Cuộc họp báo cáo kết quả kinh doanh quý 3/2026 của Vistance Networks (VISN): Hạ định hướng EBITDA

Điểm nhấn chính

• Doanh thu thuần quý 3/2026 đạt 320 triệu USD, giảm 18 triệu USD, tương đương 5% so với cùng kỳ năm trước, do mức tăng trong lượng hàng xuất xưởng DOCSIS 4.0 bị bù trừ bởi doanh số sản phẩm truyền thống sụt giảm.
• EBITDA điều chỉnh đạt 57 triệu USD. EBITDA điều chỉnh của mảng Aurora Networks tăng 5%, nhờ chi phí thù lao biến đổi giảm, trong khi EBITDA điều chỉnh từ các hoạt động kinh doanh liên tục tăng 128% theo cách trình bày chi phí dùng chung của U.S. GAAP.
• Vistance Networks đã hạ dự báo EBITDA điều chỉnh cả năm xuống còn 180 triệu - 200 triệu USD do chi phí chip nhớ tăng cao và khách hàng trì hoãn các đơn đặt hàng bộ khuếch đại nhằm quản lý hàng tồn kho cũng như tiến độ triển khai.
• Tốc độ đặt hàng của Aurora tăng 41% so với cùng kỳ năm trước, trong khi đơn hàng tồn đọng đạt 410 triệu USD, tăng 3%. Ban lãnh đạo cho biết nhu cầu nâng cấp cơ bản vẫn được duy trì, mặc dù thời điểm mua hàng có thể tiếp tục biến động.
• Công ty dự kiến sẽ hoàn trả khoảng 4 tỷ USD cho các cổ đông trong năm 2026. Các khoản phân phối đặc biệt sẽ đạt tổng cộng 16,50 USD/cổ phiếu, trong khi 28,9 triệu cổ phiếu đã được mua lại với giá 225 triệu USD tính đến ngày 30/10.
• Chủ tịch kiêm CEO Charles Treadway sẽ từ chức vào ngày 1/2. Công ty đã khởi động quy trình tìm người kế nhiệm và cho biết ông sẽ tiếp tục tập trung vào công tác điều hành cũng như đảm bảo quá trình chuyển giao diễn ra có trật tự.

Dữ liệu tài chính quan trọng

Kết quả kinh doanh và hoạt động

DOCSIS 4.0 tiếp tục là động lực tăng trưởng chính. Vistance Networks ghi nhận tiến triển liên tục với các sản phẩm bộ khuếch đại thông minh, node mạng và CMTS ảo. Việc triển khai FDX với Comcast vẫn tiếp diễn, trong khi các bộ khuếch đại ESD thế hệ tiếp theo đang được xuất xưởng tới nhiều MSO lớn tại Bắc Mỹ. Ban lãnh đạo kỳ vọng lượng hàng xuất xưởng ESD sẽ tăng mạnh trong năm 2027.

Aurora Networks cũng công bố dự án triển khai node Unified DOCSIS 4.0 quy mô lớn với Ziggo. Kiến trúc này kết hợp nền tảng node quang của Aurora, mô-đun DAA hợp nhất, Nền tảng lõi ảo hóa vCCAP Evo và ServAssure NXT Domain Manager. Công ty cũng đảm bảo được thỏa thuận triển khai vCCAP Evo với O2, dự kiến sẽ diễn ra trong vòng ba năm.

Chip nhớ tiếp tục là một áp lực chi phí đáng kể. Ban lãnh đạo ước tính tác động trong năm 2026 vào khoảng 40 triệu USD, với một phần áp lực sẽ kéo dài sang năm 2027. Công ty đang đàm phán giá với khách hàng, làm việc với các nhà cung cấp và phát triển các thiết kế thay thế.

Vistance Networks cũng đang phát triển danh mục PON của mình, bao gồm 50G PON và Telco PON. Mảng kinh doanh bảo mật PKI dự kiến sẽ tạo ra doanh thu khoảng 10 triệu USD trong năm 2026. Ban lãnh đạo ước tính quy mô thị trường có thể tiếp cận cho các sản phẩm PKI vào khoảng 700 triệu USD, tăng trưởng xấp xỉ 15% mỗi năm, và đang hoàn thiện chiến lược đầu tư cho mảng này.

Dự báo của ban lãnh đạo

Vistance Networks đã hạ dự báo EBITDA điều chỉnh cả năm 2026 xuống còn 180 triệu - 200 triệu USD. Việc điều chỉnh này phản ánh áp lực về giá cả và nguồn cung chip nhớ, cũng như việc khách hàng dời một phần chi tiêu cho bộ khuếch đại sang năm 2027.

Sau đợt phân phối đặc biệt vào tháng 11, ban lãnh đạo dự kiến lượng tiền mặt cuối năm sẽ ở mức 275 triệu - 300 triệu USD. Ước tính này chưa bao gồm các khoản mua lại cổ phiếu theo chương trình mua lại 100 triệu USD mới được phê duyệt và đã bao gồm khoản hoàn thuế 60 triệu USD được đẩy sớm về năm 2026. Khoản hoàn thuế 100 triệu USD còn lại dự kiến sẽ nhận được vào năm 2027.

Công ty dự kiến phần lớn chi phí mắc kẹt liên quan đến việc thoái vốn khỏi CCS và Ruckus sẽ được loại bỏ vào năm 2027, và toàn bộ chi phí mắc kẹt sẽ được xử lý xong vào năm 2028. Tác động của chi phí mắc kẹt trong năm 2026 là khoảng 20 triệu USD.

Rủi ro và các yếu tố cần theo dõi

• Giá chip nhớ dự kiến sẽ tăng dần trong vài quý tới, dù ban lãnh đạo kỳ vọng tốc độ tăng sẽ chậm lại. Một phần trong khoản tác động ước tính 40 triệu USD sẽ kéo dài sang năm 2027.
• Mức độ tập trung khách hàng khiến kết quả kinh doanh nhạy cảm với các thay đổi trong kế hoạch mua sắm, mức tồn kho, năng suất lắp đặt và tiến độ triển khai.
• Lượng tồn kho ở mức cao phản ánh cả tình hình chip nhớ lẫn các thành phẩm bị ảnh hưởng do khách hàng lùi lịch nhận hàng. Ban lãnh đạo kỳ vọng tình hình sẽ bình thường hóa một phần trong nửa đầu năm 2027, nhưng sẽ không quay trở lại hoàn toàn mức trước đây.
• Doanh thu từ các sản phẩm truyền thống tiếp tục sụt giảm, đòi hỏi sự tăng trưởng của DOCSIS 4.0 để bù đắp áp lực này.
• Thời điểm triển khai của khách hàng trong năm 2027 vẫn chưa chắc chắn, và ban lãnh đạo cho biết còn quá sớm để đưa ra triển vọng cụ thể cho năm 2027.

Điểm nhấn phiên hỏi đáp với chuyên gia phân tích

Ban lãnh đạo cho biết nguồn cung chip nhớ hiện vẫn nằm trong tầm kiểm soát và giá cả mới là vấn đề chính. Vistance Networks không có kế hoạch đầu cơ bằng cách mua trước lượng tồn kho quá mức; công ty mua khoảng 1,5 triệu - 2 triệu chip nhớ mỗi năm và điều chỉnh kế hoạch mua sắm phù hợp với nhu cầu của khách hàng.

Đối với các đơn hàng bị khách hàng trì hoãn, ban lãnh đạo nhận định vấn đề nằm ở thời điểm chứ không phải nhu cầu bị mất đi. Tốc độ triển khai, năng suất của đội ngũ thi công, thời tiết và mục tiêu hàng tồn kho của khách hàng có thể ảnh hưởng đến kế hoạch mua hàng. Công ty dự kiến một số hoạt động kinh doanh bị trì hoãn sẽ chuyển sang năm 2027, nhưng không đưa ra dự báo cụ thể về EBITDA hay dòng tiền tự do cho năm đó.

Liên quan đến vốn lưu động, ban lãnh đạo cho biết lượng tồn kho gắn liền với các đơn hàng bị hoãn sẽ bắt đầu bình thường hóa trong nửa đầu năm 2027. Tuy nhiên, các áp lực liên quan đến chip nhớ dự kiến sẽ khiến lượng tồn kho tiếp tục duy trì ở mức cao hơn so với mức bình thường hóa hoàn toàn.

Ông Treadway cho biết quyết định rời nhiệm sở theo kế hoạch của mình phản ánh cơ cấu tổ chức tinh gọn và tập trung hơn của công ty sau các đợt thoái vốn chiến lược, trả nợ và mua lại cổ phần ưu đãi. Ông sẽ tiếp tục giữ chức Chủ tịch kiêm CEO cho đến ngày 1/2 trong thời gian Hội đồng quản trị tìm kiếm nhà lãnh đạo tiếp theo.

Toàn văn biên bản cuộc gọi công bố kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

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.

Phần hỏi đáp

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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