CommScope Reports Fourth Quarter and Full Year 2022 Results

February 23, 2023 HICKORY, NC

Fourth Quarter Highlights

  • Net sales of $2.318 billion
  • Core net sales of $1.926 billion*
  • GAAP net loss of $1.109 billion
  • Non-GAAP adjusted EBITDA of $376.2 million
  • Core adjusted EBITDA of $380.7 million*
  • Cash flow generated by operations of $386.8 million and non-GAAP adjusted free cash flow of $402.8 million

Full Year Highlights

  • Net sales of $9.228 billion
  • Core net sales of $7.525 billion*
  • GAAP net loss of $1.287 billion
  • Non-GAAP adjusted EBITDA of $1.277 billion
  • Core adjusted EBITDA of $1.250 billion*
  • Cash flow generated by operations of $190.0 million and non-GAAP adjusted free cash flow of $197.5 million

HICKORY, NC, February 23, 2023 — CommScope Holding Company, Inc. (NASDAQ: COMM), a global leader in network connectivity solutions, today reported results for the quarter and year ended December 31, 2022.

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“I am pleased to share that we delivered Core net sales of $7.52 billion and Core adjusted EBITDA of $1.25 billion for the full year 2022 – meeting the high-end of our 2022 CommScope NEXT target. Our fourth quarter results demonstrated strong execution throughout the company, growing Core net sales 10% from the prior year period and adjusted EBITDA 50% to $381 million – a new high for Core CommScope. Our record fourth quarter performance is a testament to our continued execution to recover inflationary pressures through pricing initiatives in the back half of the year, in addition to the ramping contributions of our CommScope NEXT transformation initiatives across our core portfolio. Specifically, we view the substantial growth contributed by our CCS and NICS segments as the engines of CommScope's future growth,” said Chuck Treadway, President and Chief Executive Officer.

Treadway continued, “Our ability to adapt to significant inflation and a challenging supply chain helped restore Core CommScope margins to be more in-line with historical levels and in particular, generated $364 million in free cash flow during the fourth quarter. These results drove a reduction in net leverage to 6.9x, nearly a full turn of improvement from where we began the year and towards the lower end of our targeted range. As we drive our initiatives forward, we believe CommScope is well-positioned to continue delivering on our targets and create significant incremental shareholder value.”

“Our 2022 performance is a result of strong execution across the entire CommScope team, who continue to deliver on our CommScope NEXT transformation plans. Looking forward, while we continue to see some signs of broader macro-related uncertainty and recessionary risk, we believe our CommScope NEXT actions have enabled the Company to maintain the expectation to deliver Core adjusted EBITDA within the range of $1.35–$1.5 billion for the full year 2023 and continue our trajectory towards significantly deleveraging the company,” said Kyle Lorentzen, Chief Financial Officer.

CommScope NEXT

In 2021, CommScope announced a transformation initiative called CommScope NEXT designed to drive shareholder value through three pillars: profitable growth, operational efficiency and portfolio optimization. As a step toward optimizing its portfolio through CommScope NEXT, as of January 1, 2022, the Company reorganized its internal management and reporting structure to align its portfolio of products and solutions more closely with the markets it serves and provide better performance comparability with its competitive peer set across its businesses. As a result, the Company is now reporting financial performance based on the following operating segments: (i) Connectivity and Cable Solutions (CCS), (ii) Networking, Intelligent Cellular and Security Solutions (NICS), (iii) Outdoor Wireless Networks (OWN), (iv) Access Network Solutions (ANS) and (v) Home Networks (Home). All prior period amounts have been recast to reflect these operating segment changes.

Also as a step in the CommScope NEXT transformation plan, in 2021, the Company announced a plan to separate the Home Networks business. Due to the impact of the uncertain supply chain environment, capital spending patterns of customers and other macroeconomic factors related to the Home Networks business, the Company delayed its separation plan, but it continues to analyze the financial results of its "Core" business separately from Home. As such, in this comparison discussion, reference is made to certain supplementary Core financial measures, which reflect the results of the CCS, NICS, OWN and ANS segments, in the aggregate, and exclude the results of the Home segment.

Impacts of Supply Chain Constraints

The negative impacts of COVID-19 on CommScope's financial performance have receded as the Company has seen a recovery in demand for its products over the past year, but this has created negative indirect consequences such as inflation, shortages in materials and components and increased logistics costs. Prices for certain commodities and other raw materials that CommScope uses have experienced significant volatility as a result of changes in the levels of global demand, supply disruptions and other factors. As a result, the Company has seen a significant increase in costs that has negatively impacted its results of operations. CommScope is also experiencing limited supply of memory devices, capacitors and silicon chips, which has increased its costs and has impacted its ability to deliver products on a timely basis due to extended lead times. The Company has mitigated some of its increased component and logistics costs by implementing higher prices on its products and services. CommScope is also mitigating certain shortages by purchasing components in advance and maintaining higher levels of inventory, finding alternate vendors for some components or in certain cases, product redesign. The Company believes the global supply chain challenges and their adverse impact on its business and financial results will continue to improve in 2023 but certain shortages could continue throughout 2023. CommScope also believes certain macroeconomic pressures in the United States and the global economy, such as rising interest rates, energy prices and customer concern about an economic slow-down, could impact the timing and amount of capital spending by its customers in 2023 and could negatively impact its results of operations.

Fourth Quarter Results and Comparisons

Net sales in the fourth quarter of 2022 increased 4.2% year-over-year to $2.32 billion. Core net sales increased 10.2% year-over-year primarily due to higher net sales in the NICS, CCS and ANS segments.

Net loss of $(1.11) billion, or $(5.39) per share, in the fourth quarter of 2022, increased compared to the prior year period's net loss of $(87.1) million, or $(0.50) per share. The Company recorded a goodwill impairment charge of $1.12 billion in the fourth quarter of 2022 related to the ANS reporting unit in the ANS segment. Goodwill impairment charges are not reflected in non-GAAP adjusted results. Non-GAAP adjusted net income for the fourth quarter of 2022 increased to $123.3 million, or $0.49 per share, versus $77.5 million, or $0.31 per share, in the fourth quarter of 2021.

Non-GAAP adjusted EBITDA increased 44.4% to $376.2 million in the fourth quarter of 2022 compared to the same period last year. Non-GAAP adjusted EBITDA as a percentage of net sales increased to 16.2% in the fourth quarter of 2022 compared to 11.7% in the same prior year period. Core segment adjusted EBITDA increased 50.1% to $380.7 million in the fourth quarter of 2022 compared to the same prior year period. Core segment adjusted EBITDA as a percentage of net sales increased to 19.8% in the fourth quarter of 2022 compared to 14.5% in the same prior year period.

The supplemental schedules below include reconciliations of the reported GAAP results to non-GAAP adjusted results (in millions):

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  • CCS - Net sales of $957.1 million increased 18.8% from the prior year period primarily driven by growth in Network Cable and Connectivity.

  • NICS - Net sales of $288.5 million increased 20.3% from the prior year period primarily driven by growth in Ruckus Networks.

  • OWN - Net sales of $304.8 million decreased 18.8% from the prior year period primarily driven by declines in Base Station Antennas and HELIAX products.

  • ANS - Net sales of $375.1 million increased 15.0% from the prior year period primarily driven by growth in Access Technologies.

  • Home - Net sales of $392.4 million decreased 17.7% from the prior year period primarily driven by declines in both Broadband Home Solutions and Home Media Solutions.

Full Year Results and Comparison

Net sales in 2022 increased 7.5% year-over-year to $9.23 billion. Core net sales increased 11.7% year-over-year primarily due to higher net sales in the CCS, NICS and OWN segments.

Net loss of $(1.29) billion, or $(6.49) per share, in 2022, increased compared to the prior year net loss of $(462.6) million, or $(2.55) per share. The Company recorded a goodwill impairment charge of $1.12 billion in 2022 related to the ANS reporting unit in the ANS segment. Goodwill impairment charges are not reflected in non-GAAP adjusted results. Non-GAAP adjusted net income for 2022 increased to $412.8 million, or $1.66 per share, versus $343.7 million, or $1.39 per share, in 2021.

Non-GAAP adjusted EBITDA increased 14.3% to $1.28 billion in 2022 compared to the prior year. Non-GAAP adjusted EBITDA as a percentage of net sales increased to 13.8% in 2022 compared to 13.0% in 2021. Core segment adjusted EBITDA increased 14.6% to $1.25 billion in 2022 compared to the prior year. Core segment adjusted EBITDA as a percentage of net sales increased to 16.6% in 2022 compared to 16.2% in the prior year.

Reconciliations of the reported GAAP results to non-GAAP adjusted results can be found at https://ir.commscope.com/.

Cash Flow and Balance Sheet

  • GAAP cash flow generated by operations was $190.0 million.
  • Non-GAAP adjusted free cash flow was $197.5 million after adjusting operating cash flow for $101.3 million of additions to property, plant and equipment, $58.1 million of cash paid for restructuring costs and $50.7 million of cash paid for transaction, transformation and integration costs.
  • Ended the year with $398.1 million in cash and cash equivalents.
  • As of December 31, 2022, the Company had no outstanding borrowings under its asset-based revolving credit facility and had availability of $908.8 million, after giving effect to borrowing base limitations and outstanding letters of credit. The Company ended the year with total liquidity of approximately $1,306.9 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 2022 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 separation of the Home Networks business. 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.

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Investor Contact:
Michael McCloskey, CommScope
+1 828-431-9874
Michael.McCloskey@commscope.com

News Media Contact:
publicrelations@commscope.com

Source: CommScope