Ubiquiti (UBNT) Q3 Earnings In Line, Revenues Down Y/Y - Analyst Blog

Ubiquiti Networks, Inc. UBNT reported third-quarter fiscal 2015 adjusted earnings (including stock-based compensation adjustments) of 46 cents a share, in line with the Zacks consensus estimate.

Ubiquiti Networks Inc. - Earnings Surprise | FindTheCompany

On a GAAP basis, net income in the fiscal third quarter was 46 cents per share, down 8% compared with 50 cents per share earned in the year-ago quarter.

Decline in the bottom line was triggered by a rise in operating expenses. Also, unimpressive revenue performance adversely affected the company’s earnings.

Quarterly Facts

Revenue for the reported quarter totaled $147.5 million, inching down 0.5% from the third quarter of fiscal 2014 and below the Zacks Consensus Estimate of $150 million.

Ubiquiti‘s Service Provider Technology segment fared poorly with revenues of $106.3 million, a 12.1% fall from the year-ago quarter. However, this decrease was partially offset by the Enterprise Technology segment’s robust revenue growth of 51% to $41.2 million.

Also, a decline in sales across all major geographies except North America weighed on the revenue growth.  

Strong demand of the UniFi access points primarily drove the sales growth in Enterprise Technology segment. Despite a decline in the overall revenues of the Service Provider Technology segment, the demand for AirMAX AC products was encouraging.

On a geographic basis, revenues for North America improved 56.5% to $45.7 million. However, revenues for South America and Asia Pacific regions declined 28.7% and 5.6% to 17.9 million and 17.1 million, respectively. Moreover, revenues for Europe, the Middle East and Africa declined 14.2% to $66.8 million.  

Gross margin for the quarter increased 50 basis points (bps) year over year to 44.7%.

Balance Sheet

At the end of third-quarter fiscal 2015, Ubiquiti had cash and cash equivalents of $451.1 million compared with $388.6 million as of Dec 31, 2014. Long-term debt stood at $90 million, rising from $72.2 million at the end of Dec 31, 2014. Shareholders' equity at the end of the fiscal third quarter totaled $435.4 million, up from $392.3 million at the end of Dec 31, 2014. Net cash flow from operating activities reached $36.7 million, up from $32.7 million at the end of the prior quarter.

Quarter Highs

In the third quarter of fiscal 2015, Ubiquiti shipped its airFiber X for the first time and sold related antennas that are expected to revolutionize the ‘last-mile’ wireless industry. Also, the company introduced new products like UniFi Video Camera Micro and UniFi Video software, thereby extending its UniFi Video surveillance management portfolio. At the same time, the company’s plans to introduce an innovative gigabit Ethernet router, EdgeRouter X, indicate significant commercial opportunities, going forward.

Guidance

Based on the current performance, the company has released its guidance for fourth quarter of fiscal 2015. Management expects revenues in the range of $140–$150 million. Non-GAAP earnings per share are expected in the range of 43–48 cents, while GAAP earnings per share are likely to come within 42–47 cents.

Our Take

Ubiquiti’s performance in third-quarter fiscal 2015 has been dismal, primarily on account of decline in sales across global key markets. Despite the weak performance, management believes the company’s diversified product portfolio, supported by the launch of new products, will allow it to penetrate new markets, thereby creating better growth opportunities. Ubiquiti’s strong commitment toward R&D remains one of its key distinguishing strengths that equips it with an additional advantage over its peers.   

Zacks Rank

Ubiquiti currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Juniper Networks, Inc. JNPR, Zhone Technologies Inc. ZHNE and InterDigital, Inc. IDCC. While Juniper Networks and Zhone Technologies Inc. sport a Zacks Rank #1 (Strong Buy), InterDigital, Inc. holds a Zacks Rank #2 (Buy).

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