UBNT Page Post 1

Investment Analysis Clubs Saul’s Investing Discussions
1

UBNT (Ubiquiti Networks)
In Thousands

Revenue

Q112      Q212      Q312      Q412       Q113      Q213       Q313      Q413          Q114          Q214
79167     87817     91665     94868      61535     74901      83155     101232        129687        138439

Net Income

Q112       Q212      Q312       Q412      Q113      Q213       Q313       Q413       Q114       Q214
21493      24691     27920      28485     13179     17803      20667      28841      40528      41792

Eps

Q112        Q212      Q312        Q412     Q113       Q213       Q313     Q413       Q114      Q214
(1.30)      .16       .30          .30     .14        .20         .23     .32        .45       .47

Free Cashflow

Q112      Q212      Q312       Q412      Q113       Q213        Q313       Q413         Q114        Q214
15514     3346      31226      28392     21346      25712       34218      45252        51420       77542

Cash

Q112       Q212      Q312     Q412       Q113       Q213       Q313        Q413      Q114     Q214
52576      64844     68528    122060     132486     148301     181689      227826    279729   305553

Debt

Q112      Q212     Q312     Q412       Q113     Q213        Q313        Q413        Q114        Q214
6976      6964     6966     6968       5008     5009        5011        5013        5015        5642

Subject: Ubiquiti Networks (UBTN)
Author: Buynholdisdead
Date: 03/01/2014
Sector: Technology
Industry: Communication Equipment

Ubiquiti Networks (UBTN) Closing Price $49.41

Price: $49.41
Dow:16,321.71
Nasdaq:4,308.12
SP500:1,859.45
Oil: $102.59
Nat Gas: $4.61
Gold: $1321.60
Silver: $21.24
Copper: $3.19
Corn: $463.50
Lean Hogs: $106.85
Feeder Cattle: $173.70
Coffee: $180.30
Cotton: $86.39
Lumber: $352.20

Today the Price is $49.41: The P/E ratio is 33.49

**November 10th,2011 1q:2012 earnings highlights:
**Revenues were $79.2 million
**Cost of Revenues 46.2 million
**1Q Earnings per share were ($.1.30)
**Diluted share count were 62,717,000
**Cash Flow for the quarter was $15.5 million
**Cash $52.6 million
**Debt $7 million
** Gross Profit were $33 million
** Gross Profit Margin 41%
**Inventory for the quarter was 8,374,000 million
**IPO’d

**January 31st, 2012 2Q:2012 earnings highlights:
**Revenues were $87.8 million
**Cost of Revenues $50.5 million
**2Q Earnings per share were $.16
**Diluted share count were 90,056,000 up 44% from 62,717,000 Quarter over Quarter
**Cash Flow for the quarter was $3.3 million
**Cash $64.8 million
**Debt $7 million
** Gross Profit were $37.3 million
** Gross Profit Margin 42%
**Inventory for the quarter was 8,980,000 up 7% from 8,374,000 QoQ.
**Trading range between $17.33 to $25.30
** P/E range NA
** P/S range na

**May 1st, 2012 3Q:2012 earnings highlights:
**Revenues were $91.7 million
**Cost of Revenues $52 million
**3Q Earnings per share were $.30
**Diluted share count were 94,177,000 up 5% from 90,056,000 QoQ
**Cash Flow for the quarter was $31.2 million
**Cash $94.2 million
**Debt $7 million
** Gross Profit were $39.7 million
** Gross Profit Margin 43%
** Net Income were $27.9 million
**Inventory for the quarter was 9,111,000 up 1% from 8,980,000 QoQ
**Trading range between $22.60 to $35.99
** P/E range NA

**August 9th, 2012 4Q:2012 earnings highlights:
**Revenues were $94.9 million
**TTM Revenues were $353.5 million
**Cost of Revenues $53.8 million
**4Q Earnings per share were $.30
**Diluted share count were 94,168,000 down from 94,177,00 QoQ
**Cash Flow for the quarter was $28.4 million
**TTM cash flow was $78.5 million
**Cash $122.1 million
**Debt $7 million
** Gross Profit were $41 million
** Gross Profit Margin 43%
** Net Income were $28.5 million
**Inventory for the quarter was 7,734,000 down 15% from 9,111,000 QoQ
**Trading range between $9.37 to $27.90
** P/E range NA
** P/S range 2.50 to 7.43
**Gross Profit to asset ratio = 19%
**YOY Inventory turnover ratio = 23.82
**Inventory Holding Period = 2.18 weeks
**Ceo states Counterfeit problem will impact revenue growth going forward

**November 8th, 2012 1Q:2013 earnings highlights:
**Revenues were $61.5 million
**TTM Revenues were 335.8 million
**Cost of Revenues $36.5
**1Q Earnings per share were $.14 up from $(1.30)
**TTM Earnings per share $.90
**Diluted share count were 92,925,000 down 1% from 94,168,000 Quarter over Quarter
**Cash Flow for the quarter was $21.3 million
**TTM cash flow was $84.2 million
**Cash $132.5 million
**Debt $5 million
** Gross Profit were $25 million
** Gross Profit Margin 41%
** Net Income were $13.2 million
**Inventory for the quarter was 7,632,000 up 1% from 7,734,000
**Trading range between $7.80 to $13.39
** P/E range 8.6 to 14.88
** P/S range 2.16 to 3.71
**Gross Profit to asset ratio = 12%
**YOY Inventory turnover ratio = 23.05
**Inventory Holding Period = 2.26 weeks
**Counterfeit problem impacting Revenue growth which they have taken significant legal action against.

**February 7th, 2013 2Q:2013 earnings highlights:
**Revenues were $74.9 million
**TTM Revenues were 323 million
**Cost of Revenues $44.4 million
** Gross Profit were $30.5 million
** Gross Profit Margin 41%
** Net Income were $17.8 million
**2Q Earnings per share were $.20 up from $.16
**TTM Earnings per share $.94
**Diluted share count were 90,056,000 down 3% from 92,925,000 Quarter over Quarter
**Cash Flow for the quarter was $25.7 million
**TTM cash flow was $106.6 million
**Cash $148.3 million
**Debt $5 million
**Inventory for the quarter was 14,623,000 up 92% from 7,632,000
**Trading range between $9.97 to $15.28
** P/E range 10.61 to 16.26
** P/S range 2.96 to 4.26
**Gross Profit to asset ratio = 13%
**YOY Inventory turnover ratio = 12.77
**Inventory Holding Period = 4.07 weeks
**Paid an $.18 dividend on Dec 20th 2012
**Set up a third party logistics hub in China which caused an increase in inventory
**As of December 31st they have repurchased 5.2 million shares for approximately $54.4 million dollars

**May 9th, 2013 3Q:2013 earnings highlights:
**Revenues were $83.2 million
**TTM Revenues were 314.5 million
**Cost of Revenues $47.7 million
** Gross Profit were $35.5 million
** Gross Profit Margin 43%
** Net Income were $20.7 million
**3Q Earnings per share were $.23 down from $.30
**TTM Earnings per share $.87
**Diluted share count were 88,953,000 down 1% from 90,056,000 Quarter over Quarter
**Cash Flow for the quarter was $34.2 million
**TTM cash flow was $109.6 million
**Cash $181.7 million
**Debt $5 million
**Inventory for the quarter was 19,381,000 up 33% from 14,623,000
**Trading range between $12.76 to $16.72
** P/E range 14.67 to 19.22
** P/S range 3.61 to 4.73
**Gross Profit to asset ratio = 14%
**YOY Inventory turnover ratio = 9.4
**Inventory Holding Period = 5.53 weeks
**Implemented sophisticated anti-theft technology
**Craig Foster new CFO

**August 8th, 2013 4Q:2013 earnings highlights:
**Revenues were $101.2 million
**TTM Revenues were 320.8 million
**Cost of Revenues $56.9 million
** Gross Profit were $44.4 million
** Gross Profit Margin 44%
** Net Income were $28.8 million
**4Q Earnings per share were $.32 up from $.30
**TTM Earnings per share $.89
**Diluted share count were 89,064,000 up from 88,953,000 Quarter over Quarter
**Cash Flow for the quarter was $45.3 million
**TTM cash flow was $237.5 million up from
**Cash $227.8 million
**Debt $5 million
**Inventory for the quarter was 15,880,000 down 18% from 19,382,000
**Trading range between $15.01 to $21.96
** P/E range 16.87 to 24.67
** P/S range 4.68 to 7.00
**Gross Profit to asset ratio = 15%
**YOY Inventory turnover ratio = 12.90
**Inventory Holding Period = 4.03 weeks
**They believe they will be the #1 volume enterprise managed AP shipment vendor by fourth quarter. Currently they are the fourth.
**CEO Robert J. Pera says the counterfeit issues are behind them and that he is taking back control of the company. He also stated that he is going to kick butt and he is out for growth.
** CEO says DSO’s are at a record low of 32 DSO’s, they have legally confined the counterfeiters.
**The CEO states that when they go into a market they have never had to drop prices. That prices have continually stayed the same.

**November 7th, 2013 1Q:2014 earnings highlights:
**Revenues were $129.7 million up from 61.5 million
**TTM Revenues were 389 million up from $335.8 million
**Cost of Revenues $71.7 million up from $36.5 million
** Gross Profit were $58 million up from $25 million
** Gross Profit Margin 45%
** Net Income were $40.5 million up from 13.2 million
**1Q Earnings per share were $.45 up from $.14
**TTM Earnings per share $.1.20
**Diluted share count were 89,473,000 up from 89,064,000 Quarter over Quarter
**Cash Flow for the quarter was $51.4 million up from $21.3 million
**TTM cash flow was $126.5 million up from $84.2 million
**Cash $279.7 million up from 227.8 million QoQ
**Debt $5 million
**Inventory for the quarter was 16,375,000 up 3% from 15,880,000
**Trading range between $25.06 to $43.99
** P/E range 20.9 to 36.7
** P/S range 5.76 to 9.91
**Gross Profit to asset ratio = 17%
**YOY Inventory turnover ratio = 13.44
**Inventory Holding Period = 3.87 weeks
**They are now using wifi 802.11n for AirMax but they are going to start producing 802.11ac sometime next year which will give approximately 30% boost in speed.
** Announced the industry first 802.11ac outdoor AP.

**February 6th, 2014 2Q:2014 earnings highlights:
**Revenues were $138.4 million up from 74.9 million
**TTM Revenues were 452.5 million up from $323 million
**Cost of Revenues $77.5 million up from $44.4 million
** Gross Profit were $61 million up from $30.5 million
** Gross Profit Margin 44%
** Net Income were $41.8 million up from 17.8 million
**2Q Earnings per share were $.47 up from $.20
**TTM Earnings per share $.1.47 up from $.94
**Diluted share count were 89,653,000 up from 89,473,000 Quarter over Quarter
**Cash Flow for the quarter was $77.5 million up from $25.7 million
**TTM cash flow was $178.3 million up from $106.6 million
**Cash $305.6 million up from 279.7 million QoQ
**Debt $5.6 million
**Inventory for the quarter was 32,323,000 up 97% from 16,375,000
**Trading range between $36.30 to $48.00
** P/E range 24.70 to 32.65
** P/S range 7.19 to 9.51
**Gross Profit to asset ratio = 16%
**YOY Inventory turnover ratio = 7.85
**Inventory Holding Period = 6.62 weeks
**They are now using wifi 802.11n for AirMax but they are going to start producing 802.11ac sometime next year which will give approximately 30% boost in speed.
** Announced the industry first 802.11ac outdoor AP.
**AirPRISM new technology improves the selectivity of base station radios and perform significantly better in high noise environment.

Ubiquiti is a unique company that is built upon its customers. Their CEO believes that the easiest and best way to supply tech support is through emails. This is a very disruptive service that does not have a sales team… Everything is built on word of mouth and it seems to be working. Although recently they have started advertising in regular channels. They had a problem in the last quarter of 2012 and the first quarter of 2013 with some counterfeiters. They had a distributor in South America that decided to take their product and start producing it himself. So he was able to induce a chinese manufacture to help him make the product. Ubiquiti decided to take legal action against both of these parties and now the Chinese manufacture is sitting in jail and the South American distributor has been legally put out of business. The Revenue has had a small decrease in the 1st quarter of 2013 but has climbed substantially since then.

This quarter has been the highest growth that UBTN has ever seen. It is hard to compare this quarter with the troubled 1st quarter of 2013. But as you can see Revenue has grown substantially and so has Gross Profits, Net Income, and EPS. This companies main sauce seems to be that they do not have a sales team to pay so all of that money goes back into the companies coffers. The CEO claims that they are completely transparent and they provide a website for technicians to talk about their product and help each other out. This is a great way for technicians to confer and discuss the product. What I have found, after looking over their financials. Is their inventory holding period. It is amazing for a company in the Telecommunications field to have holding periods like this company does. When I first started tracking this in the 1q of 2013 it was at 2.13 weeks it has fluctuated up and down but is now sitting at 6.62 weeks. That is incredible. The product is flying off the shelves. The CFO has almost doubled the inventory for this quarter. Now if this was any other company I would be alarmed but I think this was a smart move. How much revenue were they leaving on the table with such short inventory holding periods? I think that they are filling, not stuffing, the channels and next quarter we should see a meaningful rise in Revenue. I can’t wait to see if I am right. Their Cash Flow is up 67% this quarter and their cash is up 9 percent while debt is up 14%. But that is really not alarming on the cash to debt ratio because to keep it in perspective they have 305.6 million in cash which is going up every quarter while their debt went up from 5 million to 5.6 million, the first increase of debt in 5 quarters. Still they have a very rock solid balance sheet. Ubnt is a very exciting company in the Wireless sector of the Telecommunications field that everyone should be looking at.

Any questions or thoughts on this company would be greatly appreciated.

Analyst Estimates
Mar. 2014 $.49
Jun. 2014 $.50
Cur year $1.92
Next year Jun 15 $2.17

Andy

14 Likes
2

Andy,

What a great analysis! It makes me want to run out and buy some more.

Saul

3

A tremendous analysis, indeed, Andy.

Thank you for putting in the time and educating me on some of the intricate details of this company. What intrigues me about your analysis is the simplicity of the thinking of the CEO. Using e mails to get the word out seems rather clever. And the transparency of how the technicians communicate, again, demonstrates a simplicity that makes for greater efficiency and better customer satisfaction.

The numbers are proving that the business model is working beautifully.

I agree with Saul and will be picking up more shares of this fast growing company Monday.

Jim

4

LOL me too Saul. Its a pretty exciting company run by a young founder that really wants to make something of his company. One thing that made me go huh about him though was when one of the Analyst asked him how much traffic could go across the AirMax and he didn’t know what traffic was. That’s a common term in telecommunications but when I started thinking about it the CEO was an Engineer at Apple. He worked on handsets and could care less about traffic he is more interested in bandwidth.

Andy

5

Thanks Drillerjim,
They really do have a simple model. If you go on their community site you will see technicians helping technician. They sell their product at an amazing price. They put most of their money into their engineering instead of sales. This is a very disruptive business that their customers love. I think I can be too excited about this company so take all of that into account. I am only a telecommunications technician and not an Analyst. I just like looking at companies as a hobby and to make money.

Andy

6

One more thing here is their community site for customers to help each other.

http://community.ubnt.com/

Andy

7

Great page post, Andy.

Thank you for all your work. Now, may be I should add to my position, or at least sell puts on them.

Anirban

8

Thanks Anirban. Here is one more link I want to share on UBNT. This guy really knows the business and you can go through all of his posts. Very interesting.

http://www.muniwireless.com/2012/05/07/ubiquiti-versus-canop…

Andy

3 Likes
9

Andy, Saul and all

Thank you very much for the great work.
I am long UBNT and have written some Puts as well, but I guess it is tme for a full position.:slight_smile:
Again, thank you guys, Erik

10

Great write-up, thanks. Opened a new position in them this morning.

BH

11

Thanks BH. I was reading a little bit more last night about UBNT’s competition and it looks like one was a spin off from Motorola called
cambium networks and another one is deliberant wireless. Both of these are private companies so I can’t see how well they are doing but Cambium is supposedly highly regarded and deliberant is an up and coming cheap provider. One person said that they were cheaper than UBNT. Just some information for people to keep their eyes on the competition.

Andy

12

Thanks for the write up.

Have a peter lynch type story.

Our house requires radio/microwave technology to get internet access. Our current service is slow and expensive. We heard of a local company with better service, and I just talked to them. They looked us up on google earth and said they had an access point we could hook up to. I asked them if they had any experience with ubnt equipment. He chuckled and said they love their equipment, use it for back haul, and just put in a 10k order with them.

We then had a long conversation about country properties they are developing internet and VoIP solutions for that are much less costly the the big players.

Ubnt seems to helping with community solutions. We have a second home on the California coast where there is no cell coverage and expensive internet. This little company is interested in working with our HOA to develop a community solution for VoIP and Internet. If we add UPS to the access points we could have communications during a disaster, and without need for internet access. Big consideration in our location. 911 call can take an hour and a half for police response.

Fascinating technology and opportunity.

12 Likes
13

Thanks gojufinance,
That is a great story. It sounds like you have a great local company to work with.

Andy

14

My ubnt story continues.

They are going to setup a ubiquitis dish at our house on Saturday. Talked with the WISP (Wireless Internet Service Provider) owner who came for a site visit. It’s amazing how many installs, and the variety that is going on up here in Northern California. He has Silicon Valley people who are building homes up here and need to get connected. The carriers want major dollars for dedicated lines brought in, versus setting up wireless connectivity for $300.

This is deja vu for me as I worked with a little data center company in the beginning days of the Internet (I think it was '98). Lots of businesses wanting onto the internet, and we couldn’t build out data centers fast enough.

I think the business case is pretty simple, in that installing landlines is expensive, and controlled by major carriers who want proof of profitability before building out. Wireless is now cheaper to install, and the concept of wireless outside the home is easier to explain now that most have wireless in the home.

I’m still studying the ubnt wiki site, and user guides to see how well they are supporting their products. Small WISPs may choose to go with the cheapest option, but if ubnt does a good job of retaining the tech’s, there may be a reluctance to move away from what works.

If the WISP market starts to consolidate the risk would be that big players like Cisco would try to capture the market. I noticed that the biggest WISP in this are has a notice on their website looking for other WISP’s that want to sell their business.

The WISP guy I talked to yesterday said it was a gold rush right now. They are getting calls from individuals, businesses, wineries, city planning people, etc.

Fascinating situation.

6 Likes
15

Great insight!

16

Goju that is great. So for 300 dollars what type of speeds are we talking about? Could you tell me what dish he is putting at your house and how far away the other dish is? Also how close to the nearest town are you. Also if you could ask him what is the bandwidth that your dish is feeding from? 0C 48, OC 12, OC 3, 1 gig? How many people are coming off of that site would be helpful also. This is some great information.

Andy

1 Like
17

Hi Andy,

Great questions. Some I asked and realized the guy I was talking to did not know.

$300 is installation, including equipment. $75 per month for up to 20Mbs download and upload.

The other dish is maybe a mile away, and can be seen. We are currently about 10 miles from our AP, so that is an immediate improvement. The receiving AP is with a customer that agreed to setup an AP, and there is not one else using the AP. Great because the current situation feels overloaded.

We’re about 10 miles from Santa Rosa, CA. If you know the area, halfway between Santa Rosa and Calistoga.

I tried to ask about bw, etc., but I could tell he wasn’t sure. I think they have a dedicated circuit, not sure what size, but would guess about T-3 in Santa Rosa, that goes to some dc in Richmond, CA. I think they then get b/w from there. Wild guess right now, and am going to try and meet the engineer and learn more. I’ll do a little researching when I get the connection. There’s no contract, so figure we’ll try it out.

They are working to give 20Mbs down, and up. They said that the usual is about 17Mbs. I’ve been checking my current provider who is selling us 10Mbs download, and 2Mbs upload. Multiple speedtest.net checks show about 4.5 d/l and 0.9 upload. The new provider does not throttle uploads.

Here are a couple of links I liked.

Building a WISP:
http://wiki.ubnt.com/Building_a_wisp

Amazing pdf on starting a WISP business. Great source of information:
http://www.wispzone.com/HOT_SPOT_DOWNLOADS/WISPZONE_Starting…

Getting the service is just an opportunity to delve further into the business and learn more about the guys running it. Would like to work with them to bring wireless out to the Mendocino coast. There are so many people out there still on modem connections. Remember those days? Yuck!

Regards,
Iain

1 Like
18

Hi Andy,

Here is the bw paragraph in the proposal we just got.

Bandwidth: We offer no less than 8 to 6 Megabit service, and even higher rates of throughput can be requested. We monitor for latency and our strong bandwidth is “always on”, allowing video content to be viewed uninterrupted, such as Hulu, Netflix, YouTube etc. Light file sharing is never a problem. Data demands are escalating - Rhinobee Internet Service is ALWAYS looking to enhance deliverable bandwidth to make high throughput available to our future Customers.

I’ll let you know the CPE model after the install.

Iain

1 Like
19

Iain, That is pretty amazing that they are offering a minimum of 6 megabit and you are able to get 20 meg for 70 dollars. That is a pretty amazing value for only 300 dollars in equipment charges. I worked Mendocino county installing equipment for Nortel back in the 80’s. That is a great part of California. I really liked Eureka when I worked up there. Thanks for the links Iain it sounds like you are working with a great Wisp.

Andy