Vistance Networks, Inc. Q1 FY2024 earnings call

• Continued uncertainty in the business with recovery in CCS and OWN order rates but deterioration in ANS and NICS.
• CommScope delivered net sales of $1.168 billion and adjusted EBITDA of $153 million in Q1 2024.
• Controlling cost structure with plan to take out $100 million of annual cost.
• CCS saw stronger ordering patterns with recovery in service providers' inventories and enterprise sales from data center and building/campus.
• RUCKUS business faces challenges from channel inventory and lower demand but has growth potential with RUCKUS One and AI solutions.
• NICS business positively supported by ICN performance, but under short-term pressure due to inventory and demand issues.
• OWN saw some recovery in order rates in Q1, with expected increase in Q2 revenue and adjusted EBITDA.
• ANS segment historically weak in H1 2024 due to inventory and next-generation architecture choices, but positioned for DOCSIS 4.0 upgrade cycle.

CCS: Net sales were $605 million, down 26% year-over-year. Adjusted EBITDA was $95 million, down 37% year-over-year. Order rates improved, with expectations of higher revenue and adjusted EBITDA in Q2 compared to Q1. NICS: Net sales were $180 million, down 37% year-over-year. RUCKUS decreased 46% and ICM decreased 17%. Adjusted EBITDA was negative $1 million, down $59 million year-over-year. Impacted by channel inventory, seasonality, and lower demand. OWN: Net sales were $196 million, down 24% year-over-year. Adjusted EBITDA was $44 million, down 26% year-over-year. Order rates started to increase in Q1. ANS: Net sales were $187 million, down 38% year-over-year. Impacted by customer inventory adjustments and upgrade delays.

• Expect Q2 revenue and adjusted EBITDA to be higher than Q1.
• CCS expected to have higher revenue and adjusted EBITDA in Q2 compared to Q1.
• RUCKUS expected to have a challenging year relative to 2023.
• OWN expected to have increased revenue and adjusted EBITDA in Q2 compared to Q1.
• ANS continues to face challenges but positioned for DOCSIS 4.0 upgrade cycle.

• Uncertainty in business visibility across all segments due to macroeconomic conditions.
• Lower demand in ANS and NICS segments driven by delayed upgrades, customer inventory, and slower market demand.
• Impact of channel inventory on RUCKUS business, leading to lower order rates and revenue.
• Short-term pressure on NICS segment and RUCKUS specifically due to excess inventory and lower demand.

Q: George Notter of Jefferies LLC asked about potential asset sales and if there's been a change in outlook.

A: Kyle Lorentzen said dialogues continue and asset sales are an alternative but not going to sell at any value.

Q: Meta Marshall of Morgan Stanley asked about CCS enterprise traction and gross margins.

A: Charles Treadway talked about data center and cloud customers driving CCS growth, and Kyle Lorentzen discussed gross margin impact from revenue level, fixed cost absorption, and segment mix.

Q: Simon Leopold of Raymond James asked about gross margin changes between quarters and ANS recovery drivers.

A: Kyle Lorentzen discussed segment mix impact and Charles Treadway talked about amplifier availability and product ramp-up for ANS.

Q: Steven Fox of Fox Advisors LLC asked about CCS full-year thinking and cash flow.

A: Charles Treadway expected sequential improvement in CCS Q2 and Kyle Lorentzen said cash flow was in line with expectations.

Q: Samik Chatterjee of JPMorgan asked about cost takeout in ANS and NICS and CCS data center market share.

A: Kyle Lorentzen talked about $100 million cost reduction and Charles Treadway said CommScope is holding share and has opportunity to gain in data center market.

Q: Amit Daryanani of Evercore asked about free cash flow and CCS project contribution.

A: Kyle Lorentzen said free cash flow profile likely to be burn early then build in Q4 and Charles Treadway talked about $4 billion TAM for CCS projects over 4-5 years.

Q: Matthew Niknam of Deutsche Bank asked about NICS inventory levels and CCS customer inventory work downs.

A: Kyle Lorentzen said inventory destocking varies by business and CCS close to inflection point of inventory work down.

Q: Timothy Savageaux of Northland Capital Markets asked about CCS order rates and Q2 sequential increase.

A: Charles Treadway was cautiously optimistic about CCS recovery and Kyle Lorentzen said Q2 CCS revenue expected higher than Q1 but dynamic.