SUWANEE, Ga., May 1, 2018 /PRNewswire/ -- ARRIS International
plc (NASDAQ: ARRS) today announced preliminary and unaudited
financial results for the first quarter 2018.
First Quarter 2018 Financial Highlights
- Revenues were $1.578 billion
- GAAP net loss was ($0.07) per
diluted share
- Adjusted net income (a non-GAAP measure) was $0.73 per diluted share
- End-of-quarter cash resources were $543
million
- Cash from operating activities was $96
million
- Order backlog was $1.3
billion
- Book-to-bill ratio was 1.11
- Repurchased ~986,000 shares for $25
million
"We delivered strong profitability to start the year, led by a
great quarter of E6000 DOCSIS® 3.1 capacity sales and
Enterprise Networks' results," said Bruce
McClelland, ARRIS CEO. "This marked the first full quarter
for Enterprise Networks with better than expected results from both
wired and wireless product lines. Performance from Enterprise
Networks and Network & Cloud more than offset a lower quarter
in CPE sales. Overall our results demonstrated good progress
toward our goals of driving profitable growth by diversifying into
higher-margin products, expanding internationally and broadening
the capabilities of ARRIS to deliver innovative services to address
the explosive demand for bandwidth capacity.
"With respect to the second quarter 2018, we expect revenues
will be in the range of $1.760
billion to $1.810 billion,
GAAP net income per diluted share in the range of $0.24 to $0.29, and
adjusted net income per diluted share in the range of $0.72 to $0.77. The strong start to the year creates
good momentum to achieve our full year targets."
On December 1, 2017, the Company
completed the acquisition of Ruckus Networks, and, as a result,
comparisons to prior year periods are materially
affected.
Revenues in the first quarter 2018 of $1.578 billion were up $95
million, or 6%, as compared to first quarter 2017 revenues
of $1.483 billion. First
quarter revenues were down $161
million, or 9%, as compared to fourth quarter 2017 revenues
of $1.739 billion.
GAAP net loss in the first quarter 2018 was ($0.07) per diluted share. First quarter
2017 GAAP net loss was ($0.21) per
diluted share, and fourth quarter 2017 GAAP net income was
$0.07 per diluted
share.
Adjusted net income (a non-GAAP measure) in the first
quarter 2018 was $0.73 per diluted
share, as compared to $0.40 per
diluted share for the first quarter 2017, and the fourth quarter
2017 adjusted net income of $0.88 per
diluted share.
A reconciliation of adjusted net income to GAAP net loss is
attached to this release and can also be found on the Company's
website (www.arris.com).
Cash resources of the Company at the end of the first
quarter, 2018 were $543 million of
cash resources as compared to $511
million at the end of the fourth quarter 2017. The
Company generated $96 million of cash
from operating activities during the first quarter 2018, as
compared to generating $250 million
during the first quarter of 2017.
The Company repurchased approximately 986,000 ordinary shares
for $25 million during the first
quarter. Since the end of the first quarter 2018, the Company
has repurchased approximately 895,000 additional ordinary shares
for $24 million. As of
May 1, 2018, the Company has
$476 million remaining in available
share repurchase authorization.
Order backlog at the end of the first quarter 2018 was
$1.293 billion, as compared to
$1.304 billion and $1.121 billion at the end of the first quarter
2017 and the fourth quarter 2017, respectively. The Company's
book-to-bill ratio in the first quarter 2018 was 1.11, as compared
to the first quarter 2017 of 1.13 and the fourth quarter 2017 of
1.02.
ARRIS management will conduct a conference call at 5:00 pm EDT, today, Tuesday, May 1, 2018, to discuss these results in
detail. 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 May 8, 2018, by dialing 855-859-2056 or
404-537-3406 for international calls and using passcode 3398479.
A replay also will be made available for a period of 12
months following the conference call on ARRIS's website site at
(www.arris.com).
Forward-Looking Statements
Statements made in this press release, including those related
to revenues and net income for the second quarter and full year
2018, growth expectations, 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 second 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;
- the anticipated benefits from the Ruckus Networks acquisition
may not be realized;
- proposed tariffs on the import of certain products into the
U.S., and any retaliatory tariffs imposed on U.S. products, could
have a material adverse result on our financials results;
- 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-K for the
year ended December 31, 2017. 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:
- Check out our blog: ARRIS EVERYWHERE
- Follow us on Twitter: @ARRIS
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.
ARRIS
INTERNATIONAL PLC
|
|
PRELIMINARY
CONSOLIDATED BALANCE SHEETS
|
|
(in
thousands)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
September
30,
|
|
June
30,
|
|
March
31,
|
|
|
2018
|
|
2017
|
|
2017
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$506,240
|
|
$487,573
|
|
$1,379,827
|
|
$1,346,028
|
|
$1,126,248
|
Short-term
investments, at fair value
|
|
36,804
|
|
23,874
|
|
33,309
|
|
38,759
|
|
90,673
|
Total cash, cash
equivalents and short term investments
|
|
543,044
|
|
511,447
|
|
1,413,136
|
|
1,384,787
|
|
1,216,921
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
|
1,008,603
|
|
1,218,089
|
|
1,056,225
|
|
991,539
|
|
1,018,108
|
Other
receivables
|
|
169,681
|
|
157,845
|
|
145,658
|
|
132,742
|
|
109,117
|
Unbilled
receivables
|
|
26,005
|
|
-
|
|
-
|
|
-
|
|
-
|
Inventories,
net
|
|
849,069
|
|
825,211
|
|
775,142
|
|
657,881
|
|
556,264
|
Prepaid income
taxes
|
|
26,409
|
|
28,351
|
|
41,780
|
|
16,354
|
|
21,845
|
Prepaids
|
|
36,308
|
|
26,644
|
|
27,954
|
|
32,149
|
|
27,898
|
Other current
assets
|
|
172,993
|
|
145,953
|
|
109,567
|
|
119,405
|
|
132,339
|
Total current
assets
|
|
2,832,112
|
|
2,913,540
|
|
3,569,462
|
|
3,334,857
|
|
3,082,491
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
309,457
|
|
372,467
|
|
347,506
|
|
355,033
|
|
354,050
|
Goodwill
|
|
2,336,820
|
|
2,278,512
|
|
2,016,580
|
|
2,014,550
|
|
2,018,012
|
Intangible assets,
net
|
|
1,583,299
|
|
1,771,362
|
|
1,406,591
|
|
1,491,103
|
|
1,586,187
|
Investments
|
|
69,858
|
|
71,082
|
|
73,199
|
|
61,047
|
|
65,035
|
Deferred income
taxes
|
|
131,417
|
|
115,436
|
|
193,703
|
|
199,102
|
|
190,037
|
Other
assets
|
|
103,525
|
|
101,858
|
|
57,246
|
|
54,843
|
|
58,919
|
|
|
$7,366,488
|
|
$7,624,257
|
|
$7,664,287
|
|
$7,510,535
|
|
$7,354,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$1,010,812
|
|
$1,206,656
|
|
$1,266,214
|
|
$1,201,883
|
|
$1,020,234
|
Accrued compensation,
benefits and related taxes
|
|
113,029
|
|
155,966
|
|
102,222
|
|
81,355
|
|
73,220
|
Accrued
warranty
|
|
42,434
|
|
44,507
|
|
45,036
|
|
44,812
|
|
46,330
|
Deferred
revenue
|
|
143,740
|
|
115,224
|
|
118,598
|
|
130,454
|
|
145,197
|
Current portion of LT
debt & financing lease obligations
|
|
83,633
|
|
83,559
|
|
89,156
|
|
89,336
|
|
82,767
|
Income taxes
payable
|
|
4,937
|
|
6,244
|
|
4,420
|
|
9,487
|
|
20,278
|
Other accrued
liabilities
|
|
316,206
|
|
321,113
|
|
327,099
|
|
303,013
|
|
300,860
|
Total current
liabilities
|
|
1,714,791
|
|
1,933,269
|
|
1,952,745
|
|
1,860,339
|
|
1,688,887
|
Long-term debt &
financing lease obligations, net of current portion
|
|
2,095,320
|
|
2,116,244
|
|
2,112,494
|
|
2,134,506
|
|
2,159,300
|
Accrued
pension
|
|
43,443
|
|
42,637
|
|
54,867
|
|
55,532
|
|
54,809
|
Noncurrent income
taxes
|
|
159,148
|
|
144,665
|
|
115,433
|
|
114,187
|
|
120,493
|
Deferred income
taxes
|
|
68,825
|
|
68,888
|
|
83,058
|
|
83,516
|
|
89,260
|
Other noncurrent
liabilities
|
|
127,587
|
|
134,520
|
|
118,420
|
|
120,381
|
|
112,977
|
Total
liabilities
|
|
4,209,114
|
|
4,440,223
|
|
4,437,017
|
|
4,368,461
|
|
4,225,726
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
Ordinary
shares
|
|
2,769
|
|
2,768
|
|
2,788
|
|
2,786
|
|
2,802
|
Capital in excess of
par value
|
|
3,392,415
|
|
3,387,128
|
|
3,367,939
|
|
3,356,183
|
|
3,322,803
|
Accumulated other
comprehensive income
|
|
12,545
|
|
4,552
|
|
8,838
|
|
2,211
|
|
10,628
|
Accumulated
deficit
|
|
(266,264)
|
|
(225,881)
|
|
(188,375)
|
|
(256,705)
|
|
(243,207)
|
Total ARRIS International plc stockholders' equity
|
|
3,141,465
|
|
3,168,567
|
|
3,191,191
|
|
3,104,475
|
|
3,093,026
|
Stockholders' equity
attributable to noncontrolling interest
|
|
15,909
|
|
15,467
|
|
36,078
|
|
37,598
|
|
35,979
|
Total stockholders'
equity
|
|
3,157,374
|
|
3,184,034
|
|
3,227,269
|
|
3,142,073
|
|
3,129,005
|
|
|
$7,366,488
|
|
$7,624,257
|
|
$7,664,287
|
|
$7,510,534
|
|
$7,354,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in thousands,
except per share data)
|
(unaudited)
|
|
|
|
|
|
For the Three
Months
|
|
Ended March
31,
|
|
2018
|
|
2017
|
|
|
|
|
Net sales
|
$1,577,710
|
|
$1,483,105
|
Cost of
sales
|
1,102,027
|
|
1,145,848
|
Gross margin
|
475,683
|
|
337,257
|
Operating
expenses:
|
|
|
|
Selling, general, and
administrative expenses
|
161,204
|
|
104,638
|
Research and
development expenses
|
169,797
|
|
132,962
|
Amortization of
intangible assets
|
114,708
|
|
93,646
|
Impairment of
goodwill
|
3,400
|
|
-
|
Integration,
acquisition, restructuring and other costs
|
13,655
|
|
10,095
|
|
462,764
|
|
341,341
|
Operating income
(loss)
|
12,919
|
|
(4,084)
|
Other expense
(income):
|
|
|
|
Interest
expense
|
22,525
|
|
19,683
|
Loss on
investments
|
527
|
|
4,530
|
Loss on foreign
currency
|
4,833
|
|
4,740
|
Interest
income
|
(1,532)
|
|
(1,922)
|
Other (income) expense,
net
|
109
|
|
(85)
|
Loss before income
taxes
|
(13,543)
|
|
(31,030)
|
Income tax
expense
|
3,489
|
|
10,001
|
Consolidated net
loss
|
(17,032)
|
|
(41,031)
|
Net loss attributable
to noncontrolling interests
|
(3,432)
|
|
(1,933)
|
Net loss attributable
to ARRIS International plc
|
($13,600)
|
|
($39,098)
|
|
|
|
|
Net loss per ordinary
share (1):
|
|
|
|
Basic
|
$
(0.07)
|
|
$
(0.21)
|
Diluted
|
$
(0.07)
|
|
$
(0.21)
|
|
|
|
|
Weighted average
ordinary shares:
|
|
|
|
Basic
|
184,805
|
|
189,796
|
Diluted
|
184,805
|
|
189,796
|
|
|
|
|
(1)
Calculated based on net loss attributable to shareowners of ARRIS
International plc
|
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
For the Three
Months
|
|
|
|
|
|
|
|
|
|
Ended March
31,
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
Consolidated net
loss
|
|
|
|
|
|
$
(17,032)
|
|
$
(41,031)
|
|
|
Depreciation
|
|
|
|
|
|
22,874
|
|
21,313
|
|
|
Amortization of
acquired intangible assets
|
|
|
|
|
|
116,595
|
|
95,306
|
|
|
Amortization of
deferred finance fees and debt discount
|
|
|
|
|
|
1,215
|
|
1,903
|
|
|
Impairment of
goodwill
|
|
|
|
|
|
3,400
|
|
-
|
|
|
Deferred income
taxes
|
|
|
|
|
|
(13,327)
|
|
(15,667)
|
|
|
Foreign currency
remeasurement of deferred income taxes
|
|
|
|
|
|
3,697
|
|
2,112
|
|
|
Stock compensation
expense
|
|
|
|
|
|
19,256
|
|
19,415
|
|
|
Provision for
non-cash warrants
|
|
|
|
|
|
-
|
|
2,423
|
|
|
Provision (recovery)
for doubtful accounts
|
|
|
|
|
|
(292)
|
|
(179)
|
|
|
Loss on disposal of
plant, property and equipment and other
|
|
|
|
|
|
156
|
|
292
|
|
|
Loss on investments
and others
|
|
|
|
|
|
662
|
|
4,530
|
|
Changes in operating
assets & liabilities, net of effects of acquisitions and
disposals:
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
|
|
|
209,405
|
|
343,960
|
|
|
Other
receivables
|
|
|
|
|
|
(11,836)
|
|
(35,924)
|
|
|
Unbilled
receivables
|
|
|
|
|
|
(25,829)
|
|
-
|
|
|
Inventories
|
|
|
|
|
|
(24,397)
|
|
(3,152)
|
|
|
Accounts payable and
accrued liabilities
|
|
|
|
|
|
(228,151)
|
|
(144,640)
|
|
|
Prepaids and other,
net
|
|
|
|
|
|
39,517
|
|
(601)
|
|
|
|
Net cash provided
by operating activities
|
|
|
|
|
|
95,913
|
|
250,060
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
|
|
|
(26,500)
|
|
(55,879)
|
|
Sales of
investments
|
|
|
|
|
|
11,000
|
|
91,885
|
|
Purchases of
property, plant & equipment, net
|
|
|
|
|
|
(15,196)
|
|
(21,867)
|
|
Deposit proceeds for
sale of property, plant and equipment
|
|
|
|
|
|
10,000
|
|
-
|
|
Other, net
|
|
|
|
|
|
171
|
|
826
|
|
|
|
Net cash (used in)
provided by investing activities
|
|
|
|
|
|
(20,525)
|
|
14,965
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
Payment of financing
lease obligation
|
|
|
|
|
|
(190)
|
|
(204)
|
|
Payment of debt
obligations
|
|
|
|
|
|
(21,875)
|
|
(22,375)
|
|
Repurchase of
shares
|
|
|
|
|
|
(25,000)
|
|
(83,110)
|
|
Repurchase of shares
to satisfy employee minimum tax withholdings
|
|
|
|
|
|
(13,976)
|
|
(13,754)
|
|
Proceeds from
issuance of shares, net
|
|
|
|
|
|
22
|
|
23
|
|
Contribution from
noncontrolling interest
|
|
|
|
|
|
1,207
|
|
-
|
|
|
|
Net cash used in
financing activities
|
|
|
|
|
|
(59,812)
|
|
(119,420)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
|
|
|
3,791
|
|
597
|
Net (decrease)
increase in cash, cash equivalents and restricted
cash
|
|
|
|
|
|
19,367
|
|
146,202
|
Cash, cash
equivalents and restricted cash at beginning of
period
|
|
|
|
|
|
489,116
|
|
981,692
|
Cash, cash
equivalents and restricted cash at end of period
|
|
|
|
|
|
$
508,483
|
|
$
1,127,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
cash, cash equivalents and restricted cash reported within the
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
|
|
$
506,240
|
|
$
1,126,248
|
|
Restricted cash
included in other current assets
|
|
|
|
|
|
1,491
|
|
162
|
|
Restricted cash
included in other assets
|
|
|
|
|
|
752
|
|
1,484
|
|
Total
|
|
|
|
|
|
|
$
508,483
|
|
$
1,127,894
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
ADJUSTED SALES & NET INCOME RECONCILIATION
|
(in thousands,
except per share data) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
2017
|
|
Q4
2017
|
|
Q1
2018
|
|
Amount
|
Per
Diluted
Share
|
|
Amount
|
Per
Diluted
Share
|
|
Amount
|
Per
Diluted
Share
|
Sales
|
$1,483,105
|
|
|
$1,738,593
|
|
|
$1,577,710
|
|
Highlighted
items:
Adjustment to revenue related to
warrants
|
2,423
|
|
|
(8,145)
|
|
|
-
|
|
Acquisition accounting
impacts of deferred revenue
|
-
|
|
|
1,120
|
|
|
5,694
|
|
Adjusted
sales
|
$1,485,528
|
|
|
$1,731,568
|
|
|
$1,583,404
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to ARRIS International plc
|
$
(39,098)
|
$
(0.21)
|
|
$
12,469
|
$
0.07
|
|
$
(13,600)
|
$
(0.07)
|
Highlighted
Items:
Impacting gross margin:
|
|
|
|
|
|
|
|
|
Stock compensation
expense
|
3,252
|
0.02
|
|
3,303
|
0.02
|
|
3,253
|
0.02
|
Adjustment to revenue
related to warrants
|
2,423
|
0.01
|
|
(8,145)
|
(0.04)
|
|
–
|
–
|
Acquisition accounting
impacts of deferred revenue
|
–
|
–
|
|
1,120
|
0.01
|
|
5,694
|
0.03
|
Acquisition accounting
impacts of fair valuing inventory
|
908
|
0.00
|
|
7,560
|
0.04
|
|
16,971
|
0.09
|
Impacting
operating expenses:
|
|
|
|
|
|
|
|
|
Integration,
acquisition, restructuring and other costs
|
10,095
|
0.05
|
|
67,736
|
0.36
|
|
13,655
|
0.07
|
Amortization of
intangible assets
|
93,646
|
0.49
|
|
100,588
|
0.53
|
|
114,708
|
0.61
|
Impairment on goodwill
and intangible assets
|
–
|
–
|
|
55,000
|
0.29
|
|
3,400
|
0.02
|
Stock compensation
expense
|
16,163
|
0.08
|
|
15,403
|
0.08
|
|
16,003
|
0.09
|
Noncontrolling
interest share of non-GAAP adj
|
(804)
|
–
|
|
(20,026)
|
(0.11)
|
|
(2,321)
|
(0.01)
|
Impacting other
(income)/expense:
|
|
|
|
|
|
|
|
|
Impairment (gain) on
investments
|
2,750
|
0.01
|
|
–
|
–
|
|
–
|
–
|
Debt amendment
fees
|
–
|
–
|
|
3,069
|
0.02
|
|
–
|
–
|
Remeasurement of
certain deferred tax liabilities
|
2,112
|
0.01
|
|
852
|
–
|
|
3,697
|
0.02
|
Impacting income
tax expense:
|
|
|
|
|
|
|
|
|
Net tax
items
|
(13,333)
|
(0.07)
|
|
(73,267)
|
(0.39)
|
|
(24,541)
|
(0.13)
|
Total highlighted
items
|
117,212
|
0.61
|
|
153,193
|
0.81
|
|
150,519
|
0.80
|
Adjusted net
income
|
$
78,114
|
$
0.40
|
|
$
165,662
|
$
0.88
|
|
$
136,919
|
$
0.73
|
Weighted average
ordinary shares - basic
|
|
189,796
|
|
|
186,548
|
|
|
184,805
|
Weighted average
ordinary shares - diluted
|
|
192,879
|
|
|
188,829
|
|
|
187,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
SUPPLEMENTAL GAAP TO ADJUSTED SALES & GROSS MARGIN
RECONCILIATION
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
|
Q1
2017
|
|
Q4
2017
|
|
Q1
2018
|
|
Sales -
GAAP
|
1,483,105
|
|
1,738,593
|
|
1,577,710
|
|
Adjustment to revenue
related to warrants
|
2,423
|
|
(8,145)
|
|
-
|
|
Acquisition
accounting impacts of deferred revenue
|
-
|
|
1,120
|
|
5,694
|
|
Adjusted Sales -
Non-GAAP
|
1,485,528
|
|
1,731,569
|
|
1,583,404
|
|
|
|
|
|
|
|
|
GAAP Gross
Margin
|
337,257
|
|
494,469
|
|
475,683
|
|
Acquisition
accounting impacts of fair valuing inventory
|
908
|
|
7,560
|
|
16,971
|
|
Acquisition
accounting impacts of deferred revenue
|
-
|
|
1,120
|
|
5,694
|
|
Stock compensation
expense
|
3,252
|
|
3,303
|
|
3,253
|
|
Adjustment to revenue
related to warrants
|
2,423
|
|
(8,145)
|
|
-
|
|
Adjusted Gross Margin
- Non-GAAP
|
343,840
|
|
498,307
|
|
501,601
|
|
|
|
|
|
|
|
|
GAAP Gross Margin -
%
|
22.7%
|
|
28.4%
|
|
30.2%
|
|
Adjusted Gross Margin
- Non-GAAP - %
|
23.1%
|
|
28.8%
|
|
31.7%
|
|
ARRIS
INTERNATIONAL PLC
|
PRELIMINARY
SUPPLEMENTAL GAAP TO ADJUSTED SALES & ADJUSTED DIRECT
CONTRIBUTION RECONCILIATION
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
|
|
|
Q1
2018
|
|
Network &
Cloud
|
CPE
|
Enterprise
|
Corp/
Other
|
Total
|
Net Sales
|
538,264
|
875,226
|
169,914
|
(5,694)
|
1,577,710
|
Non GAAP Adjustments
(1)
|
-
|
-
|
-
|
5,694
|
5,694
|
Adjusted Net
Sales
|
538,264
|
875,226
|
169,914
|
0
|
1,583,404
|
|
|
|
|
|
|
Direct
Contribution(2)
|
228,538
|
49,761
|
25,528
|
(159,145)
|
144,683
|
Adjusted Direct
Contribution (3)
|
214,717
|
43,154
|
25,927
|
(96,980)
|
186,818
|
Adjusted Direct
Contribution % of sales
|
39.9%
|
4.9%
|
15.3%
|
|
11.8%
|
|
|
|
|
|
|
Other
Items
|
|
|
|
|
|
Amortization of
intangibles
|
25,135
|
63,248
|
25,510
|
815
|
114,708
|
Impairment of
goodwill
|
3,400
|
-
|
-
|
-
|
3,400
|
Integration,acquisition, restructuring and other
costs
|
-
|
-
|
3,066
|
10,589
|
13,655
|
Depreciation
expense
|
6,900
|
7,716
|
3,565
|
4,698
|
22,880
|
Equity compensation
expense
|
7,771
|
5,298
|
2,387
|
3,801
|
19,256
|
|
|
|
|
|
|
(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)
|
|
|
|
|
|
|
|
Q1
2018
|
|
Network &
Cloud
|
CPE
|
Enterprise
|
Corp/
Other
|
Total
|
Direct
Contribution(1)
|
228,538
|
49,761
|
25,528
|
(159,145)
|
144,683
|
Allocated costs
(2)
|
(28,492)
|
(19,622)
|
(5,553)
|
53,666
|
-
|
Direct Contribution
after allocation
|
200,046
|
30,139
|
19,976
|
(105,479)
|
144,683
|
Equity compensation
expense
|
7,771
|
5,298
|
2,387
|
3,801
|
19,256
|
Depreciation
expense
|
6,900
|
7,716
|
3,565
|
4,698
|
22,880
|
Adjusted Direct
Contribution
|
214,717
|
43,154
|
25,927
|
(96,980)
|
186,818
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)
|
|
|
|
|
|
|
|
Q2 2018
Guidance
|
|
FY 2018
Guidance
|
Estimated GAAP
EPS
|
$ 0.24 - $
0.29
|
|
$ 0.73 - $
0.98
|
Reconciling
Items:
|
|
|
|
Amortization of
intangibles
|
0.47
|
|
1.98
|
Stock compensation
expense
|
0.13
|
|
0.50
|
Integration,
acquisition, restructuring and other costs
|
0.05
|
|
0.13
|
Purchase accounting
Items
|
0.01
|
|
0.16
|
Impairment of
goodwill
|
0.00
|
|
0.02
|
Net Tax
items
|
(0.18)
|
|
(0.72)
|
Subtotal
|
0.48
|
|
2.07
|
Estimated Adjusted
(Non-GAAP) EPS
|
$ 0.72 - $
0.77
|
|
$ 2.80 - $
3.05
|
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 (Gain) 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 and 2015,
the Company amended its credit agreement. This debt modification
allowed us to improve the terms and conditions of the credit
agreement, extend the maturities of certain loan facilities,
increase the amount of the revolving credit facility, and add new
term loan facility. 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.
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SOURCE ARRIS