CommScope Holding (COMM) 8 Aug 192019 Q2 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the CommScope Second Quarter 2019 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Kevin Powers, CommScope's Vice President of Investor Relations. ahead. go Please

Executive thank CommScope’s and the joining today Officer. Alex us are Morgan CFO; Good Chief Kurk, quarter you XXXX discuss Technology Pease, CEO; and second Edwards, on President results. to and Eddie and morning President for Vice With call me

You on Investor can that website. Relations review the this slides find accompany our

results Please of Please based on statements our note contain our and filings, the will business forward-looking which that materially. affect some uncertainties principal today of performance. may actual SEC recent risks future current see that our view differ future comments identify our could and

are Before I earnings materials. in housekeeping will few Today this turn a we call which the discuss certain Alex, non-GAAP described just to or review. to morning's items adjusted over measures, financial

financial measures website. on posted other be to results. and materials are our today's will associated our earnings our contained discussion of adjusted Reconciliations non-GAAP in and All during references disclosures

all XXXX reflecting quarter In to classification Xst addition for the references second changes days for Xrd, will presentation. ARRIS to results before. quarter results within the historical second April April include quarter rate align note the Also our results comparisons acquisition calendar XXXX results before described CommScope's three the include as pro of the ARRIS forma, data to of certain

All quarterly growth unless rate described during today's presentation basis otherwise are on noted. a year-over-year

quarter sales reduced $XX.X excluding second net million purchase XXXX our net reported our that to sales. accounting revenue references adjustment all Finally, deferred

Vice Pease. and Alex? I'll now call our Financial Chief turn the Alex Officer to President over Executive

third overview management comments financial remarks a morning. our quarter, today. Eddie year, I'll everybody us with this we This outlook quarter change some including and business and the discuss thanks announced give then Kevin Thanks, the the and will morning on that for for the joining from begin

open we'll for questions. remarks up the call Eddie's Following

EBITDA EPS from Beginning were net expectation. on and above results our expectations adjusted pleased this adjusted morning to with X, sales our slide line that we’re announce in

we as challenging continue execution environment. fund reflected results quarter operating a to second Our navigate

X. to Moving slide

the quarter includes which declined Second $X.XX primarily exchange. Pro billion, from of billion. a ARRIS acquisition, to which the benefit $X.XX sales impact X% increased sales foreign contributed unfavorable billion, net net $X.XX XX% to driven by forma

with sales industry North in remaining American the throughout the have reduced XX% experiencing quarter about performance sales regions. the of result significantly The across was geographic been weakness others cable and which the year. spending, decreased the in primarily net the course of we operators

$X.XX billion orders Consolidated ratio providing of were for quarter X.XX. the book-to-bill

Pro EBITDA adjusted sales. second XX% $XXX forma the million to to $XX.X XX.X% increased or XX% quarter EBITDA XX.X% declined of For adjusted million of sales. or

The adjusted top EBITDA partially results were well lower lower commodity licenses. and primarily softness were to We with this & expenses. operating volume particularly pricing CMTS software Network line as favorable able driven raw material by in as Cloud, offset

year discuss cost that will earlier later, commitments As year. the we for savings in cracking synergy we made well actions plan are ahead of and the the than

expense of as P&L, Finishing amortization was expense well interest up $XXX.X interest $X.X of debt the net the booked million issuance was excluding as related $XXX.X OID costs and acquisition million million million. interest $XX.X of

rate The in of result XX% was expected lower XX.X% quarter effective XX%. year adjusted to a our was full favorability quarter the the tax the estimated versus rate second in range The tax of assumption.

$X.XX compared as per in the million XX% First benefits quarter per net the share or diluted to was quarter. income adjusted share. $XXX net million tax $XXX recognized tax in diluted quarter adjusted was approximately or rate Adjusted additional of we $X.XX income

ARRIS $X resulted weighted XX.X help quarter outstanding. shares in million incremental our included diluted acquisition. assumed fund billion to resulting in XXXX of This the share reminder count preferred the conversion second stock is a the the average out As call from investment an

investment billion be will impact the $X equity conversion by divided Moving forward, quarter $XX.XX. full the million the XX.X price or shares

Now segment impact results Solutions excluding first discuss decreased North for followed Solutions. for moving Connectivity exchange, X%. regions. foreign Connectivity quarter and the segment remaining began of our unfavorable sales declined Mobility and million, geographic results, to in I’ll $XXX the sales In sales by six slide about decreased America, on to the X% X% year-over-year weakness

of negatively expected, America. certain current business, spending softness As in North by operators, the cable were driven results from in impacted the the cable network, by and particularly connectivity capital trend lower

in In both Europe sales fiber East. Enterprise and addition, Middle in and copper the primarily declined markets,

growing the business fiber momentum, soft Enterprise in on the our growing to XX% data our business our focus continues was in quarter. strategic cloud quarter, center While nearly gain and hyperscale

Today, in have footprint a top meaningful multi-tenant significant in both have that centers. and accounts hyperscale business cloud growing five we four data the of and

expect sales in continue we competitive accelerate the and we move and momentum to We year our to as throughout this advantages. capitalize

with Specifically, chain supply highly these advantages global a hyperscale capability include demand footprint world. efficient the in anywhere meet in the manufacturing to

was acquisition. key our from which a capabilities Cable quick-turn customized Secondly, benefit solutions for Exchange

the Connectivity Solutions finally industry-leading of the channel delivering distribution high in high-fiber-count and free-terminated low-cost and service a Thirdly, our market. pace requirements and on partners network fast

performance which pleased lower cost say pressure and about continued the addition in lower were driven $XXX at result to EBITDA and adjusted the Turning adjusted million, successfully operating was material we're while year-over-year pricing profitability, mix, by stable favorable that to volume volume decline. offset margins topline expenses XX% to down of XX%. The to EBITDA decline, was margin

sales and Solutions. to Moving on expectations to for increased Mobility second $XXX our exceeded million. the X% quarter Segment

I'll and while unfavorable due impact X%, the business third sales of in our the in of note be the including quarter what to increased Mobility Excluding typically seasonal that the to towards weighted deployments similar higher XXXX, American more sales nature results to in quarters. exchange, XXXX. foreign FirstNet in we spending the sales North expect saw second operator of we cadence the second

Asia-Pacific in North the region perspective, in offset from continue East by geographic as record our led steel in led accessories. was by significant take of steps accessories benefited the and we $XX Africa, macro proactively businesses. to and and From quarter and XX% exit in X% tower increasing nearly sales Middle in with results growth decline cell manage quarter the business lower-margin to our a profitability metro by Growth growth and America million partially a over a

accelerating In their to basis Operators densify expect ability margins this quarter, in of by the momentum improve to of cost point adjusted further and the XXX higher EBITDA relocations protect to or last manage XG the reduction and sales driven sales year, initiatives costs continue. the a we this other for spend of XX% manufacturing network Results in business. over were footprint volumes, $XXX and LTE to demonstrating team XX% and profitability. combination preparation XG nearly are million points movement increased to

Turning to acquired ARRIS slide for X segment performance.

EBITDA premise quarter segment, of or customer equipment million the $XX second $XXX million. sales were For with CPE adjusted net

Second were million, declined X%. decrease quarter million $XXX year-over-year sales net pro X% pro and a $XX of of forma EBITDA forma adjusted

to CPE impact basis X.X% stabilizing of EBITDA controllable as of of and team a a recover shipment production XX broadband points a result the pricing. U.S.-China of revenues shift Lower XX% were hard largely raw represent worked material has sales improvement forma China tariffs. year. out overhead cost product margins we last the to decline avoid Pro of from The of and continue removing versus of to manage

the to bandwidth operators refresh shipments grow X% levels technology for their for and as demand now ramped, with positioned production And to said, in move we anticipate third and believe X.X is volumes that the as broadband business DOCSIS quarter. our continue grew has continues more we the return the device improved non-China well being cycles. investment. monetize typical That significantly operators sequentially to quarter Video year-over-year to select

expect we year. top to of activities America headwinds of the factors, combination continued growth likely the second in tariff mitigation in trends the and the these Despite over ongoing North half the be

& quarter adjusted segment, $XX $XXX million net Network million. Cloud the second For were EBITDA of sales with

forma pro lower Second quarter business. sales XX% effect compared declined of adjusted the to net decrease volumes XX% a $XXX of last EBITDA sales. $XX sales XX% sales million on of is were million significant to XX% year, highlighting pro of forma of This this and

including Our additions being see in M&A view our lower Cloud lesser aligns to around of Network in added segment were positioned And when industry late capacity & as impact as the demand Network Cloud strong extremely in factors customer-driven these pause a temporary a extent a we the driven range XXXX. by abates. business spending growth sales a & virtualization. of strong and path well That factors bandwidth transitory to towards continue we architectures to said, circle wide combination

Cloud did & of portion the quarter. the Network however, the volumes end improve mentioned access is of of the For down; many reasons above, technology towards

copper cable, about this businesses. well note, network of forward, well evolution the place our favoring as as Looking in of the dollars with take thinking fiber investment amount as our and increasing an business and and the around will both connectivity as the

and installed trend. this CommScope uniquely virtualized fiber market CommScope's of and copper a nodes the access technologies from Also a generation network in a nodes benefit or fully for As and optimize hybrid architecture in our whether in base leader positioned connectivity, latest fully is legacy the support customers to to future. advanced of their configuration, upgradable technologies network are distributed combined with installed investments well

Ruckus results. the second quarter Moving on to

sales segment, Ruckus of were with $X quarter adjusted million. the net $XXX second For million EBITDA

million decrease EBITDA pro pro were of million as a of forma adjusted sales and net $X quarter XX% year. $XX forma to million Second $XXX of compared last

fixed cost result the profits nature of the business. lower in high sales volumes decline of The the largely given is

While the Ruckus to sales remaining quarter. encouraged by compared first sequential improvement XX% over we're soft, of

cloud-based demand evidence in the longer-term Wi-Fi X, for a of the an recent all this introduction architecture strength recent fast wins of We as additional E-rate customer ramping and several see of wins channel, ahead, business. OEM the

in the excited of growth capability and potential in spectrum part new remain unlicensed the solutions licensed about offering we in as long-term Furthermore, our market. Ruckus

of XG It networks this also to has most to solution venue growth and unlock the potential private full a as critical future. the element engine believe of potential serve XG which in as many combined We wireless represents extremely and the solve substantial demanding challenges of unfolds. the relevant a in-building is will

for address results Slide X. flow consolidated our I'll cash CommScope, on the to Returning

the flow. million flow months in and For free $XXX adjusted XX operations $XXX adjusted million trailing cash in cash we generated from

second the per free paid million. adjusted exclude transaction, flow negative amounts from quarter, $XX cash cash integration million was restructuring and a was During These cost. flow and negative a operations $XX cash

ARRIS cycle acquisition result the cash a cash Cash flow by expected. and slower as the conversion in was than a quarter additional impacted of interest

generation Importantly, move year. meaningfully we expect cash accelerate half of second flow into the we as to free the

quarter let's adjusted and X structure $XX We slide trailing discuss with adjusted forma million million X. pre-acquisition months, synergies as capital the the leverage of for the includes which EBITDA of on of net for ARRIS savings initiatives. EBITDA $XXX other as a XX Now pro well cost closed the anticipated times cost

our announced stated due to previously our Looking down XXXX this focus X% senior debt end, primary until XXXX. of first And we week we're $XXX ahead, $XXX isn't million million our in announce that and of notes this redeemed also secured pleased To to is maturity a intention redeem, second after call. that paying as our debt. shortly we

we payments during come advance flow of peak of in remainder year-end cash typical our XXXX. Both debt the further these payments and expect

our are ARRIS flow into steadfastly the lower EBITDA remain temporary anticipated than acquired originally to balance committed cash the headwinds XXXX heading sheet. While de-levering expected and the adjusted levels businesses, we to in due

generating net all expected of synergy and times urgency. delivering to X approximately on expenses, our with our cash focused We're managing a returning on strong flow, ratio over leverage targets

and target year short-term committed challenging meet of from will now advancing longer In said, leverage headwinds times. financial net it remain All the resulting for transactions. ARRIS X we first that is that to our fully addition, times facing to to between being cyclicality, targets very X our given be term

rationale and confident shareholder the our strategic we in the behind long combination ability term. deliver over remain However, medium to the significant and value

exceeded Before hard quarter have the guidance highlight I guidance bottom the confidence line to in to communications. consecutive our we I or forecasting our and our top that and for to quarters now rebuild have for and shift want third met worked three investor

the visibility best will we on we build continue the can we ARRIS, into of continue in progress the business. trajectory made providing you to have we integrate the As to

our slide on guidance on quarter third to moving Now XX.

and outlook adjusted Turning per in $X.X between and revenue our to million earnings the between billion non-GAAP and third $X.XX the $X.XX. range billion. $XXX Non-GAAP share to quarter, to $XXX for adjusted expect EBITDA we of $X.X million

XX% assumptions Additional and average an XXX XX% share and between approximately rate adjusted diluted of shares. weighted a include count tax effective million

yet the regarding quarter have seen XX normalize materialize. our outlook. operators year In slide we last of XXXX our were we not which hopeful, Turning the a to second remarks referenced that perspective in -- half half we spending qualitative back cable to

short While likely network challenging mid-term. architectures evolution standpoint. of and evolution distributed in of point a in the we The bandwidth still believe strong to strongly technologies that continue advanced growth growth, half to all to the access subscriber the is the revenue of back XG, from year be to

in I'll decline quarter. With From be another pattern follow soft some help our that a then margin what with perspective, in declining Connectivity expect provide third our to we model sequential well. sequentially XXXX, similar cadence Mobility segments, adjusted we'd additional our modeling we expect expectations. as that and our seasonally sales to fourth trend that to you quarter pattern said, to EBITDA we a sales normal color and seasonal consistent In with delivered expect

To than end, first of to quarter. to a partly the be slower sales In primarily in sequentially our international decline M&A sales we decline segment, the reduction international the in attributable second quarter, third market stronger of improved to pay but The the half fourth expect year year. in to we TV half in the related the CPE is that video operators continued U.S. the sequential and deployments, activity. expect

partially to market. expect by slightly broadband be a offset We dynamics these increasing

we X.X DOCSIS continued technologies XXXX next-generation Wi-Fi CPE. X modem, of In the deployment be beyond, of and for the see and to the of tailwinds evolution DOCSIS

throughout For pace year, Network we albeit of expect improvement the we contemplated. the sales not the modest & originally sequentially Cloud, at same remainder

level return capital indicated spending originally As quarter, further had call, a now higher reduced operators anticipated network a we quarter that first in we during spend the out anticipated. will of to by push second we believe our than but we

the demand We access product continue node That drive being fundamental push & Network advantage The network for deep upgrade this increased as a customer activity to increased share do and stronger portfolio splitting The we to much advantage to technologies. subscriber and count in said, XXXX given firmly we performance unchanged. year remain significant capacity next-generation expect of in and in fees better operators network drivers to take to market deeper Cloud a utilization positioned as growth. see continue remain investing XXXX. growth capture and relationships invest fiber broadband our of far

segment, and we with Ruckus sales results. our In third relatively net to quarter expect consistent the fourth second our quarter be in

the preserve business, current sales structure we While of are to we remain in to confident the focused on trajectory optimizing align long-term growth our this to profitability. cost trends

a Finally, mind. in I'll year couple keep full assumptions to provide

the of we a calendar year XXXX, outstanding. share adjusted rate XX% For million expect shares fully XXX an full count average tax weighted between of and effective around and diluted XX%

the I'd to Eddie. Now like turn call to Eddie? over

good Alex, everyone. Thanks, and morning

referenced CommScope we that our deliver range. pleased are perspective, expectations. one within line cost to above our dynamics we ago second we quarter year you with to on compression roughly as results to profitability the legacy earlier, original deliver or Alex As committed historic successfully margin pricing in are managed recent From the consolidated

XXXX of of challenging reduction XXXX we have unfolded largely is significant more network than companies due capital results segment, cable This priorities. but as expected. CapEx to business remainder to For certain spend, who publically ARRIS the permitted the on our is and more in acquired be

being long-term networks competitive. That to operators are invest and unchanged need confident said, in is we to these that remain feel their transitory view our as continue to will trends

a and and on the urgency our working achieve renewed for strategic are we long-term business growth goals. intact, expectations While long-term to remain trajectory execute our plan short-term of sense our

relationships cash opportunities As continuing what intently to on to highest we combined will cost near-term we streamline proven and can them realign This strings and well. and course, serving reductions to intend challenging focus this. are accomplish strong focus the playbook operating our of CommScope intensify to continuing adapt a result, control into we our and on the we exceedingly lean is And, generations operations customer to to environment. resources to return and organizational

immediate to and to cash round our in a and obligations. have to agility our the are short-term that similar tough the and world. absorb customers we to preserve market continue with and profitability around end, the ensure free shareholders downturns of flow During deliver shown taking we weakness can actions meet optimize past value long-term we financial we successfully To act

efforts to this position, First, the streamline role and Chief organization to team. other members of as the the morning, Operating Officer with part me of responsibilities executive my of we the elimination our announced shifting of

with As a accountability, been expands more deeply support result, role our the our and our company Bruce his him and full well decision a to leadership in leading do part these This to through we've Board's which flatten future continued CommScope's to growth of striving in day-to-day McClelland committed I'm success the of is I challenging am operational company company no endeavors. longer as our we structure every and transformation. active with part times. wish virtually taking in

exceed are million. accelerating efforts cost of now our and Second, $XX we our synergy to expect target first-year

$XX We year realized expected at are achieve the of is to in million on year first $XX calendar track XXXX. which post-close in to be million least

addition, we exceed and our annualized highly stated ahead of million of are synergy In the savings we close transaction. this so rate of do run confident will that anniversary third $XXX of

current taken Third, reductions operations to top incremental and software and cost acquisition our to synergies cost access R&D are to stated in including sales line. streamlining sales our These ARRIS we trajectory. to reduce aggress align addition with have

We expect from to during XXXX the the balance of least benefit million of these actions. at realize $XX

are other possible addition, optimize to opportunities our evaluating among savings. In further footprint to actions we generate manufacturing

control, focused R&D spend. we to we actions are our expenses optimize while on SG&A taking Fourth, are also

high-growth focusing based are while long-term opportunities jeopardizing demand, and on not on the end-market modulated are We opportunities.

our beyond, rate R&D growth to of $XXX run While below in previously will our invest spend expected and we be million. XXXX continue for

capital improve flow set steps mobilizing are flow and goals. to optimize a around to cash a renewed is our Driving progressive free debt in generation. organization DNA And will of priorities the working our company's lastly, cash efficiency we take we to repayment meet

for I'd excited open remarks. like Despite the the and call make year, we challenging ARRIS I CommScope combined the questions, up to about very Before remain few final a portfolio.

into of are the the ownership We just four now months business. ARRIS

we our of I achieve we were compelling have service for end, that some can platform providers we our exciting for a promote global and to more ahead growth together As integrate enthusiasm grows diversified what CommScope. processes, Together what continue highlight to To stronger. to teams the and enterprises. want and believe we opportunities

get venue Ruckus wireless DAS next-generation a include switching and provide that our in and applications, enabling are latency LAN Era transformation, network private Internet -- for that of XG. capability Things private to technology at core the These capacity which solution The combines capabilities ever low the of position with greater beginning are resources our industrial critical to in a their and technology private networks will before. the than for

they to distributed from the evolve best-of-class platform operators' of lead access transformation base installed and core solutions Positioned that a unmatched optical architecture as cost-effective through manner nodes. by CCAP our centralized networks, in cable virtualizing their to with combining

operators real-world power and such X.X of to technologies, Leverage of our a acquisitions, solves help define as the agnostic And unique position DOCSIS. network finally, current provide rollout OEM DOCSIS assist backhaul. problems that evolution to their site next-generation and our expertise XG holistic to with transition view the of next

research will for solutions. our architectures. advanced antennas support spectrum of wireless These remote for millimeter areas radio in wave, quest to Today, are four operator research platforms with for wireless XG connectors dynamic supporting in new the products. and in our metro DAS initiative, We XG full industry and in for U.S. cell customers is small as platform cell fundamental which city-scale opportunities provide and such our the building more we interfaces network heads, all open the cabling aspects

me than to closing, CommScope relationships long-term the future our positioned customer help connectivity. In to portfolio ever of continue in industry-leading quest our with that and growth believe is new shape great the in confidence our talented our coupled strong of products, potential. workforce, communications I give better With

customers. as XXXX I'm in highly actions will accelerated organization from reposition are improves capital spending largest our returns CommScope the taking we confident enable financial that to better that to achieve our

that, And you. I with questions. the open turn And up to floor for back over we'll it

[Operator question Instructions] of Our George of first line from the comes Notter Jefferies.

Your is now open. line

flow that's maybe, is kind about drive guys. of piece I start Thanks to think guys. the about the been that its and the in I ability for you much. talking you talk Hi, what But impairment by Network of profitability? Obviously, business. wanted to real very & a business terms can cash of Cloud of guess, struggle you free

guys about of Obviously, lot a trends, talked them, some DAA. of you

a You've of versus that just do you all-you-can-eat model. CCAP got OS transitory selling and cable think an really structurally virtual got in just in out I business their back terms kind you've a competitor product mean, the comes impaired there, what is of issues? rebounds

Morgan try Kurk. I'll answer general. Thank structure Okay. like a in what you. is from market -- to this This looks the from

So and or been a the we historically, a market for it in past all to single product called is it. of been now be the disaggregation has into centralized player been have a in the And of its cap. and of integrating the we This aggregation disaggregated. player this years CCAP XX expect core functionality

and have that on run network. The disaggregation servers code as run it taking on through we're equipment traditional concerned far we that it data and traditional migrating had as can own so our is the

the parts as in While may you the edge servers know PHY. of that cannot outward those moving the of network run remote on something types

the and have it unique are gives a two in this supporting now and is We years it XX us is these we something very featuring code something writing very that past believe that having that been to it, hardened featurish. that fact the for importing advantage ends

equipment deployed the along centralized the packaging. repackaging we taking nodes amplifier it our a where a use Bringing nodes putting and both remote position have strategy in the around and these world, about have of that hardware to have remote side we the into of world power significant with we all and to supplies

seamless a today's path upgrade operators giving for And DOCSIS.

of like those new extended in for and higher features future. Duplex amounts remote even spectrum DOCSIS we have capacity the enhance opportunity Full addition, to nodes support In to

really All an for has It market forward. grow customers. what that is which of and think experience need. and the preservation brings migration critical the allows we expand position is end which to And be something CommScope to that we this will table. they capital opportunity our plan move as It as gives that them

the end to and side expect and head expect win remote in both the in we in to both. play We

it. how Got and question of business -- here you I that guess talking a deflationary genesis terms impact are is of trends the much very about right? of In the lot you're is the revenue get. margin of guys the

So issues I the this structural, and to the the are I'm nature the there Cloud better you see? understand they in environment Network we're there temporary trying more the division business profitability seeing given you've and really question. are just or financially in like this of -- ARRIS guess, That's acquired focus that's driver

Yes.

feel in So we the be well-positioned that evolutionary was think Morgan network shift view let's to highlighting of. as we I more clear take -- are the transitory. things that of advantage issues unbelievably The

we to this So architecture a the platform have that the as that of the technology a a the into leader. we've going where legacy more place in significant we're is is technology announced market takes have to advantage CMTS we ways. well the chassis. business, that installed recently which One side take virtualized as Well, business EXXXX introduce couple hybrid of of

explaining. into was acts exactly the Morgan technologies the which the of is the absolute that and business, what business And there's is profitability node of of the the also And piece or the node. then in going revenue the migration process piece from increase CMTS

take we the we're So very shift to on advantage that market. of in that's believe well-positioned structural going

really is say right transitory What seeing I it's things. pause. would driven that by And now a you're really three

is customer-driven one M&A. So

that their about depressed capacity. cable that continuing the talked vocal although driven made other predominantly we to investments of operator XXXX has capital in One very and they Europe some through in of level spending piece substantial significantly impacts in that work been had by as on So well. it's business large

drivers waiting more broadly technology think is the before do to this how I industry then evolves to And unchanged. invest. fundamental they the But shift continue see are

this bandwidth rebounds. of -- demand as are of Morgan need growth, of that importance the And lower spending and history take all of mentioned, are when well-positioned those very latency, consumer XX to for of the the subscriber that as the will in we and have the home Internet So market one drivers years the XX growth, the leader business. fundamental here propel capital advantage the Things

Got it. Thank you.

Thanks, George.

next comes question line Suisse. Our the Badri with from Sami of Credit

Your line now open. is

Hi. very Thank you much.

have questions two I So really.

will that The impact be XQ in the your to year the us you think lot tariffs the the to still first and year? that profitability Ruckus the then has one a second similar you longer maybe And specifically business is think question no is have I just update And do when compared with on XQ and tariff remember more end And XQ. of dynamics to business. more you side, I think of if I your will the on plans? that can projected be revenue correctly, comments the

positive more are directed guys the be Just ramp. you projection may have little the revenues XQ color of perspective? you going on And not seeing just you like and at us bit least of situation. and are the a are dynamics the mentioned some technology trends and sounds of very Some because of reflect necessarily believe very peers prolific you revenues? from or us competition your distribution, acceptance XQ a give to a is different it actually Can in that to

Okay.

much down Morgan Sami much pretty first had China to the left. pretty The into accomplished make we that the the then Vietnam and the the Indonesia. was cover products and year. we're That take part antenna where in of generally relocated the DAS road having been U.S. we the moved Alex tariffs those have of the I'll So done. question the product can three behind us well one out Philippines, and of first We've ARRIS through

List end by will four year. be be that we of done relocate, covers some of which have all so our DAS of the will -- done to products that the

answer it supported, of the we the short end stopped, we'll is to normalcy now. been the level some some revenue it. because It think through but stopped guess be and lot actually very back So into where is, from were disruptive has this about I some of flow of of generally think a I the year in came

we balance work of of in the which care underway. some year X List is have But to the do take well

the X. there beyond of think end List -- think the there's unless by So we I it be anything behind will year, don't us the

be that'll behind think we us. So

for then more you giving longer-term So as let the what just Ruckus technology about some of and I'll the the and see start let we on me color the Morgan potential. year balance talk trends

balance of that we there particularly loss short-term as we to in second are being to the pointed couple issue. about some of mentioned we think QX pointed So of the then the key one And as And accounts. hit. really customer patches sales year, execution we we as for talked the the soft being

pointed to So third -- was a channel. then the of which and buildup we a in inventory

market We've one issues. and force with Enterprise channel that integrated the we're the force. create one sales partners, combined approach sales work through So to to the those CommScope to actually We've is of ongoing. Ruckus realigned force continuing sales work Enterprise set

And of channel. the we've back majority We've issues worked won the number through customers. a of the those actually in

we that of back point customer drive manufacturing that real on Some key some lost. And wins accounts then really we've OEM other the some progress making those to are front velocity. winning to we're

mentioned I've to -- we that book terms when point should strength begins strong that monetize back last when through E-rate our the that order to in well positioned spending be very then half that. flow of very And

we activity XQ. good to there's as and So of that a see XQ lot look we

a that to little potential. of lot As it fact bit qualitative largely point we longer-term really we're bringing see a moving remarks, this ongoing the the we what of we believe being the side, and more there's -- out driven the work by a think temporary flat continuing did is business to on to to impact it's this about integration some

such Morgan of is see let talk a strong technology why think and we I'll some this we trends But what is lot a growth platform. about the

Yes.

question the an to comes always on there have and So that two basic going are down and they trends are timing. impact

an you goes and unique edge just it's gigabit at XXX.XXax which fairly there switching portfolio. and bit Because be fully this exposure our upgrade we is needs as probably for is called our So requirements advantage is means beginning transition. take Wi-FiX that cycle, Everything multi of know get the just the access a cabling Wi-Fi to technology. to to also or for upgraded where it portfolio new not point this as

think is we this dramatically. in term going the rise So to medium

of shift. clients points becoming However to now just available, of taking capable advantage just these of but are access are beginning this. are And course

think be question it's So and perhaps on is the a that market. of going a believes may of the timing difference who what I us between rest

effect. that's to off that have that think the to the Finally through subscription is this that's the will cloud is XXXX agree other on think and case, year a taking impact next an in year move but starting as towards again trend we and to we we us we services. move accelerate, And

loaded would just back regarding I comments the anticipate half that perspective? Do then conversion just operating And up cash be even back still an Great. actually you like to it. or for the on year quarter Just follow great? have cycle. loaded quick be from XXXX last one relatively flow Got cash more

Yes.

me for the question. thanks Let --

we So do.

loaded the be in quarter seasonal the whether, back That's quarter. year the of late flow for heading it receivables when first feel year. flipping sort activity pattern folks of for or end deployment fourth Our first build it's into of is to of as a cash the in in inventory the even we typical tends lot part very the half and early to

and normal a our tend cycle really to of low be QX part of part seasonal first that's QX point. So of QX and second sort

the thought. cash debt we and I million anticipate the the in next the say, week likely last to of out, accelerating And we paydown through that year. another half flow back that I was -- out of do we ahead original So to we $XXX that week. million would $XXX been make have point committed was fact expectations would go advance that just

of cash even making paydown. the top very efficient cash some flow creation on So work sure the line been focus doing debt really in flow to on environment, we're lot we repay on have a soft optimizing being and

very positive are signals. those of both So, hopefully

you. Thank Great.

Our next Raymond the Simon question comes James. line Leopold with from of

open. now is line Your

taking operations cash now? us understanding could have flow an just what more prepared cash flow we bit free expectations the expected next for expecting the in XX your better, for of or are from the lower you're Could question. either flow would you Great. be quantification previously or get If indicated months Thanks cash XXXX? than expectations. give what that a I believe remarks, you Alex little on

our for would terms nothing in of I that has expectations year. the Yeah. say changed long-term

strong We continue environment, mentioned ability continuing its And accelerating and than we're being this see see half generate year, then last even my despite cash see we down through much cash. do XXXX as to as back top and pay generate the XXXX. current I the to line being soft trajectory answer, We year in a the very in positive of that to debt. more business

pushing seeing currently out of months. So expectations couple we as view everything simply we're that by a

So of longer sort change. term no

that short-term actions we Eddie mentioned generation. really taking are In to cash focus immediate the on

increased million, million taking synergy the we that despite to $XX exceeding again delivery top We're target soft million $XXX we've of profitability, cost, and the one improved our communicated. million. anticipate $XXX $XX we the accelerated to actively And actions the So, above line. the additional full get we year

pay make we've we're So can sure that everything we doing delivering commitments on down to we're made. the

just make want little clear. a to we're I And long-term. different of Everybody's definition got sure

I you the operations Is probably It billion you're number. of kind talked sounds what $X had healthy cash bit interpret right referring it's your approaching a than like a pretty about little from But comments? that way to previously. XXXX. think still to lower

in we're a transitory XXXX. guidance for rebounding now, and provide I being certainly operator not level we in think a fair. We cable position of try right yet XXXX. that's quantitative viewed to mean see obviously I spending that as

of as sort of actions XXXX So, of the a normal being the more spending both that I've much capital described I is because recovery well as rate. lot year, a environment see reaching run full

changed we bit about to then had you us with the Great, you Could ago. & changes, the within And thanks. you to with unit and acquired talk discussed from the the whether ARRIS? have to old some forward that the a bench obviously the follow-up change, move resources just time understand leadership assets the essentially Cloud Network strength right COO and management

we did we Simon, it. believe

We have very up. competent move people in both sides of the to the company that have ability

that ARRIS of and sets have there. -- primary skills technical in lot thing the we that's Our a design. They skill which have, is development

the to can try get combined as and goal positions the improve entities two. back some and continue is we Our between to with stuff to forth the

-- sending we've we the I I there. change, Network think in I we So, we're we're lot of and a that think, there help very medium-term, seeing Cloud is & have change we changes places, And people But think or to of the near as highly -- Kevin's, think any the positive. in capable term that other person. made we well. make we'll

kind virtual expect was sure And let's on, when you'll that market, press know not? do of that the be timeline the or in CCAP X-month not was out some validated you I you I say, about a whether there solution. think,

Simon, of Yeah. certainly, frame Morgan. This but the after. year it's this time end the is is

one just double-check. one to then I And want Great. last

up December that you I would think the indicated sales CPE sequentially in expected quarter. you be

that thought there different? Is as specific a maybe for of quarter Thank something Just weak you. going always in makes a that historically, CPE. that I on seasonal bit quarter little

heard they half of of the in the to customers the their have communication we've it's I -- really from intent spending most year. second think capital is that increase that

QX we conversations is quarter. that so far. side a likely some actually of then capital we've spending comes CPE little to be most expect like had benefit increased is so through that that soft the in that for in the of bit And on while the And fourth based

Thanks questions. for taking the

just finalize to was that. to I -- Okay just going

We on commented some the it's by led a driven volume. we in CPE, also that's when broadband of a in we've of some the to manufacturing decline that of of moving been out the softness remember and seen of China bit

saw offline. us. capacity So, behind fully loss that ramping production as had the and we share we some move recapturing of manufacturing that now And that up is facilities we're

ramp. part that's non-typical driving what's So, also bit of may the be

much. you Great. very Thank

the with from comes Marshall Morgan of Meta Your next question Stanley. line

line Your now is open.

on it. Simon's kind to question. Got Thanks. And of maybe coupling

make kind in what kind are of ARRIS transition in just upward are account continuity, Just of being of made the sure short-term disruption circled making on period? actions to management, sure that and there's customer the that kind no

as what kind of the in their comment kind into when Mobility just there of and ongoing that far And you then if there, seeing kind purchasing patterns? combination expectations T-Mo what spending you're expectations and just could the you or Thanks. behavior of on side, being to closes flex put as and Sprint, transaction

Meta Eddie. thanks. is This

of will the same of a senior people of met have weeks of impressed not coming generally. with have benefit I serving most That We the group in customers our all if be reinforced the customers. certainly.

entire We have combined confident that industry. the cover teams, seems sales very sales now

show we our face. need reinforce And to so and

what we we that CommScope past have from standpoint. leading can they a sure company need the think a combined combined the full so than more capabilities to and as we and what I understand provide make now maybe of that in --

is it's that there pause these think a In -- happen. happen, Sprint, each assume to topped We we generally, the time. case these and for that's long guys things positive a of We be a lot is because pause. a muted T-Mobile going could think other have and when

do a And them. -- supplier are so their primary to products we we of

And opportunity an us. think so that's we for

relationship had a with We also probably Dish. XX-year-long

however, And entity to for this get. going equation; can that they that they're so we I meaningful combined fit of -- think provider be bits the into we a the

think a close a positive. And that it think. And think conversation people but there's we've we will caveat pause, we decisions the in been a needed. is with will we be didn't these generally in it's be there making things, So,

ready to so think go. I we're And

waiting expectation figure of timing building the that TBD pause is And to and everything is it's still out or when in announced?

this Morgan. is Yes,

to as unique a said more, So, Eddie I'd muted. it's like that's a TBD, Dish think a bit but comment it's on little situation. I

very I'm the the So, bullish industry. in T-Mobile possibilities together from that'll the and get Sprint, happen

need will from The CommScope. for our legacy a to network which building addition only to them of differently a they the ground unique we've the they operators. traditional years, opportunity this Not an current for products we're network fourth opportunity than up but sold have operator represents design which

the we can edge supplied for to hard and playing the disaggregated. have has is opportunity them. CommScope enable opportunity a be network this network have is We to time interface by the able where where In in a portion that radio the units be in be been that fairly the for baseband core remote way to the do same may of an the supplier. they more portion had having open an a play closed ramp past believe use lot an to we standard of the to This

we the see developments as this in wireless -- uniquely positive industry the So,

guys. Thanks Great.

comes with the question from next line Our JPMorgan. of Chatterjee Samik

now is line Your open.

lower connectivity Hi, spend and companies thanks my their telecom to group below push for your solutions competitors taking the as by just recently expectation with from been as growth of citing it's question. cable. for fiber out I start-off the want of well one projects

the on your aspect anything well? and relative pricing seeing for started the the the Just fiber in side to see want growth with that's changed expectations as you're the to year you Have what business when changed of ground. on

commented are. recent -- it we're see where copper on seeing But, this Enterprise, both and prices same in both in when softness we more issues. to on have others Pricing think the is the as and fiber. traditional weeks of where in the depends do aggressiveness -- I maybe and or moderation

wise business from standpoint percentage now. a right is big our a, hyperscale The growth market

smaller earlier, are we hyperscale the in We four five But providers. as than said named we're of others. major

we have long a data center We position in for have the which a time. in marketplace, meaningful also been multi-tenant

seeing about. any think, is other than we're So, I previously talked what what don't have different

just, the help If forward. in it. Alex, with seasonality Alex. the going business now me think follow-up you just I combined quickly, about can got Okay, can,

in about more in curious we XQ. kind billion run Just $X.X to more from XQ -- of as $X.X rate the go billion

of overall for is appears moderation How revenue, driving million have sequential you decline kind of it of $XX in headwinds versus that million the about a the in Also much like a decline the of macro seasonality business? $XXX in more EBITDA. all

overall. a like high that, just wondering it percentage seems So

So, just can you help that? me with

Yeah.

At at don't pattern would if be a get Let it a macro weaker strong sort for a and and us -- Samik, the then and follow QX, QX on level. I me QX. you can a seasonality a macro quite weaker of as typical it. level, take QX

And a that's season, the on lot whether it's driven by the in construction of tower or the just field.

of is And so fairly that as will that is a that, lot And understanding well. sort my within of typical. businesses be acquired typical the

& Network network driven the they're QX. of as difference The with particularly at positioning side, by following the That's fairly strong capacity Cloud acquired is, end year. additions the one a the for in you to businesses large ramp tend software see license sales, the

spending been seasonality, by in taking little in a recent care seen what also, the And that any be capital call thrown in we've of they residual have in past, it sort off Mobility left budget, of bit the the FirstNet. that's typical would that so

what QX mirrored in seasonally QX than we almost we well. to be we've for And seen certainly that, year and XXXX. what to stronger So, QX. expect trend saw in QX and tend Mobility as That be is this that

than say seasonality. I'll driven what largely spending FirstNet opposed more level that's by macro And to the as

helps your So that hopefully, answer question.

with all. offline. follow-up I'm Thank the Yes. that's No And remaining you.

Thank you.

back That for session I presenters. concludes the now our will to question-and-answer the today. call turn

to we Thanks And for everybody talking end joining for interest second thank QX. We very look appreciate the your much. the We us CommScope. continued at you to Yeah. of quarter in call. forward

you concludes your participation. Ladies Thank this and conference. today's for gentlemen,

You may disconnect.