Ubiquiti Networks (UI -0.07%) announced fiscal second-quarter 2019 results early Friday, exceeding expectations for the fourth time in as many reports thanks again to its fast-growing enterprise technology segment.
With shares up more than 16% today as of this writing and 85% over the past year, let's take a closer look at how the networking hardware company capped its first half, as well as what investors should be watching in the coming quarters.
IMAGE SOURCE: UBIQUITI NETWORKS.
Ubiquiti Networks results: The raw numbers
| Metric |
Fiscal Q1 2019* |
Fiscal Q1 2018 |
Year-Over-Year Growth |
|---|---|---|---|
|
Revenue |
$307.3 million |
$250.8 million |
22.5% |
|
GAAP net income (loss) |
$77.8 million |
($51.5 million) |
N/A |
|
GAAP earnings (loss) per share |
$1.09 |
($0.66) |
N/A |
DATA SOURCE: UBIQUITI NETWORKS. *For the quarter ended Dec. 31, 2018. GAAP = generally accepted accounting principles.
What happened with Ubiquiti Networks this quarter?
- Adjusted for items like stock-based compensation, Ubiquiti Networks' (non-GAAP) net income climbed to $95.1 million, or $1.33 per share, up 75% from $0.76 per share in the same year-ago period.
- Ubiquiti Networks does not provide quarterly guidance. So for perspective, most analysts were modeling lower adjusted earnings of $1.08 per share on revenue of $276.4 million.
- Despite the impact of tariffs on certain products imported to the U.S. from China, gross margin expanded 7 percentage points year over year to 45.6%. This was well above management's near-term outlook provided in November for between 42% and 45%.
- Service provider technology segment sales (including the airMAX airFiber, EdgeMAX, and uFiber product lines) declined 5.6% year over year to $113.2 million.
- Enterprise technology segment revenue (including the UniFi, mFi, AmpliFi, and FrontRow products) climbed 48.2% to $194.1 million.
- By geography, North American revenue climbed 27.7% to $121.2 million, South American sales increased 0.8% to $20.9 million, EMEA region revenue grew 31.7% to $134.4 million, and Asia-Pacific revenue fell 7% to $30.7 million.
- The company repurchased 356,576 shares for $34.7 million between Nov. 8, 2018, and Feb. 7, 2019, good for an average price of $97.31 per share.
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Looking forward
Ubiquiti Networks once again declined to hold a subsequent conference call with analysts. But, similar to its past two quarterly reports, the company reiterated its target for gross margin to decline to between 42% and 45% in the near term given the cost of tariffs. Ubiquiti also reaffirmed its longer-term target for gross margin to remain between 45% to 50% as it works to mitigate the impact of tariffs.
Finally, the company reiterated its previous full fiscal-year 2019 outlook, which calls for revenue of $1.1 billion to $1.2 billion, and earnings per share of $4.00 to $4.80 -- with the caveat that the bottom line could decline to "$3.65 [per share] or lower" if tariffs are increased.
In the end, this holiday-quarter performance was as good as any Ubiquiti shareholder could have hoped. And the stock is continuing to respond in kind.
