• Core Net Sales: $1.112 billion, a year-over-year increase of 23%.
• Core Adjusted EBITDA: $245 million, a year-over-year increase of 159%.
• Core Adjusted EBITDA Margin: 22% of revenues.
• CCS Revenue: $724 million, a 20% increase year-over-year.
• CCS Adjusted EBITDA: $182 million, an 87% increase year-over-year.
• Enterprise Fiber Revenue: $213 million, an 88% increase year-over-year.
• Core Net Adjusted EBITDA: $25 million, increased by $42 million from the prior year.
• ANS Net Sales: $225 million, a 20% increase year-over-year.
• ANS Adjusted EBITDA: $38 million, a 177% increase year-over-year.
• Adjusted EPS: $0.14 per share, compared to a loss of $0.24 in Q1 2024.
• Core CommScope Backlog: $1.179 billion, up $202 million from Q4 2024.
• Free Cash Flow: Use of $202 million in Q1 2025.
• Net Leverage Ratio: 7.8 times.
• Stock Buyback Program: $50 million approved by the Board of Directors.

• Warning! GuruFocus has detected 5 Warning Signs with COMM.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• CommScope Holding Co Inc (NASDAQ:COMM) reported a 23% year-over-year increase in core net sales, reaching $1.112 billion.
• Core adjusted EBITDA increased by 159% year-over-year, reaching $245 million, marking the fourth consecutive quarter of sequential improvement.
• The enterprise fiber business saw an 88% increase in revenue year-over-year, driven by demand in data centers and AI-focused architectures.
• The company has a flexible global manufacturing footprint, which helps mitigate the impact of tariffs and supports US manufacturing.
• CommScope Holding Co Inc (NASDAQ:COMM) has approved a stock buyback program, indicating confidence in the company's undervalued equity and potential shareholder value generation.

Negative Points

• The company faces potential tariff impacts, estimated to be between $10 million to $15 million in the second quarter, which they plan to mitigate by the third quarter.
• Despite strong performance, the economic environment remains fluid, with macroeconomic uncertainties affecting future projections.
• The ANS segment, although showing improvement, is still in the early phases of the DOCSIS 4.0 upgrade cycle, with some customers delaying their upgrade decisions.
• Free cash flow guidance for 2025 remains at breakeven, with significant cash burn in the first quarter due to working capital needs and higher interest payments.
• The company expects a sequential decline in core net adjusted EBITDA in the second quarter due to increased variable compensation and the elimination of first-quarter inventory adjustment benefits.

Q & A Highlights

Q: Can you discuss how customer behavior has changed since the tariffs were announced and whether there have been any discussions about price increases to offset the tariff impact? A: Charles Treadway, President and CEO, explained that CommScope has a flexible global manufacturing footprint, with 80% of US sales being US-origin or USMCA compliant. The Ruckus product line is an exception, with products sourced from Vietnam or Taiwan. The estimated tariff impact for Q2 is $10 million to $15 million, which they plan to mitigate by Q3 through manufacturing adjustments. Customer order patterns have not significantly changed, and discussions with customers have been transparent and supportive.

Q: How sustainable is the 25% EBITDA margin in the CCS segment, and are there plans to expand capacity given the demand for US manufacturing? A: Kyle Lorentzen, CFO, stated that the 25% EBITDA margin in CCS is sustainable, and the company benefits from fixed cost leverage as revenue grows. They are investing in capacity, with plans to bring additional capacity online in Q2 and the second half of 2025 to meet strong demand, particularly in the data center sector.

Q: Can you provide visibility on data center customer demand compared to service providers, and update us on the ANS business? A: Charles Treadway noted that data center customers are maintaining strong CapEx plans, with some even increasing them. The demand for connectivity and cabling is driving exponential growth. In the ANS segment, investments in new products are paying off, with significant ramp-ups in amplifiers and nodes. Some customers are still deciding on upgrade paths, but the company is gaining traction with its CASA acquisition.

Q: Regarding the tariff impact, how significant are the steel and aluminum tariffs, and can you pass these costs to customers? A: Kyle Lorentzen mentioned that the $10 million to $15 million tariff impact includes steel and aluminum, but it's a manageable number. The company is using its global footprint and supplier relationships to offset tariffs. Pricing adjustments are part of the strategy, with discussions ongoing with large customers about potential price increases.

Q: On Ruckus, is the revenue growth cyclical or due to share gains amid competitor uncertainty? Also, how should we view free cash flow trajectory after a Q1 cash burn? A: Charles Treadway attributed Ruckus growth to new products and vertical strategies, with some benefit from competitor uncertainty. The 51% growth suggests potential share gains. Kyle Lorentzen indicated that cash flow will improve in the second half, with a significant build expected in Q4.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.