~ Achieves Record Revenue and Earnings
~
Ubiquiti Networks, Inc. (NASDAQ:UBNT) (“Ubiquiti” or the “Company”)
today announced results for the first fiscal quarter of 2017, ended
September 30, 2016.
First Quarter Fiscal 2017 Financial
Summary
- Revenues of $204.8 million
- GAAP gross profit of $98.3 million and non-GAAP gross profit of
$98.4 million
- GAAP net income of $71.8 million and non-GAAP net income of
$65.5 million
- GAAP diluted EPS of $0.86 and non-GAAP diluted EPS of
$0.79
- Cash of $573.6 million, up 32% year-over-year
Recent Financial Highlights
- Revenues increased 35% year-over-year and 10%
sequentially, as a result of strong demand worldwide
across all of our product lines.
- Enterprise Technology revenues increased 75%
year-over-year and 10%
sequentially, fueled by the UniFi product family and other
industry-leading products targeting the Enterprise market.
- Service Provider Technology revenues increased 17%
year-over-year and 11% sequentially, fueled by the airMAX
product family and EdgeMAX product lines.
- Non-GAAP diluted EPS increased 55% year-over-year and
14% sequentially, demonstrating the continued scalability
of Ubiquiti’s unique business model.
Recent Product Highlights
- Announced a retail partnership with Amazon,
focusing on our popular AmpliFi HD router and AmpliFi Mesh Points
from Ubiquiti Labs.
- Experienced strong demand for our UniFi Switch
products, and an expansion of this product line to include
new UniFi Switch 24-Port and 48-Port models.
- Launched UniFi Mesh technology, a powerful
multi-hop, self-healing mesh product line that expands the
application of UniFi's industry leading software-defined-networking
platform into wide-area Wi-Fi deployments.
- Announced EdgePower, which provides reliable
DC power to the EdgePoint EP-R8 and EP-S16 devices and their
attached PoE devices.
- Experienced strong demand for our UniFi Video
products, our plug and play, high-performance IP
surveillance devices that scale easily across multiple
locations.
Financial Results Summary ($, in millions, except per
share data)
Income statement highlights |
|
F1Q17 |
|
F4Q16 |
|
F1Q16 |
Revenues |
|
|
204.8 |
|
|
|
185.7 |
|
|
|
151.4 |
|
Service Provider
Technology |
|
|
120.6 |
|
|
|
109.0 |
|
|
|
103.4 |
|
Enterprise
Technology |
|
|
84.1 |
|
|
|
76.7 |
|
|
|
48.0 |
|
Gross Profit |
|
|
98.3 |
|
|
|
89.8 |
|
|
|
73.5 |
|
Gross Profit
(%) |
|
|
48.0 |
% |
|
|
48.3 |
% |
|
|
48.5 |
% |
Total Operating
Expenses |
|
|
23.4 |
|
|
|
24.1 |
|
|
|
13.7 |
|
Income from
Operations |
|
|
74.9 |
|
|
|
65.6 |
|
|
|
59.8 |
|
GAAP Net Income |
|
|
71.8 |
|
|
|
57.7 |
|
|
|
53.8 |
|
GAAP EPS (diluted) |
|
|
0.86 |
|
|
|
0.69 |
|
|
|
0.61 |
|
Non-GAAP Net
Income |
|
|
65.5 |
|
|
|
58.2 |
|
|
|
45.5 |
|
Non-GAAP
EPS (diluted) |
|
|
0.79 |
|
|
|
0.69 |
|
|
|
0.51 |
|
Balance Sheet Highlights
Total cash and cash equivalents as of September 30, 2016 were
$573.6 million, compared with $551.0 million as of June 30,
2016. We held $530.2 million of our $573.6 million of cash
and cash equivalents in accounts of our subsidiaries outside of the
United States.
This quarter we saw days sales outstanding in accounts
receivable ("DSO") of 43 days, compared with 41 days in the prior
quarter and 39 days in the first quarter of fiscal 2016.
We are committed to keeping our inventory optimized and in-line
with end market demand. During the first quarter of fiscal
2017 we invested heavily in inventory. Our inventory balance
at the end of the quarter was $79.8 million, up from $57.1 million
in the prior quarter. We have increased our inventory balance
to compensate for reduced inventory in our distribution channel and
to reduce our lead times. We expect to hold 7 to 9 weeks of
previously introduced product inventory in our warehouses going
forward.
Business Outlook
Based on recent business trends, Ubiquiti currently believes the
demand environment in its end markets supports the following
forecast for the Company's second fiscal quarter ending December
31, 2016. The following are Ubiquiti’s financial performance
estimates for the second quarter of fiscal 2017:
- Revenues between $200 million and $210 million
- GAAP diluted EPS of $0.72 - $0.78
- Non-GAAP diluted EPS of $0.73 - $0.79
Conference Call Information
Ubiquiti Networks will host a Q&A-only call to discuss the
Company’s financial results at 2:00 p.m. Pacific Time today.
Management’s prepared remarks can be found on the Investor
Relations section of the Ubiquiti Networks website,
http://ir.ubnt.com/results.cfm.
To listen to the Q&A call via telephone, dial (877) 291-1296
(U.S. toll-free) or (720) 259-9209 (International) to be connected
to the call by an operator. The conference ID number is
91377240. Participants should dial in at least 10 minutes
prior to the start of the call. Investors may also listen to
a live webcast of the Q&A conference call by visiting the
Investor Relations section of the Ubiquiti Networks website at
http://ir.ubnt.com.
A recording of the Q&A call will be available approximately
two hours after the call concludes and will be accessible on the
Investor Relations section of the Ubiquiti Networks website,
http://ir.ubnt.com.
About Ubiquiti Networks
Ubiquiti Networks (Nasdaq:UBNT) is closing the digital divide by
building network communication platforms for everyone and
everywhere. With over 38 million devices sold worldwide,
Ubiquiti is transforming under-networked enterprises and
communities. Our leading edge platforms, airMAX®, UniFi®,
airFiber®, UniFi® Video, mFi® and EdgeMAX®, combine innovative
technology, disruptive price-to-performance and the support of a
global user community to eliminate barriers to connectivity.
For more information, join our community at
http://www.ubnt.com.
Ubiquiti, Ubiquiti Networks, the U logo, UBNT, airMAX, UniFi,
airFiber, mFi, EdgeMAX and sunMAX are registered trademarks or
trademarks of Ubiquiti Networks, Inc. in the United States and
other countries.
Safe Harbor for Forward Looking Statements
Certain statements in this press release are forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. Statements other than statements of
historical fact including words such as “look”, "will",
“anticipate”, “believe”, “estimate”, “expect”, "forecast",
“consider” and “plan” and statements in the future tense are
forward looking statements. The statements in this press
release that could be deemed forward-looking statements include
statements regarding our expectations for our financial results for
the fiscal quarter ended September 30, 2016 and statements
regarding expectations related to our cash position, expenses, DSO,
number of distributors and resellers, Gross Margins, R&D,
SG&A, tax rates, inventory turns, growth opportunities, demand
and long term global environment for our products, new products,
and financial performance estimates including revenues, GAAP
diluted EPS and non-GAAP diluted EPS for the Company's fiscal
quarter ending September 30, 2016, and any statements or
assumptions underlying any of the foregoing.
Forward-looking statements are subject to certain risks and
uncertainties that could cause our actual future results to differ
materially, or cause a material adverse impact on our
results. Potential risks and uncertainties include, but are
not limited to, fluctuations in our operating results; varying
demand for our products due to the financial and operating
condition of our distributors and their customers, and
distributors' inventory management practices; political and
economic conditions and volatility affecting the stability of
business environments, economic growth, currency values, commodity
prices and other factors that may influence the ultimate demand for
our products in particular geographies or globally; impact of
counterfeiting and our ability to contain such impact; our reliance
on a limited number of distributors; inability of our contract
manufacturers and suppliers to meet our demand; our dependence on
Qualcomm Atheros for chipsets without a short-term alternative; as
we move into new markets competition from certain of our current or
potential competitors who may be more established in such markets;
our ability to keep pace with technological and market
developments; success and timing of new product introductions by us
and the performance of our products generally; our ability to
effectively manage the significant increase in our transactional
sales volumes; we may become subject to warranty claims, product
liability and product recalls; that a substantial majority of our
sales are into countries outside the United States and we are
subject to numerous U.S. export control and economic sanctions
laws; costs related to responding to government inquiries related
to regulatory compliance; our reliance on the Ubiquiti Community;
our reliance on certain key members of our management team,
including our founder and chief executive officer, Robert J. Pera;
adverse tax-related matters such as tax audits, changes in our
effective tax rate or new tax legislative proposals; whether the
final determination of our income tax liability may be materially
different from our income tax provisions; the impact of any
intellectual property litigation and claims for indemnification;
litigation related to U.S. Securities laws; and economic and
political conditions in the United States and abroad. We
discuss these risks in greater detail under the heading “Risk
Factors” and elsewhere in our Annual Report on Form 10-K for the
year ended June 30, 2016, and subsequent filings filed with
the U.S. Securities and Exchange Commission (the “SEC”), which are
available at the SEC's website at www.sec.gov. Copies may
also be obtained by contacting the Ubiquiti Networks Investor
Relations Department, by email at IR@ubnt.com or by visiting the
Investor Relations section of the Ubiquiti Networks website,
http://ir.ubnt.com.
Given these uncertainties, you should not place undue reliance
on these forward-looking statements. Also, forward-looking
statements represent our management's beliefs and assumptions only
as of the date made. Except as required by law, Ubiquiti
Networks undertakes no obligation to update information contained
herein. You should review our SEC filings carefully and with
the understanding that our actual future results may be materially
different from what we expect.
Use of Non-GAAP Financial Information
To supplement our condensed consolidated financial results
prepared under generally accepted accounting principles, or GAAP,
we use non-GAAP measures of net income and earnings per diluted
share that are adjusted to exclude certain costs, expenses and
gains such as stock based compensation expense, Business e-mail
compromise ("BEC") fraud loss/(recovery), implementation of
overhead capitalization, the adoption of ASU 2016-09 Improvements
to Employee Share-Based Payments Accounting and the tax effects of
these non-GAAP adjustments. Reconciliations of the
adjustments to GAAP results for the three months ended September
30, 2016 and 2015 are provided below. In addition, an
explanation of the ways in which management uses non-GAAP financial
information to evaluate its business, the substance behind
management's decision to use this non-GAAP financial information,
material limitations associated with the use of non-GAAP financial
information, the manner in which management compensates for those
limitations, and the substantive reasons management believes that
this non-GAAP financial information provides useful information to
investors is included under "About our Non-GAAP Net Income and
Adjustments" after the tables below.
Ubiquiti Networks Inc.Consolidated
Statement of Operations(In thousands, except per
share data)(Unaudited)
|
|
Three Months Ended September 30, |
|
|
2016 |
|
2015 |
Revenues |
|
$ |
204,757 |
|
|
$ |
151,415 |
|
Cost of revenues |
|
106,453 |
|
|
77,911 |
|
Gross profit |
|
98,304 |
|
|
73,504 |
|
Operating expenses: |
|
|
|
|
Research and development |
|
14,539 |
|
|
13,561 |
|
Sales, general and
administrative |
|
8,863 |
|
|
8,142 |
|
Business e-mail compromise ("BEC")
fraud loss/(recovery) |
|
— |
|
|
(8,034 |
) |
Total operating
expenses |
|
23,402 |
|
|
13,669 |
|
Income from
operations |
|
74,902 |
|
|
59,835 |
|
Interest expense and
other, net |
|
(1,099 |
) |
|
(116 |
) |
Income before provision
for income taxes |
|
73,803 |
|
|
59,719 |
|
Provision for income
taxes |
|
2,015 |
|
|
5,960 |
|
Net income and
comprehensive income |
|
$ |
71,788 |
|
|
$ |
53,759 |
|
Net income per share of
common stock: |
|
|
|
|
Basic |
|
$ |
0.88 |
|
|
$ |
0.62 |
|
Diluted |
|
$ |
0.86 |
|
|
$ |
0.61 |
|
Weighted average shares
used in computing net income per share of common stock: |
|
|
|
|
Basic |
|
81,812 |
|
|
87,062 |
|
Diluted |
|
83,854 |
|
|
88,465 |
|
Ubiquiti Networks Inc.Reconciliation of
GAAP Net Income to Non-GAAP Net Income(In
thousands, except per share
data)(Unaudited)
|
|
Three Months Ended September 30, |
|
|
2016 |
|
2015 |
Net income |
|
$ |
71,788 |
|
|
$ |
53,759 |
|
Stock-based
compensation: |
|
|
|
|
Cost of revenues |
|
144 |
|
|
113 |
|
Research and development |
|
560 |
|
|
624 |
|
Sales, general and
administrative |
|
223 |
|
|
290 |
|
Business e-mail compromise
("BEC") fraud loss/(recovery) |
|
— |
|
|
(8,034 |
) |
Excess tax benefits
resulting from the adoption of ASU 2016-09 Stock Compensation |
|
(6,820 |
) |
|
— |
|
Implementation of overhead
capitalization |
|
— |
|
|
(944 |
) |
Tax effect of non-GAAP
adjustments |
|
(371 |
) |
|
(297 |
) |
Non-GAAP net income |
|
$ |
65,524 |
|
|
$ |
45,511 |
|
Non-GAAP diluted EPS |
|
$ |
0.79 |
|
|
$ |
0.51 |
|
|
|
|
|
|
|
|
Shares outstanding
(Diluted) |
|
83,854 |
|
|
88,465 |
|
Share adjustment (ASU
2016-09 Adoption) |
|
(774 |
) |
|
— |
|
Weighted-average shares
used in non-GAAP diluted EPS |
|
83,080 |
|
|
88,465 |
|
Ubiquiti Networks
Inc. Consolidated Balance
Sheets (In thousands, except share
amounts) (Unaudited)
|
|
|
|
|
September 30, |
|
June 30, (1) |
Assets |
|
2016 |
|
2016 |
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
573,644 |
|
|
$ |
551,031 |
Accounts receivable, net |
|
95,728 |
|
|
82,790 |
Inventories |
|
79,841 |
|
|
57,113 |
Vendor Deposits |
|
30,088 |
|
|
30,255 |
Prepaid income taxes |
|
314 |
|
|
299 |
Prepaid expenses and other current
assets |
|
5,987 |
|
|
6,896 |
Total current assets |
|
785,602 |
|
|
728,384 |
Property and equipment,
net |
|
12,520 |
|
|
12,953 |
Long-term deferred tax
assets |
|
4,195 |
|
|
4,195 |
Other long–term
assets |
|
1,656 |
|
|
1,576 |
Total assets |
|
$ |
803,973 |
|
|
$ |
747,108 |
Liabilities and
Stockholders’ Equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
42,540 |
|
|
$ |
51,510 |
Income taxes payable |
|
2,038 |
|
|
1,488 |
Debt - short-term |
|
12,243 |
|
|
10,993 |
Other current liabilities |
|
20,300 |
|
|
26,672 |
Total current liabilities |
|
77,121 |
|
|
90,663 |
Long-term taxes
payable |
|
24,494 |
|
|
23,202 |
Debt - long-term |
|
187,879 |
|
|
191,564 |
Deferred revenues -
long-term |
|
1,498 |
|
|
1,303 |
Total liabilities |
|
290,992 |
|
|
306,732 |
Stockholders’ equity: |
|
|
|
|
|
Common stock |
|
82 |
|
|
82 |
Additional paid–in capital |
|
817 |
|
|
— |
Retained earnings |
|
512,082 |
|
|
440,294 |
Total stockholders’
equity |
|
512,981 |
|
|
440,376 |
Total liabilities and stockholders’
equity |
|
$ |
803,973 |
|
|
$ |
747,108 |
(1) Derived from audited consolidated statements as of
June 30, 2016.
Ubiquiti Networks Inc.Revenues by Product Type (In
thousands) (Unaudited) |
|
|
|
Three Months Ended September
30, |
|
|
|
2016 |
|
2015 |
|
Service
provider technology |
|
$ |
120,632 |
|
$ |
103,399 |
|
Enterprise
technology |
|
84,125 |
|
48,016 |
|
Total revenues |
|
$ |
204,757 |
|
$ |
151,415 |
|
|
|
|
|
|
Ubiquiti
Networks Inc. Revenues by Region (In thousands)
(Unaudited) |
|
|
|
|
Three Months Ended September 30, |
|
|
|
2016 |
|
2015 |
|
North
America |
|
$ |
74,165 |
|
|
$ |
53,234 |
|
South
America |
|
24,184 |
|
|
22,148 |
|
Europe, the
Middle East and Africa (EMEA) |
|
81,375 |
|
|
60,503 |
|
Asia
Pacific |
|
25,033 |
|
|
15,530 |
|
Total revenues |
|
$ |
204,757 |
|
|
$ |
151,415 |
|
About our Non-GAAP Net Income and
Adjustments
Use of Non-GAAP Financial Information
To supplement our condensed consolidated financial results
prepared under generally accepted accounting principles, or GAAP,
we use non-GAAP measures of net income and earnings per diluted
share that are GAAP net income and GAAP earnings per diluted share
adjusted to exclude certain costs, expenses and gains/losses.
We believe that the presentation of non-GAAP net income and
non-GAAP earnings per diluted share provides important supplemental
information regarding non-cash expenses, significant items that we
believe are important to understanding our financial, and business
trends relating to our financial condition and results of
operations. Non-GAAP net income and non-GAAP earnings per
diluted share are among the primary indicators used by management
as a basis for planning and forecasting future periods and by
management and our board of directors to determine whether our
operating performance has met specified targets and
thresholds. Management uses non-GAAP net income and non-GAAP
earnings per diluted share when evaluating operating performance
because it believes that the exclusion of the items described
below, for which the amounts or timing may vary significantly
depending upon the Company's activities and other factors,
facilitates comparability of the Company's operating performance
from period to period. We have chosen to provide this
information to investors so they can analyze our operating results
in the same way that management does and use this information in
their assessment of our business and the valuation of our
Company.
Use and Economic Substance of Non-GAAP Financial
Measures used by Ubiquiti Networks
We compute non-GAAP net income and non-GAAP diluted earnings per
share by adjusting GAAP net income and GAAP earnings per diluted
share to remove the impact of certain adjustments and the tax
effect of those adjustments. Items excluded from net income
are:
- Stock-based compensation expense
- Business e-mail compromise ("BEC") fraud loss/(recovery)
- Implementation of overhead capitalization
- Adoption of ASU 2016-09 Improvements to Employee Share-Base
Payment Accounting
- Tax effect of non-GAAP adjustments, applying the principles of
ASC 740
Usefulness of Non-GAAP Financial Information to
Investors
These non-GAAP measures are not in accordance with, or an
alternative to, GAAP and may be materially different from other
non-GAAP measures, including similarly titled non-GAAP measures
used by other companies. The presentation of this additional
information should not be considered in isolation from, as a
substitute for, or superior to, net income or earnings per diluted
share prepared in accordance with GAAP. Non-GAAP financial
measures have limitations in that they do not reflect certain items
that may have a material impact upon our reported financial
results. We expect to continue to incur expenses of a nature
similar to the non-GAAP adjustments described above, and exclusion
of these items from our non-GAAP net income and non-GAAP earnings
per diluted share should not be construed as an inference that
these costs are unusual, infrequent or non-recurring.
For more information on the non-GAAP adjustments, please see the
table captioned “Reconciliation of GAAP Net Income to Non-GAAP Net
Income” included in this press release.
Investor Relations Contact
Anne Fazioli
Ubiquiti Networks, Vice President of Investor Relations
IR@ubnt.com
Ubiquiti Networks (NASDAQ:UBNT)
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