CommScope Struggles With Reduced Demand, Misses Q3 Earnings, Cuts EBITDA Forecast

CommScope Holding Company, Inc. COMM reported third-quarter (Q3) net sales of $1.6 billion, missing the street view of $1.98 billion. Net sales declined 33% Y/Y.

The Claremont, North Carolina-based company registered an adjusted diluted EPS of $0.13, missing the analyst consensus of 30 cents.

The company registered non-GAAP adjusted EBITDA of $248.6 million, down 28.5% Y/Y.

Non-GAAP adjusted EBITDA margin was 15.5% in Q3 compared to 14.6% in the year-ago period.

Q3 adjusted gross profit was $544.5 million, lower than $740.4 million a year ago.

Adjusted gross margin in the quarter under review was 34%, higher than 31.1% a year ago.

Macroeconomic factors such as higher interest rates, inflation, and concerns about a global economic slow-down have softened demand for CommScope's products, with certain customers reducing purchases as they right-size their inventories and others pausing capital spending. 

This has negatively impacted the company's net sales in specific segments during the first three quarters of 2023 and may continue to negatively impact net sales during the remainder of 2023 and into the first half of 2024.

"Based on current visibility driven by a weaker demand outlook for the remainder of 2023, we reduced our Core adjusted EBITDA guideposts to a range of $1.00 to $1.05 billion," said CEO Chuck Treadway.

In the last quarter, the CEO reduced the Core adjusted EBITDA guideposts to a range of $1.15 billion to $1.25 billion.

The company ended the quarter with $518.9 million in cash and cash equivalents.

The company finished the quarter with a net leverage ratio of 6.7x.

Price Action: COMM shares are trading higher by 4.46% to $1.64 premarket on the last check Thursday.