CommScope Holding Company, Inc.

Good day and thank you for standing by. Welcome to the ComSchool first quarter 2022 results conference call. 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 this session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. And now it is my pleasure to hand the conference over to your first speaker today, Mick McCloskey, Head of Investor Relations. Thank you. Please go ahead.

Good morning, and thank you for joining us today to discuss Comscope's 2022 first quarter results. I'm Mick McCloskey, Head of Investor Relations for Comscope, and with me on today's call are Chuck Treadway, President and CEO, and Kyle Lorenzen, Executive Vice President and CFO. You can find the slides that accompany this report on our investor relations website. Please note that some of our comments today will contain forward-looking statements based on our current view of our business, and actual future results may differ materially. Please see our recent SEC filings, which identify the principal risks and uncertainties that could affect future performance. Before I turn the call over to Chuck, I have a few housekeeping items to review. Today we will discuss certain adjusted or non-GAAP financial measures which are described in more detail in this morning's earnings materials. Reconciliations of non-GAAP financial measures and other associated disclosures are contained in our earnings materials and posted on our website. All references during today's discussion will be to our adjusted results. All quarterly growth rates described during today's presentation are on a year-over-year basis unless otherwise noted. I'll now turn the call over to our president and CEO, Chuck Treadway.

Thank you, Mick, and good morning, everyone. I'll begin on slide two. I'm pleased to share that we've delivered core net sales of $1.73 billion and core adjusted EBITDA of $230 million for the first quarter of 2022. I'm encouraged by the strong top-line performance delivered by core CommScope growing net sales 10% from the prior year. Our focus on capacity expansion and organic growth is clearly paying dividends. As discussed in our February release, our margins remained under pressure in the first quarter as we continue to work price increases through our backlog. We've made strong progress on our pricing initiatives and expect to see margin improvement for the core portfolio in the second half of the year. Although the environment remains challenged, including COVID challenges in China. Based on current visibility, we maintain the expectation to deliver core adjusted EBITDA in the range of $1.15 to $1.25 billion for the full year in 2022. For consolidated CompScope, which includes our home networks business, we reported net sales of $2.23 billion, up 8%, and adjusted EBITDA of $253 million, down 13%. Now turning to slide three, before I discuss some of the business highlights behind the first quarter, I'd like to remind you about our new business segments we mentioned on our last earnings call in February. Portfolio optimization is a key pillar to our CommScope Next transformation, and as such, we believe that our new segmentation will create more focused and streamlined businesses. This will allow us to better serve our customers, and drive accountability and efficiency deeper into the organization. Under our new reporting structure, our four core business segments are as follows. Connectivity and cable solutions, outdoor wireless networks, networking, intelligent cellular and security solutions, and access network solutions. Our largest segment is connectivity and cable solutions, or CCS, and is led by Rick Johnson. CCS combines all of our connectivity and cabling assets, as well as our PON technologies. After a thorough evaluation of our entire portfolio, it became very clear that this is crucial to manage the entirety of our connector and cable operations under one single segment. This will cement CCS as one of the largest of its kind in the marketplace, leveraging a tremendous portfolio of scale and intellectual property, unlocking true global leadership in connectivity and cabling, that few others can match. Our next segment, Outdoor Wireless Networks, or OWN, is led by Farid Faroozbak. OWN remains largely the same, a provider of everything but the radio. At the macro site, in addition to consumer solutions in the metro layer to densify mobility networks. Moving to our next segment, Networking Intelligent Cellular and Security Solutions, or NICS, is led by Markus Ogerig. Nix has combined Ruckus, DAS, small cell, and security identity solutions to create a pure play business focused on intelligent connectivity applications. Nix will provide industry-leading vertical solutions enabled through software and cloud, capturing emerging growth trends in security, IoT, analytics, public and private networks. Access Network Solutions, or ANS, is led by Guy Cisurczyk. ANS takes the active product portfolio that was formerly in broadband networks and establishes a more streamlined and focused segment. ANS offers service provider solutions from the head end to the edge of their networks and will continue to leverage its large install base and product offering in software, CMTS, head-end optics, nodes, and amplifiers to service its customers. And before turning to our business highlights for the quarter, I would also add that home networks remains entirely unchanged. Now turning to slide four for a review of our first quarter. As mentioned in my opening remarks, core and consolidated CommScope delivered strong top line growth during the first quarter. Connectivity and cabling solutions led the way with net sales of $838 million, an increase of 24% from the prior year, and most notably in our fiber product lines, which grew 38%. We are continuing to see significant strength across all of our end markets. Our investments in capacity continue to ramp, helping fuel the impressive year-on-year growth. Gross margins remained under pressure as a result of the timing of our price increases and startup costs relating to our new capacity expansions. As mentioned on our previous call, we continue to work price increases through our backlog and expect margin percentages to improve sequentially throughout the year. Outdoor wireless networks also drove strong top-line performance with net sales of $390 million, growing 20% from the prior year. Carriers continued to invest in their 5G networks worldwide, and OWN's Everything But the Radio portfolio saw growth across all its business units. However, while the top-line performance was very strong, margins remained challenged as inflation continues to impact our key input and logistics costs. Networking, intelligence cellular, and security solutions delivered net sales of $188 million, a 2% decline from the prior year. Our DAS and small-cell business performed well in the quarter, and while demand was strong in ruckus, they were constrained by chip availability. Ruckus backlog continued to increase and ended the quarter at $583 million, with a book-to-bill of 1.8 times. DAS has built a healthy and growing backlog in excess of $100 million, and OneCell is continuing to progress through the qualification process needed to be approved in all three major U.S. carriers. In this segment, we continue to invest in future growth. We continue to make significant investments in ruckus in OneCell and are encouraged by market interest in our capabilities. Our investment in OneCell will continue to have a negative impact on our EBITDA for the remainder of 2022. However, as we continue to manage our chip supply challenges, input costs, and pricing, we expect the overall segment's adjusted EBITDA performance to improve throughout the year. Active network solutions generated net sales of $317 million, a 16% decline from the prior year. As we've mentioned before, the performance in this business is heavily influenced by the timing of deals, especially software license sales, and could vary significantly from quarter to quarter. During the quarter, ANS was also substantially impacted by CHIP and other supply constraints. In addition, we continue to expect a margin shift in this business as operator investment focus moves further to the edge of their networks to accommodate distributed access architecture and amplifier replacements. And to round out consolidated Comscope, home network net sales of $496 million were essentially flat to the prior year, and adjusted EBITDA improved 20% or by $4 million. Home benefited from driving price increases to offset inflationary pressures at the beginning of this year. However, in the second quarter, home expects to be more heavily impacted from chip supplier decommits, and overall visibility in their chip supply remains uncertain. That said, we continue to work with our supply base to improve chip availability and introduce substitutes where possible. As a result of our limited visibility to chip supply and our near-term performance, our efforts to spin off the home business remains on hold. Now turning to slide five to provide an update on Comscope Next. One of our major priorities for Comscope Next is organic growth. As I referenced earlier, our capacity investments are paying significant dividends as evidenced by the 24% year-over-year growth in CCS. We brought capacity online in the fourth quarter and the first quarter, and there will be additional capacity continuing to come online throughout 2022. In addition, we are evaluating our next round of capacity expansions in the CCS business. As part of our CompScope Next organic growth initiative is continued innovation. We continue to increase our investment in technologies that will fuel growth for CompScope for years to come. In 2022, the core businesses will invest approximately $600 million in R&D and new product introductions. And recently, we've had several significant innovation advancements I'd like to share. During the first quarter, CCS further expanded the release of our NOVAX connectivity product line. Our NOVAX fiber connectivity range allows operators to maximize their network and respond quickly to changing market conditions and high volume demand. These solutions deliver unprecedented ease of installation today with the flexibility to ensure that the network meets tomorrow's needs. Earlier this week, we announced our next generation XGS PON solution suite, from which we expect meaningful revenues starting in 2023. Comscope is in a unique position to offer this solution as a pioneer in PON-based broadband access solutions. The new suite of XGS PON products will power access networks with 10 gigabits and beyond for future application of broadband services and is capable of supporting 5G and next generations of wireless network deployments. Just a few weeks ago, OWN announced Mosaic, our active passive antenna platform that will drastically reduce the footprint at the top of the tower, conserving space by combining active 5G and passive 4G technologies into single presence. We have multiple trials of Mosaic in the planning stages and expect them to be completed starting in Q2. As I mentioned, in NICS, we continue to invest heavily in our small cell technologies through our one cell brand. One cell has already progressed through qualifications at two of the major U.S. carriers, and we are working on approval with the final major U.S. carrier. Once approved, one cell with its four radio modules can provide both public and private networks in a single radio point. The ability to carry all three major U.S. carriers in addition to CBRS in a single radio point is a truly unmatched capability, dramatically simplifying indoor networking. During the quarter, our progress to deploy one cell for 4G continued. In addition, during the quarter, we received our first approval from a major US carrier to begin deployments for one cell 5G. Finally, as we look to the next evolution of HFC networks, our ANS segment will have an important role to play in the advancement from DOCSIS 3.1 to DOCSIS 4.0. We are close to finalizing agreement with the leading service provider on a joint development partnership for DOCSIS 4.0. Our refocused investment in technology and capacity expansions, coupled with the strong demand environment and our pricing initiatives, positions CommScope well for growth and improved profitability in the upcoming quarters. And with that, I'd like to turn things over to Kyle to talk more about our first quarter results.