CommScope Posts Q3 Revenues of $2.38B, Net Loss of $156M
HICKORY, N.C. -- CommScope Holding Company, Inc. (NASDAQ: COMM), a global leader in infrastructure solutions for communications networks, reported results for the quarter ended September 30, 2019.
The company reported third quarter net sales of $2.38 billion, an increase of 106.9% compared to $1.15 billion during the same period in the prior year. The third quarter of 2019 included sales of $1.34 billion from ARRIS, which was acquired in April 2019. ARRIS sales in the third quarter include a $14 million reduction of revenue related to deferred revenue purchase accounting adjustments.
CommScope generated a net loss of $(156.5) million, or $(0.88) per basic share, a decrease from the prior year period's net income of $63.8 million, or $0.33 per diluted share. Non-GAAP adjusted net income for the third quarter of 2019 was $126.9 million, or $0.55 per diluted share, versus $114.5 million, or $0.59 per diluted share, in the third quarter of 2018.
Third Quarter 2019 Segment Overviews
For comparisons described below as pro forma for the Customer Premises Equipment, Network and Cloud and Ruckus segments, the third quarter of 2018 includes historical ARRIS results reflecting certain classification changes to align to CommScope's presentation. Reconciliations of the pro forma amounts and reported GAAP results to non-GAAP results are included below.
- Segment net sales of $634.5 million decreased 13.3% primarily due to lower sales volumes. Changes in foreign exchange rates negatively impacted segment net sales by approximately 1%. Net sales declined in all geographic regions.
- GAAP operating income of $55.1 million decreased 41.9%. Non-GAAP adjusted EBITDA decreased 24.8% to $121 million, or 19.1% of segment net sales, slightly lower than the adjusted EBITDA margin last year. Both GAAP operating income and non-GAAP adjusted EBITDA decreased primarily due to lower sales volumes.
- Segment net sales of $405.9 million decreased 3.1% primarily due to a pause in spending related to the pending merger of two large telecommunications customers, the impact of which is expected to continue into the fourth quarter. Changes in foreign exchange rates negatively impacted segment net sales by approximately 1%. Net sales declines in the Asia Pacific and CALA regions were partially offset by increases in the EMEA and the North America regions.
Customer Premises Equipment
Network and Cloud
- Segment net sales of $376.9 million decreased 29.2% from the pro forma year ago period primarily due to reduced cable operator spending. In addition, third quarter results benefited from customer orders that were expected to occur in the fourth quarter. Net sales in the quarter include a $7 million reduction of revenue related to deferred revenue purchase accounting adjustments. Changes in foreign exchange rates negatively impacted segment net sales by less than 1%. Net sales declined in all geographic regions.
- GAAP operating loss was $(45.5) million. GAAP operating loss was negatively impacted by acquisition accounting adjustments and restructuring costs, which are excluded from non-GAAP adjusted EBITDA. Non-GAAP adjusted EBITDA decreased 31.2% to $94.9 million, or 25.2% of net sales, compared to 25.9% of net sales in the pro forma year ago period. Non-GAAP adjusted EBITDA was negatively impacted primarily due to lower sales volumes and unfavorable product mix.
Fourth Quarter Guidance:
- Revenue of $2.2 billion $2.4 billion
- Operating income of $55 million $92 million
- Non-GAAP adjusted EBITDA of $275 million $335 million
- Non-GAAP adjusted effective tax rate of approximately 27% 28%
- Loss per share of $(0.45) $(0.42), based on 194 million weighted average basic shares
- Non-GAAP adjusted earnings per diluted share of $0.27 $0.37, based on 232 million weighted average diluted shares (assuming the if-converted method is applied for our Series A Convertible Preferred Stock)