~Revenues of $282.9 million and GAAP EPS of
$1.16~
~Initiated new $200 million Stock Repurchase
Program~
Ubiquiti Networks, Inc. (NASDAQ:UBNT) (“Ubiquiti" or the
"Company”) today announced results for the first quarter fiscal
2019, ended September 30, 2018.
First Quarter Fiscal 2019 Financial
Highlights
- Revenues of $282.9 million, increasing
15.1% year-over-year
- GAAP diluted EPS of $1.16, increasing
26.1% year-over-year
- Non-GAAP diluted EPS of $1.17,
increasing 27.2% year-over-year
Additional Highlights
- From July 1, 2018 through November 7,
2018, the Company repurchased and retired 3,260,811 shares of
common stock for $293.4 million at an average price of $89.97 per
share.
- Initiated a new stock repurchase
program, authorizing the Company to repurchase up to $200 million
of its common stock, as disclosed in the Form 8-K filed on
November 9, 2018.
- The Company's Board of Directors
declared a $0.25 per share cash dividend payable on November 26,
2018 to shareholders of record at the close of business on November
19, 2018.
Financial Highlights ($, in millions, except per share
data)
Income statement highlights F1Q19
F4Q18 F1Q18 Revenues 282.9 269.8 245.9 Service
Provider Technology 105.0 105.9 119.9 Enterprise Technology 177.9
163.8 126.0 Gross profit 131.6 120.5 111.7 Gross Profit (%) 46.5%
44.7% 45.4% Total Operating Expenses 32.0 32.4 24.6 Income from
Operations 99.6 88.1 87.1 GAAP Net Income 85.7 70.1 74.9 GAAP EPS
(diluted) 1.16 0.94 0.92 Non-GAAP Net Income 86.2 74.8 74.9
Non-GAAP EPS (diluted) 1.17 1.01 0.92
Ubiquiti Networks, Inc.Revenues
by Product Type (In thousands) (Unaudited)
Three Months Ended September 30,
2018 2017 Service Provider Technology $
104,957 $ 119,915 Enterprise Technology 177,948 125,953
Total revenues $ 282,905 $ 245,868
Ubiquiti Networks, Inc.Revenues
by Geographical Area(In thousands)(Unaudited)
Three Months Ended September 30, 2018 2017
North America $ 119,371 $ 96,170 South America 14,176 31,053
Europe, the Middle East and Africa 124,931 93,314 Asia Pacific
24,427 25,331 Total revenues $ 282,905 $ 245,868
Income Statement Items
Gross Margins
During the first quarter fiscal 2019, GAAP gross profit was
$131.6 million. This GAAP gross margin of 46.5% increased versus
the prior year GAAP gross margin of 45.4% and the prior quarter
GAAP gross margin of 44.7%.
We expect to incur costs as a result of recently-announced
tariffs on certain products imported into the U.S. from China and
therefore we anticipate near-term gross margins to range between
42% and 45%. However, we anticipate mitigating the effect of the
tariffs in the long-term and therefore our long-term gross margins
are expected to remain between 45% to 50%.
Research and Development
During the first quarter fiscal 2019, research and development
(R&D) expenses were $18.2 million. This reflects an increase
versus the prior year R&D expenses of $16.9 million and a
decrease versus the prior quarter R&D expenses of $19.5
million.
Increased costs in first quarter fiscal 2019 versus the prior
year were primarily driven by higher staffing levels. R&D
expenses represented 6.4% of revenues in the first fiscal quarter
2019, which is in line with the Company’s target model range of 6%
to 8%.
Sales, General and Administrative
The Company’s selling, general and administrative (“SG&A”)
expenses for the quarter were $13.8 million. This reflects an
increase versus both the prior year SG&A expenses of $7.7
million and the prior quarter SG&A expenses of $12.9 million.
The increase in SG&A costs are primarily related to
professional fees. SG&A expenses represented 4.9% of revenues
in the first quarter fiscal 2019, which is in line with the
Company’s target model range of 3% to 5%.
Taxes
The GAAP effective tax rate was 11.7% for the first quarter
fiscal 2019. For long-term planning purposes, we assume a target
effective tax rate of 11% to 14%.
Net Income
During the first quarter fiscal 2019, GAAP net income was $85.7
million and GAAP income per diluted share was $1.16. Non-GAAP net
income during the quarter was $86.2 million and non-GAAP income per
diluted share was $1.17. The 15.1% increase in non-GAAP net income,
and 27.2% increase in non-GAAP diluted EPS was driven primarily by
a 15.1% increase in revenues versus the prior year as well as a 7.2
million reduction in non-GAAP diluted share count.
Balance Sheet Items
Cash and Investments
Total cash, cash equivalents and investments as of September 30,
2018 were $625.5 million, compared with $666.7 million as of June
30, 2018. During the first quarter fiscal 2019, the Company
repurchased 1,238,163 shares of common stock for $112.8 million at
an average price of $91.07 per share and held $200.0 million in
investments.
DSOs
This quarter the Company experienced a decline in days sales
outstanding in accounts receivable (“DSO”) to 54 days, compared
with 59 days in the fourth fiscal 2018 quarter. The Company expects
DSO’s to increase 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 distributors to
purchase higher volumes of products on credit terms allows them to
shorten the cash conversion cycle and has helped enable Ubiquiti to
significantly expand its market share while maintaining a
conservative customer credit profile.
Inventory
Ubiquiti continues to manage inventory levels to reduce lead
times and 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. Finished
goods inventory at the end of the quarter increased $38.2 million
to $134.9 million, primarily driven by the timing of production and
expected growth in demand. The Company expects to hold 8 to 12
weeks of previously introduced product inventory in warehouses
going forward, in addition to new product inventory and selected
raw materials.
Cash Flow Statement
Items
The Company’s net cash flow from operations for the first
quarter fiscal 2019 was $93.9 million, compared with a net cash
flow from operations of $96.9 million for the first quarter fiscal
2018. The $3.0 million decrease in operating cash flow during
fiscal 2019 as compared with fiscal 2018 was driven by increased
investments in inventory, partially offset by higher operating
earnings. Capital expenditures and purchase of intangibles for the
first quarter fiscal 2019 were $4.0 million. The Company used
$131.7 million of cash related to financing activities, which was
driven by $106.7 million in stock repurchases, $18.5 million in
cash dividend payments and $6.3 million in debt repayments.
Outlook
Based on recent business trends, the Company believes that it
will achieve the guidance previously provided for the full fiscal
year ending June 30, 2019.
About Ubiquiti Networks
Ubiquiti Networks is focused on democratizing network technology
on a global scale — aggregate shipments of nearly 85 million
devices play a key role in creating networking infrastructure in
over 200 countries and territories around the world. Our
professional networking products are powered by our UNMS and UniFi
software platforms to provide high-capacity distributed Internet
access and unified information technology management,
respectively.
Ubiquiti, Ubiquiti Networks, the U logo, UBNT, airMAX, airFiber,
mFi, EdgeMAX, UniFi, UNMS, AmpliFi and UFiber are registered
trademarks or trademarks of Ubiquiti Networks, Inc. in the United
States and other countries. For more information, please visit
www.ubnt.com.
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
expectations for financial results for the full fiscal year 2019,
and statements regarding expectations of the impact of tariffs,
expected impact of taxes on our liquidity and results of
operations, our cash position, expenses, DSOs, number of
distributors and resellers, shipments, the introduction of new
consumer products, 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 and GAAP diluted EPS for
the Company's full fiscal year 2019, 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,
the impact of U.S. tariffs on results, 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, 2018, 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.
Ubiquiti Networks, Inc.Condensed
Consolidated Statement of Operations and Comprehensive
Income(In thousands, except per share
data)(Unaudited)
Three Months Ended September 30, 2018
2017 Revenues $ 282,905 $ 245,868 Cost of revenues 151,299
134,212 Gross profit 131,606 111,656
Operating expenses: Research and development 18,222 16,928 Sales,
general and administrative 13,766 7,665 Total
operating expenses 31,988 24,593 Income from
operations 99,618 87,063 Interest expense and other, net (2,527 )
(1,361 ) Income before income taxes 97,091 85,702 Provisions for
income taxes 11,388 10,777 Net income $ 85,703
$ 74,925 Net income per share of common stock: Basic $ 1.16
$ 0.93 Diluted $ 1.16 $ 0.92 Weighted
average shares used in computing net income per share of common
stock: Basic 73,774 80,135 Diluted 73,963
81,748 Other comprehensive income (loss): Unrealized
(loss) on available-for-sale securities $ (146 ) $ —
Comprehensive income $ 85,557 $ 74,925
Ubiquiti Networks,
Inc.Reconciliation of GAAP Net Income to Non-GAAP Net
Income(In thousands, except per share
data)(Unaudited)
Three Months Ended
September 30,2018
June 30, 2018
September 30,2017
Net Income $ 85,703 $ 70,085 $ 74,925 Stock-based compensation:
Cost of revenues 33 36 245 Research and development 467 520 456
Sales, general and administrative 275 228 211 Net Tax Benefits
related to Equity Awards Exercises and Vesting — 50 (575 ) SEC
Related Matters — 492 — Tax Reform Transition Tax — 3,774 — Tax
effect of Non-GAAP adjustments (240 ) (396 ) (365 ) Non-GAAP net
income $ 86,238 $ 74,789 $ 74,897 Non-GAAP
diluted EPS $ 1.17 $ 1.01 $ 0.92 Shares
outstanding (Diluted) 73,963 74,307 81,748 Share adjustment (ASU
2016-09 Adoption) — (50 ) (616 ) Weighted-average shares
used in Non-GAAP diluted EPS 73,963 74,257 81,132
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, net tax benefits
related to equity awards exercises and vesting, the SEC related
inquiry, Tax Reform Transition Tax and the tax effects of these
non-GAAP adjustments.
Reconciliations of the adjustments to GAAP results for the
periods presented are provided above. 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 the paragraphs below.
A reconciliation of non-GAAP guidance measures to corresponding
GAAP measures is not available on a forward-looking basis due to
the high variability and low visibility with respect to the charges
which are excluded from these non-GAAP measures. For example,
share-based compensation expense is impacted by the Company’s
future price at which the Company’s stock will trade in those
future periods. The items that are being excluded are difficult to
predict and a reconciliation could result in disclosure that would
be imprecise or potentially misleading. Material changes to any one
of these items could have a significant effect on our guidance and
future GAAP results. Certain exclusions, such as share-based
compensation expenses, are generally incurred each quarter, but the
amounts have historically and may continue to vary significantly
from quarter to quarter.
About our Non-GAAP Net Income and
Non-GAAP Earnings per Diluted Share
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
- Net Tax Benefits related to Equity
Awards Exercises and Vesting
- SEC related matters
- Tax Reform Transition Tax
- 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.
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.
Ubiquiti Networks, Inc.Condensed
Consolidated Balance Sheets(In thousands, except share
amounts)(Unaudited)
September 30, 2018 June 30, 2018
(1) Assets Current assets: Cash and cash equivalents
$ 480,812 $ 666,681 Investments — short-term 96,266 — Accounts
receivable, net 165,294 174,521 Inventories 139,926 102,220 Vendor
deposits 33,045 39,029 Prepaid expenses and other current assets
16,403 18,901 Total current assets 931,746 1,001,352
Property and equipment, net 13,471 14,328 Deferred tax assets —
long-term 3,106 3,106 Investments — long-term 48,445 — Other
long-term assets 6,729 3,791 Total assets $ 1,003,497
$ 1,022,577
Liabilities and Stockholders’ Equity Current
liabilities: Accounts payable $ 43,071 $ 14,098 Income taxes
payable 23,982 5,780 Debt — short-term 24,425 24,425 Other current
liabilities 60,682 68,613 Total current liabilities
152,160 112,916 Income taxes payable — long-term 119,122 127,719
Debt — long-term 454,253 460,352 Other long-term liabilities 7,323
5,842 Total liabilities 732,858 706,829 Stockholders’
equity: Common Stock 73 74 Additional paid–in capital — 393
Accumulated other comprehensive income (loss) (146 ) — Retained
earnings 270,712 315,281 Total stockholders’ equity 270,639
315,748 Total liabilities and stockholders’ equity $
1,003,497 $ 1,022,577
(1) Derived from audited consolidated financial statements as of
and for the year ended June 30, 2018.
Ubiquiti Networks, Inc.Condensed
Consolidated Cash Flows(In
thousands)(Unaudited)
Three Months Ended September 30, 2018
2017 Cash Flows from Operating Activities: Net income
$ 85,703 $ 74,925 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
1,794 1,591 Amortization of debt issuance costs 281 64 Premium
amortization and (discount accretion), net (127 ) — Provision for
inventory obsolescence 252 324 Provision/(recovery) for loss on
vendor deposits (855 ) 376 Stock-based compensation 775 912 Other,
net (21 ) 103 Changes in operating assets and liabilities: Accounts
receivable 9,287 12,017 Inventories (37,948 ) 19,421 Vendor
deposits 6,838 (15,836 ) Prepaid income taxes — 4 Prepaid expenses
and other assets 2,393 1,288 Accounts payable 29,086 (22,408 )
Income taxes payable 9,605 7,061 Deferred revenues 3,306 1,376
Accrued and other liabilities (16,428 ) 15,702 Net cash
provided by operating activities 93,941 96,920
Cash Flows from Investing Activities: Purchase of property
and equipment and other long-term assets (4,035 ) (2,932 ) Purchase
of investments (147,934 ) — Proceeds from sale of investments 3,850
— Net cash (used in) investing activities (148,119 )
(2,932 )
Cash Flows from Financing Activities: Proceeds from
borrowing under the Amended Credit Facility- Revolver — 45,000
Repayment against Amended Credit Facility- Term — (3,750 )
Repayment against Second Amended & Restated Facility- Term
(6,250 ) — Repurchases of common stock (106,764 ) (107,997 )
Payment of common stock cash dividends (18,506 ) — Proceeds from
exercise of stock options 194 722 Tax withholdings related to net
share settlements of restricted stock units (365 ) (351 ) Net cash
(used in) financing activities (131,691 ) (66,376 ) Net (decrease)
increase in cash and cash equivalents (185,869 ) 27,612 Cash and
cash equivalents at beginning of period 666,681 604,198
Cash and cash equivalents at end of period $ 480,812
$ 631,810
Supplemental Disclosure of Cash Flow
Information: Income taxes paid, net of refunds $ 1,929 $ 3,524
Interest paid $ 8,204 $ 1,792
Non-Cash Investing and Financing
Activities: Unpaid stock repurchases $ 6,000 $ 8,765 Unpaid
property and equipment and other long-term assets $ 30 $ 178 Unpaid
investment purchases $ 646 $ —
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181109005247/en/
Investor Relations:Ubiquiti
Networks, Inc.Laura Kiernan, 1-914-598-7733SVP, Investor
Relationslaura.kiernan@ubnt.com
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