優比快 (UI) 2018 Q2 法說會逐字稿

Good morning, and welcome to the Ubiquiti Networks Second Quarter Fiscal 2018 Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Ms. Laura Kiernan. Please go ahead, ma'am.

Thank you, Jake, and thank you, everyone, for joining us today. I'm here with Robert Pera, Founder, CEO and Chairman of the Board at Ubiquiti Networks.

Before we get started, I'd like to review the safe harbor statements. 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 sec.gov. Forward-looking statements are made as of today, February 8, 2018, and we assume no obligation to update them. We hope you have reviewed management's prepared remarks, which are posted on the Events and Presentations and Financial Information sections of our website, ir.ubnt.com.

This call will be a Q&A-only call. (Operator Instructions) Jake, we are now ready for your questions.

(Operator Instructions) And we'll hear first from Woo Jin Ho with Bloomberg.

So Robert, can you just talk about the second half guidance and the second half outlook? I'm just trying to get a better understanding of what the sales dynamics may be to bring your full year sales towards the lower end of the range. How do I think about it from the enterprise side? And how do I think about it from the service provider side?

Service provider is looking strong. We have a number of catalysts that are just at the early stages. If you look at airMAX, we have our airMAX AC Gen2. And by many accounts, it's by far the best-performing system in the WISP industry now. We have an excellent, what we call, Prism technology in the BaseStation that greatly mitigates noise, effects of noise in the 5-gigahertz spectrum, and it allows for much higher throughputs, much higher capacity.

On the client side, we have a number of great solutions. We just released a $49 NanoStation local 5 AC, that we think is going to lead to a lot more upgrades of networks. And where we really shine, I think, right now is our softwares. So if you look at our airOS software, the airMAX performance, I think it's as good as it's ever been. We also have great, what we call, Ubiquiti Network Management System, both consisting of a mobile app and a controller as well as a free, what we call, UCRM. So it's a complete -- which allows service providers to manage their complete businesses. So it's a complete end-to-end software suite. And combined hardware and software, I think airMAX AC is in fantastic shape. So I fully expect to see growth returning to airMAX as well.

At the same time, we have our very ambitious 5, 6 year in the making project we call LTU, which is a -- our long-term Ubiquiti vision, and that's another price performance disruption for the WISP industry. And we're essentially taking what used to be very high-end, maybe WiMAX-type base station equipment that costs thousands or tens of thousands of dollars or LTE equipment, base station equipment, and we're lowering that price to something pretty much jaw-dropping. And there's a number of enhancements in that technology, spectral efficiency is better than 22 bits per hertz -- bits per second per hertz. We have support, 4096 quantum modulation. So it's like a Rolls Royce engine at a commoditized price point.

And lastly, we have UFiber, which is early -- it's starting from a small base, but I think it's going to grow quickly. We have a very low-cost, aggressive ONU customer equipment coming out. So operator, I think will finally return to some significant growth after a 2- to 3-year lull.

On the UniFi side, we're also excited about UniFi. We have -- I guess, in the past 2 years, we've really solidified UniFi as a top performer in enterprise WiFi in terms of the WiFi driver. And what you'll see over the course of the next year is some big improvements, especially in the user experience. So we have a new wave of hardware that will make it much easier for anyone to install a UniFi system, and I think that will expand our operator base. We also have deep investments in security, intrusion-prevention, intrusion-detection systems that typically have cost thousands, tens of thousands of dollars. And we're pretty much giving this -- these powerful features free of charge in UniFi Security Gateways.

And then lastly, another big catalyst in the UniFi world is Video. We've overhauled the team and the R&D strategy about 2 years ago. And I think what you'll see in the later half of this calendar year is UniFi Video turning the corner much like UniFi did in 2016, 2017. So we're on our fourth generation of UniFi Video technology, and we're going to significantly reduce the pricing and significantly increase the performance and the user experience. And that's all going to start in the next few months with the release of UniFi Video 4.

And of course, with things like Ubiquiti Labs, we're always looking to make big bets. I believe you always have to be aggressive in this day of age. If you're not moving, if you're not adapting and trying new things, then you're going to get beat. So we always are trying to move faster than competition.

And AmpliFi, I think, considering our level of marketing, investment and infrastructure relative to the competitors, it's done extremely well and is a profitable business. I think you'll see it continue to grow. And early days trajectory is similar to what we had in UniFi in the first year to 2 years.

We'll now move to our next question. It will come from Erik Suppiger with JMP Securities.

You had refinanced your debt agreement earlier in the quarter. Can you comment, why you felt the need to take up access to capital when you also have the opportunity to repatriate the offshore cash? Why you need access to so much capital?

Well, when we started that process, it wasn't a sure thing we'd be able to repatriate the cash, one. Second, it takes a while to get financing like that lined up. And when you're looking at the market, and I believe that things are in a bubble right now. And also, when opportunities come up, you want to be able to jump on them. And so I think the benefits of having cash ready, it's a good thing to have.

And now we'll move to our next question, and that will come from Tal Liani with Bank of America Merrill Lynch.

This is Kayla Brooks on for Tal. I was wondering if you've seen any change in your North American service provider market after AT&T started to more aggressively roll out fixed wireless access in many rural areas.

Yes, this one is tough to really get a handle on. For years, there have been carriers that have launched initiatives to get to the more rural areas of the country with licensed frequencies. I'm still of the belief that economics of community wireless broadband or these independent entrepreneurs we call the wireless Internet service provider industry, I'm of the belief the -- for this community-internet type model to get broadband to these disparate areas of the world is by far and away the most efficient way to solve that problem. Big companies have license frequency overhead. They have a lot of, I'd say, high-end standardized technologies, base stations overhead. They have the infrastructure, the truck rolls. So I think it could have some impact, but I also believe that our operator market and the larger wireless Internet service provider industry will continue to grow. And one of the things we've done to give us -- I'd say, to maybe reduce our exposure just on the wireless side is to get into things like fiber and high-end switching and carrier routing, like you do with our EdgeMAX technology. So I think our diversified operator technology portfolio should still grow even if these new initiatives from big tier 1 carriers eat in to some of the WISP market.

With that ladies and gentlemen, this does conclude our question-and-answer session and will bring the conference to a conclusion. We do thank you for your attendance, and you may now disconnect.