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Ubiquiti Networks Reports Q2 Fiscal 2013 Results

February 07, 2013 --



  • Revenues of $74.9 million, an increase of 22% from the prior quarter


  • Strong rebound in airMAX revenues


  • Non-GAAP operating profitability of $21.0 million, an increase of 27.9% from the prior quarter


  • $26.8 million in net cash provided by operating activities


  • Quarterly GAAP and Non-GAAP Diluted EPS of $0.20



SAN JOSE, Calif., Feb. 7, 2013 (GLOBE NEWSWIRE) -- Ubiquiti Networks, Inc. (Nasdaq:UBNT), a next-generation communications technology company, today announced results for the second quarter of fiscal 2013, ended December 31, 2012.



For the second quarter of fiscal 2013, Ubiquiti reported revenues of $74.9 million, a decrease of 15% compared to revenues of $87.8 million for the same period the prior year and an increase of 22% compared to the prior quarter. For the six months ended December 31, 2012 Ubiquiti reported revenues of $136.4 million, a decrease of 18% compared to revenues of $167.0 million for the same period in the prior year.



For the second quarter of fiscal 2013, GAAP net income was $17.8 million, a decrease of 28% compared to GAAP net income of $24.7 million for the same period the prior year and an increase of 35% from the prior quarter. Non-GAAP net income was $18.3 million, a decrease of 26% compared to $24.9 million for the same period last year and an increase of 35% compared to the prior quarter.


For the six months ended December 31, 2012, GAAP net income was $31.0 million, a decrease of 33% compared to GAAP net income of $46.2 million for the same period in the prior year. Non-GAAP net income was $31.9 million, a decrease of 32% compared to $46.6 million for the same period in the prior year.




The following table reconciles GAAP net income to non-GAAP net income and weighted-average shares used in computing net income per share of common stock-diluted to weighted-average shares used in computing non-GAAP Diluted EPS:




























































































 

Three Months Ended December 31,

Six Months Ended December 31,

 

2012

2011

2012

2011

 

(in thousands, except per share data)

 

(unaudited)

Net income

 $ 17,803

 $ 24,691

 $ 30,982

 $ 46,184

Stock-based compensation, net of taxes

536

211

929

421

Non-GAAP net income

 $ 18,339

 $ 24,902

 $ 31,911

 $ 46,605

Weighted-average shares used in computing net income per share of common stock- diluted

90,056

90,056

91,493

75,102

Weighted-average dilutive effect of stock options and restricted stock units




3,247

Weighted-average shares of Series A preferred shares outstanding

 —

3,390


15,131

Weighted-average shares used in computing non-GAAP diluted EPS (1)

90,056

93,446

91,493

93,480

Non-GAAP diluted EPS (1)

 $ 0.20

 $ 0.27

 $ 0.35

 $ 0.50

 

 

 

 

 

(1) Non-GAAP Diluted EPS is calculated using non-GAAP net income excluding stock-based compensation, net of taxes and weighted-average shares outstanding as if Series A preferred stock is treated as common stock for the periods presented.


"Our second quarter's strong sequential improvements were driven in large part, by our investments in the company's operational and legal infrastructure. We have implemented a revamped logistics system, which has led to lower lead times and days sales outstanding. Meanwhile, our airMAX anti-counterfeit strategy has made significant progress in decreasing counterfeit shipments and deterring counterfeit activities. Our anti-counterfeit manufacturing technology is now fully implemented across all platforms, including our newer airMAX technology," said Robert J. Pera, Founder and Chief Executive Officer of Ubiquiti Networks. "We are very excited about Ubiquiti's continued growth prospects in the operator market as well as new growth opportunities in the enterprise, security, and machine to machine communications markets." 



Recent Highlights




  • In September, the Company released EdgeMAX, a price/performance disruptive software and systems routing platform, offering what the company believes to be the world's first sub-$100 router technology with greater than 1 million packet-per-second processing performance packed with powerful routing features. 

     


  • In October, AirFiber, the Company's microwave backhaul solution, won the 2012 Wireless Internet Provider Association product of the year award.

     


  • AirVision, the Company's IP video surveillance platform has been re-architected and vastly upgraded with the release of the Company's AirVision 2.0 NVR and management software. 



Mr. Pera added, "Just as we anticipate strong demand ahead with AirFiber and EdgeMAX rounding out our airMAX technology offering, UniFi (wireless LAN) has the potential to become our next major growth opportunity as we work to expand its functionality during this calendar year. AirVision version 2.0 also has been completely architected and will also launch soon. Finally, our enterprise machine to machine communications platform (mFi) will have several new updates and products this year."



Business Outlook



Ubiquiti currently believes the demand environment in its end markets supports the following forecast for the Company's fiscal third quarter ending March 31, 2013:




  • Revenues of between $76 million and $84 million


  • GAAP Diluted EPS of between $0.19 and $0.23


  • Non-GAAP Diluted EPS of between $0.20 and $0.24                                                                                               



Conference Call



Ubiquiti Networks will discuss the Company's financial results by conference call at 2:00 p.m. PST today. Instructions for listening to the conference call over the Web are available on the investor relations portion of UBIQUITI NETWORKS's website at www.ubnt.com.



About Ubiquiti Networks



Ubiquiti Networks (Nasdaq:UBNT) is closing the digital divide by building network communication platforms for everyone and everywhere.  With over 10 million devices deployed in over 200 countries, Ubiquiti is transforming under-networked businesses and communities.  Our leading edge platforms, airMAX™, UniFi™, airFiber™, airVision™, mFi™ and EdgeMAX™ combine innovative technology, disruptive price performance and the support of a global user community to eliminate barriers to connectivity.   For more information, join our community at http://www.ubnt.com.



The Ubiquiti Networks, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=10852



Use of Non-GAAP Financial Information



To supplement our condensed consolidated financial results prepared under generally accepted accounting principles, or GAAP, we use non-GAAP measures of net income and earnings per diluted share that are adjusted to exclude certain recurring costs, expenses and gains such as stock based compensation expense and the tax effects of these non-GAAP adjustments. In addition, our non-GAAP adjustments present shares of Series A preferred stock as if these shares had been converted to common stock throughout the periods presented. Reconciliations of the adjustments to GAAP results for the three and six months ended December 31, 2012 and 2011 are provided below. In addition, an explanation of the ways in which management uses non-GAAP financial information to evaluate its business, the substance behind management's decision to use this non-GAAP financial information, the material limitations associated with the use of non-GAAP financial information, the manner in which management compensates for those limitations, and the substantive reasons management believes that this non-GAAP financial information provides useful information to investors is included under "About our Non-GAAP Net Income and Adjustments" after the tables below. 



These non-GAAP measures are not in accordance with or an alternative to GAAP and may be materially different from other non-GAAP measures, including similarly titled non-GAAP measures, used by other companies. The presentation of this additional information should not be considered in isolation from, as a substitute for, or superior to, net income or earnings per diluted share prepared in accordance with GAAP. 



Safe Harbor for Forward Looking Statements



Certain statements in this press release are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Statements other than statements of historical fact including words such as "look", "anticipate", "believe", "estimate", "expect", "consider" and "plan" and statements in the future tense are forward looking statements. The statements in this press release that could be deemed forward-looking statements include statements regarding anticipated strong demand, growth prospects, expected product launches and new updates, market positioning, potential of new technology platforms, effect of anti-counterfeit manufacturing processes, short and long term opportunities, and any statements or assumptions underlying any of the foregoing.



Forward-looking statements are subject to certain risks and uncertainties that could cause our actual future results to differ materially, or cause a material adverse impact on our results. Potential risks and uncertainties include, but are not limited to, fluctuations in our operating results; varying demand for our products due to the financial and operating condition of our distributors and their customers, distributors inventory management practices and general economic conditions; impact of counterfeiting and our ability to contain that; our reliance on a limited number of distributors; inability of our contract manufacturers and suppliers to meet our demand; our dependence on Qualcomm Atheros for chipsets without a short-term alternative; as we move into new markets competition from certain of our current or potential competitors who may be more established in such markets; our ability to keep pace with technological and market developments; success and timing of new product introductions by us and the performance of our products generally; if we fail to effectively manage the significant increase in our transactional sales volumes; we may become subject to warranty claims, product liability and product recalls; that a substantial majority of our sales are into countries outside the United States and we are subject to numerous U.S. export control and economic sanctions laws; costs related to responding to government inquiries related to regulatory compliance; our reliance on the Ubiquiti Community; our reliance on certain key members of our management team, including our founder and chief executive officer, Robert J. Pera; adverse tax-related matters such as tax audits, changes in our effective tax rate or new tax legislative proposals; whether the final determination of our income tax liability may be materially different from our income tax provisions; the impact of any intellectual property litigation and claims for indemnification and litigation related to U.S. Securities laws and economic and political conditions in the United States and abroad. We discuss these risks in greater detail under the heading "Risk Factors" and elsewhere in our Annual Report on Form 10-K for the year ended June 30, 2012 and in our Quarterly Reports on Form 10-Q for the quarters ended September 30, 2012 and December 31, 2012 and other filings filed with the U.S. Securities and Exchange Commission (the SEC), which are available at the SEC's website at www.sec.gov. Copies may also be obtained by contacting Ubiquiti Networks' Investor Relations Department, or by email at investor.relations@ubnt.com or Ubiquiti Networks' Investor Relations website at www.ubnt.com.



Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management's beliefs and assumptions only as of the date made. Ubiquiti Networks undertakes no obligation to update information contained in this press release. You should review our SEC filings carefully and with the understanding that our actual future results may be materially different from what we expect.


































































































































































































































Ubiquiti Networks Inc.

Condensed Consolidated Statement of Operations

(In thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

Three Months Ended December 31,

Six Months Ended December 31,

 

2012

2011

2012

2011

Revenues

 $ 74,901

 $ 87,817

 $ 136,436

 $ 166,984

Cost of revenues

44,416

50,527

80,931

96,681

Gross profit

30,485

37,290

55,505

70,303

 

 

 

 

 

Operating expenses:

 

 

 

 

Research and development

5,052

3,683

9,763

7,052

Sales, general and administrative

5,314

2,431

9,848

4,575

Total operating expenses

10,366

6,114

19,611

11,627

Income from operations

20,119

31,176

35,894

58,676

Interest income (expense) and other, net

 (197)

 (312)

 (283)

 (946)

Income before provision for income taxes

19,922

30,864

35,611

57,730

Provision for income taxes

2,119

6,173

4,629

11,546

Net income

 $ 17,803

 $ 24,691

 $ 30,982

 $ 46,184

 

 

 

 

 

Preferred stock cumulative dividend and accretion of cost of preferred stock 


 (9,704)


 (112,431)

Less allocation of net income to participating preferred stockholders


 (559)


 — 

Net income (loss) attributable to common stockholders—basic

 $ 17,803

 $ 14,428

 $ 30,982

 $ (66,247)

Undistributed earnings re-allocated to common stockholders


15


 — 

Net income (loss) attributable to common stockholders—diluted

 $ 17,803

 $ 14,443

 $ 30,982

 $ (66,247)

 

 

 

 

 

Net income (loss) per share of common stock:

 

 

 

 

Basic

 $ 0.20

 $ 0.16

 $ 0.35

 $ (0.88)

Diluted

 $ 0.20

 $ 0.16

 $ 0.34

 $ (0.88)

 

 

 

 

 

Weighted average shares used in computing net income (loss) per share of common stock:

 

 

 

 

Basic

88,094

87,487

89,532

75,102

Diluted

90,056

90,056

91,493

75,102















































































































 

 

Ubiquiti Networks Inc.

Reconciliation of GAAP Net Income to Non-GAAP Net Income

(In thousands, except per share data)

(Unaudited)

 

Three Months Ended December 31,

Six Months Ended December 31,

 

2012

2011

2012

2011

Net income

 $ 17,803

 $ 24,691

 $ 30,982

 $ 46,184

Stock-based compensation:

 

 

 

 

Cost of revenues

104

27

 185

33

Research and development

401

116

 667

232

Sales, general and administrative

388

208

 697

437

Tax effect of non-GAAP adjustments

 (357)

 (140)

 (620)

 (281)

Non-GAAP net income

 $ 18,339

 $ 24,902

 $ 31,911

 $ 46,605

Non-GAAP diluted EPS (1)

$ 0.20

$ 0.27

 $ 0.35

$ 0.50

 

 

 

 

 

Weighted-average shares used in non-GAAP diluted EPS (1)

90,056

93,446

 91,493

93,480

 

(1)   Non-GAAP Diluted EPS is calculated using non-GAAP net income excluding stock-based compensation, net of taxes and weighted-average shares outstanding as if Series A preferred stock is treated as common stock for the periods presented.






































































 

 

Ubiquiti Networks, Inc.

Reconciliation of Weighted-Average Shares Used in Computing Net Income Per Share of Common Stock-Diluted

to Weighted-Average Shares Used In Computing Non-GAAP Diluted EPS

(In thousands, except per share data)

(Unaudited)

 

Three Months Ended December 31,

Six Months Ended December 31,

 

2012

2011

2012

2011

Weighted-average shares used in computing net income per share of common stock- diluted

90,056

90,056

91,493

75,102

Add back:

 

 

 

 

Weighted-average dilutive effect of stock options and restricted stock units




3,247

Weighted-average shares of Series A preferred shares outstanding


3,390


15,131

Weighted-average shares used in computing non-GAAP diluted EPS

90,056

93,446

91,493

93,480





























































































































































































 

 

Ubiquiti Networks Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share amounts)

(Unaudited)

 

December 31, 2012

 June 30, 2012(1)

Assets

 

 

Current assets:

 

 

Cash and cash equivalents

 $ 148,301

 $ 122,060

Accounts receivable, net

55,902

75,644

Inventories

14,623

7,734

Current deferred tax asset

882

882

Prepaid expenses and other current assets

2,771

1,577

Total current assets

222,479

207,897

Property and equipment, net

5,664

4,471

Long-term deferred tax asset

232

232

Other long–term assets

1,804

1,136

Total assets

 $ 230,179

 $ 213,736

Liabilities, Convertible Preferred Stock and Stockholders' Deficit

 

 

Current liabilities:

 

 

Accounts payable

 $ 27,747

 $ 26,450

Customer deposits

1,392

235

Deferred revenues

815

805

Income taxes payable

5,353

946

Debt – short-term

5,009

6,968

Other current liabilities

14,931

17,031

Total current liabilities

55,247

52,435

Long–term taxes payable

7,727

7,727

Debt – long-term

73,601

22,623

Total liabilities

136,575

82,785

Stockholders' deficit:

 

 

Common stock

87

92

Additional paid–in capital

130,658

128,981

Treasury stock

 (123,864)

 (69,515)

Retained earnings

86,723

71,393

Total stockholders' deficit

93,604

130,951

Total liabilities, convertible preferred stock and stockholders' deficit

 $ 230,179

 $ 213,736

 

(1)    Derived from audited consolidated statements as of and for the year ended June 30, 2012.


























































































































































 

 

Ubiquiti Networks Inc.

Revenue by Product Category and Geographical Area

(In thousands) 

(Unaudited)

 

 

 

 

 

 

Three Months Ended December 31,

Six Months Ended December 31,

 

2012

2011

2012

2011

 

 

 

 

 

Revenue by Product Category

 

 

 

 

airMAX

 $ 48,752

 $ 52,939

 $ 80,809

 $ 102,774

New Platforms

11,905

4,226

27,533

6,960

Other systems

4,835

18,254

8,619

31,019

Systems

65,492

75,419

116,961

140,753

Embedded radio

1,519

2,567

3,233

5,792

Antennas/other

7,890

9,831

16,242

20,439

Total revenues

 $ 74,901

 $ 87,817

 $ 136,436

 $ 166,984

 

 

 

 

 

Revenue by Geographical Area

 

 

 

 

North America

 $ 12,106

 $ 21,440

 $ 32,467

 $ 46,381

South America

17,081

24,250

27,324

44,085

Europe, the Middle East and Africa

35,929

30,356

59,073

55,139

Asia Pacific

9,785

11,771

17,572

21,379

Total revenues

 $ 74,901

 $ 87,817

 $ 136,436

 $ 166,984


About our Non-GAAP Net Income and Adjustments



Use of Non-GAAP Financial Information



To supplement our condensed consolidated financial results prepared under generally accepted accounting principles, or GAAP, we use non-GAAP measures of net income and earnings per diluted share that are GAAP net income and GAAP earnings per diluted share adjusted to exclude certain recurring costs, expenses and gains. 



We believe that the presentation of non-GAAP net income and non-GAAP earnings per diluted share provides important supplemental information regarding non-cash expenses, significant recurring items that we believe are important to understanding our financial, and business trends relating to our financial condition and results of operations. Non-GAAP net income and non-GAAP earnings per diluted share are among the primary indicators used by management as a basis for planning and forecasting future periods and by management and our board of directors to determine whether our operating performance has met specified targets and thresholds. Management uses non-GAAP net income and non-GAAP earnings per diluted share when evaluating operating performance because it believes that the exclusion of the items described below, for which the amounts and/or timing may vary significantly depending upon the Company's activities and other factors, facilitates comparability of the Company's operating performance from period to period. We have chosen to provide this information to investors so they can analyze our operating results in the same way that management does and use this information in their assessment of our business and the valuation of our Company.



Use and Economic Substance of Non-GAAP Financial Measures used by Ubiquiti Networks



We compute non-GAAP net income and non-GAAP diluted earnings per share by adjusting GAAP net income and GAAP earnings per diluted share to remove the impact of recurring stock-based compensation expense and the tax effect of these adjustments. In addition, our non-GAAP diluted earnings per share is calculated using weighted-average shares outstanding as if Series A preferred stock outstanding had been converted to common stock throughout the periods presented. Examples of items excluded from net income are:




  • Recurring charges and gains, including:





  • Stock-based compensation expense is recognized in accordance with FASB Accounting Standards Codification, Topic 718, Stock Compensation.





  • Tax effect of non-GAAP adjustments. After adjusting to exclude the items described above, we apply the principles of ASC 740, Income Taxes, to estimate the non-GAAP income tax provision. 



Usefulness of Non-GAAP Financial Information to Investors



These non-GAAP measures are not in accordance with or an alternative to GAAP and may be materially different from other non-GAAP measures, including similarly titled non-GAAP measures, used by other companies. The presentation of this additional information should not be considered in isolation from, as a substitute for, or superior to, net income or earnings per diluted share prepared in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. We expect to continue to incur expenses of a nature similar to the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP net income and non-GAAP earnings per diluted share should not be construed as an inference that these costs are unusual, infrequent or non-recurring.



For more information on the non-GAAP adjustments, please see the tables captioned "Reconciliation of GAAP Net Income to non-GAAP Net Income" and "Reconciliation of Weighted-Average Shares Used in Computing Net Income (Loss) Per Share of Common Stock-Diluted to Weighted-Average Shares Used In Computing Non-GAAP Diluted EPS" included in this press release.


CONTACT: The Abernathy MacGregor Group
Amy Feng / asf@abmac.com / 213-630-6550



Ubiquiti Networks, Inc.

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