01—Abstract
Summary
Summary of the 10-K filed August 21, 2019. Cited figures are marked; the original filing is the authoritative source.
Ubiquiti Inc. (filed as Ubiquiti Networks, Inc.) reported fiscal 2019 (year ended June 30, 2019) revenues of $1.16 billiona, up from $1.02 billion in fiscal 2018, and net income of $322.7 million, up from $196.3 million.
Growth was driven by Enterprise Technology, which rose to $733.2 millionb (63% of revenue) from $570.3 million, while Service Provider Technology declined to $428.5 million from $446.6 million. Gross profit margin improved to 46.0% from 44.0%, though the filing states that tariffs on Chinese imports have already affected operating results and margins and that current gross margins may not be indicative of future periods. Diluted EPS was $4.51 versus $2.51 in fiscal 2018, but fiscal 2018 net income included a $116.6 million one-time Tax Reform charge, so the effective tax rate fell to 15.4% from 37.5%.
Capital returns were significant. The company repurchased $468.2 millionc of common stock and paid $71.4 million in dividends during fiscal 2019, while cash and cash equivalents fell to $238.1 million from $666.7 million and total stockholders' equity declined to $99.3 million from $315.7 million. Total debt was about $497.5 million (Term Facility of $462.5 million and $35.0 million drawn on the Revolving Facility).
Inventories more than doubled to $264.3 milliond from $102.2 million. After year end, the board approved a new $500 million repurchase program and a $0.30 quarterly dividend.
Key risks disclosed include U.S. tariffs on Chinese-made products, heavy reliance on Qualcomm Atheros components, a Section 301 tariff escalation, a proposed IRS adjustment with a potential incremental tax liability of about $50 million, pending SEC subpoenas and shareholder class and derivative actions, and founder and CEO Robert J. Pera's majority voting control, with a pledge of up to 25% of his shares.
02—Key points
Key Highlights
- Revenue rose to $1.16 billion in fiscal 2019 from $1.02 billion in fiscal 2018, with Enterprise Technology growing to $733.2 million from $570.3 million.
- Service Provider Technology revenue declined to $428.5 million from $446.6 million, with decreases in South America, Asia Pacific and North America.
- Net income was $322.7 million, versus $196.3 million in fiscal 2018, which included a $116.6 million Tax Reform charge; diluted EPS was $4.51 versus $2.51.
- Gross profit margin increased to 46.0% from 44.0%, but the filing states tariffs have already affected operating results and margins.
- The company repurchased $468.2 million of stock and paid $71.4 million in dividends, reducing cash to $238.1 million from $666.7 million and stockholders' equity to $99.3 million from $315.7 million.
- Inventories increased to $264.3 million from $102.2 million, and total debt was about $497.5 million at June 30, 2019.
- Litigation included an $18 million Synopsys settlement, a pending SEC investigation, shareholder class and derivative actions, and an IRS draft notice proposing about $50 million of incremental tax.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Ubiquiti kept $0.28.
- Revenue$1.16B100.0%
- Cost of revenue−$624.1M53.7%
- Gross profit$537.6M46.3%
- Operating costs−$143.3M12.3%
- Operating income$394.3M33.9%
- Interest, other & tax−$71.6M6.2%
- Net income$322.7M27.8%
Where FY2019 revenue went
$1.16B- Cost of revenue: $624.1M, 54% of revenue
- Net income: $322.7M, 28% of revenue
- R&D: $82.1M, 7.1% of revenue
- SG&A: $43.2M, 3.7% of revenue
- Other operating costs: $18.0M, 1.5% of revenue
- Interest, other & tax: $71.6M, 6.2% of revenue
Kept 28% as net incomeOther operating costs $18.0M · 1.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed August 21, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $1.16B$1.02B | +14.2% |
| Cost of Revenue | $624.13M$573.29M | +8.9% |
| Gross Profit | $537.60M$443.57M | +21.2% |
| R&D Expenses | $82.07M$74.32M | +10.4% |
| SG&A Expenses | $43.24M$43.12M | +0.3% |
| Operating Expenses | $143.31M$117.44M | +22.0% |
| Operating Income | $394.30M$326.13M | +20.9% |
| Net Income | $322.69M$196.29M | +64.4% |
| EPS (Basic) | $4.52$2.54 | +78.0% |
| EPS (Diluted) | $4.51$2.51 | +79.7% |
| Shares Outstanding (Basic) | 71.44M77.18M | −7.4% |
| Shares Outstanding (Diluted) | 71.60M78.33M | −8.6% |
05—Questions
Frequently Asked Questions
How much of the company's revenue depends on distributors?
The filing states that sales to distributors accounted for 97% of revenues in the year ended June 30, 2019, and that a majority of sales are made to distributors outside the United States.
How have tariffs affected the company?
The filing states that Section 301 and other tariffs on Chinese imports have already affected operating results and margins, and that current gross profit margins may not be indicative of future periods. Additional Section 301 tariffs of 10% were scheduled to take effect on September 1, 2019 and December 15, 2019.
Why did the effective tax rate drop so much?
The effective tax rate fell to 15.4% in fiscal 2019 from 37.5% in fiscal 2018, primarily because fiscal 2018 included a one-time repatriation tax charge of $116.6 million related to the 2017 Tax Act.
What are the main legal and regulatory exposures?
The filing discloses an ongoing SEC investigation with subpoenas issued in February 2018, consolidated shareholder class actions, shareholder derivative suits in California and Delaware, a Vivato patent case, and a draft IRS adjustment that could add about $50 million in tax excluding interest and penalties. The company believes the IRS position is inconsistent with the credit facility and applicable tax laws.
What did the company announce after fiscal year end?
On August 6, 2019, the board approved a new $500 million stock repurchase program expiring December 31, 2020. It also declared a $0.30 quarterly dividend payable August 26, 2019, and the company began trading on the New York Stock Exchange as UI on August 20, 2019.
06—Continue