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Ubiquiti Networks Makes It 3 Straight

By Steve Symington – Nov 9, 2018 at 5:56PM

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The networking-technology specialist started its new fiscal year on a high note.

Ubiquiti Networks (UI 1.65%) announced fiscal first-quarter 2019 results early Friday, trouncing expectations for the third straight time this year on the continued outperformance of its budding Enterprise Technology business.

Shares climbed 17.6% when all was said and done today -- leaving the company with a nearly 60% gain so far in 2018. Let's dig a little deeper to see what drove Ubiquiti Networks this quarter.

Contemporary design in Ubiqiuiti Networks router next to a smartphone and keys.

IMAGE SOURCE: UBIQUITI NETWORKS.

Ubiquiti Networks results: The raw numbers

Metric

Fiscal Q1 2019*

Fiscal Q1 2018

Year-Over-Year Growth

Revenue

$282.9 million

$245.9 million

15.1%

GAAP net income

$85.7 million

$74.9 million

14.4%

GAAP earnings per share

$1.16

$0.92

26.1%

DATA SOURCE: UBIQUITI NETWORKS. *For the quarter ended September 30, 2018. GAAP = generally accepted accounting principles.

What happened with Ubiquiti Networks this quarter?

  • On an adjusted (non-GAAP) basis, which excludes items like stock-based compensation, Ubiquiti's net income was $86.2 million, or $1.17 per share, up from $0.92 per share in the same year-ago period.
  • Ubiquiti Networks doesn't provide specific quarterly guidance. So for perspective -- and though we don't usually pay close attention to Wall Street's demands -- consensus estimates predicted lower earnings of $0.93 per share on revenue of $252 million.
  • GAAP gross margin arrived at 46.5%, up from 45.4% in the same year-ago period.
  • Service-provider technology segment revenue declined 12.5%, to $105 million, including sales from airMAX, airFiber, EdgeMAX, and UFiber products.
  • Enterprise technology segment revenue soared 41.3%, to $177.9 million, including the UniFi, mFi, and its consumer-centric AmpliFi and FrontRow products.
  • By geography, North American revenue climbed 24.1%, to $119.4 million; Europe, Middle East, and Africa revenue increased 33.9%, to $124.9 million; Asia-Pacific revenue declined 3.6%, to $24.4 million; and South American revenue dropped 54.3%, to $14.2 million.
  • Ubiquiti repurchased and retired 1,238,163 shares of common stock this quarter for $112.8 million, or an average price of $91.07 per share.
  • On Nov. 9, 2018, the company initiated a new $200 million stock-repurchase program. 

What management had to say

Ubiquiti Networks didn't hold a subsequent conference call with analysts. But just as management warned could be the case during their call three months ago, the company stated that gross margin is expected to fall to between 42% and 45% in the near term due to recent tariffs on products imported into the U.S. from China.

That said, Ubiquiti added that it anticipates "mitigating the effect of the tariffs in the long term and therefore our long-term gross margins are expected to remain between 45% to 50%."

Looking forward

As such, Ubiquiti Networks reaffirmed its full-year guidance for fiscal 2019 revenue of $1.1 billion to $1.2 billion and earnings per share of $4.00 to $4.80. Recall that the latter range came with the caveat last quarter that earnings could fall to "$3.65 or lower" if the aforementioned tariffs were implemented -- though Ubiquiti's encouraging commentary on its ability to maintain healthy gross margins should alleviate some pressure to that end.

In any case, it's clear that the market is more than pleased with Ubiquiti's strong start to the fiscal year and its reiterated outlook heading into the holidays.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Ubiquiti Networks. The Motley Fool has a disclosure policy.

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Ubiquiti Networks, Inc. Stock Quote
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