UBNT (Ubiquiti Networks)
Thanks to SeekingAlpha.com for the use of their transcripts.
Subject: Ubiquiti Networks (UBNT)
Author: Buynholdisdead
Date: 02/06/2015
Sector: Technology
Industry: Communication Equipment
Ubiquiti Networks (UBNT) Closing Price $28.78 on February 6, 2015, UBNT reported on February 5th 5:00pm ET and the stock popped $3.76
Price: $29.99
Dow:17,824.29
Nasdaq:4,744.40
SP500:2,055.47
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Nat Gas: $2.58
Gold: $1234.60
Silver: $16.69
Copper: $2.59
Corn: $385.75
Lean Hogs: $69.27
Feeder Cattle: $199.45
Coffee: $168.05
Cotton: $58.64
Lumber: $315.50
Today the Price is $29.99: The P/E ratio is 15.07
**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 ($73.9 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.
**August 7th, 2014 4Q:2014 earnings highlights:
**Revenues were $156 million up 54% from 101.2 million
**TTM Revenues were 572.5 million up 78% from $320.8 million
**Cost of Revenues $87.1 million up 53% from $56.9 million
** Gross Profit were $68.9 million up 55% from $44.4 million
** Gross Profit Margin 44%
** Net Income were $49.4 million up 72% from 28.8 million
**4Q Earnings per share were $.55 up 72% from $.32
**TTM Earnings per share $.1.97 up 121% from $.89
**Diluted share count were 89,821,000 up from 89,064,000 Quarter over Quarter
**Cash Flow for the quarter was ($149 million) down from ($1.8 million)
**TTM cash flow was $117.3 million down from $126.5 million
**Cash $347.1 million up from $291.7 million QoQ
**Debt $0 down from $6.3 million
**Inventory for the quarter was 46,349,000 down from 66,004,000 QoQ
**Trading range between $30.60 to $47.78
** P/E range 15.53 to 24.25
** P/S range 4.80 to 7.50
**Gross Profit to asset ratio = 15%
**YOY Inventory turnover ratio = 6.88
**Inventory Holding Period = 7.56 weeks
**Average days sales outstanding (“DSO”) of 32 days
**Launched EdgeSwitch, the first switch of its price/performance class, designed to offer superior performance and capability for a fraction of the cost of a traditional enterprise switch.
**Launched UniFi Video, a new line of video surveillance camera control software and a new generation of cameras - the UVC, UVC-Dome, and UVC-Pro models - to join the UniFi family of products
**Launched UniFi VoIP, a new scalable VoIP enterprise smart phone technology to provide price/performance disruptive telephony solutions for business, schools, hotels, and more.
**November 06, 2014 1Q:2015 earnings highlights:
**Revenues were $150.1 million up 16% from $129.7 million
**TTM Revenues were 592.9 million up 52% from $389 million
**Cost of Revenues $89 million up 24% from $71.7 million
** Gross Profit were $61.1 million up 5% from $58 million
** Gross Profit Margin 41%
** Net Income were $37.7 million down 7% from 40.5 million
**1Q Earnings per share were $.42 down 7% from $.45
**TTM Earnings per share $1.94 up 62% from $1.20
**Diluted share count were 89,913,000 up from 89,821,000 Quarter over Quarter
**Cash Flow for the quarter was $43.5 million down 15% from $51.4 million
**TTM cash flow was ( $101.9 million) down from $156.6 million
**Cash $391 million up from $347.1 million QoQ
**Debt $0 down
**Inventory for the quarter was 38,747,000 down from 46,349,000 QoQ
**Trading range between $38.00 to $50.00
** P/E range 19.59 to 25.77
** P/S range 5.76 to 7.58
**Gross Profit to asset ratio = 11%
**YOY Inventory turnover ratio = 8.68
**Inventory Holding Period = 6 weeks
**Average days sales outstanding (“DSO”) of 40 days
** November 17th paid an annual dividend of $.17 to be determined by the board each year
**Signed new distribution agreements with ECS and Redington, leading technology distributors in China and India, respectively, who we expect to accelerate our expansion into established and emerging markets.
**February 5th, 2014 2Q:2015 earnings highlights:
**Revenues were $153.1 million up 11% from $138.4 million
**TTM Revenues were $607.5 million up 34% from $452.5 million
**Cost of Revenues $84.1 million up 9% from $77.5 million
** Gross Profit were $69 million up 13% from $61 million
** Gross Profit Margin 45%
** Net Income were $46.3 million down 11% from $41.8 million
**2Q Gaap Earnings per share were $.52 up 11% from $.47
**Non-Gaap diluted EPS of $.53 up 10%
**TTM Earnings per share $1.99 up 35% from $1.47
**Diluted share count were 89,737,000 down from 89,913,000 Quarter over Quarter
**Cash Flow for the quarter was $27.7 million down 1% from $28.1 million
**TTM cash flow was ($151.7) million down from $159 million
**Cash $388.6 million down from $391 million QoQ
**Debt $0 down
**Inventory for the quarter was 37,509,000 down from 38,747,000 QoQ
**Trading range between $25.67 to $34.87
** P/E range 12.90 to 17.52
** P/S range 3.79 to 5.15
**Gross Profit to asset ratio = 12%
**YOY Inventory turnover ratio = 8.8
**Inventory Holding Period = 6 weeks
**Average days sales outstanding (“DSO”) of 44 days
** Record Revenue in Enterprise Technology
**Released Point-to-Multi-Point (PtMP) software for airMax AC
**Shipped first Unifi Switch an Unifi Voip units to select distributors
**Launched airFiber X
**Service Provider Technolgy at 65% of Revenue and Enterprise Technology at 35%
Balance Sheet
On the Balance sheet Cash was up less than 1% YoY but was down from last Quarter. They had a dividend payout of $15 million dollars and they bought back $15 million dollars of stock. They had $37.5 million dollars of inventory which is 8.8 turns on an annualize basis, compared to 8.4 turns in the prior quarter. They expect inventory turns between 8 and 9 going forward. They had an increase in DSO this quarter of 4 days and this was due to their adding larger distributors worldwide and giving them longer credit terms as well as extending more favorable credit terms to other distributors who have proven their credit worthiness.
Income Statement
Revenue was up 11% with the Service provider Technology providing 65% of the Revenue at $99.7 million and Enterprise Technology providing 35% of Revenue at $53.4 million. The Service provider Technology is slipping, down 7% from last quarter. The Enterprise Technology was up 25% from the last quarter and 98% from the prior year. The Enterprise is growing very fast. Revenue was split up in the following, North America was up from $53.6 million to $54.1 million, South America was down from $31.1 million to $22.2 million, Emea was up from $50.6 million to $60.1 million, and Asia Pacific was up $14.8 million to $16.7 million. North America and EMEA are providing most of the Revenue with South America slipping 6 percentage points. R&D, as a percentage of revenue was at 8% up 2% YoY and SG&A was at 3.5% of revenue down from 4%. Gross Margins were at 45% up from 44%.
Cashflow Statement
Cash Flow for the quarter was essentially flat YoY. They were Cash Flow positive this quarter.
During the conference call Pera was asked about the video product which is part of the enterprise products he said that it is not a meaningful part of revenue at this time but he expects it to be 20% of enterprise revenue in the next few years. He also went into where he sees UBNT’s market. He explained that they really are not competing against Cisco and Aruba because UBNT’s customers are the two, three, and four star hotels. Cisco and Aruba have the five star hotels but there are more two, three, and four star hotels. Pera was asked when he expected the Service Provider Technology to pick up. He said that usually the winter months are slow but they always see a pickup in Revenue whenever they introduce a new product and since they just introduce the airMax ac an new airFiber products that we should see a bump in the next year. The new airFiber X product is not full duplex and runs at 500 mbps and has no range limitations. Pera expects this to be the de facto product for outdoor point to point links.
Pera was asked if the strength in the Enterprise product was because of North America but Pera said that the strength was across all regions. He also state that they plan on expanding Unifi through existing customers by selling a new UniFi 4.0 UI dashboard. On the dashboard you will not only have the products that you have bought but all other existing products will be on the dashboard but just not accessible. So this dashboard will allow you to control all the products in one place. At this point in time the majority of sales in UniFi has been WiFi, but in the future they hope to diversify into switching, voip, security gateways and more things to come.
Conclusion:
At this point Pera is not worried about competition. One of the analyst’s asked him about Ruckus Xclaim. Supposedly Ruckus stated on their conference call that they were going after UBNT’s enterprise market. He said that they tried the product in the lab but he didn’t seem impressed. He also talked about their customers and that he saw a lot of greenfield out there with huge growth and that they do not need to worry about incumbents. Pera stated that he is optimistic on the service provider business in the coming year. The airFiber products really haven’t taken off yet but if he is correct and it starts growing again with the Enterprise technology this company could be growing to new heights this year. Finally Pera said that they have proven their enterprise model when nobody thought they could, with a $200 million run rate in the enterprise market. He also stated that he believe there is a lot of other places they could take their business model and that they are trying to identify billion or multibillion dollar opportunities in the future to try their business model. I think they are going to be growing for a long time.
Andy
Long UBNT and overweight.
Analyst Estimates
Dec. 2014 $.48 beat
Mar. 2015 $.51
Jun. 2015 $.54
Jun. 2015 $2.01Current year
Next year Jun 16 $2.34
