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Ubiquiti Beats Q2 Earnings & Revenues, Shares Skyrocket

Ubiquiti Networks, Inc. UBNT came out with its third consecutive beat, and an impressive one at that. Its second-quarter fiscal 2016 adjusted earnings (including stock-based compensation adjustments) came in at 57 cents a share, beating the Zacks Consensus Estimate of 49 cents by 16.3%. Investors applauded the company's solid results, as shares soared over 20% in after hours trading following the release.

GAAP earnings for the company came in at 57 cents per share, rising 9.6% on a year-over-year basis.

Product launches coupled with strength in the Service Provider Technology segment boosted the company's results.

Inside the Headlines

Revenues rose 4.5% year over year to $161.9 million and surpassed the Zacks Consensus Estimate of $155 million. Segment-wise, the Service Provider Technology segment fared well with revenues rising 9.9% year over year to $109.6 million. This robust growth was partially offset by weak revenues of $52.3 million in the Enterprise Technology segment, which represented a decline of 2.2% year over year.

Strong performance of UniFi access points and other products primarily drove sales growth.

On a geographic basis, revenues rebounded in Asia, rising 19.8% year over year. Also, North America and South America were up 5.5% and 7.2% respectively over the comparable period last year, driven by higher demand for Enterprise products. However, Europe, the Middle East and Africa witnessed revenues decreasing 1.5%.

Non-GAAP gross margin for the quarter increased 370 basis points year over year to 48.9%.

Product Launches

Keeping its momentum of new offerings alive, Ubiquiti released EdgePoint, a pioneering blend of robust routing performance and fiber backhaul capability, coupled with the convenience of passive PoE support.

At the same time, Ubiquiti shipped UniFi AC access points, which are perfect for cost-effective deployment of high-performance wireless networks; LiteBeam, an extremely lightweight airMAX ac CPE device with an amazing range and disruptive pricing; and UniFi Cloud Key, a hybrid cloud device manager.

Liquidity & Share Repurchases

Ubiquiti ended the quarter with cash and cash equivalents of $496.7 million, compared with $436.1 million as of Sep 30, 2015. Long-term debt was $115.5 million, up from $87.5 million as of Jun 30, 2015.

Also, during the quarter, the company repurchased $36.7 million worth of shares. On Oct 20, 2015, Ubiquiti completed the $100 million worth of stock repurchase plan. Thereafter, it authorized a new share repurchase plan, comprising buyback of up to $50 million common shares.

Guidance

Based on the current environment, the company has released its guidance for the third quarter of fiscal 2016. Management expects revenues in the range of $160-$170 million. Non-GAAP earnings are expected within 53-60 cents per share, while GAAP earnings per share are projected to be in the band of 52 to 59 cents.

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. Finally, the government's "e-Rate" funding program in the U.S. will likely unlock multiple opportunities for Ubiquiti, thereby improving its prospects.

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 . Each of these stocks sport a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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