Ubiquiti Networks, Inc. (UBNT - Analyst Report) reported strong third-quarter fiscal 2014 results with non-GAAP earnings of 50 cents per share, exceeding the Zacks Consensus Estimate of 48 cents by 4.2%. Earnings also beat the prior-year quarter earnings of 24 cents by a robust 108%. The company reported non-GAAP net income of $45.2 million compared with $21.1 million in the year-ago quarter, reflecting an increase of 114.2%.
Growth in the company’s core business primarily drove the earnings. Ubiquiti’s consistent focus on enhancing services by increasingly investing in innovation and development also supported the upside. Management’s executive abilities and the opportunities in the enterprise business also contributed to the strong results.
Ubiquiti’s total revenue for the third quarter surged 78.2% year over year and 7.2% sequentially to $148.3 million. Top-line growth was driven by increased transaction volumes and addition of new services for existing customers. Additionally, strong performance by the Enterprise Technology segment contributed to the top-line growth. Revenues also surpassed the Zacks Consensus Estimate of $141 million by 5.2%.
TheService Provider Technology segment’s sales increased 60.3% year over year to $121 million driven by strong performance across all its businesses, including airMAX, airFiber and EdgeMAX.
TheEnterprise Technology segment’s sales reflected a phenomenal increase of 254.5% year over year to $27.3 million. The improvement was supported by a significant sales increase in its UniFi platform business.
Income and Expenses
The company reported operating income of $50.1 million, up 113.2% from $23.5 million in the prior-year quarter. Gross margins also expanded 156 basis points to 44.2% from 42.7% in the year-earlier quarter.
The company’s research and development expenses totaled $9.4 million, up 65.8% year over year from $5.7 million. Meanwhile, sales, general and administration expenses stood at $6.1 million versus $6.3 million in the prior-year quarter.
Balance Sheet and Cash Flow
Cash and cash equivalents were $291.7 million at quarter-end compared with $227.8 million as of Jun 30, 2013. The company reported total equity of $283.9 million against $147.4 million as on Jun 30, 2013. The company’s long-term debt declined 7.0% in the last nine months to $66.1 million.
Cash flow from operating activities for the quarter aggregated $14.0 million compared with $27.6 million in the prior quarter. The deterioration resulted from increased investments in inventories during the third quarter.
Management expects revenues for the fourth quarter of fiscal 2014 in the range of $147–$153 million.
The company projects non-GAAP earnings per share between 48 cents and 52 cents, while GAAP earnings are expected to lie in the 47–51 cents band.
Other Stocks to Consider
Ubiquiti currently carries a Zacks Rank #3 (Hold). Some better–ranked stocks operating in the same sector worth reckoning include ShoreTel, Inc. (SHOR - Snapshot Report) , Juniper Networks Inc. (JNPR - Analyst Report) and Nokia Corp. (NOK - Analyst Report) . While SHoreTel sports a Zacks Rank #1 (Strong Buy), Juniper Networks and Nokia carry a Zacks Rank #2 (Buy).