Third Quarter Highlights
- Net sales of $1.600 billion
- Core net sales of $1.350 billion*
- GAAP net loss of $828.7 million, including asset impairments of
$895.1 million
- Non-GAAP adjusted EBITDA of $248.6 million
- Core adjusted EBITDA of $245.5 million*
- Cash flow generated by operations of $138.8 million and
non-GAAP adjusted free cash flow of $181.7 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 third 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 September 30, 2023.
Summary of Consolidated
Results
Q3
Q3
% Change
2023
2022
YOY
(in millions, except per share
amounts)
Net sales
$
1,599.5
$
2,381.4
(32.8
)%
Core net sales (1)
1,350.1
1,990.0
(32.2
)
GAAP net income (loss)
(828.7
)
22.9
(3,718.8
)
GAAP net income (loss) per share
(3.98
)
0.04
(10,050.0
)
Non-GAAP adjusted EBITDA (2)
248.6
347.6
(28.5
)
Core adjusted EBITDA (1)
245.5
352.9
(30.4
)
Non-GAAP adjusted net income per diluted
share (2)
0.13
0.50
(74.0
)
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 third 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.
“In the third quarter, CommScope net sales declined 33% from the
prior year to $1.600 billion and adjusted EBITDA declined 28% to
$249 million. As discussed previously, our CCS and OWN businesses
have been experiencing lower order rates since the beginning of the
year and we have seen no meaningful recovery in the third quarter.
In addition to the challenges we have been experiencing in CCS and
OWN, we have started to see similar adjustments in ANS. We expect
these difficult market conditions to continue over the next few
quarters as customers manage inventories and cash. We continue to
manage what we can control including costs. We are targeting an
additional $100 million cost savings by the end of Q1 2024. Our
cost actions this year will better position the Company when demand
returns to more normalized levels,” said Chuck Treadway, President
and Chief Executive Officer.
“Based on current visibility driven by a weaker demand outlook
for the remainder of 2023, we reduced our Core adjusted EBITDA
guideposts to a range of $1.00 to $1.05 billion. We continued to
de-lever as we repurchased and retired $26 million of our long-term
debt for cash consideration of $17 million bringing the total debt
repurchases to $111 million since the beginning of the year. We
finished the quarter with a net leverage ratio of 6.7x. Liquidity
remained strong at more than $1.29 billion including cash at
quarter end of $519 million,” 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
certain segments during the first three quarters of 2023 and may
continue to negatively impact net sales during the remainder of
2023 and into the first half of 2024. Conversely, in some of
CommScope’s segments, the Company has seen higher demand and
favorable pricing impacts that have partially offset the impact of
lower demand in its other segments. CommScope is also seeing lower
input costs and has proactively implemented cost savings
initiatives that have favorably impacted its profitability in
2023.
Third Quarter Results and Comparisons
Net sales in the third quarter of 2023 decreased 32.8%
year-over-year to $1.600 billion. Core net sales decreased 32.2%
year-over-year due to lower net sales in the CCS, OWN and ANS
segments, partially offset by stronger sales in the NICS segment.
Net sales decreased across all regions in the third quarter of
2023.
Net loss attributable to common stockholders of $844.2 million,
or $(3.98) per share, in the third quarter of 2023, decreased
compared to the prior year period's net income attributable to
common stockholders of $8.0 million, or $0.04 per share. In the
third quarter of 2023, the Company recorded a goodwill impairment
charge of $425.9 million related to the ANS reporting unit in the
ANS segment and an intangible assets impairment charge of $469.2
million related to the Home segment. Asset impairment charges are
not reflected in non-GAAP adjusted results. Non-GAAP adjusted net
income for the third quarter of 2023 was $34.0 million, or $0.13
per share, versus $124.6 million, or $0.50 per share, in the third
quarter of 2022.
Non-GAAP adjusted EBITDA decreased 28.5% to $248.6 million in
the third quarter of 2023 compared to the same period last year.
Non-GAAP adjusted EBITDA as a percentage of net sales increased to
15.5% in the third quarter of 2023 compared to 14.6% in the same
prior year period. Core segment adjusted EBITDA decreased 30.4% to
$245.5 million in the third quarter of 2023 compared to the same
prior year period. Core segment adjusted EBITDA as a percentage of
net sales increased to 18.2% in the third quarter of 2023 compared
to 17.7% in the same prior year period.
Reconciliations of the reported GAAP results to non-GAAP
adjusted results are included below.
Third Quarter Comparisons
Sales by
Region
% Change
Q3 2023
Q3 2022
YOY
United States
$
957.4
$
1,495.1
(36.0
)%
Europe, Middle East and Africa
297.8
396.0
(24.8
)
Asia Pacific
172.2
210.9
(18.3
)
Caribbean and Latin America
74.9
148.6
(49.6
)
Canada
97.2
130.8
(25.7
)
Total net sales
$
1,599.5
$
2,381.4
(32.8
)%
Segment Net
Sales
% Change
Q3 2023
Q3 2022
YOY
CCS
$
632.5
$
1,007.7
(37.2
)%
NICS
289.0
257.9
12.1
OWN
210.3
382.1
(45.0
)
ANS
218.3
342.3
(36.2
)
Core net sales
1,350.1
1,990.0
(32.2
)
Home
249.4
391.4
(36.3
)
Total net sales
$
1,599.5
$
2,381.4
(32.8
)%
Segment Operating
Income (Loss)
% Change
Q3 2023
Q3 2022
YOY
CCS
$
23.6
$
143.2
(83.5
)%
NICS
43.9
1.2
3,558.3
OWN
34.0
66.7
(49.0
)
ANS
(427.1
)
(15.8
)
2,603.2
Core operating income (loss)
(325.6
)
195.3
(266.7
)
Home
(500.2
)
(39.7
)
1,159.9
Total operating income (loss)
$
(825.8
)
$
155.6
(630.7
)%
Segment Adjusted
EBITDA (See "Non-GAAP Financial Measures," below)
% Change
Q3 2023
Q3 2022
YOY
CCS
$
78.7
$
188.2
(58.2
)%
NICS
63.0
24.7
155.1
OWN
45.3
82.2
(44.9
)
ANS
58.5
57.8
1.2
Core adjusted EBITDA
245.5
352.9
(30.4
)
Home
3.1
(5.3
)
NM
Total segment adjusted EBITDA
$
248.6
$
347.6
(28.5
)%
- CCS - Net sales of $632.5 million decreased 37.2% from
the prior year period primarily driven by declines in Network Cable
and Connectivity and Building and Data Center Connectivity.
- NICS - Net sales of $289.0 million increased 12.1% from
the prior year period primarily driven by growth in Ruckus and
Intelligent Cellular Networks.
- OWN - Net sales of $210.3 million decreased 45.0% from
the prior year period primarily driven by declines in Base Station
Antennas and HELIAX product sales.
- ANS - Net sales of $218.3 million decreased 36.2% from
the prior year period primarily driven by declines in Access
Technologies and Converged Network Systems.
- Home - Net sales of $249.4 million decreased 36.3% from
the prior year period driven by declines in Broadband Home
Solutions and Home Media Solutions. As previously announced, on
October 2, 2023, CommScope signed an agreement with Vantiva SA to
divest of its Home segment. The transaction is expected to close in
the first quarter of 2024.
Cash Flow and Balance Sheet
- GAAP cash flow generated by operations was $138.8 million.
- Non-GAAP adjusted free cash flow was $181.7 million after
adjusting operating cash flow for $8.7 million of additions to
property, plant and equipment, $40.1 million of cash paid for
restructuring costs and $11.5 million of cash paid for transaction,
transformation and integration costs.
- The Company ended the quarter with $518.9 million in cash and
cash equivalents.
- As of September 30, 2023, the Company had no outstanding
borrowings under its asset-based revolving credit facility and had
availability of $771.4 million, after giving effect to borrowing
base limitations and outstanding letters of credit. The Company
ended the quarter with total liquidity of approximately $1,290.3
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 third
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 divestiture of the Home segment. 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 divestiture of the Home segment and its effect on
our remaining businesses; the potential separation, divestiture or
discontinuance of another 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 additional 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; the costs 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
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Net sales
$
1,599.5
$
2,381.4
$
5,519.4
$
6,910.2
Cost of sales
1,053.3
1,645.1
3,664.3
4,854.4
Gross profit
546.2
736.3
1,855.1
2,055.8
Operating expenses:
Selling, general and administrative
229.7
281.7
748.1
844.9
Research and development
125.5
161.9
432.1
498.0
Amortization of purchased intangible
assets
101.3
134.6
329.1
414.3
Restructuring costs, net
20.4
2.5
51.8
53.1
Asset impairments
895.1
—
895.1
—
Total operating expenses
1,372.0
580.7
2,456.2
1,810.3
Operating income (loss)
(825.8
)
155.6
(601.1
)
245.5
Other income, net
6.4
5.4
14.5
6.4
Interest expense
(171.3
)
(150.9
)
(504.9
)
(427.5
)
Interest income
3.4
0.6
7.8
1.8
Income (loss) before income taxes
(987.3
)
10.7
(1,083.7
)
(173.8
)
Income tax (expense) benefit
158.6
12.2
158.0
(4.2
)
Net income (loss)
(828.7
)
22.9
(925.7
)
(178.0
)
Series A convertible preferred stock
dividends
(15.5
)
(14.9
)
(45.9
)
(44.1
)
Net income (loss) attributable to common
stockholders
$
(844.2
)
$
8.0
$
(971.6
)
$
(222.1
)
Earnings (loss) per share:
Basic
$
(3.98
)
$
0.04
$
(4.62
)
$
(1.07
)
Diluted (a)
$
(3.98
)
$
0.04
$
(4.62
)
$
(1.07
)
Weighted average shares outstanding:
Basic
211.9
208.2
210.4
207.1
Diluted (a)
211.9
211.3
210.4
207.1
(a) Calculation of diluted income (loss)
per share:
Net income (loss) (basic and diluted)
$
(844.2
)
$
8.0
$
(971.6
)
$
(222.1
)
Weighted average shares (basic)
211.9
208.2
210.4
207.1
Dilutive effect of equity-based awards
—
3.1
—
—
Denominator (diluted)
211.9
211.3
210.4
207.1
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 September 30,
2023
December 31, 2022
Assets
Cash and cash equivalents
$
518.9
$
398.1
Accounts receivable, net of allowance for
doubtful accounts of $66.3 and $82.8, respectively
1,144.5
1,523.6
Inventories, net
1,364.6
1,588.1
Prepaid expenses and other current
assets
186.7
216.4
Total current assets
3,214.7
3,726.2
Property, plant and equipment, net of
accumulated depreciation of $918.6 and $873.5, respectively
539.1
609.6
Goodwill
3,635.7
4,072.4
Other intangible assets, net
1,673.2
2,473.5
Other noncurrent assets
1,002.9
803.7
Total assets
$
10,065.6
$
11,685.4
Liabilities and Stockholders'
Deficit
Accounts payable
$
795.3
$
1,025.5
Accrued and other liabilities
719.2
1,050.0
Current portion of long-term debt
32.0
32.0
Total current liabilities
1,546.5
2,107.5
Long-term debt
9,353.3
9,469.6
Deferred income taxes
105.2
173.4
Other noncurrent liabilities
404.4
380.6
Total liabilities
11,409.4
12,131.1
Commitments and contingencies
Series A convertible preferred stock,
$0.01 par value
1,146.3
1,100.3
Stockholders' deficit:
Preferred stock, $0.01 par value:
Authorized shares: 200,000,000;
Issued and outstanding shares: 1,146,324
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: 211,918,754
and 208,371,426, respectively
2.3
2.2
Additional paid-in capital
2,554.4
2,542.9
Accumulated deficit
(4,427.9
)
(3,502.2
)
Accumulated other comprehensive loss
(317.4
)
(296.3
)
Treasury stock, at cost: 14,345,829 shares
and 12,726,695 shares, respectively
(301.5
)
(292.6
)
Total stockholders' deficit
(2,490.1
)
(1,546.0
)
Total liabilities and stockholders'
deficit
$
10,065.6
$
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
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Operating Activities:
Net income (loss)
$
(828.7
)
$
22.9
$
(925.7
)
$
(178.0
)
Adjustments to reconcile net income (loss)
to net cash generated by (used in) operating activities:
Depreciation and amortization
138.7
172.8
442.2
529.1
Equity-based compensation
11.3
16.4
35.5
45.3
Deferred income taxes
(188.0
)
(49.0
)
(249.9
)
(75.2
)
Asset impairments
895.1
—
895.1
—
Changes in assets and liabilities:
Accounts receivable
200.6
(104.6
)
375.0
(191.0
)
Inventories
82.4
(1.9
)
218.0
(153.3
)
Prepaid expenses and other assets
(3.1
)
(6.8
)
13.2
(4.7
)
Accounts payable and other liabilities
(113.6
)
(126.0
)
(524.8
)
(154.8
)
Other
(55.9
)
(11.4
)
(49.1
)
(14.1
)
Net cash generated by (used in) operating
activities
138.8
(87.6
)
229.5
(196.7
)
Investing Activities:
Additions to property, plant and
equipment
(8.7
)
(23.6
)
(43.9
)
(78.7
)
Proceeds from sale of property, plant and
equipment
0.1
0.1
41.8
0.1
Other
—
0.1
20.4
16.0
Net cash generated by (used in) investing
activities
(8.6
)
(23.4
)
18.3
(62.6
)
Financing Activities:
Long-term debt repaid
(8.0
)
(76.0
)
(24.0
)
(252.0
)
Long-term debt repurchases
(17.1
)
—
(92.1
)
—
Long-term debt proceeds
—
123.0
—
333.0
Dividends paid on Series A convertible
preferred stock
—
(14.9
)
—
(14.9
)
Proceeds from the issuance of common
shares under equity-based compensation plans
—
0.1
—
0.1
Tax withholding payments for vested
equity-based compensation awards
—
(0.1
)
(8.9
)
(14.0
)
Other
—
0.8
2.1
2.2
Net cash generated by (used in) financing
activities
(25.1
)
32.9
(122.9
)
54.4
Effect of exchange rate changes on cash
and cash equivalents
(4.3
)
(5.7
)
(4.1
)
(9.9
)
Change in cash and cash equivalents
100.8
(83.8
)
120.8
(214.8
)
Cash and cash equivalents at beginning of
period
418.1
229.3
398.1
360.3
Cash and cash equivalents at end of
period
$
518.9
$
145.5
$
518.9
$
145.5
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
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Net income (loss), as reported
$
(828.7
)
$
22.9
$
(925.7
)
$
(178.0
)
Income tax expense (benefit)
(158.6
)
(12.2
)
(158.0
)
4.2
Interest income, as reported
(3.4
)
(0.6
)
(7.8
)
(1.8
)
Interest expense, as reported
171.3
150.9
504.9
427.5
Other income, net, as reported
(6.4
)
(5.4
)
(14.5
)
(6.4
)
Operating income (loss), as reported
$
(825.8
)
$
155.6
$
(601.1
)
$
245.5
Adjustments:
Amortization of purchased intangible
assets
101.3
134.6
329.1
414.3
Restructuring costs, net
20.4
2.5
51.8
53.1
Equity-based compensation
11.3
16.4
35.5
45.3
Asset impairments
895.1
—
895.1
—
Transaction, transformation and
integration costs
16.8
5.9
25.9
36.4
Acquisition accounting adjustments
0.6
1.8
1.9
5.4
Patent claims and litigation
settlements
(3.5
)
0.1
(14.5
)
2.3
Reserve (recovery) for Russian accounts
receivable
—
(1.1
)
(2.0
)
2.7
Cyber incident costs
1.7
—
5.8
—
Depreciation
30.7
31.8
92.7
95.5
Total adjustments to operating income
(loss)
1,074.4
192.0
1,421.3
655.0
Non-GAAP adjusted EBITDA
$
248.6
$
347.6
$
820.2
$
900.5
Net income (loss), as reported
$
(828.7
)
$
22.9
$
(925.7
)
$
(178.0
)
Adjustments:
Total pretax adjustments to adjusted
EBITDA
1,043.7
160.2
1,328.6
559.5
Pretax amortization of debt issuance costs
and OID (1)
6.7
6.4
20.5
19.3
Pretax gain on debt transactions (2)
(8.6
)
—
(19.1
)
—
Tax effects of adjustments and other tax
items (3)
(179.1
)
(64.9
)
(234.0
)
(111.3
)
Non-GAAP adjusted net income
$
34.0
$
124.6
$
170.3
$
289.5
GAAP EPS, as reported (4)
$
(3.98
)
$
0.04
$
(4.62
)
$
(1.07
)
Non-GAAP adjusted diluted EPS
(5)
$
0.13
$
0.50
$
0.67
$
1.16
(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 income (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 253.7 million and 250.8
million for the three months ended September 30, 2023 and 2022,
respectively, and 253.0 million and 248.6 million for the nine
months ended September 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
Q3 2023
Q3 2022
YOY
United States
$
957.4
$
1,495.1
(36.0
)%
Europe, Middle East and Africa
297.8
396.0
(24.8
)
Asia Pacific
172.2
210.9
(18.3
)
Caribbean and Latin America
74.9
148.6
(49.6
)
Canada
97.2
130.8
(25.7
)
Total net sales
$
1,599.5
$
2,381.4
(32.8
)%
CommScope Holding Company,
Inc.
Segment Information
(Unaudited -- In
millions)
Segment Net
Sales
% Change
Q3 2023
Q3 2022
YOY
CCS
$
632.5
$
1,007.7
(37.2
)%
NICS
289.0
257.9
12.1
OWN
210.3
382.1
(45.0
)
ANS
218.3
342.3
(36.2
)
Core net sales (1)
1,350.1
1,990.0
(32.2
)
Home
249.4
391.4
(36.3
)
Total net sales
$
1,599.5
$
2,381.4
(32.8
)%
Segment Adjusted
EBITDA (2)
% Change
Q3 2023
Q3 2022
YOY
CCS
$
78.7
$
188.2
(58.2
)%
NICS
63.0
24.7
155.1
OWN
45.3
82.2
(44.9
)
ANS
58.5
57.8
1.2
Core adjusted EBITDA (1)
245.5
352.9
(30.4
)
Home
3.1
(5.3
)
NM
Total segment adjusted EBITDA
$
248.6
$
347.6
(28.5
)%
(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)
Third Quarter
2023 Segment Adjusted EBITDA Reconciliation
CCS
NICS
OWN
ANS
Home
Total
Operating income (loss), as
reported
$
23.6
$
43.9
$
34.0
$
(427.1
)
$
(500.2
)
$
(825.8
)
Amortization of purchased intangible
assets
18.9
14.3
5.0
37.4
25.8
101.3
Restructuring costs (credits), net
16.2
(1.0
)
1.3
2.8
1.1
20.4
Equity-based compensation
3.8
2.4
1.5
2.5
1.1
11.3
Asset impairments
—
—
—
425.9
469.2
895.1
Transaction, transformation and
integration costs
0.1
3.1
—
11.3
2.3
16.8
Acquisition accounting adjustments
—
0.2
—
—
0.3
0.6
Patent claims and litigation
settlements
—
(3.5
)
—
—
—
(3.5
)
Cyber incident costs
0.7
0.2
0.3
0.3
0.2
1.7
Depreciation
15.6
3.3
3.1
5.3
3.4
30.7
Segment adjusted EBITDA
$
78.7
$
63.0
$
45.3
$
58.5
$
3.1
$
248.6
Segment adjusted EBITDA % of
sales
12.4
%
21.8
%
21.5
%
26.8
%
1.2
%
15.5
%
Third Quarter
2022 Segment Adjusted EBITDA Reconciliation
CCS
NICS
OWN
ANS
Home
Total
Operating income (loss), as
reported
$
143.2
$
1.2
$
66.7
$
(15.8
)
$
(39.7
)
$
155.6
Amortization of purchased intangible
assets
24.1
14.7
8.1
61.7
26.0
134.6
Restructuring costs, net
0.7
0.4
1.1
0.2
0.1
2.5
Equity-based compensation
4.0
3.7
1.9
4.3
2.5
16.4
Transaction, transformation and
integration costs
2.2
0.6
0.9
0.9
1.2
5.9
Acquisition accounting adjustments
—
0.5
—
0.8
0.4
1.8
Patent claims and litigation
settlements
0.1
—
—
—
—
0.1
Recovery of Russian accounts
receivable
(1.0
)
—
—
—
—
(1.1
)
Depreciation
14.8
3.6
3.5
5.7
4.2
31.8
Segment adjusted EBITDA
$
188.2
$
24.7
$
82.2
$
57.8
$
(5.3
)
$
347.6
Segment adjusted EBITDA % of
sales
18.7
%
9.6
%
21.5
%
16.9
%
(1.4
%)
14.6
%
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
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Cash flow from operations
$
(87.6
)
$
386.8
$
(46.1
)
$
136.8
$
138.8
Capital expenditures
(23.6
)
(22.6
)
(14.4
)
(20.8
)
(8.7
)
Free cash flow
(111.2
)
364.2
(60.5
)
116.0
130.1
Transaction, transformation and
integration costs
8.7
18.7
1.4
1.7
11.5
Restructuring costs, net
11.5
19.9
19.4
31.1
40.1
Adjusted free cash flow
$
(91.0
)
$
402.8
$
(39.7
)
$
148.8
$
181.7
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
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Gross profit, as reported
$
736.3
$
748.3
$
691.7
$
617.2
$
546.2
Equity-based compensation
2.2
2.2
1.7
1.3
1.2
Acquisition accounting adjustments
1.8
1.7
0.8
0.5
0.6
Patent claims and litigation
settlements
0.1
26.2
(11.0
)
—
(3.5
)
Adjusted gross profit
$
740.4
$
778.4
$
683.2
$
619.0
$
544.5
Adjusted gross profit as % of
sales
31.1
%
33.6
%
34.1
%
32.3
%
34.0
%
GAAP to Non-GAAP
Adjusted Operating Expense
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Selling, general and administrative, as
reported
$
281.7
$
290.1
$
263.5
$
254.9
$
229.7
Research and development, as
reported
161.9
159.4
153.4
153.2
125.5
Operating expenses
$
443.6
$
449.5
$
416.9
$
408.1
$
355.2
Equity-based compensation
14.2
13.7
11.8
9.4
10.1
Transaction, transformation and
integration costs
5.9
1.9
2.6
6.5
16.8
Recovery for Russian accounts
receivable
(1.1
)
—
—
(2.0
)
—
Cyber incident costs
—
—
—
4.1
1.7
Adjusted operating expense
$
424.6
$
433.9
$
402.5
$
390.1
$
326.6
Adjusted operating expense as % of
sales
17.8
%
18.7
%
20.1
%
20.3
%
20.4
%
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)
$
25
$
55
Adjustments:
Amortization of purchased intangible
assets
325
326
Equity-based compensation
43
45
Restructuring costs, net and transaction,
transformation and integration costs
70
85
Asset impairments
426
426
Acquisition accounting adjustments
1
1
Patent claims and litigation
settlements
(4
)
(4
)
Cyber incident costs
6
6
Recovery of Russian accounts
receivable
(2
)
(2
)
Depreciation
110
112
Total adjustments to core operating income
(1)
975
995
Core segment adjusted EBITDA
$
1,000
$
1,050
Adjusted Free
Cash Flow
Outlook Range
2023
Cash flow from operations
$
230
$
270
Capital expenditures
(70
)
(80
)
Free cash flow
160
190
Cash paid for restructuring, transaction,
transformation and integration costs
140
160
Adjusted free cash flow
$
300
$
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/20231109675229/en/
Investor Contact: Massimo Disabato, CommScope +1
630-281-3413 Massimo.Disabato@commscope.com
News Media Contact: publicrelations@commscope.com
CommScope (NASDAQ:COMM)
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CommScope (NASDAQ:COMM)
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