UI - NYSE
Ubiquiti Inc.
UI·NYSE
$576.13
+0.12%TechnologyCommunication Equipment
Ubiquiti Inc. develops networking technology for service providers, enterprises, and consumers. It develops technology platforms for high-capacity distributed Internet access, unified information technology, and consumer electronics for professional, home, and personal use. Its service provider product platforms offer carrier-class network infrastructure for fixed wireless broadband, wireless backhaul systems, and routing; and enterprise product platforms provide wireless LAN infrastructure, video surveillance products, switching and routing solutions, security gateways, and other WLAN products, as well as consumer products under the Ubiquiti Labs brand name. The company also provides technology platforms, such as airMAX, which include proprietary protocols that contain technologies for minimizing signal noise; EdgeMAX, a software and system routing platform; airFiber, a point-to-point radio system; and UFiber GPON, a plug and play fiber network technology to build high speed fiber internet networks. In addition, it offers UniFi -Enterprise WLAN, an enterprise Wi-Fi system that allows for on-site and remote management through the cloud; UniFi Protect, a video surveillance system, which provides statistical reporting and advanced analytics; UniFi Switch that deliver performance, switching, and power of Ethernet support for enterprise networks; UniFi Console, an enterprise class router and security gateway device; and UniFi Access, a door access system. Further, offers base stations, radios, backhaul equipment, and customer premise equipment; embedded radio products; antennas; and mounting brackets, cables, and power over Ethernet adapters. It serves customers through a network of approximately 100 distributors, online retailers, and direct to customers worldwide. The company was formerly known as Ubiquiti Networks, Inc. and changed its name to Ubiquiti Inc. in August 2019. Ubiquiti Inc. was incorporated in 2003 and is headquartered in New York, New York.
At a Glance
Live SnapshotMarket Cap$34.87B
EPS11.7700
P/E Ratio48.95
Earnings Date08/28/2026
Earnings Call Transcript
UI • 2015 • Q1
Executives
Anne Fazioli - Vice President of Investor Relations Robert J. Pera - Founder, Chairman and Chief Executive Officer Craig L. Foster - Chief Financial Officer, Principal Accounting Officer and Director
Analysts
Pierre Ferragu - Sanford C. Bernstein & Co., LLC., Research Division Erik Suppiger - JMP Securities LLC, Research Division Michael Kerlan - Wells Fargo Securities, LLC, Research Division James E. Faucette - Morgan Stanley, Research Division Matthew S. Robison - Wunderlich Securities Inc., Research Division Rajesh Ghai - Macquarie Research Timothy Long - BMO Capital Markets Canada Timothy J. Quillin - Stephens Inc., Research Division Tavis C. McCourt - Raymond James & Associates, Inc., Research Division Ryan Hutchinson - Pacific Crest Securities, Inc., Research Division Georgios Kyriakopoulos - SunTrust Robinson Humphrey, Inc., Research Division
Operator
Good day, ladies and gentlemen, and welcome to the Ubiquiti Networks Quarter 1 2015 Question and Answers Conference Call. [Operator Instructions] And as a reminder, this conference call may be recorded. And I'd like to introduce your host for today's conference, Anne Fazioli, you may begin.
Anne Fazioli
Thank you, operator, and thank you, everyone, for joining us today. I'm Anne Fazioli, Vice President of Investor Relations for Ubiquiti Networks. I'm here with Robert J. Pera, Founder, CEO and Chairman of the Board at Ubiquiti Networks; and Craig Foster, our Chief Financial Officer. Before we get started, I'd like to review the Safe Harbor statement. Some of the statements we will make during this call constitute forward-looking statements, including perspectives on our future financial results, products, market conditions and competition. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed during this call. Information on risk factors and uncertainties is contained in our most recent filing on Form 10-K with the SEC and our other SEC filings, which are available on the SEC's website at www.sec.gov. Forward-looking statements are made as of November 6, 2014, and we assume no obligation to update them. We hope you have reviewed management's prepared remarks, which are posted as a transcript on the Events & Presentations and Financial Information sections of our Investor Relations website at ir.ubnt.com. This call will be a Q&A-only call. [Operator Instructions] Operator, we are now ready for questions.
Robert J. Pera
Well, if you look at things like our forum, and the level of engagement, and traffic and the new customers and evangelism, it's going very fast. I think the total time spent in activity in our community has doubled year-over-year. So the trends I will get to evaluate the business are all positive. Now in terms of our reported revenue, which is based on sell-in because our channel is not as complex and don't have the tools necessary to actually capture sell-through. There we're always going to -- we're always going to err on the conservative side. And by that, I mean, we want to make sure these operators always have a supply of products to deploy. If you look two quarters back, I think there was a, in my opinion, overreaction to an inventory buildup, but we specifically did that because if you looked at our forum and our community, there's always been complaints about operators worried about Ubiquiti not having stock, and their network buildups are limited by stock availability. And so I think we addressed those pretty well, the past few quarters. And I think, like I've said, it's hard in the service provider to draw conclusions on quarter-to-quarter granularity. But if you look at from three years back to today, it's been impressive growth, and I think when you look at three years and the future, then you look at -- today, you're going to see at least the same type of impressive growth.
Robert J. Pera
Yes, well, we look at our total sell-through. We look at channel inventory numbers, and we look at upcoming months and deployments. And we make a decision on what inventory -- how much is healthy.
Robert J. Pera
Yes, I see the emerging markets in South America and Eastern Europe, Middle East, and then we have Africa has been ticking up, South Africa, and places like Indonesia. They are all going -- it's -- the variables are all dynamic. They're always going to be changing. So if one country is kind of the regulatory issues or maybe the import or currency issues, or political environment has challenges. Then maybe another country, it's a better environment. And there's so many of them. I don't think you could just point at one of them and draw conclusions on the overall business. You just kind to accept the emerging market, it's a great place to play. Like I said before, two-thirds of Internet users are from these emerging markets, and there's huge growth ahead. But it's not going to be as stable or visible as the developing markets are, and you just got to accept that.
Robert J. Pera
I think one of the great things about diversifying our product line is into the enterprise side. It is now we have new opportunities to expand our channel, and I think we've done this with guys like Ingram and ScanSource and Redington and ECS. And early indications so far, it looks like we're getting very promising additive revenue. And I think those distributors will show material additive revenue in the next year.
Craig L. Foster
I'm here.
Robert J. Pera
In the -- I'd say in the short-term future, it's going to happen.
Operator
And our next question comes from Rajesh Ghai from Macquarie.
Rajesh Ghai - Macquarie Research
I wanted to understand the strength that you've seen in the enterprise segment. How much was that in North America versus other geographies? And was that -- how much was that was -- can be attributed to the sell-in of the channel fill of UniFi video versus through demand?
Robert J. Pera
Okay. So I think our UniFi sales follows our service provider sales pretty closely in terms of geography. Roughly, I think, 30% is sold through the U.S. But U.S distributors also export to other countries in Canada, Mexico, and Australia and, in some cases, other countries. So I would estimate deployments are 20% in the U.S., 80% internationally. UniFi video still has a long ways to grow. We have high expectations in the next year. I think UniFi video follows the same distribution, roughly 20% deployments in the U.S., 80% internationally.
Rajesh Ghai - Macquarie Research
Right. And recognizing that most of the cash is overseas, but given that the stock is going to be down and given that -- given your confidence in the long-term prospects of the business, would you consider a buyback of these levels?
Robert J. Pera
To be honest, I haven't checked the stock. I'm in this for the long term, but I'll -- by this week, I'll or next week, I'll check it. And definitely, if it's attractive, yes, we've got to buy it back.
Rajesh Ghai - Macquarie Research
Okay. And one last question, if I could. Given -- when did you come to know that this quarter was going to be weak? And once the quarter was over, why didn't you preannounce given the magnitude of the miss?
Robert J. Pera
I think, we want to always get as much information as possible, and so we are constantly checking the activity of the channel and the sell-through of the channel before we want -- we made a final conclusion, especially on guidance.
Operator
Our next question comes from the line of Tim Long from BMO Capital Markets.
Timothy Long - BMO Capital Markets Canada
Two questions for me, if I could. Back to the new distributor relationships. It sounds like some of the ones that have been signed over the last few quarters are starting to impact. Just curious about India and China, ones that we're hearing about today. Maybe just give us a sense how big you think those can be as far as market expansion. And is that something we should expect to see maybe through the first half of calendar of '15? And then second, understanding the service provider issues in the emerging markets. But maybe could you talk a little bit about what happened with airMAX in the U.S.? What are the dynamics there? And are you expecting a little bit more rapid upgrade to AC in the North American market?
Robert J. Pera
So I think India and China are huge opportunities for us, and we haven't captured much of it yet. One of the challenges we have in India and China is there's more of a -- in areas like U.S. and South America, there's a lot of information transparency. The best product wins out. In China and India, there's more, I'd say, political barriers to entry in terms of finding partners and there's more of a traditional business model, but it's changing. And I think you've seen even in China, like Alibaba and Xiaomi are great examples of companies that have just break in (sic)[broken] the traditional business model apart in China, where Xiaomi has evangelized their brand and sold direct. And I think we have to apply ourselves a lot better in creating localized communities in a lot of these areas of the world, especially China and India, and in evangelizing our brand. And that's definitely one of our priorities right now, and we're putting in investment into a strategy for those markets. The U.S. and airMAX and the quarter-to-quarter trends, I think it's -- you could kind of look at the -- what I said about the emerging markets, where you have some seasonality due to vacations. We have new product introductions that some time takes time to qualify, and it's just very difficult in the service provider market to draw conclusions from quarter-to-quarter granularity. If we were a traditional company with a massive sales force and constantly looking at how to engineer revenue recognition timing on a quarter-to-quarter basis, maybe our results would look smoother, but quite frankly, I think our resources are better served, looking at how to get this company to the next level of billions of dollars in revenue, and you got a look at long-term investments on the R&D side rather than short term.
Robert J. Pera
Okay. There was a write down for excess -- or canceled material, so that relates to our service provider business. And one of the materials was end-of-life, and we placed a big order, and it -- to move to the new material was significant software development. We didn't think we would be done with the software development as early as we did, and the cost delta between the new chip and the end-of-life chip was more than the cancellation charge of the old material. So even though it looks like it's a onetime loss on a per unit basis, it's a net margin benefit.
Robert J. Pera
It should be within the coming -- hopefully, the coming weeks? Maybe, the coming month. And it should coincide with -- once we have a bigger volume of switches and our phones, we should have an official release on 4.0. Right now, it's in public beta.
Robert J. Pera
Okay. So I would say our advantages in UniFi is we've had an early start in terms of disruption as it's been around for a few years at these great price points. We're shipping at a rate of about two million access points per year. We have a very phenomenal, energetic, active community that's evangelizing the brand. And we significantly upgraded our R&D team, and we're quickly adding advanced features and expanding the product line. And I think for an incumbent to come in and compete against us, they're going to have to be all in and they're going to have to find some way to disrupt us. And I look at disruption as you need incredible price and you need incredible performance. And so price-wise, I don't think we leave too much on the table. It's very hard for a traditional company to compete with our margins and our operating structure. And then if they want to compete on performance, we're going after these companies, and we want to be the best performer in the space, not just looked at as a little cost solution. We want to be -- yes, we're a low cost solution, but we want to be the absolute best product in the space. And for a company to have a side project and feature-limit and not put their best stuff out under except for a brand name, I don't know if they can be effective at this point in time against something like UniFi.
Craig L. Foster
Yes. I think our tax rate is more subject to the fluctuation of the U.S. versus international sales. So at the beginning of the year, we kind of walked into things thinking that we were going to have about a 11% tax rate. We're marching that up a little bit, so somewhere between 11.5% and 12% for the full year.
Transcript from November 6, 2014
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