Ubiquiti dives due to inventory concerns, Americas sales

Though Ubiquiti (UBNT -19.3%) beat FQ3 estimates , management faced pointed questions on the CC (transcript) about enterprise sales (+1% Q/Q in FQ3) and Americas sales (-10% Q/Q). CFO Craig Foster attributed the former issue to a mix/ASP shift for UniFi Wi-Fi systems, and CEO Robert Pera suggested the latter was due to changes in Ubiquiti's inventory management. "We're not going to ship into regions that we believe [have] adequate inventory."

There were also questions about Ubiquiti's inventory (up nearly 2x Q/Q to $66M). Foster declares the buildup is needed to meet expected calendar 2H demand. He estimates ~$20M of the increase is tied to existing products, and ~$10M to new products such as new airFiber wireless backhaul hardware.

Service provider revenue rose 60% Y/Y to $121M, and enterprise revenue more than tripled to $27.3M. EMEA was 52.5% of revenue, North America 19.7%, South America 16.9%, and Asia-Pac 10.9%.

Gross margin rose 20 bps Q/Q to 44.3%. R&D spend rose 16.7% Q/Q thanks to a 26% increase in headcount, but still only accounted for 5.9% of revenue. SG&A spend rose 38%, but was still only 4.7% of revenue.

FQ4 guidance is for revenue of $147M-$153M and EPS of $0.48-$0.52 vs. a consensus of $147.7M and $0.50.

Wedbush has cut Ubiquiti to Neutral. Wireless backhaul peer Ceragon (CRNT -2.5%), which sold off yesterday following a Q1 miss, is also lower. Ubiquiti and Ceragon both sold off on Wednesday in the wake of Aviat's FQ3 miss.

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Comments (6)
  • tblakeslee2
    , contributor
    Comments (88) | Send Message
    The inventory rise was intentional and announced before it happened. This price drop is totally uncalled for and based on short manipulation and algo trading that ignores fundamentals. The SEC had better clean up this mess or everyone will leave the market.
    9 May 2014, 11:18 AM Reply Like
  • Philip Marlowe
    , contributor
    Comments (1627) | Send Message
    I think it is more and more obvious that Wall Street does not understand UBNT. The rise in inventory happened because (i) stocking up of new products and (ii) to address the chronic shortages and back-orders of products at ubiquiti distributors.


    The drop in US sales happened because of the bad winter. You have to climb up towers to install UBNT equipment, try doing that at -20 degree weather.


    That being said, I do not think Pera did a very good job explaining this on the call. Oh well, I guess UBNT will be undervalued for another quarter. Pera should use some of the plentiful cash to do a buyback.
    9 May 2014, 11:26 AM Reply Like
  • exmipos2
    , contributor
    Comments (2) | Send Message
    This is classic price reaction rooted in negative bias on the CC and sowing FUD. Hey, this is opportunity where long term value investors make money.
    9 May 2014, 03:44 PM Reply Like
  • a alto
    , contributor
    Comments (365) | Send Message
    Well let's see ,they beat on revenues and earnings , if fact that's happened the last six quarters ! So by all things taught in business colleges this would cause a stock to go up ,not down 23 % in one day ! The only news was a down grade to neutral by one numnuts any analyist. Would this analyist or his company stand to make huge profits by driving down the stock ? Maybe the S.E.C. should check this out , just don't make any sense to me. No way in hell should this happened on this earnings report . Stock will be 65.00 by end of the year.
    9 May 2014, 06:44 PM Reply Like
  • converbit
    , contributor
    Comment (1) | Send Message
    The two biggest risks to Ubiquiti right now are: LTE adoption which will affect its core business and customers and the second one is the ongoing big bugs in their software which is starting to get customers to rethink and go to different more stable products
    10 May 2014, 01:31 PM Reply Like
  • jbonefish
    , contributor
    Comments (80) | Send Message
    bugs? please elaborate
    10 May 2014, 11:12 PM Reply Like
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