CommScope Holding Company, Inc. (NASDAQ:COMM) Q2 2023 Earnings Call Transcript

Shannon Cross: Thank you.

Operator: Thank you. One moment please. Our next question comes from the line of Samik Chatterjee of JP Morgan. Your line is open.

Samik Chatterjee: Yes, hi. Thank you. Thanks for taking my questions. I had a couple, maybe if I can start with a clarification on the cost saves comment that you made in accelerating some of the cost saves and you referred to the $150 million number a few times. Just wondering, is that a full year sort of contribution to 2023 or is that more a 2024 contribution given the focus from investors on your 2024 targets? I’m just looking to sort of clarify how much of a step up in the contribution from those cost saves are you expecting going from 2023 to 2024?

Charles Treadway: Yes, the 150 million is an annualized number, and we would expect to see about 60% of that number actually hit our financials in 2023.

Samik Chatterjee: Okay, good. That’s helpful. And for my follow up, just wondering relative to the decremental margins we’re seeing or the sort of margin flow through that we’re seeing in CCS, sequentially it seems like you sort of gave up about a hundred, slightly more than a $100 million of revenue with those $70 million flow through on EBITDA. I’m just wondering what’s contributing to that strong flow through? Does it sort of moderate as we go forward, even if revenues do sort of continue to move down sequentially?

Charles Treadway: Yes, I think the, in CCS, with the volumes being down, I mean we’re, although we’re adjusting our factory cost, there’s a little bit of an absorption hit we have. I think the other thing that we see in CCS is, there’s a fair amount of mix in CCS. What I would generally say is particularly in our broadband business, our cable business is down less than our connectivity business. Our connectivity business has a little bit higher margins than cable. So some of the margin changes, yes, you’ve got an impact because your volumes are down and you’re taking a little bit of a fixed cost absorption hit. But you also are seeing within the CCS business, some of the mix changes. I mean, I don’t think there’s anything as this thing normalizes back on a volume basis, I don’t think there’s anything that would say that the profile of margins that we saw in 2022 that, I think those would be the margins that we can get back to.

And then as we continue to drive, efficiency programs, we’d expect to get improvement against those margins as we continue to move forward.

Samik Chatterjee: Got it, okay. Thank you. Thanks for taking my questions.

Operator: Thank you. One moment, please. Our next question comes from the line of Simon Leopold of Raymond James. Your line is open.

Simon Leopold: Great, thank you for taking the questions. First one is, I do appreciate that your typical seasonality is quite different than some other OEMs that sell into the operators and seasonality has sort of been wacky for this sort of post pandemic environment. But if I think about sort of the others who are exposed to similar customers, whether it’s in mobility or fiber to the home, they’ve talked about flattish sequential trends in September and then sort of strong seasonal upticks in December. I’m trying to do a little bit of a compare and contrast to those guys. I’m just wondering how you sort of think about the cadence for the balance of the year.

Charles Treadway: Okay. I think as we think, I mean, clearly we’ve got a fairly substantial mix in our business, right? Because, businesses like ANS I think as we mentioned in our prepared remarks and you’re aware of Simon that, there’s some seasonality with that. You know, as we get projects coming through, as we get some license revenue that can have an impact. And I think we feel like that is going to have an impact positively for like the ANS business. I think when we, when we think about the other businesses, I think the way that maybe we can characterize our forecast is, if we see order rates continue to pick up, we will be on the high end of our guidance. If we see order rates stabilize at Q2 levels, we’re going to be at the lower end.

So I don’t know if that answers your question, but I think as you think about the rest of the year and our guideposts that we provided, I think that’s how we are thinking about it. Hey, if we see some recovery here, we can get to that high end of the range. If we don’t, and we see this thing stabilize out, we’ll be at the low end.