Second Quarter Highlights
- Net sales of $1.918 billion
- Core net sales of $1.589 billion*
- GAAP net loss of $100.4 million
- Non-GAAP adjusted EBITDA of $259.5 million
- Core adjusted EBITDA of $262.5 million*
- Cash flow generated by operations of $136.8 million and
non-GAAP adjusted free cash flow of $148.8 million
* References to certain supplementary “Core” financial measures
reflect the results of the Connectivity and Cable Solutions (CCS),
Networking, Intelligent Cellular and Security Solutions (NICS),
Outdoor Wireless Networks (OWN) and Access Network Solutions
segments (ANS), in the aggregate. Core financial measures exclude
the results and performance of the Home Networks (Home) segment.
See the second quarter segment comparison tables below showing the
aggregation of the Core financial measures.
CommScope Holding Company, Inc. (NASDAQ: COMM), a global leader
in network connectivity solutions, today reported results for the
quarter ended June 30, 2023.
Summary of Consolidated
Results
Q2
Q2
% Change
2023
2022
YOY
(in millions, except per share
amounts)
Net sales
$
1,918.4
$
2,300.2
(16.6
)%
Core net sales (1)
1,588.8
1,876.3
(15.3
)
GAAP net loss
(100.4
)
(61.0
)
NM
GAAP net loss per share
(0.55
)
(0.36
)
NM
Non-GAAP adjusted EBITDA (2)
259.5
299.6
(13.4
)
Core adjusted EBITDA (1)
262.5
286.8
(8.5
)
Non-GAAP adjusted net income per diluted
share (2)
0.19
0.41
(53.7
)
NM – Not meaningful
(1) “Core” financial measures reflect the
results of the CCS, NICS, OWN and ANS segments, in the aggregate,
and exclude the results of the Home segment. See the second quarter
segment comparison tables below showing the aggregation of the Core
financial measures.
(2) See "Non-GAAP Financial Measures" and
"Reconciliation of GAAP Measures to Non-GAAP Adjusted Measures"
below.
“CommScope delivered Core net sales of $1.589 billion and Core
adjusted EBITDA of $263 million for the second quarter of 2023. Our
second quarter in CCS and OWN, was impacted by larger than expected
customer inventory corrections, customer capital spending
reductions and the macro environment. Despite the market
challenges, we continue to manage what we can control including our
CommScope NEXT initiatives. Two of our most significant
achievements thus far in 2023 are cost efficiencies and NICS
performance. On the cost side, we are on track to reduce annualized
costs by more than $150 million. In NICS, we achieved a record
quarter of adjusted EBITDA of $75 million, up $90 million
year-over-year. As we move into the second half, the demand
environment, particularly in our CCS and OWN segments, remains
uncertain and will impact our 2023 performance. Despite the
short-term challenges, we are excited about medium and long-term
demand including the continued government and private investment in
broadband and fiber,” said Chuck Treadway, President and Chief
Executive Officer.
“In the second quarter, CommScope net sales declined 17% from
the prior year to $1.918 billion and adjusted EBITDA declined 13%
to $260 million. The adjusted EBITDA held up a bit better than our
revenue as we continue to drive our CommScope NEXT initiative plan
including reducing our fixed costs. We also continued to de-lever
as we repurchased and retired $28 million of our long-term debt
bringing the total debt repurchases to $85 million since the
beginning of the year. We finished the quarter with a net leverage
ratio of 6.4x. Liquidity remained strong at more than $1 billion.
However, based on current visibility driven by a weaker demand
outlook for 2023, we reduced our Core adjusted EBITDA guideposts to
a range of $1.15 to $1.25 billion,” said Kyle Lorentzen, Chief
Financial Officer.
Impacts of Current Economic Conditions
Macroeconomic factors such as higher interest rates, inflation
and concerns about a global economic slow-down have softened demand
for CommScope's products, with certain customers reducing purchases
as they right-size their inventories and others pausing capital
spending. This has negatively impacted the Company's net sales in
the first half of 2023 and may continue to negatively impact net
sales further into 2023. Conversely, in certain of CommScope's
segments, the Company has seen higher demand and favorable pricing
impacts that have partially offset the impact of lower demand in
certain of its other segments. CommScope is also seeing lower input
costs and has proactively implemented cost savings initiatives that
have favorably impacted its profitability in the first half of
2023.
Second Quarter Results and Comparisons
Net sales in the second quarter of 2023 decreased 16.6%
year-over-year to $1.92 billion. Core net sales decreased 15.3%
year-over-year due to lower net sales in the OWN and CCS segments,
partially offset by stronger sales in the NICS and ANS segments.
Net sales decreased across all regions in the second quarter of
2023.
Net loss attributable to common stockholders of $115.7 million,
or $(0.55) per share, in the second quarter of 2023, increased
compared to the prior year period's net loss attributable to common
stockholders of $75.7 million, or $(0.36) per share. Non-GAAP
adjusted net income for the second quarter of 2023 was $47.3
million, or $0.19 per share, versus $100.5 million, or $0.41 per
share, in the second quarter of 2022.
Non-GAAP adjusted EBITDA decreased 13.4% to $259.5 million in
the second quarter of 2023 compared to the same period last year.
Non-GAAP adjusted EBITDA as a percentage of net sales increased to
13.5% in the second quarter of 2023 compared to 13.0% in the same
prior year period. Core segment adjusted EBITDA decreased 8.5% to
$262.5 million in the second quarter of 2023 compared to the same
prior year period. Core segment adjusted EBITDA as a percentage of
net sales increased to 16.5% in the second quarter of 2023 compared
to 15.3% in the same prior year period.
Reconciliations of the reported GAAP results to non-GAAP
adjusted results are included below:
Second Quarter Comparisons
Sales by
Region
% Change
Q2 2023
Q2 2022
YOY
United States
$
1,105.4
$
1,424.3
(22.4
)%
Europe, Middle East and Africa
369.8
378.4
(2.3
)
Asia Pacific
195.0
223.1
(12.6
)
Caribbean and Latin America
128.2
150.4
(14.8
)
Canada
120.0
124.0
(3.2
)
Total net sales
$
1,918.4
$
2,300.2
(16.6
)%
Segment Net
Sales
% Change
Q2 2023
Q2 2022
YOY
CCS
$
698.9
$
986.7
(29.2
)%
NICS
327.6
205.4
59.5
OWN
228.8
390.9
(41.5
)
ANS
333.5
293.3
13.7
Core net sales
1,588.8
1,876.3
(15.3
)
Home
329.6
423.9
(22.2
)
Total net sales
$
1,918.4
$
2,300.2
(16.6
)%
Segment Operating
Income (Loss)
% Change
Q2 2023
Q2 2022
YOY
CCS
$
28.9
$
111.7
(74.1
)%
NICS
44.7
(43.7
)
NM
OWN
27.4
43.5
(37.0
)
ANS
9.0
(25.7
)
NM
Core operating income
110.0
85.8
28.2
Home
(37.8
)
(22.7
)
66.5
Total operating income
$
72.2
$
63.1
14.4
%
Segment Adjusted
EBITDA (See "Non-GAAP Financial Measures," below)
% Change
Q2 2023
Q2 2022
YOY
CCS
$
79.6
$
169.0
(52.9
)%
NICS
74.9
(15.3
)
NM
OWN
41.7
75.3
(44.6
)
ANS
66.3
57.8
14.7
Core adjusted EBITDA
262.5
286.8
(8.5
)
Home
(3.0
)
12.8
(123.4
)
Total segment adjusted EBITDA
$
259.5
$
299.6
(13.4
)%
NM – Not meaningful
- CCS - Net sales of $698.9 million decreased 29.2% from
the prior year period primarily driven by declines in Network Cable
and Connectivity and Building and Data Center Connectivity.
- NICS - Net sales of $327.6 million increased 59.5% from
the prior year period primarily driven by growth in Ruckus and
Intelligent Cellular Networks.
- OWN - Net sales of $228.8 million decreased 41.5% from
the prior year period primarily driven by declines in Base Station
Antennas and HELIAX product sales.
- ANS - Net sales of $333.5 million increased 13.7% from
the prior year period primarily driven by growth in Access
Technologies and Converged Network Systems.
- Home - Net sales of $329.6 million decreased
22.2% from the prior year period driven by a decline in Broadband
Home Solutions.
Cash Flow and Balance Sheet
- GAAP cash flow generated by operations was $136.8 million.
- Non-GAAP adjusted free cash flow was $148.8 million after
adjusting operating cash flow for $20.8 million of additions to
property, plant and equipment, $31.1 million of cash paid for
restructuring costs and $1.7 million of cash paid for transaction,
transformation and integration costs.
- Ended the quarter with $418.1 million in cash and cash
equivalents.
- As of June 30, 2023, the Company had no outstanding borrowings
under its asset-based revolving credit facility and had
availability of $859.0 million, after giving effect to borrowing
base limitations and outstanding letters of credit. The Company
ended the quarter with total liquidity of approximately $1,277.1
million.
Conference Call, Webcast and Investor Presentation
As previously announced, CommScope will host a conference call
today at 8:30 a.m. ET in which management will discuss second
quarter 2023 results. The conference call will also be webcast.
The live, listen-only audio of the call will be available
through a link on the Events and Presentations page of CommScope’s
Investor Relations website.
A webcast replay will be archived on CommScope’s website for a
limited period of time following the conference call.
During the conference call, the Company may discuss and answer
questions concerning business and financial developments and trends
that have occurred after quarter-end, including questions relating
to the planned separation of the Home Networks business. The
Company’s responses to questions, as well as other matters
discussed during the conference call, may contain or constitute
information that has not been disclosed previously.
About CommScope:
CommScope (NASDAQ: COMM) is pushing the boundaries of technology
to create the world’s most advanced wired and wireless networks.
Our global team of employees, innovators and technologists empower
customers to anticipate what’s next and invent what’s possible.
Discover more at www.commscope.com.
Follow us on Twitter and LinkedIn and like us on Facebook.
Sign up for our press releases and blog posts.
Non-GAAP Financial Measures
CommScope management believes that presenting certain non-GAAP
financial measures enhances an investor’s understanding of our
financial performance. CommScope management further believes that
these financial measures are useful in assessing CommScope’s
operating performance from period to period by excluding certain
items that we believe are not representative of our core business.
CommScope management also uses certain of these financial measures
for business planning purposes and in measuring CommScope’s
performance relative to that of its competitors. CommScope
management believes these financial measures are commonly used by
investors to evaluate CommScope’s performance and that of its
competitors. However, CommScope’s use of certain non-GAAP terms may
vary from that of others in its industry. Non-GAAP financial
measures should not be considered as alternatives to operating
income (loss), net income (loss), cash flow from operations or any
other performance measures derived in accordance with U.S. GAAP as
measures of operating performance, operating cash flows or
liquidity. A reconciliation of each of the non-GAAP measures
discussed herein to their most comparable GAAP measures is
below.
Core Measures
CommScope believes that presenting Core financial measures
enhances the investor’s understanding of the financial performance
of the Company’s core businesses. Core financial measures are the
aggregate of the CCS, NICS, OWN and ANS segments. They do not
include the results of the Home segment. The Core segments and the
Home segment represent the business segments as currently managed
and reported by CommScope. Future results and the composition of
any business divested in the future may vary and differ materially
from the presentation of the Core financial measures.
Forward Looking Statements
This press release or any other oral or written statements made
by us or on our behalf may include forward-looking statements that
reflect our current views with respect to future events and
financial performance. These statements may discuss goals, targets,
intentions or expectations as to future plans, trends, events,
results of operations or financial condition or otherwise, in each
case, based on current beliefs and expectations of management, as
well as assumptions made by, and information currently available
to, management. These forward-looking statements are generally
identified by their use of such terms and phrases as “intend,”
“goal,” “estimate,” “expect,” “project,” “projections,” “plans,”
“potential,” “anticipate,” “should,” “could,” “designed to,”
“foreseeable future,” “believe,” “think,” “scheduled,” “outlook,”
“target,” “guidance” and similar expressions, although not all
forward-looking statements contain such terms. This list of
indicative terms and phrases is not intended to be
all-inclusive.
These forward-looking statements are subject to various risks
and uncertainties, many of which are outside our control,
including, without limitation, our dependence on customers’ capital
spending on data, communication and entertainment equipment, which
could be negatively impacted by a regional or global economic
downturn, among other factors; the potential impact of higher than
normal inflation; concentration of sales among a limited number of
customers and channel partners; risks associated with our sales
through channel partners; changes to the regulatory environment in
which we and our customers operate; changes in technology; industry
competition and the ability to retain customers through product
innovation, introduction, and marketing; changes in cost and
availability of key raw materials, components and commodities and
the potential effect on customer pricing and timing of delivery of
products to customers; risks related to our ability to implement
price increases on our products and services; risks associated with
our dependence on a limited number of key suppliers for certain raw
materials and components; risks related to the successful execution
of CommScope NEXT; potential difficulties in realigning global
manufacturing capacity and capabilities among our global
manufacturing facilities or those of our contract manufacturers
that may affect our ability to meet customer demands for products;
possible future restructuring actions; the risk that our
manufacturing operations, including our contract manufacturers on
which we rely, encounter capacity, production, quality, financial
or other difficulties causing difficulty in meeting customer
demands; substantial indebtedness and restrictive debt covenants;
our ability to incur additional indebtedness and increases in
interest rates; our ability to generate cash to service our
indebtedness; the potential separation, divestiture or
discontinuance of a business or product line, including uncertainty
regarding the timing of the separation, achievement of the expected
benefits and the potential disruption to the business; our ability
to integrate and fully realize anticipated benefits from prior or
future divestitures, acquisitions or equity investments; possible
future impairment charges for fixed or intangible assets, including
goodwill; our ability to attract and retain qualified key
employees; labor unrest; product quality or performance issues,
including those associated with our suppliers or contract
manufacturers, and associated warranty claims; our ability to
maintain effective management information technology systems and to
successfully implement major systems initiatives; cyber-security
incidents, including data security breaches, ransomware or computer
viruses; the use of open standards; the long-term impact of climate
change; significant international operations exposing us to
economic risks like variability in foreign exchange rates and
inflation, as well as political and other risks, including the
impact of wars, regional conflicts and terrorism; our ability to
comply with governmental anti-corruption laws and regulations
worldwide; the impact of export and import controls and sanctions
worldwide on our supply chain and ability to compete in
international markets; changes in the laws and policies in the
United States affecting trade, including the risk and uncertainty
related to tariffs or potential trade wars and potential changes to
laws and policies, that may impact our products; cost of protecting
or defending intellectual property; costs and challenges of
compliance with domestic and foreign social and environmental laws;
the impact of litigation and similar regulatory proceedings in
which we are involved or may become involved, including the costs
of such litigation; the scope, duration and impact of disease
outbreaks and pandemics, such as COVID-19, on our business,
including employees, sites, operations, customers, supply chain
logistics and the global economy; our stock price volatility;
income tax rate variability and ability to recover amounts recorded
as deferred tax assets; and other factors beyond our control. These
and other factors are discussed in greater detail in our 2022
Annual Report on Form 10-K and may be updated from time to time in
our annual reports, quarterly reports, current reports and other
filings we make with the Securities and Exchange Commission.
Although the information contained in this press release represents
our best judgment as of the date of this release based on
information currently available and reasonable assumptions, we can
give no assurance that the expectations will be attained or that
any deviation will not be material. Given these uncertainties, we
caution you not to place undue reliance on these forward-looking
statements, which speak only as of the date made. We are not
undertaking any duty or obligation to update this information to
reflect developments or information obtained after the date of this
press release, except as otherwise may be required by law.
CommScope Holding Company,
Inc.
Condensed Consolidated
Statements of Operations
(Unaudited -- In millions,
except per share amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Net sales
$
1,918.4
$
2,300.2
$
3,919.9
$
4,528.8
Cost of sales
1,301.2
1,617.0
2,611.0
3,209.3
Gross profit
617.2
683.2
1,308.9
1,319.5
Operating expenses:
Selling, general and administrative
254.9
277.2
518.4
563.2
Research and development
153.2
165.4
306.6
336.1
Amortization of purchased intangible
assets
101.4
139.0
227.8
279.7
Restructuring costs, net
35.5
38.5
31.4
50.6
Total operating expenses
545.0
620.1
1,084.2
1,229.6
Operating income
72.2
63.1
224.7
89.9
Other income, net
2.4
1.0
8.1
1.0
Interest expense
(168.5
)
(140.1
)
(333.6
)
(276.6
)
Interest income
1.9
0.5
4.4
1.2
Loss before income taxes
(92.0
)
(75.5
)
(96.4
)
(184.5
)
Income tax (expense) benefit
(8.4
)
14.5
(0.6
)
(16.4
)
Net loss
(100.4
)
(61.0
)
(97.0
)
(200.9
)
Series A convertible preferred stock
dividends
(15.3
)
(14.7
)
(30.4
)
(29.2
)
Net loss attributable to common
stockholders
$
(115.7
)
$
(75.7
)
$
(127.4
)
$
(230.1
)
Loss per share:
Basic
$
(0.55
)
$
(0.36
)
$
(0.61
)
$
(1.11
)
Diluted (a)
$
(0.55
)
$
(0.36
)
$
(0.61
)
$
(1.11
)
Weighted average shares outstanding:
Basic
210.5
207.6
209.7
206.5
Diluted (a)
210.5
207.6
209.7
206.5
(a) Calculation of diluted loss per
share:
Net loss (basic and diluted)
$
(115.7
)
$
(75.7
)
$
(127.4
)
$
(230.1
)
Weighted average shares (basic)
210.5
207.6
209.7
206.5
Dilutive effect of equity-based awards
—
—
—
—
Denominator (diluted)
210.5
207.6
209.7
206.5
See notes to unaudited condensed
consolidated financial statements included in our Form 10-Q.
CommScope Holding Company,
Inc.
Condensed Consolidated Balance
Sheets
(In millions, except share
amounts)
Unaudited June 30,
2023
December 31, 2022
Assets
Cash and cash equivalents
$
418.1
$
398.1
Accounts receivable, net of allowance for
doubtful accounts of $63.0 and $82.8, respectively
1,354.1
1,523.6
Inventories, net
1,454.2
1,588.1
Prepaid expenses and other current
assets
198.5
216.4
Total current assets
3,424.9
3,726.2
Property, plant and equipment, net of
accumulated depreciation of $908.9 and $873.5, respectively
565.8
609.6
Goodwill
4,079.2
4,072.4
Other intangible assets, net
2,246.3
2,473.5
Other noncurrent assets
849.5
803.7
Total assets
$
11,165.7
$
11,685.4
Liabilities and Stockholders'
Deficit
Accounts payable
$
782.7
$
1,025.5
Accrued and other liabilities
906.9
1,050.0
Current portion of long-term debt
32.0
32.0
Total current liabilities
1,721.6
2,107.5
Long-term debt
9,380.9
9,469.6
Deferred income taxes
156.4
173.4
Other noncurrent liabilities
391.9
380.6
Total liabilities
11,650.8
12,131.1
Commitments and contingencies
Series A convertible preferred stock,
$0.01 par value
1,130.8
1,100.3
Stockholders' deficit:
Preferred stock, $0.01 par value:
Authorized shares: 200,000,000;
Issued and outstanding shares: 1,130,776
and 1,100,310, respectively, Series A convertible preferred
stock
—
—
Common stock, $0.01 par value: Authorized
shares: 1,300,000,000; Issued and outstanding shares: 211,912,464
and 208,371,426, respectively
2.3
2.2
Additional paid-in capital
2,558.7
2,542.9
Accumulated deficit
(3,599.2
)
(3,502.2
)
Accumulated other comprehensive loss
(276.2
)
(296.3
)
Treasury stock, at cost: 14,342,757 shares
and 12,726,695 shares, respectively
(301.5
)
(292.6
)
Total stockholders' deficit
(1,615.9
)
(1,546.0
)
Total liabilities and stockholders'
deficit
$
11,165.7
$
11,685.4
See notes to unaudited condensed
consolidated financial statements included in our Form 10-Q.
CommScope Holding Company,
Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited -- In
millions)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Operating Activities:
Net loss
$
(100.4
)
$
(61.0
)
$
(97.0
)
$
(200.9
)
Adjustments to reconcile net loss to net
cash generated by (used in) operating activities:
Depreciation and amortization
139.4
176.1
303.5
356.3
Equity-based compensation
10.7
12.3
24.2
28.9
Deferred income taxes
(31.9
)
(28.5
)
(61.9
)
(26.2
)
Changes in assets and liabilities:
Accounts receivable
(0.9
)
(25.9
)
174.4
(86.4
)
Inventories
167.5
(77.7
)
135.6
(151.4
)
Prepaid expenses and other assets
6.1
(27.5
)
16.3
2.1
Accounts payable and other liabilities
(92.9
)
(52.3
)
(411.2
)
(28.8
)
Other
39.2
(10.1
)
6.8
(2.7
)
Net cash generated by (used in) operating
activities
136.8
(94.6
)
90.7
(109.1
)
Investing Activities:
Additions to property, plant and
equipment
(20.8
)
(27.7
)
(35.2
)
(55.1
)
Proceeds from sale of property, plant and
equipment
0.8
—
41.6
—
Other
11.2
4.5
20.5
15.9
Net cash generated by (used in) investing
activities
(8.8
)
(23.2
)
26.9
(39.2
)
Financing Activities:
Long-term debt repaid
(8.0
)
(83.0
)
(16.0
)
(176.0
)
Long-term debt repurchases
(25.0
)
—
(75.0
)
—
Long-term debt proceeds
—
125.0
—
210.0
Tax withholding payments for vested
equity-based compensation awards
(3.9
)
(3.4
)
(8.9
)
(14.0
)
Other
0.2
0.1
2.1
1.4
Net cash generated by (used in) financing
activities
(36.7
)
38.7
(97.8
)
21.4
Effect of exchange rate changes on cash
and cash equivalents
(0.5
)
(6.3
)
0.2
(4.1
)
Change in cash and cash equivalents
90.8
(85.4
)
20.0
(131.0
)
Cash and cash equivalents at beginning of
period
327.3
314.7
398.1
360.3
Cash and cash equivalents at end of
period
$
418.1
$
229.3
$
418.1
$
229.3
See notes to unaudited condensed
consolidated financial statements included in our Form 10-Q.
CommScope Holding Company,
Inc.
Reconciliation of GAAP
Measures to Non-GAAP Adjusted Measures
(Unaudited -- In millions,
except per share amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Net loss, as reported
$
(100.4
)
$
(61.0
)
$
(97.0
)
$
(200.9
)
Income tax expense (benefit)
8.4
(14.5
)
0.6
16.4
Interest income, as reported
(1.9
)
(0.5
)
(4.4
)
(1.2
)
Interest expense, as reported
168.5
140.1
333.6
276.6
Other income, net, as reported
(2.4
)
(1.0
)
(8.1
)
(1.0
)
Operating income, as reported
$
72.2
$
63.1
$
224.7
$
89.9
Adjustments:
Amortization of purchased intangible
assets
101.4
139.0
227.8
279.7
Restructuring costs, net
35.5
38.5
31.4
50.6
Equity-based compensation
10.7
12.3
24.2
28.9
Transaction, transformation and
integration costs
6.5
14.9
9.1
30.5
Acquisition accounting adjustments
0.5
1.8
1.3
3.6
Patent claims and litigation
settlements
—
1.0
(11.0
)
2.2
Reserve (recovery) for Russian accounts
receivable
(2.0
)
(1.7
)
(2.0
)
3.8
Cyber incident costs
4.1
—
4.1
—
Depreciation
30.6
30.7
61.9
63.7
Total adjustments to operating income
187.3
236.5
346.8
463.0
Non-GAAP adjusted EBITDA
$
259.5
$
299.6
$
571.5
$
552.9
Net loss, as reported
$
(100.4
)
$
(61.0
)
$
(97.0
)
$
(200.9
)
Adjustments:
Total pretax adjustments to adjusted
EBITDA
156.7
205.8
284.9
399.3
Pretax amortization of debt issuance costs
and OID (1)
6.9
6.4
13.8
12.9
Pretax gain on debt transactions (2)
(2.9
)
—
(10.4
)
—
Tax effects of adjustments and other tax
items (3)
(13.0
)
(50.8
)
(55.0
)
(46.4
)
Non-GAAP adjusted net income
$
47.3
$
100.5
$
136.3
$
164.9
GAAP EPS, as reported (4)
$
(0.55
)
$
(0.36
)
$
(0.61
)
$
(1.11
)
Non-GAAP adjusted diluted EPS
(5)
$
0.19
$
0.41
$
0.54
$
0.67
(1) Included in interest expense.
(2) Included in other income, net.
(3) The tax rates applied to adjustments
reflect the tax expense or benefit based on the tax jurisdiction of
the entity generating the adjustment. There are certain items for
which we expect little or no tax effect.
(4) For all periods presented, GAAP EPS
was calculated using net loss attributable to common stockholders
in the numerator, which includes the impact of the Series A
convertible preferred stock dividend.
(5) Diluted shares used in the calculation
of non-GAAP adjusted diluted EPS are 253.1 million and 247.6
million for the three months ended June 30, 2023 and 2022,
respectively, and 252.6 million and 247.5 million for the six
months ended June 30, 2023 and 2022, respectively.
See "Non-GAAP Financial Measures"
above.
CommScope Holding Company,
Inc.
Sales by Region
(Unaudited -- In
millions)
Sales by
Region
% Change
Q2 2023
Q2 2022
YOY
United States
$
1,105.4
$
1,424.3
(22.4
)%
Europe, Middle East and Africa
369.8
378.4
(2.3
)
Asia Pacific
195.0
223.1
(12.6
)
Caribbean and Latin America
128.2
150.4
(14.8
)
Canada
120.0
124.0
(3.2
)
Total net sales
$
1,918.4
$
2,300.2
(16.6
)%
CommScope Holding Company,
Inc.
Segment Information
(Unaudited -- In
millions)
Segment Net
Sales
% Change
Q2 2023
Q2 2022
YOY
CCS
$
698.9
$
986.7
(29.2
)%
NICS
327.6
205.4
59.5
OWN
228.8
390.9
(41.5
)
ANS
333.5
293.3
13.7
Core net sales (1)
1,588.8
1,876.3
(15.3
)
Home
329.6
423.9
(22.2
)
Total net sales
$
1,918.4
$
2,300.2
(16.6
)%
Segment Adjusted
EBITDA (2)
% Change
Q2 2023
Q2 2022
YOY
CCS
$
79.6
$
169.0
(52.9
)%
NICS
74.9
(15.3
)
NM
OWN
41.7
75.3
(44.6
)
ANS
66.3
57.8
14.7
Core adjusted EBITDA (1)
262.5
286.8
(8.5
)
Home
(3.0
)
12.8
(123.4
)
Total segment adjusted EBITDA
$
259.5
$
299.6
(13.4
)%
NM – Not meaningful
(1) “Core” financial measures reflect the
results of the CCS, NICS, OWN and ANS segments, in the aggregate,
and exclude the results of the Home segment.
(2) See "Non-GAAP Financial Measures"
above.
CommScope Holding Company,
Inc.
Reconciliation of GAAP to
Segment Adjusted EBITDA
(Unaudited -- In
millions)
Second Quarter
2023 Segment Adjusted EBITDA Reconciliation
CCS
NICS
OWN
ANS
Home
Total
Operating income (loss), as
reported
$
28.9
$
44.7
$
27.4
$
9.0
$
(37.8
)
$
72.2
Amortization of purchased intangible
assets
18.9
14.3
5.0
37.4
25.8
101.4
Restructuring costs, net
13.2
9.0
3.8
9.3
0.2
35.5
Equity-based compensation
3.4
2.4
1.4
2.5
1.1
10.7
Transaction, transformation and
integration costs
0.4
0.4
0.2
1.7
3.7
6.5
Acquisition accounting adjustments
—
0.3
—
—
0.3
0.5
Recovery of Russian accounts
receivable
(2.0
)
—
—
—
—
(2.0
)
Cyber incident costs
1.7
0.5
0.7
0.7
0.5
4.1
Depreciation
15.1
3.3
3.3
5.6
3.3
30.6
Segment adjusted EBITDA
$
79.6
$
74.9
$
41.7
$
66.3
$
(3.0
)
$
259.5
Segment adjusted EBITDA % of
sales
11.4
%
22.9
%
18.2
%
19.9
%
(0.9
%)
13.5
%
Second Quarter
2022 Segment Adjusted EBITDA Reconciliation
CCS
NICS
OWN
ANS
Home
Total
Operating income (loss), as
reported
$
111.7
$
(43.7
)
$
43.5
$
(25.7
)
$
(22.7
)
$
63.1
Amortization of purchased intangible
assets
27.4
15.2
8.2
62.0
26.2
139.0
Restructuring costs, net
10.3
5.8
17.3
4.8
0.3
38.5
Equity-based compensation
3.0
2.7
1.4
3.2
2.0
12.3
Transaction, transformation and
integration costs
3.5
1.0
1.5
7.4
1.6
14.9
Acquisition accounting adjustments
—
0.5
—
0.8
0.4
1.8
Patent claims and litigation
settlements
—
—
—
—
1.0
1.0
Recovery of Russian accounts
receivable
(1.2
)
(0.3
)
(0.1
)
—
—
(1.7
)
Depreciation
14.3
3.5
3.6
5.4
3.9
30.7
Segment adjusted EBITDA
$
169.0
$
(15.3
)
$
75.3
$
57.8
$
12.8
$
299.6
Segment adjusted EBITDA % of
sales
17.1
%
(7.4
%)
19.3
%
19.7
%
3.0
%
13.0
%
Components may not sum to total due to
rounding.
See "Non-GAAP Financial Measures"
above.
CommScope Holding Company,
Inc.
Adjusted Free Cash
Flow
(Unaudited -- In
millions)
Adjusted Free
Cash Flow
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Cash flow from operations
$
(94.6
)
$
(87.6
)
$
386.8
$
(46.1
)
$
136.8
Capital expenditures
(27.7
)
(23.6
)
(22.6
)
(14.4
)
(20.8
)
Free cash flow
(122.3
)
(111.2
)
364.2
(60.5
)
116.0
Transaction, transformation and
integration costs
13.0
8.7
18.7
1.4
1.7
Restructuring costs, net
18.7
11.5
19.9
19.4
31.1
Adjusted free cash flow
$
(90.6
)
$
(91.0
)
$
402.8
$
(39.7
)
$
148.8
See "Non-GAAP Financial Measures"
above.
CommScope Holding Company,
Inc.
Adjusted Gross Profit and
Adjusted Operating Expense
(Unaudited -- In
millions)
GAAP to Non-GAAP
Adjusted Gross Profit
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Gross profit, as reported
$
683.2
$
736.3
$
748.3
$
691.7
$
617.2
Equity-based compensation
1.6
2.2
2.2
1.7
1.3
Acquisition accounting adjustments
1.8
1.8
1.7
0.8
0.5
Patent claims and litigation
settlements
1.0
0.1
26.2
(11.0
)
—
Adjusted gross profit
$
687.6
$
740.4
$
778.4
$
683.2
$
619.0
Adjusted gross profit as % of
sales
29.9
%
31.1
%
33.6
%
34.1
%
32.3
%
GAAP to Non-GAAP
Adjusted Operating Expense
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Selling, general and administrative, as
reported
$
277.2
$
281.7
$
290.1
$
263.5
$
254.9
Research and development, as
reported
165.4
161.9
159.4
153.4
153.2
Operating expenses
$
442.6
$
443.6
$
449.5
$
416.9
$
408.1
Equity-based compensation
10.7
14.2
13.7
11.8
9.4
Transaction, transformation and
integration costs
14.9
5.9
1.9
2.6
6.5
Recovery for Russian accounts
receivable
(1.7
)
(1.1
)
—
—
(2.0
)
Cyber incident costs
—
—
—
—
4.1
Adjusted operating expense
$
418.7
$
424.6
$
433.9
$
402.5
$
390.1
Adjusted operating expense as % of
sales
18.2
%
17.8
%
18.7
%
20.1
%
20.3
%
Components may not sum to total due to
rounding.
See "Non-GAAP Financial Measures"
above.
CommScope Holding Company,
Inc.
Reconciliation of GAAP
Measures to Non-GAAP Adjusted Measures
(Unaudited -- In
millions)
Core Segment
Adjusted EBITDA
Outlook Range
2023
Core segment operating income
(1)
$
625
$
699
Adjustments:
Amortization of purchased intangible
assets
325
326
Equity-based compensation
46
48
Restructuring costs, net and transaction,
transformation and integration costs
40
60
Acquisition accounting adjustments
1
1
Cyber incident costs
4
6
Recovery of Russian accounts
receivable
(2
)
(2
)
Depreciation
111
112
Total adjustments to core operating income
(1)
525
551
Core segment adjusted EBITDA
$
1,150
$
1,250
Adjusted Free
Cash Flow
Outlook Range
2023
Cash flow from operations
$
200
$
290
Capital expenditures
(70
)
(80
)
Free cash flow
130
210
Cash paid for restructuring, transaction,
transformation and integration costs
120
140
Adjusted free cash flow
$
250
$
350
(1) “Core” financial measures reflect the
results of the CCS, NICS, OWN and ANS segments, in the aggregate,
and exclude the results of the Home segment.
Our actual results may be impacted by
additional events for which information is not currently available,
such as additional restructuring activities, asset impairments,
additional transaction, transformation and integration costs and
other gains or losses related to events that are not currently
known or measurable.
See "Forward-Looking Statements" and
"Non-GAAP Financial Measures" above.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230803903514/en/
Investor Contact: Massimo Disabato, CommScope +1
630-281-3413 Massimo.Disabato@commscope.com
News Media Contact: publicrelations@commscope.com
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