Ubiquiti Networks, Inc. UBNT reported fourth-quarter fiscal 2015 adjusted earnings of 49 cents a share, which beat the Zacks consensus estimate by a nickel (11.3%). However, earnings per share declined 10.7% year over year.
Rise in operating expenses weighed on the bottom-line performance and was mainly responsible for the year-over-year decline.
For full-year fiscal 2015, earnings per share fell 1.5% year over year to $1.97 per share.
Quarter in Detail
Revenues declined 6.9% year over year to $145.2 million and lagged the Zacks Consensus Estimate of $146 million. Fall in revenues was largely triggered by weak performance of the Service Provider Technology segment. Also, a decline in sales across all major geographies except North America weighed on the revenue growth.
For full-year fiscal 2015, Ubiquiti’s revenues recorded 4.1% growth on a year-over-year basis.
The Service Provider Technology segment fared poorly with revenues declining 15.5% year over year to $104.8 million. This decrease was partially offset by robust revenue growth of 26.5% to $40.5 million in the Enterprise Technology segment. Strong shipments of UniFi switches primarily drove the sales growth in this segment.
On a geographic basis, revenues showed improvement only for North America, growing 2.3% to $44.3 million. Other three regions witnessed a fall in revenues. Revenues for South America were hit the worst, declining 27.6%; while that of Asia Pacific fell 6.7% to 18.2 million. Also, revenues for Europe, the Middle East and Africa edged down 0.9% to $56.9 million.
Gross margin for the quarter increased 140 basis points (bps) year over year to 45.5%.
Product Updates
Keeping its momentum of new offerings alive, Ubiquiti released software v1.7.0 during the fourth quarter, to be deployed in a host of EdgeRouter applications. Apart from this, the company released a new operating system called airOS 5.6.1, that will be highly useful for products in its airMAXac family. Moreover, the company launched an advanced version of its PowerBeam series for enhancing its airMAX ac product portfolio.
At the same time, keeping in mind the huge popularity of its UniFi family of products, Ubiquiti commenced the shipments of EdgeRouterTM X and EdgeRouterTM X SFP, its latest products from the series. The company expects these products to gain rapid market traction.
Balance Sheet
At the end Jun 30, 2015, Ubiquiti had cash and cash equivalents of $446.4 million compared with $451.1 million as of Mar 31, 2015. Long-term debt was $87.5 million, down from $90 million as of Mar 31, 2015.
Net cash from operating activities totaled $18.2 million, down from $36.7 million as of Mar 31, 2015. Fall in net cash was largely led by the expenses incurred due to the business e-mail compromise ("BEC") fraud.
Also, during the quarter, the company repurchased $19.7 million of shares.
Guidance
Based on the current performance, the company has released its guidance for first quarter of fiscal 2016. Management expects revenues in the range of $145–$155 million. Non-GAAP earnings are expected within 47–52 cents per share.
Our Take
We believe strong demand of Ubiquiti’s products in end markets will improve its prospects, going forward. The company’s strong commitment toward research and development activities for cultivating innovative products and state-of-art technologies is impressive and bodes well for the long term.
Encouragingly, the adverse impact of currency fluctuations on the company’s financials is declining over time, thus adding to its strength. Finally, the government’s “e-Rate” funding program in the U.S. will likely unlock multiple opportunities for Ubiquiti, thereby improving its prospects.
Zacks Rank
Ubiquiti currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Juniper Networks, Inc. JNPR, Ericsson ERIC and InterDigital, Inc. IDCC. While Juniper Networks sports a Zacks Rank #1 (Strong Buy), both InterDigital and Ericsson hold a Zacks Rank #2 (Buy).
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