優比快 (UI) 2015 Q3 法說會逐字稿

Good day ladies and gentlemen, and thank you for standing by. Welcome to the Ubiquiti Network's third quarter 2015 question and answer conference call.

(Operator Instructions)

I would now like to introduce your host for today's presentation, Ms. Anne Fazioli. Ma'am, please begin.

Thank you, Howard, and thank you everyone for joining us today. I'm Anne Fazioli, Vice President of Investor Relations for Ubiquiti Networks. I am here with Robert J. Pera, Founder, CEO, and Chairman of the Board at Ubiquiti Networks.

Before we get started, I'd like to review the Safe Harbor statement. Some of the statements we will make during this call constitute forward-looking statements, including perspectives on our future financial results, products, market conditions, and competition. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed during this call. Information on risk factors and uncertainties is contained in our most recent filing on Form 10-K with the SEC, and our other SEC filings which are available on the SEC's website at www.sec.gov. Forward-looking statements are made as of today, March (sic) 7, 2015, and we assume no obligation to update them.

We hope you've reviewed management's prepared remarks, which are posted as a transcript on the events and presentations and financial information sections of our investor relations website at ir.ubnt.com. This call will be a Q&A only call. Please limit yourself to two questions, and time permitting we will allow for a follow-up question. Howard, we are ready for questions.

(Operator Instructions)

Our first question or comment comes from the line of Pierre Ferragu from Bernstein.

Hi, Robert; hi, Anne. Thank you for taking my question. Maybe just if you could give it a bit of clarity on what happened with this [labor] [distributor disputes] with your shipping, and if you have an idea of how much your sales in the US were impacted by this incident.

And then, when we look at your guidance on next quarter, it implies a fairly flattish development compared to this quarter, and so what is the context here? You have a lot of new products ramping up, so should we expect that ramp up to come after the next quarter, like more than three months? And do you expect still a negative impact from this situation with goods being embargoed on the West Coast? In the guidance -- have you embedded some of that in your guidance for next quarter? Thank you.

Thanks, Pierre. I think the shipping issues might have affected some North America distributors, where shipments were held up, and we invoiced them at the time they were shipped. And because they didn't have access to those shipments, it affected their ability to place new orders because our credit limits have become stricter. So that could explain some of the drop-off in North America.

But, overall, I know we are going to get a lot of questions about quarter-to-quarter results and fluctuations in regard to certain regions and certain platforms, enterprises, [our] service provider, so I want to take a step back and just say Ubiquiti's model is quite unique. We don't follow the traditional telecom model, which revolves around big sales teams supporting big customers with qualifications and high visibility. We are on the opposite end, where we've removed the economic barrier to entry for just about anybody to become an operator.

You can say we've democratized a service provider industry, and with that there's great benefits. We have a very efficient business model that's highly profitable. One of the drawbacks is we don't have the same visibility traditional companies with huge sales teams working with tier 1 operators would have.

So it's very hard for me to look at quarter-to-quarter fluctuations, region-to-region fluctuations on very small granularity levels, but I will same we are focused on products in our model. We believe the best product wins.

So we are very intensely focused on R&D in improving our product -- our user experience, and applying our R&D in business models in new industries. And I think over time, you'll see positive trends. In terms of a microanalysis, it's going to be difficult, and that's just the nature of our business model and our strategy.

Our next question or comment comes from the line of Ehud Gelblum from Citigroup.

Thanks, Robert; thanks, Anne. Just a couple of questions, I know, Robert, I you don't like to talk about quarterly trends, but you do get some sort of input from your -- if it's not a sales force, then it's from your finance group, because you base your guidance on something. If you could give us a sense as to, in the guidance, are you assuming the same mix of enterprise versus service provider as you saw this quarter?

Two, it was not immediately intuitive to me why the issues in California with the labor disputes would have impacted enterprise more than service provider. If you could kind of just go over that logic train, that would be helpful. And then, as well, these issues in California, I don't think they just started now, they have been going on for probably about a year or so, why do you think they hit you now and didn't in the past? Thanks.

Okay, so let's start with, I guess, business revenue breakdown. So, I think three years ago, Ubiquiti was seen as kind of a one-hit wonder company. We had this airMAX outdoor wireless line, and we decided to apply our R&D and business model to a new industry, which is enterprise or small/medium business hospitality, which is with the UniFi product addresses.

I think right now roughly two-thirds of the business is service provider; airFiber, airMAX, edge fiber. The other third is UniFi, and UniFi has grown very quickly in the past three years. I will say, my vision for the Company is that UniFi will ultimately be bigger than airMAX and outdoor wireless. And hopefully we have some things coming up that will hopefully be even bigger than both UniFi or airMAX.

As for getting back to your quarter-to-quarter analysis, I'm probably not the best qualified to provide very granular answers or answers you need. I think a lot of that granularity should be in our filings, and you are welcome to contact IR for follow ups.

So you don't have a sense as to whether you are expecting the enterprise versus service provider mix to be similar next quarter than this quarter?

I told you, it's very hard for me to get into quarter-by-quarter analytics. I'm focused on macro trends and driving R&D.

Okay. Can you help link the, again why the -- or maybe Anne can or someone else -- why the issues with the port in the West Coast would have impacted enterprise more than service provider? I would assume they both pull from the same distributors?

Yes, You're welcome to follow up with IR to try to get more specific answers to that.

Okay. Let me try one last time on something else, was there a currency impact we should be looking at this quarter?

Well, I think in our case since a lot of our business comes from these emerging markets, and when you factor in that a lot of these emerging markets also have value-added taxes added to the final price, the strength or weakness of the US dollar is very important. So, I think a weaker US dollar definitely benefits us in areas like South America.

All right. Okay, lots of luck. Talk to you soon, thanks.

Our next question or comment comes from the line of Matt Robison from Wunderlich.

Well, thank you. Thanks for taking the questions. So, Robert, on the distributor and the strike, that we have heard a lot about that strike from consumer and retail type of companies during the last month or so, but it would seem like, given those circumstances, a channel might be fairly lean some time later this quarter. I guess you're probably not going to pine on that, but if you do have a feel, I would love to hear what your thoughts would be there.

But also, I would like to get your -- where you feel the status is for video switching and telephony, and what kind of progress you've seen in the market acceptance of those products? And, I guess the last question I have is if you've gotten any feedback from Ben or anyone in the Company about how the VARs that your distributors address are working with your products, and how they might be able to address the [E-Rate] opportunity that is coming?

Okay. So I'll start with -- you mentioned video, I think we talked about this on the last earnings call. Video is one of our initiatives I'm most excited about. We've been working on video for six or seven years, and I think we finally solved it, and the direction it is going is, I think, pretty exciting. You're going to see some new product announcements and some software leaps forward this year.

So, our goal with video is to bridge the gap between what's considered an enterprise video experience, where you have software like Milestone with high-end cameras that typically where deployments can cost hundreds of thousands of dollars to millions of dollars, to consumer camera prices like DropCam or [neck gear] or to a certain extent [Axuse], and we are trying to provide essentially an enterprise solution at consumer pricing, with a fantastic user experience.

And we just haven't been able to get there on the product side, and I think we are finally turning the corner. So, UniFi video will essentially, I think, follow the footsteps of UniFi, and I think that is the platform to take off. And I think this year, towards the end of the year, I'm expecting a kind of an inflection point for that platform.

For switching, it's early. We've been a little slow to get mass production ramped up on the switches for both UniFi and EdgeSwitch. The customers, the reports have been pretty positive, and I think it's another price-performance breakthrough for the UniFi line to have high-density POE switches that are essentially managed at low hundreds of dollars price point, where equivalents cost low thousands of dollars. I don't think they have ramped to the point where they are material, but I think within the next year, I think we will see material contribution from switching.

Your other question regarding the port strike impact in quarter-to-quarter forecast. I stick by my original answer where I can't provide the level of detail you guys need. Feel free to look at our filings or follow up with IR.

Last question, regarding E-Rate spending, I reference my first answer to start the call. We are not a business model typical of telecom equipment providers, like Ceragon, or [Ariston], or a [Varian], or DragonWave, where we don't have huge sales teams and target tier 1 carriers with funding opportunities.

I just don't believe in that business, I don't think it is scalable. I would rather sell to 10 entrepreneurial operators who will evangelize a product for you, and lead to much larger lifetime revenue with great operating margins. That's just what I believe in, and that's what we do.

One quick follow-up that I think you can probably answer, is when should we expect to see airMAX ac that can run in [univans] Uni-1 and Uni-2 with GFS?

Okay, so, we have been slower than I hoped we'd be in getting these certifications. I will tell you that it's been a big effort for the past several months, and we've been working very hard. AirFiber X we launched with full 5 GHz [band] certifications, and at [sub] $400, it's a custom application-specific radio that provides far better spectral efficiency, noise immunity, than anything out on the market. And at sub $400, it is in the same ballpark price as gaming routers, Wi-Fi gaming routers you see in Best Buy.

So, I think for any point-to-point links, airFiber X should be it, and we have full approval for the full band, and it's incredibly clean [Tx] spectral output, and it's great for co-location as well. Now, we do have a lot of frustration, justifiable frustration from our community. We have been slow with airMAX, UNI-1, 2, 3 certifications.

We have just gotten some of these certifications trickling in, particularly the high-end products; the Rocket M5, Rocket 5ac, and our PowerBeams, both 5ac and M5, we've gotten UNI-1, UNI-3 certifications. UNI-2 is largely dependent on the SEC, and also we expect trickling in, in the next couple of months are the rest of the radios.

Thanks a lot, Robert.

Sure.

Our next question or comment comes from the line of John Lucia from JMP Securities.

Hey, guys, thanks for taking my question. I had a couple here. So, you noted the shipment of backlog was stalled in Q3 due to products that were embargoed on the West Coast. Is some or all of that backlog still embargoed on the West Coast, or is that flushed through at this point?

I've been told it's flushed through.

Okay, so flushed through in Q4?

Correct.

And I guess I have a follow-up to that; if it was flushed through in Q4, it seems like that would boost the Q4 numbers. I know you don't want to comment on quarter-over-quarter growth, but it seems like that would be a boost. I'm just trying to understand why the guidance for the quarter-over-quarter decline -- I will follow up with that later.

But on the service provider, June is typically a pretty seasonally strong quarter for service provider. Do you still expect a seasonal uptick in service provider in the June quarter?

It's tough. We've been studying sell-through for the past two years, and it's been tough to get a handle on seasonal trends, primarily because our operations performance now is much, much better than it was in, say, two years ago. We are fulfilling orders much more quickly. Stock isn't an issue.

So, I think moving forward, we have much better sell-through data to analyze to look at seasonal trends, but it's just hard to determine right now, especially with product mix and product application increasing. We have routing and switching lines now, we have the UniFi enterprise business. The best I can say is, definitely in the winter, there is probably slow down in North America, and things like Carnival in February, we do see a hit in South America, particularly Brazil. Outside of that, it's hard to draw any conclusions.

Okay, thank you.

Our next question or comment comes from the line of James Faucette from Morgan Stanley.

This is Anita Marshall for James Faucette. I have a couple of quick questions. The R&D this quarter is relatively elevated to past trends, and you're starting to creep meaningfully above 10% OpEx. I'm just wondering is that a result of the revenue shortfall causing elevated rates, or kind of a long-term larger investment in R&D?

And then the second question would just be, for the service provider market, since you were kind of implying the past couple of quarters have applied year-on-year declines, and you're implying year-on-year declines going forward. Is more related to currency, market, or just not having a product in the market right now? Or product refresh in the market?

So, when I started the Company and we started growing, and we became more serious about putting together operations and financial infrastructure, one of the things that was brought to my attention, I didn't know at the time, but people were saying, oh, wow, your business model has this incredible efficiency profile, where you are 5% or 10% operating margin, and we've never seen this before in the industry. I was kind of proud of that, and I had some discipline in making sure we kept that operating profile.

But now that I see the world kind of moves fast, and it's the great companies have a vision, and it's about getting to that vision as fast as possible. And we have a vision for our current platforms, and completely new platforms. So my philosophy has kind of changed, where I was in kind of -- in a mode where I was trying to conserve our operating margin profile, to now I'm in a mode where, okay, how we accelerate the vision?

And I am willing to spend an unlimited -- our R&D [hat] is unlimited, provided we spend it on the right resources and with the same efficiency we are used to in our R&D. And, as long as we can do that, I'm aggressively looking at ways to accelerate the vision. And so, if you look at our R&D today, a very, very small portion of it is supporting shipping revenue products.

Most of it is dedicated to very ambitious, entirely new undertakings, that the public doesn't know about yet. And so, I hope this R&D investment will have similar returns to our R&D investments to date in the Company. Was the next question?

The second question was just, if you could rank the weakness in the service provider market, do you think it's more underlying demand, currency, or just not having some of the refresh products that you were speaking of?

Yes, I think you pointed out two key issues. I think a strengthening dollar definitely slows down the amount of equipment our operators can buy, specifically in the emerging markets. And the second thing is, we've relaunched, or we have a refresh of our airMAX line, is airMAX AC, which has been phenomenal, but it's primary used for point-to-point now.

We do have some customers deploying it in MultiPoint, but a lot of them are waiting for backwards compatibility, so they could mix and match with their existing networks, their existing deployments. And we are working on that and we are close to solving it. So, I think in the next, I don't know, let's say within the next year, I think you will see an inflection point with airMAX AC, where it boosts the service provider segment, because of both new applications it enables, and replacement of existing networks.

Great, thank you.

(Operator Instructions)

Our next question or comment comes from the line of Georgios Kyriakopoulos from SunTrust.

Great, thank you. Your [WISP market] continues to be [silenced]. So I'm wondering, how has the competitive landscape changed since the entrance of [Mimosa] for Wi-Fi backhaul, given that its products are priced somewhat similar to yours. So, having said that, do you feel that your distributors understand the differences between your and the competitor products?

Well, I think, in listening to your question, you say two very interesting things. First, you are talking about competition, and second, you talk about Wi-Fi backhaul. I think the market could benefit from education on Wi-Fi in general.

So, Wi-Fi is built on a contention protocol, and the 802.11 standard was really created to support indoor networks, where all the radios can hear each other. Once you get outside, to long-distance directional links, the Wi-Fi standard could be banded to make products work effectively, which we have done with airMAX.

But if you really want to solve the problem well, you need an application-specific radio, which we have designed with airFiber. And the benefits of airFiber is it provides unparalleled spectral efficiency, so you can get an incredible amount of bandwidth, and also low latency, and predictability, noise immunity, robustness in the unlicensed bands. And airFiber is not a Wi-Fi radio, it is an application-specific radio.

And you also mentioned about pricing. AirFiber, I think, kind of blows away the competition. It's the first time a dedicated radio has been built from scratch, for the unlicensed band, at a price point of sub $400, which I mentioned is similar to consumer Wi-Fi routers or gaming routers you could see in Best Buy. So, I think that's the answer to the backhaul market. I don't see how any company can compete with that product. You can't do any better for the price-performance.

So then, do you spend much time with distributors trying to educate them as to what the differences are between your products and with the competition has to offer?

So, the great thing about the world today is the Internet has opened up this transparency to the world where information can flow accurately and transparently. And I think the field results for airFiber speak for themselves. And our community and the reach of our community is big enough, where ultimately information gets disseminated accurately and efficiently. So I think if the product is great and it's hands down the best price-performance product on the market, it's only a matter of time before the success -- the product has success and becomes the leader in the market. And I think you are seeing that right now airFiber X.

All right. And then, one last question on your distributors, if I may. You have been expanding distribution, and according to the list that you have on your website, I think you have now over 350 distributors and the sellers. So I was wondering, what is the incremental opportunity to expand beyond your current distribution list?

And also, in terms of potential savings, what that would mean? And are the new distributors required to buy a certain level of inventory when they sign up with you?

So, new distributors, we have applications, I believe many every day, for new distributors. And of course we want to be loyal to distributors who have worked with us early on, and who have stocked our product and done a good job of distributing it. So depending on the market in the region, we do have pretty hefty requirements for new distributors to come on board.

Now, we are always looking for distributors to provide products or distribute products in areas where we don't have great accessibility to end customers.

Great, thank you.

Our next question or comment comes from the line of Kent Schofield from Goldman Sachs.

Thank you. The new guidance in the remarks around R&D expense as a percentage of revenue at 9% to 10% from the previous 6% to 8%, I was unsure, is that -- should we think of that as a long-term number, or should we think about that as the revenue growth is a little bit slower here in the [interim]? I would just love to distinguish between those two.

And then the other thought, it is really just kind of a follow-up to that, is just how do you think about hiring as we look at revenue growth slowing some? Is there a period of time with which you think we should step back some and let the revenue growth come back, or is it kind of full steam ahead looking at the longer-term opportunity?

I talked about this a few questions ago, so my mindset on running the Company shifted. Before I had a lot more discipline in looking at R&D spend as a percentage of revenue, and I wanted to keep it so that the total operating expenses is at 10%. Now, the most important thing I see is time. There is only so much time, in somebody's lifetime or in a company's lifetime. You have to accelerate the vision.

And I think when you take into account we've had really good metrics on our return on R&D to date, I think it makes complete sense if we expand R&D aggressively as possible. Under the condition it can be done efficiently and with the same principles we have been running our R&D to date. So, I can't tell you what the future is for R&D spend. I will say that, under the right circumstances, I'm looking to aggressively continue R&D spending, and I don't have any limits in my mind for R&D spend. If the right opportunity or the right people come long, I'm going to aggressively pursue them.

Got it. And should we think about the return on that R&D spend any differently across the service provider side of things, versus the enterprise side of things when you think about that return, or do you feel like they are comfortably in the same band?

Well, my expectations are to get the same kind of return you have seen on things like airMAX and things like UniFi. So, my expectation is to bring on new teams that could create product lines that do hundreds of millions of revenue per year.

Got it. Thank you.

Our next question or comment comes from the line of Rajesh Ghai from Macquarie.

Oh, yes, thanks. I had a couple of Robert questions. Robert, you mentioned UniFi Video seems to be turning the corner, can you give us some sense of what makes you think that is the case? And as far as airFiber X is concerned, you seem to be very excited by the product. Apart from the fact that is has got a very appealing price, can you give us some other indications that suggest that it will not have the same fate the airFiber, which was launched last year with a lot of excitement?

Sure, so starting with Video. The biggest improvement we made is in the user experience, and what we call transcoding, which is the streaming of multiple cameras. Before, the [user] experience in terms of the set up of the network video recorder, and the overall software experience, the look and feel, it was just not -- it was buggy, it was slow, it wasn't sharp and clean and zippy. And we have improved that dramatically. I think as a NVR and controller, it is as good as, in my opinion, as software that costs thousands of dollars to license per year.

The next thing we have done is on the hardware side. We are now on our third generation of camera hardware, and it's gotten remarkably better with each generation. Our first camera in the third-generation line has been the UVC-Micro, which is about the size of a golf ball and that's a pretty phenomenal design.

It is one-third the volume of say a Dropcam, and it runs full HD, it has a multimedia speaker, microphone, it has infrared. It even has a 15-foot very thin cable, so you could professionally deploy it, inside of walls, or running alongside of walls. It's Wi-Fi, so you don't need to run a wire back to the switch. And it's $99.

And you could buy 100 of them for $99, and spend sub $10,000, and you have, along with our NVR and software, you now have a professional system that supports multiple streaming, and it's stable, it's a great user interface and great user experience. So it's very much analogous to what we did on the Wi-Fi side, where we brought price-performance, just we disrupted it, in the enterprise Wi-Fi space and [adapt]. Once you see new features we're adding to the software this year, along with follow-on third-generation cameras, I think it's going to turn the corner.

Your next question about airFiber? AirFiber has been successful. You look at airFiber 24 and airFiber 5, we had higher hopes for those, but they still sold tens of thousands of radios through the channel. And when you consider the team, which is a pretty small team we recruited out of Motorola that has combined hundreds of years of experience and built the very first outdoor broadband unlicensed band radios, I think it hasn't been the success we hoped for, but it was still a success. And now, when you throw in airFiber X, I think you're going to see some pretty incredible return on R&D.

Okay. And my last question is essentially around the UNI-1, UNI-2 [diva] certification. You said there was a lot of frustration within the community as far as the certification is concerned. I'm just surprised you didn't call that out as one of the reasons why you see some weakness in service provider in North America.

Has not that not been a factor at all? How are you thinking about that? Thank you.

Well, for the US market, it tends to be a more advanced market than the rest of the world, meaning that the operators have more experience and also access to more finance vehicles. I think the price point of the airFiber X at sub $400 gives them the absolute best price-performance backhaul that has ever existed, and that product has been shipping with 5-year hertz UNI-1, UNI-2, UNI-3 certifications from the start.

Okay, thank you.

So anybody in the market to deploy a new backhaul link, I don't think there's any reason to choose anything else but an airFiber X. Now, we have been later than I hoped in getting UNI-1, UNI-2, UNI-3 certifications for our existing airMAX radios, but that's a little bit more complicated, because those radios have a prior set of rules they are certified under, called [DTS], and it's not so easy to go back and take a DTS-certified device and then certify it for UNI-1, UNI-2, UNI-3, and to do that for a multiple family of products. But we have. And those, especially the Rocket M5, and the PowerBeam, the high-end [multivalent] have already been certified. So we have been making progress, and I hope to have it all buttoned up in the next, well, let's say the next couple months.

But you also got to take a step back. We have a global certification effort. In Europe, for example, there is a new band that opened up, 5725 to 5875 for multipoint, and we have been rushing to get those certifications done, and those are just as important to the Europe market. But because the US market is under a microscope, that is what you guys see.

But the take away I want everybody to know is, yes, we are not happy with our progress in getting our airMAX family UNI-1, 2, 3, certified, and it's not because we are being lazy, it's just, it's a big task, and it's tackling a lot of products at once to go through this process. Some of it is under our control, some of it isn't. For example, the UNI-2 certifications have to sit in a queue with SEC, that could be weeks or months, sometimes.

All right, thank you.

Our next question or comment comes from the line of Tim Long from BMO Capital Markets.

Thank you. Two questions for me. On the UniFi side, Robert, if you could give us a little update, it sounded like AC is still moving along. Could you just give us a sense as to how the move towards AC in the UniFi portfolio went in the quarter, and do you think you are maybe more or less competitive when you look at AC relative to the prior generations?

And then, the second one, you went through video and switching as some of the new products earlier in the call. If maybe you could just give us an update on IP phones and edge routers, and what you're hearing from early stages of those new products as well. That would be helpful. Thank you.

Great. So, the UniFi, we were one of the first in the enterprise space to launch our UniFi AC radio, and we did that with very early silicon. It was a big effort to get it to market, and unfortunately the cost structure, manufacturing cost structure, of that UniFi AC SKU is not in line with the rest of our UniFi line, UniFi AP, so that's a higher-price product.

And we've been working to find a way to bring, essentially, UniFi AC refresh, while keeping our price points, so that is what we've been focused on. There will be a refresh of that line. It's going to be soon. It's going to definitely be this year, and we're hoping that will be a big boost for the UniFi platform.

The phones -- the product itself in many ways has been really well done. The UI, the user experience, the industrial design, the price point, I think are all incredible. I don't think there's another product like that in the Voice over IP market. The misstep was probably trying to tackle the challenge of creating our own PBX to support along with the phones. And so, I wanted to create a closed system where people could buy our phones, our UniFi Security Gateway, and have their own PBX, and create a closed proprietary system.

And I think in hindsight that was a mistake, because third-party PBXs on the market, whether it is FreeSWITCH [face ones], or Asterisk face ones, or now this push to cloud-based PBXs, with RingCentral as being a popular option. I think the third-party PBX world has a lot of momentum. We should have from the beginning had a strategy of creating a Voice Over IP phone that could work with any third-party PBX and seamlessly.

And the reason I didn't want to do that is because I didn't want to be a position of commoditization, where we made a product for a third-party PBX, and we were ultimately replaced. Everything we do we want to build (technical difficulty) [capability] around. But I think we found a good middle ground, where we could provide management features for the Android software, found in, say, a mass UniFi Voice Over IP phone deployment, but at the same time make it compatible with third-party PBXs.

So we are working hard on that. And we also have future generations of the UniFi video phone in development. So, I think the potential is still big. I expect that to be a material contributor, but it's going to be a rocky next couple quarters, solving these problems.

Okay, thank you.

Our next question or comment comes from the line of Ryan Hutchinson from Guggenheim Security.

Hi, this is Nate Cunningham on for Ryan. Two questions. First, can you help us understand the CFO's decision to leave the Company? And then, why was the year-over-year decline so much more pronounced in South America that was in EMEA? Thank you.

So, the CFO leaving, I don't really want to comment on that, other to say the real inherent value of this Company is in the R&D and the business model. And the people that are instrumental in the R&D and the business model haven't gone anywhere, and I'm hopeful we can find a more than adequate CFO, and we'll be successful in finding one. The second part of the question was?

Why was South America down more than EMEA?

Yes, so, I'll stick by original answer earlier in the conference calls. It's very hard for me to find good reasons or conclude why certain regions are up and down, particularly quarter to quarter. UniFi, for example, has been up and down for the past two years, if you looked on quarter-to-quarter basis. But overall, it has grown several hundred percent over the two or three years.

So, I want to make sure -- our focus is looking at macro trends, and driving R&D and focused on product development, and hopefully as our operations continues to improve, and we'll have more predictable results. But until then, you have got to just take into account our business model is a very unique -- we are dealing with a lot of entrepreneurial operators, and it is just kind of the nature of the business where we are going to have short-term fluctuations.

Thanks.

Our next question or comment comes from the line of Jess Lubert from Wells Fargo Securities.

Hi, guys, thanks for taking my questions. I also have a couple. Robert, maybe the first one -- I realize it's tough to forecast your business quarter to quarter, but do you have any thoughts on what the longer-term growth rate of the business should be, anything you can help us with there?

Well, I can tell you my expectation. And it's very ambitious, but I think I said business roughly tripled from IPO to now, and looking in three years, I want it to triple again.

Okay. And then, you have some newer distribution agreements with ScanSource, Ingram Micro, ECS, Redington. Any insight into how those individual relationships are going, and how important they could be to the business as we look out toward FY16?

Well, to reiterate the same answers I've given earlier in the call, I believe it starts and ends with the product. If you can continue to disrupt price performance in these markets with great user experience, successful revenue will follow.

But no insight into just (technical difficulty) those partners are, in terms of ramping up, or if they are taking more inventory on now than they were because they like the product so much? Anything kind of qualitative you can offer there, with those relationships?

I think the best thing to do if you want to get an idea of which regions are taking off and which products are popular, you can go to our community. Our community has generally over 1,000 posts a day now, it has few hundred thousand members. And not just our community, if you research further you will find places in Brazil, or India, or even China with their own regional communities specifically dedicated to Ubiquiti product use.

So maybe just last one for me, I was hoping you could update us on how you are thinking about the buyback, which expires in a few months. Do you plan to use what's remaining here, or should we expect you to let this expire at the end of the term? I think there was $60 million left on it.

No comments there. I think if we get to the point where we feel it's a good investment for the Company, we will exercise that option. But other than that I don't have comments on that.

I mean, Robert, the stock's down pretty materially last year, it's underperforming the market again, pretty materially. I hear you have got a pretty healthy cash position; the Board's given you the authorization to use the buyback of the $75 million, and I think you've only used $15 million.

Any reason that you wouldn't look to be more aggressive if you think the business can triple over the next couple of years? I would think this would be a tremendous return on your money. How come by your actions you are not thinking the same way?

Yes, you are making some good points. Should we do it? What do you think?

Well, if you believe what you're telling us, yes, I think you should.

Okay, I'll take it into account.

Thanks.

Thank you. Ladies and gentlemen, thank you for participating in today's conference. This concludes the Q&A section. You may now disconnect. Everyone have a wonderful day.