01—Abstract
Summary
Summary of the 10-K filed August 27, 2021. Cited figures are marked; the original filing is the authoritative source.
Ubiquiti Inc. (UI) reported fiscal 2021 (year ended June 30, 2021) revenues of $1,898,094 thousanda, up from $1,284,500 thousand in fiscal 2020, and net income of $616,584 thousand, up from $380,297 thousand.
Gross profit margin rose to 48.1% from 47.3%, and income from operations was $742,592 thousandb versus $478,198 thousand a year earlier. Enterprise Technology drove most of the growth, with revenue of $1,274,931 thousand, while Service Provider Technology reached $623,163 thousand. The company operates as one reportable segment and sells mainly through distributors, which accounted for 83% of revenues in fiscal 2021.
The filing highlights significant supply risk. Management reports reduced availability of components, especially chipsets, along with increased lead times, higher costs, and production delays. The company does not stockpile sufficient components and relies on a limited number of suppliers and contract manufacturers located primarily in China and Vietnam.
Tariffs on products imported from China, ranging between 7.5% and 25%, have affected operating results and margins. The filing also describes a January 2021 cyberattack in which source code and credentials were compromised, and a securities class action filed in May 2021 related to that incident. Cash and cash equivalents rose to $249,418 thousandc at June 30, 2021, and total debt was $492,895 thousand (short-term plus long-term) after $161.3 million in net revolver and term repayments during the year.
Share repurchases totaled $219.8 milliond and dividends paid were $100.8 million. The Board declared a quarterly dividend of $0.60 per share on August 27, 2021, and the company intends to pay at least $0.60 per quarter during fiscal 2022.
Robert J. Pera, the founder, Chairman and CEO, controls a majority of voting power, and some of his shares are pledged as loan collateral.
02—Key points
Key Highlights
- Revenues rose to $1,898,094 thousand in fiscal 2021 from $1,284,500 thousand in fiscal 2020, an increase the filing describes as $613.6 million, or 48%.
- Net income was $616,584 thousand, compared with $380,297 thousand in fiscal 2020; diluted EPS was $9.78, compared with $5.80.
- Gross profit margin increased to 48.1% from 47.3%, driven mainly by favorable product mix.
- Enterprise Technology revenue reached $1,274,931 thousand (67% of revenue), up 51.3%, while Service Provider Technology revenue reached $623,163 thousand, up 41.0%.
- Component and chipset shortages limited the ability to meet demand, increased lead times and costs, and caused delays in product production; the backlog of unfulfilled orders increased significantly.
- Tariffs on China-imported products of 7.5% to 25% have affected operating results and margins, and the company expects this to continue while the tariffs remain in effect.
- The company repurchased $219.8 million of common stock and paid $100.8 million in dividends during fiscal 2021, and declared a $0.60 quarterly dividend on August 27, 2021.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Ubiquiti kept $0.32.
- Revenue$1.90B100.0%
- Cost of revenue−$985.8M51.9%
- Gross profit$912.3M48.1%
- Operating costs−$169.7M8.9%
- Operating income$742.6M39.1%
- Interest, other & tax−$126.0M6.6%
- Net income$616.6M32.5%
Where FY2021 revenue went
$1.90B- Cost of revenue: $985.8M, 52% of revenue
- Net income: $616.6M, 32% of revenue
- R&D: $116.2M, 6.1% of revenue
- SG&A: $53.5M, 2.8% of revenue
- Interest, other & tax: $126.0M, 6.6% of revenue
Kept 32% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed August 27, 2021Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $1.90B$1.28B | +47.8% |
| Cost of Revenue | $985.82M$676.33M | +45.8% |
| Gross Profit | $912.28M$608.17M | +50.0% |
| R&D Expenses | $116.17M$89.41M | +29.9% |
| SG&A Expenses | $53.51M$40.57M | +31.9% |
| Operating Expenses | $169.68M$129.97M | +30.6% |
| Operating Income | $742.59M$478.20M | +55.3% |
| Net Income | $616.58M$380.30M | +62.1% |
| EPS (Basic) | $9.79$5.81 | +68.5% |
| EPS (Diluted) | $9.78$5.80 | +68.6% |
| Shares Outstanding (Basic) | 62.99M65.43M | −3.7% |
| Shares Outstanding (Diluted) | 63.05M65.51M | −3.8% |
05—Questions
Frequently Asked Questions
How did Ubiquiti's revenue and profitability change in fiscal 2021?
Revenues increased to $1,898,094 thousand from $1,284,500 thousand, and net income increased to $616,584 thousand from $380,297 thousand. Income from operations rose to $742,592 thousand from $478,198 thousand, and the effective tax rate was 15.3% compared with 15.5% in fiscal 2020.
What are the main risks from component supply constraints?
The company reports reduced availability and higher prices for components, particularly chipsets, which has affected its ability to manufacture products and meet demand. It does not stockpile enough components to re-engineer products quickly, relies on a limited number of suppliers and contract manufacturers, and expects shortages to continue.
How much debt does Ubiquiti carry and how is it structured?
At June 30, 2021, the term loan balance was $493.8 million and the revolving facility had no outstanding balance, leaving $700.0 million available. The Third Amended and Restated Credit Agreement, dated March 30, 2021, matures March 30, 2026, and requires a maximum consolidated total leverage ratio of 3.50 to 1.00 and a minimum interest coverage ratio of 3.5 to 1.00.
Who controls Ubiquiti and what does that mean for shareholders?
Robert J. Pera, the founder, Chairman and CEO, is able to exercise voting rights over a majority of the voting power of outstanding stock, which allows him to control the election of directors and major corporate transactions. As of August 27, 2021, he beneficially owned 56,278,181 shares, and he has pledged up to 25% of his shares to secure loans, which could lead to sales that pressure the stock price.
What legal and cybersecurity issues did the company disclose?
In January 2021 the company discovered that certain IT systems hosted by a third-party cloud provider had been improperly accessed and source code and credentials compromised; it received a threat to release the materials unless paid, which it did not do. A securities class action was filed in May 2021 alleging nondisclosure of the data breach. The company also faces the Vivato patent litigation, and it states it cannot currently estimate the possible loss from these matters.
06—Continue