01—Abstract
Summary
Summary of the 10-K filed August 21, 2020. Cited figures are marked; the original filing is the authoritative source.
Ubiquiti Inc. (UI) reported fiscal 2020 (year ended June 30, 2020) revenue of $1,284.5 milliona, up from $1,161.7 million in fiscal 2019, and net income of $380.3 million, compared with $322.7 million a year earlier.
Gross profit rose to $608.2 millionb, and the filing states gross profit margin increased to 47.3% from 46.3%, driven mainly by product mix, partially offset by higher tariffs and expedited shipping costs. Enterprise Technology revenue of $842.5 million (66% of revenue) drove growth, while Service Provider Technology revenue was $442.0 million. Diluted EPS was $5.80, versus $4.51 in fiscal 2019.
The company returned substantial capital to shareholders during the year. Repurchases of common stock totaled $700.1 millionc in financing outflows, and dividends paid were $78.7 million ($1.20 per share). Total stockholders' equity was a deficit of $(295.5) million at June 30, 2020, versus $99.3 million a year earlier, reflecting repurchases exceeding retained earnings.
Debt rose to $652.5 milliond on the balance sheet (short-term $24.1 million and long-term $628.4 million), with $475.0 million outstanding on the Term Facility and $180.0 million on the Revolving Facility. Cash and cash equivalents fell to $142.6 million from $238.1 million. The filing highlights several risks: tariffs on products imported from China, COVID-19 supply chain disruption, customer concentration in distributors (93% of revenue from distributor sales), an IRS proposed adjustment with an incremental tax liability of approximately $50 million excluding interest and penalties, a pending Hong Kong tax audit with $35.5 million of deposits, and the CEO's majority voting control.
The company also disclosed an ongoing SEC investigation and the Vivato patent litigation, for which it stated it cannot estimate a possible loss. The company declared a quarterly dividend of $0.40 per share on August 21, 2020.
02—Key points
Key Highlights
- Revenue grew to $1,284.5 million in fiscal 2020 from $1,161.7 million in fiscal 2019, with Enterprise Technology revenue rising to $842.5 million from $733.2 million.
- Net income was $380.3 million (diluted EPS $5.80), up from $322.7 million (diluted EPS $4.51) in fiscal 2019.
- Gross profit margin increased to 47.3% from 46.3%, mainly due to favorable product mix, partially offset by higher tariffs and expedited shipping costs.
- Shareholder returns were significant: $700.1 million in share repurchases and $78.7 million in dividends paid ($1.20 per share) during fiscal 2020.
- Stockholders' equity turned to a deficit of $(295.5) million at June 30, 2020, from $99.3 million at June 30, 2019.
- Total debt was $652.5 million at June 30, 2020, including $475.0 million on the Term Facility and $180.0 million drawn on the $700 million Revolving Facility; cash and cash equivalents declined to $142.6 million.
- The IRS issued a final Notice of Proposed Adjustment for fiscal 2015 and 2016 with an incremental tax liability of approximately $50 million, excluding interest and penalties, which the company has formally protested.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Ubiquiti kept $0.30.
- Revenue$1.28B100.0%
- Cost of revenue−$676.3M52.7%
- Gross profit$608.2M47.3%
- Operating costs−$130.0M10.1%
- Operating income$478.2M37.2%
- Interest, other & tax−$97.9M7.6%
- Net income$380.3M29.6%
Where FY2020 revenue went
$1.28B- Cost of revenue: $676.3M, 53% of revenue
- Net income: $380.3M, 30% of revenue
- R&D: $89.4M, 7.0% of revenue
- SG&A: $40.6M, 3.2% of revenue
- Interest, other & tax: $97.9M, 7.6% of revenue
Kept 30% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed August 21, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $1.28B$1.16B | +10.6% |
| Cost of Revenue | $676.33M$624.13M | +8.4% |
| Gross Profit | $608.17M$537.60M | +13.1% |
| R&D Expenses | $89.41M$82.07M | +8.9% |
| SG&A Expenses | $40.57M$43.24M | −6.2% |
| Operating Expenses | $129.97M$143.31M | −9.3% |
| Operating Income | $478.20M$394.30M | +21.3% |
| Net Income | $380.30M$322.69M | +17.9% |
| EPS (Basic) | $5.81$4.52 | +28.5% |
| EPS (Diluted) | $5.80$4.51 | +28.6% |
| Shares Outstanding (Basic) | 65.43M71.44M | −8.4% |
| Shares Outstanding (Diluted) | 65.51M71.60M | −8.5% |
05—Questions
Frequently Asked Questions
How did Ubiquiti perform financially in fiscal 2020?
Revenue increased to $1,284.5 million from $1,161.7 million, and net income increased to $380.3 million from $322.7 million. Income from operations was $478.2 million, compared with $394.3 million in fiscal 2019.
What drove revenue growth in fiscal 2020?
The filing attributes the increase primarily to Enterprise Technology, which grew $109.2 million, or 14.9%, to $842.5 million, due to product expansion and further adoption of the UniFi platform across all regions. Service Provider Technology revenue increased $13.5 million, or 3.2%, to $442.0 million.
How much did Ubiquiti return to shareholders and how is it funded?
During fiscal 2020, the company paid $700.1 million for share repurchases and $78.7 million in cash dividends. These outflows were funded in part by $157.5 million of net borrowings under the credit facilities and by operating cash flow of $460.3 million. The company declared a quarterly dividend of $0.40 per share on August 21, 2020.
What are the main risks tied to tariffs and taxes?
The filing states that the vast majority of products imported into the U.S. from China are subject to tariffs, which have already affected operating results and margins. It also discloses a proposed IRS adjustment with an incremental tax liability of approximately $50 million, excluding interest and penalties, and a Hong Kong tax audit where $35.5 million of deposits have been made. The company states it has not provided reserves for these matters and that an adverse outcome could have a material effect.
Who controls Ubiquiti and what does that mean for investors?
Founder, Chairman and CEO Robert J. Pera is able to exercise voting rights over a majority of the voting power of the company's outstanding stock. He has pledged up to 25% of his shares to secure loans, and the filing notes that sales or foreclosure of those shares could adversely affect the stock price.
06—Continue