01—Abstract
Summary
Summary of the 10-K filed August 25, 2017. Cited figures are marked; the original filing is the authoritative source.
Ubiquiti Networks, Inc. (now Ubiquiti Inc.) reported fiscal 2017 (year ended June 30, 2017) revenues of $865.3 milliona, up from $666.4 million in fiscal 2016, and net income of $257.5 million, up from $213.6 million.
Diluted earnings per share were $3.09b, compared with $2.49 in fiscal 2016. Growth was led by Enterprise Technology, which rose to $409.7 million (47% of revenue) from $248.0 million, while Service Provider Technology reached $455.6 million (53%). Gross profit margin declined to 46% from 49%, attributed to product mix, fulfillment costs, inventory obsolescence charges and warranty accruals.
Operating expenses remained modest at $105.9 millionc, and income from operations was $289.8 million. The company ended the year with $604.2 million in cash and cash equivalents, of which $546.8 million was held by foreign subsidiaries. Total debt was $256.6 million, comprising $76.3 million on the Term Facility and $181.0 million on the Revolving Facility, after the April 2017 amendment raised the revolver to $300.0 million.
The company repurchased $105.2 milliond of common stock during fiscal 2017 and has $1.3 million remaining under its stock repurchase program. It paid no dividends in fiscal 2017 and states it has no current plans to pay cash dividends. The filing also discloses that the company's previously reported material weaknesses in internal control over financial reporting were remediated as of June 30, 2017, with KPMG LLP issuing an unqualified opinion on internal control.
Ongoing legal matters include a proposed $6.8 million shareholder class action settlement, a lawsuit filed by Synopsys, and a patent suit filed by Vivato/XR, with the company stating it cannot currently estimate possible losses in the latter two. The company is also pursuing recovery of the remaining $30.0 million lost in a 2015 business e-mail compromise fraud.
02—Key points
Key Highlights
- Revenues rose 30% to $865.3 million in fiscal 2017 from $666.4 million in fiscal 2016.
- Net income increased to $257.5 million from $213.6 million; diluted EPS was $3.09 versus $2.49.
- Enterprise Technology revenue grew to $409.7 million (47% of total) from $248.0 million, a 65% increase.
- Gross profit margin fell to 46% from 49%, mainly due to product mix, fulfillment costs, inventory obsolescence and warranty accruals.
- Cash and cash equivalents were $604.2 million at June 30, 2017, with $546.8 million held outside the United States.
- Total debt stood at $256.6 million; the revolving facility was increased to $300.0 million in April 2017.
- Share repurchases totaled $105.2 million in fiscal 2017, and the company states it has no current plans to pay cash dividends.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Ubiquiti kept $0.30.
- Revenue$865.3M100.0%
- Cost of revenue−$469.6M54.3%
- Gross profit$395.7M45.7%
- Operating costs−$105.9M12.2%
- Operating income$289.8M33.5%
- Interest, other & tax−$32.3M3.7%
- Net income$257.5M29.8%
Where FY2017 revenue went
$865.3M- Cost of revenue: $469.6M, 54% of revenue
- Net income: $257.5M, 30% of revenue
- R&D: $69.1M, 8.0% of revenue
- SG&A: $36.9M, 4.3% of revenue
- Interest, other & tax: $32.3M, 3.7% of revenue
Kept 30% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed August 25, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $865.27M$666.39M | +29.8% |
| Cost of Revenue | $469.56M$341.60M | +37.5% |
| Gross Profit | $395.71M$324.80M | +21.8% |
| R&D Expenses | $69.09M$57.77M | +19.6% |
| SG&A Expenses | $36.85M$33.27M | +10.8% |
| Operating Expenses | $105.95M$82.74M | +28.0% |
| Operating Income | $289.76M$242.06M | +19.7% |
| Net Income | $257.51M$213.62M | +20.5% |
| EPS (Basic) | $3.16$2.53 | +24.9% |
| EPS (Diluted) | $3.09$2.49 | +24.1% |
| Shares Outstanding (Basic) | 81.48M84.40M | −3.5% |
| Shares Outstanding (Diluted) | 83.25M85.78M | −3.0% |
05—Questions
Frequently Asked Questions
How concentrated is the company's customer base?
Sales to distributors accounted for 99% of revenues in fiscal 2017. One customer represented 11% of revenues in fiscal 2017, and no other customer accounted for 10% or more of revenues in fiscal 2017, 2016 or 2015. The company sells through over 100 distributors and direct customers and has no direct sales force.
What are the company's main contract manufacturing and supplier dependencies?
The company primarily uses contract manufacturers located in China and depends on a single or limited number of suppliers for several components. Most product revenues depend on products incorporating components from Qualcomm Atheros, which the company licenses under a non-exclusive agreement that either party may terminate at the end of an annual term. The company does not stockpile enough chipsets to cover re-engineering time if a second source is needed.
What did the company disclose about the business e-mail compromise fraud?
The company was the victim of a fraud in which $46.7 million was transferred from a Hong Kong subsidiary to overseas accounts. It has recovered $16.7 million to date and recorded a $39.1 million charge in fiscal 2015, partly offset by an $8.3 million net recovery in fiscal 2016. It is pursuing the remaining $30.0 million, though further recoveries are described as likely remote.
What are the company's main pending legal matters?
A shareholder class action has been settled for $6.8 million, subject to court approval, with the preliminary approval hearing scheduled for September 5, 2017. Synopsys filed a complaint in February 2017 alleging DMCA and other claims, with the court dismissing only the Anti-Counterfeiting Act claim. Vivato/XR filed a patent infringement complaint in April 2017. The company cannot currently estimate possible losses for the Synopsys and Vivato matters.
06—Continue