Arris Group beat Wall Street expectations with a 31% jump in second-quarter revenue, as sales to Time Warner Cable more than doubled year-over-year and Comcast sales climbed 43%, while investors remained leery about its ability to sustain profitable growth.
Total revenue for Q2 was $349.3 million, an increase of 15% from the prior quarter. Through the first half of 2012, Arris sales were $652.2 million -- up 22%, from $533.2 million in the year-ago period.
"These results confirm that our investments over the past few years have positioned Arris with a portfolio aligned extremely well with our customers' demands," Arris chairman and CEO Bob Stanzione said in announcing earnings Wednesday. "I remain very encouraged as I look to the balance of 2012."
Sales to Time Warner Cable totaled $75.3 million in Q2, up from $33.3 million in the year-ago quarter, and Comcast sales were $96.2 million versus. $67.2 million in Q2 2011.
Arris posted net income of $15.0 million in Q2, or $0.13 per diluted share, a decline from $16.7 million in the year-ago quarter. Adjusted EPS was $0.25, above analyst consensus expectations of $0.22.
For the third quarter of 2012, Arris projected revenue in the range of $348 million to $368 million, with adjusted net income per diluted share in the range of $0.19 to $0.23 and GAAP net income per diluted share in the range of $0.09 to $0.13.
The company's stock fell 7% in early trading Thursday, as investors remained cautious about its long-term prospects for profitable growth.
"We're inclined to remain on the sidelines until we feel confident that Arris is likely to continue to beat investor expectations," Jefferies & Co. analyst James Kisner wrote in a research note. "Q3 guidance was mixed, with revenue above expectations but EPS below as ramping opex and a richer mix of CPE and CMTS hardware is expected to drive down Q3 profitability."
Arris shipped 1.962 million customer-premises equipment units in the quarter, an increase of 22% sequentially. The company said more than 82% of CPE units were DOCSIS 3.0, and 45% were Wi-Fi-enabled.
Arris previously had anticipated its Moxi whole-home gateway product line generating at least $100 million in sales for the full-year 2012 -- a target Stanzione said would "be a stretch" to hit at this point.
The company attributed the weakness to a slower-than-expected ramp at one customer, which Jefferies' Kisner said is presumably Shaw Communications.
"[A]t this point it sounds like the premium positioning of the [Moxi] product could be a near-term inhibitor of adoption," he wrote. "Interestingly, management alluded to measures to drive ‘mainstream' adoption of Moxi -- we are wondering if perhaps they may launch a lower-priced version."