CommScope Holding Company, Inc.

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 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 that today's conference is being recorded. I would now like to hand the conference over to your first 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 2024 first 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 of 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 Trenway. Thank you, Massimo.

Good morning, everyone. 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 the OWN order rates as service providers have worked down inventories and demand appears to be rebounding. This is a positive sign and one that we have been waiting for. 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. 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. Our first quarter continued to be negatively impacted by lower market demand and larger than expected customer and channel inventory buildup. As I've mentioned in past calls, we continue to control what we can and navigate macroeconomic challenges that impact our businesses. 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 on 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. 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 had on hand, as well as stronger enterprise sales from data center and building and campus. Starting with our enterprise side of the business, we continue to find success with our launch of our SystemX 2.0 structured cabling solution. The introduction of innovative offerings such as GigaReach, and XL5 cable enable greater distances and increased bandwidth capabilities. These new cables support both building and campus solutions for the next wave of applications like security and multi-gig Wi-Fi 7 access points. 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're working with several of the large players in this arena as our products and services are well positioned for these builds. 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. Turning our attention to our broadband business, we're 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 fiber-to-the-home passings in the United States remained at historic levels, thus the need to refresh inventory. As we look forward to the government BEAT funding initiatives, we have launched hundreds of Build America, Buy America qualified products. I would encourage you to visit compscope.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 return to growth for the CCS segment. Turning to NICS, as we had 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 next 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. It is also important to note that this is not just impacting Ruckus. Other competitors in this space are citing similar issues. A bright spot in the Ruckus business is that we are seeing continued momentum towards 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. As we reinforce our CompScope 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 SaaS. 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. 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 the lower demand will continue at least throughout the next few quarters as inventory is digested and the demand drivers reset. In 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. During the first quarter, we have seen some continued recovery in order rates, largely supported by increased space station antenna sales. We expect that 2024 revenues 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 we are ready to support our customers when they are ready. In addition, we continue to develop and commercialize new products to help our customers build reliable and efficient wireless infrastructures. Last quarter, we introduced our new seed base station antenna solution aimed at delivering 15% greater efficiency at a fixed power level. In this quarter, we are happy to report that it's gained multiple operator design wins. 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 ANS, 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 HSC 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 NodePond. 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 our 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. 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 2024. 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 in their journey. 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 stated in the past, we are well positioned for market recovery. And while we remain confident that a recovery will occur, The timing and intensity of that recovery continues to be uncertain. We have been in regular dialogue with our customers and evaluate market data and projections for each of our business segments. Understanding demand drivers has been difficult for us as well as our competitors. We will continue to control what we can and will 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 results.