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Ubiquiti jumps following FQ1 beat, strong guidance; enterprise sales soar

  • Ubiquiti (UBNT +12.7%) is once more close to its all-time high of $43.99 after blowing away FQ1 estimates and providing strong guidance. The wireless networking hardware vendor expects FQ2 revenue of  $130M-$136M and EPS of $0.42-$0.46, above a consensus of $123.8M and $0.40.
  • Sales of Ubiquiti's airMAX high-speed transmission systems (47% of revenue) soared 88% Y/Y in Q3 after rising just 12% Y/Y in Q2, and declining 10% in Q1; the resolution of the the counterfeit hardware issues Ubiquiti dealt with last year had much to do with the airMAX turnaround.
  • Total service provider sales (including airMAX) rose 82% Y/Y to $94.2M, while enterprise sales rose over 3x to $35.5M.
  • Strong demand for Ubiquiti's new UniFi Wi-Fi hardware/software platform. fueled much of the enterprise growth. On the CC (transcript), CEO Robert Pera talked up UniFi's "disruptive pricing" relative to offerings from incumbents such as Cisco and Aruba (ARUN +1.1%), something he thinks make it an ideal solution for the SMB, hospitality, and education markets.
  • Ubiquiti continues to run a very tight ship: opex was just 9.3% of revenue, down from a paltry 11% in Q2. R&D spend amounted to just $6.3M (4.9% of revenue). Gross margin was 44.7%, +400 bps Y/Y. However, CFO Craig Foster says Ubiquiti is now close to a "steady state" with regards to gross margin.
  • Wedbush has upgraded shares to Outperform. The firm sees more room for enterprise Wi-Fi share gain, and notes wireless ISPs (some of whom use Ubiquiti's hardware) are taking share from cable/DSL providers.
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