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Safe Harbor
Forward-Looking Statements
Statements in this presentation, including those related to expected revenues and net income, gross margins, operating expenses,
income taxes, the general outlook for 2016 and beyond, the impacts of the Pace integration, acceptance of certain ARRIS products, the
impact of proposed regulatory changes 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 are based on preliminary estimates, assumptions and projections that management believes to be reasonable at this time, but
are largely beyond management’s control; ARRIS may fail to realize the expected benefits of the Pace acquisition and may incur
significant transaction costs and/or unknown liabilities; the strong U.S. Dollar may adversely impact our international customer’s ability
or willingness to purchase products and the pricing of our products; regulatory changes, including changes in tax laws, could negatively
affect our business and/or results from operations; ARRIS is dependent upon customer decisions to purchase the Company’s products -
these decisions can be deferred and customers also may select competitor products; and because the market in which ARRIS operates
is volatile and actions taken and contemplated may not achieve the desired impact. Other factors that could cause results to differ
materially from current expectations include: the uncertain current global economic climate and financial markets, and their impact on
our customers’ plans and access to capital; the impact of rapidly changing technologies; the impact of competition on product
development and pricing; the ability of ARRIS to react to changes in general industry and market conditions; rights to intellectual
property and the current trend toward increasing patent litigation, market trends and the adoption of industry standards; possible
acquisitions and dispositions; the impact of pending M&A transactions within both the customer and supplier base, including the
proposed acquisition of Time Warner by Charter, the proposed acquisition by Frontier Communications of several properties owned by
Verizon, and the proposed acquisition of Cablevision by Altice. These factors are not intended to be an all-encompassing list of risks
and uncertainties that may affect the Company’s business. Additional information regarding these and other factors can be found in
ARRIS’ reports filed with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the period
ended December 31, 2015. In providing forward-looking statements, the Company expressly disclaims any obligation to update publicly
or otherwise these statements, whether as a result of new information, future events or otherwise, except as required by law.
Copyright 2016 – ARRIS International plc. All rights reserved. 16 March 2016 ARRIS 2016 Investor Day 1
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Organic and Inorganic Investments Driving Revenue
8,000 ARRIS acquires ARRIS acquires 6,800
ARRIS Motorola Home Pace
Revenue History 7,000 6,600
($M)
6,000 5,323
4,798
5,000
3,621
4,000
3,000
2,000 1,145 1,108 1,088 1,089 1,354
991
1,000 680 892
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
ARRIS 700
~600
R&D Investments 600 557
534
($M) 500
426
400
300
200 171
141 147
113 125
100 60 66 71
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E
Copyright 2016 – ARRIS International plc. All rights reserved. 16 March 2016 ARRIS 2016 Investor Day 2
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ARRIS Profile
NETWORK
& CLOUD
CMTS / CCAP
VIDEO SYSTEMS
ACCESS TECHNOLOGIES
CLOUD
GLOBAL SERVICES
Any Delivery Network
IP: Optical, DOCSIS, or DSL
HFC or Satellite
CUSTOMER PREMISES EQUIPMENT
CABLE STB/GW
TELCO STB/GW
CABLE BROADBAND
TELCO BROABAND
SATELLITE STB
$3.136M – 65% Revenue 53% share of 2015 DOI(1)
$1.661M – 35% Revenue ARRIS 2015 standalone 47% share of 2015 DOI(1)
| (1) |
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Excludes corporate costs |
Copyright 2016 – ARRIS International plc. All rights reserved. 16 March 2016 ARRIS 2016 Investor Day 3
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Closed January 4, 2016
Significant accretion
Increased scale
Enhanced Product Portfolio
Expanded International Presence
Significant Satellite Market Position
Integration Underway
– Tax planning on track
– Customer facing organizations complete
– Product overlap review in process
– Corporate functions in process
– Substantial completion first half 2016
– Cost of sales synergies throughout 2016
– Anticipate some share concentration / revenue dis-synergy
On track for (~$135M) OPEX synergies in year, (~$200M) annualized exit rate and
(~$75M) COGS synergies in year
Copyright 2016 – ARRIS International plc. All rights reserved. 16 March 2016 ARRIS 2016 Investor Day
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Full Year 2016 Estimates
Year over Year
2015 2016 Growth
Revenue $4,798M $6,600M – $6,800M 37.6% — 41.7%
Non-GAAP EPS $2.16(1) $2.45 – $2.60(1) 13.4% — 20.4%
Adjusted EBITDA $598(2) $810— $840(2) 35.5% — 40.5%
Strong track record of purposeful and successful investments
Circuit
DOCSIS CCAP and IP Switch Cable Voice over CMTS and Adv. Convergence Telephony IP
CPE Cycle Gateways and 4K and DOCSIS
Positioned to accelerate growth with new market opportunities
| (1) |
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See GAAP to Non-GAAP reconciliation (2) See Adjusted EBITDA reconciliations |
Copyright 2016 – ARRIS International plc. All rights reserved. 16 March 2016 ARRIS 2016 Investor Day
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2016 U.S. Goals
$4.6B+ revenue for ARRIS U.S. business, managing some share erosion and dis-synergies driven by post Pace acquisition concentration
ARRIS and service providers working together in 2016 on next generation architectures for 2017 deployment: cloud DVR, fiber deep, WiFi refresh
ARRIS with deployments and trials for work force management tools and device management to help service providers improve customer service
Maintain and strengthen retail channels for broadband products. Monitor retail opportunity for video devices.
16 March 2016 ARRIS 2016 Investor Day
Copyright 2016 – ARRIS International plc. All rights reserved. 16 March 2016 ARRIS 2016 Investor Day
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Capital Structure, post Pace Acquisition
DEBT POST CLOSE ($M)
Revolver 0
Term Loan A (LIBOR + 1.75%; 5% amortization per year) 965
Term Loan A-1 (LIBOR + 1.75%; 5% amortization per year) 800
Term Loan B (LIBOR(1) + 2.50%; no amortization) 544
Total Debt 2,309
Estimated Debt / LTM EBITDA ~ 2.5x
LIQUIDITY
~$500M of cash resources target
~$500M undrawn Revolver availability
SHARES POST CLOSE (Shares in M)
Shares outstanding pre close 147.5
Shares issued to former Pace shareholders 47.7
Shares outstanding post close 195.2
Dilutive Effect of equity-based awards 3.0
Total dilutive shares outstanding post close 198.2(2)
Cost effective debt structure Modest leverage
Maintains significant capital structure flexibility New credit facility underwritten by existing bank group
| (1) |
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Subject to LIBOR floor of 0.75% (2) Share count prior to buyback |
Copyright 2016 – ARRIS International plc. All rights reserved. 16 March 2016 ARRIS 2016 Investor Day
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2016 Estimated Ranges
Revenues expected to improve as the year goes on
– Target of $6,600M—$6,800M
OPEX and Cost of Goods improvements expected to gain momentum through 2016
Share Count of ~196M for the year
Non-GAAP EPS expected to improve as the year goes on;
– Target $2.45—$2.60 per share; GAAP of $(0.26)—$(0.11) per share(1)
Robust Adjusted EBITDA
– $810M -$840M Adjusted EBITDA (2)
| (1) |
|
See GAAP to Non-GAAP reconciliation (2) See Adjusted EBITDA reconciliation |
Copyright 2016 – ARRIS International plc. All rights reserved. 16 March 2016 ARRIS 2016 Investor Day
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Estimated Cost Synergies
Cost of Goods Sold
Target ~$75M in year savings over and above normal cost reductions
Near term component pricing efficiencies
Leverage combined volume and simplify supplier base
Leverage internal factories
OPEX
Target ~$135M of in year savings from combined pre deal exit run rate
Costs reduce through 2016 resulting in a lower exit run rate heading into 2017
Public company costs, personnel overlap, program rationalization
Copyright 2016 – ARRIS International plc. All rights reserved. 16 March 2016 ARRIS 2016 Investor Day
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Taxes
2016 Non GAAP Tax Rate of ~25%
– Intercompany leverage inserted at close
Expanding our international activities which should result in incremental rate reduction opportunities over time
Cash taxes lower in the near term as we utilize tax assets
– Anticipate ~$65M cash tax savings in 2016 from deferred tax assets
$55M of U.S. withholding tax as a result of the Pace acquisition
Copyright 2016 – ARRIS International plc. All rights reserved. 16 March 2016 ARRIS 2016 Investor Day
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Capital Allocation Priorities
Ensure Liquidity and Flexibility:
– ~$500M of cash resources target
– ~$500M revolver (undrawn)
Share Repurchases:
– Opportunistically repurchase—have repurchased 6.4M shares for $150M in Q1 2016
– Offset employee equity grants; ~3M shares
M&A:
– Remains core part of our strategy
Debt Repayment and Dividends lower priorities
Copyright 2016 – ARRIS International plc. All rights reserved. 16 March 2016 ARRIS 2016 Investor Day
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2016 Estimated GAAP to NON GAAP EPS Reconciliation
Gaap eps
Equity compensation (net of tax)
Intangible amortization (net of tax)
Restructuring/integration/other (net of tax)
u.s. withholding tax related to Pace acquisition
inventory margin adjustment (net of tax)
adjusted (Non GAAP) EPS
Note: all adjustments are preliminary estimates
$(0.26)—$(0.11)
0.26
1.51
0.37
0.28
0.29
$2.45—$2.60
Copyright 2016 – ARRIS International plc. All rights reserved. 16 March 2016 ARRIS 2016 Investor Day
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2016 Estimated EBITDA Reconciliation
Estimated net loss $(50)M—$(20)M
Add back of interest, taxes, depreciation and amortization of intangible assets 620
Equity compensation 70
Integration, acquisition, restructuring and other costs 95
Inventory adjustment 75
Adjusted EBITDA $810M—$840M
Note: all adjustments are preliminary estimates
Copyright 2016 – ARRIS International plc. All rights reserved. 16 March 2016 ARRIS 2016 Investor Day
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2015 EBITDA Reconciliation
(In Millions)
Net income as reported 92
Income Tax Expense 23
Interest Income (2)
Interest Expense 50
Amort of Def Finance Fees 6
Depreciation 72
Amort of Intangibles 227
EBITDA 468
Adjustments:
Equity Compensation 64
Integration, acquisition, restructuring and other costs 29
Debt amendment fees 15
Credit facility—ticking fees 2
FX losses related to cash consideration of Pace acquisition 22
Liability/adjustment related to foreign tax credit benefits (4)
Loss on sale of building 5
Noncontrolling interest share of adjustments (3)
Adjusted EBITDA 598
Copyright 2016 – ARRIS International plc. All rights reserved. 16 March 2016 ARRIS 2016 Investor Day
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