Good day and thank you for standing by. Welcome to the CommScope Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please be advised today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Massimo DiSabato, Vice President of Investor Relations. Please go ahead..
Good morning and thank you for joining us today to discuss CommScope’s 2023 third quarter results. I am Massimo DiSabato, Vice President 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 are described during today’s presentation are on a year-over-year basis, unless otherwise noted.
I will now turn the call over to our President and CEO, Chuck Treadway..
Thank you, Massimo and good morning everyone. I will begin on Slide 2. CommScope delivered core net sales of $1.35 billion and core adjusted EBITDA of $245 million for the third quarter of 2023.
Our third quarter continues to be impacted by lower customer orders, driven by larger-than-expected customer inventory corrections, customer CapEx reductions and the macroeconomic uncertainty.
The consolidated CommScope, which includes our Home Networks business, we reported net sales of $1.6 billion, down 33% year-over-year and adjusted EBITDA of $249 million down 28% year-over-year.
As discussed previously, our CCS and OWN businesses have been experiencing lower order rates since the beginning of the year and we have seen no meaningful recovery in the third quarter.
In addition to the challenges we have been experiencing in CCS and OWN, in the third quarter, we were approached by our A&S customers that they are seeing project timing slipping into next year and have more inventory than required. The result is going to be a softer-than-expected rest of the year and first half of 2024 in our A&S segment.
Based on our current order rates and visibility into the fourth quarter, we are revising our 2023 core adjusted EBITDA guidepost to $1 billion to $1.05 billion. Clearly, this is a disappointing development as we look over the next few quarters.
However, we continue to be bullish on our long-term growth, including general market recovery, government funding for connectivity, and cable upgrades. We are well-positioned to take advantage of the recovery as we are a leader in each of these businesses and have invested in capacity and product development.
While we are in constant dialogue with customers about business projections and inventory levels, we continue to work with our customers to better understand true demand and the impact on our business. As we discussed on our second quarter earnings call, we continue to manage what we can control.
We have aggressively been managing our costs and have implemented approximately $150 million of cost reduction activities in 2023. Although we have been aggressive on cost, we still feel there is an opportunity for further cost reduction. These actions include direct material savings, automation and further efficiency projects.
We are working on defining these actions and are targeting an incremental $100 million of cost reduction to be implemented by the end of the first quarter 2024. I am proud of our team’s focus on what we can control.
Despite the decline in core revenue of 32% year-over-year, our core adjusted EBITDA as a percentage of revenue has improved by approximately 50 basis points. Now I’d like to give you an update on each of our businesses.
As we indicated in previous calls, CCS has strong long-term market tailwinds, including significant spending commitments to improve United States broadband infrastructure, in addition to other country programs around the world.
We are well positioned to take advantage of the recovery as we have invested in capacity and have the full suite of products in place. We have also positioned the business to meet the build America requirements for the United States government funding.
Outside of the broadband investments, we are also encouraged by developments in our building and data center portion of the CCS business as significant momentum is occurring on the cloud and AI side of the data centers. Also, in CCS, we have been aggressive with our cost structure. We are looking at additional cost opportunities to drive efficiency.
We believe that there is still a substantial value that we can drive on the cost side. However, these projects are a bit more time intensive. An example of an area that we are focusing on is automation. Investment in new equipment, processes and systems can drive further efficiency and lower costs in this segment.
We remain bullish on CCS as a result of the longer-term market tailwinds and our strong position in this market. CCS will recover. It is just a matter of timing of this recovery. The recovery, coupled with our more efficient cost structure will drive substantial financial performance. Turning to mix. The business continues to perform very well.
Our year-to-date EBITDA of $196 million is up $200 million over prior year. The mix segment LTM adjusted EBITDA is $252 million. We are very proud of the mix transformation. Our ability to grow the business and leverage our cost base has created strong value in this segment. It is a game changer for our company.
We are well positioned for continued growth as we announced two major new product offerings in the third quarter with our RUCKUS One suite and Wi-Fi 7 enterprise class access point product.
As we discussed previously, RUCKUS One is an AI-driven cloud-native platform, delivering network assurance service delivery and business intelligence in a unified dashboard. It simplifies converged network management across multi-access public and private networks. Also, we have officially launched our Wi-Fi 7 products.
As one of the first to launch Wi-Fi 7 products, we are well positioned as the first mover in the market to gain share by taking advantage of the functionality and enhancements of Wi-Fi 7. Finally, in mix, we continue to invest in our go-to-market strategy.
We believe that as a result of our channel network and knowledge of certain market segments, we can continue to increase market share by investing in products, systems and resources dedicated to those market segments. We have developed a plan and are now in the implementation phase.
In OWN, as we mentioned in previous calls, we fully contemplated a decline in U.S. carrier capital spend. However, these declines are much more severe than what we had expected, and I don’t think we are alone in these sentiments. Although carriers indicated some recovery in the second half, this has not materialized. There will be a recovery.
However, at this time, there is limited visibility into the timing of the recovery. Based on the lack of visibility in this segment, at this moment, we would expect that 2024 will look similar to what we see in 2023. Again, in the OWN segment, we continue to focus on what we can control. We have been aggressive in cost in this segment.
The results of our cost management have resulted in year-over-year flat EBITDA margins despite a 45% decline in revenue. In addition to cost management, we continue to develop and commercialize new products. We have discussed the Mosaic antenna in previous calls. However, we are also developing new products in the power and steel space.
We will continue to develop new products supplement our existing base business. Again, similar to where we are in CCS, we are well positioned in the market and feel like we will benefit from a market recovery.
Finishing with ANS, as we have discussed, the segment has made a very successful transition to a leading supplier of edge-related products, including nodes, amplifiers and RPD RMD modules. Although we remain a strong supplier of our legacy CMTS technology, we continue to grow our edge business as we are in the early phases of the DOCSIS 4.0 upgrades.
We are well positioned to be a major player in the DOCSIS 4.0 upgrade cycle as we are the only supplier with all of the products and believe our products are the best performing. During the recent SCTE Cable-Tec Expo, we were able to demonstrate our wide product range.
This show just reconfirmed the momentum behind the DOCSIS 4.0 upgrade commitment and our strong position in this market. Many of the demonstrations by cable companies showing best-in-class fees were achieved with our product backlog.
In the last 90 days, we announced our FDX product range, including collaboration with Comcast on a FDX amplifier and the launch of our virtual CMTS product that is now in customer labs. Although we are very bullish on the 4.0 upgrade in the third quarter, we saw two major short-term developments that will impact near-term performance.
The first is inventory adjustments by our customers. Several customers informed us that they are holding too much inventory and need to make short-term adjustments to orders to rightsize their inventory. In addition, some of our customers are experiencing slower-than-expected ramps on their 4.0 upgrade projects.
As a result of these two issues, order rates and revenues will be negatively impacted in the next few quarters. In summary, the markets will return. We are well positioned when the markets do return, and we are focusing on what we can control. This work will put us in a stronger financial position when the markets come back.
And with that, I’d like to turn things over to Kyle to talk more about our third quarter results..
Thank you, Chuck, and good morning, everyone. I’ll start with an overview of our third quarter 2023 results on Slide 3. For the third quarter, consolidated CommScope reported net sales of $1.6 billion, a decrease of 33% from the prior year, driven by declines in CCS, OWN, ANS and Home, but partially offset by strong mix growth.
Adjusted EBITDA of $249 million decreased by 28%. Adjusted EPS was $0.13 per share, decreasing 74% from prior year. We experienced lower demand in our CCS, OWN and ANS segments as customers more aggressively normalized inventory levels and manage their capital spending.
For core CommScope, net sales of $1.35 billion declined 32% from the prior year and adjusted EBITDA of $245 million decreased 30%. The adjusted EBITDA held up a bit better than our revenue as we continue to drive our cost reduction plan, and we have driven favorable mix. As we have experienced lower orders particularly in CCS, OWN and ANS.
Core CommScope backlog continued to decrease and ended the quarter at $1.556 billion, a decrease of 19% versus the end of Q2. In essentially all of our businesses, we are back to normalized backlog levels. As a result of the normalized backlogs, order rates are going to be the direct driver of revenue. Turning now to our segment highlights on Slide 4.
Starting with CCS, net sales of $633 million decreased 37% from the prior year. CCS adjusted EBITDA of $79 million was a decrease of 58% from the prior year, driven primarily by the drop in revenue. The decline is more attributable to our network connectivity and cabling business than our building and data center business.
We have seen no meaningful pickup in our order rates despite indications from customers that they expected to see a stronger second half. In addition to the weak third quarter order rates, we have seen limited pickup in order rates in October.
Although CCS customer conversations remain bullish on medium and long-term growth, the short-term demand profile remains very uncertain as customers continue to manage inventory and cash. We are also seeing some project delays as customers wait for government funding to ramp spend.
Based on current visibility, we expect to see lower revenues and EBITDA in the fourth quarter. Mix net sales of $289 million increased by 12%. From a business unit perspective, ICN increased 26%. Mix adjusted EBITDA of $63 million increased 155% from the prior year, a $38 million change primarily driven by stronger demand and operational improvements.
The NIC segment, LTM adjusted EBITDA, was $252 million, an improvement of $250 million versus LTM a year ago. In RUCKUS, as we have worked these supply chain constraints and release product out of backlog and order rates have declined. This is a temporary situation as customers digest their inventory.
All of our other leading indicators point to continued strong demand for our products. We are excited about our continued product development, particularly our RUCKUS One and Wi-Fi 7 products. We feel that we are well positioned to continue to take share in the medium and long-term.
OWN net sales of $210 million decreased 45% from the prior year and across most business units. Similar to CCS, customers indicated a strong second half that has not materialized. Demand in this segment remains soft with very limited visibility. Customers continue to limit new builds and our working down inflated inventories.
Although we have aggressively managed costs, OWN adjusted EBITDA of $45 million declined 45% from the prior year. The cost actions have allowed us to maintain adjusted EBITDA as a percent of sales year-over-year at approximately 21.6%. The near-term outlook remains uncertain.
However, we would expect that fourth quarter revenue and adjusted EBITDA would be lower than third quarter. Based on current visibility, which is very limited as mentioned, we would expect 2024 to look similar to 2023 in this segment. A&S net sales of $218 million decreased 36% from the prior year due to inventory adjustment and project delays.
A&S adjusted EBITDA of $58 million was essentially flat from the prior year, driven by lower revenue offset by cost reductions and product mix. During the quarter, several of our large customers approached us about pulling back order rates as they dealt with higher inventory levels and project delays. This had an impact on our third quarter revenues.
Also, we expect the adjustments to impact the fourth quarter and early 2024. Despite the short-term challenges, A&S continues to position itself to take advantage of the DOCSIS 4.0 upgrade cycle. We are the only supplier that can supply all the products from amplifiers, nodes, modules and CMTS, including virtual CMTS.
As mentioned, our new VCMTS product is in the lab trials with several customers. During the recent SCTE show, our products were part of major service provider demonstrations on industry-leading speeds. We continue to win new DOCSIS 4.0 business at major customers and are well positioned for future growth.
Finally, during the quarter, we announced the divestiture of our home business to Vantiva. We feel this combination positions the business for success in a challenging market. We feel this is the best outcome for our customers and shareholders.
Our ownership position in Vantiva will allow us to take advantage of the combined scale of the two businesses as well as the substantial synergies the combination will deliver. We look forward to working with Vantiva management to close the transaction in late 2023 or early 2024.
Home net sales were $249 million, declining 36% from the prior year essentially across all business units, driven by customer inventory adjustments and lower demand. Home adjusted EBITDA of $3 million improved from negative $5 million versus prior year as a result of cost saving efforts. Turning to Slide 5 for an update on cash flow.
During the quarter, we generated cash from operations of $139 million. We continue to reduce inventory driven by a decline in revenue as well as improved management of inventory. As previously discussed, we are still holding excess inventory driven by the supply chain constraints in 2021 and 2022. We are just beginning to unlock some of this value.
As revenue declines, it will delay our ability to monetize. Despite the revenue and EBITDA challenges, we are revising our range for 2023, adjusted free cash flow to $300 million to $350 million. Turning to Slide 6 for an update on our liquidity and capital structure. During the third quarter, our cash and liquidity remained strong.
We ended the quarter with $519 million in global cash and total available cash and liquidity of over $1.29 billion. During the quarter, we increased our cash balance by $101 million. We did not draw on our ABL revolver during the third quarter and therefore, ended the quarter with no outstanding balance.
In the third quarter, we continued to execute our debt buyback program and repurchased $26 million of our long-term debt for cash consideration of $17 million. To add more detail, we repurchased $25 million of the 8.25% senior notes due 2027 and $1 million of the 7.125% senior notes due 2028.
Since the beginning of the year, we have repurchased $111 million of debt. During the quarter, we also paid the required $8 million of term loan amortization. The company ended the quarter with net leverage ratio of 6.7x. Going forward, we intend to use cash opportunistically to buy back securities across the breadth of our capital structure.
I’m now turning to Slide 7, where I will conclude my prepared remarks with some commentary around our expectations for the remainder of 2023. As discussed, the external environment remains very uncertain as evidenced by our downward guide post revision. Let me remind you of our positioning of our guideposts over the last few quarters.
As you can recall, in our Q1 earnings, we indicated customers signaled to a strong recovery in the second half. On our second quarter call, our guidepost assumed a modest recovery in the second half orders. Fast forward to now, our customers are indicating no rebound in orders for Q4.
Although customers were indicating a recovery in the second half, this has not materialized. In addition, we have experienced a large unforeseen short-term adjustment with A&S customers. As evidenced across most of our markets and competitors, we are in a passive telecom, cable and hardware recession.
The challenge with the current position is the lack of visibility. Even despite some visibility into customer inventories, customer short-term build plans remain uncertain. We are still very bullish on medium and long-term growth However, short-term challenges are significant.
We have reduced our 2023 core adjusted EBITDA guidance to $1 billion to $1.05 billion. Although we are not giving specifics our current view on 2024 is that it looks similar to 2023. However, this would indicate some recovery from current demand levels.
As Jeff mentioned, we continue to evaluate our cost structure including accelerating certain CommScope NEXT efficiency initiatives. Although we have implemented approximately $150 million on operating expense reduction since the beginning of the year, we are still evaluating additional actions.
As we have gone through this exercise, we are excited with the opportunities we have found and implemented. Upon recovery of the demand, we should be well positioned to drive strong profitable performance. Finally, I’d like to address our capital structure and specifically our upcoming maturities.
We currently have several alternatives that could potentially be used to address the upcoming maturities including, but not limited to, cash on hand, ABL availability, our senior secured debt incurrence basket and proceeds from asset sales. For today’s call, we will not be making further comments with respect to our capital structure.
However, we will provide updates as appropriate as we continue to evaluate these alternatives. And with that, I’d like to give the floor back to Chuck for some closing remarks..
Thank you, Kyle. We are faced with some significant challenges as many of our markets have not cooperated and the visibility to the timing of the recovery is limited. The recovery in the second half has not materialized. We are not alone as this industry is facing similar challenges.
Although we continue to manage what we can control and aggressively manage costs, it is not enough to offset a 32% decline in core revenue. We do remain bullish on the recovery. It is just a matter of timing.
We are well positioned for the expected recovery as we are a leader in most of our segments and have invested in future growth with capacity and new products. Based on the actions we are taking in the current environment to drive efficiency, when the markets do recover, we are well positioned to drive significantly improved financial performance.
In addition, we will continue to work on near-term capital structure, including asset sales and opportunistic transactions. And with that, we’ll now open the line for questions..
Thank you. [Operator Instructions] Our first question comes from Simon Leopold with Raymond James. Your line is open..
Great. Thank you very much for taking the questions. I wanted to unpack the A&S segment a little bit here and that with the upgrades that operators have announced, it seems as if demand for amplifiers will be particularly strong. So I think at a high level, it sounds like you expect improvement by the second half of ‘24.
What I’m trying to get a better understanding is a little bit of insight into the composition of the A&S segment now and in the future, basically how material or amplifiers to that business? And then I’ve got a quick follow-up..
Okay. So I will start out by saying that we feel really good about where we are with the A&S business to unpack it a little bit. You think – I mean, we have our traditional legacy product lines, which are still out there. We also, at the show, we introduced a DOCSIS 3.1 extended. We’re seeing a lot of interest of that.
Obviously, we haven’t made any sales there, but this gives a lot of opportunity to go a lot faster with higher speeds without a massive upgrade. Additionally, we really turned and pivoted to where the market was going, and we are supporting our customers whichever way they go.
So with the – we were able – as you know, we launched the FDX amplifier with Comcast. We also have the ESD option as well. And I would say that the amplifier portion of our business is significant.
But in addition to that, we also have the RPDs and R&D, again, whatever choice the customer decides to go, we’re there to support them along with nodes and our virtual CMTS, which is now in labs with other customers. So I would say that our amplifier business is significant. I’m not going to give you the exact details of the size of that.
But I would say it’s a significant part of our business. And we feel like we’re the leading supplier on the edge going forward..
And then just as a follow-up. Within the NIC market, the campus wireless LAN and switching market, at least a number of the third-party market researchers are calling for that market to decline in 2024 after sort of the supply chain strength exhibited in 2023. And I get the fact you’re not beholden to the market as a relatively small player.
But could you help us understand your confidence in that particular segment for 2024? Thanks..
Yes. I think we’re not alone. I think a lot of people are calling out mid-single-digit growth going forward. And we believe that as well. We are seeing lower order rates right now, but it’s really about higher distribution inventories. We released a lot of backlog and the distributors are now digesting this inventory.
We monitor a lot of leading indicators in the business, specifically funnel. And when we win a project, it’s close on, and we’re monitoring that, and we see that coming in, which gives us a really good insight on the future and where we are. That’s why we feel the confidence in the in the mid-single digits plus growth going forward..
Thank you..
[Operator Instructions] Our next question comes from Meta Marshall with Morgan Stanley. Your line is open..
Great. Thanks. Maybe first question, when you talk about 2024 looking similar to 2023, is that on kind of Q3 run rates or just in the quantum as a whole? And then second question for me, just maybe upfront.
I know Simon just kind of asked about the NIC business, but just kind of how are you seeing the overall health of the environment kind of beyond backlog release and kind of strength that you’re finding with the new portfolio. Thanks..
Yes. Let me deal with the ‘24 question. I think when we say ‘24 looking a lot like ‘23, I think we are referencing sort of the full year look. And I think in our prepared remarks, we talked about in order to get there, we are going to have to see some recovery in order rates from where we are sitting today in Q3 and Q4.
So, that would sort of indicate at least some level of recovery in the second half..
And then to answer your other part of your question on the mix business, I mean there is a few parts to that business. But think about the DAS and error part of our business, we are actually one of the first 5G players there with an Open RAN architecture.
So, we feel really good about that and where that’s going, also with private networks on that side of our business. On the WiFi side of our business, I mean we just launched WiFi 7, RUCKUS One Network-as-a-Service. But what’s really helping us win and why I believe we are growing in the market is our dedication to vertical markets.
We specifically target the market. We really understand and go real deep into that market. We develop specific products or attributes for that marketplace. We train our salespeople in those areas and our value-added resellers and we really push.
And I believe what we are seeing is, as we have invested in salespeople in these specific verticals, we are getting the returns from our investments. So, we feel confident about where we are. And the other thing that’s helping us is we are a really small player in the grand scheme of things in terms of market share.
So, we don’t really look at where the market is going, but where our technology and where our vertical markets and investments specifically to go gain share are..
Great. Thank you..
[Operator Instructions] Our next question comes from Tal Liani with Bank of America. Your line is open..
Hi guys. I have two questions. First one on ANS, when we talk to Harmonic, they are talking about different architectures in the market where they are ahead of you, and they are taking share, and I do see announcements of cable companies their way.
Can you talk about your competitive position in the ANS space, the migration to distributed CMTS and where you are in the – on the technology front? The next question is more about the balance sheet. Last quarter, you told us you are going to give us an update this quarter on how you intend to structure.
And it seems like you are not giving us an update now. You don’t want to discuss it. What changed, why don’t we get an update on what can you do in order to pay down the 2025 debt? Thanks..
Yes. Let me – I will deal with the last part of your question. So, I think in our prepared remarks, we referenced several alternatives that we have to deal with the capital structure and the near-term maturities. We are continuing to work through that. And when we have an update, we will let people know.
At this point in time, we are continuing to work through that..
And to address your other question on ANS, I would say we have a very strong position in the marketplace today because of our legacy position.
And as I was sharing with Simon, based on Simon’s question, talking about our DOCSIS 3.1 where customers want to get symmetrical 1-gig plus speeds if they have an upgraded product with us, a Gen 2 product with software, they can get those speeds without a major investment, and we are seeing interest in that.
And that legacy position not only helps us to upgrade our existing footprint, but it also allows us to really understand the customer’s network. So, when you think about virtual CMTS, and as I shared with you in my prepared remarks, we are in several customer labs.
Because of our understanding of their software and how their – because of their understanding of how their network works and our software that we have in our E6000, that puts us in a really good position to be able to transition to a virtual or at edge CMTS. So, we feel good about that.
Additionally, on the DAA side, we pivoted to where the customer was going, which was more of a Remote PHY solution, but we also are supporting our customers that want to go Remote MAC PHY. And as we were at SCTE, our customers, there was a lot of appreciation for our ability to support them whichever way they want to go.
And we are going to continue to support our customers in whatever path they choose to take..
Alright. Thank you..
[Operator Instructions] Our next question comes from George Notter with Jefferies. Your line is open..
Hi guys. Thanks very much. I was interested in asking about supply chain input costs. Obviously, it’s a big part of the cost of goods here in the company, the economy is slowing, you are starting to see some supply chain input cost relief, I think. I know it’s a pretty big number in the context of your overall COGS.
I am wondering if it’s a tailwind in the business right now. And then – so if you could talk about that, that would be great. And then also, I would be curious about what you have assumed in terms of supply chain input costs in terms of your guidance for a similar 2024. Thanks..
Yes. So, on the input cost side, I think it’s probably a little bit of a mixed bag relative to what we are seeing. I mean there is definitely some inputs that are coming down, and there is other inputs that are – we are actually seeing some increases in.
I think just in general, how you should think about it is if we go back to where we were 2 years ago, our input costs are – still remain higher than where we were back then. I think as we think about the 20 – as we move into 2024, I don’t think we expect to see major changes there or at least in any modeling we would be doing.
And I think as we have talked about before, for us, it’s really trying to manage the margins and how the pricing versus the input costs impact margin. So, I think it’s a mixed bag. I think we are definitely still higher than where we were. It’s definitely still inflated.
We are seeing some relief, but not to the levels that we saw sort of pre-supply chain challenges..
Got it.
And then you mentioned price, I mean any opportunity to kind of try to go after some more price in the marketplace to try to improve the sort of margin and EBITDA situation here?.
I think we are competitively priced at this point. So, I wouldn’t be – we are not seeing much price pressure. So, what I would say right now, we are just seeing prices hold right now..
Okay. Thank you..
[Operator Instructions] Our next question comes from Sam McCaney with JPMorgan. Your line is open..
Hi. Thanks for the question guys. This is Joe Cardoso on for Samik. So, just one question from me. Some of your peers in the space have highlighted recent headwinds in the form of enhanced ACAM program, given participation would exclude customers from participating in BEAD.
Curious if you are seeing any of that in your customer base? And if so, any way you can characterize how much of your customer base would be eligible to participate in enhanced – the Enhance ACAM program, just trying to get a sense of the potential impact and exposure there. Thanks..
Can you restate the question? I didn’t catch – I didn’t understand the term you used in the beginning..
Yes.
The Enhance ACAM program is essentially an extension of the original ACAM program with investments to service provider customers, where essentially they can essentially participate in that instead of the BEAD funding and essentially, what that entails is that the spending would be tranched out as opposed to seeing the funding all upfront for BEAD.
So therefore, customers are taking a pause in deciding if they want to participate in that or indeed I don’t know if you guys have any…?.
Yes. I think the way that we would answer that is, we are understanding the requirements of BEAD. We are working with our customers. There is lots of permutations that we see relative to the funding and the programs. The way that I would think about it is we are in constant dialogue with the customers about what they can do and what we can do.
And I think that’s – for us, that’s still unfolding. And we don’t have any specifics around that right now..
And the other comment I would add to that is BEAD the largest program at $42.5 billion and the states are going to start getting awarded that business in the first half of ‘24. And we will see a small revenue impact from that in ‘24, but the large ramp of that is expected more in 2025..
Got it. Thanks for the color guys..
Thank you..
[Operator Instructions] Our next question comes from Matt Niknam with Deutsche Bank. Your line is open..
Hi guys. Thank you for taking the question. Just two if I could.
First, on visibility, I am just wondering maybe, Chuck or Kyle, is the commentary varying at all across CCS, OWN, ANS, or is it fairly uniform in terms of everybody pausing at a minimum through the middle of next year? And then secondarily, on asset sales, you referenced that as a potential option, something you may be evaluating.
I know there have been some press reports out there. Just wondering if there is any additional color you can offer up in terms of what pieces of the business could potentially be monetized? Thanks..
Okay. So, I will take the first part of the question. I think as we think about visibility across the business segments, I think where we have the lowest level of visibility is in the CCS and OWN business.
And I think although we are in constant dialogue with our customers, trying to get the true understanding of their build plan, I think is challenging at this point in time. And I think we are not alone in that position.
I think on the ANS side of the business, we are talking to the major customers and some of the challenges that we see now, we believe are short-term in nature as they adjust their inventory levels. And then I think we have talked about mix where yes, I mean we have pushed a lot of products into the channel partners as we release some backlog.
They are digesting that, that we are seeing a little bit lower order rates. But again, in that business, a lot of our business is going through channel partners, and we have a lot of leading metrics to look at what the funnels are and what we are winning ahead of actually shipping the product.
And I think we feel that, again, as we move into ‘24, we have some visibility in the mix. So, I think CCS and OWN, I think are probably the places that we have the most challenges with the visibility. The second part of your question, I mean we are really not going to comment on that.
I think we have identified that asset sales are a possibility for us to deal with the capital structure. And I think that’s – at this point in time, that’s all we are going to say..
Thank you..
[Operator Instructions] Our next question comes from Steven Fox with Fox Advisors. Your line is open..
Hi. Good morning.
After what you just said, Chuck, this might be an unfair question, but I was just curious, [Technical Difficulty] CCS and OWN business to disaggregate the inventory correction from the actual cycle, just – and maybe compare sort of cyclical challenges to prior cycles, especially given what seems like over enthusiasm for like government funding that is impacting things.
Thanks..
Yes. I would say what we are really learning is there was obviously an overbuy, similar to what we saw in the rest of the economy related to COVID. We are trying to get that understood about in terms of percentage. If you really ask us the ballpark of it, it could be a 20%-ish type number.
And what we have been working with our customers, and I have had personal visits in their offices and all the major customers where we are talking with them about, we want to be a better supplier to you when this thing turns back on because it will turn back on.
And we need help understanding the specific SKUs that you are going to be buying not because I can’t produce dollars, I have to produce SKUs. So, we have been working a lot with them in understanding their inventory that they have on hand.
Understanding what they think they are going to need in their build plans, but we need it at the next level of detail, and our teams are working together to do that. And I feel confident that we are going to be a better supplier and that relationship is going to help us going forward..
And just to be clear, you are saying a 20% inventory overbuy, is that what the 20% was referring to?.
That’s the ballpark, Steve, if I had to say what I think, yes..
Okay. Thank you..
And I am not showing any further questions at this time. I would like to turn the call back over to Chuck Treadway for any closing remarks..
Yes, I would like to thank everyone for their support of CommScope and for your time today. I would like everyone to have – wish everyone a very good week. Thank you..
Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day..