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Ubiquiti Networks Connects With Strong Earnings, Light Sales

By Steve Symington - Aug 13, 2019 at 9:00AM

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The networking technology specialist left the market underwhelmed with its latest quarterly update.

Ubiquiti Networks (UI 3.50%) released fiscal fourth-quarter results on Friday morning, detailing continued strong growth from its enterprise technology segment that was partially offset by a modest decline from its smaller service-provider business. Ubiquiti also ramped up its share repurchases this quarter and approved a big new buyback after nearly exhausting its current authorization.

Still, the networking technology leader's top-line gains were smaller than many investors had hoped, leaving Ubiquiti shares down around 6% in the wake of the news. So let's take a closer look at what it accomplished over the past few months. 

Contemporary wireless router made by Ubiquiti Networks next to a smartphone and keychain.

IMAGE SOURCE: UBIQUITI NETWORKS.

Ubiquiti Networks results: The raw numbers

Metric

Fiscal Q4 2019*

Fiscal Q4 2018

Growth

Revenue

$286.6 million

$269.8 million

6.3%

GAAP net income (loss)

$70.9 million

$70.1 million

1.1%

GAAP earnings (loss) per share

$1.01

$0.94

7.4%

DATA SOURCE: UBIQUITI NETWORKS. *For the quarter ended June 30, 2019. GAAP = generally accepted accounting principles. 

What happened with Ubiquiti Networks this quarter?

  • Adjusted for items like stock-based compensation, Ubiquiti's (non-GAAP) net income was $83.6 million, or $1.19 per share, up from $74.8 million, or $1.01 per share in the same year-ago period.
  • Note Ubiquiti does not provide specific quarterly guidance. So, for perspective, and though we don't typically pay too close attention to Wall Street's estimates, most analysts were modeling lower adjusted earnings of $1.16 per share on higher revenue of $303.6 million.
  • Gross margin expanded to 46.4% (from 44.7% in the same year-ago period) -- improving to the lower end of management's longer-term target for between 45% and 50% -- bringing full fiscal-year gross margin to 46.3% (from 43.6% in fiscal 2018). Gross profit increased as favorable product mix and lower inventory write-offs this year were partly offset by the impact of tariffs on goods imported to the U.S. from China.
  • Service provider technology revenue -- which includes airMax, airFiber, EdgeMAX, and uFiber products -- declined 4.7% to $100.9 million.
  • Enterprise technology segment revenue -- including UniFi, mFi, AmpliFi, and FrontRow devices -- grew 13.4% to $185.7 million.
  • As measured by geographic region, North American revenue rose 18.5% to $147.5 million, South American revenue went up 0.5% to $20.6 million, Europe,, Middle East and Africa (EMEA) revenue dropped 9.7% to $92.3 million, and Asia-Pacific revenue increased 16.5% to $26.2 million.
  • Ubiquiti repurchased 1,116,466 shares of common stock during the quarter at an average price of $127.52 per share -- spending more than $142 million and leaving just $7.4 million remaining under its repurchase authorization as of Aug. 8. That said, on Aug. 9, the company's board followed by approving a new $500 million repurchase program set to expire at the end of calendar 2020.

Looking forward

As a housekeeping item, investors should also note that next week -- specifically at the close of business on Aug. 19 -- Ubiquiti Networks is changing its name to "Ubiquiti Inc." and transferring its public listing from the Nasdaq to the New York Stock Exchange. Starting Aug. 20, the company will then trade as Ubiquiti Inc. on the NYSE under the ticker symbol "UI." 

In the meantime, and as per usual, Ubiquiti Networks did not hold a follow-up conference call with investors or analysts. So, at least until the company files its official quarterly 10-Q with the Securities and Exchange Commission (Friday's form 8-K technically contained its "preliminary results") -- or perhaps if management opts to hold an annual investor day presentation this fall -- there's little additional color on the underlying drivers of its results for now. But given broader macro concerns and Ubiquiti's top-line underperformance relative to Wall Street's average expectations, it was no surprise to see the stock falling in response.

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Stocks Mentioned

Ubiquiti Networks, Inc. Stock Quote
Ubiquiti Networks, Inc.
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