Cable vendor CommScope observed a slowdown in core net sales for the first quarter, which it attributed to low order rates amid an uncertain economic environment. But on Thursday’s earnings call, CEO Chuck Treadway pointed to “strong market tailwinds” in CommScope’s Connectivity and Cable Solutions (CCS) segment, as the company continues to build out its fiber and cable solutions portfolio.
CommScope in March announced it will invest $47 million in expanding its fiber optic manufacturing. The expansion’s focus lies in the vendor’s new HeliARC cable, which CommScope claimed will enable faster installation.
Despite a “lower book-to-bill ratio” for the quarter, Treadway said CommScope ended Q1 with a core backlog of $2.4 billion. He noted changes in near-term demand included “substantial customer inventory adjustments.”
“We believe the short-term adjustment will give way to long-term demand as network and fiber buildout[s] [are] still in early innings,” he said. “However, we are closely monitoring the expected recovery as our early second quarter order activity remains low.”
Treadway added CommScope’s cable business is “actually strong” and the company continues to “pretty much sell what we can make.”
“But the connectivity is really where we're seeing the softness, and we think that's more to our end customers finding labor maybe slow down or not going as fast on projects as they thought,” he said.
As for the Access Network Solutions (ANS) segment, CFO Kyle Lorentzen commented the business was “lumpy” in Q1 as revenue declined due to project timing. However, he anticipates that things will improve in the remainder of the year.
CommScope previously disclosed it shipped more than 1 million radio frequency amplifiers in 2022. Dell’Oro Group’s Jeff Heynen told Fierce in March that figure is a foretaste of what’s to come as operators start ramping up DOCSIS 4.0 upgrades.
“We're well-positioned with our RPD and RMD nodes, as well as the amplifiers, and that business is growing fast for us,” said Lorentzen. RPD and RMD refer to Remote PHY devices and Remote MAC PHY devices, respectively. “I would even go as far as to say, our legacy businesses still very profitable, and that we're growing share outside of the United States.”
He added CommScope is developing new products with the virtual CMTS, though he didn’t elaborate on the details. Its competitor Harmonic is the incumbent vCMTS supplier for Comcast and in March inked a vCMTS deal with Charter. Separately, Comcast is leveraging CommScope’s full duplex-capable amplifiers for its DOCSIS 4.0 rollout.
Financials
Core net sales, which exclude CommScope’s Home Networks segment, dipped 4% year-over-year to $1.66 billion. CCS segment revenue slid 2% to $823 million, partly impacted by declines in the enterprise market.
Revenue for ANS declined 6% to $299 million and Home Networks dropped 32% to $337 million. The highest revenue growth came from CommScope’s Networking, Intelligent Cellular and Security Solutions (NICS) unit, which posted a 51% YoY increase to $285 million.
The company posted a net loss of $11.7 million in Q1, but that figure was improved from a net loss of $154.4 million the year prior.