Ubnt page post 2

UBNT (Ubiquiti Networks)
In Thousands

Revenue
Q112     Q212     Q312     Q412     Q113     Q213     Q313     Q413     Q114     Q214     Q314
79167    87817    91665    94868    61535    74901    83155    101232   129687   138439   148,331

Net Income
Q112     Q212     Q312     Q412     Q113     Q213     Q313     Q413     Q114     Q214     Q314
21493    24691    27920    28485    13179    17803    20667    28841    40528    41792    45,199

Eps
Q112     Q212     Q312     Q412     Q113     Q213     Q313     Q413     Q114     Q214     Q314
(1.30)   .16      .30      .30      .14      .20      .23      .32      .45      .47      .50

Free Cashflow
Q112     Q212     Q312     Q412     Q113     Q213     Q313     Q413     Q114     Q214     Q314
15514    3346     31226    28392    21346    25712    34218    45252    51420    26122   (15,242)

Cash
Q112     Q212     Q312     Q412     Q113     Q213     Q313     Q413     Q114     Q214     Q314
52576    64844    68528    122060   132486   148301   181689   227826   279729   305553   291670

Debt
Q112     Q212     Q312     Q412     Q113     Q213     Q313     Q413     Q114     Q214     Q314
6976     6964     6966     6968     5008     5009     5011     5013     5015     5642     6,269

Thanks to SeekingAlpha.com for the use of their transcripts.

Subject: Ubiquiti Networks (UBTN)
Author: Buynholdisdead
Date: 05/11/2014
Sector: Technology
Industry: Communication Equipment


Ubiquiti Networks (UBTN) Closing Price $31.38

Price: $31.38
Dow:16,583.34
Nasdaq:4,071.87
SP500:1,878.48
Oil: $91.66
Nat Gas: $4.53
Gold: $1287.60
Silver: $19.12
Copper: $3.08
Corn: $507.50
Lean Hogs: $120.18
Feeder Cattle: $191.38
Coffee: $191.15
Cotton: $83.71
Lumber: $343.0

Today the Price is $31.38: The P/E ratio is 18.01 The stock price dropped $9.99 or 24.15%

**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.

**May 8th, 2014 3Q:2014 earnings highlights:
**Revenues were $148.3 million up 78% from 83.2 million
**TTM Revenues were 517.6 million up 65% from $314.5 million
**Cost of Revenues $82.7 million up 73% from $47.7 million
** Gross Profit were $65.6 million up 85% from $35.5 million
** Gross Profit Margin 44%
** Net Income were $45.2 million up 118% from 20.7 million
**3Q Earnings per share were $.50 up 117% from $.23
**TTM Earnings per share $.1.74 up 100% from $.87
**Diluted share count were 89,775,000 up from 89,653,000 Quarter over Quarter
**Cash Flow for the quarter was $62.3 million down from $81.3 million
**TTM cash flow was $159.3 million up from $156.7 million
**Cash $291.7 million down from $305.6 million QoQ
**Debt $6.3 million up from $5.6 million
**Inventory for the quarter was 66,004,000 up 104% from 32,323,000 QoQ
**Trading range between $30.50 to $56.85
** P/E range 17.53 to 32.67
** P/S range 3.04 to 5.67
**Gross Profit to asset ratio = 15%
**YOY Inventory turnover ratio = 4.38
**Inventory Holding Period = 11.87 weeks
**DSO’s = 30 days
**Signed new Distribution agreements with Ingram Micro and ScanSource Security, Leading Technology distributors.
**Launched Ubiquiti World Network, an alliance of independent Internet Service Providers and supporting U.S. advertising and marketing campaign.
**Refinanced outstanding credit facility, lowering their cost of capital. They are now with Wells fargo.

What a great quarter this was. Revenues up 78% YoY but only up 7% sequentially. This surprised me because I thought it would be up double digits with the increase of inventory last quarter of 97%. They increased inventory again this quarter by 104% and some people are worried about this. Inventory is up 316% from June 30th, 2013 to March 31,2014. But since they brought on a new CFO I think he has been looking at all of the problems with having to little inventory. Before they had customer complaints and last quarter the CFO said he was going to bring up the Inventory and he has. But the DSO’s sit at a respectable 30 days still and the inventory holding period is up from 6.62 weeks which was amazing to 11.87 weeks. I think they needed to raise inventory if they want to keep customers happy. Just think about you running a business of installing wireless access and you can’t get the equipment to help your customers. Wouldn’t you go somewhere else? I would have gone to the competitor to see what I can get. Cogs were up 73% but less than the growth of revenue which is good to see. Gross profits were up an amazing 85% and the gross profit ratio sits at 44%. Net Income is up 118%, now think about that, 118% YOY growth in Net Income. Pretty amazing. Earnings per share was up 100%, This company is really turning it around since the counterfeit problem. Their cash was down a little and their Cash flow was down substantially (into the negative). Also their Debt was up a little. All of this can be attributed to their ramp up in inventory. They have decreased their SG&A by 3% YoY in terms of percentage of Revenue and it sits at 4%. While they increased their spending on R&D this year by almost 4 million it is now 1% less YoY in terms of percentage of Revenue. Net Income is now 30% of Revenue where last year it was sitting at 24%. While I would like to see them spend more on R&D I am really happy with their SG&A spending. Another thing that really makes me happy is their stock compensation. They had a compensation package of 1.04 million which is .68% of Revenue. Now that’s a nice number. These guys also are pretty smart about stock buybacks. They haven’t bought back any stock since 2012 when they bought back 5,159,050 shares at an average price of 10.52. Their sales are all dominated in U.S. currency so the only currency risk they have is in operating expenses and that is negligible. They did settle on March 4, 2014 with Office of Foreign Asset Control (OFAC), and made a one time payment of $504,000 dollars because of a violation where some of their product was sold into Iran. But now that is all behind them. So with all of these great things happening why the bloodbath? Why did it sell off 24.15% or $9.99. It was all about the conference call and what the CEO stated.

First he talked about how they were focused on R&D and how they would be searching out for Engineers and that they were willing to hire as many as they could find. Also the CFO stated (Craig Foster) that a lot of the Engineers they were hiring were overseas so that they didn’t cost as much as Silicon Valley Engineers but the CEO (Robert Pera) was quick to add that they didn’t hire them because they were cheap but they hired them because they were good. Some very good Engineers can be hired all around the world and Ubiquiti is willing to build around these engineers. He also stated a little bit about the Ubiquiti World Network. This is a program where Ubnt is trying to help the little Wisp’s get the word out about their product. It is about combining them all together to give them sales literature and help them with marketing. Some of the accounts are very encouraging. I would suggest that you go to this link and see what they are saying www.ubnt.com/uwn.

The biggest thing the Analyst’s were worried about though was the inventory. It’s almost like they didn’t even show up for the last quarter conference call when one of the analysts, Raymond James, said “Craig, a couple of for you and a follow-up for Robert. In your prepared comments, you indicate DSOs should probably start trending back to the low 40s.” and the CFO responded with this answer “Okay. So first on the DSOs; yeah, I did say last quarter that we are going to try, you should expect it to creep up and then surprisingly enough, it actually went down” and this “Going forward, I don’t think 24-25 is just not sustainable, when we have people that are paying on net [30] terms. So it should creep up, it’s not going to happen overnight, but it should happen over the next couple of quarters.” The CEO and CFO have been very clear about what they are planning to do. But on this conference call they seemed to have a small problem explaining to one of the analyst’s, Jess Lubert, about their sales this quarter. The mix was higher for N then it was for AC. The N product is cheaper because it is older and slower technology, while the AC is more expensive. The analyst thought they sold more AC and couldn’t understand why the Average Selling Price (ASP) was lower. Another thing they kept botching was the calendar year and the fiscal year. They were talking about sales picking up and the CEO kept mixing up the fiscal and calendar year. He expects sales to pick up in the second half of the calendar year and right now they are at the end of the fiscal year. They also talked about their exposure to Russia and that is in the range of 2% to 4% of sales. Their exposure is 2% but with their distributors it moves it up to 4%. The CFO said he also expects enterprise to increase sequentially. Right now they divide their revenue up between Service Provider Technology, which includes airMAX, EdgeMax and airFiber platform, and the Enterprise Technology which includes the Unifi, mFi and AirVision platforms. This quarter Service provider Technology was 82% and the Enterprise was 18%.

But if I had to say what the Biggest mistake on the CC was it would have to be this statement from Robert J. Pera CEO and I quote “To repeat what I said last Call, when we first entered the public market, I was very proud of our financial margin profile. I’ve shifted my focus on accelerating a vision at the sacrifice of that financial profile. That doesn’t mean the financial profile will be any worse, it could get a lot better. It just means I’m completely focused on accelerating the visions” So to translate that, I could care less about making money I want to grow big and make this the top company and that is how you lose $9.99 of share price in one day. I wonder if Mr. Pera has been talking to Jeff Bezo’s and Jeff told him that analyst’s love it when you tell them the hell with making money? :slight_smile:

Conclusion: This sell off was crazy. The Ceo and CFO have been telling everyone that they were going to increase Revenue for at least two quarters. They said they wanted to bring DSo’s up to 40 and right now they are only at 30. These guys are going to be hitting it out of the park with Their New Ubiquiti World Network campaign and summer coming up the sales should be getting more impressive. While 7% sequential sales was not outstanding you have to remember. If weather is going to be a factor who do you think would get hurt the worse. Try climbing a pole or tower with a dish on your back in 20 to 50 below weather. It can wait for better weather. So I am overweight on this stock now because I just bought a bunch more at $24.10 and with a forward P/E of 16.09 you are getting an unbelievable company at a rock bottom price. At least that’s my Humble Opinion. I will leave you with this final thought. The CEO stated that you cannot look at this company on a quarter by quarter basis. That you must look at this company on a yearly basis. It looks to me like the Analyst’s just are not listening.

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

Analyst Estimates

Mar. 2014              $.49 beat $.50
Jun. 2014              $.51
Sept.2014              $.52
Cur year               $1.95
Next year Jun 15       $2.25

Andy

15 Likes

Conclusion: This sell off was crazy. The Ceo and CFO have been telling everyone that they were going to increase Revenue for at least two quarters.

Instead of Revenue that should read Inventory.

Andy

Andy, you do incredibly good write-ups and analysis! Congratulations and thanks!

Saul

I just bought a bunch more at $24.10

By the way, you got a heck of a buy on this purchase as the price is $31 something. Perhaps a misprint? :wink:

I just bought a bunch more at $24.10

Thanks Saul lol you are right. It wasn’t a misprint but a trick of the memory :slight_smile: I actually bought at 34.10 now if only I could have gotten it at 24.10. Thanks for the correction.

Andy