struggling to make it to the other side of this downturn? Yeah, I would say, Up to this point, I think we're all looking at the situation as we, as you just heard, one of the questions we got asked is, what's going on with inventory, you know, incoming material costs, and those are flat. I think our customers understand our volume situation. So we're not getting that much on pricing pressure.

Speaker Change: So.

Speaker Change: When you think about Oh, WN I think we have pretty strong market share positions in North America already I think our opportunity. There is what can we do outside of North America and then we also are seeing some pretty good traction on people looking at our mosaic product line up so.

Speaker Change: So that would be those will be the same setup that I see.

Speaker Change: Kind of address your question.

Speaker Change: Alright, thank you.

Speaker Change: And I'm not showing any further questions at this time I'd like to turn the call back over to Chuck Treadway for any closing remarks.

Charles L. Treadway: I think, you know, what I would hope is that we all work together through this downtime and behave appropriately. I would say we need to work together as small, you know, small firms out there right now. I think they're gonna be in a much deeper situation, much deeper and much more challenging situation than us.

Charles L. Treadway: Yeah I'd like to thank you for your time today and for your support of Commscope.

Charles L. Treadway: Like you to have a great rest of your week. Thank you very much.

Speaker Change: Ladies and gentlemen sounds conclude today's presentation. You may now disconnect and have a wonderful day.

Speaker Change: [music], Okay [music].

Kyle D. Lorentzen: But, you know, I think what we all have to do is hold together right now and get through this. That's helpful. And then just in terms of the cash flows going forward, I know you're not providing guidance, but like anything else you can add from a color standpoint, depending on what we all come up with for EBITDA, what else? www.comscope.com Yeah, I think on the cash side, you know, we've talked a little bit about the fact that we, you know, as a result of some of the challenges we had at 22 with supply But I think, you know, as we think about areas of opportunity, I think inventories are a place that, you know, we feel like there's some opportunity. You know, so I think that's, That's definitely an area.

Steven Bryant Fox: I think as we think about the cost side of our business, you know, we're talking about implementing this $100 million plan. I think that sort of goes across the organization as to where we're going to get that $100 million from. And, you know, as you would expect, not just because of our current situation and the demand profile, but just ongoing. I mean, I think we're always looking for opportunities to optimize. And, you know, that's just, you know, that's across all of our functional areas, including operations. That's helpful.

Meta A. Marshall: Thank you. One moment for our next question. Our next question comes from Meta Marshall with Morgan Stanley. Your line is open.

Meta A. Marshall: Great, thanks. I know the question has been asked in a variety of different ways, but you guys have just kind of undergone a pretty decent overhaul of the portfolio, you know, whether it be Mosaic or some of the work that you guys have done on Ruckus and the ANS portfolio. So, um, you know where you feel like the share gain opportunities are the greatest as demand comes back, and then maybe a second question: Just in terms of, you know, understanding kind of how you've laid out about OWN and ANS looking or seeing or CCS seeing some signs of kind of demand improvement, or early signs of demand improvement, but any context in terms of, you know, is that largely at the edge or just like where within the network, Thanks, Meta.

Speaker Change: [music].

Charles L. Treadway: Where I think we have the most opportunity for share gain, I would say, would be with our NICS business. I mean, we came back with the, we just launched our Wi-Fi 7. We're the first to market with that product, and I think that's going to be very well received. It already is.

Charles L. Treadway: We've already won orders in that space, and I think when markets come back, I think that's going to be very positive for us. As you mentioned, the second one, I would say is ANS, where we have, you know, we have revamped our product family to be, you know, one of the leaders on the edge or the leader at the edge of the networks. And I do believe our customers are leaning forward with upgrades, and we have the products for them. And so I think that's going to be a nice opportunity for us.

Charles L. Treadway: Especially products like FDX and our virtual CMTS, as we talked about. You know, with CCS, I believe what happened there is we were ahead of the curve. We put the capacity in place in 2021 and 2022. And I believe we have gained share in that space. I think we have given some back, but I don't believe we've lost any share there.

Charles L. Treadway: But I do think that, when the markets come back, all the capacity we put in place, we're going to be very well positioned for that. And also, in our BDCC business, which is our structured cable business, we've revamped System X. We now have System X 2.0.

Charles L. Treadway: We're going to be launching a product every quarter, and we're seeing really positive feedback from our customers based on that. And of course, what's going on with hyperscalers and Gen AI, our product families there are also very positive, and are being very positively received in the market. So thank you. It was really a tremendous trust building experience for me.

Unknown Speaker: And for you, Victor, over the next year. Good marketing, c later. Thank you, guys. Take care.

Unknown Speaker: See you next week. Thank you. And let's move on. We'll see you next episode tomorrow.

Unknown Speaker: Bye. Bye. Good night.

Unknown Speaker: See you. The BIG Main road, done. Get there.

Unknown Speaker: Be there. Be montre when. BE there. BE there. On the road.

Unknown Speaker: Bye, baby. REitch. You know, when you think about OWN, I think we have pretty strong market share positions in North America already. I think our opportunity there is, what can we do outside of North America? And then we are also seeing some pretty good traction with people looking at our Mosaic product line. So those would be the things that I see, to kind of address your question, group. Thank you, And I'm not showing any further questions at this time. I'd like to turn the call back over to Chuck Treadway for any closing remarks. Yeah, I'd like to thank you for your time today and for your support of CommScope. I'd like you to have a great rest of your week. Thank you very much. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Operator: .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ...

Operator: , www.comscopeholding.com Welcome to CommScope's 2023 full year and fourth quarter results 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. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message device when your hand is raised. To withdraw your question, please press star 11 again.

Speaker Change: [music].

Massimo DiSabato: Please be advised that today's conference is being recorded. I would like to hand the conference over to your speaker today, Massimo DiSabato, Vice President, Investor Relations. Please go ahead.

Massimo DiSabato: Good morning, and thank you for joining us today to discuss CommScope's 2023 full year and fourth quarter results. I'm Massimo DiSabato, Vice President of Investor Relations for CommScope, and with me on today's call are Chuck Treadway, President and CEO, and Kyle Lorentzen, Executive Vice President and CFO. You can find the slides that accompany this report on our investor relations website.

Massimo DiSabato: Please note that some of our comments today will contain forward-looking statements based on our current view of the 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 results. Before I turn the call over to Chuck, I have a few housekeeping items to review. Today we will discuss certain adjusted and non-GAAP financial measures, which are described in more detail in this morning's earnings. 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.

Speaker Change: Good day, and thank you for standing by and welcome to Commscope in 2023 full year fourth quarter results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session all need to press star one on your telephone you will then hear an automated message device in your hand as race to withdraw your question. Please press star one again please be.

Speaker Change: Today's conference is being recorded I would like to turn the comps over to your speaker today, Ms Motor Sabino, Vice President Investor Relations. Please go ahead.

Massimo DiSabato: All full year and quarterly growth rates described during today's presentation are on a year-over-year basis unless otherwise noted. I'll now turn the call over to our President and CEO, Chuck Tripp. Thank you, Massimo. Good morning, everyone.

Motor Sabino: Good morning, and thank you for joining us today to discuss Commscope is 2023 full year and fourth quarter results.

Massimo DiSabato: Massimo just capital Vice President of Investor Relations for Commscope and with me on today's call are chop, Treadway, President and CEO and Karl <unk> Executive Vice President and CFO.

Massimo DiSabato: You can find the slides that accompany this report on our Investor Relations website.

Charles L. Treadway: I'll be beginning on slide two. Before getting into details of our quarter, I want to address the current state of our business and changes since our last call. The business continues to be under significant pressure as demand remains low, and we continue to have minimal visibility into when a recovery will occur.

Massimo DiSabato: Please note that some of our comments today will contain forward looking statements based on our current view of the business.

Massimo DiSabato: And actual future results may differ materially.

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

Speaker Change: Before I turn the call over to Chuck I have a few housekeeping items to review.

Charles L. Treadway: During the quarter, we also experienced unexpected significant downward pressure on our NICS and ANS businesses. We're now in a position where all of our segments are dealing with market demand challenges. Although we have seen some slight uptick in demand in our OWN and CCS segments, we expect a very difficult first half and specifically first quarter.

Speaker Change: Today, we will discuss certain adjusted or non-GAAP financial measures, which are described in more detail in this morning's earnings materials.

Speaker Change: Reconciliations of non-GAAP financial measures and other associated disclosures are contained in our earnings materials and posted on our website.

Chuck: All references during today's discussion will be to our adjusted results all full year and quarterly growth rates described during today's presentation are on a year over year basis, unless otherwise noted.

Charles L. Treadway: We expect the first quarter revenue and adjusted EBITDA to be substantially lower than the fourth quarter of 2023. Starting with annual results, CORE CommScope delivered net sales of $5.79 billion, decreasing 23% from the prior year. The decline in revenue resulted in core adjusted EBITDA of $1.02 billion, a decrease of 18% from the prior year, meeting our previously provided $1.00 to $1.05 billion core adjusted EBITDA range provided on our last call. Moving to the fourth quarter.

Chuck: I'll now turn the call over to our President and CEO Chuck correctly.

Chuck: Thank you Massimo and good morning, everyone I'll be beginning on slide two.

Chuck: Before getting into the details of our quarter I want to address the current state of our business and changes since our last call.

Chuck: The business continues to be under significant pressure as demand remains low we.

Chuck: We continue to have minimal visibility to when the recovery will occur.

Chuck: During the quarter, we also experienced unexpected significant downward pressure in our Knicks and E&S businesses.

Chuck: We're now in a position where all of our segments are dealing with market demand challenges.

Charles L. Treadway: CommScope delivered core net sales of $1.186 billion and core adjusted EBITDA of $199 million for the fourth quarter of 2023. Our fourth quarter continued to be impacted by lower customer orders driven by lower market demand and a larger than expected customer inventory buildup. As I've mentioned in past calls, we continue to control what we can control. We're the market leader in most of our businesses, with capacity in place to meet expected future demand. This capacity, as well as our new product offerings, positions us well for when demand does recover. In addition, as referenced on our third-quarter call, we are managing our cost structure, including a plan to take out $100 million of annual costs.

Chuck: Although we have seen some slight uptick in demand in our OWS and Ccs segment.

Chuck: We expect a very difficult first half and specifically first quarter.

Chuck: We expect the first quarter revenue and adjusted EBITDA to be substantially lower than the fourth quarter of 2023.

Chuck: Starting with the annual results core Commscope delivered net sales of $5 $79 billion.

Chuck: Increasing 23% from the prior year.

Chuck: The decline in revenue resulted in core adjusted EBITDA of 1.02 billion the <unk>.

Chuck: Decrease of 18% from the prior year.

Chuck: Meeting our previously provided 1.00 to 1.05 billion core adjusted EBITDA range provided on our last call.

Chuck: Shifting to the fourth quarter.

Chuck: Commscope delivered core net sales of $1 186 billion and core adjusted EBITDA of $199 million for the fourth quarter of 2023.

Chuck: Our fourth quarter continued to be impacted by lower customer orders, driven by lower market demand and larger than expected customer inventory buildup.

Charles L. Treadway: Now I'd like to give you an update on each of our businesses. As we indicated in previous calls, CCS has strong long-term market tailwinds, including significant spending commitments expected to start late in 2024 and into 2025, driven by the continued build-out of fiber networks and data centers. We have seen some small but inconsistent upticks in order rates in some product lines as customers are reaching normalized inventory levels. I don't think we're ready to declare this as the beginning of a recovery, but these small indicators give us some evidence of a potentially stronger second half of 2024 and a return to growth. As we turn our focus to helping our customers meet the objectives of connecting the United States with reliable broadband connectivity, we have developed a series of products and solutions focused on rural broadband architectures, meeting the needs of Build America, Buy America requirements, or otherwise known as BABA.

As I've mentioned in past calls we continue to control what we can control we.

Chuck: We are the market leader in most of our businesses with capacity in place to meet expected future demand.

This capacity as well as our new product offerings positions us well for when the demand does recover.

Chuck: In addition, as referenced on our third quarter call, we are managing our cost structure, including our plan to take out $100 million of annual cost.

Chuck: Now I'd like to give you an update on each of our businesses.

Chuck: As we indicated in previous calls Ccs has strong long term market tailwind, including significant spending commitments expected to start late in 2024 and into 2025% driven by continued build out of fiber networks and data centers.

Chuck: We are seeing some small but inconsistent upticks in order rates and some product lines as customers are reaching normalized inventory levels.

Chuck: I don't think we're ready to declare this as the beginning of a recovery, but these small indicators give us some evidence of a potentially stronger second half of 2024 and returned to growth.

Chuck: As we turn our focus to helping our customers meet their objectives of connecting the United States with reliable broadband connectivity.

Chuck: We have developed a series of products and solutions focused on rural broadband architectures meeting the needs of build America buy America requirements or otherwise known as Barber.

Charles L. Treadway: Outside of the broadband investments, we are also encouraged by developments in our building and data center portion of our CCS business, supporting our enterprise customers. As you are aware, significant momentum is occurring on the cloud and AI side of data centers. We have also seen a boost in our hyperscale and cloud business as a result. Supporting Investments in Gen AI Projects with Key Customers

Chuck: Outside of the broadband investments. We're also encouraged by developments in our building and data center portion of our Ccs business.

Porting our enterprise customers.

Chuck: As you are aware significant momentum is occurring on the cloud and AI side of data centers.

Chuck: We have also seen a boost in our hyperscale and cloud business as a result.

Charles L. Treadway: As we invest in new products and technologies, we are well-positioned to take advantage of growth in this market. We have also found some new momentum with the innovation of our Systemax 2.0 Structured Table Solutions, offering new products for in-building solutions. In CCS, we continue to be aggressive with our cost structure, and we are looking at additional opportunities to drive efficiency. There's still value that we can drive on the cost side. We remain bullish on CCS as a result of the long-term market tailwinds and our strong position in this market. CCS will recover. It's just a matter of timing and degree.

Chuck: Porting investments in Gen AI projects with key customers.

Chuck: As we invest in new products and technologies, we are well positioned to take advantage of growth in this market.

Chuck: We have also found some new momentum with our innovation of our system acts to point out structured cable solutions offering new products for in building solutions.

Chuck: And Ccs, we continue to be aggressive with our cost structure. We are looking at additional opportunities to drive efficiency.

Chuck: There is still value that we can drive on the cost side.

Chuck: We remain bullish on Ccs is a result of the long term market tailwind and our strong position in this market.

Charles L. Treadway: Turning to NICS, the business had a standout year even after the slower than predicted fourth quarter. The team worked extremely hard to introduce new products and solutions to the market. The Ruckus team was one of the first to market the new Wi-Fi 7 enterprise-grade access point and nearly doubled the attach rate of our Ruckus 1 and Ruckus AI solutions.

Chuck: Ccs will recover is just a matter of timing and degree.

Chuck: Turning to mix the business had a standout year, even after the slower than predicted fourth quarter.

Chuck: The team worked extremely hard to introduce new products and solutions to the market.

Chuck: The Ruckus team was one of the first to market the new Wi Fi seven enterprise grade access points and nearly doubled the attach rate of our ruckus, one and Ruckus AI solutions.

Charles L. Treadway: Our full year 2023 adjusted EBITDA in NICS of $225 million is up $173 million over the prior year. Our CommScope Next Initiatives Program has supported the improvement in this business. We are not done as we continue to evaluate every aspect of this business for incremental opportunities, including investing in the next generation of product solutions and SaaS. Our Ruckus One Suite and Wi-Fi 7 Enterprise Class Access Point products are also contributing to the new technology refresh, which is in the early phases. Our NICS business was also supported by the strong ICM performance led by the DAS business providing in-building 5G connectivity. With that said, our next segment, and specifically Ruckus, is under substantial short-term pressure, as demand significantly declined in the last quarter, driven by too much inventory in the system and slower demand. The level of this demand adjustment is much more severe than we had expected and what our leading indicators identified.

Chuck: Our full year 2023, adjusted EBITDA and mix of $225 million is up $173 million over prior year.

Chuck: Our Commscope next initiatives program has supported the improvement in this business.

Chuck: We are not done as we continue to evaluate every aspect of this business for incremental opportunities, including investing in the next generation of product solutions and SaaS.

Chuck: Our Ruckus, one suite and Wi Fi seven enterprise class access point products are also contributing to the new technology refresh.

Chuck: That is in the early phases.

Chuck: Our <unk> business was also supported by the strong ICM performance led by the Das business, providing in building <unk> connectivity.

Chuck: With that said our next segment and specifically Ruckus is under substantial short term pressure as demand significantly declined in the last quarter driven by too much inventory in the system and slower demand.

Chuck: The level of this demand adjustment as much more severe than what we had expected and our leading indicators identified.

Charles L. Treadway: Although our funnel remains strong, purchasing decisions are being pushed to future periods. We expect lower demand will continue throughout the first half of this year as inventory is digested and demand drivers reset. The results of the reduced demand for Ruckus products will be a key contributor to our overall sequential decline from the fourth quarter of 2023 to the first quarter of 2024. In OWN, as we mentioned in previous calls, 2023 saw a decline in U.S. carrier capital spend. As with CCS, visibility remains limited.

Chuck: Although our funnel remains strong purchasing decisions are being pushed to future periods.

Chuck: We expect a lower demand will continue throughout the first half of this year.

Chuck: As inventory is digested and demand drivers reset.

The results of the reduce demand for ruckus product will be a key contributor to our overall sequential decline from the fourth quarter of 2023 to the first quarter of 2024.

Chuck: And <unk> and as we mentioned in previous calls 2023 saw a decline in U S carrier capital spend.

Charles L. Treadway: During the fourth quarter and early in the first quarter, we saw some slight recovery in order rates. We're not calling this a recovery, but it is a start. Based on our conversations with customers, 2024 will continue to be a challenging year. We would expect that 2024 will look similar to what we saw in 2023, but with a stronger second half of the year.

Chuck: As with Ccs visibility remains limited.

Chuck: During the fourth quarter and early in the first quarter, we have seen some slight recovery in order rates were.

Chuck: We're not calling this a recovery, but it is a start.

Chuck: Based on our conversations with customers 2024 will continue to be a challenging year.

Chuck: We would expect the 2024 will look similar to what we saw in 2023, but with a stronger second half of the year.

Charles L. Treadway: Again, as previously stated, we continue to focus on what we can control, and we'll be ready to support our customers when they are ready. In addition, we continue to develop and commercialize new products. We have discussed the mosaic antenna solution in the past and are seeing increased traction around the world. We have also introduced our new SEED Base Station Antenna Solution aimed at delivering 15% greater efficiency at a fixed power level.

Chuck: Again as.

Chuck: As previously stated we continue to focus on what we can control and will be ready to support our customers when they are ready.

Chuck: In addition, we continue to develop and commercialize new products.

Chuck: We have discussed the mosaic antenna solution in the past and are seeing increased traction around the world.

Chuck: We have also introduced our new seed base station antenna solution aimed at delivering 15% greater efficiency and a fixed power level.

Charles L. Treadway: Again, like we are in CCS, we are well positioned in the market and feel like we will benefit when the market recovers. Finishing with ANS, as we've discussed, in 2023, the segment will make a successful transition to a leading supplier of edge-related products, including nodes, amplifiers, RPD and RMB modules, and remote OLTs for node PONs. We have done this while continuing to support our large installed base of CMTS products across multiple architectures. We introduced the first FDX amplifier, made headway with our virtual CMTS solution, and paved the transitional path to DOCSIS 4.0. We also launched our DOCSIS 3.1 enhanced solution, enabling operators to offer services between 5 and 8 gigabits per second through the use of new in-home DOCSIS CPE, along with enhanced E6000 software. We are bullish on DOCSIS 4.0 upgrades, and we will likely see increased momentum in the latter part of 2024. On both DOCSIS 3.1e and virtual CMTS, we have trials underway with major MSOs.

Again like we are in Ccs, we are well positioned in the market and feel like we will benefit when the market recovers.

Chuck: Finishing with an S. As we've discussed in 2023. This segment has made a successful transition to a leading supplier of edge related products, including nodes amplifiers, RPT and RMB modules and remote royalties for node pump.

Chuck: We have done this while continuing to support our large installed base of <unk> products across multiple architectures.

Chuck: We introduced the first mdx amplifier.

Chuck: Made headway with our virtual <unk> solution and.

Chuck: And paved the transitional path to DOCSIS four <unk> architecture.

Chuck: We also launched our DOCSIS three one enhanced solution, enabling operators to offer services between five and eight gigabits per second through the use of new in home DOCSIS CPE.

Chuck: Long with enhanced E 6000 software.

Chuck: We are bullish on DOCSIS four <unk> upgrades, and we will likely see increased momentum in the latter part of 2024.

Chuck: On both DOCSIS, three <unk> and virtual CMT, yes.

Charles L. Treadway: However, in the quarter, as expected, our customers were faced with larger-than-expected inventory and adjusted shipments to right-size their inventory. In addition, some of our customers have announced slower-than-expected ramps on their DOCSIS 4.0 upgrade projects. As a result of these two issues, order rates and revenues will be negatively impacted in the first few quarters. This impact will be a key contributor to our overall sequential decline from the fourth.

Chuck: We have trials underway with major msos.

However, in the quarter as expected our customers were faced with larger than expected inventory and adjusted shipments to rightsize their inventory.

Chuck: In addition, some of our customers have announced slower than expected ramps on their DOCSIS four <unk> upgrade projects.

Chuck: As a result of these two issues order rates and revenues will be negatively impacted in the first few quarters.

Chuck: This impact will be a key contributor to our overall sequential decline from.

Fourth quarter results conference call at this time, all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session I need to press star one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star. One again. Please be advised today's conference is being recorded I would like to hand, the comps over to your speaker today.

They must motor Sabino, Vice President Investor Relations. Please go ahead.

Good morning, and thank you for joining us today to discuss Commscope is 'twenty two 'twenty three full year and fourth quarter results.

Massimo Disabato, Vice President of Investor Relations for Commscope and with me on today's call are <unk>, President and CEO, and Collin Lawrencium 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 the 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 full year and quarterly growth rates described during today's presentation are on a year over year basis, unless otherwise noted.

I'll now turn the call over to our President and CEO Chuck correctly.

Thank you Massimo and good morning, everyone I'll be beginning on slide two.

Before getting into details of our quarter I want to address the current state of our business and changes since our last call the.

The business continues to be under significant pressure as demand remains low.

We continue to have minimal visibility to when a recovery will occur.

During the quarter, we also experienced unexpected significant downward pressure in our Knicks and E&S businesses.

We're now in a position where all of our segments are dealing with market demand challenges.

Although we have seen some slight uptick in demand in our OWS and Ccs segment.

We expect a very difficult first half and specifically first quarter.

We expect the first quarter revenue and adjusted EBITDA to be substantially lower than the fourth quarter of 2023.

Starting with annual results core Commscope delivered net sales of $5 79 billion.

Decreasing 23% from the prior year.

The decline in revenue resulted in core adjusted EBITDA of $1.02 billion.

The decrease of 18% from the prior year.

Meeting our previously provided 1.00 to 1.05 billion core adjusted EBITDA range provided on our last call.

Shifting to the fourth quarter.

Commscope delivered core net sales of $1 186 billion and core adjusted EBITDA of $199 million for the fourth quarter of 2023.

Our fourth quarter continued to be impacted by lower customer orders, driven by lower market demand and larger than expected customer inventory buildup.

As I've mentioned in past calls, we continue to control, what we can control where.

We are the market leader in most of our businesses with capacity in place to meet expected future demand.

This capacity as well as our new product offerings positions us well for when the demand does recover.

In addition, as referenced on our third quarter call, we are managing our cost structure, including our plan to take out $100 million of annual cost.

Now I'd like to give you an update on each of our businesses.

As we indicated in previous calls Ccs has strong long term market tailwind, including significant spending commitments expected to start late in 2024 and into 2025, driven by continued build out of fiber networks and data centers.

We have seen some small but inconsistent upticks and.

Operator: In order rates in some product lines as customers are reaching normalized inventory levels.

Operator: I don't think we're ready to declare this as the beginning of a recovery, but these small indicators give us some evidence of a potentially stronger second half of 2024 and return to growth.

Massimo DiSabato: As we turn our focus to helping our customers meet their objectives of connecting the United States with reliable broadband connectivity.

Massimo DiSabato: We have developed a series of products and solutions focused on rural broadband architectures meeting the needs of build America America requirements or otherwise known as Barber.

Massimo DiSabato: Outside of the broadband investments. We are also encouraged by developments in our building and data center portion of our Ccs business.

Massimo DiSabato: Supporting our enterprise customers.

Massimo DiSabato: As you're aware significant momentum is occurring on the cloud and AI side of data centers.

Chuck: We have also seen a boost in our hyperscale and cloud business as a result.

Chuck: <unk> investments in Gen AI projects with key customers.

Chuck: As we invest in new products and technologies, we are well positioned to take advantage of growth in this market.

Chuck: We have also found some new momentum with our innovation of our system acts to point out structured cable solutions offering new products for in building solutions.

Charles L. Treadway: And Ccs, we continue to be aggressive with our cost structure. We are looking at additional opportunities to drive efficiency.

Charles L. Treadway: There is still value that we can drive on the cost side.

Charles L. Treadway: We remain bullish on Ccs is a result of the long term market tailwind and our strong position in this market.

Charles L. Treadway: Ccs will recover is just a matter of timing and degree.

Charles L. Treadway: Turning to mix the business had a standout year, even after the slower than predicted fourth quarter.

Charles L. Treadway: The team worked extremely hard to introduce new products and solutions to the market.

Charles L. Treadway: The Ruckus team was one of the first to market the new Wi Fi seven enterprise grade access points and nearly doubled the attach rate of our ruckus, one and Ruckus AI solutions.

Charles L. Treadway: Our full year 2023, adjusted EBITDA and mix of $225 million is up $173 million over prior year.

Charles L. Treadway: Our Commscope next initiatives program is supported the improvement in this business.

Charles L. Treadway: We are not done as we continue to evaluate every aspect of this business are incremental opportunities, including investing in the next generation of product solutions and SaaS.

Charles L. Treadway: Our Ruckus, one suite and Wi Fi seven enterprise class access point products are also contributing to the new technology refresh.

Charles L. Treadway: That is in the early phases.

Charles L. Treadway: Our <unk> business was also supported by the strong ICM performance led by the Das business, providing and building <unk> connectivity.

Charles L. Treadway: With that said, our niche segment and specifically Ruckus is under substantial short term pressure as demand significantly declined in the last quarter driven by too much inventory in the system and slower demand.

Charles L. Treadway: The level of this demand adjustment as much more severe than what we had expected and our leading indicators identified.

Charles L. Treadway: Although our funnel remains strong purchasing decisions are being pushed to future periods.

Charles L. Treadway: We expect a lower demand will continue throughout the first half of this year.

Charles L. Treadway: As inventory is adjusted and demand drivers reset.

Charles L. Treadway: The results of the reduce demand for ruckus product will be a key contributor to our overall sequential decline from the fourth quarter of 2023 for the first quarter of 2024.

Charles L. Treadway: And <unk> and as we mentioned in previous calls 2023 saw a decline in U S carrier capital spend.

Charles L. Treadway: As with Ccs visibility remains limited.

Charles L. Treadway: During the fourth quarter and early in the first quarter, we have seen some slight recovery in order rates were.

Charles L. Treadway: We're not calling this a recovery, but it is a start.

Charles L. Treadway: Based on our conversations with customers 2024 will continue to be a challenging year.

Charles L. Treadway: We would expect the 2024 will look similar to what we saw in 2023, but with a stronger second half of the year.

Charles L. Treadway: Again as previously stated we continue to focus on what we can control and will be ready to support our customers when they are ready.

Charles L. Treadway: In addition, we continue to develop and commercialize new products.

Charles L. Treadway: We have discussed the mosaic antenna solutions in the past and are seeing increased traction around the world.

Charles L. Treadway: We have also introduced our new seed base station antenna solution aimed at delivering 15% greater efficiency at a fixed power level.

Charles L. Treadway: Again like we are in Ccs, we are well positioned in the market and feel like we will benefit when the market recovers.

Charles L. Treadway: Finishing with an S. As we've discussed in 2023. This segment has made a successful transition to a leading supplier of edge related products, including nodes amplifiers, RPG and R&D modules and remote <unk> for node PA.

Charles L. Treadway: We have done this while continuing to support our large installed base of <unk> products across multiple architectures.

Charles L. Treadway: We introduced the first mdx amplifier made headway with our virtual <unk> solution.

Charles L. Treadway: And paved the transitional path to DOCSIS four <unk> architecture.

Charles L. Treadway: We also launched our DOCSIS three one enhanced solution, enabling operators to offer services between five and eight gigabits per second through the use of new in home DOCSIS CPE.

Charles L. Treadway: Along with enhanced E 6000 software.

Charles L. Treadway: We are bullish on DOCSIS four <unk> upgrades, and we will likely see increased momentum in the latter part of 2024.

Charles L. Treadway: On both DOCSIS, three <unk> and virtual <unk> TFS, we have trials underway with major msos.

Charles L. Treadway: However, in the quarter as expected our customers were faced with larger than expected inventory and adjusted shipments to rightsize their inventory.

Charles L. Treadway: In addition, some of our customers have announced slower than expected ramps on their DOCSIS four <unk> upgrade projects.

Charles L. Treadway: As a result of these two issues order rates and revenues will be negatively impacted in the first few quarters.

Charles L. Treadway: This impact will be a key contributor to our overall sequential decline from the fourth quarter of 2023 through the first quarter of 2024.

We understand that our message is not ideal as we navigate through the challenging market conditions and capital structure.

Charles L. Treadway: We are well positioned for a market recovery and recovery will occur.

Charles L. Treadway: The timing and intensity of that recovery continues to be uncertain.

Charles L. Treadway: Although we are in regular dialogue with our customers and evaluate market data and projections understanding demand drivers has been difficult for us and our competitors.

Charles L. Treadway: In most cases projections have been incorrect.

Charles L. Treadway: The uncertainty is not optimal as we continued to manage cash and capital structure.

Charles L. Treadway: And we will continue to control what we can.

Charles L. Treadway: And with that I'd like to turn things over to Kyle to talk more about our fourth quarter results.

Kyle: Thank you Chuck and good morning, everyone.

Kyle: I'll start with an overview.

Kyle: Of our full year 2023 results on slide three.

Kyle: For the full year consolidated Commscope reported net sales of $5 79 billion.

Kyle: A decrease of 23% from the prior year.

Charles L. Treadway: This performance was driven by a decline in all businesses with the exception of next.

Charles L. Treadway: It should be noted that due to the home transaction AUM is now being reported as discontinued operations.

Charles L. Treadway: Consolidated adjusted EBITDA of $999 million decreased 18% from the prior year.

Charles L. Treadway: Adjusted EBITDA declined for the full year across all segments with exception of Nyx.

Charles L. Treadway: Adjusted earnings per share of <unk> 64 deep.

<unk> decreased by 61% from the prior year.

Charles L. Treadway: As a result of our annual goodwill impairment testing, we recorded $145.

Charles L. Treadway: $4 million impairment charge during the fourth quarter, which is excluded from the adjusted earnings per share calculation.

Charles L. Treadway: For the full year core Commscope reported net sales of $5 $79 billion.

Charles L. Treadway: A decrease of 23% from the prior year.

Charles L. Treadway: The net sales decline was led by a significant year over year decrease in Ccs, followed by OWS and Ams, while partially offset by growth in mix.

Charles L. Treadway: For adjusted EBITDA for the full year was $1 2 billion.

Charles L. Treadway: A decrease of 18% from the prior year and with our expected.

Charles L. Treadway: Range for the full year 2023 that we provided in our third quarter call.

Charles L. Treadway: Similar to net sales core adjusted EBITDA decline was driven by decreases in Ccs OWS and E&S, while being partially offset by an increase in mix.

Speaker Change: Now turning to slide four.

Speaker Change: For the fourth quarter consolidated Commscope reported net sales of one 186 billion.

Speaker Change: A decrease of 38% from the prior year driven by declines in all segments.

Speaker Change: Adjusted EBITDA of $191 million decreased by 49%.

Speaker Change: Adjusted EPS was negative <unk> <unk> per share.

Charles L. Treadway: We experienced lower revenue driven by our customers continuing to manage inventory and overall lower market demand.

Charles L. Treadway: Customers continue to manage their capital spend.

<unk> pushing out some network upgrades.

Charles L. Treadway: Our core Commscope net sales of $1 $186 billion.

Charles L. Treadway: Declined 38% from the prior year and adjusted EBITDA of $199 million decreased 48%.

Charles L. Treadway: As we have experienced lower orders for Commscope backlog continued to decrease and ended the quarter at 115 2 billion.

Charles L. Treadway: A decrease of 26% versus the end of the third quarter.

Charles L. Treadway: And all of our businesses, we are back to normalized backlog levels.

Charles L. Treadway: As a result of the normalized backlogs order rates are going to be the direct driver of revenue as we move into 2024.

Charles L. Treadway: Turning now to our fourth quarter segment highlights on slide five.

Charles L. Treadway: Starting with Ccs net sales of $556 million decreased 42% from the prior year.

Ccs adjusted EBITDA of $84 million.

Charles L. Treadway: Was a decrease of 55% from the prior year driven primarily by the drop in revenue.

Charles L. Treadway: We saw some slight increases order rates during the quarter.

Charles L. Treadway: However, these orders rates still remain low relative to historical levels.

Charles L. Treadway: Although ccs customer conversations remain bullish on medium and long term growth. The short term demand profile remains very uncertain.

Charles L. Treadway: Based on current visibility, we expect to see lower Ccs EBITDA in the first quarter of 2024, and we realized in the fourth quarter of 2020.

Charles L. Treadway: Next net sales of $217 million.

Charles L. Treadway: <unk> by 25% versus the fourth quarter of 2022.

Charles L. Treadway: From a business unit perspective, Ruckus led the way decreasing 35% and ICM decreased 6%.

Charles L. Treadway: Next adjusted EBITDA of $29 million decreased 48% from the prior year.

Charles L. Treadway: $27 million change primarily driven by.

The decline in Ruckus revenue.

Charles L. Treadway: The next segment full year 2023 adjusted EBITDA.

Charles L. Treadway: It's $225 million, an improvement of $173 million versus the prior year.

Charles L. Treadway: And Rakesh as we've worked through supply chain constraints and released product out of backlog and order rates have declined as channel partners Digest them.

Charles L. Treadway: This is a temporary situation and we expect order rates to return in the second half of 2024.

Charles L. Treadway: All of our other leading indicators point to continued strong demand for our products. However customers are pushing demand out.

Charles L. Treadway: Based on latest market information the ruckus market will decline in 2024.

Charles L. Treadway: We are excited about our continued product development, specifically, our rocket one and Wi Fi seven products.

Charles L. Treadway: We feel that we are well positioned to continue to take market share in the medium and long term.

Charles L. Treadway: Overall, our mix, we expect significant pressure.

Charles L. Treadway: On adjusted EBITDA in the first quarter of 2024 versus the fourth quarter of 2023.

Charles L. Treadway: However, we are expecting a recovery in the second half of 2024 as the market Digest inventory built in the second and third quarters of 2020.

Kyle: <unk> net sales of $183 million decreased 40% from the prior year and across the majority of the business units.

Kyle: So motor Ccs customers indicated a stronger second half that did not materialize.

Kyle: Demand in this segment remain soft with limited visibility.

Kyle: Customers continue to limit new builds on our working down inflated inventories.

Kyle D. Lorentzen: Though we have aggressively manage costs <unk> adjusted EBITDA of $31 million declined 24% from the prior year.

Kyle D. Lorentzen: Recall in the fourth quarter of 2022, we had a $21 million bad debt charge related to one specific OWS customer.

Kyle D. Lorentzen: In early 2024, we have seen some pickup in OWS in order rates, we expect first quarter revenue and adjusted EBITDA to be in line with fourth quarter 2020.

Kyle D. Lorentzen: <unk> net sales of $231 million decreased 38% from the prior year due to customer inventory adjustments and project delays.

Kyle D. Lorentzen: <unk> adjusted EBITDA of $54 million was down $41 million or <unk>, 43% from the prior year driven by lower revenue.

As mentioned on previous calls several of our large customers approached us about lowering order rates as they dealt with higher inventory levels and delayed timing on up.

Kyle D. Lorentzen: This had an impact on our fourth quarter revenues.

Kyle D. Lorentzen: Also we expect these adjustments to have a significant impact on the first half of 2024.

Kyle D. Lorentzen: Despite the short term challenges and continues to position itself to take advantage of the DOCSIS four <unk> upgrade cycle.

Kyle D. Lorentzen: We are the only supplier that can supply all the products from amplifiers nodes modules and <unk>, including virtual <unk>.

Kyle D. Lorentzen: Finally during the quarter we.

Kyle D. Lorentzen: We made progress on the divestiture of our home business to van Teva that finalized in early January 2024.

Kyle D. Lorentzen: We feel this combination best positions the business for success in a challenging market.

Kyle D. Lorentzen: We feel this is the best outcome for our customers and shareholders.

Kyle D. Lorentzen: Our ownership position in van Teva will allow us to take advantage of the combined scale of the two businesses as well as the substantial synergies the combination will deliver.

Kyle D. Lorentzen: All net sales were $294 million.

Kyle D. Lorentzen: Nine and 25% from the prior year essentially across all business units driven by customer inventory adjustments and lower demand.

Kyle D. Lorentzen: AUM adjusted EBITDA of negative $46 million decreased from negative $5 million versus prior year as a result of a one time charge related to the sale.

Kyle D. Lorentzen: Turning to slide six for an update on cash flow.

During the quarter, we generated cash from operations of $60 million.

Kyle D. Lorentzen: We continue to reduce inventory.

Kyle D. Lorentzen: As previously discussed we are still holding excess inventory driven by the supply chain constraints in 2021 and 2022.

Kyle D. Lorentzen: As revenue declines it delays our ability to monetize this excess inventory.

Kyle D. Lorentzen: Despite the revenue and EBITDA challenges, we delivered 2023 adjusted free cash flow of $382 million, which was above the $300 million to $350 million range provided on the third quarter earnings call.

Kyle D. Lorentzen: Based on the lack of visibility we are not providing cash flow guideposts I would highlight that historically first quarter is a quarter with significant use of cash driven by a high cash interest payment quarter and incentive payouts.

Kyle D. Lorentzen: Coupled with our lower EBITDA is going to result in a significant use of cash in the first quarter.

Kyle D. Lorentzen: Turning to slide seven for an update on our liquidity and capital structure.

Kyle D. Lorentzen: During the fourth quarter, our cash and liquidity remains strong we ended the quarter with $544 million in global cash and.

Kyle D. Lorentzen: In total available cash and liquidity of over $1 2 billion.

Kyle D. Lorentzen: During the quarter, we increased our cash balance by $25 million.

Kyle D. Lorentzen: We did not draw on our ABL revolver during the fourth quarter, and therefore ended the quarter with no outstanding balance.

Kyle D. Lorentzen: Should be noted that we lost approximately $125 million of liquidity on our ABL with the home divestiture in early 2020.

Kyle D. Lorentzen: In the fourth quarter, we continued to execute our debt buyback program and repurchased $106 million of our long term debt for cash consideration of $51 million.

Kyle D. Lorentzen: More detail, we repurchased $52 million of the 825% senior notes due 2027.

Kyle D. Lorentzen: $54 million of the seven 5% senior notes due 2028.

Kyle D. Lorentzen: Since the beginning of 2023, we have repurchased $217 million of debt.

Kyle D. Lorentzen: During the quarter, we also paid the required $8 million of term loan amortization.

Kyle D. Lorentzen: Company ended the quarter with net leverage ratio of eight zero.

Kyle D. Lorentzen: Going forward, we intend to use cash opportunistically to buy back securities across the breadth of our capital structure.

Speaker Change: I'm now turning to slide eight where I will conclude my prepared remarks with some commentary around our expectations for 2020.

Speaker Change: Based on the lack of visibility to a market recovery, we are not providing updated annual guideposts.

Speaker Change: Our current order rates remain historically low as we are dealing with lower market demand.

Speaker Change: Visibility to the first quarter indicates a very difficult quarter from a revenue adjusted EBITDA and cash perspective.

Speaker Change: <unk> continues to be challenges many of our large customers are adjusting inventory and delaying upgrades.

Speaker Change: Nick saw a significant reset of demand from our channel partners as we released backlog in the middle of 2023.

Kyle D. Lorentzen: Although we expect some impact of the ruckus backlog release, the magnitude and length of this adjustment was unexpected.

Kyle D. Lorentzen: Our leading indicators continue to point to strong demand for ruckus products.

Kyle D. Lorentzen: All of our customers are pushing out this demand more aggressively than we have seen in the past.

Kyle D. Lorentzen: All of our businesses are dealing with depressed demand as a result of these challenges our first quarter adjusted EBITDA will be in the $100 million to $125 million range.

Kyle D. Lorentzen: Based on conversations with customers, we expect to see a revenue pickup in the second half of the year, we have seen some increase in Ccs and OWS order rates.

Kyle D. Lorentzen: Although it is too early to determine the staying power of these increases it does provide some indication that demand may be returning.

Kyle D. Lorentzen: To state the obvious however, if we don't see a meaningful recovery in the second half we should be prepared for 2020 for adjusted EBITDA and cash flow to be significantly lower than 2023, adjusted EBITDA and cash flow.

In summary, we are on a path of telecom cable and hardware recession as mentioned previously the challenge with the current position is the lack of visibility.

Kyle D. Lorentzen: Despite some visibility into customer inventories customer short term build plans remain uncertain.

Kyle D. Lorentzen: We'll recover the question remains when and at what level.

Kyle D. Lorentzen: We are still bullish on medium and long term growth. However, short term challenges are significant.

Kyle D. Lorentzen: We continue to control, what we can control, including implementing the $100 million.

Kyle D. Lorentzen: Annual cost reductions discussed on our prior call.

Kyle D. Lorentzen: With this cost action on the cost actions, we have already taken on recovery of the demand, we should be well positioned to drive strong profitability.

Kyle D. Lorentzen: Finally, I would like to address our capital structure and specifically our upcoming maturities.

Kyle D. Lorentzen: We continue to evaluate alternatives, including asset sales to address the 2025 maturity.

Kyle D. Lorentzen: Previous calls we have discussed divestitures as potential elements of our plans to address our capital structure.

We formulated those plans before it became apparent how deep the industry recession was going to be.

Kyle D. Lorentzen: Not surprisingly given the negative market implications on near term revenue and profit of our potential divestiture candidates as well as the negative financial impacts on certain potential strategic buyers, we have not thus far been successful in achieving valuations that make sense to us.

Kyle D. Lorentzen: While there are some continuing divestiture discussions there is no guarantee that we can transact at values that make sense.

Kyle D. Lorentzen: Our businesses have strong market positions, we do not intend to sell assets on the cheap.

Kyle D. Lorentzen: Credit agreement documents are very flexible and we will use this flexibility to optimize our capital structure, including dealing with the 2025 maturity.

Kyle D. Lorentzen: For today's call, we will not be making further comment with respect to our capital structure. However, we will provide updates as appropriate.

Kyle D. Lorentzen: And with that I'd like to give the floor back to Chuck for some closing remarks.

Chuck: Thank you cough as mentioned.

Chuck: We are faced with significant challenges as all of our markets have not cooperated and the visibility to the timing of the recovery is limited.

We are not alone as the entire industry is facing similar challenges.

Chuck: Although we continue to manage what we can control and aggressively manage costs. It is not enough to fully offset the market challenges we are experiencing.

Chuck: Although we are bullish on our recovery it is a matter of when and how much.

Chuck: We are well positioned for the expected recovery as we are a leader in most of our businesses and have invested in future growth with capacity and new products.

Chuck: However, the longer the demand remains low the more challenges we face.

Chuck: We have optimism that the second half of 'twenty 'twenty four will show some meaningful recovery.

Chuck: The uptick in the Ccs and OWS order rates early in 2024 is a positive trend towards that recovery.

Chuck: With that said, we just can't predict with any confidence when a recovery will occur.

Kyle D. Lorentzen: In addition to managing the businesses, we are acutely aware of our capital structure and liquidity.

Kyle D. Lorentzen: We will continue to work on managing these aggressively.

Speaker Change: We appreciate your continued support and patience and with that we'll now open the line for questions.

Speaker Change: Thank you ladies and gentlemen, if you have a question or a communist. This time. Please press star one on your telephone. If your question has been answered you were seeing with yourself from the queue. Please press star one again, we will pause for a moment, while we compile our Q&A roster.

Speaker Change: Our first question comes from <unk> <unk> with Jpmorgan. Your line is open.

Jpmorgan: Hey, guys. Thank you for taking my question. This is <unk> on for US on the strategy can you. Please dig deep into the issues that youre seeing in nicks business, particularly.

Jpmorgan: The delaying purchasing decisions being delayed relative to some key customers or it's a broad based trend across all of the customers and what leads you to believe in the.

Speaker Change: Second half of the year, Thank you and I have a follow up.

Speaker Change: Yes, I would say I would say it's broad based.

Speaker Change: And when you talk about the <unk> business overall, just a little bit of color.

Speaker Change: Although we don't like the way the year finished.

Speaker Change: Even with the challenges we had over the last two years the Knicks EBITDA has grown.

Speaker Change: Negative $15 million of plus $240 million and we believe we gained share over this time.

Speaker Change: We believe we are well positioned to continue to gain share in the future I think what really happened is we underestimated the impact of the channel inventories and again to be specific.

Speaker Change: To your question.

Speaker Change: I think it was across the board.

Speaker Change: And this coupled with I would say macro uncertainty.

Speaker Change: Is really when the supply chain constraints reversed we were able to ship out all of our we would ship out a major part of our backlog and I think that inventory buildup in the channel is what's affecting us right now.

Kyle D. Lorentzen: When we look at our leading indicators.

Kyle D. Lorentzen: Like our funnel remains strong and.

Kyle D. Lorentzen: But we do see that orders are being pushed out we think two to three quarters.

Kyle D. Lorentzen: And.

Speaker Change: I would say that we do expect the second half bounce because of what we are seeing in our funnel as well as.

Speaker Change: Indications from our customers with channel inventory.

Speaker Change: Thank you my follow up is regarding beat funding. So can you. Please.

Speaker Change: Not really put any common programs like b, how much of the how much of the plus and digital spending is awards expand towards the acute mental product categories that you saw and how material can it be in terms of the company that you guys expect thank you.

Well, let's start with what's going on with beads as the states are starting to award money.

Speaker Change: We are expecting to see.

Speaker Change: Spending start late in 2024 by.

Speaker Change: But a significant pick up in 2025, I think it's important to note that we will be compliant with all of the Baba rules when that turns back on and we think about a total available market for us, we're calling it like about $4 billion.

Kyle D. Lorentzen: I'd say thats over like a four to five year period.

Speaker Change: Thank you our next question.

Speaker Change: Our next question comes from George Notter with Jefferies. Your line is open.

Speaker Change: Yes.

George Charles Notter: Hi, guys. Thanks, very much I wanted to ask about the E&S business.

Sure.

George Charles Notter: I think in the monologue you mentioned that.

Kyle D. Lorentzen: Some significant customers who come forward and.

Kyle D. Lorentzen: Yes, I think either pushed orders or demonstrated softened.

Kyle D. Lorentzen: Softness in terms of their their pacing of network upgrades is that something thats new from you guys. In the last few months or is that something that you're already seeing yes, Dan.

Kyle D. Lorentzen: Q3, or the early part of Q4.

Dan: I would say we got.

Dan: All indications of that and we got the orders.

Pushed out in the fourth quarter of last year.

Dan: So that's when it really started happening.

Dan: We had as Cobb mentioned I think in his remarks.

Kyle D. Lorentzen: We got contacted by customers that said they wanted to push out.

Kyle D. Lorentzen: Obviously for us that business is dependent on upgrades.

Kyle D. Lorentzen: And what we can see is that the customers are leaning forward with upgrades, but it's just they are expecting to start getting more product from us in the second half of the year is what they're talking about us and one of the positive pieces for us in that businesses is the <unk> product line that we expect to start seeing.

Kyle D. Lorentzen: Significant shipments in the second half of this year.

Speaker Change: Got it Okay and then.

Speaker Change: You can say about the V core product progress there with customers trials and anything to report.

Speaker Change: We have several trials going on with our virtual <unk> product.

Hopefully, we'll have some more positive news on our next earnings call on that.

Speaker Change: Got it Okay and then the last question was just on input costs.

Yes, if you look at the business and balances there.

Are you seeing any benefits on input costs any.

Speaker Change: Any kind of.

Speaker Change: Mental benefits there would be great.

Speaker Change: Yeah, I think just in general.

Speaker Change: As you can imagine things or things go up and down in biological material and inputs.

Speaker Change: Generally across the board, we haven't we haven't seen either significant increase or any reduction.

Speaker Change: Since we saw the.

Speaker Change: Sort of the big Spike because we went through 2022.

Speaker Change: We've mentioned on previous calls the one input cost it's come down since done this for a little bit.

Speaker Change: But I think generally other than that.

Speaker Change: The materials are.

Speaker Change: Net basis, probably pretty neutral.

Okay, Great I'll pass it on thanks, guys. Thank you. Thank you.

Kyle D. Lorentzen: Moment for our next question.

Kyle D. Lorentzen: Okay.

Our next question comes from Simon Leopold with Raymond James Your line is open.

Kyle D. Lorentzen: Hey, guys. This is Victor Chu in for Simon Leopold I wanted to follow up on.

Victor Chu: The mix.

Victor Chu: <unk> this quarter.

Victor Chu: Maybe can you help us understand how we should think about.

Victor Chu: Normalized growth when we kind of look past inventory digestion.

Victor Chu: Back to 2022 2023 levels.

Victor Chu: Yes.

Victor Chu: Given the deterioration in your visibility indicators, you're looking at kind of what gives you confidence that the structural kind of demand remains intact.

Speaker Change: Yes, sorry.

Speaker Change: I'll start with our structural demand and why we believe that stays intact and thats because of our funnel.

Speaker Change: And we have a lot of projects. There we have closed one list that we keep track of how we continue to win projects. So we feel good about that.

Speaker Change: You look at the del Oro report I think they are calling out for a lower 2024, but if you think back going forward.

Kyle D. Lorentzen: If you look at that report going forward. They are talking about like a 5% CAGR over the next five years or so after this.

Kyle D. Lorentzen: So I do think we're going to have a couple of.

Kyle D. Lorentzen: Bumpy quarters as you've heard from many of our competitors kind of said the same thing.

Kyle D. Lorentzen: But we think the second half will come back in and I think thats a combination of the inventory adjustments people shipping out what we have.

Kyle D. Lorentzen: Plus the funnel that we have.

Kyle D. Lorentzen: For the balance that will help us with our bounce back.

Speaker Change: Okay great.

Chuck: On the just on the OWS segment.

Chuck: Can you help us think about the shift to open ran in the U S and Europe.

Chuck: Have you guys considered how that effects yield.

Chuck: <unk> segment.

Chuck: Built any of that into your assumptions.

Speaker Change: I would say.

Speaker Change: Related to open ran we are we are supportive of our customer base wherever they want to work with in that with that technology, we are working together with them.

Speaker Change: But I would say, we're not seeing that much.

Charles L. Treadway: In terms of our plans, we're looking at more passive antennas, our mosaic product refresh that they have going on in their networks.

Charles L. Treadway: How we support the lower frequencies.

Charles L. Treadway: We are positive about what's going to happen in the rural areas. We think that there is a larger chance for us to do with HCA, Dar which would be also positive for us.

Charles L. Treadway: Versus the massive mimo everywhere. So that's also a positive thing.

Speaker Change: Okay. That's helpful.

Speaker Change: Back in the queue. Thank you.

Speaker Change: One moment for our next question.

Speaker Change: Okay.

Speaker Change: Our next question comes from Steven Fox with Fox Advisors. Your line is open.

Steven Bryant Fox: Hi, Good morning, a couple of questions from me if I could first off.

Steven Bryant Fox: Chuck given the recessionary environment, describing can you talk about competition, how it's impacting pricing maybe.

Charles L. Treadway: Smaller competitors.

Charles L. Treadway: They may be struggling to make it to the other side of this downturn.

Speaker Change: Yeah, I would say.

Speaker Change: Up to this point I think we're all looking at the situation is as you just heard one of the questions. We get asked what's going on with inventory incoming material costs.

Operator: And those are flat I think our customers understand our volume situation. So we're not getting that much on pricing pressure.

Operator: Thank.

What I would hope is that we all work together through this.

Operator: Downtime and behave appropriately.

Operator: I would say.

Operator: We need to work together as a small small small firms out there right now I think they're going to be in a much deeper situate much deeper and much more challenging situation than us.

But I think what we all have to do assaults together right now and get through this.

Samik Chatterjee: That's helpful. And then just in terms of the cash flows going forward I know, you're not providing guidance, but like anything else you can add from a color standpoint, depending on what we all come up with EBITDA.

Samik Chatterjee: What else do you think you can do this just sort of generate cash flows from a working capital standpoint and also from.

Unknown Speaker: An active production standpoint, any more mothballing of facilities for time being things that could play.

Unknown Speaker: Layoffs et cetera anything else that you would consider doing just to sort of preserve the balance sheet.

Speaker Change: Yes, I think on the on the cash side.

Speaker Change: We've talked a little bit about the fact that we.

Speaker Change: As a result of some of the challenges that are 22 with supply.

Speaker Change: Holding a little bit more inventory that we would like to although what's the.

Speaker Change: With the demand.

Speaker Change: Continuing to sort of push out.

Speaker Change: It's a little bit harder to monetize that but I think.

Speaker Change: We think about areas of opportunity I think inventories is placed it.

Speaker Change: We feel like there is some opportunity.

Speaker Change: So I think thats.

Speaker Change: No that's definitely an area I think as we think about the cost side of our business.

Speaker Change: We were talking about.

Implementing this $100 million plan.

Speaker Change: I think that sort of goes across the organization as to where we're going to get that 100 million from.

Speaker Change: And as you would expect.

Speaker Change: Not just just not just because of our current situation and the demand profile, but just ongoing I mean, I think we're always looking for opportunities to optimize.

And that's just.

Speaker Change: That's across all of our functional areas, including them, including operations.

Speaker Change: That's helpful. Thank you.

Speaker Change: One moment for our next question.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Our next question comes from meta Marshall with Morgan Stanley. Your line is open.

Meta A. Marshall: Great. Thanks.

Meta Marshall: Yeah.

Meta A. Marshall: I know the question I've asked in a variety of different ways, but you guys have just kind of undergone a pretty decent overhaul of the portfolio.

Charles L. Treadway: Whether it be mosaic or some of the work that you guys have done on ruckus and the Ams portfolio. So just.

Speaker Change: And where do you feel like the share gain opportunities are the greatest.

As demand comes back and then just maybe a second question.

Speaker Change: Just in terms of.

Speaker Change: What.

Speaker Change: Understanding kind of how you've laid out about or W. N and M S looking or seen or <unk> seen some.

George Charles Notter: Science of kind of demand improvement early signs of demand improvement, but just any context in terms of you know is that largely at the edge or just like where within the network, you're seeing that kind of uptick within those business areas.

Speaker Change: Thanks, Matt.

Speaker Change: I think we have the most opportunity.

Speaker Change: For share gain I would say would be.

Speaker Change: With our <unk> business I mean, we came back with the one we just launched our Wi Fi seven were the first to market with that product.

Speaker Change: And I think thats going to be very well received.

Speaker Change: Already as we have already won orders in that space and I think markets come back I think that's going to be very positive for us.

Speaker Change: As you mentioned.

Speaker Change: The second one the second one I would say is a spot where we we have revamped as you mentioned, we have revamped our product family.

Speaker Change: B.

Charles L. Treadway: One of the leaders on the edge or D leader at the edge of the networks.

Charles L. Treadway: And I do believe our customers are leaning forward with upgrades and.

Charles L. Treadway: And we have the products for them and so I think that's going to be a nice opportunity for us.

Charles L. Treadway: Specialty products like MTX.

Charles L. Treadway: And our virtual CMT assets as we've talked about before.

Charles L. Treadway: With Ccs I believe what happened. There is we were ahead of the curve, we put the capacity in place in 2021 and 2022.

Charles L. Treadway: And I believe we have gained share in that space I think we have given some back.

Charles L. Treadway: But I don't believe we've lost any share there, but I do think that.

Charles L. Treadway: When the markets come back all the capacity, we put in place, we're going to be very well positioned for that.

Charles L. Treadway: And also in our BDC business, which is our structured cable business.

Charles L. Treadway: We've revamped system Max we're now have our system acts to point out we're going to be launching a product every quarter.

Charles L. Treadway: And we're seeing really positive feedback from.

Kyle D. Lorentzen: From our customer base on that.

Kyle D. Lorentzen: And of course, what's going on with Hyperscale and Gen II.

Kyle D. Lorentzen: Our product families. They are also very positively being very positively received in the marketplace.

Kyle D. Lorentzen: So.

Kyle D. Lorentzen: When you think about OWS.

Kyle D. Lorentzen: We have pretty strong market share positions in North America already.

Kyle D. Lorentzen: I think our opportunity there is what can we do outside of North America and then we also are seeing some pretty good traction on people.

Kyle D. Lorentzen: Looking at our mosaic product line up so that would be those would be the same setup that I see.

Speaker Change: To kind of address your question.

Speaker Change: Great. Thank you.

Speaker Change: And I'm not showing any further questions. This time I'd like to turn the call back over to Chuck <unk> for any closing remarks.

Chuck: Yes, I'd like to thank you for your time today and for your support of Commscope.

Chuck: Like you to have a great rest of your week. Thank you very much.

Speaker Change: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.