Vistance Networks, Inc. (VISN) FY 2024 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations is for the year ended December 31, 2024 compared with the year ended December 31, 2023. This comparison should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” included in Part I, Item 1A or in other parts of this Annual Report on Form 10-K. For a discussion and analysis of our financial condition and results of operations for the year ended December 31, 2023 compared to December 31, 2022, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2023 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 29, 2024.

OVERVIEW

We are a global provider of infrastructure solutions for communication, data center and entertainment networks. Our solutions for wired and wireless networks enable service providers, including cable, telephone and digital broadcast satellite operators and media programmers, to deliver media, voice, Internet Protocol (IP) data services and Wi-Fi to their subscribers and allow enterprises to experience constant wireless and wired connectivity across complex and varied networking environments. Our solutions are complemented by services including technical support, systems design and integration. We are a leader in digital video and IP television distribution systems, broadband access infrastructure platforms and equipment that delivers data and voice networks to homes. Our global leadership position is built upon innovative technology, broad solution offerings, high-quality and cost-effective customer solutions, and global manufacturing and distribution scale.

We completed the acquisition of certain assets of Casa Systems, Inc. and its subsidiaries (Casa) on June 7, 2024 (the Casa Transaction). As part of the Casa Transaction, we acquired certain assets (the Casa Assets) and assumed certain specified liabilities (the Casa Liabilities) of Casa. The sale was conducted pursuant to the bid procedures (the Bid Procedures) established in the chapter 11 cases of Casa Systems, Inc. and certain affiliates in the U.S. Bankruptcy Court for the District of Delaware (the Bankruptcy Court). Pursuant to the Bid Procedures, we were designated as the successful bidder following an auction held on May 29, 2024. On June 5, 2024, the Bankruptcy Court entered an order authorizing the sale of the Casa Assets to us pursuant to section 363 of the U.S. Bankruptcy Code (subject to the terms thereof). The sale closed on June 7, 2024 and, at such time, we funded the purchase price of $45.1 million and settled certain assumed Casa Liabilities, with cash on hand. We are integrating this strategic acquisition into our Access Network Solutions (ANS) segment and expect the acquisition to strengthen our ANS segment’s position by enhancing its virtual cable modem termination systems and passive optical network product offerings, which will enable customers to migrate to distributed access architecture solutions at their own speed, and further grow our customer base. We recorded $1.4 million of transaction and integration costs for the year ended December 31, 2024 related to the Casa Transaction, and these costs were recognized in selling, general and administrative expense in the Condensed Consolidated Statements of Operations. See Note 3 in the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion of the Casa Transaction.

CommScope NEXT

Since 2021, we have been engaged in a transformation initiative referred to as CommScope NEXT, which is designed to drive shareholder value through three pillars: profitable growth, operational efficiency and portfolio optimization. We believe these efforts are critical to making us more competitive and allowing us to invest in growth, de-leverage our indebtedness and maximize stockholder and other stakeholder value in the future. In 2022, CommScope NEXT generated positive impacts on net sales, profitability and cash flow from our execution on pricing initiatives, capacity expansion and operational efficiencies. In 2023, we experienced headwinds related to a slow-down in spending by our customers as discussed further below, but we continued to execute under CommScope NEXT to improve our profitability and cash flows by continuing to drive operational efficiencies and focusing on portfolio optimization, all of which is enabling us to take advantage of the recovery in demand that we began to see in late 2024. To that end, we incurred $36.7 million, $25.1 million and $41.8 million of net restructuring costs and $63.4 million, $27.1 million and $35.1 million of transaction, transformation and integration costs during the years ended December 31, 2024, 2023 and 2022, respectively, primarily related to CommScope NEXT initiatives. We expect to continue to incur such costs in 2025 as we continue executing on CommScope NEXT initiatives, and the resulting charges and cash requirements could be material.

43

On January 31, 2025, we completed the previously announced sale of our Outdoor Wireless Networks (OWN) segment and the Distributed Antenna Systems (DAS) business unit of our Networking, Intelligent Cellular & Security Solutions (NICS) segment to Amphenol Corporation (Amphenol), pursuant to the Purchase Agreement dated July 18, 2024, in exchange for approximately $2.1 billion in cash. In the third quarter of 2024, we determined the sale of our OWN segment and DAS business unit met the “held for sale” criteria and the “discontinued operations” criteria in accordance with Accounting Standards Codification (ASC) No. 360-10, Impairment and Disposal of Long–Lived Assets, and ASC No. 205-20, Presentation of Financial Statements: Discontinued Operations, due to its relative size and strategic rationale. For all periods presented, amounts in these consolidated financial statements have been recast to reflect the discontinuation of our OWN segment and DAS business unit in accordance with guidance. All discussions and results related to our NICS segment exclude the DAS business unit, since the DAS business unit was moved to held for sale in the third quarter of 2024.

On January 9, 2024, we completed the sale of our Home Networks (Home) segment and substantially all of the associated segment assets and liabilities (Home business) to Vantiva SA (Vantiva) pursuant to the Call Option Agreement entered into on October 2, 2023 and the Purchase Agreement dated as of December 7, 2023. In the fourth quarter of 2023, we determined the sale of our Home business met the “held for sale” criteria and the “discontinued operations” criteria in accordance with accounting guidance. All prior period amounts have been recast to reflect the discontinuation of our Home business.

Our continuing operations results include general corporate costs that were previously allocated to the OWN segment, DAS business unit and Home segment. These indirect costs, reflected on the corporate and other line item within our segment information below, are classified as continuing operations, since they were not directly attributable to these discontinued operations. Beginning in the first quarter of 2024, the corporate and other costs related to the Home segment have been reallocated to our remaining segments and partially offset by income from our transition services agreement with Vantiva. The corporate and other costs related to the OWN segment and DAS business will be reallocated to our remaining segments beginning in the first quarter of 2025.

Additionally, below we refer to certain supplementary Core financial measures, which reflect the results of the CCS, NICS excluding DAS, and ANS segments, in the aggregate, and exclude general corporate costs that were previously allocated to the OWN segment, DAS business unit and Home segment, since these costs were not directly attributable to the discontinued operations. The Core results represent the business results as currently managed and reported by the Company. Future results and the composition of any business divested in the future may vary and differ materially from the presentation of the Core financial measures. See the “Segment Results” section below for the aggregation of our Core financial measures.

Unless otherwise noted, the following discussions relate solely to our continuing operations. As a result, we are reporting financial performance based on the following remaining three operating segments, which excludes the OWN segment, DAS business unit in NICS and Home business: Connectivity and Cable Solutions (CCS), NICS and ANS. For further discussion of the discontinued operations related to our OWN segment, DAS business unit and Home business, see Note 4 in the Notes to Consolidated Financial Statements included elsewhere in the Annual Report on Form 10-K.

As of January 1, 2024, we shifted certain product lines from our CCS segment to our ANS segment to better align with how the businesses are managed. All prior period amounts have been recast to reflect these operating segment changes.

Impacts of Current Economic Conditions

In 2023, macroeconomic factors such as higher interest rates, inflation and concerns about a global economic slow-down softened demand for our products, with certain customers reducing purchases as they right-sized their inventories and others pausing capital spending. This industry recession has continued to negatively impact our net sales in all markets except data centers, which saw increased investment during 2024. We are beginning to see a recovery in demand in certain businesses and expect to see additional recovery in demand in 2025.

In 2023, we also began implementing additional cost savings initiatives to improve profitability, and we continued to implement further initiatives during 2024. These initiatives should enable us to take advantage of the expected recovery in demand in 2025. If this expected recovery does not occur in 2025, our outlook will be materially impacted.

For more discussion on risks related to our customers, see Part I, Item 1A, “Risk Factors” elsewhere in this Annual Report on Form 10-K.

44

RESULTS OF OPERATIONS

Comparison of results of operations for the year ended December 31, 2024 with the year ended December 31, 2023

(1)
Core financial measures reflect the results of the CCS, NICS and ANS segments, in the aggregate, and exclude general corporate costs that were previously allocated to the OWN segment, DAS business unit and Home segment, since these costs were not directly attributable to these discontinued operations. Beginning in the first quarter of 2024, these costs related to the Home segment have been reallocated to our remaining segments. These costs related to the OWN segment and DAS business unit will be reallocated to our remaining segments beginning in the first quarter of 2025. See “Segment Results” section below for the aggregation of our Core financial measures.

(2)
See “Reconciliation of Non-GAAP Measures” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, below.

Net sales

Net sales in 2024 decreased $359.4 million, or 7.9%, compared to the prior year primarily driven by decreased sales volumes as certain customers reduced purchases as they right-size their inventories and others paused capital spending and lower pricing. The decrease was driven by lower net sales in the ANS segment of $260.5 million and the NICS segment of $220.7 million, partially offset by higher net sales of $121.8 million in the CCS segment. For further details by segment, see the discussion of Segment Results below.

From a regional perspective in 2024, net sales decreased in the U.S. by $248.1 million, the Caribbean and Latin American (CALA) region by $78.0 million and the Europe, Middle East and Africa (EMEA) region by $43.1 million, and increased in Canada by $7.5 million and the Asia Pacific (APAC) region by $2.3 million. Net sales to customers located outside of the U.S. comprised 34.3% of total net sales for 2024 compared to 34.1% for 2023. Foreign exchange rate changes did not have a material impact on our net sales during 2024. For additional information on regional sales by segment, see discussion of Segment Results below and Note 18 in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

45

Gross profit, TSA income, SG&A expense and R&D expense

Gross profit (net sales less cost of sales)

Gross profit decreased in 2024 compared to the prior year primarily due to lower net sales volumes, lower pricing and higher input costs, partially offset by favorable product mix.

Transition service agreement income

Transition service agreement (TSA) income is related to the TSA we entered into with Vantiva in conjunction with the closing of the transaction to divest of the Home business in January 2024. Under the TSA agreement, we provided (and in some instances received) certain post-closing support on a transitional basis. As of the end of 2024, the services for Vantiva have ceased.

Selling, general and administrative expense

For 2024, selling, general and administrative (SG&A) expense decreased by $27.7 million compared to 2023, primarily due to cost saving initiatives and lower bad debt expense of $11.6 million, partially offset by higher transaction, transformation, and integration costs of $36.2 million and higher variable incentive compensation expense of $14.3 million. We expect to continue to incur transaction, transformation and integration costs in 2025 and the resulting charges and cash requirements could be material.

Research and development expense

Research and development (R&D) expense for 2024 decreased by $66.9 million compared to the prior year primarily due to lower spending within all segments. R&D activities generally involve ensuring that our products are capable of meeting the evolving technological needs of our customers, bringing new products to market and modifying existing products to better serve our customers.

Amortization of purchased intangible assets, Restructuring costs, net and Asset impairments

Amortization of purchased intangible assets

The amortization of purchased intangible assets was lower in 2024 compared to the prior year because certain of our intangible assets became fully amortized.

46

Restructuring costs, net

The net restructuring costs recorded in 2024 were primarily related to CommScope NEXT. For the year ended December 31, 2024, our net restructuring costs were $36.7 million and we paid $28.9 million to settle restructuring liabilities. We expect to make cash payments of $4.0 million in 2025 to settle CommScope NEXT restructuring actions. Additional restructuring actions related to CommScope NEXT are expected to be identified, and the resulting charges and cash requirements could be material.

Asset impairments

We did not record any asset impairment charges during the year ended December 31, 2024. We recorded goodwill impairment charges of $472.3 million and $99.1 million in 2023 related to our ANS and Building Data Center Connectivity (BDCC) reporting units, respectively. The ANS reporting unit is the same as our ANS segment and the BDCC reporting unit is in our CCS segment. See the discussion below under “Critical Accounting Policies and Estimates” for more information regarding the goodwill impairment tests performed during 2024.

Other income, net

Foreign currency gain (loss)

Foreign currency gain (loss) includes the net foreign currency gains and losses resulting from the settlement of receivables and payables, foreign currency contracts and short-term intercompany advances in a currency other than the subsidiary’s functional currency. The change in foreign currency gain (loss) in 2024 compared to 2023 was primarily driven by certain unhedged currencies.

Other income, net

The change in other income, net in 2024 compared to 2023 was primarily driven by a gain of $74.3 million on the early extinguishment of debt related to our debt repurchases in 2023 and $6.4 million of debt issuance costs related to the debt refinancing transactions in December 2024. See Note 9 in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for further discussion of the 2024 debt refinancing transactions.

Interest expense, Interest income and Income taxes

Interest expense and Interest income

Interest expense for the year ended December 31, 2024 increased $11.1 million compared to the prior year primarily due to the write-off of $16.2 million of existing debt issuance costs and original issuance discount associated with the redemption of our senior unsecured notes due June 15, 2025 (2025 Notes) and the refinancing of our existing senior secured term loan due 2026 (2026 Term Loan) as further discussed in Note 9 in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. The increase was partially offset by favorable impacts from lower long-term balances as a result of the debt repurchases in 2023. Our weighted average effective interest rate on outstanding borrowings, including the impact of the interest rate swap contracts and the amortization of debt issuance costs and original issue discount, was 8.09% at December 31, 2024 and 7.22% at December 31, 2023. Our interest expense and payments on our variable rate debt could increase if the Federal Reserve increases interest rates in 2025.

47

Income tax expense

For 2024, we recognized income tax expense of $51.7 million on a pretax loss of $409.3 million. Our tax expense on a pretax loss was less than the statutory rate of 21.0% in 2024 primarily due to the unfavorable impact related to an additional net $135.2 million of valuation allowance recorded during the year. Our tax expense was also impacted unfavorably by the U.S. anti-deferral provisions and non-creditable withholding taxes, partially offset by tax benefits related to federal tax credits. See Note 14 in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for more discussion of our income tax expense.

For 2023, we recognized income tax expense of $97.4 million on a pretax loss of $998.4 million. Our tax expense was more than the statutory rate of 21.0% in 2023 primarily due to the unfavorable impact related to a net $165.4 million of valuation allowance recorded during the year and a goodwill impairment charge of $571.4 million, for which minimal tax benefits were recorded. Our tax expense was also impacted by the unfavorable impacts of U.S. anti-deferral provisions and non-creditable withholding taxes, partially offset by tax benefits related to federal tax credits.

48

Segment Results

(1)
Core financial measures reflect the results of the CCS, NICS and ANS segments, in the aggregate, and exclude general corporate costs that were previously allocated to the OWN segment, DAS business unit and Home segment, since these costs were not directly attributable to these discontinued operations.

(2)
The corporate and other line item above reflects general corporate costs that were previously allocated to the OWN segment, DAS business unit and Home segment. These indirect expenses have been classified as continuing operations, since the costs were not directly attributable to these discontinued operations. Beginning in the first quarter of 2024, the corporate and other costs related to the Home segment have been reallocated to our remaining segments and partially offset by income from the Vantiva TSA. The corporate and other costs related to the OWN segment and DAS business unit will be reallocated to our remaining segments beginning in the first quarter of 2025.

(3)
See “Reconciliation of Non-GAAP Measures” within this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Connectivity and Cable Solutions Segment

Net sales for the CCS segment increased in 2024 compared to the prior year primarily due to higher sales volumes in the Enterprise business, partially offset by lower outdoor network solutions sales volumes in the first half of the year as certain customers paused spending as they right-sized their inventory levels. From a regional perspective in 2024, net sales increased in the U.S. by $115.5 million, the EMEA region by $36.7 million, the APAC region by $13.5 million and Canada by $6.3 million, but decreased in the CALA region by $50.2 million compared to the prior year. Foreign exchange rate changes did not have a material impact on CCS segment net sales during 2024.

49

For 2024, CCS segment operating income and adjusted EBITDA increased compared to the prior year primarily due to higher sales volumes, favorable product mix and lower input costs, partially offset by higher SG&A costs. The increases in SG&A costs were primarily due to higher variable incentive compensation expense, partially offset by lower bad debt expense and cost savings initiatives. In 2024, compared to the prior year, CCS segment operating income was favorably impacted by a reduction to impairment charges resulting from the prior year goodwill impairment charge of $99.1 million, a reduction of $12.6 million in restructuring costs and a reduction of $3.2 million in amortization expense, partially offset by an increase of $13.9 million in transaction, transformation and integration costs. Goodwill impairment charges, restructuring costs, amortization expense and transaction, transformation and integration costs are not reflected in adjusted EBITDA. See “Reconciliation of Segment Adjusted EBITDA” within this Management’s Discussion and Analysis of Financial Condition and Results of Operations, below.

Networking, Intelligent Cellular and Security Solutions Segment

Net sales for the NICS segment decreased in 2024 compared to the prior year primarily due to lower sales volumes of our Ruckus products driven by lower demand and channel inventory digestion. From a regional perspective in 2024, net sales decreased in the U.S. by $140.2 million, the EMEA region by $47.8 million, the APAC region by $27.0 million and Canada by $8.7 million, but increased in the CALA region by $3.0 million compared to the prior year. Foreign exchange rate changes did not have a material impact on NICS segment net sales during 2024.

For 2024, NICS segment operating income and adjusted EBITDA decreased compared to the prior year primarily due to lower sales volumes and E&O reserves recorded for excess inventory, partially offset by lower R&D costs and favorable product mix. In 2024, compared to the prior year, NICS segment operating income was unfavorably impacted by an increase of $3.2 million in transaction, transformation and integrations costs and a reduction of $3.5 million in gains related to the settlement of an intellectual property litigation claim received in the prior year. These unfavorable impacts were partially offset by a reduction of $4.6 million in restructuring costs. Transaction, transformation and integration costs, intellectual property litigation costs and restructuring costs are not reflected in adjusted EBITDA. See “Reconciliation of Segment Adjusted EBITDA” within this Management’s Discussion and Analysis of Financial Condition and Results of Operations, below.

Access Network Solutions Segment

Net sales for our ANS segment decreased in 2024 compared to the prior year primarily due to lower sales volume as certain customers have paused spending as they right-size their inventory levels. From a regional perspective in 2024, net sales decreased in the U.S. by $223.4 million, the EMEA region by $32.0 million and the CALA region by $30.8 million, but increased in the APAC region by $15.8 million and Canada by $9.9 million compared to the prior year. Foreign exchange rate changes did not have a material impact on ANS segment net sales during 2024.

Excluding the prior year goodwill impairment charge of $472.3 million from operating loss, for 2024, ANS segment operating loss and adjusted EBITDA were negatively impacted by lower sales volumes and unfavorable product mix, partially offset by benefits from lower SG&A, input and R&D costs, compared to the prior year. The reductions in SG&A costs were primarily due to cost savings initiatives. ANS segment operating loss was favorably impacted by a reduction of $63.1 million in amortization expense, partially offset by an increase of $37.8 million in restructuring costs. Also see “Reconciliation of Segment Adjusted EBITDA” within this Management’s Discussion and Analysis of Financial Condition and Results of Operations, below.

50

Liquidity and Capital Resources 2

The following table summarizes certain key measures of our liquidity and capital resources:

(1)
Includes cash and cash equivalents in assets held for sale of $98.4 million and $43.5 million as of December 31, 2024 and 2023, respectively.

(2)
Working capital is net of assets and liabilities held for sale and consists of current assets of $2,127.0 million less current liabilities of $984.4 million as of December 31, 2024 and current assets of $2,118.0 million less current liabilities of $925.6 million as of December 31, 2023.

(3)
Total capitalization includes long-term debt, including the current portion, Series A convertible preferred stock (Convertible Preferred Stock) and stockholders’ deficit.

Our principal sources of liquidity on a short-term basis are cash and cash equivalents, cash flows provided by operations and availability under our credit facilities. On a long-term basis, our potential sources of liquidity also include raising capital through the issuance of additional equity and/or debt.

The primary uses of liquidity include debt service requirements, voluntary debt repayments, redemptions or purchases on the open market, working capital requirements, capital expenditures, business separation transaction costs, transformation costs, restructuring costs, dividends related to the Convertible Preferred Stock if we elect to pay such dividends in cash, litigation settlements, income tax payments and other contractual obligations. As of December 31, 2024, we have repaid the $1.27 billion previously outstanding on our 2025 Notes.

We currently believe that our existing cash, cash equivalents and cash flows from operations, combined with availability under our Revolving Credit Facility, will be sufficient to meet our presently anticipated future cash needs. However, we may be required to obtain additional financing in the future to address our liquidity needs, and, subject to market conditions, we may from time to time seek to amend, refinance, restructure, exchange or repurchase our outstanding indebtedness and/or raise additional equity or other financing. Any debt we incur in the future may have terms (including cash interest rate, financial covenants and covenants limiting our operating flexibility or ability to obtain additional financings) that are not favorable to us, and any such additional equity financing may dilute the economic and/or voting interests of our existing stockholders, may be preferred in right of payment to our outstanding common stock or confer other privileges to the holders and may contain financial or operational covenants that restrict our operating flexibility or ability to obtain additional financings. Furthermore, our failure to obtain any necessary financing, amendment, refinancing, restructuring, exchange or repurchases could have a material and adverse effect on our results of operations, cash flows, financial condition and liquidity.

We may experience volatility in cash flows between periods due to, among other reasons, variability in the timing of vendor payments and customer receipts. We may, from time to time, seek to obtain alternative sources of financing, by borrowing additional amounts under our Revolving Credit Facility, issuing debt or equity securities or incurring other indebtedness, if market conditions are favorable, utilizing trade credit, selling assets (including businesses or business lines) or securitizing receivables to meet future cash needs or to reduce our borrowing costs. Any issuance of equity or debt may be for cash or in exchange for our outstanding securities or indebtedness, or a combination thereof.

2 In connection with the repayment of all outstanding amounts under our Revolving Credit Facility on January 31, 2025, the committed amount thereunder was reduced to $750.0 million, subject to borrowing base limitations.

51

Certain of our outstanding debt securities and debt under our credit facilities are currently trading at discounts to their respective principal amounts. In order to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, we may, from time to time, purchase such debt for cash, in exchange for common or preferred stock or debt, or for a combination thereof, in each case in open-market purchases and/or privately negotiated transactions, tender offers or exchange offers and upon such terms and at such prices as we may determine. Any such transactions will be dependent upon several factors, including our liquidity requirements, contractual restrictions, general market conditions and applicable regulatory, legal and accounting factors. Whether or not we engage in any such transactions will be determined at our discretion. The amounts involved in any such transactions, individually or in the aggregate, may be material.

Our interest payments on long-term debt are expected to total $2,906.8 million over the duration of the debt, with $613.5 million due in 2025 (assuming interest rates in effect as of December 31, 2024 on our variable rate debt). In 2024, the interest payments on our variable rate debt were higher than the prior year as a result of the Federal Reserve maintaining higher interest rates throughout most of the year. While the Federal Reserve ended 2024 with several rate cuts, our interest payments on our variable debt could increase if the Federal Reserve chooses to raise interest rates in future periods. For additional information regarding our long-term debt obligations, see Note 9 in the Notes to Consolidated Financial Statements and our discussion of our interest rate risk in Item 7A. Quantitative and Qualitative Disclosures About Market Risk included elsewhere in this Annual Report on Form 10-K. For information on our obligations related to our Convertible Preferred Stock, see Note 15 in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

In July 2023, we entered into a long-term supply contract with a third-party to secure the supply of certain raw materials. Under the terms of the contract, we will make advance payments through 2026 totaling $120.0 million (undiscounted) and based on meeting certain minimum purchase requirements through 2031, such advance payments will be credited and applied to future orders on a quarterly basis beginning in 2027 through 2031. We have committed to purchases of raw material under this agreement beginning in 2023 and growing to a level of approximately $137 million per year by 2026 and continuing through 2032.

We have $140.7 million in unrecognized tax benefits; however, the timing of the related tax payments is highly uncertain. We anticipate a reduction of up to $22.0 million of unrecognized tax benefits during the next twelve months. See Note 14 in the Notes to Consolidated Financial Statements included elsewhere in the Annual Report on Form 10-K for further discussion.

Although there are no financial maintenance covenants under the terms of our senior notes, there is a limitation, among other limitations, on certain future borrowings based on an adjusted leverage ratio or a fixed charge coverage ratio. These ratios are based on financial measures similar to non-GAAP adjusted EBITDA as presented in the “Reconciliation of Non-GAAP Measures” section below, but also give pro forma effect to certain events, including acquisitions, synergies and savings from cost reduction initiatives such as facility closures and headcount reductions. For the year ended December 31, 2024, our non-GAAP pro forma adjusted EBITDA, as measured pursuant to the indentures governing our notes, was $717.6 million, which included annualized savings expected from cost reduction initiatives of $17.4 million so that the impact of cost reduction initiatives is fully reflected in the twelve-month period used in the calculation of the ratios. In addition to limitations under these indentures, our senior secured credit facilities contain customary negative covenants based on similar financial measures. We believe we are in compliance with the covenants under our indentures and senior secured credit facilities at December 31, 2024.

Cash and cash equivalents increased by $119.5 million during 2024 as described under the Cash Flow Overview section below. As of December 31, 2024, approximately 42% of our cash and cash equivalents were held outside the U.S.

Working capital, net of assets and liabilities held for sale and excluding cash and cash equivalents and the current portion of long-term debt, decreased during 2024 compared to the prior year primarily due to lower inventory driven by inventory reduction initiatives, higher accounts payable due to timing of payments and higher accrued expenses including a higher variable incentive compensation expense in 2024. These impacts were partially offset by higher accounts receivable due to timing of collections. During 2024, we sold accounts receivable under customer-sponsored supplier financing agreements. This had an impact of approximately $103 million on working capital, excluding cash and cash equivalents and the current portion of long-term debt, as of December 31, 2024. Under these agreements, we are able to sell accounts receivable to a bank, and we retain no interest in and have no servicing responsibilities for the accounts receivable sold. The net reduction in total capitalization during 2024 reflected the net loss for the year.

52

Cash Flow Overview

The cash flows related to discontinued operations have not been segregated. Accordingly, the following cash flow overview includes the results of continuing and discontinued operations. Cash and cash equivalents increased during 2024 primarily driven by cash generated by operating activities of $273.1 million, partially offset by net cash paid for the debt refinancing transaction of $57.1 million, amortization payments totaling $24.0 million related to the 2026 Term Loan, cash paid related to the Casa Transaction of $45.1 million and capital expenditures of $26.2 million. For additional discussion related to the debt refinancing transactions, see Note 9 in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

Operating Activities

During 2024, the decrease in cash generated by operating activities compared to the prior year was primarily driven by lower operating performance, partially offset by decreases in working capital in the current year due to a reduction in net sales driving lower inventory purchases and lower accounts receivable. For information on significant non-cash operating activities related to our discontinued operations, see Note 4 in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

Investing Activities

53

During 2024, the decrease in cash generated by investing activities compared to the prior year was primarily due to lower cash of $71.0 million driven by proceeds collected in the prior year on the sale of property, plant and equipment and cash paid of $45.1 million in the current year related to the Casa Transaction, partially offset by higher cash of $35.4 million driven by a reduction of capital expenditures in the current year. Capital expenditures related to our discontinued operations were $0.7 million in 2024 compared to $5.2 million in the prior year. Cash generated by other investing activities in the current year included proceeds of $13.0 million on the sale of certain nonfinancial assets. Cash generated by other investing activities in the prior year period included proceeds of $11.1 million related to the sale of an equity investment and proceeds of $9.3 million on the sale of certain nonfinancial assets.

Financing Activities

In 2024, we completed certain refinancing transactions including the issuance of $1,000 million in aggregate principal amount of 9.500% senior secured notes due 2031 and entry into the new senior secured term loan facility due December 2029 with an initial aggregate principal amount of $3,150.0 million. We used the net proceeds, together with cash on hand and $200.0 million of borrowings under our asset-based revolving credit facility (Revolving Credit Facility), to refinance in full the Company’s existing 2026 Term Loan and redeem all of the approximately $1,274.6 million in outstanding aggregate principal amount of our 2025 Notes. In connection with the refinancing transactions, we paid approximately $59.4 million of original issuance discount and $33.1 million of debt issuance costs.

In 2024, we paid quarterly scheduled amortization payments totaling $24.0 million on the 2026 Term Loan prior to the refinancing.

As of December 31, 2024, we had $200.0 million of outstanding borrowings and the remaining availability was $449.3 million, reflecting a borrowing base subject to maximum capacity of $719.2 million reduced by $69.9 million of letters of credit issued under our Revolving Credit Facility.

In 2023, we repurchased $133.1 million aggregate principal amount of our 8.25% senior notes due 2027, $58.4 million aggregate principal amount of our 7.125% senior notes due 2028 and $25.4 million aggregate principal amount of our 2025 Notes, for total cash consideration paid of $142.6 million. We also paid four quarterly scheduled amortization payments totaling $32.0 million on our 2026 Term Loan during 2023. We did not borrow under our Revolving Credit Facility during 2023.

In 2024, we paid dividends of $65.2 million in additional shares due under the Convertible Preferred Stock. In 2023, we paid dividends of $61.8 million in additional shares due under the Convertible Preferred Stock. During 2024, employees surrendered shares of our common stock to satisfy their tax withholding requirements on vested restricted stock units (RSUs) and performance share units (PSUs), which reduced cash flows by $1.9 million compared to $9.1 million in the prior year.

Reconciliation of Non-GAAP Measures

We believe that presenting certain non-GAAP financial measures enhances an investor’s understanding of our financial performance. We further believe that these financial measures are useful in assessing our operating performance from period to period by excluding certain items that we believe are not representative of our core business. We also use certain of these financial measures for business planning purposes and in measuring our performance relative to that of our competitors.

54

We believe these financial measures are commonly used by investors to evaluate our performance and that of our competitors. However, our use of the term “non-GAAP adjusted EBITDA” may vary from that of others in our industry. This financial measure should not be considered as an alternative to operating income (loss), net income (loss) or any other performance measures derived in accordance with U.S. GAAP as measures of operating performance, operating cash flows or liquidity.

Although there are no financial maintenance covenants under the terms of our senior notes, there is a limitation, among other limitations, on certain future borrowings based on an adjusted leverage ratio or a fixed charge coverage ratio. These ratios are based on financial measures similar to non-GAAP adjusted EBITDA as presented in this section, but also give pro forma effect to certain events, including acquisitions and savings from cost reduction initiatives such as facility closures and headcount reductions.

Consolidated

(1)
In 2024 and 2023, primarily reflects transaction costs related to certain CommScope NEXT initiatives. In 2022, primarily reflects transformation costs related to certain CommScope NEXT initiatives and integration costs related to the ARRIS International plc (ARRIS) acquisition.

(2)
In 2023 and 2022, reflects ARRIS acquisition accounting adjustments related to reducing deferred revenue to its estimated fair value.

(3)
In 2023, primarily reflects costs of the identification, investigation, defense, recovery and litigation efforts related to a cyber incident that occurred in late March of 2023.

55

Reconciliation of Segment Adjusted EBITDA

Segment adjusted EBITDA is provided as a performance measure in Note 18 in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. Below we reconcile segment adjusted EBITDA for each segment individually to operating income (loss) for that segment to supplement the reconciliation of the total segment adjusted EBITDA to consolidated operating income (loss) in that footnote.

The corporate and other line item as presented in Note 18 in the Notes to Consolidated Financial Statements represents general corporate costs that were previously allocated to the OWN segment, DAS business unit and Home segment. These indirect costs are classified as continuing operations since they were not directly attributable to these discontinued operations. Beginning in the first quarter of 2024, the corporate and other costs related to the Home segment have been reallocated to the Company’s remaining segments and partially offset by income from the Vantiva TSA. The corporate and other costs related to the OWN segment and DAS business unit will be reallocated to our remaining segments beginning in the first quarter of 2025.

Connectivity and Cable Solutions Segment

Networking, Intelligent Cellular and Security Solutions Segment

56

Access Network Solutions Segment

Note: Components may not sum to total due to rounding.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our consolidated financial statements have been prepared in conformity with generally accepted accounting principles (GAAP) in the United States (U.S.). The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and their underlying assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other objective sources. Management bases its estimates on historical experience and on assumptions that are believed to be reasonable under the circumstances and revises its estimates, as appropriate, when changes in events or circumstances indicate that revisions may be necessary.

The following critical accounting policies and estimates reflected in our financial statements are based on management’s knowledge of and experience with past and current events and on management’s assumptions about future events. While we have generally not experienced significant deviations from our critical estimates in the past, it is reasonably possible that these estimates may ultimately differ materially from actual results. See Note 2 in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a description of all our significant accounting policies.

Asset Impairment Reviews

Impairment Reviews of Goodwill

We test goodwill at the reporting unit level for impairment annually as of October 1 and on an interim basis when events occur or circumstances exist that indicate the carrying value may no longer be recoverable. We compare the fair value of our reporting units with the carrying amount, including goodwill. We recognize an impairment charge for the amount by which the reporting unit’s carrying amount exceeds its fair value.

57

We estimate the fair value of a reporting unit using a discounted cash flow (DCF) method or, as appropriate, a combination of the DCF method and a market approach known as the guideline public company method. Under the DCF method, we calculate the fair value of a reporting unit based on the present value of estimated future cash flows. The significant assumptions in the DCF model primarily include, but are not limited to, forecasts of annual revenue growth rates, annual EBITDA margin and the discount rate used to determine the present value of the cash flow projections. When determining these assumptions and preparing these estimates, we consider historical performance trends, terminal growth rates, industry data, insight derived from customers, relevant changes in the reporting unit’s underlying business and other market trends that may affect the reporting unit. The discount rate is based on the estimated weighted average cost of capital as of the test date of market participants in the industry in which the reporting unit operates and is commensurate with the risk and uncertainty inherent in each reporting unit and in internally developed forecasts. Under the guideline public company method, we estimate the fair value based upon market multiples of revenue and earnings derived from publicly-traded companies with similar operating and investment characteristics as the reporting unit. The weighting of the fair value derived from the market approach may vary depending on the level of comparability of these publicly-traded companies to the reporting unit. When comparable public companies are not meaningful or not available, we may estimate the fair value of a reporting unit using only the DCF method.

Estimating the fair value of a reporting unit involves uncertainties because it requires management to develop numerous assumptions, including assumptions about the future growth and potential volatility in revenues and costs, capital expenditures, industry economic factors and future business strategy. Changes in projected revenue growth rates, projected EBITDA margins or estimated discount rates due to uncertain market conditions, loss of one or more key customers, changes in our strategy, changes in technology or other factors could negatively affect the fair value in one or more of our reporting units and result in a material impairment charge in the future.

To assess the reasonableness of the calculated fair values of our reporting units, we also compare the sum of the reporting units’ fair values to our market capitalization and calculate an implied control premium (the excess of the sum of the reporting units’ fair values over the market capitalization). If the implied control premium is not reasonable, we will reevaluate the fair value estimates of the reporting units by adjusting the discount rates and/or other assumptions.

2024 Interim and Annual Goodwill Analysis

Interim Test

Goodwill is tested for impairment annually or at other times if events have occurred or circumstances exist that indicate the carrying value of the reporting unit may exceed its fair value. As of January 1, 2024, we assessed goodwill for impairment due to changes in the composition of certain reporting units and performed impairment testing immediately before and after the change once goodwill was reallocated and determined that no goodwill impairment existed. During the third quarter of 2024, we completed an impairment analysis for goodwill recorded within the NICS reporting unit, which is impacted by the divestiture of the DAS business. The quantitative assessment was used, and the Company determined that the fair value of the impacted reporting unit exceeded the carrying value and that no impairment existed immediately prior to or subsequent to allocating goodwill to the disposal group that includes our DAS business.

Annual Test

The annual test of goodwill impairment was performed for each of the reporting units with goodwill balances as of October 1, 2024. For the 2024 annual goodwill test, we determined the fair value of each reporting unit using a DCF model and a guideline public company approach, with 75% of the value determined using the DCF model and 25% of the value determined using the market approach. The range of discount rates used in our annual tests was 9.5% to 14.5% for 2024. We determined that the fair value of the reporting units exceeded the carrying value and that no impairment existed.

Considering the low headroom going forward for the ANS reporting unit, there is a risk for future impairment in the event of further declines in general economic, market or business conditions or any significant unfavorable change in the forecasted cash flows, weighted average cost of capital or growth rates. If current and long-term projections for the ANS reporting unit is not realized or decrease materially, we may be required to recognize additional goodwill impairment charges, and these charges could be material to our results of operations.

58

The following table provides summary information regarding our reporting units with goodwill balances as of December 31, 2024 that have the lowest level of headroom. The table presents key assumptions used in our annual goodwill analysis, along with sensitivity analysis showing the effect of a change in certain key assumptions, assuming all other assumptions remain constant, to the resulting fair value using an income approach.

Definite-Lived Intangible Assets and Other Long-Lived Assets

Management reviews definite-lived intangible assets and other long-lived assets for impairment when events or changes in circumstances indicate that their carrying values may not be fully recoverable. This analysis differs from our goodwill impairment analysis in that an intangible or other long-lived asset impairment is only deemed to have occurred if the sum of the forecasted undiscounted future net cash flows related to the assets being evaluated is less than the carrying value of the assets. If the forecasted net cash flows are less than the carrying value, then the asset is written down to its estimated fair value. Other than certain assets impaired as a result of restructuring actions, we did not identify any impairments of definite-lived intangible assets or other long-lived assets in 2024. Changes in the estimates of forecasted net cash flows or changes in classification from held for use may result in future asset impairments that could be material to our results of operations.

Revenue Recognition

We recognize revenue based on the satisfaction of distinct obligations to transfer goods and services to customers. Our revenue is generated primarily from product or equipment sales. We apply a five-step approach as defined in ASC 606, Revenue from Contracts with Customers, in determining the amount and timing of revenue to be recognized: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when a corresponding performance obligation is satisfied. Most contracts with customers are to provide distinct products or services within a single contract. However, if a contract is separated into more than one performance obligation, the total transaction price is allocated to each performance obligation in an amount based on the estimated relative standalone selling price.

Product sales, to end-customers or distributors, represent over 90% of our revenue and are generally recognized at the point in time when products have been shipped, right to payment has been obtained and risk of loss has been transferred. Certain of our product performance obligations include proprietary operating system software, which typically is not considered separately identifiable. Therefore, sales of these products and the related software are considered one performance obligation.

License contracts include revenue recognized for the licensing of intellectual property, including software, sold separately without products. Functional intellectual property licenses do not meet the criteria for revenue to be recognized over time, and revenue is most commonly recognized upon delivery of the license/software to the customer.

Revenue is measured based on the consideration to which we expect to be entitled based on customer contracts. Sales are adjusted for variable consideration amounts, including, but not limited to, estimated discounts, rebates, distributor price protection programs and returns. These estimates are determined based upon historical experience, contract terms, inventory levels in the distributor channel and other related factors. Adjustments to variable consideration estimates are recorded when circumstances indicate revisions may be necessary. Variable consideration is primarily related to sales to our distributors, system integrators and value-added resellers.

59

Contingencies and Litigation

We are a party to lawsuits, claims and proceedings incident to the operation of our business, including intellectual property infringement matters, those pertaining to labor and employment contracts and other matters, some of which allege substantial monetary damages. We assess these matters in order to determine if a contingent liability should be recorded. In making this determination, management may, depending on the nature of the matter, consult with internal and external legal counsel and technical experts. We expense legal fees associated with consultations and defense of lawsuits as incurred. We accrue for loss contingencies when losses become probable and are reasonably estimable. If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability. Gain contingencies are recognized when they are realized.

Litigation outcomes are difficult to predict and are often resolved over long periods of time, making our estimates highly judgmental. Estimating probable losses requires the analysis of multiple possible outcomes that often depend on judgments about potential actions by third parties, such as future changes in facts and circumstances, differing interpretations of the law, assessments of the amount of damages and other factors beyond our control. There is the potential for a material adverse effect on our results of operations and cash flows if one or more matters are resolved in a particular period in an amount materially in excess of what we anticipated. Alternatively, if the judgments and estimates made by management are incorrect and a particular contingent loss does not occur, the contingent loss recorded would be reversed, thereby favorably impacting our results of operations.

Inventory Reserves

We maintain reserves to reduce the value of inventory based on the lower of cost or net realizable value, including allowances for excess and obsolete inventory. These reserves are based on management’s assumptions about and analysis of relevant factors including current levels of orders and backlog, forecasted demand, market conditions and new products or innovations that diminish the value of existing inventories. If actual market conditions deteriorate from those anticipated by management, additional allowances for excess and obsolete inventory could be required and may be material to our results of operations.

Tax Valuation Allowances and Liabilities for Unrecognized Tax Benefits

We establish an income tax valuation allowance when available evidence indicates that it is more likely than not that all or a portion of a deferred tax asset will not be realized. In assessing the need for a valuation allowance, we consider the amounts, character, source and timing of expected future deductions or carryforwards as well as sources of taxable income and tax planning strategies that may enable utilization. We maintain an existing valuation allowance until sufficient positive evidence exists to support its reversal. Changes in the amount or timing of expected future deductions or taxable income may have a material impact on the level of income tax valuation allowances. If we determine that we will not be able to realize all or part of a deferred tax asset in the future, an increase to an income tax valuation allowance would be charged to earnings in the period such determination was made.

We also establish allowances related to value-added and similar recoverable taxes when it is considered probable that those assets are not recoverable. Changes in the probability of recovery or in the estimates of the amount recoverable are recognized in the period such determination is made and may be material to our gain (loss) from continuing operations.

We recognize income tax benefits related to particular tax positions only when it is considered more likely than not that the tax position will be sustained if examined on its technical merits by tax authorities. The amount of benefit recognized is the largest amount of tax benefit that is evaluated to be greater than 50% likely to be realized. Considerable judgment is required to evaluate the technical merits of various positions and to evaluate the likely amount of benefit to be realized. Lapses in statutes of limitations, developments in tax laws, regulations and interpretations, and changes in assessments of the likely outcome of uncertain tax positions could have a material impact on the overall tax provision.

60

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2 in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.