Vistance Networks (VISN) Q3 2026 Earnings Call: EBITDA-Prognose gesenkt

Wichtigste Erkenntnisse

• Der Nettoumsatz lag im dritten Quartal 2026 bei 320 Millionen US-Dollar – ein Rückgang um 18 Millionen US-Dollar bzw. 5 % im Jahresvergleich, da höhere Auslieferungen von DOCSIS 4.0 durch geringere Verkäufe von Altprodukten aufgezehrt wurden.
• Das bereinigte EBITDA lag bei 57 Millionen US-Dollar. Das bereinigte EBITDA des Segments Aurora Networks stieg um 5 %, begünstigt durch geringere variable Vergütungen, während das bereinigte EBITDA der fortgeführten Geschäftsbereiche gemäß der US-GAAP-Darstellung der geteilten Kosten um 128 % zulegte.
• Vistance Networks senkte die Prognose für das bereinigte EBITDA im Gesamtjahr auf 180 bis 200 Millionen US-Dollar. Grund dafür sind höhere Speicherkosten sowie Kunden, die Bestellungen von Verstärkern aufschieben, um ihre Lagerbestände und Rollout-Zeitpläne anzupassen.
• Der Auftragseingang bei Aurora stieg im Jahresvergleich um 41 %, während der Auftragsbestand ein Plus von 3 % auf 410 Millionen US-Dollar verzeichnete. Die Unternehmensleitung erklärte, dass die grundlegende Nachfrage nach Upgrades intakt bleibe, der Zeitpunkt der Beschaffungen jedoch weiterhin volatil sein könne.
• Das Unternehmen rechnet damit, im Jahr 2026 rund 4 Milliarden US-Dollar an die Aktionäre zurückzugeben. Die Sonderausschüttungen werden sich auf insgesamt 16,50 US-Dollar je Aktie belaufen; zudem wurden bis zum 30. Oktober 28,9 Millionen Aktien für 225 Millionen US-Dollar zurückgekauft.
• Präsident und CEO Charles Treadway wird sein Amt zum 1. Februar niederlegen. Das Unternehmen hat den Nachfolgeprozess eingeleitet und mitgeteilt, dass er sich weiterhin auf die operative Umsetzung und einen geordneten Übergang konzentrieren wird.

Wichtige Finanzkennzahlen

Geschäftsverlauf und operative Entwicklung

DOCSIS 4.0 blieb der wichtigste Wachstumstreiber. Vistance Networks berichtete über kontinuierliche Fortschritte bei intelligenten Verstärkern, Nodes und virtuellen CMTS-Produkten. Der FDX-Rollout bei Comcast wurde fortgesetzt, während ESD-Verstärker der nächsten Generation an mehrere große nordamerikanische Kabelnetzbetreiber (MSOs) ausgeliefert wurden. Die Unternehmensleitung rechnet damit, dass die ESD-Auslieferungen 2027 hochlaufen werden.

Aurora Networks kündigte zudem einen groß angelegten Rollout von Unified-DOCSIS-4.0-Nodes bei Ziggo an. Die Architektur kombiniert die optische Node-Plattform von Aurora, das Unified-DAA-Modul, die vCCAP Evo Virtualized Core Platform und den ServAssure NXT Domain Manager. Zudem sicherte sich das Unternehmen einen Rollout von vCCAP Evo bei O2, der über einen Zeitraum von drei Jahren erfolgen soll.

Speicherchips sorgten weiterhin für erheblichen Kostendruck. Die Unternehmensleitung schätzte die Belastung für 2026 auf rund 40 Millionen US-Dollar, wobei ein Teil dieses Drucks bis ins Jahr 2027 anhalten dürfte. Das Unternehmen verhandelt über Preise mit Kunden, arbeitet mit Zulieferern zusammen und entwickelt alternative Designs.

Vistance Networks baut zudem sein PON-Portfolio aus, darunter 50G PON und Telco PON. Für das PKI-Sicherheitsgeschäft wird für 2026 ein Umsatz von rund 10 Millionen US-Dollar erwartet. Das Management schätzt den adressierbaren Markt für seine PKI-Produkte auf etwa 700 Millionen US-Dollar bei einem jährlichen Wachstum von rund 15 % und finalisiert derzeit eine Investitionsstrategie für diesen Bereich.

Prognose der Unternehmensleitung

Vistance Networks senkte seine Prognose für das bereinigte EBITDA im Gesamtjahr 2026 auf 180 bis 200 Millionen US-Dollar. Die Anpassung spiegelt den Preis- und Verfügbarkeitsdruck bei Speichern wider sowie die Tatsache, dass Kunden einen Teil ihrer Ausgaben für Verstärker in das Jahr 2027 verschieben.

Nach der Sonderausschüttung im November rechnet die Unternehmensleitung zum Jahresende mit Barmitteln von 275 bis 300 Millionen US-Dollar. Diese Schätzung berücksichtigt keine Rückkäufe im Rahmen des neu genehmigten Aktienrückkaufprogramms über 100 Millionen US-Dollar und schließt eine auf 2026 vorgezogene Steuererstattung von 60 Millionen US-Dollar ein. Die verbleibende Erstattung von 100 Millionen US-Dollar wird für 2027 erwartet.

Das Unternehmen geht davon aus, dass der Großteil der verbleibenden Gemeinkosten (Stranded Costs) im Zusammenhang mit den Verkäufen von CCS und Ruckus bis 2027 abgebaut sein wird; bis 2028 sollen alle Stranded Costs entfallen. Die Belastung durch Stranded Costs beläuft sich 2026 auf rund 20 Millionen US-Dollar.

Risiken und Beobachtungspunkte

• Bei den Speicherpreisen wird in den kommenden Quartalen mit einem allmählichen Anstieg gerechnet, wenngleich das Management eine Verlangsamung der Zuwachsrate erwartet. Ein Teil der geschätzten Belastung von 40 Millionen US-Dollar wird bis in das Jahr 2027 hineinreichen.
• Die Kundenkonzentration führt dazu, dass die Ergebnisse empfindlich auf Änderungen bei Beschaffungsplänen, Lagerbeständen, Installationsproduktivität und Rollout-Zeitplänen reagieren.
• Die erhöhten Lagerbestände spiegeln sowohl die Lage bei Speicherchips als auch Fertigprodukte wider, die von Verzögerungen seitens der Kunden betroffen sind. Die Unternehmensleitung rechnet im ersten Halbjahr 2027 mit einer teilweisen Normalisierung, jedoch nicht mit einer vollständigen Rückkehr auf das vorherige Niveau.
• Die Erlöse aus Altprodukten sind weiterhin rückläufig, sodass Wachstum bei DOCSIS 4.0 erforderlich ist, um diesen Druck auszugleichen.
• Der Zeitpunkt der Kunden-Rollouts im Jahr 2027 bleibt ungewiss, und das Management erklärte, es sei noch zu früh, um einen konkreten Ausblick für 2027 zu geben.

Höhepunkte der Fragerunde für Analysten

Die Unternehmensleitung erklärte, die Verfügbarkeit von Speichern sei derzeit beherrschbar und die Preisgestaltung stelle das Hauptproblem dar. Vistance Networks plane nicht, durch übermäßige vorausschauende Lagerkäufe zu spekulieren; das Unternehmen beziehe jährlich rund 1,5 bis 2 Millionen Speicherchips und richte die Beschaffung an der Kundennachfrage aus.

Zu den verzögerten Kundenaufträgen merkte das Management an, dass es sich eher um eine zeitliche Verschiebung als um eine verlorene Nachfrage handele. Rollout-Geschwindigkeit, Teamproduktivität, Wetter und Lagerbestandsziele der Kunden könnten die Beschaffungspläne beeinflussen. Das Unternehmen rechnet damit, dass sich ein Teil des verzögerten Geschäfts in das Jahr 2027 verlagert, gab jedoch keine konkrete EBITDA- oder Free-Cashflow-Prognose für dieses Jahr ab.

Hinsichtlich des Betriebskapitals erklärte das Management, dass die an verzögerte Aufträge gebundenen Lagerbestände im ersten Halbjahr 2027 beginnen sollten, sich zu normalisieren. Allerdings dürften speicherbedingte Belastungen die Bestände über einem vollständig normalisierten Niveau halten.

Treadway erklärte, sein geplanter Abschied spiegle die verkleinerte und fokussiertere Struktur des Unternehmens nach den strategischen Veräußerungen, der Schuldentilgung und der Rücknahme von Vorzugsaktien wider. Er werde bis zum 1. Februar Präsident und CEO bleiben, während der Verwaltungsrat nach einer Nachfolge sucht.

Vollständiges Transkript der Telefonkonferenz

Vollständiges Transkript der Telefonkonferenz

Ausführungen des Managements

Operator

[Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Ginny Thompson. Ma'am, please go ahead.

Jenny Thompson

Good morning, and thank you for joining us today to discuss Vistance Networks' 2026 third quarter results. I'm Ginny Thompson, Vice President of Investor Relations for Vistance Networks, 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 the current view of our business, and actual future results may differ materially. Please see our recent SEC filings, which identify the risks and uncertainties that could affect future performance.

Before I turn the call over to Chuck, I have a few housekeeping items to review. Today we will discuss certain adjusted or non-GAAP financial measures which are described in more detail in this morning's earnings materials. Reconciliations of non-GAAP financial measures and other associated disclosures are contained in our earnings materials and posted on our website. All references during today's discussion will be to our adjusted results. All quarterly growth rates described during today's presentation are on a year-over-year basis unless otherwise noted.

I'll now turn the call over to our President and CEO, Chuck Treadway.

Charles Treadway

Thank you, Ginny, and good morning, everyone. Thank you for joining our third quarter 2026 earnings call. Before we discuss our results, I'd like to briefly address the announcement made this morning. After 6 years as CEO of CommScope, I will be stepping down as President and CEO on February 1. When I joined CommScope, we had $9 billion of revenue, four large business segments, and 30,000 employees around the world. Today we are a much smaller and much more focused company. It has been a privilege to lead CommScope and Vistance Networks through such an important moment of transformation.

We set out to unlock value for our shareholders, and our team delivered. We completed a series of strategic divestitures, repaid all of our debt, and redeemed all of our preferred equity. I am proud of what this team has accomplished and believe now is the right time to initiate this succession plan to identify a leader for the company's next chapter. My focus is unchanged. I remain committed to executing our plan, serving our customers, and delivering on our commitments, and I will work closely with the Board to ensure a smooth transition.

Now turning to Slide 3, before discussing our third quarter results, I'd like to discuss our recent activity around our use of excess cash resulting from the Ruckus transaction. As indicated on our second quarter earnings call, we expected to have between $700 million and $750 million of cash at year-end. This cash balance reflected the payment of our special distribution of $5 per share in August. Subsequent to the end of last quarter and payment of the $5 per share special distribution, we have implemented two additional actions to utilize a significant portion of our excess cash. The first was our recently announced additional special distribution of $1.50 per share.

This distribution will result in a cash outlay of approximately $300 million and will be paid on November 6. This special distribution, along with the $10 per share distribution in April and the $5 per share special distribution in August, will result in total cash distributions to shareholders of $16.50 per share. As indicated, following the sale of our CCS business, a key objective was to return cash to shareholders, and we believe that $16.50 per share achieves that objective.

In addition to the special cash distributions, during the quarter, the company also announced the Board of Directors authorized a share repurchase of $250 million. I'm pleased to report that through October 30, we have utilized approximately $225 million of that program, resulting in 28.9 million shares repurchased. This is a reduction of approximately 13% of the outstanding shares at the end of the second quarter of 2026, including any shares vested as part of the Ruckus transaction. In addition to the $250 million previously authorized, the Board of Directors has authorized an additional $100 million buyback program, bringing the total authorization to $350 million.

We believe this is a balanced use of our excess cash. Including the November distribution and buybacks completed to date, we will have returned approximately $4 billion to shareholders in 2026. Before any repurchases under the new $100 million authorization, we expect to end the year with $275 million to $300 million of cash. This cash balance and strong balance sheet, along with expected cash generation in future years, positions the company for continued investment in the business and a hedge against future volatility.

Now on to the third quarter results on Slide 4. Vistance Networks delivered net sales of $320 million and adjusted EBITDA of $57 million. Revenue was down 5% year-over-year, and adjusted EBITDA was up 5%. Adjusted EBITDA was slightly higher than our expectations as a result of lower variable compensation in the quarter. Overall, it was a solid quarter as we continue to see DOCSIS 4.0 upgrades and the adoption of our next-generation intelligent amplifiers.

The business continues to be impacted by two major items: memory chips and timing of upgrades for our largest customers. On memory chips, the annual impact is approximately $40 million, of which a portion will roll out next year. We continue to deal with availability and pricing associated with memory chips. In the third quarter, we experienced another memory price increase. Despite the challenges, we continue to work with our suppliers and customers to improve availability and manage costs. In addition, we are also working on alternative designs to minimize the impact of memory supply and demand challenges.

We are also seeing some large customers managing inventory and adjusting the timing of their amplifier orders as they evaluate deployment schedules and inventory positions. Given our customer concentration, changes in purchasing patterns can have a significant impact on near-term results. As certain customers have pushed some spending into 2027, we have revised our full-year adjusted EBITDA guidance to between $180 million and $200 million. We remain confident in the underlying demand for our products, although the timing of certain customer deployments remains uncertain.

The market for DOCSIS 4.0 products continues to expand as we deploy our suite of products, including intelligent amplifiers, nodes, and virtual CMTS. Our FDX deployment with Comcast continues to go well. Also, 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 ESD shipments to ramp up in 2027.

At the SCTE TechExpo last month, we showcased our entire suite of products and solutions that help customers upgrade their networks in the most agile ways possible. On display were DOCSIS 4.0 unified solutions, including the RPDs and intelligent amplifiers. Prior to the show, we jointly announced with Ziggo the first large-scale deployment of Unified DOCSIS 4.0 nodes in a live network.

The full solution combines Aurora's optical node platform, its unified DAA module configured for Remote PHY operation, vCCAP Evo Virtualized Core Platform, and ServAssure NXT Domain Manager. This architecture allows operators to deploy flexible network infrastructure that supports evolving DOCSIS standards while simplifying network upgrades. While Ziggo's deployment is based on DOCSIS 4.0 ESD, the unified module supports both ESD and FDX configurations, providing flexibility for different operator network architectures and future requirements.

For Ziggo, this architecture provides a flexible and scalable foundation to evolve its existing HFC network, supporting greater capacity, reliability, and future customer needs while making use of its existing infrastructure. ServAssure NXT Domain Manager enhances and simplifies management of both Remote PHY and virtual CCAP and introduces network automation capabilities. The deployment highlights Aurora Networks' leadership in next-generation broadband infrastructure and demonstrates the readiness of its DOCSIS 4.0 ecosystem for large-scale commercial operation.

In addition, we were awarded another vCCAP Evo win at O2. This deployment will modernize and upgrade their network to Remote PHY. It will roll out over the next 3 years. As stated before, we believe Aurora is well positioned with decades of knowledge of our customers' ecosystems and a broad array of new products for service providers to continue to take advantage of the latest DOCSIS 4.0 upgrade cycle, as well as expanding their current DOCSIS 3.1 networks. We feel our amplifier position, with millions of installed amplifiers requiring upgrades, is valuable as MSOs require upgrades to stay competitive. In addition, with each intelligent amplifier supporting an average of approximately 20 homes passed, we are well positioned to drive edge compute as our current intelligent amplifier has built-in AI machine learning capabilities.

With the Ruckus transaction complete, we're focused on executing in our core cable business and investing organically in select product lines. Our strategy takes advantage of our position in the HFC network and the need for MSOs to continue to upgrade their networks to stay competitive. While cable is under pressure, our customers have large installed bases that have significant value and will require upgrades well into the future. We believe our products are well positioned to be at the leading edge of current and existing upgrades. In particular, our intelligent amplifiers will be at the forefront of upgrade cycles as cable moves towards 25 gigabits. Our intelligent amplifier portfolio includes the only amplifier in the market with AI machine learning capabilities. In the current and future upgrade cycles, we believe amplifiers will be the largest part of the market, and we are the leader in amplifiers. Although we may see some cyclicality, we're confident in the long-term demand for our products.

In addition to continuing to support the required cable upgrades well into the future, we will continue to develop our PON portfolio of products, including Telco PON. Although it's a competitive market, we believe that our product range, including 50G PON and our technology partnerships, will allow us to win market share. We're also finalizing an investment strategy to take advantage of our industry-leading security solution products, specifically PKI. The PKI products provide end-to-end device security, digital certificate provisioning, and software licensing for IoT devices, smart networks, and digital video systems.

Our current PKI business has been internally focused as we have used PKI in our own products. It only represents approximately $10 million of our overall revenue in 2026. However, we have provisioned over 7 billion device credentials and have more than 40 years of security experience. Based on strategic work we have done, our PKI technology is very competitive, and we believe we can grow this business with focused go-to-market investments. Our estimate of addressable market for our products is approximately $700 million, growing at roughly 15% per year. We see this as an attractive opportunity to create long-term value.

We look forward to socializing more of our strategy over the next few quarters as our strategic plans are finalized. And with that, I'd like to turn things over to Kyle to talk more about our third quarter results.

Kyle Lorentzen

Thank you, Chuck, and good morning, everyone. I'll start with an overview of our third quarter results on Slide 5. For Vistance Networks' continuing operations, net sales ended at $320 million, down $18 million or 5% year-over-year, and adjusted EBITDA was up $32 million or 128% to $57 million. Adjusted EPS for the third quarter was up 283% to $0.23 per share versus $0.06 in the third quarter of 2025. It should be noted that the continuing operations presentation reflects the required U.S. GAAP treatment of shared costs. We believe our segment results provide a better insight into the underlying operating performance of the business.

Turning now to our third quarter segment highlights on Slide 6. Aurora Networks' third quarter net sales of $320 million were down 5% from the prior year as increased shipments of our DOCSIS 4.0 products were offset by a decline in our legacy product sales. Aurora Networks' adjusted EBITDA of $57 million was up $3 million, or 5% from the prior year, driven by considerably lower variable compensation in the current quarter, partially offset by lower legacy product revenues, memory chip pricing, and higher stranded costs.

Our stranded cost impact in 2026 is approximately $20 million. We expect the majority of stranded costs associated with the CCS and Ruckus divestitures to be eliminated by 2027, with all stranded costs eliminated by 2028. Aurora order rates were up 41% in the third quarter of 2026 versus prior year. Aurora backlog ended the third quarter at $410 million, up $11 million or 3% versus the end of the third quarter of 2025. Aurora remains well positioned to take advantage of upgrade cycles while offsetting declines in the legacy business. However, timing of upgrades may be cyclical, driven by large customer concentration and timing of their purchases.

Turning to Slide 7 for an update on cash flow. We ended the quarter with $683 million of cash on hand. As expected in the quarter, cash flow from operations was a use of $57 million and free cash flow was a use of $58 million due to working capital needs. Subsequently, after the end of the third quarter, the Board approved a special distribution of $1.50 per share, or approximately $300 million. The distribution will be paid on November 6 from cash on hand and is expected to be treated as a return of capital for tax purposes. With the latest $1.50 per share special distribution, in total, we will have provided special distributions of $16.50 per share in 2026.

Turning to Slide 8 for an update on our liquidity and capital structure. During the third quarter, our cash and liquidity remained strong. As indicated, we ended the quarter with $683 million in cash on hand. The Board of Directors approved an additional buyback of up to $150 million in August 2026 for a total of $250 million in authorized share repurchases. Through October 30, we purchased 28.9 million shares, totaling $225 million against our buyback authorization. The buybacks equated to approximately 13% of our outstanding shares at the end of the second quarter, including any shares vested as part of the Ruckus transaction.

It should be noted that since repurchases occurred ahead of special distributions, the net amount after adjustments for distributions is approximately $140 million, including all commissions and excise tax. In addition to the previously approved $250 million of buybacks, the Board of Directors has authorized an additional $100 million of buybacks. This brings our total authorized buybacks to $350 million.

The company ended the quarter with no outstanding debt. At the end of the third quarter, the current availability under our existing line of credit was $159 million. Based on our cash on hand, cash flow expectations, and leverage capability, we have ample opportunity to invest in growth and value creation and hedge against volatility. Based on our projections, after the $1.50 per share special distribution, we expect to end 2026 with cash on hand between $275 million and $300 million. This does not include any repurchases under the newly authorized $100 million buyback program.

As a result of making certain tax elections, we were able to accelerate $60 million of the previously announced $160 million tax refund into 2026. This $60 million is reflected in the cash estimate for the end of 2026. We still expect to receive the remaining $100 million in 2027. This provides us with a strong balance sheet, allowing for incremental investment and a hedge against volatility.

I will conclude my prepared remarks with commentary around our expectations for the remainder of 2026. We delivered solid execution in the first 3 quarters. However, memory pricing and availability continues to pressure the business. In addition, certain customers are adjusting the timing of amplifier orders as they manage inventory and deployment schedules. As a result, we are lowering our full-year adjusted EBITDA guidance to $180 million to $200 million. We remain confident in the long-term demand for our products, although customer concentration and deployment timing may continue to drive variability in the near term.

We are very pleased with the return of $16.50 per share in 2026, as well as our buyback program. We feel this represents a proper balance of returning cash to our shareholders as well as investing in future value creation. We look forward to continuing to develop and implement the Vistance Networks strategy focused on taking advantage of continued long-term investment in HFC network, PON, and security solutions. And with that, I'll turn it back to Chuck.

Charles Treadway

Thank you, Kyle. In closing, I'm pleased with our progress this year. We've extinguished all of our long-term debt, redeemed our preferred equity, and returned approximately $4 billion in cash to our shareholders through our special distributions and stock buybacks. Although we are dealing with some short- and medium-term challenges with memory chips and volatility of large customer demand, we are well positioned to take advantage of the DOCSIS 4.0 build over the next several years.

Beyond DOCSIS 4.0, we believe that the cable infrastructure market will continue to require upgrades, and we are currently working with our key customers to develop new products, including next-generation intelligent amplifiers, PON, and PKI security solutions. With that, we'll now open the line up for questions.

Operator

[Operator Instructions] Our first question is going to come from the line of George Notter with Wolfe Research. Please go ahead.

Fragen und Antworten

George Notter

Chuck, it's been great working with you [ in the ] future going forward. Again, it's been great. All right, my question is on memory pricing. Obviously, there are some real pressures here. I guess I'm just curious about the outlook for 2027 memory pricing. What are you guys seeing? Do you have an ability to offset that memory cost incrementally with surcharges or price increases? What does that look like right now? Thanks a lot.

Charles Treadway

Yes, I would start out by saying I think we're going to see gradual price increases continuing for the next several quarters, but probably not at the same rate as it was—probably a little less, a little flatter, at least that's what we're believing. And in terms of passing costs through, we are working with our customers to push price through there. And obviously, as prices go higher, we're able to push more to them. So, we did call out that the impact would be about $40 million this year to us, with some rolling out next year.

George Notter

Got it. Okay. And then I assume availability is still okay for you guys in terms of memory, or is this just really a pricing impact?

Charles Treadway

I'd agree with that at this point.

George Notter

Okay, cool. And then the customer pushout, I assume this is one of your large customers. Is it related to CapEx pressures? Is it related to component supply? Is it budget-related or project timing? Any more you could tell us on that pushout would be great.

Charles Treadway

I would say it's really more dependent on their deployment schedules and how fast they install, in addition to levels of inventory that they want to hold. Right now, their installation schedules can be impacted by many things. Think about how fast they're installing, productivity of their crews, weather, such like that. I don't really see anything causing them not to do work. It's just how fast they can move. Obviously, we're going to listen to Charter's report tomorrow. We'll learn more from them. But I would say we're working with them on schedules and timing and how they're viewing what's going to be installed.

George Notter

Okay, thanks very much. Good luck.

Charles Treadway

Thank you.

Operator

And our next question will come from the line of Amit Daryanani with Evercore ISI. Please go ahead.

Amit Daryanani

I guess just first off, on the memory pricing, how much are you guys able to buy ahead of some of these price increases? It seems like you guys have been talking about pricing continuing to rise for a couple of quarters here. I guess, you know, you've had some additional cash on hand, just thinking about why not buy a bit more now.

Charles Treadway

Well, we're obviously not going to be speculating on memory. We buy approximately 1.5 million to 2 million—I mean, 1.5 million to 2 million memory chips a year, which is big numbers. So we have to work very closely with the suppliers, very close to the suppliers of that. And we tie it to their demand, not necessarily looking at, hey, we don't want to be holding the bag if the prices go the other way. I would say that, yes.

Amit Daryanani

And Chuck, maybe just touch on, you know, why now are you stepping down, given that it seems like Aurora is now in a good spot to keep operating by itself?

Charles Treadway

Yes, look, I would say the business is just at a much smaller scale than what I took over in 2020. You know, we delivered on the commitments that we made to the Board. I've agreed with the Board that this is just the right time to identify a next leader. It's a more focused business, and I'm going to remain in this role until February 1 and committed to a smooth transition. Thank you, guys.

Operator

And our next question will come from the line of Joseph Cardoso with JPMorgan. Please go ahead.

Joseph Cardoso

This is Mark on for Joseph Cardoso. I guess with regards to the customer pushout commentary, it seems like that's mostly being described as a timing factor rather than a demand factor. So should we expect that that business comes back in '27? I guess, with regards to the '27 outlook itself, do you see that potentially improving EBITDA and free cash flow year-over-year as well?

Charles Treadway

Look, I'd say to your question and in your comment, I do believe the demand is real and it's going to stay, it's just pushed out. And in terms of what are we thinking for '27, I would say we see this as, first of all, because of our concentration of customers, there will be some cyclicality there, but we do believe that they're going to move forward with redoing and upgrading their networks. What we've seen so far is some delays related to inventory adjustments, but I would say that it's really too early to be specific for 2027.

Joseph Cardoso

Got it, got it. And then maybe just to follow up regarding the free cash flow outlook, as we think about the inventory build that you have going into '27, should we think about these elevated inventory levels maybe as the new normal given an uncertain cost environment, or do you also maybe expect some degree of normalization in '27 there?

Kyle Lorentzen

Yes, I think we're seeing really two impacts on inventory. One is the memory pricing, and Chuck talked about that. I don't think we feel like that's going away anytime soon, so I think we'll continue to see elevated levels. To be honest with you, the larger driver of the inventory is some of these timing issues, right? So we've built product that's now being pushed out. We would expect to see some normalization of that inventory in the first half of '27. So I don't think this is going back to a completely normalized level, but I think we will see some gain back in inventory in the first half of '27, just based on some inventory that we're holding related to some of these pushouts.

Joseph Cardoso

Got it. Thank you.

Operator

Thank you, and I would now like to hand the conference back over to Chuck Treadway for closing remarks.

Charles Treadway

Thank you for your time today, and I appreciate your interest in our company. Have a great rest of your week. Thank you.

Operator

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

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