Ubiquiti (UBNT) Tops Q3 Earnings & Revenue Estimates, Up Y/Y

Ubiquiti Networks, Inc. (NASDAQ:UBNT) reported healthy third-quarter fiscal 2019 results with year-over-year increase in revenues and adjusted earnings. Both the bottom line and the top line surpassed the respective Zacks Consensus Estimate.

Net Income

On a GAAP basis, net income for the quarter was $88.3 million or $1.25 per share compared with $102.7 million or $1.32 per share in the prior-year quarter. The year-over-year deterioration, despite top-line improvement and reduction in share count was due to higher income tax expenses.

Non-GAAP net income came in at $88.9 million or $1.26 per share compared with $76 million or 98 cents per share, a year ago. The bottom line beat the Zacks Consensus Estimate by 20 cents.

Ubiquiti Networks, Inc. Price, Consensus and EPS Surprise

Ubiquiti Networks, Inc. price-consensus-eps-surprise-chart | Ubiquiti Networks, Inc. Quote

Revenues

Quarterly revenues increased 13.8% year over year to $284.9 million, primarily driven by higher sales at Enterprise Technology business. The top line surpassed the consensus estimate of $257 million.

By product type, revenues from Service Provider Technology were $109.4 million compared with $100.9 million in the year-ago quarter. Enterprise Technology revenues were $175.5 million compared with $149.5 million a year ago.

Geographically, revenues from North America were $109.1 million compared with $94.8 million in the year-ago quarter. Revenues from Europe, the Middle East and Africa were $125.7 million, up from $113.7 million. Revenues from Asia Pacific were $27.1 million, up from $22 million. Revenues from South America were $23 million compared with $19.9 million in the prior-year quarter.

Other Details

Gross profit increased to $132.8 million from $114.5 million in the year-ago quarter on the back of top-line growth. Gross margin improved to 46.6% from 45.7%, driven by the mix of products sold, however, partly offset by higher indirect expenses.

Total operating expenses were $30.7 million compared with $29.6 million in the year-earlier quarter. Despite year-over-year increase in operating expenses, operating income improved to $102.1 million from $84.9 million owing to higher gross profit.

Cash Flow & Liquidity

During the first nine months of fiscal 2019, Ubiquiti generated $158.3 million of net cash from operating activities compared with $285.1 million in the year-ago period. As of Mar 31, 2019, the computer networking company had $310.3 million in cash and equivalents with $438.9 million of long-term debt.

During the reported quarter, Ubiquiti repurchased 91,249 shares for $9 million at an average price of $98.63 per share. The company had $178.2 million worth of shares outstanding under its $200 million share repurchase program, announced on Nov 9, 2018.

Fiscal 2019 Outlook Reiterated

Ubiquiti reiterated its earlier guidance for fiscal 2019, backed by the recent business trends. The company expects to generate revenues between $1.1 billion and $1.2 billion and earnings per share (EPS) of $4.00-$4.80 in fiscal 2019. Also, due to potential impact of the tariffs imposed on certain products imported into the United States from China, the low-end of EPS may decline to $3.65 or lower. The company anticipates to mitigate the effect of the tariffs in the long term and expects long-term gross margin between 45% and 50%.

Zacks Rank & Stocks to Consider

Ubiquiti currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are Harris Corp. (NYSE:HRS) , Juniper Networks, Inc. (NYSE:JNPR) and Motorola Solutions, Inc. (NYSE:MSI) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Harris has long-term earnings growth expectation of 8%.

Juniper has long-term earnings growth expectation of 6.2%.

Motorola has long-term earnings growth expectation of 7.7%.

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