HICKORY, N.C.--(BUSINESS WIRE)--CommScope Holding Company, Inc. (NASDAQ: COMM), a global leader in infrastructure solutions for communications networks, reported results for the quarter ended June 30, 2020.

“The network connectivity we provide to our customers and business partners has never been more essential. Our business model has once again demonstrated its strength and resiliency as we delivered results in the second quarter above our expectations in an incredibly challenging operating environment. Our talented employees quickly adapted to new ways of working, managed the global supply chain dynamically to mitigate the impacts of pandemic related disruptions and remain committed to building a stronger foundation for the future,” said President and Chief Executive Officer Eddie Edwards.

Edwards continued, “We are focused on delivering innovative solutions that keep people connected around the world. Our team is actively evolving our business to better position us for growth and success. We are focused on right-sizing our operations, reprioritizing investments, and focusing on the key technologies that empower our connected society. The Board and leadership team are proud of our accomplishments to date and are confident we will build momentum and continue to enhance shareholder value in the near- and long-term.”

Alex Pease, Executive Vice President and Chief Financial Officer, said, “While market conditions remain dynamic, we are focused on controlling what we can control, strengthening our liquidity position and improving our cost structure. We continue to take decisive actions to enhance our financial flexibility, including the recent refinancing of $700 million of senior unsecured notes. In the first half of the year we prudently managed cash on the balance sheet in light of the significant uncertainty related to the global pandemic and its impact on the global banking system. As we look ahead to the second half of the year, we believe some of that risk has abated, our business has strengthened, and our liquidity remains very strong. As a result, we plan to resume debt repayment in the third quarter, and we will evaluate additional opportunities before year-end depending on business performance and the macro economic environment.”

Second Quarter Results and Comparison

For comparisons described below as a combined company, the second quarter of 2019 includes historical ARRIS results for April 1 to April 3, 2019, the three days within the calendar second quarter before the acquisition date of April 4, 2019 with certain classification changes to align to CommScope’s presentation. Reconciliations of the combined company amounts and reported GAAP results to non-GAAP adjusted segment results can be found at https://ir.commscope.com/.

Net sales in the second quarter of 2020 decreased 18.1% year over year to $2.10 billion. On a combined company basis, net sales decreased 19.0% year over year due to reduced spending from cable operators and wireless carriers, primarily in the Home Networks and Outdoor Wireless Networks segments. The Company estimates that net sales were negatively impacted by approximately $50 million due to supply constraints related to COVID-19.

CommScope generated a net loss of $(321.1) million, or $(1.71) per basic share, in the second quarter, compared to the prior year period's net loss of $(334.0) million, or $(1.81) per basic share. Due to indicators of goodwill impairment found in our Home Networks reporting unit during the second quarter of 2020, we performed an interim goodwill impairment test; and we recorded $206.7 million of goodwill impairment charges related to our Home Networks segment during the period. Non-GAAP adjusted net income for the second quarter of 2020 was $76.9 million, or $0.32 per diluted share, versus $152.8 million, or $0.66 per diluted share, in the second quarter of 2019.

Non-GAAP adjusted EBITDA decreased 29.3% to $279.8 million compared to the same period last year. On a combined company basis, non-GAAP adjusted EBITDA for the second quarter of 2020 decreased by 26.5% and was 13.3% of net sales compared to 14.7% of net sales in the second quarter of 2019. The Company estimates that second-quarter 2020 non-GAAP adjusted EBITDA was negatively impacted by approximately $30 million related to supply chain disruptions as a result of COVID-19, as well as certain other COVID-19 related incremental costs.

Cash Flow and Balance Sheet

• GAAP cash flow from operations of $209.1 million.
• Non-GAAP adjusted free cash flow was $217.4 million after adjusting operating cash flow for $23.8 million of additions to property, plant and equipment, $23.0 million of cash paid for restructuring costs and $9.1 million of cash paid for transaction and integration costs.
• Ended the quarter with $823.4 million in cash and cash equivalents.
• As of June 30, 2020, the Company had $250.0 million outstanding borrowings under its asset-based revolving credit facility and had availability of $521.6 million, after giving effect to the borrowings outstanding, borrowing base limitations and outstanding letters of credit, resulting in total liquidity of approximately $1.34 billion. The Company repaid the $250.0 million of borrowings under its asset-based revolving credit facility in July 2020 after determining that the proceeds were not needed for future liquidity as cash flow generation has continued to improve and the broader financial markets have continued to stabilize.

Outlook

Due to the significant and evolving uncertainties related to the impact of the COVID-19 pandemic, CommScope is providing limited financial guidance for 2020.

While the Company is not providing specific guidance for the third quarter, the Company expects its third quarter sales and non-GAAP adjusted EBITDA to improve modestly compared to the second quarter. Additionally, the Company expects sales and non-GAAP adjusted EBITDA to sequentially improve in the fourth quarter.

About CommScope:

CommScope (NASDAQ: COMM) is pushing the boundaries of technology to create the world’s most advanced wired and wireless networks. Our global team of employees, innovators and technologists empower customers to anticipate what’s next and invent what’s possible. Discover more at www.commscope.com.