Original Source: FD (FAIR DISCLOSURE) WIRE
. Jim Bauer, ARRIS Group, Inc., VP of IR . Bob Stanzione, ARRIS Group, Inc., Chairman and CEO . Dave Potts, ARRIS Group, Inc., EVP and CFO
. Jim Lakin, ARRIS Group, Inc., President, ARRIS Broadband Group
. Greg Mesniaeff, Needham & Co., Analyst . Jason Ader, Thomas Weisel Partners, Analyst . Anton Wahlman, ThinkEquity Partners, Analyst
. Eric Buck, Brean Murray, Analyst . Simon Leopold, Morgan Keegan, Analyst . Todd Koffman, Raymond James, Analyst . Glen Anderson, CIBC World Markets, Analyst . Amitabh Passi, UBS, Analyst . Brian Coyne, Friedman, Billings, Ramsey, Analyst
Co. reported that 2Q07 sales were $252.7m, slightly above the range provided in April. 2Q07 GAAP EPS was $0.21. 2Q07 non-GAAP EPS, excluding certain items, was $0.22. Co. expects 3Q07 sales to be $253-263m. 3Q07 GAAP diluted EPS is expected to be $0.19-0.22, including equity compensation of approx. $0.02 per diluted share.
A. Key Data From Call 1. 2Q07 sales = $252.7m. 2. 2Q07 GAAP EPS = $0.21. 3. 2Q07 non-GAAP EPS (excluding certain items) = $0.22.
4. 2Q07 GM percentage = 28.6%. 5. 2Q07 OpEx = $44.3m. 6. 2Q07 DSO = 44.5. 7. Inventory at the end of June = $90.5m. 8. Cash and short-term investments at 2Q07-end = $604m. 9. 3Q07 sales guidance = $253-263m. 10. 3Q07 GAAP diluted EPS guidance (including equity compensation of approx. $0.02 per diluted share) = $0.19-0.22.
S1. 2Q07 Operational Review (B.S.) 1. Highlights: 1. Sales were $253m, up almost 15% YoverY and about 7.5% QoverQ. 1. 2Q07 was the first qtr. that results didn't include any appreciable Cornerstone Voice sales. 2. GM percentage for Supplies & CPE product category reached and exceeded 20% goal, it was 21.6%. 3. GAAP EPS of $0.21 and non-GAAP EPS of $0.22 were at the high-end of the range that Co. had predicted. 4. Cash flow from operating activities was $28m. 5. Record CPE sales. 1. Shipped almost 1.9m EMTAs.
2. During 2Q07, began shipping significant quantities of multi-line EMTAs that are going into use for business services. 6. Strong CMTS sales results. 1. Shipped over 6,900 downstreams, which is a new record for ARRS. 7. Backlog was down as Co. [entered the qtr.], which is a similar pattern to last year. 1. Co. has line of sight toward order fill that leads to further growth in this qtr. and in the year as it proceeds. 8. Won a major next-generation EDGE QAM project with Comcast. 1. This is for Co.'s D5 product.
2. This win solidifies Co.'s entry into the rapidly growing video application area. 3. This is going to require a little additional investment. 1. Has built that into guidance for the qtr.
9. Received approval from Cablevision for C4 CMTS deployments.
1. Had first revenue with Cablevision for C4s in 2Q07. 2. Expects that this will be a growing part of the business as time goes on. 10. Had significant CMTS orders from TV Bogota, which is a Telmex affiliate. 1. This is part of the Latin America initiative. 2. Sees Latin America as a large emerging market for Co.'s products. 11. Canadian business continues to grow as Co. adds additional customers north of the border. 12. Demand for ARRS products remains strong. 1. Expects it to do so for the foreseeable future. 2. Cable operators are investing aggressively.
3. Continues to add new customers each qtr. 13. Network traffic is increasing rapidly. 1. Continuing worldwide growth of broadband subscribers and higher-speed services are driving Co.'s business.
14. Operators are beginning to invest aggressively in bandwidth
reclamation using Switched Digital Video (SDV). 1. This enables them to deploy more revenue-generating high-definition TV, video-on-demand, and wideband Internet access services. 1. This represents a large opportunity in 2008 and beyond. 2. Looking Forward:
1. Has a residential Voice-over-IP business that continues
strong. 2. Has traffic growth and bandwidth demands driving the CMTS business. 3. DOCSIS 3.0 upgrade cycle is going to begin in 2008. 4. Has business services being rolled out,
customer-after-customer, driving Co.'s multi-line business
upward. 5. Now can add a large SDV deployment that is going to drive D5 growth.
S2. 2Q07 Financial Review (D.P.) 1. Overview: 1. Sales were $252.7m, slightly above the range provided in April. 2. GM percentage was 28.6%, which was at the upper-end of guidance. 3. Margins of Supplies & CPE product line were 21.6%. 4. GAAP EPS was $0.21.
5. Non-GAAP EPS, excluding certain items, was $0.22. 6. Backlog, bookings and book-to-bill were down from 1Q07. 1. Some of 1Q07 bookings related to multiple quarters. 7. Guidance for 3Q07 is $253-263m. 1. Despite a lower backlog [entering 3Q07], remains confident in achieving this range. 8. Cash from operating activities was just under $28m and ended June with $604m of cash and short-term investments. 2. Sales: 1. Sales were $252.7m, up 7.4% from 1Q07 and up 14.9% from 2Q06. 2. Supplies & CPE sales were $175.3m, up $20.2m from 1Q07 and up $54.1m from 2Q06. 1. Increases were the results of the continued robust rollouts of Voice-over-IP by customers. 3. Broadband sales were down $2.8m and $21.4m from 1Q07 and 2Q06. 1. Declines, as expected, were the result of lower sales of CBR product. 2. Sales of CBR declined to $2.5m from $9.3m in 1Q07. 3. Sales of CMPS increased QoverQ. 4. Sales to: 1. Comcast were $102.2m, up from $91.6m in 1Q07. 2. Cox were $12.8m vs. $14.8m in 1Q07. 3. Time Warner were $23.4m vs. $22.4m in 1Q07. 4. Liberty were $16.5m vs. $19.3m in 1Q07.
3. Orders: 1. Backlog, bookings, and book-to-bill were all sequentially
down. 2. Booking pattern was similar to . 3. Remains confident in Co.'s ability to achieve 3Q07 revenue guidance.
4. Gross Profit: 1. Gross profit was $72.4m, up sequentially and YoverY. 2. GM percentage was 28.6%. 1. As expected, slightly down from 1Q07. 3. GM percentage for Supplies & CPE product was …