Good day, ladies and gentlemen, and thank you for standing by. Welcome to the CommScope First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded. At this time, I would like to turn the conference over to Massimo Disabato. Sir, please begin.

Good morning, and thank you for joining us today to discuss CommScope's 2025 first quarter results. I'm Massimo Disabato, Vice President of Investor Relations for CommScope, and with me on today's call are Chuck Treadway, President and CEO; and Kyle Lorentzen, Executive Vice President and CFO. You can find the slides that accompany this report on our Investor Relations website. Please note that some of our comments today will contain forward-looking statements based on our current view of our business, and actual future results may differ materially. Please see our recent SEC filings, which identify the principal risks and uncertainties that could affect future performance. Before I turn the call over to Chuck, I have a few housekeeping items to review. Today, we will discuss certain adjusted or non-GAAP financial measures, which are described in more detail in this morning's earnings materials. Reconciliations of non-GAAP financial measures and other associated disclosures are contained in our earnings materials and posted on our website. All references during today's discussion will be to our adjusted results. All quarterly growth rates described during today's presentation are on a year-over-year basis, unless otherwise noted. I'll now turn the call over to our President and CEO, Chuck Treadway.

Thank you, Massimo. Good morning, everyone. I'll begin on Slide 2. I'm pleased to announce our first quarter results. In the first quarter, CommScope delivered core net sales of $1.112 billion, a year-over-year increase of 23% and core adjusted EBITDA of $245 million, a year-over-year increase of 159%. The performance in all of our core segments contributed to year-over-year growth for the quarter. I'm extremely pleased with our first quarter performance as we sequentially improved core adjusted EBITDA for the fourth consecutive quarter. Core adjusted EBITDA as a percentage of revenues of 22% remains strong. Our adjusted EBITDA as a percentage of revenues reaffirms our strategy of managing what we can control as we continue to navigate various external market conditions. We are closely monitoring the implementation and impact of the recently announced tariffs and the fluidity of the situation. Assuming tariff rates on April 30, 2025 remain constant, we have developed and are implementing our plan to mitigate the effect of tariffs over the next 90 days with our flexible global manufacturing footprint, our broad supplier base and commercial strategies. We are very supportive of U.S. manufacturing and produce a large number of products in the United States for the U.S. market. In addition, essentially, all of our products produced in Mexico comply with USMCA guidelines, reducing our overall exposure to tariffs. Although the situation remains fluid, with current visibility, we believe we can manage the uncertainty and maintain our 2025 adjusted EBITDA guidepost of $1 billion to $1.05 billion. With that, I'd like to give you an update on each of our core businesses. In the first quarter, CCS revenue grew 20% year-over-year, while CCS adjusted EBITDA increased 87% as a result of revenue growth, mix and cost leverage. CCS adjusted EBITDA as a percentage of revenue reached…

Thank you, Chuck and good morning, everyone. I'll start with an overview of our first quarter results on Slide 3. For core CommScope, which excludes the OWN and DAS businesses and general corporate costs that were previously allocated to the OWN, DAS and home businesses, we reported core adjusted EBITDA of $245 million for the first quarter of 2025, which increased 159% from prior year. First quarter adjusted core EBITDA results were up 2% sequentially versus the fourth quarter of 2024. Our core adjusted EBITDA as a percentage of revenues was 22%, the best that we have seen since the ARRIS acquisition and increased by 11.5 points year-over-year and 1.5 points versus the fourth quarter of 2024. For the first quarter, CommScope reported net sales from continuing operations of $1.112 billion, an increase of 23% from the prior year, driven by an increase in all segments. Adjusted EBITDA from continuing operations of $240 million increased by 186%. Adjusted EPS was $0.14 per share versus a loss of $0.24 in the first quarter of 2024. Order rates were stronger in the first quarter of 2025 than the fourth quarter of 2024. Core CommScope backlog ended the quarter at $1.179 billion, up $202 million versus the end of the fourth quarter 2024. We continue to operate with short lead times and do not expect this to change in the forecast period. Turning now to our first quarter highlights on Slide 4. Starting with CCS, net sales of $724 million increased 20% from the prior year. CCS adjusted EBITDA of $182 million increased 87% from the prior year. CCS adjusted EBITDA as a percentage of revenue for the quarter remained strong at 25.1%, driven by favorable mix and cost leverage. The CCS revenue increase was across all product lines with hyperscale and cloud…

Thank you, Kyle. I'm pleased with where we are positioned as we move into the second quarter of 2025. This is evidenced by a sequential growth in adjusted EBITDA during 2024 and the first quarter of 2025. The customer inventory challenges are behind us, and demand is growing in all of our segments. We have made significant investments in our product offerings and capacity over the last several years, and we are in a great position to take advantage of the stronger markets. In particular, the data center market tailwinds have allowed us to focus on our scale, technical leadership and customer focus, making us one of the key suppliers in the data center connectivity and cabling space. I'm very excited about the future of this business. Although we are optimistic about market conditions, the economic environment is fluid. We will continue to monitor and manage the tariff impact not only on cost, but on market conditions. We're using our flexible global manufacturing footprint, our broad supplier base and commercial strategies to effectively navigate the environment. Across CommScope our teams have done a great job taking advantage of the recovering markets by focusing on what they can control. We will continue to focus on what we control through our CommScope NEXT initiative program. I'm excited about the initiatives that we have in the pipeline and the first quarter is just another step in our journey. And with that, we'll now open the line for questions.

[Operator Instructions]. Our first question or comment comes from the line of Samik Chatterjee from JPMorgan. Your line is open.

Hi, good morning. And thanks for taking my questions. And congrats on the strong margins here. Maybe, Chuck, if you can talk about -- you talked a bit about tariff exposure for you specifically as a company. But maybe if you can talk about how customer behavior or purchasing commentary has been, since the tariffs were announced? And how much of the discussion has been about price increase with them or the potential price increases to pass through some of the tariff impact? And what have you seen in terms of pull forward or macro conversations from them? And I have a follow-up.

Okay. Thank you, Samik. Look, I'd start by saying we have a very flexible manufacturing global footprint with -- and we manufacture products close to our customers, and we source most of our raw materials locally. To give you some numbers, roughly 80% of our U.S. sales in the first quarter were country of origin in the United States or USMCA compliant. And the only business really that was an outlier is our RUCKUS product line. And if we excluded RUCKUS from our U.S. percent of sales, we'd be at 90%, that would our products would either be U.S. origin or USMCA compliant. RUCKUS gets most of their products either from Vietnam or Taiwan and currently, as you're aware, a large portion of the RUCKUS products fall under the tariff exemption. So then the next piece would be based on the tariffs today, the growth impact of these tariffs in the second quarter is estimated to be between, say, $10 million to $15 million. And we will mitigate most of the or some of this impact in the second quarter and all of it by the third quarter, and we're going to do that by using our flexible global manufacturing footprint in addition to increasing U.S. capacity that we're bringing on in the second quarter and our supplier base. The second quarter impact that we have is just really a result of timing of our ability to implement all these mitigating actions. You asked -- the other thing I would say is we continue to be optimistic with all of our segments for the full-year and as we shared, we're holding the adjusted EBITDA guidepost. We're just not raising them at this time, because it's early in the year in addition to the macroeconomic uncertainty that we're seeing. And your question about pull in, I would say, we have potentially seen a small amount of pull in, but we continue to operate with small lead times. And I'd say, this is how our business normally operates and we have a lot of localized manufacturing, I would say, with minimal impact -- minimal tariff impact, and I believe our customers understand that. And we really didn't see any changes to our order patterns in the first quarter or the second quarter. And I'd say, in conversations with our customers, we're really transparent about what's going on and where we do have a small impact. We're talking to them about it and working through it with them. So I'd say pretty much we've had positive feedback and support and they understand what we're doing to mitigate the challenges.

Got it. And maybe for my follow-up, if I can ask you on the strong margins in CCS and firstly, how sustainable should we think this sort of 25% EBITDA margin is? And in the past, you've talked about capacity expansion. Maybe you can sort of give us an update on where that stands? And if do you see a need to sort of add to your capacity plans for the -- on that front, particularly now given sort of there's probably more demand for U.S. manufacturing?

Yes. So I'll take that. I think on the margin side for CCS, we're definitely happy with the work that the team has done to drive a lot of improvement on margins there. I think those are margins that we can sustain. And as we grow the business, I think as we've talked about in the past, we do get some fixed cost leverage as we continue to grow the revenue side of the business. When we think about growth in CCS, particularly around data centers, we continue to invest in capacity. As Chuck mentioned, we're going to bring some capacity on in Q2, and we've already -- we're already starting to plan for bringing additional capacity on in the second half of '25. So it's sort of an ongoing process for us as we try to build ahead of the demand, and the demand looks like it is going to remain strong and we're building to meet that demand with our internal capacity.

Thank you. Thanks for taking my questions.

Thank you.

Thank you. Our next question or comment comes from the line of Meta Marshall from Morgan Stanley. Your line is open.

Great. Thanks. And congrats on the quarter. A couple of questions. Just one on the visibility that you're getting from kind of data center customers as you kind of increase demand, can you just kind of give a sense of how the visibility on the data center side compares to the service provider side? And then second, if you could just kind of give an update on the ANS business. I know you had a large customer that's going through an upgrade this year, but just how other customers who may have been -- kind of been holding patterns on architectural decisions, if you're seeing any kind of movement there? Thanks.

Thank you, Meta. To start with the data center question, I would say, our customers are still indicating strong CapEx plans to support their AI initiatives. And in some cases, we're hearing just as recent as yesterday that they're even raising CapEx plans. We're talking to them on a daily basis and we're actively in their databases -- in their data centers every day. Our product revenues, what's the most important to note here is that this beyond just data center growth rates, because of our exponential growth and we're getting that exponential growth because of connectivity and cabling because as they're moving to this GenAI, we're just getting a lot more connections which is a lot more product for us to sell. And I would say, bookings in the second quarter are ahead of Q1 which we would expect. So I would say things -- the visibility is, I would say, as good or better than what we're seeing in the broadband side because of this constant communication that we are at with them and the demand at which they're coming at us with needs. In terms of ANS, our business -- we're really seeing the benefits of our investments that we made an increase in developing new products over the last three to four years. And I would say, in terms of what's going on in our customer base, I mean we won't talk specific customers. But I would say, there are investments already going on in place and they're ramping up with amplifiers or nodes, we're seeing really significant strong ramp-ups as we talked about in our prepared remarks with some major customers. In other cases, I would say, there's still a lot of time. There's still a lot of, I'd say drag in terms of customers deciding which path they want to take, but we are seeing some really nice wins with our Casa acquisition with virtual CMTS. And I would say, the good news is that we're winning and we're gaining traction with this solution and I would say, overall, we're very pleased with our Casa acquisition.

Great. Thank you.

Thank you. Our next question or comment comes from the line of Simon Leopold from Raymond James. Mr. Leopold, your line is open.

Thank you for taking the question. First, I just wanted to come back to the tariff topic quickly and understand two things. One is within the headwind you described, $10 million to $15 million in 2Q, is some of this or could you quantify how much of this is related to the steel and aluminum? I'm trying to understand how big a deal those tariffs are for you because I presume those are important materials and your ability to either pass the tariff expenses to customers either through contracts or planned price hikes? Then I've got a very quick follow-up.

Yes. I think on the tariff situation, when we think about the $10 million to $15 million, I mean, it's -- in relation to the size of our business, it's a relatively small, we believe, manageable number. Your question around steel and aluminum, I mean, there is -- part of that $10 million to $15 million, as you would expect is steel and aluminum. But the one thing that we all are starting to understand is the complexity of the different rules and exemptions. So we're not going to give a number on steel and aluminum, but you can gather that, we're giving you $10 million to $15 million, it's a relatively small number. And again, it's a complex situation that we have to work through on the -- exactly what's being charged duty and not.

And your ability to either pass the pricing of hikes or as basically fees, are they pass through in your existing contracts?

Yes. I mean, I think Chuck talked about it and is the first answer. I mean, we're doing a bunch of things to offset the tariffs using our global footprint working with our suppliers. I think on the pricing side, that is a part of the puzzle. And I think in many cases, our businesses, it sort of -- it's different by business, all the way from changing some of our distributor or pricing that goes through enterprise. But then also having individual conversations with some of our large customers around places where we may need to require a price increase. But again, I think we would -- when we look at the total impact of $10 million to $15 million and us being able to manage it, I mean, I think we feel pretty comfortable that, that number is small enough that we're going to work through it.

Great. And then just as the follow-up, I wanted to clarify, within the deck, you mentioned the unified amplifiers would be available in 2025. I wanted to understand, is that availability, meaning we should expect revenue this year or is this when your customers would get them begin testing and integration? So would the revenue for unified amplifiers be more of a 2026 event, and in the RPD part of ANS, are you currently gaining market share during the first half of this year? Thank you.

Yes. In terms of the unified amplifier, you're correct, it's 2026 when we're expecting to see revenue in that. And on the RPD side, I would say, when you think about share, a lot of those things are split with major customers. And I would say, if anything, it's just depending on the timing of what part of the network they're upgrading. And so I would say, in general, I think our share is relatively flat related to the hardware. And we -- it's just the timing of when we get our products in the network compared to our competitors.

Thank you.

Thank you. Our next question or comment comes from the line of Matt Niknam from Deutsche Bank. Your line is open sir.

Hi guys, thanks so much for taking the questions. Two if I could. First, on RUCKUS, you've obviously seen some good revenue inflections and improvements. And so, I'm wondering if it's more sort of cyclical in nature, alongside some of the tailwinds from the inventory digestion, the channels work through? Or is there any incremental share gains you're seeing from some customer uncertainty as two of your competitors are contemplating a merger? So that's question one. Question two, on free cash, you reaffirmed the guide for breakeven for the year. You were -- you also burned about $200 million cash flow in 1Q. So I'm just wondering directionally how to think about the trajectory for free cash in 2Q and subsequent periods? Thank you.

Yes. So thanks for the question. You're correct. Related to RUCKUS, our channel inventories are behind us now, I believe. And I think we are gaining traction with our new products, whether it's RUCKUS One or it's our Wi-Fi 7 or I would also say some go-to-market strategies in terms of our vertical approach, I think those are all helping us. And I do believe there's some uncertainty out there or a cloud over the big potential acquisition that's going to be in the courts here soon. The other thing I would say is at 51% growth, that's pretty significant. I haven't seen all the numbers from all of our competition, but I would say, that's a pretty nice growth year-over-year number in terms of -- we'll see if we're gaining share or not, but I believe that's a pretty significant number.

On the cash flow side, I think it will be -- the trajectory of that will be pretty similar to what we've seen in the past. Second half, we'll see the build in cash and it will be heavily weighted to Q4 as we work through the year.

Thank you. Our next question or comment comes from the line of Michael Fisher from Evercore. Mr. Fisher, your line is now open.

Yes, great. Just wanted to start on the free cash flow guidance for the year. I know you called out the headwind from working capital and capacity expansion. I'm just wondering, in a more normalized environment for those two factors, what percentage of EBITDA over the long-term would you expect to convert into free cash flow?

I think in our prepared remarks, I mean, if you look at it, essentially in '25, we expect to build about $250 million in -- between working capital and CapEx north of $200 million. So if you think about -- if everything normalized out, technically, that's a number that would fall back into free cash flow.

Okay. And then on the mix adjusted EBITDA guidance being down sequentially, just trying to understand because it sounds like -- and I think you did probably outgrow a lot of your competitors this quarter, but it sounds like for the most part, people are expecting the RUCKUS market to stay pretty strong throughout all of 2025. So just wondering why you're expecting a sequential debt next quarter?

Yes. We had a few onetime favorable items relative to some inventory adjustments that we had in Q1. And then as we work through the year, we have to book our incentive compensation and the way that, that just flows through in Q2 versus Q1. Those are sort of two items that are headwinds. We'd expect to get back to sort of more normalized growth in the second half of the year, but we may take a little bit of a dip here in Q2. Clearly, that will depend on where the revenue comes in. But those are two sort of headwinds that we have going from Q1 to Q2.

Great. Thanks for taking my questions.

Thank you. I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.

Yes. Thank you so much for your time today, and we appreciate your interest in CommScope. Have a great rest of your week. Thank you.

Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the presentation. You may now disconnect. Everyone, have a wonderful day.