IM Ingram Micro Inc. (delisted)

Ubiquiti Networks, Inc. (UBNT) reported strong second-quarter fiscal 2014 results with non-GAAP earnings of 48 cents per share, exceeding the Zacks Consensus Estimate of 44 cents and the prior-year quarter earnings of 2 cents. The company reported non-GAAP net income of $42.6 million compared with $18.3 million in the year-ago quarter, reflecting an increase of 132.5%.

On a GAAP basis, Ubiquiti’s net income came in at $41.8 million, an increase of 135% year over year; whereas earnings per share rose to 46 cents from 20 cents in the prior-year quarter.

Growth in the company’s core business primarily drove the earnings. Ubiquiti’s consistent focus on expanding services by increasing investments in innovation and development was a key growth driver. Management’s executive abilities and the opportunities in the enterprise business also contributed to the strong results.

Revenues

Ubiquiti’s total revenue surged 84.8% year over year and 6.7% sequentially to $138.4 million. The growth was driven by increased transaction volumes and addition of new services for existing customers. Additionally, strong performances from the Enterprise Technology segment contributed to top-line growth. Revenues beat the Zacks Consensus Estimate of $132 million by 4.8%.

Segment Performance

Service Provider Technology segment’s sales increased 63.5% year over year to $111.4 million driven by strong performance in all its business including airMAX, airFiber and EdgeMAX businesses.

Enterprise Technology segment’s sales reflected a phenomenal increase of 301.0% year over year, reaching the figure to $27.0 million. The improvement was driven by a significant sales increase in its UniFi platform business.

Income and Expenses

The company reported operating income of $47.1 million compared with $20.1 million in the prior-year quarter. Gross margins also increased to 44.7% from 40.7% in the year-earlier quarter.

The company’s research and development expenses were $8.1 million, up 59.9% year over year from $5.0 million, while sales, general and administration expenses stood at $5.8 million versus $5.3 million in the prior-year quarter.

Balance Sheet and Cash Flow

Cash and cash equivalents were $305.5 million at quarter-end compared with $227.8 million at the end of Jun 30, 2013. The company reported total equity of $235.0 million against $147.4 million at the end of Jun 30, 2013. The company’s long-term debt fell 4.4% in the last six months to $71.1 million.

The cash flow from operating activities for the quarter aggregated $27.6 million.

Outlook

Along with the earnings release, management provided guidance for the third quarter of fiscal 2014. Revenues for the third quarter of fiscal 2014 are expected to be in the range of $138–$144 million.

The company expects non-GAAP income per share to be between 47 cents and 51 cents, while the GAAP earnings are expected to lie in the 46–50 cents band.

Business Update

Last month, the company launched Ubiquiti World Network (UWN), a wireless Internet platform for the public and also signed a distribution agreement with Ingram Micro Inc (IM) for augmenting the company’s marketing efforts in the U.S.

UWN is a consortium of independent Internet service providers (ISP) across the globe. It was designed to provide the ISPs with a unified platform to foster growth and innovation in the wireless industry while catering to consumer’s needs.

Ingram Micro is a leading technology distributor with its network spanning the globe. Ingram will be responsible for expanding the market for Ubiquiti while also enhancing its presence in the existing markets.

Other Stocks to Consider

Ubiquiti currently carries a Zacks Rank #3 (Hold). Some better–ranked stocks operating in the same sector worth reckoning include ShoreTel, Inc. (SHOR) which carries a Zacks Rank #1 (Strong Buy) and Nokia Corp. (NOK) having a Zacks Rank #2 (Buy).

 
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UBIQUITI NETWRK (UBNT): Free Stock Analysis Report
 
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