Ubiquiti Networks, Inc. Picks Up the Pace

The plug-and-play UniFi Cloud Key was one of several notable products Ubiquiti Networks shipped this quarter. Image source: Ubiquiti Networks.

Ubiquiti Networks (UI 0.58%) just released fiscal second-quarter 2016 results Wednesday after the bell. And with shares of the network communications platform specialist up 20% in after-hours trading as of this writing, investors couldn't be more pleased

Let's take a closer look at what Ubiquiti Networks achieved:

Ubiquiti Networks results: The raw numbers

Data source: Ubiquiti Networks. 

What happened with Ubiquiti Networks this quarter?

• Non-GAAP(adjusted) net income rose 5.5% to $49.7 million, and climbed 9.4% on a per-share basis to $0.58.
• For perspective, Ubiquiti Networks' guidance called for lower revenue between $150 million and $160 million, GAAP earnings diluted EPS of $0.48 to $0.55, and adjusted EPS of $0.49 to $0.56
• Service provider technology revenue climbed 9.9% year over year (and 6% sequentially from last quarter) $109.6 million, 
• Enterprise technology revenue fell 2.1% year over year -- but also rose 9% sequentially -- to $52.3 million, notably driven by demand for UniFi AC access points and UniFi Switch products
• Generated $77.3 million in cash from operations, up 136% over cash from operations of $32.7 million in last year's fiscal Q2
• Released EdgePoint, an intelligent WISP control point featuring "FiberProtect," which significantly reduces electrostatic discharge failures and electromagnetic interference in tower deployments
• Shipped LiteBeam, an attractively priced, lightweight, long-range airMAX ac CPE device
• Shipped UniFi Cloud Key, a hybrid cloud device manager that offers the security of a local controller with the convenience and remote connectivity capabilities of cloud controller
• Sales to both North America and South America were strong, each up 7% on a sequential basis to comprise 35% and 15% of total revenue, respectively
• Sales in Asia rebounded after last quarter's shipments in the region were negatively affected by flooding in India
• Subsequent to the quarter's end, completed its $50 million stock repurchase plan as of Feb. 3, 2016. This plan was originally approved by Ubiquiti Networks' board on Nov. 6, 2015

What management had to say 
Management explained in a prepared statement:

We believe that our quarterly financial results are reflective of our ability to execute Ubiquiti's global business model in the context of ever-changing business conditions. We continue to have a focused approach to deliver competitively priced, proprietary network communication platforms with outstanding performance to our end customers. The strength of our business model is evident in the ongoing global demand for our products.

Looking forward 
Based on analysis of orders received and estimated channel inventory levels, Ubiquiti anticipates revenue in the current quarter to be between $160 million and $170 million, representing growth of 8.5% to 15.3% over last year's fiscal Q3. Meanwhile, quarterly GAAP earnings per share are expected to be in the range of $0.52 to $0.59, and adjusted earnings per share should arrive at $0.53 to $0.60.

By contrast, Wall Street predicted revenue and adjusted earnings in fiscal Q3 would fall below the bottom ends of Ubiquiti Networks' guidance ranges, with analysts' consensus estimates calling for revenue and adjusted earnings of $155.1 million and $0.51 per share, respectively.

In the end, Ubiquiti Networks significantly exceeded expectations both with its fourth-quarter financial performance and what appears to be accelerated momentum given strong demand for its market-leading products looking forward. With shares having closed Thursday trading at reasonable 17.2 times trailing-12-month earnings and a mouth-watering 12.9 times next year's estimates -- and given the likely scenario Wall Street will ratchet up those expectations once it has a chance to fully digest these results -- it's no surprise to see investors so aggressively bidding up Ubiquiti Networks stock today.