Ubiquiti Inc. Reports Second Quarter Fiscal 2021 Financial Results

Rhea-AI Summary

Ubiquiti Inc. (NYSE: UI) reported strong financial results for the second quarter of fiscal 2021, ending December 31, 2020. Revenues soared to $479.4 million, up 55.5% year-over-year, while GAAP diluted EPS reached $2.54, marking a 92.4% increase. The company repurchased 309,133 shares at an average price of $178.11 per share. A dividend of $0.40 per share was declared, payable February 22, 2021. Despite supply chain disruptions due to COVID-19, Ubiquiti's net income nearly doubled compared to the prior year, signaling robust business resilience.

Positive

• Revenues of $479.4 million, a 55.5% increase year-over-year.
• GAAP net income of $159.7 million, up 86.0% from the prior year.
• GAAP diluted EPS increased to $2.54, a 92.4% rise year-over-year.
• Share repurchase of 309,133 shares at an average price of $178.11 per share.

Negative

• Supply chain disruptions continue due to COVID-19, leading to increased costs.

Ubiquiti Inc. (NYSE: UI) (“Ubiquiti” or the “Company”) today announced results for the second quarter fiscal 2021, ended December 31, 2020.

Second Quarter Fiscal 2021 Financial Summary

• Revenues of $479.4 million, increasing 55.5% year-over-year
• GAAP diluted EPS of $2.54, increasing 92.4% year-over-year
• Non-GAAP diluted EPS of $2.53, increasing 80.7% year-over-year

Additional Financial Highlights

• Repurchased 309,133 shares of common stock at an average price of $178.11 per share during the quarter.
• The Company's Board of Directors declared a $0.40 per share cash dividend payable on February 22, 2021 to shareholders of record at the close of business on February 16, 2021.

Financial Highlights ($, in millions, except per share data)

Income statement highlights		F2Q21		F1Q21		F2Q20
Revenues		479.4		473.5		308.3
Service Provider Technology		149.9		157.5		97.7
Enterprise Technology		329.6		316.1		210.6
Gross profit		230.7		228.1		145.1
Gross Profit (%)		48.1%		48.2%		47.1%
Total Operating Expenses		39.9		38.2		33.0
Income from Operations		190.8		189.9		112.0
GAAP Net Income		159.7		156.5		85.8
GAAP EPS (diluted)		2.54		2.46		1.32
Non-GAAP Net Income		159.0		157.1		91.4
Non-GAAP EPS (diluted)		2.53		2.47		1.40

Ubiquiti Inc. Revenues by Product Type (In thousands) (Unaudited)
		Three Months Ended December 31,								Six Months Ended December 31,
		2020				2019				2020				2019
Service Provider Technology		$	149,875			$	97,716			$	307,337			$	213,642
Enterprise Technology		329,561				210,568				645,632				417,919
Total revenues		$	479,436			$	308,284			$	952,969			$	631,561

Ubiquiti Inc. Revenues by Geographical Area In thousands) (Unaudited)
		Three Months Ended December 31,								Six Months Ended December 31,
		2020				2019				2020				2019
North America		$	193,440			$	129,966			$	414,320			$	277,917
Europe, the Middle East and Africa		218,755				120,607				397,934				246,447
Asia Pacific		37,374				32,804				79,319				62,521
South America		29,867				24,907				61,396				44,676
Total revenues		$	479,436			$	308,284			$	952,969			$	631,561

Income Statement Items

Revenues

Revenues for the second quarter fiscal 2021 were $479.4 million, representing an increase from the prior quarter of 1.2% and an increase from the comparable prior year period of 55.5%. Revenues for the first six months of fiscal 2021 were $953.0 million, representing an increase of 50.9% from the first six months of fiscal 2020. The fiscal quarter sequential increase in revenue was primarily due to an increase in our direct sales through our webstores.

Gross Margins

During the second quarter fiscal 2021, gross profit was $230.7 million. GAAP gross margin of 48.1% increased 1.0% versus the comparable prior year period GAAP gross margin of 47.1% and decreased 0.1% versus the prior quarter GAAP gross margin of 48.2%. The increase in gross profit margin for the second quarter fiscal 2021 as compared to the comparable prior-year period was primarily driven by favorable changes in product mix, partially offset by higher shipping costs. The decrease in gross profit margin compared to the prior quarter was primarily driven by higher shipping costs, partially offset by lower tariffs on United States imports.

Research and Development

During the second quarter fiscal 2021, research and development (“R&D”) expenses were $28.9 million. This reflects an increase as compared to the R&D expenses of $24.0 million in the comparable prior year period and an increase as compared to R&D expenses of $25.8 million in the prior quarter. The increase in R&D expenses as compared to the comparable prior year period and prior quarter were both primarily driven by higher employee related expenses and professional and service related fees.

Sales, General and Administrative

The Company’s sales, general and administrative (“SG&A”) expenses for the second quarter fiscal 2021 were $11.0 million. This reflects an increase as compared to the SG&A expenses of $9.0 million in the comparable prior year period and a decrease as compared to the SG&A expenses of $12.4 million in the prior quarter. The increase in SG&A costs as compared to the comparable prior year period was primarily due to higher professional and service fees and higher depreciation expense, partially offset by a legal settlement received, lower payroll and lower marketing expenses. The decrease in SG&A costs as compared to the prior quarter is primarily driven by a legal settlement received in the second quarter fiscal 2021 and lower professional fees.

Net Income and Earnings Per Share

During the second quarter fiscal 2021, GAAP net income was $159.7 million and non-GAAP net income was $159.0 million. This reflects an increase in GAAP net income and non-GAAP net income from the comparable prior year period by 86.0% and 74.0% respectively, primarily driven by an increase in revenues and higher gross margin. Second quarter fiscal 2021 GAAP earnings per diluted share was $2.54 and non-GAAP earnings per diluted share was $2.53. This reflects an increase in GAAP and non-GAAP earnings per diluted share from the comparable prior year period of 92.4% and 80.7% respectively. Both GAAP and non-GAAP earnings per share benefited from higher net income and a reduction in GAAP and non-GAAP diluted shares outstanding.

COVID-19

During the three months ended December 31, 2020, we continued to experience a disruption in our supply chain as a result of the COVID-19 pandemic. This disruption impacted our suppliers' ability to manufacture or provide key components and services and as a result we have incurred, and we continue to incur, additional costs to expedite deliveries of components and services. While our ability to procure components and services has improved during the quarter, the disruptions in our supply chain have not been fully remediated and the effects, if any, of the COVID-19 pandemic may not be fully reflected in the Company's financial results until future periods.

About Ubiquiti Inc.

Ubiquiti Inc. is focused on democratizing network technology on a global scale — aggregate shipments of over 108 million devices play a key role in creating networking infrastructure in over 200 countries and territories around the world. Our professional networking products are powered by our UNMS and UniFi software platforms to provide high-capacity distributed Internet access and unified information technology management, respectively.

Ubiquiti and the U logo are trademarks or registered trademarks of Ubiquiti and/or its affiliates in the United States and other countries. For more information, please visit www.ui.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 the impact of COVID-19 and our intentions to pay quarterly cash dividends 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, the impact of public health problems, such as COVID-19, and U.S. tariffs on results; fluctuations in our operating results; varying demand for our products due to the financial and operating condition of our distributors and their customers, and our distributors’ inventory management practices; political and economic conditions and volatility affecting the stability of business environments, economic growth, currency values, commodity prices and other factors that may influence the ultimate demand for our products in particular geographies or globally; 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 chipset suppliers 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 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; 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, 2020, and subsequent 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 Inc. Investor Relations Department, by email at IR@ui.com or by visiting the Investor Relations section of the Ubiquiti Inc. website, http://ir.ui.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. Except as required by law, Ubiquiti Inc. 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.

Ubiquiti Inc. Condensed Consolidated Statements of Operations and Comprehensive Income (In thousands, except per share data) (Unaudited)
		Three Months Ended December 31,								Six Months Ended December 31,
		2020				2019				2020				2019
Revenues		$	479,436			$	308,284			$	952,969			$	631,561
Cost of revenues		248,762				163,198				494,179				335,084
Gross profit		$	230,674			$	145,086			$	458,790			$	296,477
Operating expenses:
Research and development		28,912				24,041				54,725				44,293
Sales, general and administrative		10,951				8,997				23,301				19,447
Total operating expenses		39,863				33,038				78,026				63,740
Income from operations		190,811				112,048				380,764				232,737
Interest expense and other, net		(3,613)				(12,085)				(7,530)				(16,738)
Income before income taxes		187,198				99,963				373,234				215,999
Provision for income taxes		27,530				14,152				57,057				32,042
Net income		$	159,668			$	85,811			$	316,177			$	183,957
Net income per share of common stock:
Basic		$	2.54			$	1.32			$	5.00			$	2.76
Diluted		$	2.54			$	1.32			$	5.00			$	2.75
Weighted average shares used in computing net income per share of common stock:
Basic		62,823				64,973				63,217				66,682
Diluted		62,889				65,071				63,282				66,781

Ubiquiti Inc. Reconciliation of GAAP Net Income to Non-GAAP Net Income (In thousands, except per share data) (Unaudited)
		Three Months Ended												Six Months Ended December 31,
		December 31, 2020				September 30, 2020				December 31, 2019				2020				2019
Net Income		$	159,668			$	156,509			$	85,811			$	316,177			$	183,957
Stock-based compensation:
Cost of revenues		29				28				33				57				65
Research and development		512				510				527				1,022				1,008
Sales, general and administrative		209				202				170				411				346
Litigation settlement		(1,625)				—				—				(1,625)				—
Impairment of cost-based investment		—				—				5,000				—				5,000
Tax effect of Non-GAAP adjustments		206				(174)				(172)				32				(334)
Non-GAAP net income		$	158,999			$	157,075			$	91,369			$	316,074			$	190,042
Non-GAAP diluted EPS		$	2.53			$	2.47			$	1.40			$	4.99			$	2.85
Weighted-average shares used in Non-GAAP diluted EPS		62,889				63,673				65,071				63,282				66,781

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 costs, expenses and gains such as stock-based compensation expense, litigation settlement, impairment of cost-based investment and the tax effects of these non-GAAP adjustments.

Reconciliations of the adjustments to GAAP results for the periods presented are provided above. 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 the paragraphs below.

Usefulness of Non-GAAP Financial Information to Investors

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 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 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.

About our Non-GAAP Net Income and Non-GAAP Earnings per Diluted Share

We compute non-GAAP net income and non-GAAP earnings per diluted share by adjusting GAAP net income and GAAP earnings per diluted share to remove the impact of certain adjustments and the tax effect of those adjustments. Items excluded from net income are:

• Stock-based compensation expense
• Litigation settlement
• Impairment of cost-based investment
• Tax effect of non-GAAP adjustments, applying the principles of ASC 740

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.

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.

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FAQ

What were Ubiquiti's Q2 fiscal 2021 revenues?

Ubiquiti reported revenues of $479.4 million for Q2 fiscal 2021.

How did Ubiquiti's earnings per share perform in Q2 fiscal 2021?

GAAP diluted EPS was $2.54, reflecting a 92.4% increase year-over-year.

What is the impact of COVID-19 on Ubiquiti's supply chain?

COVID-19 caused disruptions in Ubiquiti's supply chain, leading to additional costs.

When will Ubiquiti's dividend be paid?

The dividend of $0.40 per share will be payable on February 22, 2021.