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Form 8-K Ubiquiti Networks, Inc. For: Nov 03

November 5, 2015 4:09 PM EST

 


UBIQUITI NETWORKS REPORTS FIRST QUARTER FISCAL 2016 FINANCIAL RESULTS

 ~ Achieves Strong Revenue and Earnings ~

~ Non-GAAP Diluted EPS of $0.51 Per Share ~



SAN JOSE, Calif. Nov. 5, 2015 - Ubiquiti Networks, Inc. (NASDAQ: UBNT) (Ubiquiti) today announced results for the first fiscal quarter of 2016, ended September 30, 2015.


First Quarter Financial Summary


Revenues of $151.4 million

GAAP gross profit of $73.5 million and non-GAAP gross profit of $72.7 million

GAAP net income of $53.8 million and non-GAAP net income of $45.5 million

GAAP diluted EPS of $0.61 and non-GAAP diluted EPS of $0.51

$47.7 million in net cash provided by operating activities


Recent Financial Highlights

 

Enterprise Technology revenues increased 19% quarter-over-quarter, fueled by UniFi® access points and other industry-leading products targeting the Enterprise market

Completed $100 million stock repurchase plan as of October 20, 2015, repurchasing $63.3 million of common stock during the quarter ended September 30, 2015

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 5, 2015


Recent Product Highlights

 

Released the new UniFi AC, four new access points and a redesigned UniFi Controller featuring advanced technology for enterprise, hospitality, and education markets.  In conjunction with this release, we launched an Easy App for UniFi setup

Achieved backwards compatibility for airMAX® AC products through release of beta version of airOS® 8

Obtained DFS certifications for our remaining 802.11n and 802.11ac products, unlocking the full spectrum available to our U.S. WISP operators

Launched UniFi Cloud Key, hybrid cloud device management that securely runs a local instance of the UniFi Controller software and features cloud Single Sign-On for remote access

Announced sunMAX®, a solar solution designed to address the obstacles preventing solar deployment on a global scale

Introduced enhancements to our recently introduced airFiber® X with the airFiber NxN, a thoughtfully engineered MIMO multiplexer designed for the global last-mile wireless industry. With expected range exceeding 200km+ and increased throughput of up to 2Gbps+, airFiber NxN is a technological leap in true long-range, carrier-class, backhaul technology for the world




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


Income statement highlights

 

F1Q16

 

F4Q15

 

F1Q15

Revenues

 

151.4

 

145.3

 

150.1

    Service Provider Technology

 

103.4

 

104.8

 

107.3

    Enterprise Technology

 

48.0

 

40.5

 

42.8

Cost of Revenues

 

77.9

 

79.1

 

89.0

Gross Profit

 

73.5

 

66.1

 

61.0

    Gross Profit (%)

 

48.5%

 

45.5%

 

40.7%

Total Operating Expenses(1)

 

13.7

 

58.8

 

17.4

Income from Operations

 

59.8

 

7.3

 

43.6

GAAP Net Income

 

53.8

 

4.5

 

37.7

GAAP EPS (diluted)

 

0.61

 

0.05

 

0.42

Non-GAAP Net Income

 

45.5

 

44.1

 

43.4

Non-GAAP EPS (diluted)

 

0.51

 

0.50

 

0.48

 

(1)

Includes business e-mail compromise (BEC) fraud loss of $39.1 million in F4Q15 and recovery of $8.0 million in F1Q16.

 


Balance Sheet Highlights


Total cash and cash equivalents as of September 30, 2015 were $436.1 million, compared with $446.4 million as of June 30, 2015.  The slight sequential decrease in cash and cash equivalents during the first quarter of fiscal 2016 is net of $63.3 million in share repurchases as part of our share repurchase program.


This quarter we saw days sales outstanding in accounts receivable ("DSO") of 39 days, compared with 41 days in the prior quarter, and 40 days in the first 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 second fiscal quarter ending December 31, 2015.  The following are Ubiquitis financial performance estimates for the second quarter of fiscal 2016:


Revenues of between $150 million and $160 million

GAAP diluted EPS of $0.48 - $0.55

Non-GAAP diluted EPS of $0.49 - $0.56





Conference Call Information


Ubiquiti Networks will host a Q&A-only call to discuss the Companys financial results at 2:00 p.m. Pacific Time today.  Managements 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 (Nasdaq: UBNT) is closing the digital divide by building network communication platforms for everyone and everywhere. With over 28 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



Investor Relations Contact


Anne Fazioli

Ubiquiti Networks, Vice President of Investor Relations

[email protected]



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 September 30, 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 [email protected] 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 months ended September 30, 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

September 30,

 

 

 

2015

 

 

2014

 

Revenues

 

$

151,415

 

 

$

150,087

 

Cost of revenues

 

77,911

 

 

89,036

 

Gross profit

 

73,504

 

 

61,051

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

13,561

 

 

11,721

 

Sales, general and administrative

 

8,142

 

 

5,696

 

Business e-mail compromise ("BEC") fraud loss/(recovery)

 

(8,034)

 

 

 

Total operating expenses

 

13,669

 

 

17,417

 

Income from operations

 

59,835

 

 

43,634

 

Interest expense and other, net

 

(116)

 

 

(58)

 

\Income before provision for income taxes

 

59,719

 

 

43,576

 

Provision for income taxes

 

5,960

 

 

5,833

 

Net income

 

$

53,759

 

 

$

37,743

 

Net income per share of common stock:

 

 

 

 

 

 

Basic

 

$

0.62

 

 

$

0.43

 

Diluted

 

$

0.61

 

 

$

0.42

 

Weighted average shares used in computing net income per share of common stock:

 

 

 

 

 

 

Basic

 

87,062

 

 

88,240

 

Diluted

 

88,465

 

 

89,913

 

 

 

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,

 

 

 

2015

 

 

2014

 

Net income

 

$

53,759

 

 

$

37,743

 

Stock-based compensation:

 

 

 

 

 

 

 

 

Cost of revenues

 

 

113

 

 

 

149

 

Research and development

 

 

624

 

 

 

825

 

Sales, general and administrative

 

 

290

 

 

 

398

 

Purchase commitment termination fee

 

 

 

 

 

5,500

 

Business e-mail compromise ("BEC") fraud loss/(recovery)

 

 

 (8,034)

 

 

 

 

Implementation of overhead capitalization

 

 

(944)

 

 

 

 

Tax effect of non-GAAP adjustments

 

 

(297)

 

 

 

(1,209)

 

Non-GAAP net income

 

$

45,511

 

 

$

43,406

 

Non-GAAP diluted EPS

 

$

0.51

 

 

$

0.48

 

Weighted-average shares used in non-GAAP diluted EPS

 

 

88,465

 

 

 

89,913

 



 





 

Ubiquiti Networks Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share amounts)

(Unaudited)

 

 

September 30,

2015

 

 

June 30, 

2015

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

436,080

 

 

$

446,401

 

Accounts receivable, net

 

63,585

 

 

66,104

 

Inventories

 

30,694

 

 

37,031

 

Vendor deposits

 

19,052

 

 

19,998

 

Current deferred tax asset

 

1,535

 

 

1,535

 

Prepaid income taxes

 

 

 

2,566

 

Prepaid expenses and other current assets

 

13,641

 

 

7,711

 

Total current assets

 

564,587

 

 

581,346

 

Property and equipment, net

 

15,755

 

 

15,602

 

Long-term deferred tax asset

 

1,538

 

 

1,515

 

Other longterm assets

 

2,020

 

 

2,109

 

Total assets

 

$

583,900

 

 

$

600,572

 

Liabilities and Stockholders Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

23,129

 

 

$

43,856

 

Income taxes payable

 

 

2,065

 

 

 

1,108

 

Debt - short-term

 

 

10,000

 

 

 

10,000

 

Other current liabilities

 

28,101

 

 

15,170

 

Total current liabilities

 

63,295

 

 

70,134

 

Long-term taxes payable

 

20,867

 

 

19,810

 

Debt - long-term

 

85,000

 

 

87,500

 

Deferred revenues - long-term

 

1,005

 

 

974

 

Total liabilities

 

170,167

 

 

178,418

 

Stockholders equity:

 

 

 

 

 

 

Common stock

 

82

 

 

87

 

Additional paidin capital

 

 

 

 

Treasury stock

 

 

 

 

Retained earnings

 

413,651

 

 

422,067

 

Total stockholders equity

 

413,733

 

 

422,154

 

Total liabilities and stockholders equity

 

$

583,900

 

 

$

600,572

 




 





 

Ubiquiti Networks Inc.

Revenue by Product Category

(In thousands)

(Unaudited)

 

 

Three Months Ended

September 30,

 

 

 

2015

 

 

2014

 

Service Provider Technology

 

$

103,399

 

 

$

107,271

 

Enterprise Technology

 

 

48,016

 

 

 

42,816

 

Total revenues

 

$

151,415

 

 

$

150,087

 




Ubiquiti Networks Inc.

Revenue by Geographical Area

(In thousands)

(Unaudited)

 

 

Three Months Ended

September 30,

 

 

 

2015

 

 

2014

 

North America

 

$

53,234

 

 

$

53,582

 

South America

 

 

22,148

 

 

 

31,134

 

Europe, the Middle East and Africa

 

 

60,503

 

 

 

50,607

 

Asia Pacific

 

 

15,530

 

 

 

14,764

 

Total revenues

 

$

151,415

 

 

$

150,087

 




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.

 








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