Yesterday, after the closing bell,
Arris Group Inc.
) declared its financial results for the second quarter of 2012
beating the Zacks Consensus Estimates. The company exited the
second quarter with a strong order backlog.
ARRIS GROUP INC (ARRS): Free Stock Analysis
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GAAP net income in the second quarter of 2012 was $15.0 million or
13 cents per share compared with $16.7 million or 13 cents per
share in the prior-year quarter. However, quarterly adjusted
(excluding special items) earnings per share came in at 20 cents,
beating the Zacks Consensus Estimate by a penny.
Quarterly total revenue was $349.3 million, up 31.4% year over
year, surpassing the Zacks Consensus Estimate of $342 million.
Quarterly Domestic revenue was 74% while International revenue was
Time Warner Cable Inc.
) together constituted 49.1% of the total second-quarter revenue.
Quarterly gross margin came in at 33.9% compared with 40.2% in the
year-ago quarter. Operating income, in the second quarter of
2012, was $26.9 million compared with $25.4 million in the
prior-year quarter. Quarterly operating margin was 7.7% compared
with 9.6% in the year-ago quarter.
Total order backlog of Arris, at the end of the second quarter, was
$251.9 million compared with $154.2 million at the end of the
year-ago quarter. Book-to-bill ratio was 0.93 in the second quarter
compared with 0.91 in the prior-year quarter. In the previous
quarter, Arris repurchased approximately 1.4 million of its common
outstanding shares for a total consideration of $15.2 million.
Arris generated $30.6 million of cash from operations during the
second quarter of 2012 compared with $31.4 million in the
prior-year quarter. Quarterly free cash flow (cash flow from
operations less capital expenditures) was $25.1 million, remaining
the same year over year.
At the end of the second quarter of 2012, Arris had $576.3 million
of cash & marketable securities on its balance sheet compared
with $589.9 million at the end of 2011. Total debt was $215.8
million at the end of the second quarter of 2012 compared with
$209.8 million at the end of 2011. At the end of the second quarter
of 2012, its debt-to-capitalization ratio was 0.19, flat with
Broadband Communications Systems Segment
Quarterly revenue was $280.6 million, up 39% year over year.
Quarterly gross margin was 34.3% compared with 42.5% in the
year-ago quarter. Arris shipped a total of 1.962 million CPE units,
82% of which were DOCSIS 3.0. The company also shipped 75,662 C4
CMTS downstream ports. The company's E6000 Cable Edge Router is
expected to go for trial runs during the second half of 2012.
Access, Transport, & Supplies Segment
Quarterly revenue was $52.2 million, up 11.3% year over year.
Quarterly gross margin was 21%, compared with 24.2 year over year.
Media & Communication System Segment
Quarterly revenue was $16.5 million, down 3.5% year over year.
Quarterly gross margin was 67.8% compared with 57.1% in the
Future Financial outlook
Management's guidance for net sales in the third quarter of 2012 is
expected to be in the range of $348 million-$368 million. Earnings
per shares (EPS), on a GAAP basis, are expected to be in the range
of 9 cents to 13 cents. EPS, on a non-GAAP basis, is expected
within the range of 19 cents to 23 cents. This includes stock-based
compensation expenses of 4 cents per share.
We maintain our long-term Neutral recommendation on Arris.
Currently, it holds a short-term Zacks #3 Rank (Hold) on the