Market Overview

Ubiquiti Networks Reports First Quarter Fiscal 2018 Financial Results

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~ Achieves Record Revenue and Ninth Consecutive Quarter of Revenue
Growth ~

~ Diluted EPS of $0.92 Per Share ~

Ubiquiti Networks, Inc. (NASDAQ:UBNT) ("Ubiquiti" or the "Company")
today announced results for the first fiscal quarter of 2018, ended
September 30, 2017.

First Quarter Fiscal 2018 Financial Summary

  • Revenues of $245.9 million, increased 20.1% year-over-year
  • GAAP gross profit of $111.7 million, representing 45.4% of revenues
  • GAAP and non-GAAP net income of $74.9 million
  • GAAP and non-GAAP diluted EPS of $0.92

First Quarter Financial Highlights

  • Revenues increased 20.1% year-over-year and 7.6% sequentially.
    Year-over-year growth was primarily driven by the UniFi-AC,
    UniFi-Switch, airMAX-AC, airFiber and AmpliFi platforms.
  • Enterprise Technology revenues increased over 49.8% year-over-year
    and 11% sequentially
    . Year-over-year growth was driven by the
    evolution toward AC technology products, growth in switching and
    higher average selling prices.
  • GAAP gross margin was 45.4%, consistent with the prior quarter
    but down versus the prior year primarily due to product mix.
  • Days sales outstanding in accounts receivable ("DSO") decreased by
    7 days to 48 days
    , compared with 55 days in the prior quarter
    driven by higher collections.
  • Repurchased 2,751,024 shares of common stock at an average price
    per share of $54.98
    , between July 1 and October 6, 2017.
  • Increased the maximum amount of availability under our revolving
    loan facility to $425 million from $300 million
    , representing an
    increase of $125 million, as disclosed in the Form 8-K filed on
    November 1, 2017.
  • Initiated a new stock repurchase program, authorizing the
    Company to repurchase up to $50 million of its common stock, as
    disclosed in the Form 8-K filed on November 9, 2017.

Recent Product Highlights

  • Launched UniFi AC SHD access points, an 802.11AC Wave 2 MU-MIMO
    access point with a dedicated security radio
    , providing persistent
    threat management combined with the latest Wave 2 technology.
  • Released GPS Sync for airMAX AC, providing for GPS
    synchronization between airMAX AC and airMAX M series equipment.
  • Launched the airCube, a Wi-Fi access points for use by wireless
    internet service providers in residential customer deployments
    ,
    featuring a sleek design, a mobile app and 24V PoE passthrough.
  • Introduced FrontRow, featuring a new camera technology that
    enables effortless capture and sharing of life's experiences. The
    product was launched in mid-August and is available through on-line
    retail including FrontRow.com, Amazon.com, BestBuy.com and through
    traditional retail channels such as BestBuy and Sam's Club.
  • Announced significant updates to Ubiquiti's proprietary UCRM
    software
    , a customer management platform for wireless internet
    service providers, including enhanced billing features and
    multi-language support.
 

Financial Highlights ($, in millions, except per share data)

 
Income statement highlights     F1Q18     F4Q17     F1Q17
Revenues 245.9 228.6 204.8
Service Provider Technology 119.9 114.7 120.6
Enterprise Technology 126.0 114.0 84.1
Gross profit 111.7 103.2 98.3
Gross Profit (%) 45.4% 45.1% 48.0%
Total Operating Expenses 24.6 31.5 23.4
Income from Operations 87.1 71.7 74.9
GAAP Net Income 74.9 60.7 71.8
GAAP EPS (diluted) 0.92 0.74 0.86
Non-GAAP Net Income 74.9 61.0 65.5
Non-GAAP EPS (diluted) 0.92 0.75 0.79
 

Balance Sheet Highlights

Total cash and cash equivalents as of September 30, 2017 were $631.8
million, compared with $604.2 million as of June 30, 2017. The Company
held $597 million of cash and cash equivalents in accounts of the
Company's subsidiaries outside of the United States. Cash and cash
equivalents, less debt (net cash) of $333.9 million decreased $13.7
million sequentially. The sequential decrease in net cash during the
first quarter of fiscal 2018 was primarily driven by the repurchase of
common stock, partially offset by operating earnings.

First quarter fiscal 2018 days sales outstanding in accounts receivable
("DSO") were 48 days, compared with 55 days in the prior quarter, and 43
days in the first quarter of fiscal 2017. DSO's in the current period
declined approximately one week versus the prior quarter, driven
primarily by higher collections.

Ubiquiti continues to invest in inventory to reduce lead times, meet
increasing demand and support the commensurate growth of the Company's
customers. At the same time, the Company is committed to optimizing
inventory to correspond with end-market demand. Inventory at the end of
the quarter decreased $19.8 million to $122.2 million. Consequently,
inventory weeks on hand decreased on a sequential basis to 13 weeks in
the current quarter versus 14 weeks the prior quarter. 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.

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, 2017:

  • Revenues of between $240 million and $250 million;
  • GAAP diluted EPS of $0.85 - $0.92;
  • Gross margins are expected to remain consistent on a sequential basis;
    and
  • An effective tax rate of 13.5%.

Conference Call Information

Ubiquiti Networks will host a Q&A-only call to discuss the Company's
financial results at 11:00 a.m. Eastern Time (8:00 a.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/financial/quarterly-results.

To listen to the Q&A call via telephone, dial (866) 807-9684 (U.S.
toll-free) or (412) 317-5415 (International) to be connected to the call
by an operator. 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 for replay 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. currently focuses on 3 main technologies:
high-capacity distributed Internet access, unified information
technology, and next-gen consumer electronics for home and personal use.
The majority of the company's resources consist of entrepreneurial and
de-centralized R&D teams. Ubiquiti does not employ a traditional direct
sales force, but instead drives brand awareness largely through the
company's user community where customers can interface directly with
R&D, marketing, and support. With over 70 million devices shipped in
over 200 countries and territories in the world, Ubiquiti aims to
connect everyone to everything, everywhere. Ubiquiti was founded by
former Apple engineer Robert Pera in 2005. More insight about the
company management can be found at www.rjpblog.com.

Ubiquiti, Ubiquiti Networks, the U logo, UBNT, airMAX, airFiber, mFi,
EdgeMAX, UniFi, AmpliFi and UFiber 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 expectations for the second fiscal quarter of 2018
and full fiscal year 2018 and statements regarding expectations related
to our cash position, expenses, DSO, number of distributors and
resellers, shipments, the roll-out of our consumer retail channel, 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 second fiscal quarter of 2018 and full fiscal year 2018, 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, 2017, 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

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