UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 7, 2014

 

UBIQUITI NETWORKS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		001-35300		32-0097377
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

2580 Orchard Parkway

San Jose, California 95131

(Address of principal executive offices, including zip code)

(408) 942-3085

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 2.02	Results of Operations and Financial Condition.

On August 7, 2014, Ubiquiti Networks, Inc. (the “Company”) issued a press release and will hold a conference call regarding its financial results for the quarter ended June 30, 2014. A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K.

This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

The Company is making reference to non-GAAP financial information in both the press release and the conference call. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release and financial tables.

 

Item 9.01	Financial Statements and Exhibits.

(d) Exhibits

Exhibit Number		Description
99.1		Press release of Ubiquiti Networks, Inc. dated August 7, 2014

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

		UBIQUITI NETWORKS, INC.
August 7, 2014		By:		/s/ Craig L. Foster
		Name:		Craig L. Foster
		Title:		Chief Financial Officer and Director

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EXHIBIT INDEX

 

Exhibit Number		Description
99.1		Press release of Ubiquiti Networks, Inc. dated August 7, 2014

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Exhibit 99.1

 

UBIQUITI NETWORKS REPORTS RECORD FOURTH QUARTER FISCAL 2014 FINANCIAL RESULTS

~ Achieves Record Revenue and Earnings ~

~ Posts Non-GAAP EPS of $0.56 Per Diluted Share ~

San Jose, Calif. - August 7, 2014 - Ubiquiti Networks, Inc. (NASDAQ: UBNT) (“Ubiquiti”), a next-generation communications technology company, today announced results for its fourth quarter of fiscal 2014 ended June 30, 2014.

Fourth Quarter Fiscal 2014 Financial Highlights

•	Revenues of $156.0 million, up 54% year-over-year

•	GAAP operating profit of $52.8 million, up 59% year-over-year

•	GAAP net income of $49.4 million, up 71% year-over-year

•	GAAP diluted EPS of $0.55 and non-GAAP diluted EPS of $0.56, with non-GAAP up 70% year-over-year

•	Average days sales outstanding ("DSO") of 32 days

Recent Business and Product Highlights

•	Sustained growth in Service Provider Technology, mainly driven by demand for our airFiber® 5 and airMAX® ac products.

•	Strong momentum in Enterprise Technology, primarily due to product expansion and further adoption of our UniFi® technology platform.

•	Launched EdgeSwitch, the first switch of its price/performance class, designed to offer superior performance and capability for a fraction of the cost of a traditional enterprise switch.

•	Launched UniFi Video, a new line of video surveillance camera control software and a new generation of cameras - the UVC, UVC-Dome, and UVC-Pro models - to join the UniFi family of products

•	Launched UniFi VoIP, a new scalable VoIP enterprise smart phone technology to provide price/performance disruptive telephony solutions for business, schools, hotels, and more.

Financial Results Summary ($, in millions, except per share data)

Financials		F4Q14		F3Q14		F4Q13
Revenues		156.0		148.3		101.2
Service Provider Technology		124.0		121.0		90.1
Enterprise Technology		32.0		27.3		11.1
Cost of Revenues		87.1		82.7		56.9
Gross Profit		68.9		65.6		44.4
Total Operating Expenses		16.1		15.5		11.2
Income from Operations		52.8		50.1		33.2
Net Income		49.4		45.2		28.8
Non-GAAP EPS (diluted)		0.56		0.50		0.33

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Fourth Quarter 2014 Financial Highlights

Total revenue for the fourth quarter of fiscal 2014 increased 54% to a record $156.0 million, compared with $101.2 million in the fourth quarter of fiscal 2013. Service Provider Technology revenues increased $33.9 million, or 38%, to $124.0 million in the fourth quarter of fiscal 2014, compared with $90.1 million in the fourth quarter of fiscal 2013. Enterprise Technology revenues increased $20.9 million, or 188%, to $32.0 million in the fourth quarter of fiscal 2014, compared with $11.1 million in the fourth quarter of fiscal 2013.

GAAP net income for the fourth quarter of fiscal 2014 was $49.4 million, or $0.55 per diluted share, compared with GAAP net income of $28.8 million, or $0.32 per diluted share, in the fourth quarter of fiscal 2013. Ubiquiti recorded fourth quarter fiscal 2014 non-GAAP net income of $50.2 million, or $0.56 per diluted share, compared with non-GAAP net income of $29.5 million, or $0.33 per diluted share, in the fourth quarter of fiscal 2013.

Ubiquiti’s net cash inflow from operations for the fourth quarter of fiscal 2014 was $55.8 million, compared with a net cash inflow of $46.2 million in the fourth quarter of fiscal 2013. The key driver for the increase in net cash from operations in the fourth quarter of fiscal 2014 was due to an improvement in our lead times to customers and a reduction in inventory related to new products launched and sold at scale. Total cash and cash equivalents as of June 30, 2014 were $347.1 million, compared with $291.7 million as of March 31, 2014, and $227.8 million as of June 30, 2013.

Average days sales outstanding ("DSO") was 32 days in the fourth quarter of fiscal 2014, compared with 30 days in the prior quarter, and 32 days in the fourth quarter of fiscal 2013.

“We continue to ramp our R&D resources in an effort to accelerate the next phase of our long-term vision of democratizing end to end communications technology infrastructure for the unconnected” said Robert J. Pera, Founder and Chief Executive Officer of Ubiquiti Networks.

Craig L. Foster, Ubiquiti’s Chief Financial Officer, added, “We are very focused on execution which is demonstrated in another quarter of strong financial results. Several new product launches are driving revenue growth and we continue to make the strategic investments that we believe will help us not only expand our addressable market but also preserve our company’s vision.”

Business Outlook

Based on current business trends, Ubiquiti currently believes the demand environment in its end markets supports the following forecast for the Company's first fiscal quarter 2015 ending September 30, 2014:

•	Revenues of between $156 million and $161 million

•	GAAP Diluted EPS of between $0.51 and $0.53

•	Non-GAAP Diluted EPS of between $0.52 and $0.54

Conference Call Information

Ubiquiti Networks will host a Q&A-only conference call to discuss the Company’s financial results at 2:00 p.m. Pacific Time today. Management’s prepared remarks can be found on the Investor Relations section of the Ubiquiti Networks website, http://ir.ubnt.com.

To listen to the Q&A-only conference call via telephone, dial (877) 291-1296 (U.S. toll-free) or (720) 259-9209 (International) to be connected to the call by an operator. Participants should dial in at least 10 minutes prior to the start of the call. Investors may also listen to a live webcast of the Q&A-only conference call by visiting the Investor Relations section of the Ubiquiti Networks website, http://ir.ubnt.com.

A recording of the Q&A call will be available approximately two hours after the call concludes and will be accessible on the Investor Relations section of the Ubiquiti Networks website, http://ir.ubnt.com.

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About Ubiquiti Networks

Ubiquiti Networks (NASDAQ: UBNT) is closing the digital divide by building network communication platforms for everyone and everywhere. With over 20 million devices deployed in over 180 countries, Ubiquiti is transforming under-networked businesses and communities. Our leading edge platforms, airMAX®, airFiber®, UniFi®, UniFi® Video, UniFi® VoIP, mFi® and EdgeMAX®, combine innovative technology, disruptive price-performance and the support of a global user community to eliminate barriers to connectivity. For more information, join our community at http://www.ubnt.com.

Ubiquiti, the Ubiquiti logo, Ubiquiti Networks, airMAX, airFiber, UniFi, mFi, EdgeMAX, EdgeSwitch and Ubiquiti World Network are registered trademarks or trademarks of Ubiquiti Networks, Inc. and/or its affiliates in the United States and other countries.

Investor Relations Contact

Anne Fazioli

Ubiquiti Networks, Vice President of Investor Relations

IR@ubnt.com

Safe Harbor for Forward Looking Statements

Certain statements in this press release are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements other than statements of historical fact including words such as “look”, "will", “anticipate”, “believe”, “estimate”, “expect”, "forecast", “consider” and “plan” and statements in the future tense are forward looking statements. The statements in this press release that could be deemed forward-looking statements include statements regarding business trends, anticipated demand for our new products, long-term benefits of leasing manufacturing space in Suzhou, China, DSOs, fluctuations in margins, R&D expenses and SG&A expenses, inventory, and revenues, GAAP diluted EPS and non-GAAP diluted EPS forecasts for the Company's fiscal quarter ending September 30, 2014, and any statements or assumptions underlying any of the foregoing.

Forward-looking statements are subject to certain risks and uncertainties that could cause our actual future results to differ materially, or cause a material adverse impact on our results. Potential risks and uncertainties include, but are not limited to, fluctuations in our operating results; varying demand for our products due to the financial and operating condition of our distributors and their customers, distributors' inventory management practices and general economic conditions; impact of counterfeiting and our ability to contain such impact; our reliance on a limited number of distributors; inability of our contract manufacturers and suppliers to meet our demand; our dependence on Qualcomm Atheros for chipsets without a short-term alternative; as we move into new markets competition from certain of our current or potential competitors who may be more established in such markets; our ability to keep pace with technological and market developments; success and timing of new product introductions by us and the performance of our products generally; our ability to effectively manage the significant increase in our transactional sales volumes; we may become subject to warranty claims, product liability and product recalls; that a substantial majority of our sales are into countries outside the United States and we are subject to numerous U.S. export control and economic sanctions laws; costs related to responding to government inquiries related to regulatory compliance; our reliance on the Ubiquiti Community; our reliance on certain key members of our management team, including our founder and chief executive officer, Robert J. Pera; adverse tax-related matters such as tax audits, changes in our effective tax rate or new tax legislative proposals; whether the final determination of our income tax liability may be materially different from our income tax provisions; the impact of any intellectual property litigation and claims for indemnification and litigation related to U.S. Securities laws and economic and political conditions in the United States and abroad. We discuss these risks in greater detail under the heading “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended June 30, 2013, subsequent Quarterly Reports on Form 10-Q and other filings filed with the U.S. Securities and Exchange Commission (the SEC), which are available at the SEC's website at www.sec.gov. Copies may also be obtained by contacting the Ubiquiti Networks Investor Relations Department, or by email at IR@ubnt.com or by visiting the Investor Relations section of the Ubiquiti Networks website, http://ir.ubnt.com.

Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management's beliefs and assumptions only as of the date made. Ubiquiti

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Networks undertakes no obligation to update information contained herein. You should review our SEC filings carefully and with the understanding that our actual future results may be materially different from what we expect.

Use of Non-GAAP Financial Information

To supplement our condensed consolidated financial results prepared under generally accepted accounting principles, or GAAP, we use non-GAAP measures of net income and earnings per diluted share that are adjusted to exclude certain recurring costs, expenses and gains such as stock based compensation expense, the gain on the reversal of a charge for an export compliance matter and the tax effects of these non-GAAP adjustments. Reconciliations of the adjustments to GAAP results for the three and twelve months ended June 30, 2014 and 2013 are provided below. In addition, an explanation of the ways in which management uses non-GAAP financial information to evaluate its business, the substance behind management's decision to use this non-GAAP financial information, material limitations associated with the use of non-GAAP financial information, the manner in which management compensates for those limitations, and the substantive reasons management believes that this non-GAAP financial information provides useful information to investors is included under "About our Non-GAAP Net Income and Adjustments" after the tables below.

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Ubiquiti Networks Inc. Condensed Consolidated Statement of Operations (In thousands, except per share data) (Unaudited)
		Three Months Ended June 30,								Years Ended June 30,
		2014				2013				2014				2013
Revenues		$	156,007			$	101,232			$	572,464			$	320,823
Cost of revenues		87,146				56,868				318,997				185,489
Gross profit		68,861				44,364				253,467				135,334
Operating expenses:
Research and development		10,155				5,515				33,962				20,955
Sales, general and administrative		5,912				5,642				23,560				21,775
Total operating expenses		16,067				11,157				57,522				42,730
Income from operations		52,794				33,207				195,945				92,604
Interest expense and other, net		(556		)		(281		)		(1,334		)		(851		)
Income before provision for income taxes		52,238				32,926				194,611				91,753
Provision for income taxes		2,820				4,085				17,674				11,263
Net income and comprehensive income		$	49,418			$	28,841			$	176,937			$	80,490
Net income per share of common stock:
Basic		$	0.56			$	0.33			$	2.02			$	0.91
Diluted		$	0.55			$	0.32			$	1.97			$	0.89
Weighted average shares used in computing net income per share of common stock:
Basic		88,122				87,148				87,772				88,314
Diluted		89,821				89,064				89,715				90,259

Ubiquiti Networks Inc. Reconciliation of GAAP Net Income to Non-GAAP Net Income (In thousands, except per share data) (Unaudited)
		Three Months Ended June 30,								Years Ended June 30,
		2014				2013				2014				2013
Net income		$	49,418			$	28,841			$	176,937			$	80,490
Stock-based compensation:
Cost of revenues		145				137				590				446
Research and development		744				442				2,423				1,433
Sales, general and administrative		387				548				1,893				1,497
Gain on reversal of charge for an export compliance matter		—				—				(1,121		)		—
Tax effect of non-GAAP adjustments		(510		)		(451		)		(1,514		)		(1,351		)
Non-GAAP net income		$	50,184			$	29,517			$	179,208			$	82,515
Non-GAAP diluted EPS		$	0.56			$	0.33			$	2.00			$	0.91
Weighted-average shares used in non-GAAP diluted EPS		89,821				89,064				89,715				90,259

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Ubiquiti Networks Inc. Condensed Consolidated Balance Sheets (In thousands, except share amounts) (Unaudited)
		June 30,
		2014				2013(1)
Assets
Current assets:
Cash and cash equivalents		$	347,097			$	227,826
Accounts receivable, net		54,871				35,884
Inventories		46,349				15,880
Current deferred tax asset		884				733
Prepaid income taxes		3,256				—
Prepaid expenses and other current assets		13,267				3,151
Total current assets		465,724				283,474
Property and equipment, net		7,260				5,976
Long-term deferred tax asset		1,255				4
Other long–term assets		1,912				2,886
Total assets		$	476,151			$	292,340
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	33,933			$	36,187
Customer deposits		1,835				5,123
Deferred revenues		4,218				691
Income taxes payable		2,499				1,257
Debt - short-term		—				5,013
Other current liabilities		9,830				11,150
Total current liabilities		52,315				59,421
Long-term taxes payable		15,346				11,857
Debt - long-term		72,254				71,116
Deferred revenues - long-term		972				2,510
Total liabilities		140,887				144,904
Stockholders’ equity:
Common stock		88				87
Additional paid–in capital		145,872				134,982
Treasury stock		(123,864		)		(123,864		)
Retained earnings		313,168				136,231
Total stockholders’ equity		335,264				147,436
Total liabilities and stockholders’ equity		$	476,151			$	292,340

(1)	Derived from audited consolidated statements as of and for the year ended June 30, 2013.

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Ubiquiti Networks Inc. Revenues by Product Type (In thousands) (Unaudited)
		Three Months Ended June 30,								Years Ended June 30,
		2014				2013				2014				2013
Service provider technology		$	124,005			$	90,128			$	450,663			$	285,390
Enterprise technology		32,002				11,104				121,801				35,433
Total revenues		$	156,007			$	101,232			$	572,464			$	320,823

Ubiquiti Networks Inc. Revenues by Geographical Area (In thousands) (Unaudited)
		Three Months Ended June 30,								Years Ended June 30,
		2014				2013				2014				2013
North America		$	43,260			$	31,301			$	142,438			$	84,820
South America		35,757				19,944				109,584				65,764
Europe, the Middle East and Africa		57,418				37,170				247,009				127,860
Asia Pacific		19,572				12,817				73,433				42,379
Total revenues		$	156,007			$	101,232			$	572,464			$	320,823

About our Non-GAAP Net Income and Adjustments

Use of Non-GAAP Financial Information

To supplement our condensed consolidated financial results prepared under generally accepted accounting principles, or GAAP, we use non-GAAP measures of net income and earnings per diluted share that are GAAP net income and GAAP earnings per diluted share adjusted to exclude certain recurring costs and non-recurring expenses and gains.

We believe that the presentation of non-GAAP net income and non-GAAP earnings per diluted share provides important supplemental information regarding non-cash expenses, significant recurring items that we believe are important to understanding our financial, and business trends relating to our financial condition and results of operations. Non-GAAP net income and non-GAAP earnings per diluted share are among the primary indicators used by management as a basis for planning and forecasting future periods and by management and our board of directors to determine whether our operating performance has met specified targets and thresholds. Management uses non-GAAP net income and non-GAAP earnings per diluted share when evaluating operating performance because it believes that the exclusion of the items described below, for which the amounts and/or timing may vary significantly depending upon the Company's activities and other factors, facilitates comparability of the Company's operating performance from period to period. We have chosen to provide this information to investors so they can analyze our operating results in the same way that management does and use this information in their assessment of our business and the valuation of our Company.

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Use and Economic Substance of Non-GAAP Financial Measures used by Ubiquiti Networks

We compute non-GAAP net income and non-GAAP diluted earnings per share by adjusting GAAP net income and GAAP earnings per diluted share to remove the impact of recurring stock-based compensation expense, the gain on the reversal of a charge for an export compliance matter and the tax effect of these adjustments. Items excluded from net income are:

•	Recurring charges and gains, including:

◦	Stock-based compensation expense is recognized in accordance with FASB Accounting Standards Codification, Topic 718, Stock Compensation.

•	Gain on reversal of charge for an export compliance matter

•	Tax effect of non-GAAP adjustments. After adjusting to exclude the items described above, we apply the principles of ASC 740, Income Taxes, to estimate the non-GAAP income tax provision.

Usefulness of Non-GAAP Financial Information to Investors

These non-GAAP measures are not in accordance with, or an alternative to, GAAP and may be materially different from other non-GAAP measures, including similarly titled non-GAAP measures used by other companies. The presentation of this additional information should not be considered in isolation from, as a substitute for, or superior to, net income or earnings per diluted share prepared in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. We expect to continue to incur expenses of a nature similar to the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP net income and non-GAAP earnings per diluted share should not be construed as an inference that these costs are unusual, infrequent or non-recurring.

For more information on the non-GAAP adjustments, please see the table captioned “Reconciliation of GAAP Net Income to Non-GAAP Net Income” included in this press release.