~ Achieves Record Revenue ~
Ubiquiti Networks, Inc. (NASDAQ:UBNT) (“Ubiquiti” or the “Company”)
today announced results for the second fiscal quarter of 2017 ended
December 31, 2016.
Second Quarter Fiscal 2017 Financial
Summary
- Revenues of $213.5 million, increasing 32% year-over-year
- GAAP gross profit of $95.1 million and non-GAAP gross profit of
$95.2 million
- GAAP net income of $60.6 million and non-GAAP net income of
$60.1 million
- GAAP and non-GAAP diluted EPS of $0.72
- Cash of $612.7 million
Recent Financial Highlights
- Revenues increased 32% year-over-year and 4%
sequentially, primarily driven by robust demand for the
Company’s UniFi product family and increasing demand for new
offerings for the Ubiquiti service provider community.
- Enterprise Technology revenues increased 87%
year-over-year and 16%
sequentially, primarily fueled by the continued adoption
of the Company’s UniFi AC access points, UniFi Switch, UniFi Video
and other industry-leading products targeting the Enterprise
market. Enterprise revenues also benefitted from strong
initial sales of the Company’s new consumer products, including the
AmpliFi HD Mesh Router and AmpliFi HD MeshPoints.
- Service Provider Technology revenues increased 5%
year-over-year, primarily driven by demand for new
offerings for the Ubiquiti service provider community.
- Gross margin of 45% was negatively impacted by
product mix and discrete expedited shipping charges to provide U.S.
availability of the Company’s AmpliFi products during the 2016
holiday season.
- Non-GAAP diluted EPS increased 24%
year-over-year, demonstrating the continued scalability of
Ubiquiti’s unique business model, while Ubiquiti’s 28% net income
margin continues to trend well above industry averages of less than
20%.
Recent Product Highlights
- Launched UniFi AC HD, the highest performance
access point in the industry at the best value.
- Expanded the UniFi Switch Portfolio,
introducing the US-16-XG, US-8-60W and US-8 and enabling Ubiquiti’s
rapidly growing base of enterprise customers to manage the core to
the edge of their wired networks.
- Released AirOS 8.0, providing complete
compatibility between airMAX ac and airMAX devices.
- Expanded the AmpliFi product family with the
introduction of AmpliFi HD MeshPoint from Ubiquiti Labs.
- Introduced UCRM, free software for Ubiquiti’s
service provider customers that streamlines billing and customer
management.
Financial Results Summary ($, in millions, except per
share data)
Income statement highlights |
|
F2Q17 |
|
F1Q17 |
|
F2Q16 |
Revenues |
|
213.5 |
|
|
204.8 |
|
|
161.9 |
|
Service
Provider Technology |
|
115.6 |
|
|
120.6 |
|
|
109.6 |
|
Enterprise Technology |
|
98.0 |
|
|
84.1 |
|
|
52.3 |
|
Gross Profit |
|
95.1 |
|
|
98.3 |
|
|
79.0 |
|
Gross
Profit (%) |
|
44.6 |
% |
|
48.0 |
% |
|
48.8 |
% |
Total Operating
Expenses |
|
25.3 |
|
|
23.4 |
|
|
22.6 |
|
Income from
Operations |
|
69.8 |
|
|
74.9 |
|
|
56.4 |
|
GAAP Net Income |
|
60.6 |
|
|
71.8 |
|
|
49.5 |
|
GAAP EPS (diluted) |
|
0.72 |
|
|
0.86 |
|
|
0.57 |
|
Non-GAAP Net
Income |
|
60.1 |
|
|
65.5 |
|
|
49.7 |
|
Non-GAAP
EPS (diluted) |
|
0.72 |
|
|
0.79 |
|
|
0.58 |
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Highlights
Total cash and cash equivalents as of December 31, 2016 were
$612.7 million, compared with $573.6 million as of September 30,
2016. We held $572.7 million of cash and cash equivalents in
accounts of the Company’s subsidiaries outside of the United
States.
This quarter we experienced an increase in days sales
outstanding in accounts receivable ("DSO") to 50 days, compared
with 43 days in the prior quarter. DSO’s have increased over
time and we expect this increase to continue as the mix of the
Company’s distributors evolves toward larger volumes of products
moving through large distributors who qualify for credit
terms. Enabling these customers to purchase higher volumes of
products on credit terms allows them to shorten the cash conversion
cycle and has helped enable the Company to significantly expand its
market share while maintaining a conservative customer credit
profile.
The Company has invested in inventory to reduce customer lead
times, meet increasing demand and support the commensurate growth
of the Company’s customers. The Company is committed to
optimizing inventory to correspond with end-market demand.
During F2Q17, the Company continued to invest in inventory.
Inventory at the end of the quarter was $104.4 million, up $24.6
million from F1Q17. The Company expects to hold 8 to 12 weeks
of previously introduced product inventory in warehouses going
forward.
Business Outlook
Based on recent business trends, the Company believes the demand
environment in its end markets supports the following forecast for
the Company's third fiscal quarter ending March 31, 2017. The
following are the Company’s financial performance estimates for the
third quarter of fiscal 2017:
- Revenues between $210 million and $220 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 5:00 p.m. Eastern Time (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) Conference ID:
52655989. 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, Inc. (Nasdaq:UBNT) eliminates barriers to
connectivity for under-networked enterprises, communities and
consumers with its leading-edge platforms that connect hundreds of
millions of people throughout the world. With over 60 million
devices sold worldwide, through a network of over 100 distributors,
to customers in more than 180 countries and territories, Ubiquiti
has maintained an industry-leading financial profile by leveraging
a unique business model to develop products that combine innovative
technology with disruptive price-to-performance
characteristics. Our growth is supported by the Ubiquiti
Community, a global grass-roots community of 4 million
entrepreneurial operators and systems integrators who engage in
thousands of forums. For more information, join our community
at http://www.ubnt.com.
Ubiquiti, Ubiquiti Networks, the U logo, UBNT, airMAX, UniFi,
airFiber, mFi, EdgeMAX and AmpliFi 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 December 31, 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
December 31, 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 and six month periods
ended December 31, 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 December 31, |
|
Six Months Ended December 31, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Revenues |
|
$ |
213,536 |
|
|
$ |
161,871 |
|
|
$ |
418,293 |
|
|
$ |
313,286 |
|
Cost of revenues |
|
118,397 |
|
|
82,830 |
|
|
224,850 |
|
|
160,741 |
|
Gross profit |
|
95,139 |
|
|
79,041 |
|
|
193,443 |
|
|
152,545 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Research
and development |
|
16,338 |
|
|
15,429 |
|
|
30,877 |
|
|
28,990 |
|
Sales,
general and administrative |
|
9,001 |
|
|
7,433 |
|
|
17,864 |
|
|
15,575 |
|
Business
e-mail compromise (“BEC”) fraud loss/(recovery) |
|
— |
|
|
(257 |
) |
|
— |
|
|
(8,291 |
) |
Total operating
expenses |
|
25,339 |
|
|
22,605 |
|
|
48,741 |
|
|
36,274 |
|
Income from
operations |
|
69,800 |
|
|
56,436 |
|
|
144,702 |
|
|
116,271 |
|
Interest expense and
other, net |
|
(1,170 |
) |
|
(651 |
) |
|
(2,269 |
) |
|
(767 |
) |
Income before provision
for income taxes |
|
68,630 |
|
|
55,785 |
|
|
142,433 |
|
|
115,504 |
|
Provision for income
taxes |
|
8,022 |
|
|
6,333 |
|
|
10,037 |
|
|
12,293 |
|
Net income and
comprehensive income |
|
$ |
60,608 |
|
|
$ |
49,452 |
|
|
$ |
132,396 |
|
|
$ |
103,211 |
|
Net income per share of
common stock: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.74 |
|
|
$ |
0.58 |
|
|
$ |
1.61 |
|
|
$ |
1.20 |
|
Diluted |
|
$ |
0.72 |
|
|
$ |
0.57 |
|
|
$ |
1.58 |
|
|
$ |
1.18 |
|
Weighted average shares
used in computing net income per share of common stock: |
|
|
|
|
|
|
|
|
Basic |
|
82,169 |
|
|
84,724 |
|
|
81,990 |
|
|
85,893 |
|
Diluted |
|
83,888 |
|
|
86,091 |
|
|
83,875 |
|
|
87,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ubiquiti Networks, Inc. |
Reconciliation of GAAP Net Income to Non-GAAP Net
Income |
(In thousands, except per share data) |
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
Six Months Ended December 31, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Net income and
comprehensive income |
|
$ |
60,608 |
|
|
$ |
49,452 |
|
|
$ |
132,396 |
|
|
$ |
103,211 |
|
Stock-based
compensation: |
|
|
|
|
|
|
|
|
Cost of
revenues |
|
30 |
|
|
114 |
|
|
174 |
|
|
227 |
|
Research
and development |
|
381 |
|
|
580 |
|
|
941 |
|
|
1,204 |
|
Sales,
general and administrative |
|
155 |
|
|
263 |
|
|
378 |
|
|
553 |
|
Business e-mail
compromise (“BEC”) fraud loss/(recovery) |
|
— |
|
|
(257 |
) |
|
— |
|
|
(8,291 |
) |
Excess tax benefits
resulting from the adoption of ASU 2016-09 Stock Compensation |
|
(860 |
) |
|
— |
|
|
(7,680 |
) |
|
— |
|
Implementation of
overhead capitalization |
|
— |
|
|
(50 |
) |
|
— |
|
|
(994 |
) |
Tax effect of Non-GAAP
adjustments |
|
(227 |
) |
|
(377 |
) |
|
(598 |
) |
|
(674 |
) |
Non-GAAP net
income |
|
$ |
60,087 |
|
|
$ |
49,725 |
|
|
$ |
125,611 |
|
|
$ |
95,236 |
|
Non-GAAP diluted
EPS |
|
$ |
0.72 |
|
|
$ |
0.58 |
|
|
$ |
1.51 |
|
|
$ |
1.09 |
|
|
|
|
|
|
|
|
|
|
Shares outstanding
(Diluted) |
|
83,888 |
|
|
86,091 |
|
|
83,875 |
|
|
87,285 |
|
Share adjustment (ASU
2016-09 Adoption) |
|
(654 |
) |
|
— |
|
|
(715 |
) |
|
— |
|
Weighted-average shares
used in Non-GAAP diluted EPS |
|
83,234 |
|
|
86,091 |
|
|
83,160 |
|
|
87,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ubiquiti Networks, Inc. |
Consolidated Balance Sheets |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016 |
|
June 30, 2016(1) |
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
612,725 |
|
|
$ |
551,031 |
|
Accounts
receivable, net |
|
115,816 |
|
|
82,790 |
|
Inventories |
|
104,417 |
|
|
57,113 |
|
Vendor
Deposits |
|
37,068 |
|
|
30,255 |
|
Prepaid
income taxes |
|
5,378 |
|
|
299 |
|
Prepaid
expenses and other current assets |
|
11,188 |
|
|
6,896 |
|
Total
current assets |
|
886,592 |
|
|
728,384 |
|
Property and equipment,
net |
|
12,622 |
|
|
12,953 |
|
Long-term deferred tax
assets |
|
4,195 |
|
|
4,195 |
|
Other long-term
assets |
|
2,029 |
|
|
1,576 |
|
Total assets |
|
$ |
905,438 |
|
|
$ |
747,108 |
|
Liabilities and
Stockholders’ Equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts
payable |
|
$ |
77,571 |
|
|
$ |
51,510 |
|
Income
taxes payable |
|
1,576 |
|
|
1,488 |
|
Debt -
short-term |
|
13,493 |
|
|
10,993 |
|
Other
current liabilities |
|
26,638 |
|
|
26,672 |
|
Total
current liabilities |
|
119,278 |
|
|
90,663 |
|
Long-term taxes
payable |
|
25,289 |
|
|
23,202 |
|
Debt - long-term |
|
184,194 |
|
|
191,564 |
|
Deferred revenues -
long-term |
|
2,071 |
|
|
1,303 |
|
Total liabilities |
|
330,832 |
|
|
306,732 |
|
Stockholders’
equity: |
|
|
|
|
Common
stock |
|
82 |
|
|
82 |
|
Additional paid–in capital |
|
1,834 |
|
|
— |
|
Retained
earnings |
|
572,690 |
|
|
440,294 |
|
Total stockholders’
equity |
|
574,606 |
|
|
440,376 |
|
Total
liabilities and stockholders’ equity |
|
$ |
905,438 |
|
|
$ |
747,108 |
|
|
|
|
|
|
|
|
|
|
(1) Derived from audited consolidated statements as of
June 30, 2016.
|
Ubiquiti Networks, Inc. |
Revenues by Technology Platform (In
thousands) |
(Unaudited) |
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
Six Months Ended December 31, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Service provider
technology |
|
$ |
115,580 |
|
|
$ |
109,616 |
|
|
$ |
236,212 |
|
|
$ |
213,015 |
|
Enterprise
technology |
|
97,956 |
|
|
52,255 |
|
|
182,081 |
|
|
100,271 |
|
Total
revenues |
|
$ |
213,536 |
|
|
$ |
161,871 |
|
|
$ |
418,293 |
|
|
$ |
313,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ubiquiti Networks, Inc. |
Revenues by Region (In thousands) |
(Unaudited) |
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
Six Months Ended December 31, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
North
America |
|
$ |
94,609 |
|
|
$ |
57,402 |
|
|
$ |
168,774 |
|
|
$ |
110,636 |
|
South
America |
|
19,285 |
|
|
23,526 |
|
|
43,469 |
|
|
45,674 |
|
Europe, the
Middle East and Africa (EMEA) |
|
77,381 |
|
|
60,973 |
|
|
158,756 |
|
|
121,476 |
|
Asia
Pacific |
|
22,261 |
|
|
19,970 |
|
|
47,294 |
|
|
35,500 |
|
Total revenues |
|
$ |
213,536 |
|
|
$ |
161,871 |
|
|
$ |
418,293 |
|
|
$ |
313,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 earnings per diluted
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
Laura Kiernan
SVP Investor Relations
Ubiquiti Networks
laura.kiernan@ubnt.com
Ph. 1-646-461-2769 x2016
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