Ubiquiti Networks Reports Second Quarter Fiscal 2016 Financial Results

~ Achieves Record Revenue and Earnings ~ ~ Non-GAAP Diluted EPS of $0.58 Per Share ~

SAN JOSE, Calif., Feb. 04, 2016 -- Ubiquiti Networks, Inc. (UBNT) (“Ubiquiti”) today announced results for the second fiscal quarter of 2016, ended December 31, 2015.

Second Quarter Fiscal 2016 Financial Summary

  • Revenues of $161.9 million
  • GAAP gross profit of $79.0 million and non-GAAP gross profit of $79.1 million
  • GAAP net income of $49.5 million and non-GAAP net income of $49.7 million
  • GAAP diluted EPS of $0.57 and non-GAAP diluted EPS of $0.58
  • Cash of $496.7 million, up 28% year-over-year and 14% sequentially
  • $77.3 million in net cash provided by operating activities

Recent Financial Highlights

  • Enterprise Technology revenues increased 9% quarter-over-quarter, fueled by UniFi® AC access points, UniFi Switch and other industry-leading products targeting the Enterprise market.
  • Service Provider Technology revenues increased 6% quarter-over-quarter, primarily fueled by our airMAX® technology platform.
  • Completed $50 million stock repurchase plan as of February 3, 2016.


Recent Product Highlights

  • Shipped in volume UniFi AC access points which feature the latest Wi-Fi 802.11ac technology in a refined industrial design and are ideal for cost-effective deployment of high‑performance wireless networks.
  • Released EdgePoint, an innovative combination of robust routing performance, fiber backhaul capability, and the convenience of passive PoE support.
  • Shipped LiteBeam, an ultra-lightweight airMAX ac CPE device with incredible range and disruptive pricing.
  • Shipped UniFi Cloud Key, a hybrid cloud device manager that securely runs a local instance of the UniFi Controller software and features cloud Single Sign-On for remote access.


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

Income statement highlights   F2Q16   F1Q16   F2Q15
Revenues     161.9       151.4       153.1  
Service Provider Technology     109.6       103.4       99.7  
Enterprise Technology     52.3       48.0       53.4  
Cost of Revenues     82.8       77.9       84.1  
Gross Profit     79.0       73.5       69.0  
Gross Profit (%)     48.8 %     48.5 %     45.1 %
Total Operating Expenses(1)     22.6       13.7       18.3  
Income from Operations     56.4       59.8       50.7  
GAAP Net Income     49.5       53.8       46.3  
GAAP EPS (diluted)     0.57       0.61       0.52  
Non-GAAP Net Income     49.7       45.5       47.1  
Non-GAAP EPS (diluted)     0.58       0.51       0.53  
(1)  Includes business e-mail compromise (“BEC”) fraud loss recoveries of $8.0 million and $257 thousand in F1Q16 and F2Q16, respectively.
 


Balance Sheet Highlights

Total cash and cash equivalents as of December 31, 2015 were $496.7 million, compared with $436.1 million as of September 30, 2015.  We held $476.9 million of our $496.7 million of cash and cash equivalents in accounts of our subsidiaries outside of the United States.

The sequential increase in cash and cash equivalents during the second quarter of fiscal 2016 is net of $36.7 million in share repurchases as part of our $100 million share repurchase program which has been extinguished, partially offset by draws of $33 million on our revolver.  Effective November 6, 2015, the Board of Directors of the Company approved a $50 million stock repurchase program.  The full $50 million common stock repurchase program was completed subsequent to the close of second quarter of fiscal 2016.

This quarter we saw days sales outstanding in accounts receivable ("DSO") of 37 days, compared with 39 days in the prior quarter, and 44 days in the second quarter of fiscal 2015.


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 third fiscal quarter ending March 31, 2016.  The following are Ubiquiti’s financial performance estimates for the third quarter of fiscal 2016:

  • Revenues between $160 million and $170 million
  • GAAP diluted EPS of $0.52 - $0.59
  • Non-GAAP diluted EPS of $0.53 - $0.60


Conference Call Information

Ubiquiti Networks will host a Q&A-only call to discuss the Company’s financial results at 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) 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 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 (UBNT) is closing the digital divide by building network communication platforms for everyone and everywhere. With over 34 million devices sold worldwide, Ubiquiti is transforming under-networked enterprises and communities. Our leading edge platforms, airMAX®, UniFi®, airFiber®, UniFi® Video, mFi® and EdgeMAX®, combine innovative technology, disruptive price-to-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, Ubiquiti Networks, the U logo, UBNT, airMAX, UniFi, airFiber, mFi, EdgeMAX and sunMAX are registered trademarks or trademarks of Ubiquiti Networks, Inc. in the United States and other countries.

The Ubiquiti Networks, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=24865


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 related to our cash position, expenses, 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, 2015, 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, 2015, 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 This email address is being protected from spambots. You need JavaScript enabled to view it. 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, reserve against vendor deposits relating to a purchase commitment termination fee 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, 2015 and 2014 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.
Condensed Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited)
    Three Months Ended December 31,   Six Months Ended December 31,
      2015       2014       2015       2014  
Revenues     $   161,871         $   153,137     $   313,286     $   303,224  
Cost of revenues         82,830       84,116       160,741       173,152  
Gross profit     79,041       69,021       152,545       130,072  
Operating expenses:                    
Research and development     15,429       12,936       28,990       24,657  
Sales, general and administrative     7,433       5,362       15,575       11,058  
Business e-mail compromise ("BEC") fraud loss/(recovery)       (257 )           (8,291 )      
Total operating expenses     22,605       18,298       36,274       35,715  
Income from operations     56,436       50,723         116,271       94,357  
Interest expense and other, net     (651 )     17         (767 )     (41 )
Income before provision for income taxes     55,785       50,740       115,504       94,316  
Provision for income taxes     6,333       4,475         12,293       10,308  
Net income     $   49,452         $   46,265     $   103,211     $   84,008  
Net income per share of common stock:                    
Basic     $   0.58         $   0.52     $   1.20     $   0.95  
Diluted     $   0.57         $   0.52     $   1.18     $   0.94  
Weighted average shares used in computing net income per
share of common stock:
                   
Basic     84,724       88,196       85,893       88,218  
Diluted     86,091       89,737       87,285       89,838  
                                 

 

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,
      2015       2014       2015       2014  
Net income   $   49,452     $   46,265     $   103,211     $   84,008  
Stock-based compensation:                
Cost of revenues       114       150       227       299  
Research and development     580       864        1,204       1,689  
Sales, general and administrative     263       417       553        815  
Purchase commitment termination fee                  —       5,500  
Business e-mail compromise ("BEC") fraud loss/(recovery)       (257 )            (8,291 )      —  
Implementation of overhead capitalization     (50 )      —        (994 )      
Tax effect of non-GAAP adjustments     (377 )      (572 )      (674 )      (1,781 )
Total Non-GAAP adjustments   $ 273     $ 859     $ (7,975 )   $ 6,522  
Non-GAAP net income   $   49,725     $   47,124     $   95,236     $   90,530  
Non-GAAP diluted EPS   $   0.58     $   0.53     $   1.09     $   1.01  
Weighted-average shares used in non-GAAP diluted EPS     86,091       89,737       87,285       89,838  
                                 

 

Ubiquiti Networks Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
(Unaudited)
         
    December 31, 2015     June 30, 2015(1)  
Assets            
Current assets:            
Cash and cash equivalents   $ 496,672     $ 446,401  
Accounts receivable, net   64,568     66,104  
Inventories   33,105     37,031  
Vendor deposits   15,620     19,998  
Current deferred tax asset   1,535     1,535  
Prepaid income taxes       2,566  
Prepaid expenses and other current assets   8,440     7,711  
Total current assets   619,940     581,346  
Property and equipment, net   13,359     15,602  
Long-term deferred tax asset   1,538     1,515  
Other long–term assets   1,918     2,109  
Total assets   $ 636,755     $  600,572  
                 
Liabilities and Stockholders’ Equity            
Current liabilities:            
Accounts payable   $ 42,600     $ 43,856  
Income taxes payable     1,739       1,108  
Debt - short-term     10,000       10,000  
Other current liabilities   16,217     15,170  
Total current liabilities   70,556     70,134  
Long-term taxes payable   22,129     19,810  
Debt - long-term   115,500     87,500  
Deferred revenues - long-term   1,003     974  
Total liabilities   209,188     178,418  
Stockholders’ equity:            
Common stock   85     87  
Additional paid–in capital        
Treasury stock        
Retained earnings   427,482     422,067  
Total stockholders’ equity   427,567     422,154  
Total liabilities and stockholders’ equity   $ 636,755     $ 600,572  
   
(1)  Derived from audited consolidated statements as of and for the year ended June 30, 2015.  
   

 

Ubiquiti Networks Inc.
Revenue by Product Category
(In thousands)
(Unaudited)
 
    Three Months Ended December 31,   Six Months Ended December 31,  
    2015     2014   2015     2014  
Service Provider Technology   $ 109,616     $ 99,720   $ 213,015     $ 206,991  
Enterprise Technology   52,255     53,417   100,271     96,233  
Total revenues   $ 161,871     $ 153,137   $ 313,286     $ 303,224  
                               

 

Ubiquiti Networks Inc.
Revenue by Geographical Area
(In thousands)
(Unaudited)
 
    Three Months Ended December 31,   Six Months Ended December 31,
        2015         2014       2015         2014  
North America   $     57,133       $   54,127     $   110,367       $   107,708  
South America       23,795         22,241       45,943         53,376  
Europe, the Middle East and Africa       60,973         60,097       121,476         110,704  
Asia Pacific       19,970         16,672       35,500         31,436  
Total revenues   $     161,871       $   153,137     $   313,286       $   303,224  
                                       


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
  • Reserve against vendor deposits relating to a purchase commitment termination fee
  • 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.

Contact:
Investor Relations Contact

Anne Fazioli
Ubiquiti Networks, Vice President of Investor Relations
This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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