Ubiquiti Networks, Inc. reports 23.8% Net Income decline in 2018 while 17.5% Revenue growth
08/24/2018 • About Ubiquiti Networks, Inc. (
$UBNT) • By InTwits
Ubiquiti Networks, Inc. reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- Ubiquiti Networks, Inc. is a fast growth stock: FY2018 revenue growth was 17.5%, 5 year revenue CAGR was 26.0% at FY2018 ROIC 39.1%
- Ubiquiti Networks, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.1%. At the same time it's in pair with industry average of 3.6%
- CAPEX is quite volatile: $9m in FY2018, $7m in FY2017, $6m in FY2016, $13m in FY2015, $4m in FY2014
- The company has highly profitable business model: ROIC is 39.1%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue surged on 17.5%. Revenue growth showed acceleration in FY18Q4 - it increased 18.0% YoY. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 5.7 pp from 30.8% to 25.1% in FY2018.
Gross Margin decreased on 2.1 pp from 45.7% to 43.6% in FY2018. SG&A as a % of Revenue showed almost no change in FY2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018. During the last 5 years SBC as a % of Revenue topped in FY2015 at 0.49% and was declining since that time.
Net Income margin dropped on 10.5 pp from 29.8% to 19.3% in FY2018. The efficient tax rate was 37.5% in FY2018 while the average for the last five years was 17.4%.
Investments (CAPEX, working capital and M&A)
Ubiquiti Networks, Inc.'s CAPEX/Revenue was 0.90% in FY2018. CAPEX/Revenue decreased slightly on 1.2 pp from 2.1% in FY2015 to 0.90% in FY2018. It's average level of CAPEX/Revenue for the last three years was 0.89%.
Accounts receivable as a % of Revenue increased slightly on 0.92 pp from 16.2% to 17.2% in FY2018. Inventories as a % of Revenue decreased on 6.4 pp from 16.4% to 10.1% in FY2018. Accounts payable as a % of Revenue decreased on 8.0 pp from 10.4% to 2.5% in FY2018.
Return on investment
The company operates at high and attractive ROIC (39.1%) and ROE (42.8%). ROIC increased slightly on 0.61 pp from 38.5% to 39.1% in FY2018. ROE decreased on 6.6 pp from 49.4% to 42.8% in FY2018.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.5x and Debt / EBITDA is 1.5x. Debt jumped on 88.9% while cash jumped on 10.3%.
Ubiquiti Networks, Inc. has no short term refinancing risk: cash is higher than short term debt (2,729.5%).
Valuation and dividends
Ubiquiti Networks, Inc.'s trades at EV/EBITDA 19.4x and P/E 33.8x.
Management team
The company's CEO is Robert J Pera. Robert J Pera is a founder and has 15 years tenure with the company.
The company has 80.7% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 843 employees. The number of employees surged on 16.3%. Average revenue per employee in FY2018 was
$1,206,241 and it increased slightly on 1.1%.
Financial and operational results
FY ended 06/30/2018
Ubiquiti Networks, Inc. ($UBNT) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 572 | 596 | 666 | 865 | 1,017 | 17.5% |
| Gross Profit | 253 | 262 | 325 | 396 | 444 | 12.1% |
| SG&A | 24 | 22 | 33 | 37 | 43 | 17.0% |
| EBITDA | 199 | 152 | 248 | 297 | 333 | 12.2% |
| EBIT | 196 | 147 | 242 | 290 | 326 | 12.6% |
| Tax | 18 | 16 | 26 | 28 | 118 | 328.3% |
| Net Income | 177 | 130 | 214 | 258 | 196 | -23.8% |
| Stock Based Compensation | -1 | 3 | 3 | 3 | 3 | 15.2% |
Balance Sheet
|
|---|
| Cash | 347 | 446 | 551 | 604 | 667 | 10.3% |
| Accounts Receivable | 55 | 66 | 83 | 141 | 175 | 24.2% |
| Inventory | 46 | 37 | 57 | 142 | 102 | -28.0% |
| Accounts Payable | 34 | 44 | 52 | 49 | 14 | -71.2% |
| Short Term Debt | 0 | 10 | 11 | 15 | 24 | 65.7% |
| Long Term Debt | 72 | 88 | 192 | 242 | 460 | 90.4% |
Cash flow
|
|---|
| Capex | 4 | 13 | 6 | 7 | 9 | 26.0% |
| Dividends | | 15 | | | | |
Ratios
|
|---|
| Revenue growth | 78.4% | 4.1% | 11.8% | 29.8% | 17.5% | |
| EBITDA growth | 110.2% | -23.6% | 63.5% | 19.6% | 12.2% | |
|
|---|
| Gross Margin | 44.3% | 44.0% | 48.7% | 45.7% | 43.6% | -2.1% |
| EBITDA Margin | 34.7% | 25.5% | 37.3% | 34.3% | 32.8% | -1.5% |
| EBIT Margin | 34.2% | 24.6% | 36.3% | 33.5% | 32.1% | -1.4% |
| SG&A, % of revenue | 4.1% | 3.6% | 5.0% | 4.3% | 4.2% | -0.0% |
| SBC, % of revenue | -0.2% | 0.5% | 0.4% | 0.3% | 0.3% | -0.0% |
| Net Income Margin | 30.9% | 21.8% | 32.1% | 29.8% | 19.3% | -10.5% |
| CAPEX, % of revenue | 0.7% | 2.1% | 0.9% | 0.8% | 0.9% | 0.1% |
|
|---|
| ROIC | 61.4% | 31.5% | 41.5% | 38.5% | 39.1% | 0.6% |
| ROE | 73.3% | 34.2% | 49.5% | 49.4% | 42.8% | -6.6% |
| Net Debt/EBITDA | -1.4x | -2.3x | -1.4x | -1.2x | -0.5x | 0.6x |
People
|
|---|
| Insider ownership | 80.7% | 80.7% | 80.7% | 80.7% | 80.7% | 0.0% |
| Employees | 312 | 435 | 537 | 725 | 843 | 16.3% |
| Revenue/Employee, th. $ | 1,835 | 1,370 | 1,241 | 1,193 | 1,206 | 1.1% |
Ubiquiti Networks, Inc. ($UBNT) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 246 | 251 | 250 | 270 | | 20.1% | 17.5% | 14.7% | 18.0% |
| EBITDA | 89 | 68 | 87 | 90 | | 16.1% | -5.3% | 14.8% | 22.6% |
| Net Income | 75 | -51 | 103 | 70 | | 4.4% | -184.9% | 59.5% | 15.5% |
Balance Sheet
|
|---|
| Cash | 632 | 824 | 691 | 667 | | 10.1% | 34.4% | 29.4% | 10.3% |
| Short Term Debt | 15 | 15 | 24 | 24 | | 20.4% | 9.3% | 65.7% | 65.7% |
| Long Term Debt | 283 | 453 | 466 | 460 | | 50.7% | 145.9% | 121.6% | 90.4% |
Ratios
|
|---|
| Gross Margin | 45.4% | 38.6% | 45.7% | 44.7% | | -2.6% | -5.9% | 0.3% | -0.5% |
| EBITDA Margin | 36.1% | 27.0% | 34.6% | 33.5% | | -1.2% | -6.5% | 0.0% | 1.3% |
| Net Income Margin | 30.5% | -20.5% | 41.0% | 26.0% | | -4.6% | -48.9% | 11.5% | -0.6% |
Peers in Communications Equipment
Below we provide Ubiquiti Networks, Inc. benchmarking against other companies in Communications Equipment industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Ribbon Communications Inc. ($RBBN) | | | | 30.6% | 75.2% |
| Extreme Networks, Inc. ($EXTR) | | 6.4% | -4.4% | 13.2% | 64.4% |
| Optical Cable Corporation ($OCC) | | -11.3% | -12.2% | -0.8% | 37.0% |
| ParkerVision Inc ($PRKR) | | | 37,601.2% | -97.5% | 35.0% |
| Network-1 Technologies, Inc. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | -0.4% | 7.3% | 5.1% | 2.8% |
|---|
| Ubiquiti Networks, Inc. ($UBNT) | | 4.1% | 11.8% | 29.8% | 17.5% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 82.1% | 82.7% | 83.1% | 83.1% | 83.3% |
| Radware Ltd. ($RDWR) | 82.1% | 82.4% | 81.8% | 81.3% | 82.2% |
| Radcom Ltd. ($RDCM) | 63.2% | 76.8% | 69.6% | 71.8% | 74.0% |
| Casa Systems, Inc. ($CASA) | | 70.8% | 69.1% | 73.4% | 73.4% |
| NetScout Systems, Inc. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 41.4% | 41.3% | 43.7% | 41.0% | 40.5% |
|---|
| Ubiquiti Networks, Inc. ($UBNT) | 44.3% | 44.0% | 48.7% | 45.7% | 43.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Network-1 Technologies, Inc. ($NTIP) | 35.5% | 33.7% | 50.6% | 37.8% | 42.8% |
| InterDigital, Inc. ($IDCC) | 50.8% | 58.1% | 73.6% | 67.3% | 41.9% |
| EchoStar Corporation ($SATS) | 25.7% | 39.7% | 40.3% | 38.1% | 37.4% |
| Ituran Location and Control Ltd. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| F5 Networks, Inc. ($FFIV) | 31.2% | 31.5% | 30.3% | 29.9% | 30.1% |
| |
|---|
| Median (65 companies) | 5.3% | 4.7% | 5.5% | 6.0% | 4.6% |
|---|
| Ubiquiti Networks, Inc. ($UBNT) | 34.7% | 25.5% | 37.3% | 34.3% | 32.8% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Resonant Inc. ($RESN) | | | 132.5% | 124.8% | 245.2% |
| ViaSat, Inc. ($VSAT) | 22.8% | 26.5% | 26.7% | 33.0% | 32.1% |
| Applied Optoelectronics, Inc. ($AAOI) | 31.5% | 30.1% | 19.0% | 17.5% | 26.9% |
| EchoStar Corporation ($SATS) | 19.7% | 43.8% | 39.9% | 30.9% | 26.5% |
| Finisar Corporation ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.3% | 2.3% | 2.0% | 1.9% | 1.7% |
|---|
| Ubiquiti Networks, Inc. ($UBNT) | 0.7% | 2.1% | 0.9% | 0.8% | 0.9% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 33.9% | 40.8% | 43.1% | 46.9% | 47.9% |
| Motorola Solutions, Inc. ($MSI) | -16.1% | 18.9% | 26.4% | 39.5% | 35.3% |
| Ituran Location and Control Ltd. ($ITRN) | 50.9% | 46.8% | 50.1% | 48.5% | 35.1% |
| Casa Systems, Inc. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| Ceragon Networks Ltd. ($CRNT) | -5.8% | 13.8% | 13.2% | 16.2% | 17.6% |
| |
|---|
| Median (70 companies) | 1.2% | 2.0% | 2.2% | 2.1% | 0.3% |
|---|
| Ubiquiti Networks, Inc. ($UBNT) | 61.4% | 31.5% | 41.5% | 38.5% | 39.1% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Extreme Networks, Inc. ($EXTR) | | | -2.2x | -1.5x | 7.1x |
| ViaSat, Inc. ($VSAT) | 3.4x | 2.5x | 3.2x | 2.5x | 5.8x |
| CommScope Holding Company, Inc. ($COMM) | 2.3x | 9.6x | 4.3x | 4.6x | 4.4x |
| Inseego Corp. ($INSG) | | | | | 3.9x |
| Finisar Corporation ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
| |
|---|
| Median (45 companies) | -0.7x | -0.6x | -0.8x | -0.6x | 0.2x |
|---|
| Ubiquiti Networks, Inc. ($UBNT) | -1.4x | -2.3x | -1.4x | -1.2x | -0.5x |
