CommScope Holding Company, Inc.

Good day and thank you for standing by. Welcome to the CommScope 2024 Second Quarter 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, VP of Investor Relations. Please go ahead.

Good morning, and thank you for joining us today to discuss CommScope's 2024 second quarter results. I'm Massimo Di Sabato, Vice President of Investor Relations for CommScope, and with me on today's call are Chuck Treadway, President and CEO, and Kyle Lawrenson, 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, Massimo. Good morning, everyone. I'll begin on slide two. In the second quarter, CommScope delivered net sales of $1.387 billion and adjusted EBITDA of $302 million, driven by strength in our CCS and OWN segments. For core Comscope, which excludes the OWN and DAS businesses, we reported net sales of $1.05 billion and core adjusted EBITDA of $201 million for the second quarter of 2024. I will start my comments today addressing the recently announced deal to sell our OWN and DAS businesses to Ampinon. As we have discussed in previous calls, we have been exploring alternatives to optimize our capital structure. One of the alternatives we mentioned was asset sales. We believe that the OWN and DAS deal offers significant value at an opportune time for a strategic buyer. The deal is expected to close in the first half of 2025, giving us time to evaluate how to best manage proceeds, though we intend to use this flexibility to reduce debt and or delever through accretive investment. I want to thank our OWN and DAS teams for all they have done for CommScope. For our customers and employees, Amphenol represents an ideal home for these businesses' next phase of growth. Moving forward, our core business will consist of CCS, ANS, and CoreNICS. CoreNICS will now consist of Ruckus and Small Cell. Our second quarter core business performance was mixed with strength in CCS and continued weakness in ANS and NICS. As I've mentioned in past earnings calls, We continue to control what we can. While our core revenue was down 17%, our adjusted EBITDA was essentially flat. Adjusted EBITDA as a percentage of sales increased from 15.9% to 19.1%. This improvement has been driven by our CommScope Next program. We have focused on very specific initiatives in all areas of our business to enhance profitability. Now I'd like to give you an update on each of our businesses. In the second quarter, CCS continued to improve order rates as customer inventory continues to normalize and demand has improved. Although we saw sequential order and revenue improvement in all businesses, we're experiencing stronger recovery in building and data center than in broadband. Our building and data center business is seeing very strong demand from hyperscale and cloud. The need for bandwidth and data center capacity driven by enhanced gen AI has resulted in substantial growth in this area of our business. We are well positioned as one of the market leaders in MPO cable and connectors. The outlook is very strong, with our customers signaling robust growth in data centers over the next several years. Currently, we are assessing the demand requirement and are investing in capacity to meet that demand. In the first half of the year, we've installed capacity to drive $100 million of incremental annualized revenue. These investments are highly accreted to EBITDA with returns expected in less than six months. In addition to capacity, we continue to launch new products in our building and data center business to drive additional growth. Turning our attention to broadband, we have seen orders improve sequentially from the first quarter to the second quarter. Since the beginning of last year, customer inventory levels continue to improve, driving increased sequential order rates. However, demand remains low relative to 21 and 22. Customers continue to assess their upgrades, including evaluating the impact of BEAD and other federal funding programs on their build plans. Although we remain bullish on broadband, a level of uncertainty remains on the timing of a true demand recovery and the timing of BEAD. As we have previously mentioned, we are well prepared for the recovery and the BEAD program. We have ample capacity to meet the expected higher demands, and we have a full suite of BABA-compliant products. The latest market feedback suggests that BEAT program is now pushed to the second half of 2025. As we move into the second half of the year, based on continued strength in building and data center, we would expect CCS revenue and adjusted EBITDA tracking closer to the second quarter levels than the first quarter levels. Turning to core NICs, which excludes DAS, we continue to see depressed market conditions as our channel digest inventory built in the second half of 2023. Although EBITDA improved sequentially, CoreNICS delivered negative EBITDA in the second quarter, driven by lower revenue and inventory write-offs. Despite challenges in the first half, we feel optimistic on a stronger second half as Ruckus channel inventory has stabilized and demand is improving. In Ruckus, we have strong visibility to channel inventory. Current inventory levels are back to what we would consider normal. In addition to normalized inventory and subsequent demand, we're gaining traction on several Ruckus initiatives, including our Wi-Fi 7 launch, Ruckus 1, and vertical market strategy. During the second quarter, we continue to make strides in our Ruckus subscription and SaaS offerings. We remain bullish on our core NICS business. Finishing our core businesses with ANS. As previously mentioned, the first half of 2024 was historically weak due to our customers being faced with larger than expected inventory and navigating the choices for next generation HSC architecture. Despite this, we believe the ANS segment is well positioned to take advantage of the latest upgrade cycle with the breadth of new products including virtual CMTS, nodes, amplifiers, RPD and RMB modules, and remote OLTs for NodePond. This, coupled with our legacy technology install base, allows us maximum flexibility for customer upgrades. An example of a new product development we are excited about is Unified DOCSIS 4.0 that we are developing with our silicon partner and customers. The Unified product will allow operators to choose ESD and or full duplex DOCSIS providing scale and flexibility. In addition, we have significant opportunities to partner with our expansive legacy install base to quickly and effectively improve their customers' experience with only a software upgrade and modem change. Our recently commercialized DOCSIS 3.1e software upgrade allows our customers to dramatically increase their network performance. An example of a recent win was with a major tier one service provider upgrading to DOCSIS 3.1e and achieving speeds of four gigabits per second down and one gigabits per second up. During the second quarter, we purchased the HSC assets of CASA Systems. This acquisition provides us with cash flow from their legacy customer base and new products such as the virtualized CMTS and upgraded PON products. This acquisition will be deleveraging. In the short time we have owned CASA, we have had several inquiries about virtualized CCAP with Tier 1 and Tier 2 customers. In addition to the CASA acquisition, we have finalized agreements with a large Tier 1 customer on FDX products. These products will begin shipping in the second half of 2024 with a significant ramp in the first half of 2025. The real question with our A&S business is the timing and magnitude of the upcoming upgrade cycle. Although customers have indicated a fairly aggressive upgrade cycle over the next several years, many of these upgrades appear to be pushing out. The timing and the magnitude of these upgrade cycles will be an important driver of revenue and profitability for A&S. We are continuing to navigate our business through varying market conditions. Although we are bullish medium and long term, timing and magnitude of demand improvement remains uncertain. For our core businesses, we believe we are well positioned to take advantage of a demand rebound with ample capacity and the right product offerings. We will continue to control what we can, including supporting our customers as they navigate through their requirements. And with that, I'd like to turn things over to Kyle to talk more about our second quarter results.