01—Abstract
Summary
Summary of the 10-K filed August 25, 2023. Cited figures are marked; the original filing is the authoritative source.
Ubiquiti Inc. (UI) reported fiscal 2023 (year ended June 30, 2023) revenues of $1.94 billiona, up from $1.69 billion in fiscal 2022, and net income of $407.6 million, compared with $378.7 million the prior year.
Growth was driven by Enterprise Technology revenue, which rose to $1.62 billionb from $1.32 billion, while Service Provider Technology revenue declined to $319.1 million from $375.0 million. Gross profit margin slipped to 39.2% from 39.6%, reflecting product mix and higher component costs. Interest expense and other, net rose to $58.2 million from $17.8 million, driven by higher borrowings and interest rates.
Cash flow weakened sharply. Net cash used in operating activities was $145.4 millionc, compared with $370.3 million provided in fiscal 2022, mainly because inventories increased by $487.9 million as the company secured components during the supply shortage. Inventories rose to $737.1 million at year-end from $262.4 million.
To fund this and $145.0 milliond of dividends, the company net borrowed $291.9 million under its facilities, and total debt reached about $1.08 billion. The company stated that a key liquidity objective over the next twelve months is to reduce inventories and debt levels. The filing also highlights concentration and legal risks.
Founder and CEO Robert J. Pera owns a majority of common stock and has pledged up to 25% of his shares to secure loans.
The company paid $0.60 per share quarterly dividends throughout the year, and it had $200 million remaining under its repurchase program, with no repurchases made in fiscal 2023. The company disclosed an IRS Notice of Deficiency on 2015 and 2016 tax years, with an estimated incremental tax liability of approximately $50.0 million, and $60.1 million of Hong Kong tax deposits under audit.
02—Key points
Key Highlights
- Revenue of $1,940.5 million in fiscal 2023, up from $1,691.7 million in fiscal 2022; Enterprise Technology revenue rose to $1,621.4 million while Service Provider Technology fell to $319.1 million.
- Net income of $407.6 million in fiscal 2023 versus $378.7 million in fiscal 2022; diluted EPS of $6.74 compared with $6.13.
- Gross profit margin declined to 39.2% from 39.6%, driven by product mix and higher component costs.
- Net cash used in operating activities of $145.4 million, versus $370.3 million provided in fiscal 2022, as inventories increased by $487.9 million to $737.1 million.
- Interest expense and other, net increased to $58.2 million from $17.8 million due to incremental borrowings and higher interest rates; total debt was about $1.08 billion at year-end.
- Dividends of $0.60 per share were paid each quarter, totaling $145.0 million, and no shares were repurchased in fiscal 2023 under the $200 million program.
- Founder and CEO Robert J. Pera owns a majority of common stock, and he has pledged up to 25% of his shares to secure loans, creating potential share-sale pressure.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Ubiquiti kept $0.21.
- Revenue$1.94B100.0%
- Cost of revenue−$1.18B60.8%
- Gross profit$760.7M39.2%
- Operating costs−$216.2M11.1%
- Operating income$544.6M28.1%
- Interest, other & tax−$136.9M7.1%
- Net income$407.6M21.0%
Where FY2023 revenue went
$1.94B- Cost of revenue: $1.18B, 61% of revenue
- Net income: $407.6M, 21% of revenue
- R&D: $145.2M, 7.5% of revenue
- SG&A: $71.0M, 3.7% of revenue
- Interest, other & tax: $136.9M, 7.1% of revenue
Kept 21% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed August 25, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $1.94B$1.69B | +14.7% |
| Cost of Revenue | $1.18B$1.02B | +15.5% |
| Gross Profit | $760.73M$669.81M | +13.6% |
| R&D Expenses | $145.17M$137.69M | +5.4% |
| SG&A Expenses | $70.99M$69.86M | +1.6% |
| Operating Expenses | $216.16M$207.55M | +4.2% |
| Operating Income | $544.57M$462.26M | +17.8% |
| Net Income | $407.64M$378.66M | +7.7% |
| EPS (Basic) | $6.75$6.14 | +9.9% |
| EPS (Diluted) | $6.74$6.13 | +10.0% |
| Shares Outstanding (Basic) | 60.44M61.69M | −2.0% |
| Shares Outstanding (Diluted) | 60.45M61.72M | −2.1% |
05—Questions
Frequently Asked Questions
What drove revenue growth in fiscal 2023?
Revenue rose 15% to $1,940.5 million, primarily due to Enterprise Technology, which grew 23% to $1,621.4 million across all geographic regions. The company said it was able to procure components and manufacture products at a level far above fiscal 2022. Service Provider Technology revenue fell 15% to $319.1 million.
Why did operating cash flow turn negative?
Operating cash flow was negative $145.4 million, primarily because inventories increased $487.9 million as the company secured components while they were available. Vendor deposits rose $39.5 million and accounts receivable rose $48.2 million, partially offset by net income of $407.6 million.
How did the company finance its inventory build and dividends?
The company net borrowed $291.9 million under its facilities and added a $250.0 million term loan in April 2023, with proceeds used to repay part of the revolver. It paid $145.0 million in dividends. Its revolver had $310 million available at June 30, 2023.
What are the main risks around the founder and ownership?
Robert J. Pera, founder, Chairman and CEO, is able to control the outcome of matters submitted to stockholders. He beneficially owned 56,278,181 shares as of August 25, 2023. He has pledged up to 25% of his shares to secure loans, and lender sales or his own sales could adversely affect the stock price. He has indicated he intends to keep at least a majority ownership.
What tax and legal matters could affect future results?
The IRS issued a Notice of Deficiency for the 2015 and 2016 tax years, which the company is contesting in Tax Court. The company estimates the incremental tax liability at approximately $50.0 million, excluding interest and penalties, and has not reserved for it. Separately, $60.1 million of deposits with Hong Kong's Inland Revenue Department are under audit, and the company expects a refund upon completion. A patent suit by Vivato/XR Communications is ongoing, and the company cannot estimate a possible loss.
06—Continue