Ubiquiti Inc. UI reported relatively modest second-quarter fiscal 2020 results, wherein the bottom line increased year over year and matched the Zacks Consensus Estimate. Following the results, its share price fell 15.1% in Friday’s trading session to close at $144.95 as the quarterly performance failed to meet the broader market expectations with investors probably anticipating a healthy beat.
On a GAAP basis, net income for the December quarter was $85.8 million or $1.32 per share compared with $77.8 million or $1.09 per share in the prior-year quarter. The improvement was primarily attributable to lower operating expenses and a reduction in outstanding share count.
Non-GAAP earnings came in at $91.4 million or $1.40 per share compared with $95.1 million or $1.33 per share in the year-ago quarter. The bottom line was in sync with the Zacks Consensus Estimate.
Ubiquiti Inc. Price, Consensus and EPS Surprise
Ubiquiti Inc. price-consensus-eps-surprise-chart | Ubiquiti Inc. Quote
Quarterly revenues were relatively flat at $308.3 million and missed the consensus estimate of $343 million. By product type, revenues from Service Provider Technology were $97.7 million compared with $113.2 million reported in the year-ago quarter due to lower revenues in Europe, Middle East and Africa (EMEA), North America, South America and Asia Pacific. Enterprise Technology revenues were $210.6 million, up from $194.1 million driven by product expansion and further adoption of UniFi technology platform across all regions other than EMEA.
Region wise, revenues from North America were $130 million compared with $121.2 million a year ago. Revenues from South America were $24.9 million compared with $20.9 million, and the same from Asia Pacific totaled $32.8 million, up from $30.7 million. The increase was primarily due to higher revenues from Enterprise Technology products, partially offset by lower contribution from Service Provider Technology products. Revenues from EMEA were $120.6 million, down from $134.4 million.
Overall gross profit increased to $145.1 million from $140.2 million in the year-ago quarter driven by lower costs of sales. Gross margin improved to 47.1% from 45.6%, led by favorable mix of products sold, partly offset by higher tariffs and indirect costs. Total operating expenses were $33 million compared with $48.6 million in the year-earlier quarter led by higher litigation costs in the year-ago quarter. Operating income improved to $112 million from $91.7 million mainly due to lower operating expenses.
Cash Flow & Liquidity
For the first six months of fiscal 2020, Ubiquiti generated $243.3 million of net cash from operating activities compared with $144.6 million in the prior-year period. As of Dec 31, 2019, the computer networking company had $100 million in cash and equivalents with $615.5 million of long-term debt. During the reported quarter, Ubiquiti repurchased 995,495 shares at an average price of $120.11.
Zacks Rank & Stocks to Consider
Ubiquiti currently has a Zacks Rank #3 (Hold).
Better-ranked stocks in the broader industry include Bandwidth Inc. BAND, ATN International, Inc. ATNI and Calix, Inc CALX, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bandwidth has long-term earnings growth expectation of 12.9%. It delivered positive earnings surprise of 67.6%, on average, in the trailing four quarters, beating estimates on each occasion.
ATN International surpassed earnings estimates twice in the trailing four quarters, the positive surprise being 143.9%, on average.
Calix has long-term earnings growth expectation of 6%. It delivered positive earnings surprise of 24%, on average, in the trailing four quarters, beating estimates thrice.
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