Uncertainty continues to impact CommScope’s core business

“Our second quarter core business performance was mixed,” said Treadway, “with strength in CCS and continued weakness in ANS and NICS.”

Broadband in transition

Treadway reported that the company’s broadband business saw order improvements quarter-over-quarter but is facing lower demand than in 2021 and 2022.

“Customers continue to assess their upgrades,” he said, “including evaluating the impact of BEAD and other federal funding programs on their build plans. Although we remain bullish on broadband, a level of uncertainty remains on the timing of a true demand recovery and the timing of BEAD.”

According to Treadway, CommScope is well prepared for recovery and BEAD. He said the company has ample capacity to meet high demands, in addition to a full suite of BABA-compliant products.

CommScope’s reported net sales of $1.4 billion represented a 13% year-over-year decrease, and the EBITDA of $302 million an increase of 20%.

CCS net sales were $728 million, an increase of 5% year-over-year.

“The CCS revenue increase is being driven by the building and data center business,” Lorentzen explained, “particularly the hyperscale and cloud business.”

ANS net sales were $193 million, a 43% year-over-year decrease.

“The ANS market continues to be challenging as customers deal with excess inventory and delayed upgrade cycles,” said Lorentzen. “Although we expect to see a stronger second half of the year, this comes off a historically low first half of 2024.”

Core NICS net sales were $132 million, decreasing 44% year-over-year, which Lorentzen attributed to a decline in RUCKUS revenue and inventory write-offs.

“As expected, the overhang from channel inventory lasted through the first half of 2024,” he said. “Toward the end of the second quarter, we saw a normalization of inventory that will support improved sequential third quarter 2024 revenues. We continue to drive our RUCKUS One and Wi-Fi 7 initiatives. With these new products and vertical market focus, we are well positioned to take market share in the medium and long term.”

Lorentzen also touched on the acquisition of cable business assets from Casa Systems. He reported the price of the acquisition as $45 million, which contributed to a cash balance decrease of $11 million for the quarter.

Treadway said that he is generally pleased with the quarter’s results and the strength of the CCS segment, though he acknowledged the uncertainty that continues to impact the other segments of CommScope’s core business.

“Although off of a low base, we would expect to see continued sequential improvement in our core business in the second half of 2024,” he said. “I’m encouraged by our focus on items that we control, including new products, customer support, and profitability. This focus positions us well for medium and long-term growth.”