CommScope net sales declined 30% from the prior year to $1.17 billion

CommScope Holding Company, Inc. (NASDAQ: COMM), a global leader in network connectivity solutions, reported results for the quarter ended March 31, 2024.

“As expected, our first quarter was a challenging quarter as we continued to deal with lower demand. On a positive note, we have begun to see early signs of recovery in our Connectivity and Cable Solutions and Outdoor Wireless Networks businesses as order rates increased sequentially in the first quarter for those two businesses. These favorable trends were offset by significantly lower demand for Networking, Intelligent Cellular and Security Solutions and Access Network Systems as customers managed inventory and timing of upgrade cycles. Overall, we continue to be bullish on medium- and long-term recovery in all of our businesses. We continue to manage the levers that we can control, such as customer interface, costs, new product development and capital. We are very focused on supporting our customers and we appreciate their support. We are confident that market conditions will improve and we are well positioned to capture the recovery in all segments,” said Chuck Treadway, President and Chief Executive Officer.

“For the first quarter, CommScope net sales declined 30% from the prior year to $1.17 billion and delivered adjusted EBITDA of $153 million, which was higher than our previously provided guidance range but down 51% from the prior year. Adjusted EPS was a loss of $(0.08) per share. Based on current visibility, we expect the first quarter to be the lowest revenue and adjusted EBITDA quarter of the year. We continue to evaluate capital structure alternatives, including asset sales, to address the upcoming debt maturities. We finished the quarter with significant liquidity of over $900 million,” said Kyle Lorentzen, Chief Financial Officer.

On January 9, 2024, CommScope completed the sale of its Home business to Vantiva SA. As a result, unless otherwise noted, these financial results relate to CommScope’s continuing operations, which include the Company’s remaining four operating segments: Connectivity and Cable Solutions (CCS), Outdoor Wireless Networks (OWN), Networking, Intelligent Cellular and Security Solutions (NICS) and Access Network Solutions (ANS). For all periods presented, amounts have been recast to reflect these changes.

Impacts of Current Economic Conditions

In 2023, macroeconomic factors such as higher interest rates, inflation and concerns about a global economic slow-down softened demand for CommScope’s products, with certain customers reducing purchases as they right-size their inventories and others pausing capital spending. This industry recession has continued to negatively impact the Company’s net sales in all segments for the first quarter of 2024. CommScope does not expect to begin to see a recovery in demand until in the second half of 2024.

In 2023, CommScope began implementing additional cost savings initiatives to improve profitability, and the Company continued to implement further initiatives during the three months ended March 31, 2024. These initiatives should enable the Company to take advantage of the expected recovery in demand in the second half of 2024. If the expected recovery in demand of CommScope’s products does not occur in 2024, the Company’s outlook will be materially impacted.

First Quarter Results and Comparisons

Net sales in the first quarter of 2024 decreased 29.8% year-over-year to $1.168 billion due to lower net sales in the CCS, NICS, OWN and ANS segments. Net sales decreased across all regions in the first quarter of 2024.

Loss from continuing operations of $(262.1) million, or $(1.31) per share, in the first quarter of 2024, decreased compared to the prior year period’s income from continuing operations of $29.8 million, or $0.07 per share. Non-GAAP adjusted net loss for the first quarter of 2024 was $(20.3) million, or $(0.08) per share, versus $86.7 million, or $0.34 per share, in the first quarter of 2023.

Non-GAAP adjusted EBITDA decreased 51.2% to $153.0 million in the first quarter of 2024 compared to $313.7 during the same period last year. Non-GAAP adjusted EBITDA as a percentage of net sales decreased to 13.1% in the first quarter of 2024 compared to 18.8% in the same period last year.