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Ubiquiti Networks Inc (NASDAQ:UBNT)
Q4 2018 Earnings Conference Call
Aug. 24, 2018, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the Ubiquiti Networks Fourth Quarter Fiscal 2018 Conference Call. All participants are in a listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Ms. Laura Kiernan. Please go ahead.

Laura Kiernan -- Senior Vice President of Investor Relations

Thank you, Ann, and thank you everyone for joining us today. I'm here with Robert Pera, Founder, CEO, and Chairman of the Board at Ubiquiti Networks.

Before we get started, I'd like to review the safe harbor statement. Some of the statements we will make during this call constitute forward-looking statements, including the perspectives on our future financial results, products, market conditions, and competition. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed during today's call. Information on these risk factors and uncertainties is contained in our most recent Form 10-K filed with the SEC and our other filings, which are available on the SEC website at sec.gov. Forward-looking statements are made as of today, August 24, 2018, and we assume no obligation to update them.

This call will be a Q&A call only. Please limit yourself to one question. Operator, we are now ready for questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) We'll take our first question from Tim Long with BMO Capital Markets.

Tim Long -- BMO Capital Markets -- Analyst

Thank you. Robert, real strong performance in North America and in enterprise in the quarter, I'm sure they're related. Could you just talk a little bit about what was behind that strong performance this quarter? I'm assuming UniFi was strong, but was there anything -- any other color you can give me -- give us maybe on kind of the UniFi [ph] ASP dynamic or other products that might have contributed to that strength that would be great? Thank you.

Robert Pera -- Founder, Chief Executive Officer & Chairman of the Board

Sure. Thanks for the question. I think it was maybe a couple of main things. First, UniFi is expanding fast from just being known as WiFi to being a well unified networking solution with (Technical Difficulty) network security and we continue to add advanced features. The second thing is our supply chain is still pretty inefficient and our sales channel and their ability to stock is still very inefficient and we set up some -- a big facility in the US, inventory facility, that kind of plugged the weaknesses of the sales channel to date keeping product and stock. And we are still not there yet, but I think those are the two key things with UniFi. Moving forward, we continue to expand the application use and get into more verticals and then we need to continue our -- improving our operations to just meet the demand, which we're not doing yet.

Operator

We'll go next to Erik Suppiger with JMP Securities.

Erik Suppiger -- JMP Securities -- Analyst

Yes, thanks for taking the question. I have two, if I could. One, on the tariff front, can you tell us are you expecting those to take effect and if you are, would you consider raising prices to pass through some of the cost or the tax? And then, secondly, on the warehouse inventory. Your inventories are approaching your target -- your finished good inventories are approaching 8 to 12 weeks right now. How much of your shipments are actually coming from inventory that has been through your warehouse?

Robert Pera -- Founder, Chief Executive Officer & Chairman of the Board

I believe a decent percentage of our US revenue is now flowing through our inventory center. Outside the US, largely we ship directly out of Asia.

Erik Suppiger -- JMP Securities -- Analyst

That suggests that there's still going to be a considerable addition of finished goods as you expand warehouse inventory or is it at a level that you think you'll maintain at this point?

Robert Pera -- Founder, Chief Executive Officer & Chairman of the Board

My primary priority is we're trying to find a way to meet demand. Right now, we have still chronic stock-outs on key items and that's what's going to drive my business decisions not inventory level on the balance sheet.

Operator

We'll take a follow-up question from Tim Long with BMO Capital Markets.

Tim Long -- BMO Capital Markets -- Analyst

Thanks a lot. Just wanted to ask Robert on the gross margin. It sounds like there's obviously an impact from expedited shipping cost this quarter, but longer term that would go away, particularly with what you're doing on the inventory front. But you made some comments about new products having higher margins and some cost reduction actions that you continually take on the products. Can you just give us a little color on that -- that new product front? Is it -- are you addressing some newer areas and why would they have higher margin profiles? And the cost reduction actions, would that -- should we think of that really focused on across the portfolio, or is that mostly UniFi, or where would that be targeted most?

Robert Pera -- Founder, Chief Executive Officer & Chairman of the Board

So, I -- we're continuously making good cost reductions, but we also plan to continue to be aggressive on new product introductions. For example, video security is something I think we should have a much larger market share of and we're going to be very aggressive with UniFi Video over the next couple of years. And so you have a product mix that could bring margins down in the short term, but you also have some material efficiency, cost efficiency capture on mature products. So I think long term, our peer margins should remain relatively steady. Now where we have to improve is everything else that goes in those margins. Specifically, our shipping, logistics efficiency. We've been very inefficient on delivering product to the channel and meeting demand and as a result, we've had a lot of excessive cost due to last minute air shipping. So I think as our operations continues to mature, you're going to see significant margin improvement from that.

Operator

And this does conclude today's conference. We thank you for your participation. You may now disconnect.

Duration: 9 minutes

Call participants:

Laura Kiernan -- Senior Vice President of Investor Relations

Tim Long -- BMO Capital Markets -- Analyst

Robert Pera -- Founder, Chief Executive Officer & Chairman of the Board

Erik Suppiger -- JMP Securities -- Analyst

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