Q1 2024 CommScope Holding Co Inc Earnings Call

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Operator: Good day, and thank you for standing by. Welcome to the CommScope first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press * one on your telephone. You will then hear an automated message advising your hand is raised.

Good day, and thank you for standing by.

Speaker Change: Welcome to the Commscope first quarter 2024 earnings conference call.

Speaker Change: At this time all participants are in a listen only mode.

Speaker Change: After the Speakers' presentation, there'll be a question and answer session.

Speaker Change: To ask a question during the session you will need to press star one on your telephone you will then hear an automated message advising your hand is raised.

Speaker Change: To withdraw your question. Please press star one again.

Speaker Change: Please be advised that today's conference is being recorded I would now like to hand, the call over to your first speaker today, Matthew Motorship Auto Vice President of Investor Relations. Please go ahead.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Massimo DiSabato, Vice President of Investor Relations. Please go ahead.

Massimo DiSabato: Good morning, and thank you for joining us today to discuss CommScope's 2024 first quarter. I'm Massimo DiSabato, Vice President of Investor Relations. And with me on today's call are Chuck Treadway, President and CEO, and Kyle Lorentzen, Executive Vice President and CEO. You can find the slides that accompany this report on our investor relations page. Please note that some of our comments today will be forward-looking, based on our current view of our, and actual future results may differ. Please see our recent SEC filings, which identify the principal risks and uncertainties that could affect us. Before I turn the call over to Chuck, I have a few housekeeping items.

Speaker Change: Good morning, and thank you for joining us today to discuss Commscope in 2024 first quarter results.

Speaker Change: I'm, Mark Smith, Vice President of Investor Relations for Commscope and with me on today's call are Chuck <unk>, President and CEO.

Charles L. Treadway: Colleran Executive Vice President and CFO.

Charles L. Treadway: You can find the slides that accompany this report on our Investor Relations website.

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

Charles L. Treadway: And actual future results may differ materially.

Charles L. Treadway: 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.

Massimo DiSabato: Today we will discuss certain adjusted or non-GAAP financial measures, which are described in more detail in this morning's webinar. Reconciliations of non-GAF 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 financial statements.

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

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

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

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

Charles L. Treadway: I'll begin on slide two. We continue to see uncertainty in our business. In the first quarter, we saw recovery in our CCS and OWN order rates as service providers worked down inventories and demand appeared to be rebounding. This is a positive sign and one that we have been waiting for.

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

Chuck: We continue to see uncertainty in our business.

Chuck: In the first quarter, we saw recovery in our Ccs in the OWS order rates as service providers have worked down inventories and demand appears to be rebounding.

Chuck: This is a positive sign and one that we have been waiting for.

Charles L. Treadway: Unfortunately, with the early signs of recovery in CCS and OWN, our ANS and NICS segments realized further deterioration in the quarter. In ANS and NICS, we experienced lower sequential quarterly revenues driven by delayed upgrades, customer inventory, and lower demand. Visibility remains limited across all segments as customers continue to manage through macroeconomic conditions and upgrade plans.

Chuck: Unfortunately, with the early signs of recovery in Ccs and OWS, our E&S in niche segments realized further deterioration in the quarter.

Chuck: And the mix, we experienced lower sequential quarterly revenues driven by delayed upgrades customer inventory and lower demand.

Chuck: Visibility remains limited across all segments as customers continue to manage through macroeconomic conditions and upgrade plans.

Charles L. Treadway: Based on current visibility, we expect the second quarter revenue and adjusted EBITDA to be higher than the first quarter. Turning to the first quarter results, CommScope delivered net sales of $1.168 billion and adjusted EBITDA of $153 million for the first quarter of 2024.

Chuck: Based on current visibility, we expect the second quarter revenue and adjusted EBITDA to be higher than the first quarter.

Chuck: Turning to the first quarter results Commscope delivered net sales of $1 168 billion.

Chuck: And adjusted EBITDA of $153 million for the first quarter of 2024.

Charles L. Treadway: Our first quarter continued to be negatively impacted by lower market demand and larger-than-expected customer and channel inventory build. As I've mentioned in past calls, we continue to control what we can and navigate macroeconomic challenges that impact our business. We are the market leader in most of our businesses with a comprehensive strategy and capacity in place to meet expected future demand. In addition, as referenced in our fourth quarter call, we are managing our cost structure and are on track with our plan to take out $100 million of annual costs.

Chuck: Our first quarter continued to be negatively impacted by lower market demand and larger than expected customer and channel inventory buildup.

Chuck: As I've mentioned in past calls, we continue to control, what we can and navigate macroeconomic challenges that impact our businesses.

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

Chuck: In addition, as referenced in our fourth quarter call. We are managing our cost structure and are on track with our 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. In the quarter, CCS saw stronger ordering patterns than we saw in late 2023. As mentioned, we believe that this is due to our service providers continuing to digest their inventories they have on hand, as well as stronger enterprise sales from data center, building, and campus. Starting with our enterprise side of the business. We continue to find success with the launch of our Systemax 2.0 structured cabling solution.

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

Chuck: In the quarter Ccs saw stronger ordering patterns that we saw in late 2023.

Chuck: As mentioned, we believe that this is due to our service providers continuing to digest their inventory they had on hand as well as stronger enterprise sales from data center and building on campus.

Chuck: Starting with our enterprise side of the business. We continued to find success with our launch of our system acts to point out structured cabling solution.

Charles L. Treadway: The introduction of innovative offerings, such as GigaReach and XL5 cable, enable greater distances and increased bandwidth capability. These new cables support both building and campus solutions for the next wave of applications like security and multi-gigabit Wi-Fi 7 access.

Chuck: The introduction of innovative offerings, such as Giga reach and XO five cable enabled greater distances and increased bandwidth capabilities.

Chuck: These new cable support both building and campus solutions for the next wave of applications like security and multi gig Wi Fi access points.

Charles L. Treadway: In addition to our building and campus market, the cloud and hyperscale portion of the business saw additional project momentum and build-outs of Gen-AI data centers. We are working with several of the large players in this arena as our products and services are well positioned for these bills. To supplement strong demand in this business, we're in the process of expanding our connector capacity, with the capacity to be implemented by mid-year. Now, turning our attention to our broadband.

Chuck: In addition to our building in catalyst market, the cloud and Hyperscale portion of the business saw additional project momentum and build outs of Gen AI data centers.

Chuck: We're working with several of the of the large players in this arena as our products and services are well positioned for these builds.

Chuck: To supplement strong demand in this business we are in the process of expanding our connector capacity with the capacity to be implemented by mid year.

Chuck: Turning our attention to our broadband business we are in.

Charles L. Treadway: We are encouraged to not only see ordering patterns stabilize, but growth in order rates throughout the quarter as service providers work through high inventory levels over the past few quarters. Much of our research suggests that private-to-the-home passing rates in the United States remained at historic levels, thus the need to refresh in the middle ages.

Chuck: Courage to not only see ordering patterns stabilize but growth in order rates throughout the quarter as service providers work through high inventory levels over the past few quarters.

Chuck: Much of our research suggests that fiber to the home passes in the United States remained at historic levels, thus the need to refresh inventory.

Charles L. Treadway: As we look forward to the Government Beats Funding Initiative, we have launched hundreds of Build America, Buy America qualified products. I would encourage you to visit commscope.com to see the breadth of our BABA-compliant products. These products and solutions are positioned to capture the long-term market tailwinds supporting broadband infrastructure projects that are expected to start late in 2024 and into 2025. All of these factors and the recent order trends are evidence of a potentially stronger second half of 2024 and a return to growth for the CCS sector. Turning to Nick,

Chuck: As we look forward to the government beat funding initiatives, we've launched hundreds of build America by American qualified products.

Chuck: We encourage you to visit Commscope dot com to see the breadth of our <unk> compliant products.

Chuck: These products and solutions are positioned to capture the long term market tailwind supporting broadband infrastructure projects that are expected to start.

Chuck: Start late in 2024 and into 2025.

Chuck: All of these factors and the recent order trends are evidence of a potentially stronger second half of 2024 and return to growth for the Ccs segment.

Nicks: Turning to Nicks.

Charles L. Treadway: As we discussed on the Q4 earnings call, the business is seeing weaker-than-predicted sales primarily driven by a ruckus business impacted by higher-than-average inventory levels in the channel. As we work with our partners to bring their inventory down to an acceptable level, this will continue to affect our niche segment performance. In addition to the inventory build, we are also seeing a rather significant reduction in demand. We have a number of initiatives underway to help the business, but we do not expect that these initiatives will fully offset the lower demand we expect to see over the next few quarters.

Chuck: As we have discussed on the Q4 earnings call. The business is seeing weaker than predicted sales, primarily driven by a ruckus business impacted by higher than average inventory levels in the channel.

Chuck: As we worked with our partners to bring their inventory down to an acceptable level. This will continue to affect our niche segment performance.

Chuck: In addition to the inventory build we are also seeing a rather significant reduction in demand.

Chuck: We have a number of initiatives underway to help the business, but we do not expect that these initiatives will fully offset the lower demand we expect to see over the next few quarters.

Charles L. Treadway: It is also important to note that this is not just impacting RUF; other competitors in this space are citing similar issues. A bright spot in the Ruckus business is that we are seeing continued momentum for our Ruckus One and Ruckus AI solutions. As our customers are looking for more ways to optimize their networks, they are turning to our software solutions for help.

Chuck: It is also important to note that this is not just impacting ruckus.

Chuck: Other competitors in this space are siding similar issues.

Chuck: A bright spot in the Ruckus business is that we are seeing continued momentum towards our ruckus, one and Ruckus AI solutions.

Chuck: As our customers are looking for more ways to optimize our networks. They are turning to our software solutions for health.

Charles L. Treadway: As we reinforce our CommScope Next initiatives, we expect to continue to improve this business as we believe it has significant long-term growth potential. 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 staff. Our next business was positively supported by ICN Performance, led by the DAS business, providing in-building 5G connectivity. This positions us nicely to grow with operators and enterprises, as well as in public and private networks.

Chuck: As we reinforce our Commscope next initiatives, we expect to continue to improve this business as we believe it has significant long term growth potential.

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 <unk> business was positively supported by ICM performance led by the Das business, providing and building <unk> connectivity.

Chuck: This positions us nicely to grow with operators and enterprises as well as in public and private networks.

Charles L. Treadway: With that said, our next segment, and specifically Ruckus, remains under substantial short-term pressure as demand significantly declined in the last quarter, driven by too much inventory in the system and slower overall market demand. In the first quarter, we saw a drop in the Ruckus sales funnel, with purchasing decisions being pushed to future periods. We expect that lower demand will continue for at least the next few quarters as inventory is digested and the demand drivers reset.

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

Chuck: In the first quarter, we saw a drop in the ruckus sales funnel with purchasing decisions being pushed to future periods.

Chuck: We expect that the lower demand will continue at least throughout the next few quarters as inventory is digested in the demand drivers reset.

Charles L. Treadway: And OWN, as mentioned in previous calls, 2023 saw a decline in U.S. carrier capital spend, as well as pressure from U.S. carriers digesting inventory. However, during the first quarter, we have seen some continued recovery in order rates, largely supported by increased space station antennas. We expect 2024 revenues to look similar to what we saw in 2023, but with a stronger second half of the year. Again, as previously stated, we continue to focus on what we can control, and we are ready to support our customers when they are ready.

Chuck: And <unk> as mentioned in previous calls 2023 saw a decline in U S carrier capital spend as well as pressure from U S carriers digesting inventory.

Chuck: During the first quarter, we are seeing some continued recovery in order rates largely supported by increased base station antenna sales.

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

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

Charles L. Treadway: In addition, we continue to develop and commercialize new products to help our customers build reliable and efficient wireless infrastructure. Last quarter, we introduced our new seed base station antenna solution aimed at delivering 15% greater efficiency at a fixed power level.

Chuck: In addition, we continue to develop and commercialize new products to help our customers build reliable and efficient wireless infrastructures.

Chuck: Last quarter, we could.

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

Charles L. Treadway: In this quarter, we are happy to report that it gained multiple operator design. Again, like we are in CCS, we are well positioned in the market and feel like we have the right solutions to support the market as recovery continues. Finishing with A&F.

Chuck: In this quarter, we are happy to report that <unk> gained multiple operator design wins.

Chuck: Again like we are in Ccs, we are well positioned in the market and feel like we have the right solutions to support the market as recovery continues.

Chuck: Finishing with Ams.

Charles L. Treadway: The first half of 2024 will be historically weak due to our customers being faced with larger than expected inventory and navigating the choices for next-generation HFC architecture. As mentioned previously, the ANS segment has made a successful transition to a leading supplier of edge-related products, including nodes, amplifiers, RPD, and RMD modules, and remote OLTs for nodes. We will have a significant role helping our customers build out their next generation of multi-gigabit networks while continuing to support our large installed base of CMTS products. We also recently launched DOCSIS 3.1 Enhanced Solution, enabling operators to turn on services between 5 and 8 gigabits per second, largely through existing infrastructure and a software upgrade.

Chuck: First half of 2024 will be historically weak due to our customers being faced with larger than expected inventory and navigating the choices for next generation HFC architecture.

Chuck: As mentioned previously the E&S segment has made a successful transition to a leading supplier of edge related products, including nodes amplifiers, RPT and R&D modules and remote royalties for node pump.

Chuck: We will have a significant role in helping our customers build out their next generation of multi gigabit networks, while continuing to support our large installed base of <unk> products.

Chuck: We also recently launched DOCSIS three one enhanced solution, enabling operators to turn on services between five and eight gigabits per second largely through existing infrastructure and software upgrades.

Charles L. Treadway: As we move closer to the second half of the year, we're on track to start delivering products supporting DOCSIS 4.0 upgrades, and we will likely see increased momentum toward the latter part of 2020. We will continue to invest in our virtual CMTS solution that will be fully DOCSIS 4.0 compliant, as major MSOs determine which path to take. Whether it be the Extended Spectrum DOCSIS variant or Full Duplex DOCSIS, we will have the right product to support them on their journey.

Chuck: As we move closer to the second half of the year, we are on track to start delivering.

Chuck: Products supporting DOCSIS, four <unk> upgrades, and we will likely see increased momentum towards the latter part of 2024.

Chuck: We will continue to invest in our virtual GM tests CMT <unk> solution that will be fully DOCSIS four <unk> compliant.

Chuck: As major msos determine which path to take.

Chuck: Whether it be the extended spectrum DOCSIS variants are full duplex DOCSIS, we will have the right product to support them in their journey.

Charles L. Treadway: With that said, as we suggested would be the case in our fourth quarter comments, our customers were faced with larger than expected inventory and adjusted shipments to right-size their inventory. As a result of these two issues, we anticipate that order rates and revenues will be negatively impacted in the next few quarters. We're continuing to navigate our businesses through varying market conditions, but as we have stated in the past, we are well-positioned for a market recovery. And while we remain confident that a recovery will occur, the timing and intensity of that recovery continue to be uncertain.

Chuck: With that said as we suggested would be the case in our fourth quarter comments, our customers were faced with larger than expected inventory and adjusted shipments to rightsize their inventory.

Chuck: As a result of these two issues, we anticipate that order rates and revenues will be negatively impacted in the next few quarters.

Chuck: We're continuing to navigate our business through varying market conditions, but as we stated in the past we are well positioned for a market recovery and while we remain confident that a recovery will occur the timing and intensity of that recovery continues to be uncertain.

Charles L. Treadway: We have been in regular dialogue with our customers and evaluating market data and projections for each of our business sectors. Understanding demand drivers has been difficult for us, as well as our competitors. We will continue to control what we can, and we'll support our customers in the process. And with that, I'd like to turn things over to Kyle to talk more about our first quarter. Thank you, Chuck, and good morning, everyone.

Chuck: We've been in regular dialogue with our customers and evaluate market data and projections for each of our business segments.

Chuck: Understanding demand drivers has been difficult for us as well as our competitors.

Chuck: We will continue to control, what we can and will support our customers in the process.

Chuck: And with that I'd like to turn things over to Kyle to talk more about our first quarter results.

Kyle: Thank you Chuck and good morning, everyone.

Kyle D. Lorentzen: I'll start with an overview of our first quarter 2024 results on slide three. For the first quarter, Consolidated CommScope reported net sales of $1.168 billion, a decrease of 30% from the prior year, driven by declines in all segments. Justin Ibbitts' revenue of 153 million dollars decreased by 51 percent. Adjusted EPS was negative eight cents per share.

Kyle: I will start with an overview of our first quarter 2024 results on slide three.

Kyle: For the first quarter consolidated Commscope reported net sales of $1 168 billion, a decrease of 30% from the prior year driven by declines in all segments.

Kyle: Adjusted EBITDA of $153 million decreased by 51%.

Kyle: Adjusted EPS was negative <unk> <unk> per share.

Kyle D. Lorentzen: We experienced lower revenue driven by continued delays in upgrades, customer inventory levels, and an overall lower market. The sequential trend of quarterly revenue and adjusted EBITDA decline continued in the first quarter of 2020. CommScope backlog ended the quarter at $1.162 billion, up slightly versus the end of the fourth quarter.

Kyle: We experienced lower revenue driven by continued delays and upgrades customer inventory levels and overall lower market demand.

Kyle: The sequential trend of quarterly revenue and adjusted EBITDA decline continued in the first quarter of 2024.

Kyle: Commscope backlog ended the quarter at $1 $162 million.

Kyle: Up slightly versus the end of the fourth quarter as mentioned previously in all of our businesses, we are back to normalized backlog levels.

Kyle D. Lorentzen: As mentioned previously, in all of our businesses, we are back to normalized backlog levels. Order rates are going to be the direct driver of revenues over the next few quarters. As Chuck mentioned earlier, we saw an increase in order rates from the fourth quarter of 2023 to the first quarter of 2024, particularly in CCS and OWA. However, although this is a positive sign, we continue to lag well behind historical revenue levels. Turning now to our first quarter segment highlights on slide four. Starting with CCS, net sales of $605 million decreased 26% from the prior year. TCS's adjusted EBITDA of $95 million decreased 37% from the prior year, driven primarily by a drop in revenue.

Kyle: Order rates are going to be the direct driver of revenues over the next few quarters.

Kyle: As Chuck mentioned earlier, we saw an increase in order rates from the fourth quarter of 2023 to the first quarter of 2024, particularly in Ccs and OWS.

Kyle: Although this is a positive side, we continue to lag well behind historical revenue levels.

Kyle: Turning now to our first quarter segment highlights on slide four.

Kyle: Starting with Ccs net sales of $605 million decreased 26% from the prior year.

Kyle: Tcs adjusted EBITDA of $95 million decreased 37% from the prior year, driven primarily by the drop in revenue.

Kyle D. Lorentzen: The decline is being driven by broadband, which continues to see increases in odor rates during the quarter. On a sequential basis, revenue was up nine. Despite the pickup in order rates, these order rates still remain low relative to historical levels in 2021 and 2022. Although CCS order rates have improved, and customer conversations remain bullish on medium and long-term growth, the short-term demand profile remains uncertain. However, based on current visibility, we expect higher CCS revenue and adjusted EBITDA in the second quarter of 2024 compared to the first quarter.

Kyle: The decline is being driven by the broadband business.

Kyle: We continue to see increases of order rates during the quarter.

Kyle: On a sequential basis revenue was up 9%.

Kyle: Despite the pickup in order rates. These order rates still remain low relative to historical levels in 2021 and 2022.

Kyle: Although ccs order rates improved and customer conversations remain bullish on medium and long term growth. The short term demand profile remains uncertain.

Kyle: However, based on current visibility, we expect higher Ccs revenue and adjusted EBITDA in the second quarter of 2024 versus the first quarter.

Kyle D. Lorentzen: Next, net sales of $180 million decreased by 37% versus the first quarter of 2020. From a business unit perspective, Ruckus decreased 46% and ICN decreased 17%. Nick suggested even a negative $1 million decreased $59 million from the prior year, primarily driven by the decline in Ruckus revenue.

Kyle: Next net sales of $180 million decreased by 37% versus the first quarter of 2023.

Kyle: From a business unit perspective rocket decreased 46% and ICM decreased 17%.

Kyle: Next adjusted EBITDA of negative $1 million decreased $59 million from the prior year, primarily driven by the decline in Ruckus revenue.

Kyle D. Lorentzen: In Ruckus, as we have worked through supply chain constraints and released product out of backlog, order rates have declined as channel partners digest inventory. It should also be noted that with Ruckus backlog at historical levels, seasonality is also impacting Ruckus revenue. Historically, the first quarter is the lowest revenue quarter for Rockets. In addition to channel inventory and seasonality, overall demand is lower in the market. During the quarter, we also saw our near-term funnel decline as customers pushed projects and upgrades to later periods. Based on the latest third-party forecasts, the roughest market will decline in 2024. We expect Ruckus to have a challenging year relative to 2023.

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

Kyle: It should also be noted that with ruckus backlog at historical levels.

Kyle: His analogy is also impacting ruckus revenue.

Kyle: Historically, the first quarter is the lowest revenue quarter for rockets.

Kyle: In addition to channel inventory and seasonality overall demand is lower than the market.

Kyle: During the quarter. We also saw our near term funnel decline as customers push projects and upgrades to later periods.

Kyle: Based on latest third party forecast the office market will decline in 2024.

Kyle: We expect rochus to have a challenging year relative to 2023.

Kyle D. Lorentzen: Despite these challenging short-term market conditions, we are excited about our continued product development, specifically our RUFUS-1 and Wi-Fi 7 products. We feel that we are well positioned to continue to take market share in the medium and long term. OWM net sales of $196 million decreased 24% from the prior year and across the majority of the business. Despite limited visibility to a recovery, order rates in this segment started to increase in the first quarter. We continue to aggressively manage costs in this segment to offset revenue.

Kyle: Despite these challenging short term market conditions. We are excited about our continued product development, specifically, our ruckus, one and Wi Fi seven products.

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

Kyle: <unk> net sales of $196 million decreased 24% from the prior year and across the majority of the business units.

Kyle: Despite limited visibility to our recovery order rates in this segment started to increase in the first quarter.

Kyle: We continue to aggressively manage costs in this segment to offset the revenue decline.

Kyle D. Lorentzen: OWN Adjusted ETH, at $44 million, declined only 26% from the prior year. Continued investment in new product development positions us for continued leadership in the segment. We expect second quarter OWN revenue and adjusted EBITDA to increase compared to the first quarter. ANF net sales of $187 million decreased 38% from the prior year due to customer inventory adjustments and upgraded delay. ANS adjusted EBIT of $15 million was down 32 million or 68% from the prior year, driven by lower revenue.

Kyle: <unk> adjusted EBITDA of $44 million declined only 26% from the prior year.

Kyle: Our continued investment in new product development positions us for continued leadership in this segment.

Kyle: We expect second quarter, <unk> revenue and adjusted EBITDA to increase compared to the first quarter.

Kyle: And net sales of $187 million decreased 38% from the prior year due to customer inventory adjustments and upgrade delays.

Kyle: <unk> adjusted EBITDA of $15 million was down $32 million or 68% from the prior year driven by lower revenue.

Kyle D. Lorentzen: As mentioned on our previous call, several 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 first quarter revenue. Also, we expect these adjustments to have a significant impact throughout 2024. Despite the short-term challenges, A&S continues to position itself to take advantage of the DOCSIS 4.0 upgrade cycle. We're the only supplier that can supply all the products, from amplifiers, nodes, modules, and CMPS, including virtual.

Kyle: As mentioned on our previous call.

Kyle: Of our large customers approached us about low rate order rates as they dealt with higher inventory levels and delayed timing on upgrades.

Kyle: This had an impact on our first quarter revenues.

Kyle: Also we expect these adjustments to have a significant impact throughout 2024.

Kyle: Despite the short term challenges AOS continues to position itself to take advantage of the DOCSIS four <unk> upgrade cycle. We're the only supplier that can supply all the products from amplifiers nodes modules and see MTS, including virtual <unk> Mcs.

Kyle D. Lorentzen: Turning the slides by for an update on tasks. As indicated on our prior call, we expected the first quarter to be a use of cash because of the lower EBITDA, higher cash interest-paying quarter, and timing of our annual cash incentive. That said, for the first quarter, cash flow from operations was a use of $178 million, and adjusted free cash flow was a use of $154 million.

Kyle: Turning to slide five for up.

Kyle: On cash flow.

Kyle: As indicated on our prior call we expected the first quarter to be a use of cash because of the lower EBITDA higher cash interest paying quarter and timing of our annual cash incentive payout.

Kyle: That said for the first quarter cash flow from operations was a use of $178 million and.

Kyle: The free cash flow was a use of $154 million.

Kyle D. Lorentzen: 2024 first quarter cash flow from operations declined from the prior year as a result of the lower EBIT, and we continue to reduce inventory in the quarter. As previously discussed, we're still holding excess inventory driven by supply chain constraints in 2021 and 2022. As revenue declines, it delays our ability to monetize this access investment. Turning to slide six for an update on our liquidity and capital. During the first quarter, our cash and liquidity remained strong.

Kyle: 2024 first quarter cash flow from operations declined from the prior year as a result of the lower EBITDA.

Kyle: We continue to reduce inventory in the quarter as previously.

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

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

Kyle D. Lorentzen: We ended the quarter with $357 million in global cash and total available cash and liquidity of over $900 million. As expected, during the quarter, our cash balance decreased by $187 million. We did not draw on our AVL revolver during the first quarter and therefore ended the quarter with no outstanding value. As previously mentioned, our ABL availability was negatively impacted by the home digestiture in early 2020. During the quarter, we paid the required $8 million of term loan amortization and purchased no debt on the open market.

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

Kyle: During the first quarter, our cash and liquidity remains strong we ended the quarter with $357 million in global cash and total available cash and liquidity of over $900 million.

Kyle: As expected during the quarter, our cash balance decreased by $187 million.

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

Kyle: As previously mentioned, our ABL availability was negatively impacted by the <unk> divestiture in early 2024.

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

Kyle: We purchased no debt on the open market.

Kyle D. Lorentzen: Going forward, we intend to continue to use cash opportunistically to buy back securities across the breadth of our capital. The company ended the quarter with a net leverage ratio of 9.9%. I'm now turning to slide 7, where I'll conclude my prepared remarks with some commentary around our expectations for 2021. Despite some pickup in CCS and OWN order rates in the first quarter, our current order rates remain low as we are dealing with lower market demand.

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

Kyle: The company ended the quarter with a net leverage ratio of nine nine times.

Kyle: I'll now turning to slide seven where I'll conclude my prepared remarks, with some commentary around our expectations for 2024.

Kyle: Despite some pickup in Ccs and OWS order rates in the first.

Kyle: Our current order rates remained low as we are dealing with lower market demand.

Kyle D. Lorentzen: The magnitude of demand drop off in NICS and ANS is concerning. The lower order rates had a significant impact on our revenue and adjusted earnings. As we have said throughout the downturn, we remain bullish on medium and long-term growth in all of our sectors. However, visibility to the timing and magnitude of the recovery remains unclear.

Kyle: The magnitude of demand drop off the mix and Ams is concerning.

Kyle: The lower order rates had a significant impact on our revenue and adjusted EBITDA.

Kyle: As we have said throughout the downturn, we remained bullish on medium and long term growth and all of our segments.

Kyle: However, visibility to the timing and magnitude of the recovery remains unclear.

Kyle D. Lorentzen: The recovery in CCS and OWN order rates is definitely a positive. Based on current visibility, we expect the first quarter to be the lowest revenue and adjusted EBITDA quarter of the year. We continue to control what we can control, including implementing the $100 million of our annual cost reductions we have referenced on previous calls.

Kyle: The recovery in Ccs and OWS order rates is definitely a positive sign.

Kyle: Based on current visibility, we expect the first quarter to be the lowest revenue and adjusted EBITDA quarter of the year.

Kyle: We continue to control, what we can control, including implementing the $100 million of our annual cost reductions we have referenced on previous calls.

Kyle D. Lorentzen: We are encouraged by our ability to manage costs during the downturn and are well positioned to drive profitability when revenues return. We've been able to achieve these cost reductions while continuing to invest in all of our segments with new product development and enhanced customer support. Finally, I'd like to address our capital. Not much has changed since last quarter. We continue to evaluate alternatives, including asset sales, to address the 2025 maturity and beyond. We have proposals from certain credit groups to deal with essentially all of our nearer-term maturities. However, we do not believe that the proposals we have received to date align with our strategic goals or optimize our capital.

Kyle: We are encouraged by our ability to manage costs during the downturn and are well positioned to drive profitability when revenues return.

Kyle: We've been able to achieve these cost reductions while continuing to invest in all of our segments with new product development and enhanced customer support.

Kyle: Finally, I'd like to address our capital structure.

Kyle: Not much has changed since last quarter, we continue to evaluate alternatives, including asset sales to address the 2025 maturity and beyond.

Kyle: We have proposals from certain credit groups to deal with essentially all of our near term maturities. However, we do not believe that proposals. We have received to date align with our strategic goals or optimize our capital structure.

Kyle D. Lorentzen: As mentioned in our last call, our credit documents are very flexible. We intend to use this flexibility to optimize our capital structure, including dealing with the 2025 maturity. For today's call, we will not be making further comments with respect to our capital. 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. As predicted, the first quarter was a very challenging quarter.

Kyle: As mentioned in our last call our credit documents are very flexible.

Kyle: We intend to use this flexibility to optimize our capital structure, including dealing with the 2025 maturity.

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

Chuck: Thank you Carl.

Speaker Change: As predicted the first quarter was very challenging quarter.

Charles L. Treadway: We're in the middle of a hardware recession, and our revenues reflect that, although there were some bright spots in the quarter with CCS and OWN order rates. However, visibility to a pending recovery remains uncertain. The falloff in demand in the NICS and ANS businesses was sharper than we predicted as customers managed inventory and pushed out projects and upgrades.

Speaker Change: We're in the middle of a hardware recession, and our revenues reflect that recession.

Chuck: Although there were some bright spots in the quarter with Ccs and OWS order rates visibility to our pending recovery remains uncertain.

Chuck: The falloff in demand in the mix and E&S businesses, where sharper than we predicted as customers manage inventory and push out projects and upgrades.

Charles L. Treadway: I'm confident we're doing the right things with the levers we control, like customer interface, cost, new product development, and capital. We're very focused on supporting our customers, and we appreciate their support. When market conditions improve, we are well-positioned to capture the recovery in all segments. In addition to managing the businesses, we're extremely aware of our capital structure and liquidity.

Speaker Change: I'm confident we're doing the right things with the levers we control like customer interface cost new product development and capital.

Speaker Change: We're very focused on supporting our customers.

Speaker Change: And we appreciate their support.

Speaker Change: When market conditions improve we are well positioned to capture the recovery in all segments.

Speaker Change: In addition to managing the businesses, we're extremely aware of our capital structure and liquidity. We will continue to work on managing these aggressively for the benefit of our shareholders.

Charles L. Treadway: We will continue to work on managing these challenges aggressively for the benefit of our shareholders. We appreciate your continued support and patience. And with that, we'll now open the line for questions. Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

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

Speaker Change: Thank you.

Speaker Change: This time, we will conduct a question and answer session.

Operator: To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. Thank you. Our first question comes from the line of George Notter of Jeffreys, LLC. Your line is now open. Hi, guys. Thanks very much.

George Charles Notter: I wanted to ask about potential asset sales. I think last quarter you guys made a comment to the effect of you won't be selling assets in the near or medium term. I think from the press release and some of your comments, it sounds like maybe that's on the table a bit more. I'm just wondering if there's been any change in the outlook there. Yeah, George, I'll just refer to the prepared remarks. I mean, it continues to be an alternative for us.

Charles L. Treadway: You know, we're continuing to look at them and have dialogue. And, you know, I think what we said last time is, you know, We're not going to go sell those assets for any value. So I mean, I think the dialogues will continue, and it is an alternative. Okay, I got it. And then on CCS, I was very interested in the comments about order rates improving. Are there specific pieces of the business where you're really seeing order rates improve?

Speaker Change: You know look at those and have dialogue and.

Speaker Change: What we said last time is you know.

Speaker Change: We're not gonna go sell those assets and it any value. So I mean, I think the dialogues continue and it is an alternative.

Speaker Change: Okay got it and then on on C. C. S. I was very interested in the comments about order rates improving are there specific pieces of the business, where you're really seeing order rates improve in I.

Charles L. Treadway: And I guess as I think about CCS, I mean, there are parts of the business that are more asset intensive. I'm thinking about, you know, fiber cabling manufacturing, for example, and then areas of business that are less capital intensive.

Speaker Change: I guess as I think about C. C. S. I mean, there's parts of the business that are more asset intensive I'm thinking about you know fiber cabling manufacturing for example in in in areas of business that are less capital intensive I guess I'm thinking here about fiber connectivity and I assume that.

Charles L. Treadway: I'm thinking here about fiber connectivity, and I assume that as fiber cabling gets better, it's a better lever for you in terms of EBITDA improvement as you utilize those assets. But I'm wondering if there's kind of a chain of events here in terms of really getting that business back to reasonable profits. Well, thanks for the question, George.

Speaker Change: Fiber cable and gets better it's a better lever for you in terms of EBITDA improvement as utilize those assets, but I'm wondering if there's kind of a chain of events here in terms of really getting that business back to reasonable looking profitability.

Speaker Change: Well thanks for the question George you know.

Speaker Change: I think what we're saying what we said in the remarks is that we're starting to see stronger order rates, but but I'd say that we are still well below are 22 levels, but we are seeing pick up and I would say we are seeing pick up both in the broadband or the N. C. C portion of our business as well as the building building in Davis and a part of our business.

Charles L. Treadway: You know, I think what we're saying, what we said in the remarks is that, you know, we're starting to see stronger order rates, but I'd say that we are still well below our 22 levels, but we are seeing pickup. And I would say we are seeing pickup both in the broadband or the NCC portion of our business, as well as in the building, building, and data center part of our business. We're probably seeing more of a pickup in the building and data center side than the NCC side right now, but to your point, I mean, we made the capacity investments prior to the last ramp up, and we need more connectivity, which we talked about in our remarks, which we're adding by mid-year, but we're going to have capacity to support us even above the levels we had in 22 going forward. Okay, thanks very much. I appreciate it

Speaker Change: We're seeing actually probably more of a pick up in the building a data center side, then the N C. C side right now but to your point I mean, we made the capacity investments prior to the last ramp up and we need more connectivity, which we talked about and Ah remarks, which we're adding by mid year, but we're gonna.

Speaker Change: We're gonna have capacity to support us.

Speaker Change: Even above the levels, we had in 22 going forward.

Speaker Change: Okay. Okay. Thanks, very much I appreciate it.

Operator: Yep, thanks. One moment for our next question. Thank you. Our next question comes from the line of Meta Marshall of Morgan Stanley. Your line is now open.

Speaker Change: One moment for our next question.

Speaker Change: Oh.

Speaker Change: Thank you. Our next question comes from the line of meta Marshal at Morgan Stanley. Your line is now open.

Meta A. Marshall: Great, thank you. I might want to ask you two questions. First, on the CCS business, you spoke about kind of some of your enterprise traction, but is there anything to note with kind of data center customers or cloud customers that you might have? And then maybe second, just some commentary on gross margins. Clearly, EBITDA was a highlight. You know, was it all utilization that led to gross margins being a hair short of expectations or just any commentary on how we should look at gross margins throughout? Thanks, Meta.

Meta A. Marshall: Great. Thank you Uhm, maybe wanted to ask two questions first on the C. C. S business any you spoke about kind of some of your enterprise traction that is there anything to note with an update us on our customers or cloud customers that you might have and then maybe.

Speaker Change: And just some commentary on gross Martin.

Speaker Change: Clearly EBITDA with a highlight is that all utilization and that led to kind of gross margins being a here short of expectations or just any commentary on how we should look at gross margins throughout the thanks.

Charles L. Treadway: I'll take the first part, and Kyle can hit the gross margins. But I would say on the data center side, that's where we're seeing our biggest lift in the building and data center part of our business, hyperscalers, as well as cloud. And I would say it's linked to Gen AI and the press there, you know, what's going on. There's just a lot, a lot of interest.

Speaker Change: Thanks, <unk> I'll take the first part and stuff and hit the gross margins, but I would say on the data center site, that's where we're seeing our biggest lift in the building and data center part of our business Hyperscalers as well as cloud.

Speaker Change: And and I would say is linked to the <unk> and the press. There you know what's going on there's just a lot a lot of interest plus we have some really nice products will propel with and then our structural cable system X 2.0 stuff that helps support that so we feel good about where we are.

Charles L. Treadway: Plus, we have some really nice products with Propel and then our structural cable System X 2.0 stuff that helps support that. So, you know, we feel good about where we are in that business. Yeah, I'll get to the gross margin. So I think on the gross margin side, you know, clearly the level of revenue and the absorption of our fixed costs have an impact on the gross margin side.

Speaker Change: In that business.

Speaker Change: Yeah, I'll I'll I'll get to the gross margin. So I think on the gross margin side.

Kyle D. Lorentzen: I think also, you know, when we think about the businesses and just the level of gross margins, our ANS and NICS businesses tend to be a little bit higher on the gross margin basis. So, you know, there's a mixed component that's impacting the margins in Q1, just as well as the fixed cost leverage. Great, thank you.

Speaker Change: You know.

Speaker Change: Clearly the level of revenue in the absorption of our fetched cost as an impact on the.

Speaker Change: On the the margin side I think also you know when we think about the businesses and just level of gross margins are.

Speaker Change: R. A N S and next business tend to be a little bit higher on the gross margin basis. So there's a Mexican ponant that's impacting the margins in Q1, just as well as the fixed costs leverage.

Speaker Change: Okay, great. Thank you.

Operator: One moment for our next question. Thank you. Our next question comes from the line of Simon Leopold of Raymond James. Your line is now open.

Speaker Change: One moment for our next question.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Simon Leopold is Raymond James Your line is now open.

Simon Matthew Leopold: Thanks for taking the question. Yeah, I want to follow up on that gross margin commentary and see if you could help us maybe build a little bit of a bridge to the December quarter versus the March quarter in terms of the changes. What I'm really trying to understand was whether things like NICs and ANFs were down materially relative to the prior quarter or, you know, anything you can help to sort of bridge the two quarters? And then I've got a follow-up. I'll let you answer that one first.

Simon Matthew Leopold: Thanks for taking the question Yeah, I I wanted to follow up on that gross margin commentary.

Simon Matthew Leopold: Commentary and see if you could help us build a little bit of a bridge to the to the December quarter versus the the March quarter in terms of the changes what I'm really trying to understand what.

Speaker Change: Was it that that on the lower volumes things like Nixon a N S, where we're down materially relative to the prior quarter or anything you could help to sort of bridge that the two quarters and then I've got a follow up I'll, let you answer that one first please yeah on a sequential basis from Q4 two Q1.

Kyle D. Lorentzen: Yeah, on a sequential basis from Q4 to Q1, the ANF business and the NICS business were down, you know, relative to, you know, what we saw in CCS and OWN, where we saw a little bit of growth. And as I answered in the previous question, the mix of those businesses does have an impact on just the margin profile, as ANS and Ruckus, in particular, have a little bit of a higher margin profile than the CCS and OWN.

Speaker Change: You know the <unk> business in the next business. We're down you know we're down relative to what we saw on C. C. S.

Speaker Change: O W N, where we saw a little bit of growth and as I did I did I answer to the previous question.

Speaker Change: The the mix of those businesses does have an impact on just the margin profile.

Speaker Change: As you know just <unk> and raucous in particular have a little bit higher margin profile than the C. C. S N O W on business.

Kyle D. Lorentzen: Yeah, what I'm trying to clarify here is that it's not just the mix of segments, but the gross margin within A&S and within the roughest businesses was down materially versus the prior quarter themselves. Is that correct?

Speaker Change: What I'm, what I'm trying to clarify here is that it's not just the mix of segments, but a gross margin within a N S and with within the the rockets businesses were down materially versus the prior quarter themselves is that correct cause Europe, because the revenues are down and you're not getting the coverage on the fifth.

Kyle D. Lorentzen: Yeah, because revenues are down, and you're not getting the coverage and the fixed costs in those two businesses. Perfect. That's what I wanted to make sure I understood. So, what I wanted to ask about was the trajectory of the NNS recovery and some of the key drivers. I guess what I'm wondering about is the availability of the key components and chips for the DOCSIS IV products. What's your expectation on the availability or timing of when you expect those amplifiers to ramp?

Speaker Change: Costs and those businesses.

Speaker Change: Perfect. That's what I wanted to make sure I understood. So what I, what I wanted to ask about was sort of the the trajectory of Ah began S recovery and some of the key drivers <unk> I I guess, what I'm wondering about is the availability of the key components and chips for the doctors for products. What's your expect.

Speaker Change: <unk> on the availability or timing of when you expect those amplifiers would ramp and how are you thinking about the possibility of products that would essentially D. I a single amplifier that could be do a puncture either full-duplex or extended spectrum is that.

Kyle D. Lorentzen: And how are you thinking about the possibility of products that would essentially be a single amplifier that could be dual function, either full duplex or extended spectrum? Is that something you'd be offering? And if so, when?

Speaker Change: Something you'd be offering and if so what's the timing of that.

Charles L. Treadway: Yeah, I'd start by saying, you know, on the amplifier side, in terms of chips, we're looking at the fourth quarter for being able to launch that FDX product, ESD, a little bit sooner than that. And then related to, Where we're going with the products in our business in the future ramp up, I would say, you know, in general, our customers just have too much inventory right now, and they're trying to figure out where they want to go with HFC or whether they want to go to DAA.

Speaker Change: Yep.

Speaker Change: Start by saying you know in the amplifier side in terms of chips.

Speaker Change: We're just we're looking at the fourth for for being able to launch that F. D X product.

Speaker Change: <unk>, a little bit sooner than that.

Speaker Change: And then related to.

Speaker Change: Where we're going with the products in our business in the future ramp up I would say in general our customers just have too much inventory right now, they're trying to figure out where they Wanna go with HFC or.

Speaker Change: Do they want to go to D E. A and I mean, we have a pretty large installed base. So we have some customers that just wanted to do more with their existing network and Lucas DOCSIS 3.1 E. For example, we're ready to go with that as we talked about that gives you five to eight gigabytes down speed just with software upgrades. If you have the right hardware.

Charles L. Treadway: And I mean, we have a pretty large installed base, so we have some customers that just want to do more with their existing network and look at DOCSIS 3.1e, for example. We're ready to go with that, as we talked about. That gets you 5 to 8 gigabits down speed, just with software upgrades if you have the right hardware.

Charles L. Treadway: And then, of course, we have our virtual CNTS that's in labs right now with the RPDs and RNDs. There are some challenges with parts for the ESD side of those, but that's getting worked out. I'm talking about the main chip on the FDX side.

Speaker Change: And then of course, we have our virtual CMT assets and labs right now with the R. P. DS and R&d's. There are some challenges with parts for the ese side of those but that's getting worked out I'm talking about the main the main chip.

Speaker Change: On the <unk> those are pretty much ready to come in so.

Charles L. Treadway: Those are pretty much ready to come in. So. I hope that helps answer the question. Good. Thank you very much.

Speaker Change: I hope that helps answer the question for Ya.

Speaker Change: Thank you very much.

Operator: One moment for our next question. Thank you. Our next question comes from the line of Steven Fox of Fox Advisors LLC. Your line is now open. Hi, good morning.

Speaker Change: One moment.

Speaker Change: <unk>.

Speaker Change: Thank you.

Speaker Change: Next question comes from the line of Stephen Fox Fox Advisers LLC. Your line is now open.

Steven Bryant Fox: I had two questions. First of all, Chuck, I understand that there's a lot going on within the different businesses that makes you talk about limited visibility, but can you just dial in a little bit closer on your thinking for the CCS business for the full year? Some of your competitors have talked about improvements as they go throughout the year to varying degrees, and I was wondering what you thought about that.

Speaker Change: Hi, good morning at two questions first of all a shock I understand there's a lot going on within the different businesses that makes you talk about limited visibility, but can you just dial in a little bit closer on your thinking for the C. C. S business truthful year. Some of your competitors of talk about improvements as he goes throughout the year.

Speaker Change: To varying degrees I was wondering what you sorta on that and then secondly kind of just send the cash flow statement I just want to confirm that the cash flows for the quarter came in basically where you're looking at what you're looking for 90 days ago or if there were any puts and takes we should know about thanks.

Charles L. Treadway: And then secondly, Kyle, just on the cash flow statement, I just want to confirm that the cash flows for the quarter came in basically where you were looking, what you were looking for 90 days ago, or if there were any puts and takes we should know about. Thanks. Yeah, let me answer the second one first, and then Chuck can answer the first question. Yeah, I mean, I think we said in our prepared remarks that the cash flow was sort of in line with, you know, what our expectations were. There weren't any major puts or takes on the cash flow.

Kyle D. Lorentzen: You know, other than maybe a little bit of a bump just because of the better EBITDA, but in general, it came in on line. Great. Yeah, so Steven, yeah, I would say that, you know, as I shared, we are seeing the pickup and the momentum that we are seeing; we do believe we're going to have a sequential improvement in Q2 and a stronger second half than the first. So that would, you know, that would lead you to think that we would believe that Q1 would be our lowest quarter in CCS and it would continue to build from there. So, in general, it sounds like you're in line with competition. There are no areas where you're lagging or leading in terms of end markets or product areas.

Charles L. Treadway: That's correct. Okay, thank you. One moment for our next question. Thank you. Our next question comes from the line of Samik Chatterjee of J.P. Morgan. Your line is now open.

Speaker Change: Yeah, Let me answer the second one first and then truck and answer the first question. Yeah. I mean, I think we started our prepared remarks that the cash flow was sort of in line with.

Speaker Change: What what our expectation was there weren't any major Pulitzer takes on the on the cash flow.

Speaker Change: You know other than maybe a little bit of a bump just because of the better EBITDA, but in general it came in and one.

Speaker Change: Great.

Speaker Change: Yeah, So Stephen Yeah, I would say that <unk>, we are seeing a pick up and the old momentum that we are seeing we do believe we're gonna have a sequential improvement in Q2.

Steven Bryant Fox: Stronger second half from the first so that would that would lead you to think that we would believes that Q1 would be our lowest quarter and Ccs and it will continue to build from there.

Steven Bryant Fox: So in general it sounds like you're in line with competition.

Steven Bryant Fox: There's no areas, where you're lagging or or bleeding in terms of market source product areas.

Speaker Change: That's correct.

Speaker Change: Okay. Thank you.

Speaker Change: One moment for our next question.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line <unk> J P. Morgan Your line is now open.

Samik Chatterjee: Yep, thank you. And thank you for taking the time to answer my questions. Maybe for the first one, Kyle, I hear you on the loss of volume leverage in ANS and NICS as revenues come down there. And that likely will continue into 2Q, is what I'm sensing from your tone here. But how should we think about your ability to sort of take costs out through the year in those two businesses just to buffer some of the loss of volume leverage as you go sort of look at the lower order rate in those two businesses? Yeah, so I guess what I would say on the cost side. We've mentioned we're in the process of a $100 million sort of fixed cost reduction. We're in the middle of identifying projects and implementing projects.

Speaker Change: Yep. Thank you and thank you for taking my questions maybe for the first one uhm skylight here you're on the loss of volume leverage in N. S. N mix of its revenues come down there and that lately continuous <unk>, what I'm sensing from your tone here uhm, but how should we think about <unk>.

Speaker Change: Sort of take cost out through the urine those two businesses just but first of all the loss of volume leverage as you go sort of look at the lower auto right in those two businesses.

Skylight: Kind of a slight.

Skylight: So.

Speaker Change: So I guess, what I would say on the on the cost side.

Speaker Change: We've mentioned you know we're in the process of 100 million dollar you know sort of.

Speaker Change: Cost reduction.

Speaker Change: We're in the middle of identifying projects and implementing projects I would say that you know as we sorta get to the end of the year, you know that will be fully baked into our numbers and what I would say on that is that.

Kyle D. Lorentzen: I would say that as we sort of get to the end of the year, that will be fully baked into our numbers. What I would say on that is that, although that's across all of our segments, definitely the NICS business and ANS are part of that $100 million reduction. I think also, with that said, in both of those businesses, we expect that there is going to be a recovery in those businesses, and we're going to continue to make investments in those businesses as it relates to supporting our customers and generating new products.

Speaker Change: Although that's across all of our segments you know.

Speaker Change: Definitely you know.

Speaker Change: The next business and and asked her part.

Speaker Change: You know of that $100 million production I think you know also with that said.

Speaker Change: And both of those businesses you know we expect that there there is gonna be a recovery of that business in those businesses.

Speaker Change: And we're gonna continue to you know make investments and those businesses it relates to supporting our customers and you know you know generating new products. So I mean that I think there's always the balance on the cost side, but we definitely continue to look at cost reduction and you know I think will.

Kyle D. Lorentzen: So I think there's always the balance on the cost side, but we definitely continue to look at cost reduction, and I think we'll definitely get some additional cost out as we work through the year. And for my follow-up, if I can just go back to CCS and your commentary about what you're seeing in terms of strength on the data center or side of the business. Can you just talk a bit more about what your sort of overall customer footprint there looks like across data center companies and sort of cloud companies? Do you feel you have your fair share already?

Speaker Change: We will definitely get some additional cost out as we work through the year.

Speaker Change: Sure.

Speaker Change: And for my follow up if I can just go back to C. C S and your coming.

Speaker Change: <unk> about what you're seeing in terms of strength on the data center or side of the business can you just talk a bit more about what does your sort of overall customer footprint they'll look like across data Centre company, then sort of cloud companies do you feel you have your fish had already or as you think about this investment cycle on the data center.

Speaker Change: <unk> do you think there's more opportunity for market share creative to where you started today.

Charles L. Treadway: Or, as you think about this investment cycle on the data center side, do you think there's more opportunity for market share relative to where you stand today? Look, I believe this market is growing at really, really fast rates. And I think we're holding a share now. I think we obviously have an opportunity to gain share; we have some great partners, as well as some great products. So I wouldn't, I wouldn't count us out on this in terms of gaining share. And I believe the market is very strong right now. And we're definitely getting our fair share of it.

Speaker Change: You'll look I believe this market is growing really really fast rates and I think we're holding sure now I think he obviously you have an opportunity to gain sure. We have some great partners as well as some break products.

Speaker Change: So I wouldn't I wouldn't count us out on this in terms of gaining Sharon I believe the market's very strong right now and we definitely getting our fair share of it and I believe we have an opportunity Moore.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Operator: And I believe we have an opportunity to do more. Thank you. One moment for our next question. Thank you. Our next question comes from the line of Amit Daryanani of Evercore. Your line is now open. Good morning. Thanks for taking my question. I have two as well.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line as I <unk> <unk>.

Speaker Change: <unk> I'm evercore.

Speaker Change: Okay.

Evercore: Good morning, Thanks for taking my question I'll have to as well I guess first of all the free cashflow side Uhm I do need folks talked about nor free casually expectation and 24 were supposed twenty-three uhm and if you called up working capital requirements as a big drive for that can you. Just helped me think about it do you think free cash will be positive in queue to inflict on the 20th.

Amit Jawaharlaz Daryanani: You know, I guess, first off, on the free cash flow side, I think you folks talked about lower free cash flow expectations in 2024 versus 2023, and I think you called out working capital requirements as a big driver for that. Can you just help me think about, do you think free cash flow will be positive in Q2 and for Canada in 2024? Yeah, I mean, we're not providing that level of guidance.

Evercore: Four.

Speaker Change: Yeah, I don't I mean, we're not we're not providing that level of you know of.

Evercore: Guidance I mean I think.

Kyle D. Lorentzen: I mean, I think, I'll characterize it as... as, you know, as we definitely won't see the cash burn that we saw in Q1, but there's probably some level of cash burn that happens in Q2. Historically, we're building a lot of cash in the fourth quarter. So the profile is sort of burn cash early in the year and then build it back in Q4. I think that a similar profile will be what we see in 2024.

Evercore: You know I'll characterize it as.

Evercore: As good as.

Evercore: As we you know.

Evercore: We definitely won't see the cashback that we saw in Q1, but there you know there's probably some level of cash burn that happens in Q2.

Evercore: Historically.

Evercore: No.

Evercore: We're building a lot of cash in the fourth quarter and I'd you know.

Evercore: The profile is you know sort of burn cash early in the year and then build it back in queue for you know I think I think that some of our profile.

Evercore: Will be what we see in 2024.

Kyle D. Lorentzen: And then, you know, just on the CCS side, could you just talk about, you know, what contribution do you think B, you know, projects could have for the company over time? And is it reasonable to think that that might be more of a calendar 25 revenue contribution versus 21st? I'm wondering, A, if you could size what that potential could be, and when you think you start to see the benefits.

Speaker Change: Got it and then you'll just.

Speaker Change: <unk> on the on the C. C. S side could you could you just talk about what contribution meeting be you know projects could have for the company or time and is reasonable the thing that that might be more of a calendar twenty-five revenue contribution versus 21st I'm wondering if you could size would that potentially could be and when do you think that you just have to see the benefits there.

Kyle D. Lorentzen: Yeah, I would say it's going to be at the very end of 24, probably at the earliest, but most likely, we believe it's more 2025 now. In terms of the opportunity there, I think I said in our last earnings call, it's around $4 billion opportunity over, you know, four to five years. I think that's still achievable.

Speaker Change: Yeah, I would say, it's gonna be at the very end of 24, probably at the earliest but most likely we believe it's more 2025 now.

Evercore: In terms of the opportunity there I think I've said in our last earnings cause around 4 billion dollar opportunity over four to five years.

Evercore: I think that's still homes.

Charles L. Treadway: I'm sorry, is that $4 to $5 billion over four years? Is that the TAM, or is that what CommScope could get? Just so I understand that. Yes, that's the TAM.

Speaker Change: I'm sorry is that that four to 5 billion or four years is that the time or is that what commscope could get just just lines on that.

Evercore: Tam.

Operator: Yeah, all right. Perfect, thank you. One moment for our next question. Thank you. Our next question comes from the line of Matt Niknam of Dusha Bank. Your line is now open.

Speaker Change: Alright, perfect. Thank you.

Speaker Change: One moment.

Speaker Change: Question.

Speaker Change: Thank you next question comes from the line is not next ma'am Acacia Bank. Your line is now open.

Matthew Niknam: Hey guys, thanks for taking the question. My question is mainly related to inventories and where they sit at the customer level. I guess first on NYX, if there's any more color you can give on where inventory levels sit today and any visibility in terms of when demand comes back. And I ask this in the context of commentary that implies 1Q should be the bottom with an uptick in subsequent quarters, yet, you know, the commentary doesn't sound too great in terms of end market demand.

Acacia Bank: Hey, Thanks for taking my question. My question is mainly related to inventory and where they set at customer levels. I guess first on Nick's if there's any more color you can give on.

Acacia Bank: Where inventory levels sit today and any visibility in terms of when demand comes back and I ask it in the context of commentary that implies one Q should be the bottom with an uptick in subsequent quarters. Yet you know the commentary doesn't sound too great in terms of and market demand. So that's the first question and then maybe secondary.

Matthew Niknam: So that's the first question. And then, maybe secondarily on CCS, similarly, you talked about an uptick in orders for CCS. Just wondering whether customers are largely done with inventory workdowns or if that's varied across different types of carrier customers.

Acacia Bank: Italy on C. C. S. Similarly, you talked about uptick in orders and T. C. S. Just wondering whether customers are largely done with inventory work down or if that's varied across different types of carrier customers. Thank you.

Kyle D. Lorentzen: Thank you. Yeah, I think, you know, as you mentioned, as we think about just where our customers are with inventory de-stocking, you know, clearly, you know, it's by business. You know, I think as we think about your questions just around, you know, you know, sort of the Knicks and Ruckus business, I mean, I think, I think, I think we have, you know, we have visibility into the inventories; the inventories have been coming down.

Acacia Bank: Yeah, I think you know as you mentioned as we think about just where our customers customers are within inventory destocking.

Acacia Bank: Clearly you know it it's five by business.

Acacia Bank: You know I think as we think about your questions just around you know.

Acacia Bank: The next and raucous business May I think I think I think we have you know we have visibility to the inventories inventories have been coming down I think where we are in that business is there's probably still a little bit of ways to go before we get to the destocking.

Kyle D. Lorentzen: I think where we are in that business is there's probably still a little way to go before, you know, we get to, you know, the de-stocking that needs to take place to start seeing, you know, sort of more normal growth. I think on the CCF side of the business, I think, as Chuck mentioned in his comments, you know, I think we're, we're, we're probably close to the inflection point of seeing that, you know, that inventory has been worked down by the customers, and we're now starting to get back to sort of normal growth levels. And I think we're seeing that in some of these order rates that we've talked about. Great, thank you.

Acacia Bank: That needs to take place to start seeing you know some sort of move or normal <unk>.

Acacia Bank: Growth I think on the C. C. S side of the business I think is Chuck mentioned and does his comments I think we're we're we're probably close to your inflection point of seeing that you know that that inventory I've been work down by the customers and we're now starting to get back to sort of normal growth levels and I think we're seeing that and some.

Acacia Bank: These order rates that we've talked about.

Speaker Change: Great. Thank you.

Speaker Change: One moment, Sir next question.

Operator: One moment for our next question. Thank you. Our next question comes from the line of Tim Savageaux of Northland Capital Markets. Your line is now open. Hi, good morning.

Speaker Change: Thank you.

Speaker Change: Next question comes from the line <unk> Northern capital market. Your line is now open.

Timothy Paul Savageaux: Question on CCS. You mentioned increasing order rates throughout the Corps. I guess my question is, have you seen that continue into Q2? And have you seen any changes with regard to the mix?

Speaker Change: Hi, Good morning question on C C. As you mentioned.

Speaker Change: Increasing order rates throughout the core I guess my question is have you seen that continue here into Q2.

Speaker Change: And have you seen any changes with regard to the mix you mentioned stronger building in data center and up taken carriers, but maybe not as much have.

Charles L. Treadway: You mentioned, you know, stronger building and data center construction, an uptick in carriers, but maybe not as much. Have you seen or do you expect that to change? here as we go forward. And just as a follow-up, you know, if you look at the magnitude of the sequential increase you're expecting for CCS and Q2, can you give us some more color on that, say, relative to what you saw in Q1 over Q4?

Speaker Change: Have you seen or do you expect that to change.

Speaker Change: Here as we go forward.

Speaker Change: And just as a follow up if you look at the magnitude of the sequential increase your expecting for C. C. S. And Q2 can you give us some more color on that I'd say relative to what you saw in Q1 over Q4 X.

Charles L. Treadway: Thanks. So, you know, I'd start by saying that we believe that where we are right now is kind of, we're hopeful, we're cautiously optimistic that this is the start of the recovery. You know, right now, the data center and building a campus business are stronger than broadband, but I believe those will, you know, kind of line up to get to the same level of growth going forward. And potentially broadband will be more, but we haven't seen that yet, but that's what we would expect as this thing moves forward.

Speaker Change: You know, let's start by saying you know.

Speaker Change: We believe that you know where we are right now is kind of <unk>.

Speaker Change: Hopeful we're cautiously optimistic that this is the start of the recovery.

Speaker Change: Right now the data center and building a campus business is stronger than than broadband, but I believe those will you know kind of line up to get to the same level of growth.

Speaker Change: Going forward and potentially brought being being more but.

Speaker Change: But we haven't we haven't seen that yet, but we that's what we would expect a sustainable swollen.

Kyle D. Lorentzen: And I'll sort of answer your question about Q2. I mean, I think what we're seeing is, you know, it continues to be a little bit dynamic from the standpoint of, you know, even though we're, you know, sort of at the end of the quarter, you know, I think it's still dynamic. I mean, I think, you know, as we said, I think we'll, you know, sort of stick with Q2 being, you know, higher than Q1 for CCS revenues.

Speaker Change: That all all sort of answer your your your question about queue to relative I mean I think.

Speaker Change: What we're seeing is.

Speaker Change: It continues to be a little bit dynamics from the standpoint of even though we're sort of end of the quarter.

Speaker Change: I think it's still dynamic I mean, I think you know as we sat adequate <unk> sort of stick with Q.

Speaker Change: Q to being you know.

Speaker Change: Higher than than Q1 for for Ccf's revenues, but clearly it's pretty dynamic and were you know.

Kyle D. Lorentzen: You know, but, you know, clearly it's pretty dynamic, and we're, you know, you know, seeing, you know, the increases and, you know, we're not exactly sure where that's going to wind up at the end of the quarter. So, I don't think we're going to be specific about what that's going to look like, but we'll have to play through the quarter.

Speaker Change: Seen the increases in.

Speaker Change: We're not exactly sure where that that's gonna wind up at the end of the quarter. So I don't think we're gonna be specific about.

Speaker Change: That's going to look like I will have to play through the quarter.

Operator: Thanks very much. I am showing no further questions at this time. I would now like to turn it back to Chuck Treadway, Chief Executive Officer, for closing remarks. Thank you for your time today, and I appreciate your interest in CommScope. I'd like all of you to have a great rest of the week. Thank you. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Thank you for watching!

Speaker Change: Thank you very much.

Speaker Change: I am showing no further questions at this time I would now like to turn it back to check <unk> Chief Executive Officer for closing remarks.

Speaker Change: Thank you for your time today and I appreciate your interest in <unk>.

Speaker Change: I'd like to have a great rest of the week. Thank you.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

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