CommScope Reports First Quarter 2018 Results

CommScope Holding Company, Inc. reported sales of USD 1.12 billion and net income of USD 34 million, or USD 0.17 per diluted share, for the quarter ended March 31, 2018. Non-GAAP adjusted net income for the first quarter of 2018 was USD 95 million, or USD 0.49 per diluted share. A reconciliation of reported GAAP results to non-GAAP results is attached.

In comparison, for the quarter ended March 31, 2017, CommScope reported sales of USD 1.14 billion and net income of USD 34 million, or USD 0.17 per diluted share. Non-GAAP adjusted net income for the first quarter of 2017 was USD 103 million, or USD 0.52 per diluted share.

First quarter 2018 overview. Sales were consistent with expectations and declined 1 percent year over year as growth in the Europe, Middle East and Africa (EMEA) and Asia-Pacific regions was more than offset by lower sales in the U.S. Net sales in most major international regions increased, primarily driven by the 2.4 percent favorable impact of foreign exchange rates as compared to the prior year period. GAAP operating income in the first quarter of 2018 declined 14 percent year over year to USD 104 million. Non-GAAP adjusted operating income, which excludes amortization of purchased intangibles, integration and transaction costs, restructuring costs and other special items, declined 13 percent year over year to USD 189 million. The decreases in operating income and non-GAAP adjusted operating income were primarily driven by lower sales volumes, reductions in certain selling prices and higher material costs. These were partially offset by the benefit of cost reduction initiatives.

First quarter 2018 segment overview. First quarter Connectivity Solutions segment sales decreased 1 percent year over year to USD 674 million with broad-based international growth more than offset by declines in the U.S. The international growth was primarily driven by the 2.4 percent favorable impact from foreign exchange rate changes from the prior year period. Connectivity Solutions GAAP operating income increased 13 percent year over year to USD 53 million, while non-GAAP adjusted operating income decreased 5 percent year over year to USD 109 million. GAAP operating income improved largely due to lower integration costs. The decrease in non-GAAP adjusted operating income was primarily driven by reductions in certain selling prices and higher material costs, partially offset by the benefit of cost reduction initiatives. First quarter mobility solutions segment sales declined 2 percent year-over-year to USD 447 million. Year-over-year growth in the EMEA and Asia-Pacific regions was more than offset by lower sales in the U.S. The international growth was primarily driven by the 2.5 percent favorable impact from foreign exchange rate changes compared to the year-ago period. Sequentially, Mobility Solutions sales increased 5 percent with a growing North American backlog. Mobility Solutions GAAP operating income declined 31 percent year over year to USD 51 million, and non-GAAP adjusted operating income decreased 21 percent year over year to USD 80 million. Both GAAP and non-GAAP adjusted operating income were impacted by lower sales volumes and unfavorable geographic and product mix.

Outlook. CommScope management revised its outlook primarily to reflect the price reductions at certain large North American operators expected in 2018 and 2019, as well as higher input costs. The company is taking action to mitigate these customer price changes through additional cost reduction initiatives, including manufacturing optimization, value engineering projects and additional product in-sourcing. The company provided the following second quarter and full year 2018 guidance.