Transcript: Vistance Networks Q2 2026 Earnings Conference Call

Vistance Networks (NASDAQ: VISN ) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

75 billion, enabling a special distribution of $5 per share to shareholders. The company aims to end 2026 with $700 to $750 million in cash and expects a $160 million tax refund in 2027, positioning them for strategic investments and potential stock buybacks. Second-quarter net sales were $320 million, down 1% year over year, with adjusted EBITDA down 32% to $36 million due to memory chip issues and stranded costs. 0 upgrade cycle and evaluates investments beyond cable markets, including PON, vBNG, and Security Solutions.

Challenges include memory chip pricing and availability, customer upgrade delays, and a decline in legacy product sales, impacting EBITDA and revenue performance. Full Transcript OPERATOR Good day, and thank you for standing by. Welcome to Vistance Networks' second quarter 2026 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-1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star-1-1 again.

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jenny Thompson. Ma'am, please go ahead. Jenny Thompson, Vice President of Investor Relations Good morning, and thank you for joining us today to discuss Vistance Networks' 2026 second quarter results.

I'm Jenny Thompson, Vice President of Investor Relations for Vistance Networks, and with me on today's call are Chuck Treadway, President and CEO, and Kyle Lorenzen, 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 the 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 our 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. Charles Treadway, Chief Executive Officer Thank you, Jenny. Good morning, everyone.

I'll begin on slide 3. Before discussing our second quarter results, I'd like to discuss the recent Ruckus transaction. 846 billion. 75 billion.

There was considerable interest in Ruckus over the years. We feel this transaction provides our shareholders with significant value, being an all-cash transaction. We want to thank all of our Ruckus employees for their dedication in driving value in the Ruckus business and wish them continued success under Belden leadership. As a result of this transaction, this morning we announced the Board of Directors has approved a special distribution of $5 per share.

The special distribution will be paid by the end of August 2026. We expect that the special distribution will be treated as a return of capital for tax purposes. The cash associated with the special distribution will be supported by the proceeds from the Ruckus sale. In total, between the special distribution, after both the CCS and Ruckus divestitures, we will have distributed $15 per share back to our shareholders while paying off all of our debt and redeeming all of our preferred equity.

We are very pleased with this result, as the sale of these two businesses has unlocked significant equity value. As we evaluated the amount of special distribution, we considered the cash on hand, expected cash flows, as well as future investment opportunities and strategies. We would expect to end the year with between $700 and $750 million of cash on the balance sheet. In addition, we expect a tax refund of approximately $160 million in the second half of 2027 as a result of our divestiture tax strategy.

The strong cash balance and unlevered balance sheet allows us to evaluate investments, both organic and inorganic, including expanding outside of the cable market. In addition to business investments, we will evaluate stock buyback opportunities, including taking advantage of the $100 million buyback program the Board approved in the second quarter. As we continue to work on our go-forward strategy, we will provide updates as appropriate. 0 upgrade cycle that we believe will last for several years.

We are well positioned in the amplifier space, which will be the largest segment of the market over the next few years. 0 upgrade cycle, we are working closely with our customers on next-generation cable architecture. We will evaluate growth opportunities, including organic and inorganic investments. These investments could range from investing more aggressively in existing or new technology to evaluating potential acquisitions to broaden the markets we participate in, our technology portfolio, and our customer base.

As we evaluate acquisitions, we will be disciplined on valuations, including understanding long-term return opportunity. In addition to the core DOCSIS and DAA cable business, we are evaluating investments that allow us to participate in large markets outside cable and technology that we already own like PON, vBNG, and Security Solutions. In PON, we have a commercial agreement with Altice Labs. This agreement allows us to bring best-of-breed technology, including providing a robust portfolio of PON solutions for next-generation fiber-to-the-home networks.

Together we can cover traditional GPON, XGS-PON, and 50G PON technologies, providing scalable ultra-high-speed broadband services while optimizing network density and energy efficiency. Our vBNG, or virtual Broadband Network Gateway, products were acquired as part of our CASA acquisition in 2024. Our vBNG is a cloud-native software solution that separates routing and subscriber management functions from physical hardware. It allows service providers to dynamically scale and control user planes on standard servers to manage multiple access networks, such as fixed wireless and fiber, with low latency.

One specific use case is mobile data offload, where using our virtualized system helps enable wireless gateways. S. wireless carriers. Finally, I would like to touch on our Security Solutions business that includes our PKI, or Public Key Infrastructure, products.

Our PKI products provide end-to-end device security, digital certificate provisioning, and software licensing for IoT devices, smart networks, and digital video systems. This is a business that we've been in for some time and have agreements with Motorola and Texas Instruments, among others. We have a unique, broad offering that we feel has significant potential for investment and growth. The three examples above show the diversity of our business product offerings.

In many cases over the last few years, due to the need to focus on deleveraging and managing our balance sheet, we have not focused on these product lines and limited investment. Now that we have a strong balance sheet with substantial cash flow and available cash, we have the funds to make investments in these product lines. These investments may be organic or inorganic and may broaden our product portfolio through research and development funding or additional resources supporting go-to-market. Our Security Solutions business alone has the opportunity to create substantial value with investment in PKI as a service and further product offerings.

The Security Solutions business will allow us to diversify beyond our traditional cable markets at very attractive valuation multiples. I'm very excited about the opportunity we have in our non-DOCSIS product lines. We will continue to keep you posted as we continue to define our strategies. Now on the second quarter results on slide four, Aurora Networks delivered net sales of $319 million and adjusted EBITDA of $46 million.

Revenue was down 1% year over year, and adjusted EBITDA was down 43%. Adjusted EBITDA was in line with our expectations, as indicated in our first quarter earnings call. The second quarter was going to be a challenging quarter-over-quarter comparative due to very strong legacy product and license sales in the second quarter of 2025. Our Aurora adjusted EBITDA guidance for the full year is now $200 to $225 million.

As indicated on our last call, the business continues to be impacted by two major items in 2026: memory chip issues and stranded G&A costs. On the memory chip issue, the impact on our forecast is approximately $40 million. This is higher than our previous forecast. In addition, we are experiencing some customer upgrade delays.

We continue to deal with memory availability and pricing issues associated with memory chips. Our visibility is limited; however, we successfully managed the first half of the year with multi-year forecasted demand as well as passing on a portion of the increased cost to our customers. We continue to be focused on alternatives to minimize the impact of memory costs and availability. Our stranded cost impact in 2026 is approximately $20 million.

We expect the majority of stranded costs associated with CCS and Ruckus divestitures to be eliminated by 2027, with all stranded costs eliminated by 2028. 0 products continues to be strong as we deploy our suite of products, including amplifiers and nodes. Our FDX deployment with Comcast continues to go well. We continue to make headway with our suite of next-generation ESD amplifiers and are now shipping to multiple large North American MSOs.

We expect shipments to ramp up over the next couple of quarters, and these products will continue to ship over multiple years. We continue making progress on the Unified products. We shipped and deployed the Unified Node in the second quarter. The Unified Node allows our customers to choose between either the ESD or FDX technology within a single device.

The Unified amplifiers have started lab testing, and we expect to start shipping at the beginning of 2027. In the second quarter, cable operators continued upgrading their E6000 and C100G CCAP deployments to help them deliver low-latency Internet without requiring major infrastructure replacement. Also during the quarter, we continued our development of our vCCAP with a Remote PHY solution to key customers in Europe, with a significant win and deployment program which will span three years. During the quarter, Aurora continued to solidify its relationship with DVSUM.

As announced last year, Aurora began partnering with DVSUM to offer an AI version of the Aurora ServAssure NXT platform. The solution combines DVSUM's self-service analytics technology for call center and network operations with Aurora's ServAssure network monitoring solution. This AI-based tool allows for advanced triage and proactive analytics, network optimization, and fault management. The recently signed agreement allows Aurora to participate in DVSUM's growth through a warrant.

Although initially modest, DVSUM's AI product offering has an opportunity to be used in a multitude of applications beyond Aurora ServAssure. We had our first win with the platform in Latin America to monitor both HFC and PON networks. 1 network. The new products position Aurora Networks to maintain performance, and with that I'd like to turn things over to Kyle to talk more about our second quarter results.

Kyle Lorenzen, Chief Financial Officer Thank you, Chuck, and good morning, everyone. I'll start with an overview of our second quarter results on Slide 5 for Vistance Networks' continuing operations. Net sales ended at $320 million, down $4 million, or 1% year over year. The stranded costs associated with the RUCKUS business, memory chips, and reduction in legacy license sales drove EBITDA down $17 million, or 32%, to $36 million.

13 in the second quarter of 2025. S. GAAP presentation and does not reflect true performance of the business due to allocation methodology of shared costs. Vistance Networks, including RUCKUS, adjusted EBITDA for the second quarter was $76 million, down 40% versus prior year as a result of memory chip pricing, reduction in legacy license sales, stranded costs associated with the divestitures, and pull-ahead RUCKUS revenue from pending second-quarter 2025 tariffs.

As indicated in our first quarter earnings call, we expected a year-over-year decline in second-quarter Vistance Networks, including RUCKUS, adjusted EBITDA. Turning now to our second-quarter segment highlights on Slide 6. 0 products were slightly offset by a decline in our legacy product sales. As we have mentioned, the second quarter of 2025 was an unusually strong quarter for our legacy license sales.

As we have discussed in the past, Aurora Networks is a project-driven business, with timing of projects driving some volatility in quarterly results both from a revenue and EBITDA perspective. The second-quarter comparatives are an example of the volatility. Aurora Networks' adjusted EBITDA of $46 million was down $34 million, or 43%, from the prior year, driven by lower margins due to decreased high-margin legacy license sales, memory chip pricing, and stranded costs. The second quarter impact of memory pricing and stranded costs year over year is approximately $15 million.

The $46 million of adjusted EBITDA was in line with our expectations provided on our first quarter earnings call. Aurora order rates were down 55% in the second quarter of 2026 versus prior year, primarily due to timing of orders. Subsequent to quarter end, we received approximately $200 million of orders in July. Aurora backlog ended the second quarter at $470 million, down $82 million, or 15%, versus the end of the second quarter 2025.

Aurora remains well positioned to take advantage of upgrade cycles while offsetting declines in the legacy business. Turning to Slide 7 for an update on cash flow. We ended the quarter with $152 million of cash on hand. This was above our projection of $125 million.

As expected in the quarter, cash flow from operations was a use of $73 million and free cash flow was a use of $75 million due to working capital needs and RUCKUS transaction costs. 15 billion. The distribution will be paid before the end of August and is expected to be treated as a return of capital for tax purposes. The distribution will be paid without putting any leverage on the company.

With no leverage and ample cash on hand, we are well positioned to take advantage of strategic opportunities. As Chuck mentioned earlier, we are excited about the RUCKUS transaction as it further unlocks shareholder value and provides an opportunity to return additional cash to shareholders. Turning to Slide 8 for an update on our liquidity and capital structure. During the second quarter, our cash and liquidity remained strong.

As indicated, we ended the quarter with $152 million in cash on hand. 9 billion of cash. 15 billion of this cash will be distributed through the special distribution in the quarter. We did not purchase any equity on the open market; however, we will continue to evaluate opportunities to buy back stock, and as we mentioned on the earnings call in April, in Q2 the Board of Directors approved the buyback of up to $100 million.

Our ample liquidity gives us opportunity to potentially increase our buyback program if warranted. The company ended the quarter with no outstanding debt. In the second quarter, the company entered into a new revolving credit agreement with Citibank in an aggregate amount up to $300 million, subject to borrowing base availability.