Ubiquiti Networks (NASDAQ: UBNT) announced impressive fiscal first-quarter 2018 results on Thursday morning, highlighting continued solid demand for its core wireless networking platforms, a number of compelling new products, and sustained growth from the Enterprise Technology segment.
However, Ubiquiti followed those results with seemingly disappointing guidance for the current quarter, leaving shares down around 4% on Thursday. Let's take a closer look at what Ubiquiti Networks accomplished over the past few months, as well as what investors should expect from the company.
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Ubiquiti Networks results: The raw numbers
What happened with Ubiquiti Networks this quarter?
- On an adjusted (non-GAAP) basis, which excludes expenses like stock-based compensation, net income grew 14.4%, and net income per share increased 16.5%. Ubiquiti repurchased and retired 2,751,024 common shares for roughly $54.98 per share this quarter.
- The top and bottom lines compared favorably to Ubiquiti's latest guidance, which called for revenue of $230 million to $250 million, and earnings per share of $0.80 to $0.90.
- Service provider technology sales -- which are comprised of airMAX, airFiber, EdgeMAX, and UFiber product lines -- declined 0.6% year over year to $119.9 million. Service provider technology sales climbed 5% sequentially from last quarter, however, thanks to demand for new AC technology products.
- Enterprise technology revenue grew 50% year over year on strong sales of UniFi products in all regions, and demand for AmpliFi consumer products.
- By geography:
- North American revenue grew 29.7% year over year to $96.2 million.
- South American revenue climbed 28.4% to $31.1 million.
- The Europe, Middle East, and Africa region saw revenue increase 14.7% to $93.3 million.
- Asia-Pacific revenue rose 1.2% to $25.3 million.
- Introduced the FrontRow wearable camera in mid-August.
- Launched the new airCube Wi-Fi access point for use by wireless ISPs in residential customer deployments.
- Launched UniFi AC SHD with Wave 2 technology and a dedicated security radio for persistent threat management.
What management had to say
In a prepared statement, Ubiquiti Networks management pointed out that this marked the company's ninth straight quarter of revenue growth, helped by their propensity for entering markets with new products at disruptive price points.
Even so, the midpoint of Ubiquiti's outlook for the holiday quarter (more on that below) calls for sales to be roughly flat on a sequential basis. When asked to clarify on that guidance during the subsequent conference call, CEO Robert Pera noted that there is still room for significant improvement in Ubiquiti's sales channel and supply chain execution. As such, Pera explained, there's still "a little bit of a mismatch between our quarter-to-quarter results and the true business demand."
For that reason, starting with the end of this fiscal year Ubiquiti will stop providing quarterly guidance in favor of focusing on its annual outlook.
In the meantime, for its current fiscal second quarter 2018 (ending Dec. 31, 2017), Ubiquiti expects revenue of between $240 million and $250 million, and GAAP earnings per diluted share of $0.85 to $0.92. By comparison, consensus estimates on Wall Street called for higher earnings of $0.94 per share on revenue of $251.5 million.
It's no surprise, then, to see shares pulling back on Thursday as the market laments Ubiquiti Networks' light guidance for the holiday quarter, even if its consumer-oriented products are still early in their respective life cycles. It's also tempting to be disappointed with Ubiquiti's decision to soon reduce transparency by removing quarterly guidance -- something to which prominent short-sellers will almost certainly latch to bolster their bearish case against the company.
But patient shareholders should be encouraged that Ubiquiti management is instead choosing to place greater focus on their long-term performance. In the end, this was another great quarter from Ubiquiti Networks on broad-based demand for its sleek, innovative products. And as the company continues to take market share and hone its operational focus, I suspect it will reward long-term investors accordingly.
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