Arris Group Management Discusses Q2 2012 Results - Earnings Call Transcript

Arris Group (ARRS)

Q2 2012 Earnings Call

July 25, 2012 5:00 pm ET

Executives

Robert Puccini - President of Telewire Supply

Robert J. Stanzione - Chairman and Chief Executive Officer

David B. Potts - Chief Financial Officer, Chief Accounting Officer, Chief Information Officer and Executive Vice President

Bruce W. McClelland - Group President

Analysts

Mark Sue - RBC Capital Markets, LLC, Research Division

Simon M. Leopold - Raymond James & Associates, Inc., Research Division

Jeffrey T. Kvaal - Barclays Capital, Research Division

James Kisner - Jefferies & Company, Inc., Research Division

Blair King - Avondale Partners, LLC, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2012 Arris Group Earnings Conference Call. My name is Kim, and I will be your coordinator for today. [Operator Instructions] As a reminder, this call is being recorded. I would now like to call -- to turn the call over to your host for today, Mr. Bob Puccini with Investor Relations. Please proceed.

Robert Puccini

Thank you, Kim, and welcome to the Arris conference call with management. This afternoon, we will be discussing our second quarter 2012 financial results, which we released after the close of markets today. As usual, we will be using a series of slides during our webcast, which are also posted on the Arris website in the Investor Relations section.

With us here at Arris headquarters are Bob Stanzione, Arris' Chairman and CEO; Dave Potts, Executive Vice President and Chief Financial Officer; and Bruce McClelland, Group President.

There will be a replay of this entire call available several hours after the conclusion of the call, and a replay of the call and the slides will be available on our website for the next 12 months.

Before we begin, please go to Chart 2. During this call, we may be making forward-looking statements including our outlook and expectations for our industry in general, estimated revenue and earnings for the third quarter of 2012, certain financial operating metrics, the timing and the introduction of new products and technologies, anticipated spending patterns by some of our customers, and expected sales levels for various product categories. It is important to note that actual results may differ materially from those suggested by any forward-looking statements, which may be made during today's call. For further information in this regard, and for specific examples of risks that could cause actual results to differ materially from these forward-looking statements, please see our recent filings with the SEC.

Now, if you go on to Chart 3, Bob and Dave will provide their comments on the quarter results after which, we will open up for questions. Now, over to you, Bob.

Robert J. Stanzione

Thanks, Bob, and good afternoon, everyone. I'm very pleased to report outstanding June quarter results with record revenues at the high-end of our guidance and earnings above the high-end of our guidance as well as strong bookings, backlog and cash generation. Revenues were up 15% quarter-over-quarter at $349 million and up a remarkable 31% over the second quarter of 2011. Year-to-date, sales are up 22% over the first half of last year, and sequentially, sales are up in all segments and in all regions.

Non-GAAP earnings of $0.25 per share were above the upper end of our guidance, a 31% sequential improvement over the first quarter. Year-to-date, non-GAAP EPS is up 10% over last year in spite of the higher tax rates that we're paying. Both U.S. and international sales were up, with domestic sales representing 74% of the total, about the same mix as last quarter.

I'm really especially pleased with our working capital management and the effectiveness of our supply chain in turning out these results. While climbing the steep volume ramp, the teams managed to keep working capital roughly flat by increasing inventory turns to 8.9 from 5.8 a year ago and reducing DSO from 52 to 47. So that's a great job by our operations team.

Cash generated from operating activities was at $31 million and we aggressively bought shares again in the quarter, purchasing 1.4 million shares at an average price of $11.21. Dave will provide more details in just a moment.

On to Chart 5. The worldwide demand for broadband access continues to be the primary growth driver in our business, and as you can see, the new product introductions that we've made over the past few years are really paying off. BCS revenues of $280million were up significant, posting about 15% sequential and 39% year-over-year growth. Gross margin was down due to a mix shift toward more hardware sales in the network category and the strong growth of the CPE sales. More specifically, we had continued strong sales of CMTS equipment in Q2. However, the mix shifted within this category, with CMTS downstream ports shipped at -- decreasing to just under 76,000, offset by very strong demand for upstream ports as we increased shipments of our new 24U upstream cards.

Our E6000 next-generation Cable Edge Router program continues on track and is progressing well toward further lab and field trials in the second half of the year. In BigBand which we now call Edge Media Processing, integration is done and we've had some sizable initial MSP QAM deployments in the quarter. The major highlight of the quarter was the shipments of CPE devices that were up significantly during the quarter at just under 2 million units. At the same time, ASPs in this category also increased, as almost 83% of the shipments were DOCSIS 3.0 capable and we continued to see a sharp increase in demand for a higher value Wi-Fi-enabled devices.

Read the rest of this transcript for free on seekingalpha.com

More from Stocks

Trump's Obsession With Winning His China Trade War Could Pummel Investors

Trump's Obsession With Winning His China Trade War Could Pummel Investors

3 Great Stock Market Sectors Millennials Should Invest In

3 Great Stock Market Sectors Millennials Should Invest In

Trump, Trade Wars, General Electric, 'Jurassic World' - 5 Things You Must Know

Trump, Trade Wars, General Electric, 'Jurassic World' - 5 Things You Must Know

Harley-Davidson to Shift Some U.S. Production in Wake of Tariffs

Harley-Davidson to Shift Some U.S. Production in Wake of Tariffs

Futures Fall on Further Trade News and 4 Other Stories to Watch Monday Morning

Futures Fall on Further Trade News and 4 Other Stories to Watch Monday Morning