優比快 (UI) 2018 Q3 法說會逐字稿

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

At this time, I'd like to turn the conference over to Ms. Laura Kiernan, SVP, Investor Relations. Please go ahead.

Thank you, Brian. And thank you, everyone, for joining us today. I'm here with Robert Pera, our Founder, CEO and Chairman of the Board of 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 SEC's website at sec.gov. Forward-looking statements are made as of today, May 10, 2018, and we assume no obligation to update them.

We hope you've had a chance to review management's prepared remarks, which were posted as a transcript on the Events and Presentations and Financial Information sections of our website at ir.ubnt.

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

(Operator Instructions) And we'll go first to Tim Long with BMO Capital Markets.

I'll try 2, if I can. First, Robert, can you talk a little bit about products in the quarter and in the pipeline? I know a few more were announced during the quarter. Just talk about any products that stood out outside of airMAX and UniFi where you're seeing traction and from the newly announced products where you're most excited. And then just secondly, if you just touch on South American business, a little bit of weakness there and as well in the service provider. I'm assuming those 2 are linked. Anything other than just the standard lumpiness there? Is there anything else you would attribute that performance to in the quarter?

Sure, I can start with new products. So we have 2 main businesses right now. One, of course, is UniFi. And UniFi started off as WiFi. We expanded it to power ethernet switching and security gateways and a whole portfolio of different APs. And now we're taking it -- video is picking up. We're taking it into adjacent markets. And we're trying to create a complete collection of technology, all consolidated within the one UniFi controller platform.

So I think you'll see UniFi over time become more and more diversified. It was largely WiFi APs when we started. Now I think it's a pretty good mix of everything from our Cloud Keys, security gateways, PoE switches and APs. And I think our next generation of video, we finally got right. So I hope we will see a nice ramp-up in our video products to match the quantities of switches and APs we sell.

On the service provider side, traditionally, we sold airMAX was our dominant platform. But we are also adding new technologies to service provider including things like UFiber. And our long-term strategy right now for operator is shaping up nicely. It's following a similar trend to what we did with UniFi, where we're trying to integrate all these technologies into one management controller, which is our Ubiquiti Networks Management System, UNMS.

And UNMS, the installations and the active users on the mobile app has really grown significantly over the past 0.5 year or so. And I think you'll see service provider start to show some growth over the long term. Now back to your question about service provider being down and South America being down. It's really hard to draw conclusions on our business quarter-to-quarter. Our channel is imperfect. Our supply chain is far from perfect, and that is one of the reasons we're going to move away from quarterly guidance. I think they create a misrepresentation of the strength of our business, but there's also opportunities there. I think if we could make our channel more efficient, make our supply chain more efficient, we should see increased scale and, hopefully, more consistency.

And we'll go next to Woo Jin Ho with Bloomberg Intelligence.

Robert, can you just talk about -- just to dig into the international segments. Can you just talk a little bit more about EMEA? EMEA has been fairly strong. 7 out of the last 8 quarters, you've grown 20% plus. Just help us understand the growth dynamics and the demand dynamics there. And then just to follow on on that, we're slowly approaching the 802.11ac cycle. Given the misexecution issues -- I'm sorry, the AX cycle, given the misexecution of your first try at AC, have you put steps in place to ensure a smoother rollout for your AX products in the future?

Pardon the interruption, this is the operator. We are hearing silence at this time. (Operator Instructions)

Okay, just a moment, we're going to see if we can get Mr. Pera to dial back in.

Sorry, about that.

Do you need for Woo to repeat...

Yes, sorry, Laura. Did I answer that question or not? I was trying to keep my phone on mute while people were asking the questions. I think I didn't unmute. I can answer that question again. Should I answer it again?

Yes, please.

Okay. So starting first part of your question about introducing AX, you have a great point. The AC introductions in UniFi and in airMAX both were not -- didn't go well. And I think they negatively impacted the brand and hurt the trust of our customers to adopt our new products and new releases into production. So the R&D today, our R&D leadership and our culture is much more disciplined. And we're going to make sure we perfect any new platform before it's released officially in the market moving forward. And I think we've demonstrated much better discipline in that area in the past couple of years.

To the next part of your question about EMEA, I think it's largely due to UniFi, especially in Western Europe. We see it -- just people in the system integrator community are becoming aware of UniFi, the powerful performance, the superior user experience and the great value compared to traditional vendors. And just it's seeing some network effects and scaling right now.

We'll go next to Erik Suppiger with JMP.

I wanted to ask a few questions, one on the buyback. You've spent about $750 million on the buyback or more than that. You just authorized another $200 million. You've talked about your interest in Teledyne where they bought back 90% of their shares. Can you give us an update on what your goals are for your buyback? You've been very aggressive there. And how you're measuring your returns on that buyback?

My goal is to use our cash, our capital efficiently. And I think, as demonstrated by our past share buyback performance, it's been a much better return on investment versus leaving the cash in the bank. We're also always looking at acquisitions. The problem with acquisitions is we have such a unique culture that it's going to be difficult to devote resources to cultural integration. And we're much faster, in my opinion, growing new technology and new businesses organically. So it leaves, I guess, a good opportunity for us. We have cash on hand. And if we feel the stock's undervalued and we believe in our long-term prospects, it's an easy decision to use that cash to retire shares and improve our future EPS.

And we'll go next to Tal Liani with Bank of America Merrill Lynch.

Robert, this is Dan Bartus on for Tal. First, I just wanted to ask about AmpliFi. Just generally, are you happy with where it's at right now? Is it growing within your expectations? And when do you think it moves the needle? And then just briefly on professional fees and SG&A, if you know about it? SG&A is up quite a bit. I was wondering what those fees are related to?

Sure. So AmpliFi, it's doing okay. It's tens of millions of dollars of revenue rate. It could be a lot better. I think in consumer markets your timing and first to market is critical, and I think we could have executed AmpliFi better. At the same time, I think relative to competitors and our investment, marketing and sales investment relative to our competitors, it's done really well. And I think it has kind of validated our business model and our R&D model where we can apply this model to different markets and similar returns on investments. The -- sorry, second part of your question was?

And this concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.