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ARRIS Announces Preliminary and Unaudited Second Quarter 2018 Results

SUWANEE, Ga., Aug. 1, 2018 /PRNewswire/ -- ARRIS International plc (NASDAQ: ARRS) today announced preliminary and unaudited financial results for the second quarter 2018.

Second Quarter 2018 Financial Highlights

  • Revenues were $1.727 billion
  • GAAP net income was $0.19 per diluted share
  • Adjusted net income (a non-GAAP measure) was $0.72 per diluted share
  • End-of-quarter cash resources were $548 million
  • $100 million of share repurchases ($175 million YTD as of 8/1/2018)
  • Order backlog was $1.3 billion
  • Book-to-bill ratio was 0.98

"ARRIS posted a solid second quarter, with non-GAAP earnings growing 14% year-over-year to $0.72 per share with continued strong performance from our higher margin Network & Cloud and Enterprise businesses," said Bruce McClelland, ARRIS CEO.  "Revenue grew by 4% year-over-year with the addition of Ruckus and increased E6000 CCAP sales.  We have been active buyers of our stock in 2018 and intend to allocate the majority of our free cash flow to stock repurchases for the remainder of the year, targeting a minimum of $400 million for the year."

"For the third quarter 2018, we are estimating revenues in the range of $1.680 billion to $1.730 billion.  We expect GAAP net income per diluted share in the range of $0.20 to $0.25 and adjusted net income per diluted share in the range of $0.65 to $0.70.  For full year 2018, we now expect sales to be in the range of $6.850 billion to $7.0 billion, GAAP net income per diluted share in the range of $0.68 to $0.83 and adjusted net income per diluted share in the range of $2.85 to $3.00."

Revenues in the second quarter 2018 of $1.727 billion were up $63 million, or 4%, as compared to second quarter 2017 revenues of $1.664 billion and up $149 million, or 9%, as compared to first quarter 2018 revenues of $1.578 billion.

Through the first six months of 2018, revenues were $3.304 billion, up $157 million, or 5%, as compared to the first six months of 2017 revenues of $3.147 billion

GAAP net income in the second quarter 2018 was $0.19 per diluted share, as compared to GAAP net income of $0.16 per diluted share in the second quarter 2017 and a GAAP net loss of $(0.07) per diluted share in the first quarter 2018.  

Year to date 2018 GAAP net income was $0.12 per diluted share, as compared to the first six months of 2017 GAAP net loss of $(0.05) per diluted share.       

Adjusted net income (a non-GAAP measure) in the second quarter 2018 was $0.72 per diluted share, as compared to $0.63 per diluted share for the second quarter 2017, and first quarter 2018 adjusted net income of $0.73 per diluted share.  

Year to date adjusted net income was $1.45 per diluted share for 2018 as compared to the first six months of 2017 adjusted net income of $1.04 per diluted share.

A reconciliation of adjusted net income per diluted share to GAAP net income per diluted share is attached to this release and can be found on the Company's website (www.arris.com).

Cash & Cash Equivalents - The Company ended the second quarter 2018 with $548 million of cash resources, as compared to $543 million at the end of the first quarter 2018.  The Company generated $103 million of cash from operating activities during the second quarter 2018, as compared to $246 million during the second quarter of 2017.  Through the first six months of 2018 the company generated $199 million of cash from operating activities.  This compares to $496 million during the same period in 2017.

The Company repurchased approximately 4.0 million ordinary shares for $100 million during the second quarter of 2018.  Since the end of the second quarter, the Company has repurchased approximately 2.0 million additional ordinary shares for $50 million.  Through August 1, 2018, the Company has repurchased 6.9 million ordinary shares for $175 million.  As of August 1, 2018, the Company has $350 million remaining in available repurchase authorization.

Order backlog at the end of the second quarter 2018 was $1.258 billion as compared to $1.326 billion and $1.293 billion at the end of the second quarter 2017 and the first quarter 2018, respectively. The Company's book-to-bill ratio in the second quarter 2018 was 0.98 as compared to the second quarter 2017 of 1.01 and the first quarter 2018 of 1.11.

ARRIS management will conduct a conference call at 5:00 pm EDT, today, Wednesday, August 1, 2018, to discuss second quarter 2018 results. You may participate in this conference call by dialing 888-655-5028 or 503-343-6025 for international calls prior to the start of the call.  Please note that ARRIS will not accept any calls related to this earnings release until after the conclusion of the conference call. A replay of the conference call can be accessed approximately two hours after the call through August 8, 2018, by dialing 855-859-2056 or 404-537-3406 for international calls and using the pass code 4368658. A replay also will be made available for a period of 12 months following the conference call on ARRIS' website at www.arris.com.

Forward-Looking Statements

Statements made in this press release, including those related to revenues and net income for the third quarter and full year 2018, growth expectations, share repurchases, cost initiatives, the general market outlook and industry trends are forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements.  Among other things:

  • projected results for the third quarter 2018, as well as the general outlook for 2018, are based on preliminary estimates, assumptions and projections that management believes to be reasonable at this time, but are beyond management's control;
  • volatility in component pricing and supply could impact revenues and gross margins more than currently anticipated;
  • fluctuations in share price or reductions in free cash flow may impact the volume of share repurchases;
  • recently enacted tariffs on imports from China and the proposed 10% tariff on additional products imported from China could have a material adverse impact on our financial results;
  • the anticipated benefits from the Ruckus Networks acquisition may not be realized;
  • volatility in currency fluctuation may adversely impact our international customers' ability or willingness to purchase products and the pricing of products;
  • impacts of the U.K. invoking Article 50 of the Lisbon Treaty to leave the European Union, could have an adverse impact on results of operations;
  • regulatory changes, including those related to recently completed changes to the U.S. income tax code, could have an adverse impact on operations and results of operations;
  • the impact of litigation and similar regulatory proceedings that we are involved in or may become involved in, including the costs of such litigation; and
  • the Company's customers operate in a capital-intensive consumer-based industry, and volatility in the capital markets or changes in customer spending may adversely impact their ability or willingness to purchase the products that the Company offers.

These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect the Company's business and results from operations. Additional information regarding these and other factors can be found in the Company's reports filed with the Securities and Exchange Commission, including its Form 10-Q for the quarter ended March 31, 2018. In providing forward-looking statements, the Company expressly disclaims any obligation to update these statements publicly or otherwise, whether as a result of new information, future events or otherwise, except as required by law.

About ARRIS
ARRIS International plc (NASDAQ: ARRS) is powering a smart, connected world.  The company's leading hardware, software and services transform the way that people and businesses stay informed, entertained and connected.  For more information, visit www.arris.com.

For the latest ARRIS news:

ARRIS and the ARRIS Logo are trademarks or registered trademarks of ARRIS Enterprises, LLC. All other trademarks are the property of their respective owners. © 2018 ARRIS Enterprises, Inc.  All rights reserved.

Notes to GAAP to Adjusted Non-GAAP Financial Measures

The Company reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP" or referred to herein as "reported"). However, management believes that certain non-GAAP financial measures provide management and other users with additional meaningful financial information that should be considered when assessing our ongoing performance. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the factors management uses in planning for and forecasting future periods.  Non-GAAP financial measures should be viewed in addition to, and not as an alternative to, the Company's reported results prepared in accordance with GAAP.  Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:

Reduction in Revenue Related to Warrants:    We entered into agreements with two customers for the issuance of warrants to purchase up to 14.0 million of ARRIS's ordinary shares. Vesting of the warrants is subject to certain purchase volume commitments, and therefore the accounting guidance requires that we record any change in the fair value of warrants as a reduction in revenue. Until final vesting, changes in the fair value of the warrants will be marked to market and any adjustment recorded in revenue. We have excluded the effect of the implied fair value in calculating our non-GAAP financial measures. We believe it is useful to understand the effects of these items on our total revenues and gross margin.

Acquisition Accounting Impacts Related to Deferred Revenue:    In connection with the accounting related to our acquisitions, business combination rules require us to account for the fair values of deferred revenue arrangements for post contract support in our purchase accounting. The non-GAAP adjustment to our sales and cost of sales is intended to include the full amounts of such revenues as if these purchase accounting adjustments had not been applied. We believe the adjustment to these revenues is useful as a measure of the ongoing performance of our business. We historically have experienced high renewal rates related to our support agreements, and our objective is to increase the renewal rates on acquired post contract support agreements. However, we cannot be certain that our customers will renew their contracts.

Stock-Based Compensation Expense:    We have excluded the effect of stock-based compensation expenses in calculating our non-GAAP operating expenses and net income (loss) measures. Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. We record non-cash compensation expense related to grants of restricted stock units. Depending upon the size, timing and the terms of the grants, the non-cash compensation expense may vary significantly but will recur in future periods.

Acquisition Accounting Impacts Related to Inventory Valuation:    In connection with the accounting related to our acquisitions, business combinations rules require the acquired inventory be recorded at fair value on the opening balance sheet. This is different from historical cost. Essentially, we are required to write the inventory up to the end customer price less a reasonable margin as a distributor. We have excluded the resulting adjustments in inventory and cost of goods sold as the historic and forward gross margin trends will differ as a result of the adjustments. We believe it is useful to understand the effects of this on cost of goods sold and margin.

Integration, Acquisition, Restructuring and Other Costs:    We have excluded the effect of acquisition, integration, and other expenses and the effect of restructuring expenses in calculating our non-GAAP operating expenses and net income measures. We incurred expenses in connection with the Pace and Ruckus Networks acquisitions, which we generally would not otherwise incur in the periods presented as part of our continuing operations. Acquisition and integration expenses consist of transaction costs, costs for transitional employees, other acquired employee related costs, and integration related outside services. Restructuring expenses consist of employee severance, abandoned facilities, product line disposition and other exit costs. We believe it is useful to understand the effects of these items on our total operating expenses.

Impairment of Goodwill and Intangible Assets:  We have excluded the effect of the estimated impairment of goodwill and intangible assets in calculating our non-GAAP operating expenses and net income measures.  Although an impairment does not directly impact the Company's current cash position, such expense represents the declining value of the business, technology and other intangible assets that were acquired.  We exclude these impairments when significant and they are not reflective of ongoing business and operating results.

Amortization of Intangible Assets:    We have excluded the effect of amortization of intangible assets in calculating our non-GAAP operating expenses and net income (loss) measures. Amortization of intangible assets is non-cash, and is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods.

Noncontrolling Interest share of Non-GAAP Adjustments:    The joint venture formed for the ActiveVideo acquisition is accounted for by ARRIS under the consolidation method. As a result, the consolidated Statements of Income include the revenues, expenses, and gains and losses of the noncontrolling interest. The amount of net income (loss) related to the noncontrolling interest are reported and presented separately in the consolidated Statements of Operations. We have excluded the noncontrolling share of any non- GAAP adjusted measures recorded by the venture, as we believe it is useful to understand the effect of excluding this item when evaluating our ongoing performance.

Impairment on Investments:    We have excluded the effect of other-than-temporary impairments and certain gains on investments in calculating our non-GAAP financial measures. We believe it is useful to understand the effect of this non-cash item in our other expense (income).

Debt Amendment Fees:    In 2017, the Company amended its credit agreement. This debt modification allowed us to improve the terms and conditions of the credit agreement and extend the maturities of certain loan facilities. We have excluded the effect of the associated fees in calculating our non-GAAP financial measures. We believe it is useful to understand the effect of this item in our other expense (income).

Remeasurement of Deferred Taxes:    The Company records foreign currency remeasurement gains and losses related to deferred tax liabilities in the United Kingdom. The foreign currency remeasurement gains and losses derived from the remeasurement of the deferred income taxes from GBP to USD. We have excluded the impact of these gains and losses in the calculation of our non-GAAP measures. We believe it is useful to understand the effects of this item on our total other expense (income).

Income Tax Expense (Benefit):    We have excluded the tax effect of the non-GAAP items mentioned above. Additionally, we have excluded the effects of certain tax adjustments related to tax and legal restructuring, state and non-US valuation allowances, benefits for releases of uncertain tax positions due to settlement, change in law or statute of limitations and provision to return differences.

 

 

ARRIS INTERNATIONAL PLC

PRELIMINARY CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

























June 30,


March 31,


December 31,


September 30,


June 30,



2018


2018


2017


2017


2017












ASSETS






















Current assets:











Cash and cash equivalents


$501,410


$506,240


$487,573


$1,379,827


$1,346,028

Short-term investments, at fair value


46,698


36,804


23,874


33,309


38,759

Total cash, cash equivalents and short term investments


548,109


543,044


511,447


1,413,136


1,384,787












Accounts receivable, net


1,183,360


1,034,608


1,218,089


1,056,225


991,539

Other receivables 


192,067


169,681


157,845


145,658


132,742

Inventories, net


803,217


849,069


825,211


775,142


657,881

Prepaid income taxes


10,406


26,409


28,351


41,780


16,354

Prepaids


40,290


36,308


26,644


27,954


32,149

Other current assets


196,014


172,993


145,953


109,567


119,405

Total current assets


2,973,463


2,832,112


2,913,540


3,569,462


3,334,857












Property, plant and equipment, net 


299,991


309,457


372,467


347,506


355,033

Goodwill


2,259,177


2,336,820


2,278,512


2,016,580


2,014,550

Intangible assets, net


1,580,393


1,583,299


1,771,362


1,406,591


1,491,103

Investments


69,902


69,858


71,082


73,199


61,047

Deferred income taxes


146,443


131,417


115,436


193,703


199,102

Other assets


72,155


103,525


101,858


57,246


54,843



$7,401,524


$7,366,488


$7,624,257


$7,664,287


$7,510,535























LIABILITIES AND STOCKHOLDERS' EQUITY






















Current liabilities:











Accounts payable


$1,125,619


$1,010,812


$1,206,656


$1,266,214


$1,201,883

Accrued compensation, benefits and related taxes


140,387


113,029


155,966


102,222


81,355

Accrued warranty


38,651


42,434


44,507


45,036


44,812

Deferred revenue


123,590


143,740


115,224


118,598


130,454

Current portion of LT debt & financing lease obligations


83,709


83,633


83,559


89,156


89,336

Income taxes payable


2,093


4,937


6,244


4,420


9,487

Other accrued liabilities


361,315


316,206


321,113


327,099


303,013

Total current liabilities


1,875,365


1,714,791


1,933,269


1,952,745


1,860,340

Long-term debt & financing lease obligations, net of current portion


2,074,352


2,095,320


2,116,244


2,112,494


2,134,506

Accrued pension


31,889


43,443


42,637


54,867


55,532

Noncurrent deferred revenue


58,233


56,041


54,090


34,569


36,855

Noncurrent income taxes


120,987


159,148


144,665


115,434


114,187

Deferred income taxes


62,886


68,825


68,888


83,058


83,516

Other noncurrent liabilities


68,507


71,546


80,430


83,852


83,526

Total liabilities


4,292,219


4,209,114


4,440,223


4,437,018


4,368,462












Stockholders' equity:











Ordinary shares


2,722


2,769


2,768


2,788


2,786

Capital in excess of par value


3,424,906


3,392,415


3,387,128


3,367,940


3,356,183

Accumulated other comprehensive loss


(4,649)


12,545


4,552


8,838


2,211

Accumulated deficit


(329,731)


(266,264)


(225,881)


(188,375)


(256,705)

     Total ARRIS International plc stockholders' equity


3,093,248


3,141,465


3,168,567


3,191,191


3,104,475

Stockholders' equity attributable to noncontrolling interest


16,056


15,909


15,467


36,078


37,598

 Total stockholders' equity


3,109,304


3,157,374


3,184,034


3,227,269


3,142,073



$7,401,524


$7,366,488


$7,624,257


$7,664,287


$7,510,535

 

 

 ARRIS INTERNATIONAL PLC

 PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)










For the Three Months


For the Six Months


Ended June 30,


Ended June 30,


2018


2017


2018


2017









Net sales

$1,726,540


$1,664,170


$3,304,250


$3,147,276

Cost of sales

1,227,785


1,260,813


2,329,812


2,406,661

Gross margin

498,755


403,357


974,438


740,615

Operating expenses:








Selling, general, and administrative expenses

173,353


113,921


334,557


218,560

Research and development expenses

167,200


133,098


336,997


266,060

Amortization of intangible assets

90,485


91,012


205,193


184,657

Impairment of goodwill 

-


-


3,400


-

Integration, acquisition, restructuring and other costs

22,844


9,690


36,500


19,785


453,882


347,721


916,647


689,062

Operating income 

44,873


55,636


57,792


51,553

Other expense (income):








Interest expense

23,647


23,344


46,173


43,027

(Gain) loss on investments

(844)


3,609


(317)


8,139

(Gain) loss on foreign currency

(824)


9,373


4,009


14,113

Interest income

(1,792)


(1,788)


(3,324)


(3,709)

Other (income) expense, net

(169)


926


(61)


841

Income (loss) before income taxes

24,855


20,172


11,312


(10,858)

Income tax (benefit) expense

(9,944)


(8,302)


(6,454)


1,699

Consolidated net income (loss)

34,799


28,474


17,766


(12,557)

Net loss attributable to noncontrolling interests

(955)


(1,862)


(4,388)


(3,795)

Net income (loss) attributable to ARRIS International plc

$35,754


$30,336


$22,154


($8,762)









Net net (loss) per ordinary share (1):








Basic

$          0.19


$              0.16


$           0.12


$        (0.05)

Diluted

$          0.19


$              0.16


$           0.12


$        (0.05)









Weighted average ordinary shares:








Basic

184,216


186,803


184,376


188,291

Diluted

185,669


189,002


186,288


188,291









(1)  Calculated based on net income (loss) attributable to shareowners of ARRIS International plc



 

 

ARRIS INTERNATIONAL PLC

PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)










For the Three Months


For the Six Months










Ended June 30,


Ended June 30,










2018


2017


2018


2017

















Operating Activities:














Consolidated net income (loss)






$         34,799


$         28,474


$       17,766


$      (12,557)



Depreciation






21,235


21,690


44,109


43,003



Amortization of acquired intangible assets






92,360


92,672


208,955


187,978



Amortization of deferred finance fees and debt discount






1,207


1,988


2,422


3,891



Impairment of goodwill 






-


-


3,400


-



Deferred income taxes






(32,750)


(16,740)


(46,077)


(37,523)



Foreign currency remeasurement of deferred income taxes






(3,676)


4,060


21


7,191



Stock compensation expense






23,503


22,325


42,759


41,740



Provision for non-cash warrants






-


2,658


-


5,081



Provision (recovery) for doubtful accounts






-


(69)


(292)


(248)



Loss on disposal of plant, property and equipment and other






66


1,298


222


1,590



Loss on investments and others






(844)


3,609


(182)


8,139


Changes in operating assets & liabilities, net of effects of acquisitions and
disposals:















Accounts receivable






(162,538)


24,060


20,862


368,020



Other receivables






(22,386)


(23,625)


(34,222)


(59,549)



Inventories






43,817


(103,689)


19,420


(106,841)



Accounts payable and accrued liabilities






123,764


181,521


(104,470)


36,881



Prepaids and other, net






(15,220)


5,628


24,557


9,124




Net cash provided by operating activities






103,337


245,860


199,250


495,920

















Investing Activities:














Purchases of investments






(10,809)


(6,371)


(37,309)


(62,250)


Sales of investments






549


58,416


11,549


150,301


Purchases of property, plant & equipment, net






(13,450)


(21,033)


(28,646)


(42,900)


Deposit proceeds for sale of property, plant and equipment






20,000


-


30,000


-


Purchases of intangible assets






(423)


(422)


(423)


(422)


Other, net






-


-


171


826




Net cash (used in) provided by investing activities






(4,133)


30,590


(24,658)


45,555

















Financing Activities:














Proceeds from issuance of debt






-


30,314


-


30,314


Payment of financing lease obligation






(224)


(201)


(414)


(405)


Payment of debt obligations






(21,875)


(52,864)


(43,750)


(75,239)


Payment for deferred financing costs and debt discount






-


(1,462)


-


(1,462)


Repurchase of shares 






(86,244)


(43,855)


(111,244)


(126,965)


Repurchase of shares to satisfy employee minimum tax withholdings






(3)


(128)


(13,979)


(13,882)


Proceeds from issuance of shares, net






8,996


8,530


9,018


8,553


Contribution from noncontrolling interest






1,050


3,500


2,257


3,500




Net cash used in financing activities






(98,300)


(56,166)


(158,112)


(175,586)

















Effect of exchange rate changes on cash, cash equivalents and restricted cash




(6,440)


(450)


(2,649)


147

Net (decrease) increase in cash, cash equivalents and restricted cash






(5,536)


219,834


13,831


366,036

Cash, cash equivalents and restricted cash at beginning of period






508,483


1,127,894


489,116


981,692

Cash, cash equivalents and restricted cash at end of period






$       502,947


$    1,347,728


$      502,947


$   1,347,728

































Reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets


















Cash and cash equivalent






501,410


1,346,028






Restricted cash included in other current assets






820


165






Restricted cash included in other assets






717


1,535






Total







502,947


1,347,728





 

 

ARRIS INTERNATIONAL PLC

PRELIMINARY ADJUSTED SALES & NET INCOME RECONCILIATION

(in thousands, except per share data) (unaudited)










































Q2 2017


Q1 2018


Q2 2018


JUN YTD 2017


JUN YTD 2018


Amount

Per
Diluted
Share


Amount

Per
Diluted
Share


Amount

Per
Diluted
Share


Amount

Per
Diluted
Share


Amount

Per
Diluted
Share

Sales

$1,664,170



$1,577,710



$1,726,540



$3,147,276



$3,304,250


Highlighted items:
    Reduction in revenue related to warrants

2,658



-



-



5,081




   Acquisition accounting impacts of deferred revenue

-



5,694



3,307



-



9,002


Adjusted sales 

$1,666,828



$1,583,404



$1,729,847



$3,152,357



$3,313,252

















Net income (loss) attributable to ARRIS International plc

$         30,336

$    0.16


$       (13,600)

$   (0.07)


$         35,754

$    0.19


$         (8,762)

$   (0.05)


$         22,154

$           0.12

Highlighted Items:
Impacting gross margin:















Stock compensation expense

3,495

0.02


3,253

0.02


3,809

0.02


6,747

0.04


7,062

0.04

Reduction in revenue related to warrants

2,658

0.01




5,081

0.03


Acquisition accounting impacts of deferred revenue


5,694

0.03


3,307

0.02



9,002

0.05

Acquisition accounting impacts of fair valuing inventory


16,971

0.09



908

0.00


16,971

0.09

Impacting operating expenses:















Integration, acquisition, restructuring and other costs

9,690

0.05


13,655

0.07


22,844

0.12


19,785

0.10


36,499

0.20

Amortization of intangible assets

91,012

0.48


114,708

0.61


90,485

0.49


184,657

0.97


205,193

1.10

Impairment on goodwill and intangible assets


3,400

0.02




3,400

0.02

Stock compensation expense

18,829

0.10


16,003

0.09


19,694

0.11


34,992

0.18


35,697

0.19

Noncontrolling interest share of non-GAAP adj

(811)


(2,321)

(0.01)


(867)

(0.00)


(1,615)

(0.01)


(3,188)

(0.02)

Impacting other (income)/expense:















Impairment on investments

2,782

0.01




2,750

0.01


Debt amendment fees




2,782

0.01


Remeasurement of deferred taxes

2,828

0.01


3,697

0.02


(3,676)

(0.02)


4,940

0.03


20

0.00

Impacting income tax expense:















Net tax items

(40,937)

(0.22)


(24,541)

(0.13)


(37,387)

(0.20)


(54,270)

(0.28)


(61,928)

(0.33)

Total highlighted items

89,546

0.47


150,519

0.80


98,209

0.53


206,757

1.08


248,728

1.34

Adjusted net income 

$      119,882

$    0.63


$      136,919

$    0.73


$      133,963

$    0.72


$      197,995

$    1.04


$      270,882

$           1.45

Weighted average ordinary shares - basic


186,803



184,805



184,216



188,291



184,376

Weighted average ordinary shares - diluted


189,002



187,175



185,669



190,932



186,288

 

 

ARRIS INTERNATIONAL PLC




PRELIMINARY SUPPLEMENTAL GAAP TO ADJUSTED SALES & GROSS MARGIN RECONCILIATION




(in thousands)




(unaudited)















Q2 2017


Q1 2018


Q2 2018


Jun YTD 2017


Jun YTD 2018

Sales - GAAP

1,664,170


1,577,710


1,726,540


3,147,276


3,304,250

Adjustment to revenue related to warrants

2,658


-


-


5,081


-

Acquisition accounting impacts of deferred revenue

-


5,694


3,307


-


9,002

Adjusted Sales - Non-GAAP

1,666,828


1,583,404


1,729,847


3,152,357


3,313,252











GAAP Gross Margin

403,357


475,683


498,755


740,615


974,438

Acquisition accounting impacts of fair valuing inventory

-


16,971


-


908


16,971

Acquisition accounting impacts of deferred revenue

-


5,694


3,307


-


9,002

Stock compensation expense

3,495


3,253


3,809


6,747


7,062

Adjustment to revenue related to warrants

2,658


-


-


5,081


-

Adjusted Gross Margin - Non-GAAP

409,510


501,601


505,871


753,351


1,007,473











GAAP Gross Margin - %

24.2%


30.2%


28.9%


23.5%


29.5%

Adjusted Gross Margin - Non-GAAP -  %

24.6%


31.7%


29.2%


23.9%


30.4%

 

 

ARRIS INTERNATIONAL PLC

PRELIMINARY SUPPLEMENTAL GAAP TO ADJUSTED SALES & ADJUSTED DIRECT CONTRIBUTION RECONCILIATION

(in thousands)

(unaudited)








Q2 2018


Network &
Cloud

CPE

Enterprise

Corp/ Other

Total

Net Sales

549,496

1,008,131

172,240

(3,327)

1,726,540

Non GAAP Adjustments (1)

-

-

-

3,307

3,307

Adjusted Net Sales

549,496

1,008,131

172,240

(20)

1,729,847







Direct Contribution(2)

201,282

85,723

17,774

(146,577)

158,202

Adjusted Direct Contribution (3)

187,886

78,946

19,194

(83,092)

202,934

Adjusted Direct Contribution % of sales

34.2%

7.8%

11.1%


11.7%







Other Items






Amortization of intangibles

24,749

50,621

14,300

815

90,485

Integration,acquisition, restructuring and other costs

6,427

14,589

1,650

179

22,845

Depreciation expense

6,571

6,958

3,158

4,543

21,230

Equity compensation expense

8,647

5,927

4,485

4,444

23,503







(1)  Impact of adjustment related to acquisition accounting impacts

(2) Defined as gross margin less direct operating expenses, excluding amortization of intangible assets, restructuring charges, acquisition, integration and other costs.

(3) Defined as direct contribution less allocated facility costs, service provider sales and marketing costs plus equity compensation and depreciation expense

 

 

ARRIS INTERNATIONAL PLC

PRELIMINARY SUPPLEMENTAL DIRECT CONTRIBUTION TO ADJUSTED DIRECT CONTRIBUTION RECONCILIATION

(in thousands)

(unaudited)








Q2 2018


Network &
Cloud

CPE

Enterprise

Corp/ Other

Total

Direct Contribution(1)

201,282

85,723

17,774

(146,577)

158,202

Allocated costs (2)

(28,614)

(19,622)

(6,223)

54,499

40,446

Direct Contribution after allocation

172,668

66,101

11,551

(92,078)

158,242

Equity compensation expense

8,647

5,927

4,485

4,444

23,503

Depreciation expense

6,571

6,958

3,158

4,543

21,230

Adjusted Direct Contribution 

187,886

78,986

19,194

(83,091)

202,975













(1) Defined as gross margin less direct operating expenses, excluding amortization of intangible assets, restructuring charges, acquisition, integration and other costs.

(2) Allocated facility costs and service provider sales and marketing costs 

 

 

ARRIS INTERNATIONAL PLC



PRELIMINARY SUPPLEMENTAL GAAP TO ADJUSTED EPS GUIDANCE RECONCILIATION 



(in millions, except per share data)








Q3 2018 Guidance 


FY 2018 Guidance 

Estimated GAAP EPS 

$ 0.20 - $ 0.25


$ 0.68 - $ 0.83

Reconciling Items:




Amortization of intangibles

0.48


2.09

Stock compensation expense

0.13


0.49

Integration, acquisition, restructuring and other costs

0.02


0.13

Purchase accounting Items

0.01


0.16

Impairment of goodwill

-


0.02

Net Tax items

(0.19)


(0.72)

Subtotal

0.45


2.17

Estimated Adjusted (Non-GAAP) EPS

$ 0.65 - $ 0.70


$ 2.85 - $ 3.00

 

 

ARRIS INTERNATIONAL PLC

PRELIMINARY ADJUSTED SALES & EBITDA RECONCILIATION

(in millions)

(unaudited)
















Q2 2015

Q3 2015

Q4 2015

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Sales

$         1,260

$      1,221

$      1,102

$      1,615

$      1,730

$      1,725

$      1,759

$      1,483

$      1,664

$      1,729

$      1,739

$      1,578

$      1,727

Highlighted items:
    Reduction in revenue related to warrants

-

-

-

-

4

10

16

2

3

3

(8)

-

-

   Acquisition accounting impacts of deferred revenue

-

-

-

-

-

-

-

-

-

-

1

6

3

Adjusted sales 

1,260

1,221

1,102

1,615

1,734

1,735

1,775

1,486

1,667

1,732

1,732

1,583

1,730















Trailing Twelve Months Adjusted Sales




$      5,198

$      5,672

$      6,185

$      6,859

$      6,730

$      6,663

$      6,659

$      6,616

$      6,713

$      6,776











































Net income (loss) as reported

$           15

$           23

$           27

$        (205)

$           82

$           46

$           86

$          (41)

$           28

$           87

$            (8)

$          (17)

$           35

Income tax expense (benefit)

13

12

(7)

86

(69)

9

(11)

10

(8)

(14)

(32)

3

(10)

Interest income

(1)

(1)

(1)

(1)

(1)

(1)

(2)

(2)

(2)

(2)

(2)

(2)

(2)

Interest expense

28

15

14

20

19

20

21

20

23

20

24

23

24

Depreciation expense

17

17

18

24

22

23

22

21

22

22

23

23

21

Amortization of intangible assets

57

57

56

98

110

89

100

94

91

90

101

115

90

EBITDA

130

124

107

22

164

186

216

102

154

203

105

145

158















Adjustments














Stock-based compensation expense

16

16

18

14

12

18

16

19

22

20

19

19

24

Integration, acquisition, restructuring and other costs

13

8

8

91

41

11

8

10

10

11

68

14

23

Impairment on goodwill and intangible assets

-

-

-

-

2

-

-

-

-

-

55

3

-

Reduction in revenue related to warrants

-

-

-

-

4

10

16

-

-

-

-

-

-

Acquisition accounting impacts of deferred revenue

-

-

-

-

-

-

-

2

3

3

(7)

6

3

Acquisition accounting impacts of fair valuing inventory

-

-

-

30

20

-

1

1

-

-

8

17

-

Impairment (gain) on investments

0

-

(0)

-

5

3

4

3

-

(2)

-

-

-

Credit facility - ticking fees

-

1

1

(0)

-

-

-

-

-

-

-

-

-

FX contract losses related to acquisition

(7)

15

14

2

-

-

(16)

-

-

-

-

-

-

Adjustment to liability related to foreign tax credit

-

(4)

-

-

-

-

-

-

-

-

-

-

-

Remeasurement of deferred taxes

-

-

-

-

-

-

-

2

3

4

1

4

(4)

Adjusted EBITDA - Non-GAAP

$             152

$             160

$             148

$             159

$             248

$             227

$             245

$             139

$             192

$             239

$             248

$             208

$             204















Trailing Twelve Months Adjusted EBITDA




$             619

$             715

$             782

$             879

$             859

$             803

$             815

$             818

$             886

$             899

 

 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/arris-announces-preliminary-and-unaudited-second-quarter-2018-results-300690505.html

SOURCE ARRIS

Bob Puccini, Investor Relations, +1.720.895.7787, bob.puccini@arris.com