ubnt-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-35300

UBIQUITI INC.

(Exact name of registrant as specified in its charter)


Delaware						32-0097377
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

685 Third Avenue, 27th Floor, New York, NY 10017

(Address of principal executive offices, Zip Code)

(646) 780-7958

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	UI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

(Do not check if a smaller reporting company)

Smaller reporting company

☐

Emerging growth company

☐

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of November 2, 2023, 60,448,074 shares of Common Stock, par value $0.001, were issued and outstanding.

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UBIQUITI INC.

INDEX TO

QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023


		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	4

	Consolidated Balance Sheets	4

	Consolidated Statements of Operations and Comprehensive Income	5

	Consolidated Statements of Stockholders’ Equity (Deficit)	6

	Consolidated Statements of Cash Flows	7

	Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	28

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	52

Item 3.	Defaults Upon Senior Securities	52

Item 4.	Mine Safety Disclosures	52

Item 5.	Other Information	52

Item 6.	Exhibits	53

Signatures		54

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PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

UBIQUITI INC.

Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)


	September 30, 2023		June 30, 2023
Assets
Current assets:
Cash and cash equivalents	$	108,527	$	114,826
Investments — short-term	41		109
Accounts receivable, net of allowance for doubtful accounts of $117 and $92 at September 30, 2023 and June 30, 2023, respectively	168,660		167,787
Inventories	706,508		737,121
Vendor deposits	147,991		125,227


Prepaid expenses and other current assets	21,959		21,974
Total current assets	1,153,686		1,167,044
Property and equipment, net	85,000		86,845
Operating lease right-of-use assets, net	55,131		57,485
Deferred tax assets	23,585		23,701

Other long-term assets	70,733		71,324
Total assets	$	1,388,135	$	1,406,399
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	124,222	$	154,157
Income taxes payable	39,941		19,309
Debt — short-term	36,508		36,508
Other current liabilities	137,444		141,845
Total current liabilities	338,115		351,819
Income taxes payable — long-term	53,658		74,880
Operating lease liabilities — long-term	44,012		46,052
Debt — long-term	1,007,257		1,041,381
Deferred tax liability — long-term	226		226
Other long-term liabilities	7,931		7,774
Total liabilities	1,451,199		1,522,132
Commitments and contingencies (Note 9)
Stockholders’ deficit:
Preferred stock—$0.001 par value; 50,000,000 shares authorized; none issued	—		—
Common stock—$0.001 par value; 500,000,000 shares authorized:
60,447,556 and 60,441,896 issued and outstanding as of September 30, 2023 and June 30, 2023, respectively	60		60
Additional paid–in capital	5,908		4,721

Accumulated deficit	(69,032)		(120,514)
Total stockholders’ (deficit)	(63,064)		(115,733)
Total liabilities and stockholders’ deficit	$	1,388,135	$	1,406,399

See accompanying notes to consolidated financial statements (unaudited).

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UBIQUITI INC.

Consolidated Statements of Operations and Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30,
	2023		2022
Revenues	$	463,078	$	498,083
Cost of revenues	279,203		326,715
Gross profit	183,875		171,368
Operating expenses:
Research and development	36,283		32,659
Sales, general and administrative	19,290		16,696

Total operating expenses	55,573		49,355
Income from operations	128,302		122,013
Interest expense and other, net	(21,224)		(10,651)
Income before income taxes	107,078		111,362
Provision for income taxes	19,328		18,180
Net income	$	87,750	$	93,182
Net income per share of common stock:
Basic	$	1.45	$	1.54
Diluted	$	1.45	$	1.54
Weighted average shares used in computing net income per share of common stock:
Basic	60,447		60,427
Diluted	60,451		60,446

Other comprehensive income:
Unrealized losses on available-for-sale securities	$	—	$	(49)
Other comprehensive loss	—		(49)
Comprehensive income	$	87,750	$	93,133

See accompanying notes to consolidated financial statements (unaudited).

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UBIQUITI INC.

Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands, except share data)

(Unaudited)


	Three Months Ended September 30, 2023
	Common Stock			Additional Paid-In Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Amount		Amount		Amount		Amount
Balance at June 30, 2023	60,441,896	$	60	$	4,721	$	(120,514)	$	—	$	(115,733)
Net Income	—	—		—		87,750		—		87,750


Restricted stock units issued, net of tax withholdings	5,660	—		(313)		—		—		(313)

Share-based compensation expense	—	—		1,500		—		—		1,500
Dividends Paid on Common Stock ($0.60 per share)	—	—		—		(36,268)		—		(36,268)
Balance at September 30, 2023	60,447,556	$	60	$	5,908	$	(69,032)	$	—	$	(63,064)


	Three Months Ended September 30, 2022
	Common Stock			Additional Paid-In Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Amount		Amount		Amount		Amount
Balance at June 30, 2022	60,420,525	$	60	$	650	$	(383,112)	$	(474)	$	(382,876)
Net Income	—	—		—		93,182		—		93,182
Other comprehensive (loss)	—	—				—		(49)		(49)
Stock options exercised	2,112	—		23		—		—		23
Restricted stock units issued, net of tax withholdings	6,174	—		(544)		—		—		(544)

Share-based compensation expense	—	—		1,048		—		—		1,048
Dividends Paid on Common Stock ($0.60 per share)	—	—		—		(36,256)		—		(36,256)
Balance at September 30, 2022	60,428,811	$	60	$	1,177	$	(326,186)	$	(523)	$	(325,472)

See accompanying notes to consolidated financial statements (unaudited).

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UBIQUITI INC.

Consolidated Statements of Cash Flows

(In thousands) (Unaudited)


	Three Months Ended September 30,
	2023		2022
Cash Flows from Operating Activities:
Net income	$	87,750	$	93,182
Adjustments to reconcile net income to net cash (used in)/provided by operating activities:
Depreciation and amortization	5,131		3,686
Amortization of debt issuance costs	434		321
Non-cash lease expense	258		172

Provision for inventory obsolescence	1,382		1,576
Provision for loss on vendor deposits	2,954		(2,090)
Share-based compensation	1,500		1,048

Deferred taxes	116		135

Provision for sales returns	(704)		—
Other, net	93		564
Changes in operating assets and liabilities:
Accounts receivable	(898)		(27,937)
Inventories	28,615		(94,244)
Vendor deposits	(25,718)		30,393

Prepaid expenses and other assets	62		(1,708)
Accounts payable	(29,834)		10,414
Income taxes payable	(590)		4,450
Deferred revenues	828		(1,744)
Accrued and other liabilities	(3,697)		23,766
Net cash provided by operating activities	67,682		41,984
Cash Flows from Investing Activities:
Purchase of property and equipment and other long-term assets	(3,025)		(8,662)


Net cash used in investing activities	(3,025)		(8,662)
Cash Flows from Financing Activities:
Proceeds from borrowing under the credit facility- Revolver	—		50,000
Repayment against credit facility- Revolver	(25,000)		(40,000)
Repayment against credit facility- Term	(9,375)		(6,250)

Payment of common stock cash dividends	(36,268)		(36,256)
Proceeds from exercise of stock options	—		23
Tax withholdings related to net share settlements of restricted stock units	(313)		(544)
Net cash used in financing activities	(70,956)		(33,027)
Net increase (decrease) in cash and cash equivalents	(6,299)		295
Cash and cash equivalents at beginning of period	114,826		136,224
Cash and cash equivalents at end of period	$	108,527	$	136,519
Supplemental Disclosure of Cash Flow Information:
Income taxes paid, net of refunds	$	19,861	$	13,780
Interest paid	$	21,687	$	6,738
Non-Cash Investing and Financing Activities:
Right-of-use asset recognized	$	23	$	236
Unpaid property and equipment and other long-term assets	$	1,174	$	421

See accompanying notes to consolidated financial statements (unaudited).

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UBIQUITI INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—BUSINESS AND BASIS OF PRESENTATION

Business— Ubiquiti Inc. and its wholly owned subsidiaries (collectively, “Ubiquiti” or the “Company”) develop high performance networking technology for service providers, enterprises, and consumers globally.

The Company operates on a fiscal year ending June 30. In these notes, Ubiquiti refers to the fiscal years ending June 30, 2024 and 2023, as fiscal 2024 and fiscal 2023 respectively.

Basis of Presentation— The Company’s consolidated financial statements and accompanying notes are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) related to interim financial statements based on applicable Securities and Exchange Commission (“SEC”) rules and regulations. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. These consolidated financial statements reflect all adjustments, which are, in the opinion of the Company, of a normal and recurring nature and those necessary to state fairly the statements of financial position, results of operations and cash flows for the dates and periods presented. The June 30, 2023 balance sheet was derived from the audited consolidated financial statements as of that date. All significant intercompany transactions and balances have been eliminated.

These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2023, included in its Annual Report on Form 10-K, as filed with the SEC on August 25, 2023 (the “Annual Report”). The results of operations for the three months ended September 30, 2023 are not necessarily indicative of the results to be expected for any future periods.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies are disclosed in its audited consolidated financial statements for the fiscal year ended June 30, 2023, included in the Annual Report on Form 10-K. There have been no changes to the Company’s significant accounting policies as discussed in the Annual Report.

Use of Accounting Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. Those estimates and assumptions include, but are not limited to, revenue recognition and deferred revenue; sales return reserves; inventory valuation and vendor deposits; accounting for income taxes, including the valuation allowance on deferred tax assets and reserves for uncertain tax positions. We evaluate our estimates and assumptions based on historical experience and other assumptions that are believed to be reasonable under the circumstances. Actual results could differ materially from those estimates.

NOTE 3—REVENUES

Revenue is primarily generated from the sale of hardware as well as the related implied post contract services ("PCS").

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. Revenue is recognized when obligations under the terms of a contract with our customers are satisfied; generally, this occurs with the transfer of control of our products and PCS to our customers. Transfer of control to the customer for products generally occurs at the point in time when products have been shipped to our customer as this represents the point in time when the customer has a present obligation to pay and physical possession including title and risk of loss have been transferred to the customer. Revenue for PCS is recognized ratably over time over the estimated period for which implied PCS services will be delivered.

Disaggregation of Revenue

See Note 13, "Segment Information, Revenues by Geography and Significant Customers" for disaggregation of revenue by product category and geography.

Contract Balances

The timing of revenue recognition, billing and cash collections results in billed accounts receivable, deferred revenue primarily

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attributable to PCS and customer deposits on the consolidated balance sheets. Accounts receivable are recognized in the period our right to the consideration is unconditional. Our contract liabilities consist of advance payments (Customer deposits) as well as billing in excess of revenue recognized primarily related to deferred revenue. We classify customer deposits as a current liability, and deferred revenue as a current or non-current liability based on the timing of when we expect to fulfill these remaining performance obligations. The current portion of deferred revenue is included in other current liabilities and the non-current portion is included in other long-term liabilities in our consolidated balance sheets.

As of September 30, 2023 and June 30, 2023, the Company’s customer deposits were $0.4 million and $1.2 million, respectively.

As of September 30, 2023, the Company’s deferred revenue, included in other current liabilities and other long-term liabilities, was $19.6 million and $7.9 million, respectively.

As of June 30, 2023, the Company’s deferred revenue, included in other current liabilities and other long-term liabilities, was $17.9 million and $7.8 million, respectively.

We expect the deferred revenue to convert to revenue in two years. For the quarters ended September 30, 2023 and September 30, 2022, we recognized revenues amounting to $6.7 million and $8.6 million, respectively from previous years' deferred revenue balances.

NOTE 4—EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share for the periods indicated (in thousands, except per share data):


	Three Months Ended September 30,
	2023		2022
Numerator:
Net income	$	87,750	$	93,182
Denominator:
Weighted-average shares used in computing basic earnings per share	60,447		60,427
Add—dilutive potential common shares:
Stock options	—		2
Restricted stock units	4		17
Weighted-average shares used in computing diluted net income per share	60,451		60,446
Net income per share of common stock:
Basic	$	1.45	$	1.54
Diluted	$	1.45	$	1.54

The Company excludes potentially dilutive securities from its diluted net income per share calculation when their effect would be anti-dilutive to net income per share amounts.

NOTE 5—BALANCE SHEET COMPONENTS

Inventories

Inventories consisted of the following (in thousands):


	September 30, 2023		June 30, 2023
Finished goods	$	607,259	$	643,499
Raw materials	99,249		93,622

Total	$	706,508	$	737,121

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Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):


	September 30, 2023		June 30, 2023
Testing equipment	$	18,199	$	18,265
Tooling equipment	22,806