CommScope Reports Fourth Quarter and Full Year 2023 Results
- CommScope reported a 38% decrease in net sales for the fourth quarter of 2023 compared to the previous year.
- The company's adjusted EBITDA for the fourth quarter declined by 49% compared to the prior year.
- CommScope's full-year net sales for 2023 decreased by 23% compared to the previous year.
- The company's adjusted EBITDA for the full year 2023 decreased by 18% compared to the prior year.
- CommScope is targeting $100 million in cost savings in early 2024 to address market challenges and uncertainties.
- CommScope experienced significant declines in net sales and adjusted EBITDA for both the fourth quarter and full year of 2023.
- The company's lack of visibility on the timing of a market recovery led to the decision not to provide updated 2024 annual guidance.
- Lower market demand is expected to impact the first-quarter Core adjusted EBITDA, projected to be in the range of $100 to $125 million.
Insights
The reported financials by CommScope Holding Company, Inc. indicate a substantial decline in net sales and adjusted EBITDA year-over-year, which is a significant concern for investors and stakeholders. The 38% decrease in quarterly net sales and the 23% drop for the full year reflect the company's reduced market demand across all segments. Notably, the GAAP loss from continuing operations has improved by 68% and 28.1% for the quarter and full year, respectively, which could be interpreted as a cost containment effort despite revenue challenges.
However, the non-GAAP adjusted net loss per diluted share turning negative in Q4 from a positive figure in the previous year signals a deteriorating bottom line on an adjusted basis. This points to underlying operational issues that need to be addressed beyond the GAAP figures. The company's acknowledgment of market pressures and inventory adjustments suggests a broader industry trend that could affect competitors similarly.
The divestiture of the Home business is a strategic move that could streamline operations and focus resources on more profitable segments. However, the lack of guidance for 2024 raises questions about future performance and the company's confidence in market recovery. The planned cost savings of $100 million might mitigate some financial strain, but the effectiveness of these measures will be crucial to monitor.
CommScope's report highlights the impact of macroeconomic conditions on the network connectivity solutions industry. The decline in sales across all segments suggests a contraction in market demand, which could be attributed to factors such as inventory adjustments by customers and possibly a shift in technology preferences. The company's anticipation of a market recovery in the second half of 2024 indicates a cyclical downturn rather than a long-term decline.
From a competitive standpoint, CommScope's performance could signal a market-wide slowdown in the network equipment sector. This could affect suppliers, customers and competitors, potentially leading to consolidation or strategic partnerships within the industry. Stakeholders should monitor not only CommScope's recovery but also that of its peers to gauge overall sector health.
Furthermore, the company's decision not to provide 2024 guidance reflects the current uncertainty in global economic conditions, including higher interest rates and inflation. This lack of visibility may increase market volatility and investor caution in the short term. The company's focus on cost savings and capacity investments is a proactive approach, but its success will depend on the timing and strength of the market recovery.
The financial results of CommScope Holding Company, Inc. can be seen as a reflection of broader economic headwinds. The asset impairments totaling over $571 million for the year suggest a revaluation of assets in response to changing market conditions, which could be indicative of a potential overestimation of asset values in prior periods or a strategic shift in business operations.
The company's performance must be contextualized within the current economic climate, characterized by higher interest rates and inflationary pressures. These factors can lead to reduced capital expenditures in the telecommunications sector, directly impacting companies like CommScope. The reported figures could be a bellwether for other firms in the industry facing similar economic challenges.
Long-term implications for stakeholders include the possibility of a prolonged recovery period with limited growth prospects in the near term. The company's efforts to reduce costs and the strategic divestiture of its Home business may be necessary to weather the economic downturn. However, the effectiveness of these strategies in a potentially stagflationary environment remains to be seen.
Fourth Quarter Highlights
-
Net sales of
$1.18 6 billion -
GAAP loss from continuing operations of
$339.0 million $145.4 million -
Non-GAAP adjusted EBITDA of
$190.7 million -
Core segment adjusted EBITDA of
$198.9 million -
Cash flow generated by operations of
$60.4 million $91.5 million
Full Year Highlights
-
Net sales of
$5.78 9 billion -
GAAP loss from continuing operations of
$851.3 million $571.4 million -
Non-GAAP adjusted EBITDA of
$999.0 million -
Core segment adjusted EBITDA of
$1.02 2 billion -
Cash flow generated by operations of
$289.9 million $382.3 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 (ANS) segments, in the aggregate. Core financial measures exclude general corporate costs that were previously allocated to the Home Networks (Home) segment and are now classified as continuing operations, since the costs were not directly attributable to the discontinued operations of the Home segment. See the segment comparison tables below showing the aggregation of the Core financial measures.
Summary of Consolidated Results |
||||||||||||
|
|
Q4 |
|
Q4 |
|
% Change |
||||||
|
|
2023 |
|
2022 |
|
YOY |
||||||
|
|
(in millions, except per share amounts) |
||||||||||
Net sales |
|
$ |
1,185.9 |
|
|
$ |
1,925.5 |
|
|
|
(38.4 |
)% |
GAAP loss from continuing operations |
|
|
(339.0 |
) |
|
|
(1,060.5 |
) |
|
|
(68.0 |
) |
GAAP loss from continuing operations per share |
|
|
(1.67 |
) |
|
|
(5.16 |
) |
|
|
(67.6 |
) |
Non-GAAP adjusted EBITDA |
|
|
190.7 |
|
|
|
375.2 |
|
|
|
(49.2 |
) |
Core segment adjusted EBITDA |
|
|
198.9 |
|
|
|
380.7 |
|
|
|
(47.8 |
) |
Non-GAAP adjusted net income (loss) per diluted share |
|
|
(0.02 |
) |
|
|
0.55 |
|
|
|
(103.6 |
) |
|
|
Full Year |
|
Full Year |
|
% Change |
||||||
|
|
2023 |
|
2022 |
|
YOY |
||||||
|
|
(in millions, except per share amounts) |
||||||||||
Net sales |
|
$ |
5,789.2 |
|
|
$ |
7,524.7 |
|
|
|
(23.1 |
%) |
GAAP loss from continuing operations |
|
|
(851.3 |
) |
|
|
(1,184.7 |
) |
|
|
(28.1 |
) |
GAAP loss from continuing operations per share |
|
|
(4.33 |
) |
|
|
(6.00 |
) |
|
|
(27.8 |
) |
Non-GAAP adjusted EBITDA |
|
|
999.0 |
|
|
|
1,223.4 |
|
|
|
(18.3 |
) |
Core segment adjusted EBITDA |
|
|
1,022.2 |
|
|
|
1,250.4 |
|
|
|
(18.3 |
) |
Non-GAAP adjusted net income per diluted share |
|
|
0.64 |
|
|
|
1.63 |
|
|
|
(60.7 |
) |
“As we closed a challenging year, CommScope net sales declined
“For the fourth quarter, CommScope reported consolidated net sales of
As previously announced, in the fourth quarter of 2023, CommScope entered into an agreement with Vantiva SA to divest of its Home business. As a result, unless otherwise noted, these financial results relate to CommScope’s continuing operations, which include the Company’s remaining four operating segments: CCS, OWN, NICS and ANS. For all periods presented, amounts have been recast to reflect these changes. The divestiture of Home closed on January 9, 2024.
Impacts of Current Economic Conditions
In 2023, macroeconomic factors such as higher interest rates and concerns about continued inflation and a global economic slow-down softened demand for CommScope’s products, with certain customers reducing purchases as they right-sized their inventories and others pausing capital spending. This negatively impacted net sales in the Company's CCS, OWN and ANS segments in 2023 and may continue to have a material negative impact on net sales into at least the first half of 2024. Conversely, in the Company's NICS segment, CommScope saw higher demand and favorable pricing impacts that partially offset the impact of lower demand in its other segments for the full year 2023. However, NICS segment net sales were down in the fourth quarter of 2023 as the Company saw order rates decline as channel partners paused to digest inventory.
CommScope saw lower input costs across most of its segments as inflation settled during the year. The Company proactively implemented cost savings initiatives that favorably impacted its profitability in 2023 and should enable CommScope to take advantage of the expected recovery in demand in the second half of 2024.
Fourth Quarter Results and Comparisons
Net sales in the fourth quarter of 2023 decreased
Loss from continuing operations of
Non-GAAP adjusted EBITDA decreased
Core segment adjusted EBITDA decreased
Reconciliations of the reported GAAP results to non-GAAP adjusted results are included below.
Fourth Quarter Comparisons
Sales by Region |
||||||||||
|
|
|
|
% Change |
||||||
|
|
Q4 2023 |
|
Q4 2022 |
|
YOY |
||||
|
|
$ |
740.2 |
|
$ |
1,316.6 |
|
|
(43.8 |
)% |
|
|
|
192.1 |
|
|
302.4 |
|
|
(36.5 |
) |
|
|
|
159.1 |
|
|
173.7 |
|
|
(8.4 |
) |
|
|
|
65.6 |
|
|
86.1 |
|
|
(23.8 |
) |
|
|
|
28.9 |
|
|
46.7 |
|
|
(38.1 |
) |
Total net sales |
|
$ |
1,185.9 |
|
$ |
1,925.5 |
|
|
(38.4 |
)% |
Segment Net Sales |
||||||||||
|
|
|
|
|
|
% Change |
||||
|
|
Q4 2023 |
|
Q4 2022 |
|
YOY |
||||
CCS |
|
$ |
555.8 |
|
$ |
957.1 |
|
|
(41.9 |
)% |
NICS |
|
|
216.7 |
|
|
288.5 |
|
|
(24.9 |
) |
OWN |
|
|
182.5 |
|
|
304.8 |
|
|
(40.1 |
) |
ANS |
|
|
230.9 |
|
|
375.1 |
|
|
(38.4 |
) |
Total net sales |
|
$ |
1,185.9 |
|
$ |
1,925.5 |
|
|
(38.4 |
)% |
Operating Income (Loss) |
||||||||||||
|
|
|
|
|
|
% Change |
||||||
|
|
Q4 2023 |
|
Q4 2022 |
|
YOY |
||||||
CCS |
|
$ |
(54.7 |
) |
|
$ |
146.1 |
|
|
|
(137.4 |
)% |
NICS |
|
|
3.5 |
|
|
|
34.3 |
|
|
|
(89.8 |
) |
OWN |
|
|
19.9 |
|
|
|
25.9 |
|
|
|
(23.2 |
) |
ANS |
|
|
(22.5 |
) |
|
|
(1,101.5 |
) |
|
|
(98.0 |
) |
Core segment operating loss |
|
|
(53.8 |
) |
|
|
(895.2 |
) |
|
|
(94.0 |
) |
Corporate and other |
|
|
(8.3 |
) |
|
|
(7.6 |
) |
|
|
9.2 |
|
Total operating loss |
|
$ |
(62.1 |
) |
|
$ |
(902.8 |
) |
|
|
(93.1 |
)% |
Segment Adjusted EBITDA (See “Non-GAAP Financial Measures,” below) |
||||||||||||
|
|
|
|
|
|
% Change |
||||||
|
|
Q4 2023 |
|
Q4 2022 |
|
YOY |
||||||
CCS |
|
$ |
83.6 |
|
|
$ |
187.9 |
|
|
|
(55.5 |
)% |
NICS |
|
|
29.3 |
|
|
|
56.3 |
|
|
|
(48.0 |
) |
OWN |
|
|
31.5 |
|
|
|
41.2 |
|
|
|
(23.5 |
) |
ANS |
|
|
54.5 |
|
|
|
95.3 |
|
|
|
(42.8 |
) |
Core segment adjusted EBITDA |
|
|
198.9 |
|
|
|
380.7 |
|
|
|
(47.8 |
) |
Corporate and other |
|
|
(8.2 |
) |
|
|
(5.5 |
) |
|
|
49.1 |
|
Total segment adjusted EBITDA |
|
$ |
190.7 |
|
|
$ |
375.2 |
|
|
|
(49.2 |
)% |
-
CCS - Net sales of
$555.8 million 41.9% from the prior year period primarily driven by declines in Network Cable and Connectivity and Building and Data Center Connectivity. -
NICS - Net sales of
$216.7 million 24.9% from the prior year period primarily driven by declines in Ruckus and Intelligent Cellular Networks. -
OWN - Net sales of
$182.5 million 40.1% from the prior year period primarily driven by declines in Base Station Antennas and HELIAX product sales. -
ANS - Net sales of
$230.9 million 38.4% from the prior year period driven by declines in Access Technologies and Converged Network Solutions.
Full Year Results and Comparison
Net sales in 2023 decreased
In 2023, loss from continuing operations of
Non-GAAP adjusted EBITDA decreased
Reconciliations of the reported GAAP results to non-GAAP adjusted results are included below.
Cash Flow and Balance Sheet
-
GAAP cash flow generated by operations in 2023 was
$289.9 million -
Non-GAAP adjusted free cash flow in 2023 was
$382.3 million $53.3 million $117.7 million $28.0 million -
The Company ended the year with
$543.8 million -
As of December 31, 2023, the Company had no outstanding borrowings under its asset-based revolving credit facility and had availability of
$688.0 million $1,231.8 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 fourth quarter and full year 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. 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
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 managed and reported by CommScope as of December 31, 2023. 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
View source version on businesswire.com: https://www.businesswire.com/news/home/20240229258894/en/
Investor Contact:
Massimo Disabato, CommScope
+1 630-281-3413
Massimo.Disabato@commscope.com
News Media Contact:
publicrelations@commscope.com
Source: CommScope Holding Company, Inc.
FAQ
What were CommScope's fourth-quarter net sales for 2023?
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What was the percentage decrease in CommScope's full-year net sales for 2023?
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