UBNT Inventory Question

Sorry if this has been discussed in detail before, but curious how folks here are digesting the rather market ramp up in inventory especially since they are not projecting an equally dramatic increase in sales.

Sorry but just trying to catch up to the story.

Thanks in advance.

if this has been discussed in detail before, but curious how folks here are digesting the rather market ramp up in inventory especially since they are not projecting an equally dramatic increase in sales.

Duma, That’s a great question and probably the most important question about this company. They were having problems with not enough inventory. A great problem to have but a lot of their customers were complaining because they couldn’t get enough. So they brought in a new CFO and he said they were going to ramp up inventory to supply their customers. This was said in the 3rd quarter conference call. Then we had a bad winter quarter in the 4th quarter so all that inventory didn’t get sold off. The last conference call, 4th quarter, it was brought up by an analyst that stated he didn’t think the inventory would go up above 30 million. Its now sitting above 60 million. Now how much demand is out there nobody has really said but the CEO and CFO believe there is big demand out there and that is why they ramped up the inventory. They stated this in the last two conference calls. This next conference call we should get a clearer picture. I think they will have sold off a lot of this inventory. We will see.

Hopefully this answered your question.

Andy
Long UBNT

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Sorry if this has been discussed in detail before, but curious how folks here are digesting the rather market ramp up in inventory especially since they are not projecting an equally dramatic increase in sales.

Someone posted on the UBNT board that their inventory turns in 34 days, which to my mind is pretty fast. If the increase slows that down to say 45 days I still don’t think that is too high. I agree it is something to watch, but at this point I am not concerned.

Jeb
Long UNBT

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Your right Jeb and that’s a good point.

Andy
Long UBNT

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Hi dumaflotchie,

My take on this is that the inventory situation is to give confidence to the smb market they sell to. My own experience of buying ISP services from a ubnt small business is that they do not stock, but buy as they close the sale. Installation is not difficult so the main delay in closing the sale was availability of h/w. By ubnt having inventory they can move faster with less inventory cost. I also have a suspicion ubnt is helping cut out the distributor and giving profit to smb. This can also help retain the smb, as they are working with ubnt directly. With ubnt s/w for installation and operations mgt the smb has a greater chance of being a ubnt only shop. Similar concept to apple strategy.

My guess on sales is that ubnt is introducing new products and needs to keep conservative sales forecasts until they have empirical sales to base future sales on. This is always an issue for financial planning and public companies. Lawyers and finance people always prefer to under promise and over deliver to keep the stock holder lawsuits at bay.

Just guesses on my part and rational for continuing to add ubnt stock.

Ik

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Thanks for the input all!

I was a bit concerned that this inventory buildup was two quarters consecutive and that they were not guiding much higher revs.

I suppose the next quarter’s earnings will tell the tail of the tape.

Thanks again!