Ubiquiti Inc. Reports Third Quarter Fiscal 2024 Financial Results

Rhea-AI Summary

Ubiquiti Inc. (NYSE: UI) reported revenues of $493.0 million and GAAP diluted EPS of $1.26 in the third quarter fiscal 2024. The company's Board declared a $0.60 per share cash dividend. Revenues increased by 6.0% from the prior quarter and 7.7% from the prior year. GAAP gross margin decreased to 35.3%. R&D expenses and SG&A expenses increased. GAAP net income was $76.3 million, with non-GAAP net income at $77.6 million. GAAP earnings per diluted share was $1.26, while non-GAAP earnings per diluted share were $1.28.

Positive

• Revenue increased by 6.0% from the prior quarter and 7.7% from the comparable prior year period.

• The company declared a $0.60 per share cash dividend.

• Ubiquiti provided professional networking products powered by UISP and UniFi software platforms.

Negative

• GAAP gross margin decreased to 35.3% in the third quarter fiscal 2024.

• R&D expenses and SG&A expenses increased compared to the prior quarter and the comparable prior year period.

• GAAP net income and non-GAAP net income decreased by 22.6% and 22.1% from the comparable prior year period, respectively.

Insights

Financial Analyst

Ubiquiti Inc.'s Q3 fiscal report highlights a revenue increase of 7.7% year-over-year, which is a reassuring sign of growth, particularly given that it's driven by the Enterprise Technology platform—a segment that typically aligns with corporate and long-term infrastructure investment. However, there's a notable contraction in gross profit margin, which moved from 41.2% to 35.3% year-over-year. This compression is significant and raises concerns about cost management and scalability, particularly in light of the reported increases in operational expenses like warehouse-related costs and excess inventory charges.

The declaration of a $0.60 per share cash dividend would typically be considered a shareholder-friendly move, suggesting confidence in cash flow sufficiency. Yet, the juxtaposition with their reduced net income hints that this decision may weigh on their financial flexibility, especially if the gross margin continues to erode. The decrease in GAAP and non-GAAP earnings per share (EPS) is also a red flag, particularly for value-oriented investors focused on per-share metrics as a value assessment tool. Furthermore, increased R&D spending, while positive for long-term innovation, must be monitored to ensure it translates into future revenue streams and market share growth.

Market Research Analyst

Geographically, Ubiquiti is showing robust performance in North America, which is a key market for stability and growth. The significant increase in revenues from the region may reflect well on the company's local distribution and marketing strategies. However, it's essential to consider that the Asia Pacific and South America markets have not shown the same upward trajectory. This could be indicative of challenges in market penetration, or possibly competitive pressures in these regions.

Furthermore, the decline in the Service Provider Technology segment is concerning, as it suggests a potential shift in market demand or competitive dynamics that investors should monitor closely. The increase in SG&A costs, particularly relating to webstore credit card processing and travel expenses, could suggest expanded sales efforts or increased e-commerce activity, which might be a strategic investment in customer acquisition and market reach.

~ Revenues of $493.0 million ~

~ GAAP Diluted Earnings Per Share of $1.26 ~

NEW YORK--(BUSINESS WIRE)-- Ubiquiti Inc. (NYSE: UI) ("Ubiquiti" or the "Company") today announced its financial results for the third quarter ended March 31, 2024.

Third Quarter Fiscal 2024 Financial Summary

• Revenues of $493.0 million
• GAAP diluted EPS of $1.26
• Non-GAAP diluted EPS of $1.28

Additional Financial Highlight

• The Company's Board of Directors declared a $0.60 per share cash dividend payable on May 28, 2024 to shareholders of record at the close of business on May 20, 2024.

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

Income statement highlights		F3Q24		F2Q24		F3Q23
Revenues		493.0		465.0		457.8
Enterprise Technology		414.3		391.5		373.6
Service Provider Technology		78.7		73.5		84.2
Gross profit		174.1		177.6		188.5
Gross Profit (%)		35.3%		38.2%		41.2%
Total Operating Expenses		62.9		56.5		55.0
Income from Operations		111.2		121.1		133.5
GAAP Net Income		76.3		82.1		98.6
GAAP EPS (diluted)		1.26		1.36		1.63
Non-GAAP Net Income		77.6		83.3		99.5
Non-GAAP EPS (diluted)		1.28		1.38		1.65

Ubiquiti Inc. Revenues by Product Type (In thousands) (Unaudited)
		Three Months Ended March 31,						Nine Months Ended March 31,
		2024			2023			2024			2023
Enterprise Technology		$	414,345		$	373,573		$	1,185,932		$	1,217,279
Service Provider Technology			78,652			84,200			235,097			232,148
Total revenues		$	492,997		$	457,773		$	1,421,029		$	1,449,427

Ubiquiti Inc. Revenues by Geographical Area (In thousands) (Unaudited)
		Three Months Ended March 31,						Nine Months Ended March 31,
		2024			2023			2024			2023
North America		$	242,511		$	230,741		$	693,154		$	683,907
Europe, the Middle East and Africa			200,666			173,262			546,010			568,502
Asia Pacific			26,459			26,880			95,815			116,158
South America			23,361			26,890			86,050			80,860
Total revenues		$	492,997		$	457,773		$	1,421,029		$	1,449,427

Income Statement Items

Revenues

Revenues for the third quarter fiscal 2024 were $493.0 million, representing an increase from the prior quarter of 6.0% and an increase from the comparable prior year period of 7.7%.

The increase in revenues compared to the prior quarter was driven by an increase in revenue from both our Enterprise Technology platform and Service Provider Technology platform. The increase in revenues as compared to the comparable prior year period was driven by an increase in revenue from our Enterprise Technology platform, offset in part by decrease in revenue from our Service Provider Technology platform.

Gross Margins

During the third quarter fiscal 2024, GAAP gross profit was $174.1 million. GAAP gross margin of 35.3% decreased by 2.9% as compared to the prior quarter GAAP gross margin of 38.2% and decreased by 5.9% as compared to the comparable prior year period GAAP gross margin of 41.2%.

The decrease in gross profit margin as compared to the prior quarter was primarily driven by incremental excess and obsolete inventory charges and higher warehouse-related operating expenses, offset in part by lower shipping costs and favorable product mix. The decrease in gross profit margin as compared to the comparable prior year period was primarily driven by incremental excess and obsolete inventory charges, unfavorable product mix and higher shipping costs, offset in part by lower tariffs.

Research and Development

During the third quarter fiscal 2024, research and development ("R&D") expenses were $42.5 million. This reflects an increase as compared to the R&D expenses of $36.9 million in the prior quarter and an increase as compared to the R&D expenses of $38.2 million in the comparable prior year period.

The increase in R&D expenses as compared to both the prior quarter and the comparable prior year period were primarily driven by higher prototype-related expenses and higher employee-related expenses.

Sales, General and Administrative

The Company’s sales, general and administrative ("SG&A") expenses for the third quarter fiscal 2024 were $20.4 million. This reflects an increase as compared to the SG&A expenses of $19.6 million in the prior quarter and an increase compared to the SG&A expenses of $16.7 million in the comparable prior year period.

The increase in SG&A costs as compared to the prior quarter was primarily due to higher travel expenses and higher fees associated with webstore credit card processing, offset in part by lower marketing expenses and professional fees. The increase in SG&A as compared to the comparable prior year period was primarily due to higher fees associated with webstore credit card processing, higher travel expenses, professional fees, higher employee-related expenses, and marketing expenses.

Interest Expense and Other, net

During the third quarter fiscal 2024, Interest expense and other, net ("I&O") expenses were $18.9 million. This reflects an increase as compared to the I&O expenses of $18.3 million in the prior quarter and an increase compared to I&O expenses of $16.5 million in the comparable prior year period.

The increase in I&O expenses as compared to the prior quarter was primarily due to increase in foreign exchange losses, offset in part by lower interest expense driven by a decrease in borrowings. The increase in I&O expenses as compared to the comparable prior year period was primarily due to higher interest expense driven by increased interest rates.

Net Income and Earnings Per Share

During the third quarter fiscal 2024, GAAP net income was $76.3 million and non-GAAP net income was $77.6 million. This reflects a decrease in GAAP net income and non-GAAP net income from the comparable prior year period by 22.6% and 22.1%, respectively, primarily driven by lower gross profit, higher operating expenses and higher interest expense. Third quarter fiscal 2024 GAAP earnings per diluted share was $1.26 and non-GAAP earnings per diluted share was $1.28. This reflects a decrease in GAAP and non-GAAP earnings per diluted share from the comparable prior year period of 22.7% and 22.4%, respectively.

About Ubiquiti Inc.

Ubiquiti Inc. is focused on democratizing network technology on a global scale — creating networking infrastructure in over 200 countries and territories around the world. Our professional networking products are powered by our UISP 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 the statement regarding our intention to pay quarterly cash dividends, any statements or assumptions underlying the foregoing, and any statement regarding future events and the future financial performance of Ubiquiti Inc. that involves risks or uncertainties.

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 social, economic and political conditions in the United States and abroad, including the impact of the military conflict between Russia and Ukraine and the tension between China and Taiwan. 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, 2023, 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, https://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 March 31,						Nine Months Ended March 31,
		2024			2023			2024			2023
Revenues		$	492,997		$	457,773		$	1,421,029		$	1,449,427
Cost of revenues			318,897			269,297			885,407			892,023
Gross profit			174,100			188,476		$	535,622		$	557,404
Operating expenses:
Research and development			42,498			38,210			115,692			104,633
Sales, general and administrative			20,379			16,741			59,302			52,080
Total operating expenses			62,877			54,951			174,994			156,713
Income from operations			111,223			133,525			360,628			400,691
Interest expense and other, net			18,870			16,497			58,356			38,421
Income before income taxes			92,353			117,028			302,272			362,270
Provision for income taxes			16,063			18,451			56,116			58,306
Net income		$	76,290		$	98,577		$	246,156		$	303,964
Net income per share of common stock:
Basic		$	1.26		$	1.63		$	4.07		$	5.03
Diluted		$	1.26		$	1.63		$	4.07		$	5.03
Weighted average shares used in computing net income per share of common stock:
Basic			60,461			60,441			60,452			60,432
Diluted			60,463			60,455			60,455			60,451

Ubiquiti Inc. Reconciliation of GAAP Net Income to Non-GAAP Net Income (In thousands, except per share data) (Unaudited)
		Three Months Ended												Nine Months Ended March 31,
		March 31, 2024				December 31, 2023				March 31, 2023				2024				2023
Net Income		$	76,290			$	82,116			$	98,577			$	246,156			$	303,964
Share-based compensation:
Cost of revenues			44				35				24				113				47
Research and development			1,272				1,161				942				3,567				2,524
Sales, general and administrative			348				310				280				991				823
Tax effect of Non-GAAP adjustments			(399	)			(361	)			(294	)			(1,119	)			(801	)
Non-GAAP net income		$	77,555			$	83,261			$	99,529			$	249,708			$	306,557
Non-GAAP diluted EPS		$	1.28			$	1.38			$	1.65			$	4.13			$	5.07
Shares outstanding (Diluted)			60,463				60,451				60,455				60,455				60,451
Weighted-average shares used in Non-GAAP diluted EPS			60,463				60,451				60,455				60,455				60,451

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 share-based compensation expense 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:

• Share-based compensation expense
• 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240509848611/en/

Investor Relations Contact

Ubiquiti Inc.

Investor Relations

ir@ui.com

Ph.1-646-780-7958

Source: Ubiquiti Inc.

FAQ

What was Ubiquiti Inc.'s revenue in the third quarter fiscal 2024?

Ubiquiti Inc. reported revenues of $493.0 million in the third quarter fiscal 2024.

What was the GAAP diluted EPS in the third quarter fiscal 2024?

The GAAP diluted EPS was $1.26 in the third quarter fiscal 2024 for Ubiquiti Inc.

What was the percentage change in revenue compared to the prior quarter?

Revenues increased by 6.0% from the prior quarter for Ubiquiti Inc.

What is the dividend per share declared by Ubiquiti Inc.?

Ubiquiti Inc. declared a $0.60 per share cash dividend for shareholders.

What products does Ubiquiti Inc. offer?

Ubiquiti Inc. provides professional networking products powered by UISP and UniFi software platforms.