CommScope Holding Company, Inc.

Good day and thank you for standing by. Welcome to the CommScope third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Massimo Di Sabato, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining us today to discuss Comscope's 2023 third quarter results. I'm Massimo Di Sabato, Vice President 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 are 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, Massimo, and good morning, everyone. I'll begin on slide two. CommScope delivered core net sales of $1.35 billion and core adjusted EBITDA of $245 million for the third quarter of 2023. Our third quarter continues to be impacted by lower customer orders driven by larger than expected customer inventory corrections, customer capex reductions, and the macroeconomic uncertainty. The consolidated CommScope, which includes our home networks business, we reported net sales of $1.6 billion, down 33% year over year, and adjusted EBITDA of $249 million, down 28% year over year. As discussed previously, our CCS and OWN businesses have been experiencing lower order rates since the beginning of the year, and we have seen no meaningful recovery in the third quarter. In addition to the challenges we have been experiencing in CCS and OWN, In the third quarter, we were approached by our ANS customers that they are seeing project timing slipping into next year and have more inventory than required. The result is going to be a softer than expected rest of the year and first half of 2024 in our ANS segment. Based on our current order rates and visibility into the fourth quarter, we're revising our 2023 Core Adjusted EBITDA Guidepost to $1 billion to $1.05 billion. Clearly, this is a disappointing development as we look over the next few quarters. However, we continue to be bullish on our long-term growth, including general market recovery, government funding for connectivity, and cable upgrades. We are well positioned to take advantage of the recovery as we are a leader in each of these businesses and have invested in capacity and product development. While we are in constant dialogue with customers about business projections and inventory levels, We continue to work with our customers to better understand true demand and the impact on our business. As we discussed on our second quarter earnings call, we continue to manage what we can control. We have aggressively been managing our costs and have implemented approximately $150 million of cost reduction activities in 2023. Although we have been aggressive on cost, we still feel there is an opportunity for further cost reduction. These actions include direct material savings, automation, and further efficiency projects. We're working on defining these actions and are targeting an incremental $100 million of cost reduction to be implemented by the end of the first quarter 2024. I'm proud of our team's focus on what we can control. Despite the decline in core revenue of 32% year-over-year, Our core adjusted EBITDA, the percentage of revenue, has improved by approximately 50 basis points. Now I'd like to give you an update on each of our businesses. As we indicated in previous calls, GCS has strong long-term market tailwinds, including significant spending commitments to improve United States broadband infrastructure, in addition to other country programs around the world. We are well positioned to take advantage of the recovery, as we have invested in capacity, and have the full suite of products in place. We have also positioned the business to meet the Build America requirements for the United States government funding. Outside of the broadband investments, we are also encouraged by developments in our building and data center portion of the CCS business as significant momentum is occurring on the cloud and AI side of the data centers. Also, in CCS, we have been aggressive with our cost structure. We are looking at additional cost opportunities to drive efficiency. We believe that there is still a substantial value that we can drive on the cost side. However, these projects are a bit more time intensive. An example of an area that we are focusing on is automation. Investment in new equipment, processes, and systems can drive further efficiency and lower costs in this segment. We remain bullish on CCS as a result of the longer-term market tailwinds and our strong position in this market. CCS will recover. It is just a matter of timing of this recovery. The recovery coupled with our more efficient cost structure will drive substantial financial performance. Turning to NICS, the business continues to perform very well. Our year-to-date EBITDA of $196 million is up $200 million over the prior year. The NICS segment LTM adjusted EBITDA is $252 million. We are very proud of the NICS transformation. Our ability to grow the business and leverage our cost base has created strong value in this segment. It is a game changer for our company. We are well positioned for continued growth as we announce two major new product offerings in the third quarter with our Ruckus One Suite and Wi-Fi 7 Enterprise Class Access Point product. As we discussed previously, Ruckus One is an AI-driven cloud native platform delivering network assurance, service delivery, and business intelligence in a unified dashboard. It simplifies converged network management across multi-access public and private networks. Also, we have officially launched our Wi-Fi 7 products. As one of the first to launch a Wi-Fi 7 product, we are well positioned as a first mover in the market to gain share by taking advantage of the functionality and enhancements of Wi-Fi 7. Finally, in NICS, we continue to invest in our go-to-market strategy. We believe that as a result of our channel network and knowledge of certain market segments, we can continue to increase market share by investing in products, systems, and resources dedicated to those market segments. We have developed a plan and are now in the implementation phase. In OWN, as we mentioned in previous calls, we fully contemplated a decline in U.S. carrier capital spend. However, these declines are much more severe than what we had expected, and I don't think we are alone in these sentiments. Although carriers indicated some recovery in the second half, this has not materialized. There will be a recovery. However, at this time, there is limited visibility into the timing of the recovery. Based on the lack of visibility in this segment, At this moment, we would expect that 2024 will look similar to what we see in 2023. Again, in the OWN segment, we continue to focus on what we can control. We have been aggressive in cost in this segment. The results of our cost management have resulted in year-over-year flat EBITDA margins, despite a 45% decline in revenue. In addition to cost management, we continue to develop and commercialize new products. We have discussed the mosaic antenna in previous calls. However, we are also developing new products in the power and steel space. We will continue to develop new products to supplement our existing base business. Again, similar to where we are in CCS, we are well positioned in the market and feel like we will benefit from a market recovery. Finishing with ANS, as we have discussed, The segment has made a very successful transition to a leading supplier of edge-related products, including nodes, amplifiers, and RPD R&D modules. Although we remain a strong supplier of our legacy CMTS technology, we continue to grow our edge business as we are in the early phases of the DOCSIS 4.0 upgrades. We are well positioned to be a major player in the DOCSIS 4.0 upgrade cycle as we are the only supplier with all of the products and believe our products are the best performing. During the recent SCTE Cable Tech Expo, we were able to demonstrate our wide product range. This show just reconfirmed the momentum behind the DOCSIS 4.0 upgrade commitment and our strong position in this market. Many of the demonstrations by cable companies showing best-in-class speeds were achieved with our product backbone. In the last 90 days, we announced our FDX product range, including collaboration with Comcast on an FDX amplifier, and the launch of our virtual CMTS product that is now in customer labs. Although we were very bullish on the 4.0 upgrade, in the third quarter, we saw two major short-term developments that will impact near-term performance. The first is inventory adjustments by our customers. Several customers informed us that they were holding too much inventory and need to make short-term adjustments to orders to right-size their inventory. In addition, some of our customers are experiencing slower than expected ramps on their 4.0 upgrade projects. As a result of these two issues, order rates and revenues will be negatively impacted in the next few quarters. In summary, the markets will return. We are well-positioned when the markets do return, and we are focusing on what we can control. This work will put us in a stronger financial position when the markets come back. And with that, I'd like to turn things over to Kyle to talk more about our third quarter results.