Participants

Massimo DiSabato

Charles Treadway; President, Chief Executive Officer, Director; CommScope Holding Company Inc

Kyle Lorentzen; Chief Financial Officer, Executive Vice President; CommScope Holding Company Inc

George Notter; Analyst; Jefferies LLC

Meta Marshall; Analyst; Morgan Stanley

Simon Leopold; Analyst; Raymond James & Associates, Inc.

Steven Fox; Analyst; Fox Advisors LLC

Samik Chatterjee; Analyst; J.P. Morgan

Amit Daryanani; Analyst; Evercore Partners

Matthew Niknam; Analyst; Deutsche Bank AG

Tim Savageaux; Analyst; Northland Securities

Presentation

Operator

Good day and thank you for standing by, and welcome to the CommScope First Quarter 2024 earnings conference call. At this time, all participants are in a listen only mode after the speakers' presentation, there will be a question and answer session to ask a question. During the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one.
Again.
Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Matthew Modus, ADAGIO, Vice President of Investor Relations. Please go ahead.

Massimo DiSabato

Good morning, and thank you for joining us today to discuss CommScope's 2024 first quarter results. I'm asked by distributor, 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 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 <unk>.

Charles Treadway

Thank you, Massimo, and good morning, everyone. I'll begin on Slide 2. We continue to see uncertainty in our business. In the first quarter. We saw recovery in our CCS and OWN order rates as service providers have worked down, inventories and demand appears to be rebounding. This is a positive sign and one that we have been waiting for unfortunately, with the early signs of recovery in CCS and OWN, our analog and mixed segments realized further deterioration in the quarter in A. and S. and mix, we experienced lower sequential quarterly revenues driven by delayed upgrades, customer inventory and lower demand. Visibility remains limited across all segments as customers continue to manage through macroeconomic conditions and upgrade plans. Based on current visibility we expect the second quarter revenue and adjusted EBITDA to be higher than the first quarter.
Turning to the first quarter results, CommScope delivered net sales of $1.168 billion and adjusted EBITDA of $153 million for the first quarter of 2024. Our first quarter continued to be negatively impacted by lower market demand and larger than expected customer and channel inventory buildup.
As I've mentioned in past calls, we continue to control what we can and navigate macro economic challenges that impact our businesses. We are the market leader in most of our businesses with a comprehensive strategy and capacity in place to meet expected future demand. In addition, as referenced on our fourth quarter call, we are managing our cost structure and are on track with our plan to take out $100 million of annual costs.
Now I'd like to give you an update on each of our businesses in the quarter, CCS saw stronger ordering patterns than we saw in late 2023. As mentioned, we believe that this is due to our service providers continuing to digest their inventories they had on hand as well as stronger enterprise sales from data center and building and campus.
Starting with our enterprise side of the business, we continued to find success with our launch of our System x 2.0 structured cabling solutions. The introduction of innovative offerings such as Giga reach and XO. five cable enabled greater distances and increased bandwidth capabilities. These new cables support both building and Campus Solutions for the next wave of applications like security and Multi-Gig WiFi seven access points.
In addition to our building and campus market. The cloud and hyperscale portion of the business saw additional project momentum and build-outs of Gen AI. data centers. We are working with several of the other large players in this arena as our products and services are well positioned for these builds to supplement strong demand in this business. We're in the process of expanding our connector capacity with the capacity to be implemented by midyear.
Turning our attention to our broadband business, we are encouraged to not only see ordering patterns stabilize, but growth in order rates throughout the quarter as service providers work through high inventory levels over the past few quarters, much of our research suggests that fiber to the home passings in the United States remained at historic levels, thus the need to refresh inventory as we look forward to the government bead funding initiatives, we have launched hundreds of Build America, Buy America qualified products. I would encourage you to visit CommScope.com to see the breadth of our bottler compliant products. These products and solutions are positioned to capture the long-term market tailwinds supporting broadband infrastructure projects that are expected to start in start late in 2024 and into 2025. All of these factors in the recent order trends are evidence of a potentially stronger second half of 2024 and return to growth for the CCS segment.
Turning to mix, as we have discussed on the Q4 earnings call, the business is seeing weaker than predicted sales, primarily driven by our Ruckus business impacted by higher than average inventory levels in the channel as we work with our partners to bring their inventory down to an acceptable level. This will continue to affect our next segment performance.
In addition to the inventory build, we are also seeing a rather significant reduction in demand. We have a number of initiatives underway to help the business, but we do not expect that these initiatives will fully offset the lower demand we expect to see over the next few quarters.
It is also important to note that this is not just impacting Ruckus. Other competitors in this space are citing similar issues. A bright spot in the Ruckus business is that we are seeing continued momentum towards our Ruckus one and Ruckus AI solutions. As our customers are looking for more ways to optimize their networks. They are turning to our software solutions for help as we reinforce our CommScope NEXT initiatives we expect to continue to improve this business as we believe it has significant long-term growth potential. We are not done as we continue to evaluate every aspect of this business for incremental opportunities, including investing in the next-generation of product solutions and SaaS. Our next business was positively supported by ICN performance, led by the DAS business, providing in-building 5G connectivity. This positions us nicely to grow with operators and enterprises as well as in public and private networks.
With that said, our next segment and specifically, Ruckus remains under substantial short-term pressure as demand significantly declined in the last quarter, driven by too much inventory in the system and slower overall market demand. In the first quarter, we saw a drop in the Ruckus sales funnel with purchasing decisions being pushed to future periods. We expect that the lower demand will continue at least throughout the next few quarters as inventory is digested and the demand drivers reset in OWN. As mentioned in previous calls, 2023 saw a decline in U.S. carrier capital spend, as well as pressure from US carriers digesting inventory. During the first quarter, we have seen some continued recovery in order rates, largely supported by increased base station and tenant sales. We expect the 2024 revenues will look similar to what we saw in 2023, but with a stronger second half of the year. Again, as previously stated, we continue to focus on what we can control and we are ready to support our customers when they are ready. In addition, we continue to develop and commercialize new products to help our customers build, reliable and efficient wireless infrastructures. Last quarter, we introduced our new seat base station antenna solution aimed at delivering 15% greater efficiency at a fixed power level. And this quarter, we are happy to report that as again multiple operator design wins again, like we are in CCS, we are well-positioned in the market and feel like we have the right solutions to support the market as recovery continues.
Finishing with ANS., the first half of 2024 will be historically weak due to our customers being faced with larger than expected inventory and navigating the choices for next generation HFC architecture.
As mentioned previously, Dan, as segment has made a successful transition to a leading supplier as related products, including nodes, amplifiers, our PD. and R. and D. modules and remote royalties for no plants, we will have a significant role in helping our customers build out their next-generation of multi-gigabit networks while continuing to support our large installed base of CMTS products. We also recently launched Docsis 3.1 enhanced solution, enabling operators to turn on services between five and eight gigabits per second, largely through existing infrastructure and a software upgrade as we move closer to the second half of the year, we are on track to start delivering products supporting Docsis 4.0 upgrades, and we will likely see increased momentum toward the latter part of 2024, we will continue to invest in our virtual CMTS CMTS solution that will be fully Docsis 4.0 compliant as major MSOs determine which path to take whether it be the extended spectrum, Docsis variant or full duplex Docsis, we will have the right product to support them in their journey. With that said, as we suggested would be the case in our fourth quarter comments, our customers were faced with larger than expected inventory and adjusted shipments to rightsize their inventory. As a result of these two issues, we anticipate that order rates and revenues will be negatively impacted in the next few quarters.
We're continuing to navigate our businesses through varying market conditions. But as we stated in the past, we are well positioned for a market recovery. And while we remain confident that a recovery will occur, the timing and intensity of that recovery continues to be uncertain. We have been in regular dialogue with our customers and evaluate market data and projections for each of our business segments. Understanding demand drivers has been difficult for us as well as our competitors. We will continue to control what we can and will support our customers in the process.
And with that, I'd like to turn things over to Kyle to talk more about our first quarter results.

Kyle Lorentzen

Thank you, Chuck, and good morning, everyone. I'll start with an overview of our first quarter 2024 results on Slide 3. For the first quarter, consolidated CommScope reported net sales of $1.168 billion, a decrease of 30% from the prior year, driven by declines in all segments. Adjusted EBITDA of $153 million decreased by 51%. Adjusted EPS was negative $0.08 per share. We experienced lower revenue, driven by continued delays in upgrades, customer inventory levels and overall lower market demand. The sequential trend of quarterly revenue and adjusted EBITDA decline continued in the first quarter of 2024. For CommScope backlog ended the quarter at $1.162 billion, up slightly versus the end of the fourth quarter. As mentioned previously, in all of our businesses, we are back to normalized backlog levels. Order rates are going to be the direct driver of revenues over the next few quarters. As Chuck mentioned earlier, we saw an increase in order rates from the fourth quarter of 2023 to the first quarter of 2020 for particularly NCCS. and OWM. Although this is a positive sign, we continue to lag well behind historical revenue levels.
Turning now to our first quarter segment highlights on slide 4. Starting with CCS. Net sales of $605 million decreased 26% from the prior year. Ccs adjusted EBITDA of $95 million decreased 37% from the prior year, driven primarily by the drop in revenue. The decline has been driven by the broadband business. We continue to see increases in order rates during the quarter. On a sequential basis, revenue was up 9% despite the pickup in order rates. These order rates still remain low relative to historical levels in 2021 and 2022. Although CCS order rates improved and customer conversations remain bullish on medium and long-term growth, the short term demand profile remains uncertain. However, based on current visibility, we expect higher CCS revenue and adjusted EBITDA in the second quarter of 2024 versus the first quarter.
Next, net sales of $180 million decreased by 37% versus the first quarter of 2023. From a business unit perspective, Ruckus decreased 46% and ICM decreased 17%. Mix adjusted EBITDA of negative $1 million decreased $59 million from the prior year, primarily driven by the decline in Ruckus revenue in Ruckus as we work through supply chain constraints and release product out of backlog, order rates have declined as channel partners digest inventory. It should also be noted that with Ruckus backlog at historical levels, seasonality is also impacting Ruckus revenue. Historically, the first quarter is the lowest revenue quarter for Ruckus. In addition to channel inventory and seasonality, overall demand is lower in the market. During the quarter, we also saw our near-term funnel decline as customers pushed projects and upgrades to later periods. Based on latest third party forecasts, the office market will decline in 2024. We expect Ruckus to have a challenging year relative to 2023 despite the challenging short-term market conditions, we are excited about our continued product development, specifically our office one and Life Five seven products. We feel that we are well positioned to continue to take market share in the medium and long term.
OWM. net sales of $196 million decreased 24% from the prior year, but across the majority of the business units, despite limited visibility to a recovery, order rates in this segment started to increase in the first quarter. We continue to aggressively manage costs in this segment to offset the revenue decline. Own adjusted EBITDA of $44 million declined only 26% from the prior year. Our continued investment in new product development positions us for continued leadership in the segment. We expect second quarter OWN revenue and adjusted EBITDA to increase comparisons first quarter and F Net sales of $187 million decreased 38% from the prior year due to customer inventory adjustments and upgrade delays and as adjusted EBITDA of $15 million was down $32 million or 68% from the prior year, driven by lower revenue. As mentioned on our previous call, several of our large customers approach us about lowering order rates as they dealt with higher inventory levels and delayed timing of upgrades. This had an impact on our first quarter revenues. Also, we expect these adjustments to have a significant impact throughout 20.4 despite the short-term challenges and as continues to position itself to take advantage of the boxes for So upgrade cycle, we're the only supplier that can supply all the products from amplifiers nodes, modules and CMTS, including virtual CMTS.
Turning to slide 5 for a date on cash flow. As indicated on our prior call, we expected the first quarter to be a use of cash because of the lower EBITDA, higher cash interest paying quarter and timing of our annual cash incentive payouts. That said, for the first quarter, cash flow from operations was a use of $178 million and adjusted free cash flow was a use of $154 million 2024 first quarter cash flow from operations declined from the prior year. As a result of the lower EBITDA, we continued to reduce inventory in the quarter. As previously discussed, we are still holding excess inventory driven by the supply chain constraints in 2021 and 2022. As revenue declines, it delays our ability to monetize this excess inventory.
Turning to Slide 6 for an update on our liquidity and capital structure. During the first quarter, our cash and liquidity remained strong. We ended the quarter with $357 million in global cash and total available cash and liquidity of over $900 million. As expected, during the quarter, our cash balance decreased by $187 million. We did not draw on our ABL revolver during the first quarter and therefore ended the quarter with no outstanding balance. As previously mentioned, our ABL availability was negatively impacted by the home divestiture in early 2024. During the quarter, we paid the required $8 million of term loan amortization. We purchased no debt on the open market going forward. We intend to continue to use cash opportunistically to buy back securities across the breadth of our capital structure. The Company ended the quarter with a net leverage ratio of 9.9 times.
I'm now turning to Slide 7, where I'll conclude my prepared remarks with some commentary around our expectations for 2024. Despite some pickup in CCS and OWN. Order rates in the first for our current order rates remain low as we are dealing with lower market demand for magnitude of demand, drop-off in mix and a analysis concerning the lower order rates had a significant impact on our revenue and adjusted EBITDA. As we have said throughout the downturn, we remain bullish on medium and long-term growth in all of our segments. However, visibility to the timing and magnitude of the recovery remains unclear through recovery and CCF and OW and order rates is definitely a positive sign. Based on current visibility, we expect the first quarter to be the lowest revenue and adjusted EBITDA quarter of the year. We continue to control what we can control, including implementing the $100 million of our annual cost reductions we have referenced on previous calls, we are encouraged by our ability to manage costs during the downturn and are well positioned to drive profitability when revenues return. We have been able to achieve these cost reductions while continuing to invest in all of our segments with new product development and enhanced customer support.
Finally, I'd like to address our capital structure. Not much has changed since last quarter. We continue to evaluate alternatives, including asset sales to address the 2025 maturity and beyond. We have proposals from certain credit groups to deal with essentially all of our near term maturities. However, we do not believe that proposals we have received to date align with our strategic goals or optimize our capital structure. As mentioned in our last call, our credit documents are very flexible. We intend to use this flexibility to optimize our capital structure, including dealing with the 2025 maturity.
For today's call, we will not be making further comment with respect to our capital structure. However, we will provide updates as appropriate.
And with that, I'd like to give the floor back to Chuck for some closing remarks.

Charles Treadway

Thank you.
Karl has predicted the first quarter was very challenging quarter. We're in the middle of a hardware recession and our revenues reflect that recession, although there were some bright spots in the quarter with CCS NOW and order rates. Visibility to a pending recovery remains uncertain. The falloff in demand in the mix and as businesses were sharper than we predicted as customers manage inventory and push out projects and upgrades. I'm confident we're doing the right things with the levers we control, like customer interface costs, new product development and capital. We're very focused on supporting our customers and we appreciate their support. When market conditions improve, we are well positioned to capture the recovery in all segments. In addition to managing the businesses, we are extremely aware of our capital structure and liquidity. We will continue to work on managing these aggressively for the benefit of our shareholders. We appreciate your continued support and patience. And with that, we'll now open the line for question.

Question and Answer Session

Operator

Thank you. At this time we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be in To withdraw your question, please press star one one. Again, please stand by while we compile the Q&A roster.
Yes, thank you.
Our first question comes from the line of George Notter of Jefferies LLC. Your line is now open.

George Notter

Hi, guys. Thanks very much. I wanted to ask about some potential asset sales. I think last quarter you guys made a comment to the effect of some you won't be selling assets in the near or medium term. I think come from the press release and some of your comments, it sounds like maybe that's on the table a bit more. I'm just wondering if there's been any change in the outlook there.

Charles Treadway

Yes, George, I'll just I'll refer to the prepared remarks. I mean, it continues to be an alternative for us and we're continuing to look at those and have dialogue.
And I think what we said last time is no, we're not going to go sell those assets at any value. So I mean, I think the dialogues continue and it is an alternative.

George Notter

Okay. Got it. And then on, um, on CCS, I was very interested in the comments about some order rates improving. Are there specific pieces of the business where you're really seeing order rates improving I guess as I think about CCS, I mean, there's parts of the business that are more asset intensive. I'm thinking about fiber cabling manufacturing, for example, and in the areas of business that are less capital-intensive. I guess I'm thinking here about fiber connectivity, and I assume that dumb as fiber cabling gets better, it's a better lever for you in terms of EBITDA improvement as you utilize those assets.
But I'm wondering if some there's kind of a chain of events here in terms of really getting that business back to reasonable looking profitability.

Charles Treadway

Well, thanks for the question, George. I think what we're saying, what we said in the remarks is that we're starting to see stronger order rates. But I'd say that we are still well below our 22 levels, but we are seeing pickup. And I would say we're seeing pickup both in the broadband or the NCC. portion of our business as well as the building building and data center part of our business, we're seeing actually probably more of a pickup in the building and data center side than the NCC. side right now. But to your point, I mean, we made the capacity investments prior to the last ramp up and we need more connectivity, which we've talked about in our remarks, which we're adding by midyear. But we're going to we're going to have capacity to support us even above the levels we had in 22 going forward.

George Notter

Okay.
Thanks very much.
Appreciate it so much.
One moment for our next question.
Yes.

Operator

Thank you. Our next question comes from the line of Meta Marshall of Morgan Stanley. Your line is now open.

Meta Marshall

Great. Thank you. Maybe wanted to ask two questions. First on the CCS business, and you spoke about kind of some of your enterprise traction, but is there anything to note with kind of data center customers or cloud customers that you might have?
And then maybe second and just some commentary on gross margins.
Clearly, EBITDA was a highlight. Is that all utilization and that led to kind of gross margins being a hair short of expectations?
Or just any commentary on how we should look at gross margin throughout these things?

Charles Treadway

Thanks, Matt. I'll take the first part and talk and hit the gross margins. But I would say on the data center side, that's where we're seeing our biggest lift in the big building and data center part of our business hyperscalers as well as cloud. And I would say it's linked to the G. and AI. and the press there. What's going on? There's just a lot a lot of interest plus we have some really nice products with PROPEL with and then our structural cabled System x 2.0 stuff that helps support that. So we feel good about where we are in that business.

Kyle Lorentzen

Yes, our all get to the gross margin side and on the gross margin side, you know, clearly the level of revenue and the absorption of our fixed cost has an impact on that.
On the margin side, I think also, you know, when we think about the businesses and just level of gross margins. Our ANS. and mix business tend to be a little bit higher on the gross margin basis. So there's a mix component that's impacting the margins in Q1. Just as well as the fixed cost leverage.

Meta Marshall

Great.
Thank you.
One moment for our next question.

Operator

Yes, thank you. Our next question comes from the line of Simon Leopold of Raymond James.
Your line is now open.

Simon Leopold

Thanks for taking the question.
Yes, I wanted to follow up on the gross margin commentary and see if you could help us maybe build a little bit of a bridge to the to the December quarter versus the March quarter in terms of the changes, what I'm really trying to understand was was it that that's on the lower volumes, things like mix and ANS., we're down materially relative to the prior quarter or.
Yes.
Anything you can help to sort of bridge that the two quarters and then I've got a follow-up.
I'll let you answer that first, please.

Charles Treadway

Yes, on a sequential basis from Q4 to Q1, the and business and the next business were down, we were down relative to what we saw in CCS and OWN, where we saw a little bit of growth. And as I as I answered in the previous question, the the mix of those businesses, but does have an impact on just the margin profile. As you know, A. and S. and Ruckus in particular, have a little bit different, a higher margin profile than the CCS. and OWM. business?

Simon Leopold

Yes. What I'm what I'm trying to clarify here is that that it's not just the mix of segments, but the gross margin with in A. and S. and with within on the Ruckus businesses were down materially versus the prior quarter themselves. Is that correct?

Charles Treadway

Because you're because the revenues are down and you cannot gain coverage on the fixed costs and those business businesses.

Simon Leopold

Perfect. That's what I wanted to make sure I understood. So what I what I wanted to ask about was sort of the trajectory of BNS recovery and and some of the key drivers, I guess what I'm wondering about is the availability of the key components and chips for the Docsis four products. What's your expectation on the availability or timing of when you expect those amplifiers would ramp? And how are you thinking about the possibility of products that would essentially be a single amplifier that could be a dual function, either a full duplex or extended spectrum? Is that something you'd be offering in?
So what's the timing of that?

Charles Treadway

Yes, I'd start by saying on the amplifier side on the in terms of chips, we're looking at the fourth quarter and for being able to launch that FDX. product YSD. a little bit sooner than that. And then related to where we're going with the products in our business in the future ramp up, I would say in general, our customers just have too much inventory right now, and they are trying to figure out where they want to go with HFC or of do they want to go to DAA. And I mean, we have a pretty large installed base. So we have some customers that just want to do more with their existing network and look at Docsis 3.18 for example, we're ready to go with that. As we talked about, that gets you five to eight gigabits down speed just with software upgrades, if you have the right hardware and then, of course, we have our virtual CMTS. It's in labs right now with the RPD.s and R & D's. There are some challenges with parts for the ESD. side of those, but that's getting worked out on. I'm talking about the main, the main chip on FDX side, those are pretty much ready to come here. So I hope that helps answer the question for you.

Simon Leopold

Yes.
Thank you very much.
One moment question.

Operator

Thank you. Our next question comes from the line of Steven Fox of Fox Advisors, LLC. Your line is now open.

Steven Fox

Hi, good morning.
I had two questions on. First of all, Chuck, I understand there's a lot going on within the different businesses that makes you talk about limited visibility, but can you just dial in a little bit closer on your thinking for the CCS business for full year? Some of your competitors have talked about improvements as we go throughout the year at varying degrees. I was wondering what your thoughts are on that.
And then secondly, on Karl, just on the cash flow statement, I just want to confirm that the cash flow for the quarter came in basically where you are looking at what you were looking for 90 days ago, or if there were any puts and takes we should know about things.
Yes.

Kyle Lorentzen

Let me answer the second first and then Chuck can answer the first question.
Yes.
I mean, I think we said in our prepared remarks that the cash flow was sort of in line with what our expectation was. There weren't any major puts or takes on the cash flow other than maybe a little bit of a bump just because of the better EBITDA, but in general, it came in in line credit.

Charles Treadway

Yes. So Stephen, yes, I would say that as I shared, we are seeing a pickup and the order momentum that we are seeing, we do believe we're going to have a sequential improvement in Q2 and a stronger second half than the first. So that would that would lead you to think that we would believe that Q1 would be our lowest quarter in CCS and it would continue to build from there because it's so in general, it sounds like you're in line with competition.

Steven Fox

There's no areas where you're lagging or leading in terms of end markets or product areas?

Charles Treadway

That's correct.

Steven Fox

Okay.
Thank you.

Operator

One moment for our next question.
Yes.
Thank you. Our next question comes from the line of Samik Chatterjee of JPMorgan. Your line is now open.

Samik Chatterjee

Yes, thank you, and thanks for taking my questions. Maybe for the first one dumb guy load here you on the loss of volume leverage in this mix of revenues come down there and that likely continues into 2Q is what I'm sensing from your tone here, but how should we think about your ability to sort of take cost out through the year in those two businesses, just to buffer some of the a lot of volume leverage as you go from sort of look at the lower order rate in those two businesses.

Charles Treadway

And I've got a slide. So I guess what I would say on the on the cost side, we've mentioned we're in the process of $100 million sort of fixed cost reduction. We're in the middle of identifying projects and implementing projects. I would say that, you know, as we sort of get to the end of the year, that will be fully baked into our numbers. And I what I would say on that is that although that's across all of our segments, definitely, you know, the next business and answer part of that $100 million reduction. I think also with that said in both of those businesses, we expect that there are there is going to be a recovery in that business in those businesses, and we're going to continue to make investments in those business as it relates to supporting our customers and generating new products. I mean, I think there's always the balance on the cost side, but we definitely continue to look at cost reduction. And I think we'll we'll definitely get some additional cost out as we work through the year.

Steven Fox

And for my follow-up, if I can just go back to CCS and your commentary about what you're seeing in terms of strength on the data center side of the business. And can you just talk a bit more about what does your sort of overall customer footprint look like across data center companies and sort of cloud companies. Do you feel you have your fair share already? Or as you think about this investment cycle on the data center side, do you think there's more opportunity for market share relative to where you stand today?

Kyle Lorentzen

Look, I believe this market is growing really, really fast rates and I think we're holding share now. I think we obviously have an opportunity to gain share. We have some great partners as well as some great products. So I wouldn't I wouldn't count us out on this in terms of gaining share. And I believe the market's very strong right now, and we're definitely getting our fair share of it. And I believe we have an opportunity to do more.

Operator

I think one moment for our next question.
Thank you. Our next question comes from the line of Amit Daryanani of Evercore. Your line is open.
Bob.

Amit Daryanani

Good morning. Thanks for taking my question.
I have two as well up.
I guess first on the free cash flow side of it, you folks talked about lower free cash flow expectation in 24 versus 23 opportunity called our working capital requirements is a big driver for that up. Can you just help me think about using free cash flow positive in Q2 and for calendar 24?

Charles Treadway

Yes. I mean, I we're not we're not providing that level of guidance.
I mean, I think from a I'll characterize it as as the as we know, we definitely won't see the cash burn that we saw in Q1 from, but there there's probably some level of cash burn that happens in Q2. Historically, you know, we're building a lot of cash in the fourth quarter and I know Joe, so the profile is, you know, sort of burn cash early in the year and then build it back in Q4. I think I think that similar profile will will be what we see in 2024.

Amit Daryanani

I've got it in an up RPO, just on the on the CCS side. Can you just talk about what contribution you think big data projects could have for the Company over time? And is it reasonable to think that that might be more of a calendar 25 revenue contribution versus 21st. I'm wondering if you could size what that potential could be and when do you think that you start to see the benefits there?

Charles Treadway

Yes, I would say it's going to be at the very end of 24, probably at the earliest, but most likely we believe it's more 2025 now in terms of the opportunity there, I think I said in our last earnings call, it's around $4 billion opportunity over four to five years.
I think that still holds I'm sorry, is that $4 billion to $5 billion or four years, is that the TAM? Or is that what CommScope could get just designs and as some point?

Amit Daryanani

Yes, perfect.
Thank you.
Yes.

Operator

One more on that front question.
Thank you. Our next question comes from the line of Matt Niknam of Deutsche Bank. Your line is now open.

Matthew Niknam

Hey, guys. Thanks for taking my question. My question is mainly related to inventories and where they sit at customer levels.
I guess first on mix, if there's any more color you can give on where inventory levels sit today and any visibility in terms of when demand comes back?
And I ask it in the context of our commentary that implies 1Q should be the bottom with an uptick in subsequent quarters yet the commentary doesn't sound too great in terms of end market demand.
So that's the first question.
And then maybe secondarily on CCS. Similarly, you talked about uptick in orders in CCS.
Just wondering whether customers are largely done with inventory work downs or if that's varied across different types of carrier customers.
Thank you.

Charles Treadway

Yes, I think as you mentioned as we think about just where our customers' customers are with inventory destocking, clearly it gets five by business.
Tom, I think as we think about on your questions, just around the sort of the mix and Ruckus business, I think are I think I think we have some we have visibility to the inventories. The inventories have been coming down from I think where we are in that business is there's probably still a little bit a ways to go before we get to the destocking and that needs to take place to start seeing some sort of more normal growth?
I think on the CCS side of the business, I think as Chuck mentioned in his comments, I think we're probably close to the inflection point. I've seen that, you know that that inventory had been worked down by the customers, and we're now starting to get back to sort of normal growth levels. And I think we're seeing that and some of these order rates that we've talked about.

Matthew Niknam

Great.
Thank you.

Operator

One moment for our next question.
Yes, thank you. Our next question comes from the line of Tim Savageaux of Northland Capital Markets. Your line is now open.

Tim Savageaux

Yes, hi, good morning. A question on, as you mentioned, increasing order rates throughout the quarter. I guess my question is, have you seen that continue here into Q2? And have you seen any changes with regard to the mix? You mentioned stronger building in data center and uptick in carriers but maybe not as much have you seen or do you expect that to change from here as we go forward?
And just as a follow-up, if you look at the magnitude of the sequential increase you're expecting for CCS in Q2. Can you give us some more color on that, say relative to what you saw on Q1 over Q4?

Charles Treadway

We believe that where we are right now is kind of we're hopeful we're cautiously optimistic that this is the start of the recovery right now. The data center and building a campus business is stronger than than broadband, but I believe those will kind of line up to get to the same level of growth going forward on and potentially broadband being more, but we haven't we haven't seen that yet, but we that's what we would expect to sustain going forward.

Kyle Lorentzen

And I'll sort of answer your question about Q2 relative. I mean, I think what we're seeing is it continues to be a little bit dynamic from the standpoint of even though we're sort of end of the quarter. I think it's still dynamic. I mean, I think as we said, I think we would sort of stick with Q2 being higher than than Q1 for CCS revenues. But clearly, it's pretty dynamic and where we know we are seeing the increases and we're not exactly sure where that's going to wind up at the end of the quarter. So I don't think we're going to be specific about what that's going to look like, but what will have to play through the quarter.

Tim Savageaux

Thanks very much.

Operator

Yes, I'm showing no further questions at this time. I would now like to turn it back to Chuck Treadway, Chief Executive Officer, for closing remarks.

Charles Treadway

Thank you for your time today, and I appreciate your interest in CommScope. I'd like to all of you to have a great rest of the week. Thank you.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.