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Ubiquiti (UBNT) Q2 Earnings Miss Estimates, Revenues Up Y/Y


Ubiquiti Networks, Inc.’s UBNT second-quarter fiscal 2018 earnings fell short of estimates, putting an end to the three-quarter earnings beat streak. The company’s adjusted earnings came in at 76 cents, which missed the Zacks Consensus Estimate of 81 cents by 6.2%. Shares fell about 14.1% in the trading session following the results, indicating that investors were disappointed with the earnings miss.

However, the figure was up 5.6% compared with year-ago quarterly figure of 72 cents. The year-over-year improvement can primarily be attributable to impressive top-line growth during the quarter.

Inside the Headlines

Ubiquiti reported record revenues of $250.8 million, which crossed the higher end of the company’s projected range of $240-$250 million. Further, it grew 17.2% on a year-over-year basis, and topped the Zacks Consensus Estimate of $220 million comfortably. Steady demand in all product lines across end markets proved conducive to top-line growth.

Ubiquiti Networks, Inc. Price, Consensus and EPS Surprise

Ubiquiti Networks, Inc. Price, Consensus and EPS Surprise | Ubiquiti Networks, Inc. Quote

The company’s Enterprise Technology segment continued to fare remarkably well, with revenues surging a whopping 33.7% year over year to $131 million. Continued adoption of the company’s UniFi AC technology platform fueled striking growth.

The Service Provider Technology segment also achieved growth of 3.7% year over year, generating $119.9 million.

In terms of geography, revenues in Asia Pacific remained steady, rising 48.6% year over year. EMEA regions (Europe, the Middle East and Africa) and South America increased 31.8% and 7.6% respectively, from the comparable period last year. North America also witnessed a growth on a year-over-year basis, with revenues growing 0.4% during the fiscal second quarter.

GAAP gross margin for the quarter was down year over year to 38.6%.

Significant Developments

During the reported quarter, Ubiquiti initiated a new stock repurchase program. The stock repurchase program authorizes the company to repurchase up to $150 million of its common stock. Moreover, the company entered into a new credit facility, providing for a $400 million revolving credit facility as well as a $500 million term loan.

Further, during the reported quarter, the company announced UNMS (Ubiquiti Network Management System), proprietary software, offering for the centralized control of Ubiquiti devices across multiple sites globally.

Liquidity & Share Repurchases

Ubiquiti ended the fiscal second quarter with cash and cash equivalents of $823.8 million, compared with $604.2 million as of Jun 30, 2017. Long-term debt was about $453 million, compared with $241.8 million as of Jun 30, 2017.


Concurrent with the earnings release, the company provided guidance for third-quarter fiscal 2018. Management projects revenues for the fiscal third quarter in the range of $245-260 million, while non-GAAP earnings are expected within 92-99 cents per share.

To Conclude

Though the end of the earnings beat streak may not go well with investors, the solid year-over-year revenue growth of Ubiquiti is a major positive. Going forward, the company believes traction of the recently launched products to drive top-line growth.

However, in recent times, the company is experiencing adverse macroeconomic issues like currency risks, rising labor costs in key locations and natural disasters, which pose concerns. The extremely competitive environment, which includes big multinational wireless telecom players, service providers as well as newly established companies, poses a threat to the company.

Additionally, the company faces issues with its sales channel and supply chain execution, which might affect operations and impact margins negatively.

Ubiquiti currently carries a Zacks Rank #4 (Sell).

Stocks to Consider

A few better-ranked stocks in the same space include Aspen Technology, Inc. AZPN, Motorola Solutions, Inc. MSI and Harris Corporation HRS. While Aspen Technology sports a Zacks Rank #1 (Strong Buy), Motorola Solutions and Harris Corporation carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aspen Technology has an excellent earnings surprise history, surpassing estimates in the trailing four quarters, with an average beat of 33.7%.

Motorola Solutions also boasts an excellent earnings surprise history, exceeding estimates in the trailing four quarters, with an average beat of 11.8%.

Harris Corporation has delivered earnings beat thrice in the trailing four quarters, for an average beat of 6.7%.

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