Financial Data Points
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Q411 Q113 Q213 Q313 Q413 Q114 Q214 Q314
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Revenue 94.87 61.54 74.90 83.16 101.23 129.69 138.44 148.33
CFO 34.06 15.78 20.12 23.50 33.21 45.90 47.12 50.14
Net inc 28.49 13.18 17.80 20.67 28.84 40.53 41.79 45.20
Shares out 94168 92,925 90,056 88,953 89,064 89,473 89,653 89775
EPS 0.30 0.14 0.20 0.23 0.32 0.45 0.47 0.50
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Valuation
Date 5/9/2014
Stock Price 41.37
PE (TTM) 23.78
PS (TTM) 7.17
P/CFO (TTM) 21.06
Q4 Guidance (mid-point of specified range)
- Revenue - $150M
- EPS - $0.50
http://files.shareholder.com/downloads/AMDA-JI74R/2916681593…
Notes from Prepared Remarks
- Revenues up 78% YoY; up about 7% over prior Q.
- EPS up 100% YoY; up about 10% over prior Q.
- Average days sales outstanding in accounts receivable (“DSO”) of 30 days
- Service provider technology products accounted for 82% of the revenues; grown 60% over prior year. Growth was attributed to the continued infrastructure build-out of Wireless Internet Service Providers (“WISPs”) using airMAX® and complementary products.
- Enterprise technology provides about 18% of revenues; 1% from the prior quarter and 256% from the prior year.
- Overtime, Enterprise technology should become much bigger and this segment should also grow faster than the service provider technology segment.
-
Interesting that EMEA accounted for 52% of the total revenues. This is what management had to say about this:
"Over the last year we have become more sophisticated in our ability analyze channel sales and inventory around the world. We are committed to keeping channel inventory in-line with end market demand and we think you can see our discipline during this quarter. Regions will continue to fluctuate, but we believe this is a reflection of our strategies to keep the channel optimized to turn inventory efficiently. We also continue to monitor geopolitical developments as they materialize because of their potential impact on ports being available to receive goods, but we did not see an impact during our third quarter results.” -
SG&A: UBNT’s USP → under 5% of revenue. No net additional headcount.
Commentary on inventory
- looks like the second half of the year would be strong.
"During the last quarter, we invested heavily in inventory. Our inventory balance at the end of the quarter was $66.0 million, up substantially from $32.3 million in the prior quarter. The increase was a result of new products that had not been previously released, and the additional build of existing products. Based upon channel sales data, we believe the last half of the calendar year is typically the strongest period for our end markets, primarily due to favorable weather for outdoor equipment installations. We have had constraints in the past with inventory supply during these periods, and we have prepared accordingly by investing in finished goods and certain pre-paid arrangements with some of our key component suppliers. We expect our higher stock levels to reduce our delivery lead-times and increase supply consistency for our channel partners to support their demand for our products. We expect to hold 7 to 8 weeks of previously introduced product inventory in our warehouse going forward. The total inventory number will fluctuate when we introduce new products because there will be an element of “stocking the shelves” during the initial sell-in period.
We recognize a currently paying distributor is more likely to remain a productive long-term channel partner. Over a year ago, we overhauled the credit process for our distributors and have demonstrated excellent results through a dramatic reduction in our average days sales outstanding in accounts receivable (“DSO”). This quarter we saw DSO of 30 days, compared to 24 days in the prior quarter, and 42 days in the third quarter of fiscal 2013. Going forward, we expect to see our DSOs increase to the low 40s due to the addition of some larger distributors."
Some thoughts
The quarter was solid.
Their DSO commentary above implied that they should have a strong second half. Q4 13, for example, was significantly stronger than Q3 13, about 22% increase in revenues. Management has guided for about $150M in revenue for Q4 14, which is pretty much no growth at all and doesn’t seem to line up with the inventory buildup etc discussed in the prepared remarks. Anyways, the forward guidance must be the cause of AH decline. Is management sandbagging? Don’t know, and need to check the call transcripts for more information. Stock probably decently priced if there’s more growth ahead.
Anirban