COMM - NASDAQ

Good day, and thank you for standing by. Welcome to the CommScope's Third Quarter 2022 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your first speaker for today, Mr. Mick McCloskey, Head of Investor Relations. Please go ahead.

Good morning, and thank you for joining us today to discuss CommScope's 2022 3rd quarter results. I'm Mick McCloskey, Head of Investor Relations for CommScope. And with me on today's call are Chuck Treadway, President and CEO; and Kyle Lorentzen, Executive Vice President and CFO. You can find the slides that accompany this report on our Investor Relations website. Please note that some of our comments today will contain forward-looking statements based on our current view of our business, and actual future results may differ materially. Please see our recent SEC filings, which identify the principal risks and uncertainties that could affect future performance. Before I turn the call over to Chuck, I have a few housekeeping items to review. Today, we will discuss certain adjusted or non-GAAP financial measures, which are described in more detail in this morning's earnings materials. Reconciliations of non-GAAP financial measures and other associated disclosures are contained in our earnings materials and posted on our website. All references during today's discussion will be to our adjusted results. All quarterly growth rates described during today's presentation are on a year-over-year basis unless otherwise noted. I'll now turn the call over to our President and CEO, Chuck Treadway.

Thank you, Mick, and good morning, everyone. I'll begin on Slide 2. For the third quarter of 2022, core CommScope delivered net sales of $1.99 billion and core adjusted EBITDA of $353 million, the highest on record since the ARRIS acquisition. For consolidated CommScope, which includes Home Networks, we reported net sales of $2.38 billion and adjusted EBITDA of $348 million. Our third quarter results represent strong execution by the CommScope team in driving growth and efficiencies through our CommScope NEXT transformation. In addition, our results reflect the continued progress in working to offset inflationary impacts to our margins. We are reaffirming the core CommScope business to deliver adjusted EBITDA in the range of $1.15 billion to $1.25 billion, and net leverage between the range of 6.8x to 7.2x. As we've continued to indicate, I'm encouraged by our performance as we closed out the remainder of 2022. We are pleased with our performance in our CCS, OWN and NICS segments. As indicated in our previous earnings call, consistent with our expectations, our NEXT team delivered strong revenue and EBITDA growth for the quarter as our renewed strategy is paying significant dividends. As we move toward the end of the year, we continue to monitor the macro environment and how potential recession scenarios may impact CommScope. In Q3, we started to see some project delays and inventory adjustments slowing demand. With current visibility, we expect to see some spillover of these impacts into 2023. As we predicted, in some of our businesses, whether through increased capacity or better supply, some of our lead times are beginning to come down. Despite backlog reduction, our backlog is very healthy and represents approximately 6 months of trailing 12-month revenue. Our CCS business continues to capitalize on healthy end market demand and the capacity we've installed to serve it. CCS segment grew -- sales grew 28% from the prior year as we continue to leverage our capacity investments in a growing demand environment, and offset input cost inflation through price. Similar to last quarter, our most notable growth within the segment was driven by fiber cable and connectivity, growing 47% from the prior year. We are very proud of this accomplishment as it equates to an approximate $900 million in annualized growth. We remain very bullish for the medium and long term in our CCS end markets, and we are now looking at the next round of capacity expansions. Recently, we approved capital to expand our fiber connectivity injection molding capacity to service immediate demand. Overall backlog within CCS remains strong, with more than 2x historical levels at approximately $1.7 billion. But as expected, with a significant portion of our capacity brought online and lead times coming in, we maintain our expectation for this to modestly normalize over time. Turning to profitability. In the quarter, CCS adjusted EBITDA grew 55% from the prior year. As expected, we continue to drive price to offset inflation, while driving operating efficiencies throughout the business. In our manufacturing plants, we are driving operating leverage as capacity ramps. Additionally, we are making significant progress in our CommScope NEXT efficiency plans as we generate savings from better material utilization and throughput improvements. NICS delivered an impressive quarter of top line growth, growing the business approximately 25%, both annually and sequentially. NICS growth was led by RUCKUS as they delivered their highest quarterly revenue on record. Strong execution in our product design and procurement processes enabled the business to deliver product in spite of a challenging chip environment. Market demand remains strong overall. While lead times are beginning to come down, the business still maintained a backlog of nearly $820 million, up 100% from the prior year. Importantly, as we indicated on our second quarter earnings call, NICS delivered a substantial improvement in profitability, turning the segment's adjusted EBITDA from a loss in the first and second quarters to a positive EBITDA in the third quarter. I'd add that we expect this profitability trend to continue going forward while we continue to invest in R&D for the future -- for future growth in both RUCKUS and ONECELL. OWN delivered 7% growth over prior year. Performance in the business was led by continued site preparation activities in our Integrated Solutions and HELIAX businesses. Operational efficiencies and pricing actions helped improve adjusted EBITDA to $82 million, an increase of 36% from the prior year. ANS delivered net sales that were relatively flat to prior year. As expected, the business has lapped the tougher comparables from prior quarters, which were related to peak pandemic demand for bandwidth. In addition to net sales, adjusted EBITDA performance was down versus prior year, driven by the mix shift from the head end to the edge. I'm now turning to Slide 3 for some additional perspective on the third quarter and an update on my priorities for CommScope. Overall, our team continues to execute well in a challenging environment. We are working hard to continue driving price to offset inflation and are starting to deliver efficiency through our general manager model. Our general manager model is enabling better alignment throughout the CommScope portfolio, and the enhanced visibility, accountability, speed and workflow improvements are starting to contribute to our bottom line, all while we are continuing to invest heavily in R&D and new product introductions. As Kyle and I shared in August, we expected our increased volumes, pricing offset and efficiency actions to continue driving overall core EBITDA margin expansion through the back half of the year. Execution on this front is evidenced in the 240 basis point sequential improvement in core EBITDA margins during the quarter. And this sequential improvement in profitability was most impactful in our NICS segment, which grew overall adjusted EBITDA by $40 million quarter-over-quarter. Before I hand the call over to Kyle, I'd like to provide an update on Home Networks as well as my priorities for the remainder of the year and into 2023. Turning to Home Networks. Home continues to be challenged with chip constraints, demand and negative impacts from foreign exchange rates. In response to this, we are implementing a transformation plan specific to Home to help improve performance. And finishing with core CommScope, our organization remains intently focused on driving organic growth initiatives and becoming more operationally efficient in every way we do business. This includes innovation and new technologies that will support our customers in creating the future of wireless and wireline networks. Additionally, our CommScope NEXT priorities are driving incremental profitability. Our business leaders are directly aligned with sales, operations, supply chain planning and engineering functions to reduce waste in the system, challenge cost, drive better material utilization and boost overall productivity. We believe our actions are continuing to make great progress and will enable us to deliver significant incremental shareholder value. With that, I will now turn the call over to Kyle to talk more about the quarter.

Thank you, Chuck, and good morning, everyone. I'll start with an overview of our third quarter results on Slide 4. For the third quarter, consolidated CommScope reported net sales of $2.38 billion, an increase of 13% from the prior year, driven by an increase in all core segments and partially offset by a decline in Home Networks. Growth in top line includes approximately $53 million or 2.5% headwind associated with the year-over-year change in FX rate. Adjusted EBITDA of $348 million increased 34% as a result of our volume growth, pricing actions to offset inflation and operational efficiencies through our CommScope NEXT actions. Adjusted EPS was $0.50 per share, increasing 72% from prior year. For core CommScope, net sales of $1.99 billion, grew 18%, and adjusted EBITDA of $353 million, grew 29% from prior year. I'd also highlight the 23% sequential improvement in core adjusted EBITDA. As we've mentioned throughout the year, we expect to see a larger favorable impact on the P&L from our pricing actions to offset inflation during the second half of this year, a trend that will continue into the fourth quarter. In addition, as Chuck mentioned, we are continuing to drive efficiencies within our core businesses through our CommScope NEXT actions, aided by the enhanced focus and flexibility unlocked with the implementation of our general manager model. Consistent with our expectations, as we indicated on our previous call, with our increases in capacity, modest improvement in supply availability and overall lead times coming down, core CommScope backlog declined 4% from the previous quarter, ending at over $3.6 billion. This represents a 62% increase from the third quarter of last year. For core CommScope, the third quarter yielded a book-to-bill of 0.93. Turning to our segment highlights on Slide 5. Starting with CCS, net sales of $1.01 billion, increased 28% from the prior year. Growth in fiber drove the overall segment performance increasing, 47% from the prior year, driven by strong demand for fiber products and our pricing initiatives. Our capital investments in fiber have paid significant dividends and we will continue to invest in new capacity. CCS adjusted EBITDA of $188 million, grew 55%, as the segment benefited from the increase in volume, price to offset inflation and operational efficiencies. With pricing, growth and efficiency actions, CCS EBITDA margins have returned to more normalized historical levels. Looking forward, we are expecting fourth quarter net sales to be below the third quarter driven by typical seasonality, project delays and inventory investments. NICS net sales of $258 million, grew 25% from the prior year. Growth was driven by our RUCKUS business, which, as Chuck stated, delivered its highest sales quarter on record. NICS adjusted EBITDA of $25 million, grew $33 million from the prior year driven by volume, growth and price, representing strong execution in a challenging chip supply market. This also represents a $40 million adjusted EBITDA improvement from the prior quarter despite our continued aggressive investment in RUCKUS and ONECELL to drive future growth. We expect our strong performance to continue through the end of the year. OWN net sales of $382 million, grew 7% from the prior year, primarily driven by price and strength in the Integrated Solutions and HELIAX businesses. OWN adjusted EBITDA of $82 million, grew 36% from the prior year, driven by price to offset inflation, higher volumes and improved regional and product mix. Consistent with our prior OWN commentary, we expect the top line environment to moderate in the fourth quarter, given the speed of carrier deployments earlier this year and typical weather-related seasonality. ANS net sales of $342 million, increased 1% from the prior year, driven by an increase in our access technology businesses. ANS adjusted EBITDA of $58 million, declined 43% from the prior year, driven by the mix change to lower-margin hardware-centric products found on the network edge. Looking forward, we expect ANS sequential EBITDA improvement in the fourth quarter through a combination of increasing material flow, internal production ramping and project timing. Finishing up our segment performance with Home Networks. Home Networks net sales of $391 million, declined 6% from the prior year driven by declines in our Broadband Gateway business. Home Networks delivered an adjusted EBITDA loss of $5 million for the quarter. This was an improvement of approximately $11 million from the prior year. However, I'd remind you that the prior year included a significant bad debt expense in the third and fourth quarters that should be considered in annual comparisons. As mentioned, Home continues to be our most significantly impacted segment from a chip supply perspective. In addition, the business was negatively impacted by changes in foreign exchange rates as the majority of their cost base is priced in U.S. dollar, while a higher percentage of customer revenues are derived in local currencies. Ultimately, we believe in the strategic rationale to separate the Home business from core CommScope. However, given the current performance, we are implementing transformational improvement plans that will take time to produce results. Turning to Slide 6 for an update on cash flow. For the third quarter, cash from operations was a use of $88 million and adjusted free cash flow was a use of $91 million. As indicated on our Q2 call, during the quarter, working capital continued to be a significant use of cash as a result of increasing revenues and quarter-end timing of payables. While inventory balances remained elevated, the build moderated during the quarter, and we continue to view inventory as a lever to drive improved cash performance at the end of the year. Looking forward, given our improved profitability and opportunity to work down elevated inventory balances, we expect a substantial improvement in free cash flow during the fourth quarter. This will drive the company to a positive free cash flow on a full year basis. And to provide further context, as of this week, we have fully repaid the $105 million of our ABL that was drawn at the end of September. Turning to Slide 7 for an update on our liquidity and capital structure. During the third quarter, cash and liquidity remained strong. We ended the quarter with $146 million in global cash. Total cash and liquidity for the quarter was approximately $925 million, a modest improvement from the prior quarter. As I just mentioned a moment ago, while we ended the quarter with $105 million outstanding on our ABL revolver, as of this week, that amount was fully repaid as our cash flow generation has begun to pick up. In addition, as you may have seen from our 8-K filed a few weeks ago, we have successfully extended the maturity of our ABL an additional 3 years to September 2027, while adding an additional flexibility for a European-based tranche, if needed in the future, and increasing the underlying assets included in our borrowing base. During the quarter, we made no incremental debt repayments beyond the required $8 million of term loan amortization. The company ended the quarter with net leverage of 7.8x, an improvement from the 8.1x at the end of the second quarter. And as mentioned earlier this morning, we remain committed to meeting our year-end target of net leverage within the range of 6.8 to 7.2x. I'll now turn it over to Chuck to provide some closing comments and perspective on 2023.

Thank you, Kyle. I'm now on Slide 8. As I mentioned in my earlier remarks, we believe our strong execution will allow core CommScope to deliver adjusted EBITDA for the full year 2022 within our provided range. I'd also like to give you some early perspective into 2023. Despite conditions for some level of moderate recessionary headwinds in our results, we still believe there is enough offset through our CommScope NEXT organic growth and efficiency levers to maintain our existing expectations. Specifically, with current line of sight, we are reaffirming the expectations that we shared with you on our December 2021 Investor Day of a core adjusted EBITDA in the range of $1.35 billion to $1.5 billion, and net leverage target of 5.5x to 6.5x for the full year 2023. In addition, again, with current line of sight, we are also reaffirming our 2024 guidepost of $1.6 billion to $1.8 billion of core adjusted EBITDA, and net leverage in the range of 4 to 5x. I'd like to thank you for your interest and support in CommScope and belief in our ability to drive transformative change, which we believe will continue to unlock significant value for our shareholders. And with that, we'll now open the line for questions.

[Operator Instructions]. Your first question comes from the line of Samik Chatterjee from JPMorgan.

Congrats on the strong brand. I guess I had a couple to start with. Chuck, definitely, it sounds like you've seen more indications of customers hesitating in terms of their outlook, just given your comments around recessionary sort of impact on your business. Just wondering if you can share more insights in terms of what you're hearing from your customers? And particularly which segments of your business are you seeing some of those discussions sort of pick up with your customers? And I have a follow-up.

Yes. I would say we are seeing some project delays and inventory adjustments, let's say, primarily in the CCS business and maybe in OWN. But electronic shortages also were still out there, but although I would say that's improving. But I would say, Samik, that we're very bullish medium and long term for both CCS and our NICS businesses. I mean so we're very confident about where this is going.

Okay. And then just a follow-up. You're seeing strong sequential improvement in margins on account of the price increases that you've been able to drive. Where are we in terms of continuing to see that sequential improvement driven by price increases? Are you -- you also have a big backlog. So obviously, that probably delays the impact of any further price increases you take. But are we sort of at a peak in terms of 4Q in relation to pricing flowing through the P&L? Or is there more to come in 2023 when we look at the EBITDA guide or the improvement in 2023?

Yes. I think as we had talked about earlier in the year and even late last year, as the price increases through, we have to work them through the backlog. I think at this point in time, all of our pricing is in the backlog now. And I think we'll see a little bit of bump in Q4 related to pricing. But I think we're starting to get to the peak as we exit '22 with having all of those inflationary price increases in our backlog and now hitting the P&L.

Your next question comes from the line of Sami Badri from Credit Suisse.

The first question I really had was if we -- I want to kind of put your economic kind of slowdown comment into some context here. If you actually look at any kind of project that is benefiting from federal funds and stimulus, are you seeing any of those projects from RDOF, ARPA or any other kind of federal program, are those projects seeing any kind of slowdowns? So maybe I wanted to just clarify that piece and maybe compare and contrast that to the other parts of your business that are not seeing direct federal funds flows. And then the other question I had is, it sounds like -- I think I heard this correctly, is that the NICS segment has $820 million of backlog? And if I just look at the model and I look at where you came in at 3Q of '22, does that mean that the revenue that you guys are willing to recognize in that segment need to be comparable to the 3Q '22 margin profile? It looks like you have about 12 months of runway in that segment from a backlog perspective, and I think a lot of analysts actually have margins lower in 2023 versus what you just reported in 3Q. So just giving us some context around that number, the margin profile, what to expect would be helpful.

Yes. Look, I'll take the second question. So I think on NICS, clearly, as we indicated,back in Q2, we've seen the business go from a negative EBITDA to a positive EBITDA, and a lot of that has to do with the top line growth. It has to do with a little bit of pricing. It has to do with us working the chip side and getting a little bit better availability. I think as we think about the NICS business, we think that there may be some mix within the business because the RUCKUS business and our ICM business are a little bit different in margin profile, but not a lot. I think we feel like, moving forward, the margin profile that you're seeing in Q3 is the margin profile that we can sort of maintain moving forward.

So on the -- on your first part of the question, we still remain very, very bullish on the government spending. We don't see any slowdown at all. In fact, that's all like a big machine in process. They're starting to figure out which states get money, how that's going to happen. We're very bullish on that. In terms of how that compares to other pieces of business outside of government, I would say, in my view, it really looks more like installation capacity and maybe a little bit of planning. But I think long term, we're very positive about where all this is going. It's going to happen. We're going to close the digital divide and they've got to put stuff on the ground to make that happen. And being in telecom infrastructure, I think is -- I mean, fairly positive in terms of our muted effects that we see from the recession.

Got it. And I just had a free cash flow question, and I want to tie in kind of your inventory level. There was a reference made earlier on the call regarding inventory being one of the strategic components of free cash flow. It wasn't phrased that way, but I guess I'm kind of reading between the lines here. I guess I wanted to know is how much of your inventory today could you just convert to cash flow and free up your balance sheet, right? Because inventories have been going up for a long time and we're reaching a point now where things technically and the supply chains are supposed to be easing. So just how much control do you have as a company on relieving or releasing inventory levels to generate significant cash flow if you guys wanted to do it?

I mean I think -- I mean, inventory is a function of how we see demand and how we're planning the demand and the supply. Clearly, as we've gone through the supply chain challenges that we have, it's clearly, just because of those factors, has sort of generated higher inventory levels because we may have a shortage somewhere and we bought other parts to try to complete a product. And then the other thing is lead times are a little bit longer, particularly on the ocean freight side. So I think there's some general factors that have caused our inventory to build a little bit. But as we've moderated this inventory, I mean, I think how -- I think how I would answer your question, which may be a little bit different than what you asked, I think we feel like there's a couple of hundred million dollars of inventory that we should be able to work out of the system over the next few quarters as we think about managing just our planning process better, particularly as the supply chain situation gets a little bit better. Because, hey, the reality of it is we also are holding things that, hey, we may have ordered a little bit more because of the uncertainty in the supply chain.

Your next question comes from the line of Steven Fox from Fox Advisors.

I had two questions. First of all, in terms of catching up on price, obviously inflation is a moving target, and you guys have been at this for a while. So how do you think about going forward? What should we expect from the company, better or worse, in terms of passing on higher costs, which are still possible, to customers as you go into next year? And then in terms of, Chuck, just reaffirming all the long-term targets for EBITDA for next year and '24, can you talk about any kind of moving pieces within that? Things that may be now you're a little bit more optimistic about realizing things that maybe will take a little bit longer, et cetera.

Sure. Thanks so much, Steven. I'll take the price piece and Kyle can take the guidance piece. I would say on price, what we've really put in place in the company is tools and mechanisms to understand what's going on with commodities and what's going on with each of our product lines. And so I think we're in a much better position now to understand what's going on. And using those muscles to be able to talk to our sales team and our customers about what's going on, I think we're in a much better position than we were in the past. So I feel good about that, and we're going to continue to monitor that as we go forward. This is not something that we're going to stop. And I would say, as of right now, prices continue to, I'd say, be over last year, but I would say they're stabilizing. And that we just have to watch them and see what's going on and be in constant dialogue with our customers.

And then on the EBITDA.

Yes. So on the EBITDA side, I mean, I think the -- when we think about the '23 guidepost that we provided, I mean, I think the thing that moves it is just what's going to go on with the economy and how that impacts our markets. I think in our guidepost, we've provided that we've assumed that there's some modest recessionary impact in there. And the reality of it is if there's a deeper recession, those numbers probably come down. If there's a shallower recession, we do better than those numbers. So I think as we sit here, we feel like that's really the driving factor because we feel very confident about our initiatives and our plans, it's just the things that we can't control that are the things that we believe will move our 2023 numbers up or down. I think the one thing we would also say is regardless of what happens in those scenarios, we are going to be well positioned to take advantage of those. So hey, if it's -- we have capacity that we can continue to grow the business against. So even though those may be the plans, we definitely are positioning ourselves to make sure that we can take advantage of if there's some upside to that.

That's helpful. I guess what I was getting at, is there anything under -- in terms of the controllables, now that you've been at this for a while on a project-by-project basis, where you're realizing benefits sooner than expected or things are taking longer, any other color on just sort of the project -- progress of your own plan is what I was curious about.

Yes. I mean I can -- I'll let Chuck comment, but I'll comment first. I mean, I think just like any plan, there's things that -- I think there's things that work better than you expect and things that you don't pan out. We spend a lot of time as a company, as a leadership team, trying to improve where we're placing bets. And I think as we get deeper into the CommScope NEXT process, I think we're doing a better job of improving our hit rate on making sure that we're focusing on the right initiatives. And a lot of that is driven from what the market is telling us or something else that may not necessarily be in our control.

What I'd add to that, Steve, is just the whole general manager model and business unit leaders. We meet with them once a month. We're working with them individually, as their team, helping them identify opportunities or just listening to opportunities across their business and trying to build a, let's say, a winning mindset, where, regardless of what happens in the market, we can control -- we have a lot more control than we think we do. And I believe these initiatives and everything we do have in place is what's allowing us to have the confidence to hold the numbers that we said in 2021 in December. So I think the team is continuing to improve our X matrix, our CommScope NEXT initiatives, our mindset change, thinking that we can control our destiny. This whole winning mindset, I think, is what's helping us have that confidence.

Your next question is from George Notter from Jefferies.

Hello, can you guys hear me?

Yes, we can.

All right. I guess I wanted to ask about the CCS business, 3% sequential growth. I realize I might be nitpicking here given how much growth you guys have delivered on a year-on-year basis. But I guess I would have thought CCS could have grown a little bit more in sequential terms given the new manufacturing capacity coming online, given some of the price coming into the model. I'd just love to understand kind of what you guys are seeing there right now. And then also on that note, you guys talked about, I think, a down sequential compare in CCS in Q4. I know that Corning, your key competitor there, is also looking at a down sequential compare. Can you talk about what you're seeing in that business for Q4?

I'll hit the down sequential. And I think what we're really talking about there is there's some seasonality going on anyway. And I would say there is just -- as I talked a little bit before, I think they just have a lot of capacity in their -- they have a lot of material that they just haven't been able to install as fast as they wanted to, and I think they planned a little bit higher. They're planning calls for a little bit more than they can take on. But we believe this is going to continue to moderate, and we're going to be better at that. They're going to be better at that. And I think it's a small bump. But as I said, we were very bullish medium and long term on that.

I would just add. I think in Q3, we talked about some of the project delays and inventory adjustments. I think we saw that at the tail end of Q3. We saw some of that sneak into Q3, and we expect to see a little bit of that in Q4.

Got it. And then the manufacturing capacity...

The only other thing I would comment on that is our fiber growth was extremely healthy, right? I mean we were in the 47% growth in our fiber. So the fiber side of the business continues to be extremely, extremely strong on a year-over-year basis.

The other thing I would add to that, George, is on the inside plant stuff, a lot of our components connect into active products that have electronics in them. And when that electronics loosens it up and those people can get those parts that our stuff connects to, I think that's going to unlock as well.

Got it. That's helpful. And then also the manufacturing expansion in Mexico, I think you guys talked about $350 million to $400 million, and $100 million in EBITDA. Where are you right now in terms of the contribution from that facility? And where are you in terms of its ramp?

Yes. I mean I think that as we get in Q3, most of that has ramped up. All of that is in fiber. So that fiber growth that we talked about year-over-year, it's all -- a lot of that is coming from the plant in Mexico. So from a peer utilization standpoint, I'm thinking that we're probably 3 quarters of capacity utilization in that plant right now. So I mean, we're definitely using a lot of that capacity in Q3 as we talked about adding capacity in the facility itself.

Your next question is from the line of Amit Daryanani from Evercore.

I have two as well. Maybe to start with on the free cash flow performance. At least September quarter came in somewhat below what we had modeled. Can you maybe just expand on, just simplistically, what drove that in September? But more importantly, how do you think about free cash flow performance in December quarter, then into calendar '23?

Yes. I mean I think we indicated back on the Q2 call, we sort of recognized that Q3 was going to be challenging on the cash side. It's a large interest quarter for us. Plus as the business was growing, we were making some additional investments in accounts receivable. So I don't -- what happened in Q3, I don't think was unexpected, and I think we sort of indicated that on the Q2 call. I think moving forward, as we said on the call, we feel like we're on track to really start generating the cash. We talked about being able to pay down our ABL that was drawn at the end of September at $105 million, we paid that off in the month of October. So I think we're on track to deliver that year-over-year positive cash flow in '22. So -- and I think as we move into '23, I think it becomes more of a normalized cash year where we're going to see some cash outflow in the first quarter and then we'll build up during the year. Q1 historically is our weak cash quarter because of interest payment, timing as well as we pay a lot of our incentives in Q1.

Got it. And then when I think about all the kind of segment performance metrics that you shared and the expectations for December, I guess, how should we think about aggregate revenues in December quarter? I mean it's been a little bit up and down last few years, but is it fair to think it's going to be down low to mid-single digits sequentially? Or is there a different way to not to think about that? So that would be really helpful to understand how you think about aggregate revenues into December? And if I have a to just sneak one more in, given all the product delays and some of the macro worries you've talked about, how confident do you think -- how confident do you feel that the price increase you've implemented can hold versus have to reverse back in '23?

I'll take the price one first. And I think it really depends on supply and demand, and I think that's really what's going to drive. It's going to be input cost driven. And there's just still a ton of demand out there for product. So I don't see anything really slowing down from that side, at least for the first quarter or so.

Yes. I think on the Q4 revenue side, I think we talked a little bit about CCS, which is a pretty big driver of the business being down sequentially. I think our Q4 revenues are going to be sort of flat to slightly down overall.

Your next question is from the line of Simon Leopold from Raymond James.

Do you hear me okay?

Yes.

I wanted to see if we could get an update of what you're seeing going on in the cable TV side of the business on the Networks, not the Home side. It does sound like there's been some shifts in some architectural choices away from MACPHY into Remote PHY. And I think you've talked about the fact that you support all options. I'm just wondering what you're thinking about these potential shifts and what, if anything, they mean to your business? And then I've got a quick follow-up.

Sure. Look, as we shared with everyone at SCTE, I mean, we're the largest in the game and have very large investments in R&D, which allow us to support whatever technologies customers choose. Our E6000 can act as an [indiscernible] actually to drive Remote PHY, if that's what people want to use. We also have a virtual CMTS with the Remote PHY that works to -- that we sell a lot to very large customers today. And then we have a remote MACPHY, which Mediacom just chose to do. I know there are still lots of questions on the technology path, but I think our history and installed base gives us a very strong knowledge position over the competition as we understand their networks, both the hardware and the software and puts us in a great position to be their partner.

And just as a follow-up, with the change in maturities on the debt, I just wanted to see if you could update us on how or if this affects your quarterly interest expenses?

I'm sorry, repeat the question, Simon?

You had moved the maturities of your debt out. Just wondering how or if it changes your quarterly interest expense?

Yes. So we -- the only thing that we pushed out was the ABL. So we pushed the ABL out to '27. The rest of the debt remains the same with the same interest payment profile.

Your next question is from the line of Meta Marshall from Morgan Stanley.

I was just wondering, I know the question has been asked a couple of times, but just on kind of some of the fiber digestion period or labor bottleneck that the carriers are seeing. Have they given you a sense of duration of some of these pauses as it's just kind of normal seasonality, that they'll digest through the winter months or something more extended? And then maybe just second question, just on the Home initiatives, just how should we consider the timing of when we could see some of the improvement on the Home business? And does that impact kind of the timing of when you think you would potentially spin it? Or it's still largely supply chain driven as [indiscernible] decision?

Okay. I'll take the first one, Meta, and probably both of them actually. When I think about the what we're hearing from our customers, I get the sense that it's just -- it's not a long-term thing. It's more of a short-term thing. And we continue to get orders, and it's just about which customer -- there's some that actually are taking everything fine and installing everything fine. There's others that have maybe planning -- some planning challenges that just have to work -- get worked through, but that's how I would see it. Related to Home, we have monthly operating reviews with each of the businesses. And we're just going to spend some time with them specifically on building a plan on how we can get this thing on the right track while we wait for components and figure out our next steps. But to your point, the business has to be in a healthier position before we make a move.

Next question is from the line of Jim Suva from Citi Bank.

Just wondering, you mentioned that you paid down the ABL, which is great to hear. The changing interest rate environment, does that impact the interest expense that you had to pay or anything like that? Or is everything locked in? Could you just kind of update investors? So we are reminded about the changing interest rate environment in your company's interest payments.

Yes. We -- of our debt -- about $3 billion of our debt is variable. So the changes that you see and the LIBOR rates would have an impact on $3 billion worth of our debt.

And then can you update us a little bit -- you mentioned some product slippage or delays, is that due to like adding a lot of reasons, it could be like funding or political elections coming up or customers uncertain with their road maps or component shortages? Or kind of can you bucket what some of the reasons are for some of the delays?

Yes. I think it's a combination of maybe planning and installation time in addition to seasonality. I mean there were really long lead times and concerns for materials. I think people ordered maybe more than they needed just to make sure they had product. All this was flowing in. Now they have to install it and put it out. And you got normal seasonality. You might have some products that are connecting to electronics that are waiting on electronic components. But I mean, I would say these are what's going on there.

There are no further questions at this time. I would now like to turn the conference back to Mr. Chuck Treadway for closing remarks.

Well, we really appreciate your support in CommScope, and thank you very much for the call today and your questions.