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Analyst Blog

Yesterday, after the closing bell, Arris Group Inc. (ARRS - Analyst Report) declared its financial results for the first quarter of 2013, which fell below the Zacks Consensus Estimates. As a result, in the after market trade on NASDAQ, the stock price of Arris was down 33 cents (0.84%) to $18.31.

However, the company exited the third quarter with a strong order backlog. Arris currently has a Zacks Rank #3 (Hold). The company recently acquired the cable set-top box business of Motorola Mobility, a subsidiary of Google Inc. .

GAAP net loss in the second quarter of 2013 was $14.7 million or a loss of 13 cents per share compared with a net income of $5.8 million or 5 cents per share in the prior-year quarter. However, quarterly adjusted (excluding special items) earnings per share came in at 17 cents, which fell below the Zacks Consensus Estimate of 21 cents.

Quarterly total revenue was $353.7 million, up 16.8% year over year but missed the Zacks Consensus Estimate of $358 million. Quarterly Domestic revenue was 68.3% while International revenue was 31.7%. Comcast Corp. (CMCSA - Analyst Report) and Time Warner Cable Inc. (TWC - Analyst Report) together constituted 43% of the total first-quarter revenue of Arris.

Quarterly gross margin came in at 30.7% compared with 36% in the year-ago quarter.  Operating income, in the reported quarter, was $9.5 million compared with $11.7 million in the prior-year quarter. Quarterly operating margin was 2.7% compared with 3.9% in the year-ago quarter.

Total order backlog of Arris, at the end of the reported quarter, was $282.1 million compared with $277.7 million at the end of the year-ago quarter. Book-to-bill ratio was 1.17 in the last quarter compared with 1.43 in the prior-year quarter.

Arris generated $50.1 million of cash from operations during the first quarter of 2013 compared with $35.3 million in the prior-year quarter. Quarterly free cash flow (cash flow from operation-less capital expenditure) was $43.8 million compared with $31.5 million in the year-ago quarter. At the end of the reported quarter, Arris had $608.4 million of cash & marketable securities on its balance sheet compared with $530.1 million at the end of 2012. Total debt was $225.4 million at the end of the reported quarter compared with $222.1 million at the end of 2012.

Broadband Communications Systems Segment

Quarterly revenue was $288.3 million, up 17.9% year over year. Quarterly gross margin was 31.6% compared with 36.6% in the year-ago quarter. Arris shipped a record-high 2.864 million CPE units, 92% of which are DOCSIS 3.0. The company also shipped a record-high 122,700 C4 CMTS downstream ports. The company’s E6000 Cable Edge Router gained market traction.

Access, Transport, & Supplies Segment

Quarterly revenue was $52.3 million, up 18.6% year over year. Quarterly gross margin was 20.7%, compared with 24.1% year over year.

Media & Communication System Segment

Quarterly revenue was $13 million, down 9.1% year over year. Quarterly gross margin was 50.5% compared with 60.8% in the year-ago quarter.

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