- Net sales increased 5% year-over-year for consolidated
company
- Core CommScope net sales increased 9%
year-over-year*
- Momentum continues to build in Connectivity and Cable
Solutions as net sales increased 26% year-over-year and 18%
quarter-over-quarter
Second Quarter Highlights
- Net sales of $2.300 billion
- Core net sales of $1.876 billion*
- GAAP net loss of $61.0 million
- Non-GAAP adjusted EBITDA of $299.6 million
- Core adjusted EBITDA of $286.8 million*
- Cash flow used in operations of $(94.6) million and non-GAAP
adjusted free cash flow of $(90.6) million
* References to certain supplementary "Core" financial measures
reflect the results of the Connectivity and Cable Solutions;
Outdoor Wireless Networks; Networking, Intelligent Cellular and
Security Solutions; and Access Network Solutions segments, in the
aggregate. Core financial measures exclude the results and
performance of the Home Networks 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, 2022.
Summary of Consolidated
Results
Q2
Q1
Q2
% Change
% Change
2022
2022
2021
Sequential
YOY
(in millions, except per share
amounts)
Net sales
$
2,300.2
$
2,228.6
$
2,185.3
3.2
%
5.3
%
Core net sales (1)
1,876.3
1,732.9
1,728.8
8.3
8.5
GAAP net loss
(61.0
)
(139.9
)
(153.8
)
(56.4
)
(60.3
)
GAAP net loss per share
(0.36
)
(0.75
)
(0.82
)
(52.0
)
(56.1
)
Non-GAAP adjusted EBITDA (2)
299.6
253.3
307.7
18.3
(2.6
)
Core adjusted EBITDA (1)
286.8
230.0
293.1
24.7
(2.1
)
Non-GAAP adjusted net income per diluted
share (2)
0.41
0.26
0.43
57.7
(4.7
)
(1) "Core" financial measures reflect the
results of the Connectivity and Cable Solutions; Outdoor Wireless
Networks; Networking, Intelligent Cellular and Security Solutions;
and Access Network Solutions segments, in the aggregate. Core
financial measures exclude the results of the Home Networks
segment. See the second quarter segment comparison tables below
showing the aggregation of the Core financial measures.
(2) See description of Non-GAAP Financial
Measures and Reconciliation of GAAP Measures to Non-GAAP Adjusted
Measures below.
"I am pleased to share that we delivered Core net sales of $1.88
billion and Core adjusted EBITDA of $287 million for the second
quarter of 2022. As discussed over the last several quarters, we
have taken actions to continue to grow our business and offset
inflationary impacts. Our second quarter results are a step in that
direction, as we have sequentially improved our top-line and
profitability, a trend that we expect to continue. Despite supply
chain and other macroeconomic challenges, with our robust backlog
and solid demand in our key end markets, we believe we are
positioned to deliver a stronger second half," said Chuck Treadway,
President and Chief Executive Officer.
Treadway added, "We continue to make great progress on our
CommScope NEXT initiatives. We are ramping capacity to fuel
top-line growth, while our general manager model and re-segmenting
are helping drive greater focus, accountability and operational
efficiencies in our business. In addition, as part of our
transformation, we are investing heavily in R&D and new product
introductions for the future growth of the Company – with exciting
new technology advancements and strategic partnerships such as our
DOCSIS® 4.0 RMD Node Platform selection with Liberty Global and
Microsoft for our wireless networking products, and developments in
our ONECELL®, NOVUX®, PROPEL™, XGS-PON and MOSAIC™ product lines.
As our CommScope NEXT initiatives begin to drive results and
pricing improvements work through our backlog, we expect to see
improved adjusted EBITDA and cash flow."
"With the continued progress we are making through CommScope
NEXT, we are re-affirming our commitment to full year 2022 Core
adjusted EBITDA between $1.15 - $1.25 billion, as well as our
year-end net leverage target of 6.8x – 7.2x," said Kyle Lorentzen,
Chief Financial Officer. "As we drive our refocused investments in
technology innovation, capacity expansion and operational
efficiency throughout our portfolio, we believe CommScope is well
positioned to deliver on our targets and create significant
incremental shareholder value."
CommScope NEXT
In 2021, CommScope announced a transformation initiative called
CommScope NEXT designed to drive shareholder value through three
pillars: profitable growth, operational efficiency and portfolio
optimization. As a step toward optimizing its portfolio through
CommScope NEXT, as of January 1, 2022, the Company reorganized its
internal management and reporting structure to align its portfolio
of products and solutions more closely with the markets it serves
and bring better performance clarity with its competitive peer set.
As a result, the Company is reporting financial performance for the
2022 year based on the following operating segments: (i)
Connectivity and Cable Solutions, (ii) Outdoor Wireless Networks,
(iii) Networking, Intelligent Cellular and Security Solutions, (iv)
Access Network Solutions and (v) Home Networks. All prior period
amounts have been recast to reflect these operating segment
changes.
Also as a step in the CommScope NEXT transformation plan, in
2021, the Company announced a plan to separate the Home Networks
business via a spin-off transaction. Due to the impact of the
uncertain supply chain environment on the Home Networks business,
the Company delayed its separation plan, but it continues to
analyze the financial results of its "Core" business separately
from Home Networks. As such, in this comparison discussion,
reference is made to certain supplementary Core financial measures,
which reflect the results of the Connectivity and Cable Solutions;
Outdoor Wireless Networks; Networking, Intelligent Cellular and
Security Solutions; and Access Network Solutions segments, in the
aggregate. Core financial measures exclude the results of the Home
Networks segment.
Impacts of Supply Chain Constraints
The negative impacts of COVID-19 on CommScope's financial
performance have receded as the Company is seeing a recovery in
demand for its products over the past year, but this has created
negative indirect consequences such as inflation, shortages in
materials and components and increased logistic costs. Prices for
certain commodities that it uses have experienced significant
volatility as a result of changes in the levels of global demand,
supply disruptions and other factors. As a result, the Company has
seen a significant increase in costs that has negatively impacted
its results of operations. CommScope is also experiencing limited
supply of memory devices, capacitors and silicon chips, which has
increased its costs and has impacted its ability to deliver on a
timely basis due to extended lead times. The Company is trying to
mitigate the increasing component and logistics costs by
implementing higher prices on its products and services. CommScope
is also mitigating certain shortages by purchasing components in
advance and maintaining higher levels of inventory or finding
alternate vendors for some components. The Company believes the
global supply chain challenges and their adverse impact on its
business and financial results will ease in the second half of 2022
but certain shortages are expected to continue for the remainder of
2022 and possibly into 2023.
Second Quarter Results and Comparison
Net sales in the second quarter of 2022 increased 5.3%
year-over-year to $2.30 billion. Core net sales increased 8.5%
year-over-year primarily due to higher net sales in the
Connectivity and Cable Solutions and Outdoor Wireless Networks
segments.
Net loss of $(61.0) million, or $(0.36) per share, in the second
quarter of 2022, decreased 60.3% compared to the prior year
period's net loss of $(153.8) million, or $(0.82) per share.
Non-GAAP adjusted net income for the second quarter of 2022 was
$100.5 million, or $0.41 per share, versus $105.7 million, or $0.43
per share, in the second quarter of 2021.
Non-GAAP adjusted EBITDA decreased 2.6% to $299.6 million in the
second quarter of 2022 compared to the same period last year.
Non-GAAP adjusted EBITDA as a percentage of net sales decreased to
13.0% in the second quarter of 2022 compared to 14.1% in the same
prior year period. Core segment adjusted EBITDA decreased 2.1% to
$286.8 million in the second quarter of 2022 compared to the same
prior year period. Core segment adjusted EBITDA as a percentage of
net sales decreased to 15.3% in the second quarter of 2022 compared
to 17.0% in the same prior year period.
Reconciliations of the reported GAAP results to non-GAAP
adjusted results can be found at https://ir.commscope.com/.
Second Quarter Comparisons
Sales by
Region
% Change
% Change
Q2 2022
Q1 2022
Q2 2021
Sequential
YOY
United States
$
1,424.3
$
1,347.1
$
1,254.2
5.7
%
13.6
%
Europe, Middle East and Africa
378.4
406.4
408.8
(6.9
)
(7.4
)
Asia Pacific
223.1
203.4
244.1
9.7
(8.6
)
Caribbean and Latin America
150.4
162.3
190.3
(7.3
)
(21.0
)
Canada
124.0
109.4
87.9
13.3
41.1
Total net sales
$
2,300.2
$
2,228.6
$
2,185.3
3.2
%
5.3
%
Segment Net
Sales
% Change
% Change
Q2 2022
Q1 2022
Q2 2021
Sequential
YOY
Connectivity and Cable Solutions
$
986.7
$
838.0
$
783.4
17.7
%
26.0
%
Outdoor Wireless Networks
390.9
390.1
360.1
0.2
8.6
Networking, Intelligent Cellular and
Security Solutions
205.4
188.0
223.7
9.3
(8.2
)
Access Network Solutions
293.3
316.8
361.6
(7.4
)
(18.9
)
Core net sales
1,876.3
1,732.9
1,728.8
8.3
8.5
Home Networks
423.9
495.7
456.5
(14.5
)
(7.1
)
Total net sales
$
2,300.2
$
2,228.6
$
2,185.3
3.2
%
5.3
%
Segment Operating
Income (Loss)
% Change
% Change
Q2 2022
Q1 2022
Q2 2021
Sequential
YOY
Connectivity and Cable Solutions
$
111.7
$
37.3
$
5.6
199.5
%
1,894.6
%
Outdoor Wireless Networks
43.5
52.9
63.4
(17.8
)
(31.4
)
Networking, Intelligent Cellular and
Security Solutions
(43.7
)
(43.0
)
(21.7
)
1.6
101.4
Access Network Solutions
(25.7
)
(6.6
)
(12.3
)
289.4
108.9
Core operating income
85.8
40.6
35.0
111.3
145.1
Home Networks
(22.7
)
(13.8
)
(53.4
)
64.5
(57.5
)
%
Total operating income
$
63.1
$
26.8
$
(18.4
)
135.4
%
NM
NM - Not meaningful
Segment Adjusted
EBITDA (See Description of Non-GAAP Financial
Measures)
% Change
% Change
Q2 2022
Q1 2022
Q2 2021
Sequential
YOY
Connectivity and Cable Solutions
$
169.0
$
98.6
$
124.5
71.4
%
35.7
%
Outdoor Wireless Networks
75.3
71.0
79.6
6.1
(5.4
)
Networking, Intelligent Cellular and
Security Solutions
(15.3
)
(13.8
)
4.5
10.9
(440.0
)
Access Network Solutions
57.8
74.2
84.5
(22.1
)
(31.6
)
Core adjusted EBITDA
286.8
230.0
293.1
24.7
(2.1
)
Home Networks
12.8
23.3
14.6
(45.1
)
(12.3
)
Total segment adjusted EBITDA
$
299.6
$
253.3
$
307.7
18.3
%
(2.6
)
%
Connectivity and Cable Solutions
- Net sales of $986.7 million, increased 26.0% from the prior
year period driven by growth in Network Cable and
Connectivity.
Outdoor Wireless Networks
- Net sales of $390.9 million, increased 8.6% from the prior year
period primarily driven by growth in Integrated Solutions.
Networking, Intelligent Cellular and Security
Solutions
- Net sales of $205.4 million, decreased 8.2% from the prior year
period driven by a decline in Ruckus Networks and Intelligent
Cellular Networks.
Access Network Solutions
- Net sales of $293.3 million, decreased 18.9% from the prior
year period primarily driven by declines in CMTS and Access
Technologies.
Home Networks
- Net sales of $423.9 million, decreased 7.1% from the prior year
period primarily driven by declines in Video Solutions, partially
offset by growth in Broadband Home Solutions.
Cash Flow and Balance Sheet
- GAAP cash flow used in operations was $(94.6) million.
- Non-GAAP adjusted free cash flow was $(90.6) million after
adjusting operating cash flow for $27.7 million of additions to
property, plant and equipment, $18.7 million of cash paid for
restructuring costs and $13.0 million of cash paid for transaction,
transformation and integration costs.
- Ended the quarter with $229.3 million in cash and cash
equivalents.
- As of June 30, 2022, the Company had $50.0 million of
outstanding borrowings under its asset-based revolving credit
facility and had availability of $671.1 million, after giving
effect to borrowing base limitations and outstanding letters of
credit. The Company ended the quarter with total liquidity of
approximately $900.4 million.
All product names, trademarks and registered trademarks are
property of their respective owners.
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 2022 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 Connectivity and Cable Solutions, Access Network
Solutions, Networking, Intelligent Cellular and Security Solutions
and Outdoor Wireless Networks segments. They do not include the
results of the Home Networks segment. The Core segments and the
Home Networks 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,
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, risks related to the successful
execution of CommScope NEXT; 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; 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 that
we rely on, 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; our ability to generate
cash to service our indebtedness; the potential separation of the
Home Networks business or any other potential separation,
divestiture or discontinuance of a business or product line,
including uncertainty regarding the timing of the separation,
achieving 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; our dependence on customers’ capital spending on data
and communication systems, which could be negatively impacted by a
regional or global economic downturn, among other factors;
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; 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; the potential impact of higher than normal
inflation; our ability to comply with governmental anti-corruption
laws and regulations and export and import controls and sanctions
worldwide; our ability to compete in international markets due to
export and import controls to which we may be subject; 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 environmental laws; the impact of litigation and similar
regulatory proceedings that we are involved in or may become
involved in, 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; 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 2021
Annual Report 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.
Source: CommScope
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220803006029/en/
Investor Contact: Michael McCloskey, CommScope +1
828-431-9874 Michael.McCloskey@commscope.com
News Media Contact: publicrelations@commscope.com
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