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Analyst Blog

Yesterday, after the closing bell, Arris Enterprises Inc. (ARRS - Analyst Report) 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. , 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 - Analyst Report) and Time Warner Cable Inc. (TWC - Analyst Report) 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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