Arris Beats Q2 Earnings and Rev

Zacks

Yesterday, after the closing bell, Arris Enterprises Inc. (ARRS) declared excellent financial results for the second quarter of 2013, significantly beating the Zacks Consensus Estimate. As a result, in the after market trade on NASDAQ, the stock price of Arris was up by $1.03 (6.59%) to $16.65. Acquisition of the home business of Motorola Mobility, a subsidiary of Google Inc. (GOOG), contributed to the company’s performance. Arris currently has a Zacks Rank #3 (Hold).

GAAP net loss in the second quarter of 2013 was $50.3 million or a loss of 37 cents per share compared with a net income of $15 million or 13 cents per share in the prior-year quarter. However, quarterly adjusted (excluding special items) earnings per share came in at 41 cents, significantly above the Zacks Consensus Estimate of 18 cents.

Quarterly total revenue was $1,000.4 million, up 186.4% year over year and well above the Zacks Consensus Estimate of $989 million. Quarterly Domestic revenues were 65.8% while International revenues were 34.2%. Segment wise, Network and Cloud segment accounted $340 million of total revenue, up 70% year over year. CPE segment generated $663 million of total revenue, up by a whopping 344% year over year.  Comcast Corp. (CMCSA) and Time Warner Cable Inc. (TWC) together constituted 28.8% of the total second-quarter 2013 revenue.

Quarterly gross margin came in at 23.1% compared with 33.9% in the year-ago quarter.  Operating loss, in the reported quarter, was $89.9 million compared with an operating income of $26.9 million in the prior-year quarter. Quarterly operating margin was a negative 9% compared with 7.7% in the year-ago quarter.

Total order backlog of Arris, at the end of the reported quarter, was $534.9 million compared with $251.9 million at the end of the year-ago quarter. The book-to-bill ratio was 0.95 in the last quarter compared with 0.93 in the prior-year quarter.

Arris generated $294 million of cash from operations during the second quarter of 2013 compared with $30.6 million in the prior-year quarter. Quarterly free cash flow was $278.8 million compared with $25.1 million in the year-ago quarter. At the end of the reported quarter, Arris had $741.2 million of cash & marketable securities on its balance sheet compared with $530.1 million at the end of 2012. Total debt was $2,127.9 million at the end of the reported quarter compared with $222.1 million at the end of 2012. The debt-to-capitalization ratio, at the end of the last quarter, was 0.59.

Future Financial Outlook

Management expects third-quarter 2013 total revenue of $1,050 – $1,080 million. GAAP earnings per share will be (12 cents) to (7 cents). Non-GAAP earnings per share will be 32 cents – 37 cents.

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