UBNT earnings

UBNT earnings were just released and lo and behold another board favorite it taking a hit. Kind of a rough day.

First Quarter Financial Summary

Revenues of $150.1 million, up 16% year-over-year.
GAAP net income of $37.7 million and non-GAAP net income of $43.4 million.
GAAP operating profit of $43.6 million and non-GAAP operating profit of $50.5 million.
GAAP diluted EPS of $0.42 and non-GAAP diluted EPS of $0.48.
Cash of $391.0 million, up 40% year-over-year and 13% sequentially.
$46.9 million in net cash provided by operating activities.



Listening to the CC. If I would have listened to RP before today I would not have bought the stock.

They should have warned before todays numbers. Saul said that even coming in at the middle of the numbers would have been fine and I agreed. The fact that there was no warning made me think the they would have at least met the low end of the estimates. Live and learn but this is an expensive lesson.


I’m listening to it as well, why don’t you like RP now that you’ve heard him speak? Just curious, I don’t have a problem with him so far, but I just jumped on (and this is the first time I’ve heard him)

this has got to be part of the reason we’re seeing such a huge drop after hours:

Business Outlook

The following are Ubiquiti’s financial performance estimates for the second quarter of fiscal 2015:

Revenues of between $147 million and $153 million
GAAP diluted EPS of between $0.45 and $0.48
Non-GAAP diluted EPS of between $0.46 and $0.49

So they’re guiding for almost no growth in earnings next quarter. Q214 GAAP earnings were 0.47 (non GAAP 0.48)

Revenue for Q214 was 138.4m so they’re guiding for 8.38% revenue growth taking the midpoint of 150m.

I really didn’t expect them to come in lower then their own guidance.

1 Like

Well he said it himself on the call, he’s a product CEO, not a sales CEO, so he’s certainly not as smooth as you’d wish he might be. But try to stay focus on the fundamentals and business execution.

I’m also a little disappointed revenue growth is so light, but I think they’re still good at what they do and so I’ll give them the benefit of doubt for now.

1 Like

Well he said it himself on the call, he’s a product CEO, not a sales CEO, so he’s certainly not as smooth as you’d wish he might be. But try to stay focus on the fundamentals and business execution.

OK I definitely missed that part, I only caught the last part of the Q and A.

They have a non GAAP TTM earnings sitting of 2.02 now, so at $28.90 we’re sitting at a TTM PE of 14.30. Thankfully this company wasn’t trading at something ridiculous like a PE of 40-50 or I’d be really sweating it. As it is I already had a large position here at 7.29% before this report so I’m still going to feel it tomorrow.

I caught the end of the conference call Q and A but I didn’t get much out of it. I’m really looking forward to seeing the transcript. Overall it looks like a poor quarter and it’s not going to get any better next quarter. I’m not sure what I’m going to do here.

I’m happy to focus on the fundamentals of a company like this, part of our process here is to pick low PE companies that have high earnings growth. This quarter we saw no earnings growth, next quarter again management expects no earnings growth. Revenue growth looks OK at 16% this quarter, but 8.38% next quarter is underwhelming.

Monster just reported today as well, revenue up 7.7%. That’s great for a bigger mature company, but for a young growing company like UBNT? Seems really mediocre.

To say he is not as smooth as you wish he might be is an understatement. The fact that that he would not let anyone else answer the questions made me take notice.


The fact that that he would not let anyone else answer the questions made me take notice.

That’s interesting because I interpreted it in the exact opposite way. He had a bad quarter and he owned up to it - that’s what leaders do. I’m glad he didn’t hide behind the big bad numbers guy.


From another board.

Pera unprepared and immature CEO
Mr. Pera’s heart is in right place. His judgement to manage the CC himself was the right thing. He was unprepared however. His answers were evasive or vague. UBNT is disrupting the business model by eliminating sales and marketing. Removing that huge value add does remove cost. Got it. Then UBNT can lower price and Gross margin to unheard of levels that others cannot compete with. However, Pera refers to the best hardware and software and all the money going into development The products are NOT the best and do not compare on reliability and performance to the traditional players. That may happen in the future when the industry is completely commoditized because the chip vendors incorporate all the features.
If the business model is going to be disrupted then it behooves the company to find alternative methods to project the revenue and earnings. That is what mature businesses do. If you cannot see the business then drop quarterly guidance and move to annual guidance with quarterly calls. the company can adjust the annual numbers on the call if they choose. Blaming the lack of predictability because “we are not a traditional financially engineered company” is unacceptable. But you are a public company choosing to disrupt the business model. Consequently, you have a responsibility to re-engineer the financial modelling process.
When asked about training of partners PERA had no answer. When asked twice he answered it will happen soon. I know for a fact they have new distributors who are not trained themselves. They must train the disty so the disty can support training the partners. Disty told me directly, they were having trouble getting training several months ago. TERRIBLE!!
When asked about pre-announcing the miss, PERA said they were looking at the numbers so they could predict next quarter. in my opinion the CFO and his team had no idea what was happening and they dropped the ball. The answer from PERA clearly indicated they were scrambling right up to CC


While Pera is not the normal “smooth operator” many are used to listening to on conference calls, I liked the fact that he took control of the conference call and remains incredibly positive about the long term outlook for the company.

Here are the reasons I remain positive on the long term outlook of UBNT and will probably be buying more in short order.

First, they have a relatively low P/E with $351MM in cash and only $72MM in debt. According to Pera, two-thirds of internet users are overseas and the majority of their business is in developing countries. This is going to present many near term challenges, but the long term opportunity remains huge.

UBNT makes good products at an incredibly attractive price. Pera has proven himself as an innovator in this field and is continuing to plow cash into R&D to improve on current products and create new ones.

Finally, he is thinking long term whereas the analysts on the call wanted to know more about the quarter to quarter business. They wanted to know more about sales in each geography. It’s apparent the Pera is not interested in slicing and dicing the business to that level especially because they sell in so many different countries.

Running short on time, but thought I’d put some thoughts out there. I still believe in the long term opportunity here.

I’m always interested in hearing other’s views.

Take care,


Here is the one I noticed from the earning release: Purchase commitment termination fee @ 5.5 million for the quarter. So it was adjusted in the non-GAAP eps calculation and came up with 0.48. I haven’t listened to the CC yet, don’t know if anyone asked the question, but this raised a yellow flag, what happened? It should not affect the non-GAAP eps calculation one way or the other, but the amount is not trivial.

The bigger question is what we should do as investor (long term), should we wait a few quarters hoping for the business picking up steam again or take the loss now and move the money to other faster growing businesses. From what I can tell by the next quarter guidance, October sales did not go well with UBNT, hence the very conservative outlook.


The products are NOT the best and do not compare on reliability and performance to the traditional players.

Everett could you expound on this? Who do you think has the best products?


That is not my statement. I reposted that. I have a friend who runs a small/med IT company who loves the products and told me ubnt was eating cisco’s lunch. Part of the reason I bought the stock.


1 Like

That is not my statement. I reposted that.

Ok well who ever you reposted that from doesn’t understand UBNT’s model. They never claimed to be the best they claim that they are trying to be the best. But they are the cheapest and they beat Cisco’s price by 7 to 10 times. Also no one ever heard someone say they needed to be Ubiquiti certified. While I have no qualms with the Cisco certification, I do have a problem with them expecting you to requalify every two years. That is ridiculous. Anyone working in this field realizes that once you are qualified to have to go back and requalify is a waste of time. That is another one of the reasons that UBNT will eat Cisco’s lunch in this space.

When asked about training of partners PERA had no answer. When asked twice he answered it will happen soon. I know for a fact they have new distributors who are not trained themselves. They must train the disty so the disty can support training the partners. Disty told me directly, they were having trouble getting training several months ago. TERRIBLE!!

While Pera was not specific on when exactly the training would take place he did say they would train people on the new Unifi voice over Ip, and Unifi Video. That is what was being asked. Not on training of all products but the new voice over Ip products. Foster the CFO stated that they would have training in the short term future. Pera also stated that they did have training on their other products. Also, UBNT’s model has been to provide access to other technicians to help train each other on their products. If it wasn’t terrible a year ago why now is it terrible? This seems like someone who is just looking for a problem where none exists. If they understood the model they wouldn’t have a problem with it. Also if by disty you mean distributors they should have no problem reading the white papers to understand the equipment. This equipment is not complicated and compared to Cisco’s equipment, any worthy technician should have no problem installing and getting it up and running.

I think the one thing I am looking at is the Inventory. Why was it down so much and we didn’t see a big spike in sales. Did they stuff the channel and not take revenues?



Although the quarter was definitely not great, I think the strong USD probably hurt them. It looks like Pera went out of his way to avoid questions about sales by region and focused more on the long-term trend of the company. He is definitely not focused on the quarterly sales and thinks that over the longer term, the company will do really well. Reading through the call made me feel better after being slightly disappointed after reading through the initial press release. I pasted some interesting Pera quotes below:

So first of all, I want to say, Ubiquiti’s service provider market is focused on the emerging markets. It’s a great opportunity. I think if you look at the Internet and the users, 2/3 come from these emerging markets. The penetration for fixed broadband is probably only 10% globally. So the service provider segment, we see huge runway for the – in the future, and we think we’re in the early innings of the game.

So it’s very difficult to look at this company and say, “Okay. Well, they did such and such revenue last quarter, and they’re down 5% this quarter. And what will they be the next quarter?” If you look at from our IPO, I think, we’ve tripled up to this point within 3 years, and I – my aim is to triple the service provider business again in the next few years.

We’ve introduced UniFi, which is our enterprise solution, a few years back. And that’s growing very fast, and we’re expanding it, and we think it’s probably about 30% of our business right now. And long term, we think it’s going to be close to an equal split between enterprise and service provider.

Well, if you look at things like our forum, and the level of engagement, an traffic and the new customers and evangelism, it’s going very fast. I think the total time spent in activity in our community has doubled year-over-year. So the trends I will get to evaluate the business are all positive.

But if you look at from 3 years back to today, it’s been impressive growth, and I think when you look at 3 years and the future, then you look at – today, you’re going to see at least the same type of impressive growth.

I’m going to consistently say you have to look at – especially with the service provider business, you have to look at long-term trends in drawing conclusions, and I think the long-term trends have been very good in the past, and there’s no reason, I believe, they won’t continue to be very good in the future.

Yes, I would say we’re – we’ve been conservative. So when you look at this 1.5 years or 6, 7 quarters, we always beat – I think for a run, we beat expectations. So yes, we want to be as conservative as possible. But I expect in the long-term, which is several quarters or in the next several years, I’m always thinking about how to get this company from hundreds of millions of – in revenue to billions and ultimately, tens of billions, and you can’t do that by putting your resources around financially engineering quarter-to-quarter numbers, and so – and reported revenue. You do that by – you’ve got to really concentrate on R&D and make bets and big bets in R&D and have vision, and look at long-term results. That’s what this company is focused on.

To be honest, I haven’t checked the stock. I’m in this for the long term, but I’ll – by this week, I’ll or next week, I’ll check it. And definitely, if it’s attractive, yes, we’ve got to buy it back.

So I think India and China are huge opportunities for us, and we haven’t captured much of it yet. One of the challenges we have in India and China is there’s more of a – in areas like U.S. and South America, there’s a lot of information transparency. The best product wins out. In China and India, there’s more, I’d say, political barriers to entry in terms of finding partners and there’s more of a traditional business model, but it’s changing. And I think you’ve seen even in China, like Alibaba and Xiaomi are great examples of companies that have just break in (sic)[broken] the traditional business model apart in China, where Xiaomi has evangelized their brand and sold direct. And I think we have to apply ourselves a lot better in creating localized communities in a lot of these areas of the world, especially China and India, and in evangelizing our brand. And that’s definitely one of our priorities right now, and we’re putting in investment into a strategy for those markets.

Okay. There was a write down for excess – or canceled material, so that relates to our service provider business. And one of the materials was end-of-life, and we placed a big order, and it – to move to the new material was significant software development. We didn’t think we would be done with the software development as early as we did, and the cost delta between the new chip and the end-of-life chip was more than the cancellation charge of the old material. So even though it looks like it’s a onetime loss on a per unit basis, it’s a net margin benefit.

We have a big presence on a IT website called Spiceworks, and I think we’re picking up popularity fast there. The new channels and distribution definitely helped. And I think you’re right, as that UniFi platform becomes more compelling, we’re going to have to become much more aggressive in expanding the channels. In the case of our service provider, we’ve never really called up someone to carry the product before. We’ve been spoiled. We have – we’re inundated with constant requests to carry that product.

We have a very phenomenal, energetic, active community that’s evangelizing the brand. And we significantly upgraded our R&D team, and we’re quickly adding advanced features and expanding the product line. And I think for an incumbent to come in and compete against us, they’re going to have to be all in and they’re going to have to find some way to disrupt us. And I look at disruption as you need incredible price and you need incredible performance. And so price-wise, I don’t think we leave too much on the table. It’s very hard for a traditional company to compete with our margins and our operating structure. And then if they want to compete on performance, we’re going after these companies, and we want to be the best performer in the space, not just looked at as a little cost solution. We want to be – yes, we’re a low cost solution, but we want to be the absolute best product in the space. And for a company to have a side project and feature-limit and not put their best stuff out under except for a brand name, I don’t know if they can be effective at this point in time against something like UniFi.

we’re going to have to deal with the quarter-to-quarter ebbs and flows due to difficulties with things like fluctuating currency exchange rates, logistic issues, political maybe uncertainty, and the fact that we have a new product adoption and qualification cycle in the service provider market. So like I said, quarter-to-quarter granularity, it’s very hard to get to the bottom of what exactly is causing it, especially when you’re talking about very small percentage points on a sequential basis. But if you look at the overall long-term trends in the history of the company, they’ve been positive, and I believe the next few years ahead will be the most impressive yet.

I think we got to go deeper and we got to create localized communities in areas like India and China, and do a much better job of evangelizing the brand, and then expanding your channel makes your product more available. But everything we’re going to do is going to be focused on pool and brand evangelism.


I think the strong USD probably hurt them

Why do you think that a strong USD hurt them? They were up 6% YoY in North America. I am thinking Europe, Middle East and Africa might have hurt them. They were down 7% in that region according to their 10q.


1 Like

Never mind Wouter. I get what you are saying now.



You got my rec. I think the tone of the call got to me.


The one potential threat that might disrupt UBNT is Google’s project to bring internet access for free to the developing/remote world via massive high altitude balloons and signal beamers.

Otherwise I think this stock is a steal.

1 Like

Thanks and I can understand what you mean. Pera didn’t do a very good job of explaining the quarter. He is still a relatively young CEO but hopefully he will get much better.