CommScope Holding Company, Inc. Q2 FY2025 earnings call

• Announced the definitive agreement to sell CCS business to Amphenol for $10.5 billion, expected to close in first half of 2026, with net proceeds after taxes and expenses expected to be ~$10 billion.
• RemainCo (ANS and RUCKUS) had strong second quarter results, with ANS driven by record deployment of DOCSIS 4.0 amplifier and node products, and RUCKUS benefiting from normalized channel inventory and vertical market strategy.
• Developed and implemented plan to mitigate tariff effects, with minimal net impact expected if tariffs remain at current levels, and most Mexico-produced products compliant with USMCA.
• Raised full year CommScope adjusted EBITDA guidance to $1.15 billion to $1.2 billion, with RemainCo expected to deliver $325 million to $350 million of adjusted EBITDA in 2025.

In the second quarter, CommScope's segments showed strong performance. ANS had net sales of $322 million, up 65% year-over-year, with adjusted EBITDA of $80 million, up 132% year-over-year. RUCKUS had net sales of $190 million, up 47% year-over-year, and adjusted EBITDA of $46 million, up $51 million year-over-year. CCS had net sales of $875 million, up 20% year-over-year, and adjusted EBITDA of $211 million, up 23% year-over-year. ANS and RUCKUS together contributed $513 million in revenue in the second quarter, with adjusted EBITDA of $127 million, up 326% year-over-year.

• Raised full year CommScope adjusted EBITDA guidance to $1.15 billion to $1.2 billion.
• RemainCo (ANS and RUCKUS) expected to deliver between $325 million to $350 million of adjusted EBITDA in 2025.
• Second half RemainCo adjusted EBITDA expected to be down from first half due to onetime items and project timing.

• Tariffs remain a fluid situation, though mitigation plan in place, but continued monitoring required.
• ANS business is cyclical due to project nature and license sales, with upgrade cycle still in early phases for DOCSIS 4.0.

Q: Just in terms of kind of the RemainCo, whether these assets kind of make sense together? Or is this kind of the final step in the journey.

A: We're focused on running the businesses and closing the recently announced transaction. We've invested in both ANS and RUCKUS, with positive developments like new product development and incremental selling resources. We'll continue to support and invest in these businesses.

Q: Just to get a sense of kind of what are the corporate overhead costs that we should think of kind of from on a go-forward basis of kind of the ANS and RUCKUS businesses together without CCS.

A: As part of the transaction, a significant amount of G&A team will be transferred to Amphenol. The remaining G&A costs for RemainCo will be representative of the go-forward G&A organization.

Q: I assume there's a CapEx and working capital obligation you'll have on the CCS business going forward. I'm just curious what that would look like.

A: We're not going to provide specifics, but we'll continue to support the business and the cash flow from it will be considered within our 2025 cash flow guidepost.

Q: What the customer concentration looks like in RemainCo? I would imagine that Comcast and Charter are quite significant customers here.

A: We're not going to provide details, but ANS has higher concentration than RUCKUS, and we manage and will continue to manage customer concentration.

Q: Can you give us how much of ANS is sort of next-gen or growth business versus what we might consider legacy CMTS, and how does that translate in your mind into a growth rate?

A: Majority of ANS revenue is from next-gen products, legacy business is less than 50%. Upgrade cycle is gaining momentum but still not across all customer base, and ANS is cyclical due to project timing. RemainCo's growth rates have different profiles for the businesses.

Q: I wanted to see if you could help us understand the breakout of free cash flow between RemainCo and the CCS segment within your forecast. Is that something you're able to split?

A: We're not able to split that, but CCS is performing well and contributes to cash generation in the second half.

Q: I'm wondering if there's any possibility that tariffs affected your customer behavior in whether or not you perceived or potential that there were pull forwards of customers buying ahead of any new tariff rules.

A: Customers understand our flexible global manufacturing network and broad supplier base. Most RUCKUS products had tariff exemptions, and there might have been some pull in RUCKUS due to tariff uncertainty, but it looks like exemptions will stay.