Ubiquiti Networks, Inc. (UBNT) recorded adjusted earnings of 53 cents per share in the second quarter of fiscal 2015, higher than the year-ago tally of 48 cents. Considering stock-based compensation, adjusted earnings came in at 52 cents a share, comprehensively beating the Zacks consensus estimate of 45 cents.
On a GAAP basis, net income in the second quarter of fiscal 2015 was $46.3 million or 52 cents per share compared with $41.8 million or 47 cents per share in the year-ago quarter, recording an 11% increase. A major part of the company’s profits was derived from the Wi-Fi usage of smaller hotels, which cannot afford to hire its peers for establishing a robust Wi-Fi infrastructure. This strategy is uspported by management’s belief that the aggregate worth of 2-star, 3-star and 4-star hotels exceeds that of a few 5-star hotels.
Quarterly Facts
Revenue for the quarter totaled $153.1 million, registering a 10.6% rise from the second quarter of fiscal 2014 and in line with the Zacks Consensus Estimate of $153 million. The improvement in revenues can be attributed to the company’s latest strategic decisions regarding launch of products and exploration of new markets. As evident from the impressive figures, successful implementation of strategies to suit the changing market dynamics has strengthened the company’s growth potential.
Ubiquiti‘s Service provider technology segment has fared poorly, recording revenues of $99.7 million, a 10.5% fall from the year-ago quarter. However, this fall was partially offset by the enterprise technology segment’s revenues of $53.4 million, up from $27.0 million in the year-ago quarter. Robust performance of the UniFi technology platform has been the driving factor contributing to the overall profitability of the technology sector.
Gross profit totaled $69.0 million compared with $61.0 million in the prior-year quarter. Further, the company’s operating profit grew 8% year over year to $50.7 million.
Ubiquiti has recently released point-to-multi-point software for its popular product AirMax AC, and also commenced the shipment of UniFi Switch and UniFi VoIP. These factors have also contributed to the surge in profits.
Balance Sheet
At the end of the second-quarter fiscal 2015, Ubiquiti had cash and cash equivalents of $388.6 million compared with $391 million in the preceding quarter. Long-term debt stood at $72.2 million, declining marginally from $72.3 million in the fiscal first quarter of fiscal 2015. Shareholders' equity totaled $392.3 million; while net cash flow from operating activities reached $32.7 million, down from $46.9 million in the prior quarter of fiscal 2015.
Outlook
Management is bullish about the launch of airFiberX, expecting the latest product to escalate its profits. Ubiquiti is keen on exploring strategies that have not been tried out by its peers. Moreover, the company expects to widen its presence through its latest contracts. However, macroeconomic issues like currency fluctuations and an unfavorable political scenario in Russia and Iran remain as headwinds.
Based on the current performance, the company has released its guidance for the third quarter of fiscal 2015. Management expects revenues in the range of $146–$158 million. Non-GAAP earnings per share are expected to come in the range of 45–50 cents while GAAP earnings per share are likely to lie in the range of 44-49 cents
Zacks Rank
Ubiquiti currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include InterDigital, Inc. (IDCC), Juniper Networks, Inc. (JNPR) and Nokia Corporation (NOK). While InterDigital and Juniper Networks sport a Zacks Rank #1 (Strong Buy), Nokia Corporation holds a Zacks Rank #2 (Buy).
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