CommScope Holding Company, Inc.

Good day and thank you for standing by. Welcome to CommScope's 2023 full year and fourth quarter results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll 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 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 full year and fourth 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 the business. and actual future results may differ materially. Please see our recent SEC filings, which identify the principal risks and uncertainties that could affect future performance. Before I turn the call over to Chuck, I have a few housekeeping items to review. Today we will discuss certain adjusted and non-GAAP financial measures, which are described in more detail in this morning's earnings materials. Reconciliations of non-GAAP financial measures and other associated disclosures are contained in our earnings materials and posted on our website. All references during today's discussion will be to our adjusted results. All full-year and quarterly growth rates described during today's presentation are on a year-over-year basis unless otherwise noted. I'll now turn the call over to our President and CEO, Chuck Treadway.

Thank you, Massimo. Good morning, everyone. I'll be beginning on slide two. Before getting into the details of our quarter, I want to address the current state of our business and changes since our last call. The business continues to be under significant pressure as demand remains low. We continue to have minimal visibility to when a recovery will occur. During the quarter, we also experienced unexpected significant downward pressure in our NICs and ANS businesses. We are now in a position where all of our segments are dealing with market demand challenges. Although we have seen some slight uptick in demand in our OWN and CCS segments, we expect a very difficult first half and specifically first quarter. We expect the first quarter revenue in adjusted EBITDA to be substantially lower than the fourth quarter of 2023. Starting with annual results, Core Comscope delivered net sales of $5.79 billion, decreasing 23% from the prior year. The decline in revenue resulted in Core Adjusted EBITDA of $1.02 billion, a decrease of 18% from the prior year, meeting our previously provided $1.00 to $1.05 billion Core Adjusted EBITDA range provided on our last call. Shifting to the fourth quarter, Comscope delivered Core Net Sales of $1.186 billion and Core Adjusted EBITDA of $199 million for the fourth quarter of 2023. Our fourth quarter continued to be impacted by lower customer orders driven by lower market demand and larger than expected customer inventory buildup. As I've mentioned in past calls, we continue to control what we can control. We're the market leader in most of our businesses with capacity in place to meet expected future demand. This capacity, as well as our new product offerings, positions us well for when the demand does recover. In addition, As referenced on our third quarter call, we are managing our cost structure, including a plan to take out $100 million of annual costs. Now I'd like to give you an update on each of our businesses. As we indicated in previous calls, CCS has strong long-term market tailwinds, including significant spending commitments expected to start late in 2024 and into 2025, driven by continued build-out of fiber networks and data centers. We have seen some small but inconsistent upticks in order rates in some product lines as customers are reaching normalized inventory levels. I don't think we're ready to declare this as the beginning of a recovery, but these small indicators give us some evidence of a potentially stronger second half of 2024 in return to growth. As we turn our focus to helping our customers meet the objectives of connecting the United States with reliable broadband connectivity, We have developed a series of products and solutions focused on rural broadband architectures, meeting the needs of Build America, Buy America requirements, or otherwise known as BABA. Outside of the broadband investments, we are also encouraged by developments in our building and data center portion of our CCS business, supporting our enterprise customers. As you are aware, significant momentum is occurring on the cloud and AI side of data centers. We have also seen a boost in our hyperscale and cloud business as a result, supporting investments in gen AI projects with key customers. As we invest in new products and technologies, we are well positioned to take advantage of growth in this market. We have also found some new momentum with our innovation of our SystemX 2.0 structured cable solutions, offering new products for in-building solutions. In CCS, we continue to be aggressive with our cost structure We are looking at additional opportunities to drive efficiency. There is still value that we can drive on the cost side. We remain bullish on CCS as a result of the long-term market tailwinds and our strong position in this market. CCS will recover. It is just a matter of timing and degree. Turning to NICS, the business had a standout year even after the slower than predicted fourth quarter. The team worked extremely hard to introduce new products and solutions to the market. The Ruckus team was one of the first to market the new Wi-Fi 7 enterprise-grade access point and nearly doubled the attach rate of our Ruckus One and Ruckus AI solutions. Our full year 2023 adjusted EBITDA and NICS of $225 million is up $173 million over prior year. Our CompScope Next initiatives program has supported the improvement in this business. We are not done as we continue to evaluate every aspect of this business for incremental opportunities, including investing in the next generation of product solutions and SaaS. Our Ruckus One Suite and Wi-Fi 7 Enterprise Class Access Point products are also contributing to the new technology refresh that is in the early phases. Our NICS business was also supported by the strong ICM performance led by the DAS business, providing in-building 5G connectivity. With that said, our next segment, and specifically ruckus, is under substantial short-term pressure as demand significantly declined in the last quarter, driven by too much inventory in the system and slower demand. The level of this demand adjustment is much more severe than what we had expected and our leading indicators identified. Although our funnel remains strong, purchasing decisions are being pushed to future periods. We expect the lower demand will continue throughout the first half of this year, as inventory is digested and demand drivers reset. The results of the reduced demand for Ruckus product will be a key contributor to our overall sequential decline from the fourth quarter of 2023 to the first quarter of 2024. In OWN, as we mentioned in previous calls, 2023 saw a decline in U.S. carrier capital spend. As with CCS, visibility remains limited. During the fourth quarter and early in the first quarter, we have seen some slight recovery in order rates. We're not calling this a recovery, but it is a start. Based on our conversations with customers, 2024 will continue to be a challenging year. We would expect that 2024 will look similar to what we saw in 2023, but with a stronger second half of the year. Again, as previously stated, we continue to focus on what we can control and would be ready to support our customers when they are ready. In addition, we continue to develop and commercialize new products. We have discussed the MOSAIC antenna solution in the past and are seeing increased traction around the world. We have also introduced our new SEED base station antenna solution aimed at delivering 15% greater efficiency at a fixed power level. Again, like we are in CCS, we are well positioned in the market and feel like we will benefit when the market recovers. Finishing with ANS, As we've discussed, in 2023, the segment has made a successful transition to a leading supplier of edge-related products, including nodes, amplifiers, RPD and RMD modules, and remote OLTs for NodePond. We have done this while continuing to support our large installed base of CMTS products across multiple architectures. We introduced the first FDX amplifier, made headway with our virtual CMTS solution, and paved the transitional path to DOCSIS 4.0 architecture. We also launched our DOCSIS 3.1 enhanced solution, enabling operators to offer services between 5 and 8 gigabits per second through the use of new in-home DOCSIS CPE along with enhanced E6000 software. We are bullish on DOCSIS 4.0 upgrades, and we will likely see increased momentum in the latter part of 2024. On both DOCSIS 3.1e and virtual CMTS, we have trials underway with major MSOs. However, in the quarter, as expected, our customers were faced with larger than expected inventory and adjusted shipments to right-size their inventory. In addition, some of our customers have announced slower than expected ramps on their DOCSIS 4.0 upgrade projects. As a result of these two issues, order rates and revenues will be negatively impacted in the first few quarters. This impact will be a key contributor to our overall sequential decline from the fourth quarter of 2023 to the first quarter of 2024. We understand that our message is not ideal as we navigate through the challenging market conditions and capital structure. We are well positioned for a market recovery, and a recovery will occur. The timing and intensity of that recovery continues to be uncertain. Although we are in regular dialogue with our customers and evaluate market data and projections. Understanding demand drivers has been difficult for us and our competitors. In most cases, projections have been incorrect. The uncertainty is not optimal as we continue to manage cash and capital structure. And we will continue to control what we can. And with that, I'd like to turn things over to Kyle to talk more about our fourth quarter results.