CommScope leans on connectivity and cable solutions for revenue growth

“We are continuing to navigate our businesses through varying market conditions,” said Treadway. “For our core businesses, we believe we are well positioned to take advantage of the demand rebound with ample capacity and the right product offerings. We will continue to control what we can, including supporting our customers as they navigate through their requirements.”

In the third quarter, core CommScope, which consists of Connectivity and Cable Solutions (CCS), Access Network Solutions (ANS), and Networking, Intelligent Cellular & Security Solutions (NICS), delivered net sales of $1.08 billion, up 3% year-over-year.

Treadway attributed the growth to strength in the CSS segment, which was somewhat offset by weakness in ANS and NICS.

“I’m pleased with our third quarter performance as we sequentially improved revenue and adjusted EBITDA from the second quarter as a result of the initial recovery of our core NICS segment,” said Treadway.

Mixed business performances

Executive vice president and CFO Kyle Lorentzen reported that core CommScope, excluding the outdoor wireless networks (OWN) and distributed antenna systems (DAS) businesses, had an adjusted EBITDA of $220 million for the third quarter, an increase of 25% year over year.

CommScope’s OWN and DAS segments, which have been sold to Amphenol in a transaction expected to close in the first quarter of 2025, had combined revenues of $332 million in the third quarter, a year-over-year increase of 12%.

Including OWN and DOS, CommScope reported net sales of $1.4 billion, a 5% year-over-year increase, and adjusted EBITDA of $308 million, a 27% increase year over year. The core CommScope backlog ended the quarter at $882 million, down sequentially.

“In all of our businesses, we are back to normalized backlog levels with short lead times,” said Lorentzen.

For CCS, net sales were $737 million, up 17% from the prior year and up 1% sequentially. Adjusted EBITDA was $174 million, up 115% from the prior year.

“Although we expect CCS adjusted EBITDA as a percentage of revenue to remain strong, we would not expect it to remain at this level for the fourth quarter,” advised Lorentzen. “The CCS revenue increase is primarily being driven by the enterprise business, particularly hyperscale and cloud data centers.”

CommScope believes that the fourth quarter will likely bring slightly improved sequential revenue and flat EBITDA for CSS.

“We are continuing to see very strong demand from the hyperscale and cloud data center business as the industry’s need for bandwidth and data center capacity is increasing,” said Treadway. “We continue to invest in capacity to meet that demand. During the third quarter, we approved an additional capacity expansion project that will support demand into 2025. The outlook is very strong, with our customers signaling robust growth in data centers over the next several years.”

CommScope also delivered year-over-year growth on the broadband side of CCS.

“Since the beginning of last year, we have seen continued improvement in customer inventory levels,” said Treadway. “However, demand remains low relative to 2021 and 2022. Customers are continuing to assess their upgrade plans, including evaluating the impact of BEAD and other federal funding programs on their builds BEAD.”

NICS net sales were $157 million, down 22% year over year but up 19% quarter over quarter. Adjusted EBITDA was $28 million, decreasing 29% from the prior year, primarily driven by the decline in RUCKUS revenue, according to Lorentzen.

“We continue to drive our vertical market strategies and RUCKUS initiatives, including RUCKUS Edge and WiFi 7 initiatives,” said Lorentzen. “In addition, we continue to shift more of our business to subscription. With the new products and vertical market focus, we are well positioned to take market share in the medium and long term.”

ANS net sales were $188 million, down 15% from the prior year; adjusted EBITDA was $19 million, down 67% from the prior year.

“The ANS market continues to be challenging as customers deal with excess inventory and delayed upgrade cycles,” said Lorentzen. “We expect to see an increase in both revenue and EBITDA in the fourth quarter versus the third quarter.”

Treadway sees a bright future for the ANS segment, and reported that the company’s ANS products, which include virtual CMTS, nodes, amplifiers, and RPD and RMD modules, have positioned the company to take advantage of the latest DOCSIS upgrade cycle.

“In September at the SCTE Tech Expo, we showcased our entire suite of products and solutions that help customers upgrade their networks in the most agile ways possible,” said Treadway. “We demonstrated DOCSIS 3.1E that allows customers with an existing installed base of Casa, our ARRIS E6000 CMTS, to deliver multi-gigabit speeds with a simple software upgrade and a new CPE. We also highlighted our newest development, a unified DOCSIS 4.0 solution that can enable FDX or ESD from the same hardware. These new solutions are welcomed by our customers at the show because it provided maximum flexibility for their upgrade cycle.”