Ubiquiti Networks Reports Record Second Quarter Financial Results

~ Achieves Record Revenue and Earnings

~~ Posts Non-GAAP EPS of $0.48 Per Diluted Share

06 Feb, 2014, 16:30 ET from Ubiquiti Networks, Inc.

SAN JOSE, Calif., Feb. 6, 2014 /PRNewswire/ -- Ubiquiti Networks, Inc. (NASDAQ: UBNT) ("Ubiquiti") today announced results for the second fiscal quarter of 2014, ended December 31, 2013.

Second Quarter Financial Highlights

  • Revenues of $138.4 million, up 85% year-over-year
  • GAAP net income of $41.8 million, up 135% year-over-year
  • Non-GAAP operating profitability of $48.5 million, up 131% year-over-year
  • GAAP Diluted EPS of $0.47, up 135% year-over-year and non-GAAP diluted EPS of $0.48
  • Average days sales outstanding (DSOs) declined slightly to 24 days, the lowest in the company's history
  • $27.6 million in net cash provided by operating activities

Second Quarter Business and Product Highlights

  • Publicly launched Ubiquiti World Network, an alliance of independent Internet Service Providers, and initiated a supporting nationwide advertising and marketing campaign.
  • Announced U.S. Distribution Agreement with Ingram Micro, showing that Ubiquiti's technology addresses a critical segment important to large tech distributors.

Service Provider Technology:

  • Introduced significant updates to its next-generation airMAX®, airFiber™ and EdgeMAX™ products.

Enterprise Technology:

  • UniFi™ Platform Revenues grew by more than 200% from last quarter according to Gartner Research.
  • Ubiquiti's Golden AP was found in Brazil, commemorating UniFi's one millionth access point sold.

"We continue to expand our business," said Robert J. Pera, Founder, Chief Executive Officer and Executive Chairman of Ubiquiti Networks.  "In our second quarter, we laid important groundwork to enhance our long term growth.  This included the hiring of key engineering talent which we expect will ramp our pace of innovation, took steps to reduce supply constraints experienced in recent quarters, and formally rolled out our Ubiquiti World Network, which we believe will create powerful network effects supporting our customer's businesses, and in turn creating new and sustainable demand for our products."

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

Financials

F2Q14

F1Q14

F2Q13

Revenues

138.4

129.7

74.9

    Service Provider

111.4

94.2

68.2

    Enterprise

27

35.5

6.7

Cost of Revenues

77.5

71.7

44.4

Gross Profit

61

58

30.5

Total Operating Expenses

13.9

12.1

10.4

Income from Operations

47.1

45.9

20.1

Non-GAAP EPS (diluted)

0.48

0.46

0.2

Business Outlook Based on current business trends, Ubiquiti currently believes the demand environment in its end markets supports the following forecast for the Company's third fiscal quarter ending March 31, 2014:

  • Revenues of between $138 million and $144 million
  • GAAP Diluted EPS of between $0.46 and $0.50
  • Non-GAAP Diluted EPS of between $0.47 and $0.51

Conference Call Ubiquiti Networks will host a Q&A-only conference call to discuss the Company's financial results at 2:00 p.m. PT today. A transcript of management's prepared remarks can be found on the Investor Relations section of Ubiquiti Networks' website, http://www.ubnt.com/.

To listen to the Q&A-only conference 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. 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-only conference call by visiting the Investor Relations section of Ubiquiti Networks' website.

The playback 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 Ubiquiti Networks' website.

About Ubiquiti Networks Ubiquiti Networks (NASDAQ: UBNT) is closing the digital divide by building network communication platforms for everyone and everywhere.  With over 10 million devices deployed in over 180 countries, Ubiquiti is transforming under-networked businesses and communities.  Our leading edge platforms, airMAX™, UniFi™, airFiber™, airVision™, mFi™ and EdgeMAX™ combine innovative technology, disruptive price 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, the Ubiquiti logo, Ubiquiti Networks, airMAX, UniFi, airFiber, airVision, mFi and EdgeMAX are registered trademarks or trademarks of Ubiquiti Networks, Inc. and/or its affiliates in the United States and other countries.

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 recurring costs, expenses and gains such as stock based compensation expense and the tax effects of these non-GAAP adjustments.  Reconciliations of the adjustments to GAAP results for the three and six months ended December 31, 2013 and 2012 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, the 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. 

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.

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 anticipated healthy and strong demand, growth prospects, expected product launches and new updates, market positioning, potential of new technology platforms, effect of anti-counterfeit manufacturing processes, short and long term opportunities, revenues, GAAP diluted EPS and non-GAAP diluted EPS forecasts for the Company's fiscal quarter ending March 31, 2014, 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, distributors' inventory management practices and general economic conditions; 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 and 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, 2013 and other 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 Ubiquiti Networks' Investor Relations Department, or by email at IR@ubnt.com or Ubiquiti Networks' Investor Relations website at www.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.  Ubiquiti Networks undertakes no obligation to update information contained in this press release.  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

(In thousands, except per share data)

(Unaudited)

Three Months Ended December 31,

Six Months Ended December 31,

2013

2012

2013

2012

Revenues

$138,439

$74,901

$268,126

$136,436

Cost of revenues

77,468

44,416

149,132

80,931

Gross profit

60,971

30,485

118,994

55,505

Operating expenses:

Research and development

8,077

5,052

14,394

9,763

Sales, general and administrative

5,774

5,314

11,584

9,848

Total operating expenses

13,851

10,366

25,978

19,611

Income from operations

47,120

20,119

93,016

35,894

Interest expense and other, net

(249)

(197)

(495)

(283)

Income before provision for income taxes

46,871

19,922

92,521

35,611

Provision for income taxes

5,079

2,119

10,201

4,629

Net income

$41,792

$17,803

$82,320

$30,982

Net income per share of common stock:

Basic

$0.48

$0.20

$0.94

$0.35

Diluted

$0.47

$0.20

$0.92

$0.34

Weighted average shares used in computing

 net income per share of common stock:

Basic

87,661

88,094

87,536

89,532

Diluted

89,653

90,056

89,593

91,493

Cash dividends declared per common share

$—

$0.18

$—

$0.18

 

Ubiquiti Networks Inc.

Reconciliation of GAAP Net Income to Non-GAAP Net Income

(In thousands, except per share data)

(Unaudited)

Three Months Ended December 31,

Six Months Ended December 31,

2013

2012

2013

2012

Net income

$41,792

$17,803

$82,320

$30,982

Stock-based compensation:

Cost of revenues

148

104

292

185

Research and development

553

401

1,049

667

Sales, general and administrative

721

388

1,248

697

Tax effect of non-GAAP adjustments

(569)

(357)

(1,036)

(620)

Non-GAAP net income

$42,645

$18,339

$83,873

$31,911

Non-GAAP diluted EPS

$0.48

$0.20

$0.94

$0.35

Weighted-average shares used in non-GAAP diluted EPS

89,653

90,056

89,593

91,493

 

Ubiquiti Networks Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

December 31, 2013

June 30, 2013(1)

Assets

Current assets:

Cash and cash equivalents

$305,553

$227,826

Accounts receivable, net

36,809

35,884

Inventories

32,323

15,880

Current deferred tax asset

733

733

Prepaid income taxes

2,799

Prepaid expenses and other current assets

4,425

3,151

Total current assets

382,642

283,474

Property and equipment, net

6,793

5,976

Long-term deferred tax asset

4

4

Other long–term assets

3,105

2,886

Total assets

$392,544

$292,340

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$49,688

$36,187

Customer deposits

3,930

5,123

Deferred revenues

898

691

Income taxes payable

1,257

Debt - short-term

5,642

5,013

Other current liabilities

12,953

11,150

Total current liabilities

73,111

59,421

Long-term taxes payable

13,380

11,857

Debt - long-term

68,006

71,116

Deferred revenues - long-term

3,017

2,510

Total liabilities

157,514

144,904

Stockholders' equity:

Common stock

88

87

Additional paid–in capital

140,255

134,982

Treasury stock

(123,864)

(123,864)

Retained earnings

218,551

136,231

Total stockholders' equity

235,030

147,436

Total liabilities and stockholders' equity

$392,544

$292,340

(1)    Derived from audited consolidated statements as of and for the year ended June 30, 2013.

Ubiquiti Networks Inc.

Revenues by Product Type

(in thousands)

(Unaudited)

Three Months Ended December 31,

Six Months Ended December 31,

2013

2012

2013

2012

Service provider technology

$111,454

$68,170

$205,671

$119,787

Enterprise technology

26,985

6,731

62,455

16,649

Total revenues

$138,439

$74,901

$268,126

$136,436

 

 

Ubiquiti Networks Inc.

Revenues by Geographical Area

(In thousands)

(Unaudited)

Three Months Ended December 31,

Six Months Ended December 31,

2013

2012

2013

2012

North America

$32,567

$12,106

$70,000

$32,467

South America

27,992

17,081

48,768

27,324

Europe, the Middle East and Africa

58,842

35,929

111,708

59,073

Asia Pacific

19,038

9,785

37,650

17,572

Total revenues

$138,439

$74,901

$268,126

$136,436

 

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 recurring costs, expenses and gains.

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 recurring 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 and/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 recurring stock-based compensation expense and the tax effect of these adjustments.  Examples of items excluded from net income are:

  • Recurring charges and gains, including:
    • Stock-based compensation expense is recognized in accordance with FASB Accounting Standards Codification, Topic 718, Stock Compensation.
  • Tax effect of non-GAAP adjustments. After adjusting to exclude the items described above, we apply the principles of ASC 740, Income Taxes, to estimate the non-GAAP income tax provision.

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.

Contact: Mary Zimmerman - IR@ubnt.com

SOURCE Ubiquiti Networks, Inc.



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