Ubiquiti Inc. (UI - Free Report) reported solid third-quarter fiscal 2020 results, with the bottom and the top line surpassing the respective Zacks Consensus Estimate and increasing year over year. Notably, the company registered record revenues and GAAP earnings per share. Following the results, the stock rose 17.8% in Friday’s trading session to close at $188.62.
On a GAAP basis, net income in the March quarter was $103.7 million or $1.60 per share compared with $88.3 million or $1.25 per share in the prior-year quarter. The improvement can be primarily attributed to top-line growth.
Non-GAAP net income came in at $104.3 million or $1.61 per share compared with $88.9 million or $1.26 per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 20 cents.
Ubiquiti Inc Price, Consensus and EPS Surprise
Quarterly revenues increased 18.4% year over year to $337.4 million backed by higher sales of enterprise technology products. By product type, revenues from Service Provider Technology were $106.4 million compared with $109.4 million reported in the year-ago quarter. Enterprise Technology revenues were $231 million, up 31.6% from $175.5 million in the prior-year quarter. The top line surpassed the consensus estimate of $317 million.
Region wise, revenues from North America were $133.9 million compared with $109.1 million in the year-ago quarter, driven by higher revenues from Enterprise Technology products. Revenues from South America were $17.8 million compared with $23 million and that of Asia Pacific totaled $26.2 million, down 3.3% from $27.1 million in the year-ago quarter. The year-over-year decline was primarily caused by lower revenues from Service Provider Technology products, partially offset by higher revenues from Enterprise Technology products. Revenues from Europe, Middle East and Africa were $159.4 million, up 26.9% from $125.7 million in the prior-year quarter mainly on higher Enterprise Technology revenues.
Overall gross profit increased to $159.6 million from $132.8 million in the year-ago quarter, driven by top-line growth. Gross margin improved to 47.3% from 46.6%, led by favorable mix of products sold and reduced inventory reserves. However, it was partly offset by higher tariffs and indirect costs. Total operating expenses were $32.3 million compared with $30.7 million in the year-earlier quarter due to higher R&D and SG&A expenses. Operating income increased to $127.3 million from $102.1 million, primarily owing to higher revenues.
Cash Flow & Liquidity
For the first nine months of fiscal 2020, Ubiquiti generated $335.3 million of net cash from operating activities compared with $158.3 million in the prior-year quarter. As of Mar 31, 2020, the computer networking company had $77.8 million in cash and equivalents with $659.4 million of long-term debt.
During the reported quarter, Ubiquiti repurchased more than 1.1 million shares at an average price of $133.38 per share for $148.4 million. It bought back an additional 99,165 shares at an average price of $138.25 for $13.7 million subsequent to the end of the quarter. Further, the company started off a new stock repurchase program to buy back up to $500 million worth of shares.
Despite the uncertainties pertaining to the COVID-19 pandemic, Ubiquiti has emerged as a strong player by augmenting its proprietary network communication platform that is well equipped to meet end-market customers’ needs. Backed by a resilient business model, the operating framework contributes significantly toward the expansion of its addressable market, thereby maintaining its dominant foothold in the industry. However, the global pandemic has taken a toll on Ubiquiti’s supply chain and logistics, thereby disrupting the distribution of products and services globally. Nevertheless, the company is committed to increase R&D investments and enhance its inventory management techniques to steer challenges and maximize growth.
Zacks Rank & Stocks to Consider
Ubiquiti currently has a Zacks Rank #3 (Hold).
A few other better-ranked stocks in the broader industry are InterDigital, Inc. (IDCC - Free Report) , Ooma, Inc. (OOMA - Free Report) and Opera Limited (OPRA - Free Report) . While InterDigital sports a Zacks Rank #1 (Strong Buy), Ooma and Opera carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
InterDigital’s bottom line surpassed the Zacks Consensus Estimate thrice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 99.5%, on average.
Ooma’s bottom line surpassed the Zacks Consensus Estimate in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 124.1%, on average.
Opera’s bottom line surpassed the Zacks Consensus Estimate twice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 192.9%, on average.
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