비스턴스 네트웍스(VISN) 2026년 3분기 실적 발표 콘퍼런스콜: EBITDA 가이던스 하향

핵심 요약

• 2026년 3분기 순매출은 3억 2,000만 달러로 전년 동기 대비 1,800만 달러(5%) 감소했다. DOCSIS 4.0 출하량 증가분이 기존 제품 매출 감소로 상쇄된 데 따른 것이다.
• 조정 EBITDA는 5,700만 달러를 기록했다. 오로라 네트워크 부문 조정 EBITDA는 변동보상비 감소에 힘입어 5% 증가했으며, 계속영업 조정 EBITDA는 미국 회계기준(U.S. GAAP)의 공통비용 표기 방식에 따라 128% 증가했다.
• 비스턴스 네트워크는 메모리 비용 상승과 고객사들의 재고 및 구축 일정 관리에 따른 증폭기 주문 지연으로 인해 연간 조정 EBITDA 가이던스를 1억 8,000만~2억 달러로 하향 조정했다.
• 오로라 수주율은 전년 동기 대비 41% 증가했고 수주잔고는 4억 1,000만 달러로 3% 늘었다. 경영진은 구매 시점의 변동성은 지속될 수 있으나 근본적인 업그레이드 수요는 견조하게 유지되고 있다고 밝혔다.
• 회사는 2026년에 약 40억 달러를 주주에게 환원할 것으로 예상하고 있다. 특별 배당금은 주당 총 16.50달러에 달할 예정이며, 10월 30일까지 2억 2,500만 달러 규모로 2,890만 주를 자사주 매입했다.
• 찰스 트레드웨이 사장 겸 최고경영자(CEO)는 2월 1일 사임할 예정이다. 회사는 후임 인선 절차에 착수했으며, 그가 업무 집행과 질서 있는 경영권 승계에 계속 집중할 것이라고 밝혔다.

주요 재무 데이터

사업 및 영업 실적

DOCSIS 4.0은 여전히 주요 성장 동력으로 작용했다. 비스턴스 네트워크는 지능형 증폭기, 노드, 가상 CMTS 제품에서 지속적인 진전을 보고했다. 컴캐스트와의 FDX 구축은 계속 진행되었으며, 차세대 ESD 증폭기는 북미 주요 복수종합유선방송사업자(MSO) 여러 곳에 출하되고 있었다. 경영진은 ESD 출하량이 2027년에 본격 확대될 것으로 예상하고 있다.

오로라 네트워크는 또한 지고(Ziggo)와 대규모 통합 DOCSIS 4.0 노드 구축 계약을 발표했다. 해당 아키텍처는 오로라의 광 노드 플랫폼, 통합 DAA 모듈, vCCAP 에보 가상화 코어 플랫폼, 서브어슈어 NXT 도메인 매니저를 결합한 것이다. 회사는 또한 O2와 향후 3년에 걸쳐 도입될 예정인 vCCAP 에보 구축 계약도 확보했다.

메모리 반도체는 여전히 상당한 비용 압박 요인으로 남아 있다. 경영진은 2026년의 영향 규모를 약 4,000만 달러로 추산했으며, 이 압박의 일부는 2027년까지 이어질 것으로 내다봤다. 회사는 고객사와 가격을 협상하고 공급업체와 협력하는 한편 대체 설계를 개발하고 있다.

비스턴스 네트워크는 50G PON과 통신사 PON을 포함한 PON 포트폴리오도 개발 중이다. 동사의 PKI 보안 사업은 2026년에 약 1,000만 달러의 매출을 올릴 것으로 예상된다. 경영진은 자사 PKI 제품의 전체 잠재시장(TAM) 규모를 연간 약 15% 성장하는 약 7억 달러로 추산하고 있으며, 해당 사업에 대한 투자 전략을 마무리하고 있다.

경영진 가이던스

비스턴스 네트워크는 2026년 연간 조정 EBITDA 가이던스를 1억 8,000만~2억 달러로 하향 조정했다. 이번 조정은 메모리 가격 및 공급 여건의 압박과 함께 고객사들이 증폭기 지출 일부를 2027년으로 미룬 점을 반영한 것이다.

11월 특별 배당 이후 경영진은 연말 현금 보유액을 2억 7,500만~3억 달러로 예상하고 있다. 이 추정치에는 새로 승인된 1억 달러 규모의 자사주 매입 프로그램에 따른 매입액은 제외되었으며, 2026년으로 앞당겨진 6,000만 달러의 세금 환급액이 포함되어 있다. 나머지 1억 달러의 환급액은 2027년에 유입될 것으로 예상된다.

회사는 CCS 및 루커스 매각과 관련된 매각 잔여비용의 대부분이 2027년까지 해소되고, 2028년까지는 전액 해소될 것으로 예상하고 있다. 2026년 매각 잔여비용 영향은 약 2,000만 달러다.

리스크 및 주시 요인

• 경영진은 상승 속도가 둔화될 것으로 예상하면서도 메모리 가격이 향후 몇 분기 동안 완만하게 상승할 것으로 내다봤다. 추산된 4,000만 달러 규모 영향 중 일부는 2027년까지 이어질 전망이다.
• 고객 집중도가 높아 구매 일정, 재고 수준, 설치 생산성, 구축 시점의 변화에 실적이 민감하게 반응한다.
• 높아진 재고 수준은 메모리 수급 상황과 고객사의 일정 연기 영향을 받은 완제품 재고를 모두 반영한다. 경영진은 2027년 상반기에 부분적인 정상화를 기대하고 있으나, 이전 수준으로의 완전한 복귀는 어려울 것으로 보고 있다.
• 기존 제품 매출이 지속적으로 감소하고 있어, 이를 상쇄하기 위해서는 DOCSIS 4.0의 성장이 필수적이다.
• 2027년 고객사의 구축 시점은 여전히 불확실하며, 경영진은 2027년의 구체적인 전망치를 제시하기에는 아직 이르다고 밝혔다.

애널리스트 Q&A 주요 내용

경영진은 메모리 조달 가능 여부는 현재 관리 가능한 수준이며 가격이 주된 문제라고 밝혔다. 비스턴스 네트워크는 사전에 과도한 재고를 구매하는 투기적 매입은 계획하지 않고 있으며, 연간 약 150만~200만 개의 메모리 반도체를 구매하며 조달을 고객 수요에 맞추고 있다.

고객사의 주문 지연과 관련해 경영진은 이를 수요 상실이 아닌 시기상의 문제로 규정했다. 구축 속도, 작업 인력 생산성, 기상 조건, 고객사 재고 목표치 등이 구매 일정에 영향을 미칠 수 있다. 회사는 지연된 사업의 일부가 2027년으로 이연될 것으로 예상했으나, 해당 연도의 구체적인 EBITDA나 잉여현금흐름 가이던스는 제시하지 않았다.

운전자본과 관련해 경영진은 지연된 주문과 연계된 재고가 2027년 상반기부터 정상화되기 시작할 것이라고 말했다. 다만 메모리 관련 압박으로 인해 재고가 완전한 정상화 수준을 웃돌 것으로 예상된다.

트레드웨이 CEO는 자신의 사임 계획이 전략적 사업 매각, 부채 상환, 우선주 상환 이후 회사의 구조가 더 작고 집중된 형태로 재편된 점을 반영한 것이라고 밝혔다. 그는 이사회가 차기 리더를 물색하는 동안 2월 1일까지 사장 겸 CEO 직무를 유지할 예정이다.

실적 발표 콘퍼런스콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

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.

질의응답

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.

This live transcript is auto-generated without human intervention or review.