Re: UBNT
Great thoughts clm5. I guess for completeness I should post my own notes, which are largely pilfered/ far less organized:
| is the stock sufficiently liquid (large enough market cap, ADRs available if foreign stock) | yes | | death slide or recent run-up? | consolidating | | screen in Ycharts | | | LT liabilities/ tang book | their LT obligations are only about half their tbook | | SeekingAlpha negative articles | Key risks include a pending lawsuit regarding a counterfeiting scheme which took away millions of dollars of the company's funds and will most likely be unrecoverable. Cyber criminals have defrauded the company of 46.7 million, 8.1 million has been recovered, and the company expects to regain another 6.8 million, the remaining 31.8 million is uncertain.\nhttps://seekingalpha.com/article/4030431-ubiquiti-primer-survival-land-carnivores-dinosaurs\nSoftware defined networking, the advent of the cloud and the advent of a host of new data center technologies have undercut most of the competitors in this space."}"]https://seekingalpha.com/article/4053181-disruptive-growth-fair-price-ubiquiti-networks
Ubiquiti Networks Inc (NASDAQ:UBNT) began under Robert Pera, a young admirer of Steve Jobs, who landed a job at Apple Inc (NASDAQ:AAPL) where he noticed that Apple's WiFi devices could increase their transmission range over dozens of miles, gaining access to areas that phone and cable companies don't reach. As his idea was ignored, he decided to build his own low-cost, high performance WiFi modules in 2005 using $30,000 of personal savings and credit card debt. Since the IPO in 2011, the disruptive low-cost and high performing technology has sold 60 million devices worldwide, through a network of over 100 distributors, to customers in more than 180 countries and territories (source: latest 10-Q).
This company is a long-term bet on the fact that people will continue to demand high-speed Internet. UBNT uses a low-cost technology to address a market and get more people up to speed.
Even if margin levels drop in the near term, Ubiquiti's operates at a much lower cost compared to competitors.
Through 4 million registered users the product development team can quickly and easily engage a core audience to sell to, which avoids traditional selling expenses.
With a current market cap of $4 billion and a total addressable market of $34 billion this company has lots of room for expansion.
UBNT could also be a buyout candidate for CSCO 0 other authors have hinted at this in the past as CSCO could greatly enhance their product line with UBNT offerings.
[] Key risks include a pending lawsuit regarding a counterfeiting scheme which took away millions of dollars of the company's funds and will most likely be unrecoverable. Cyber criminals have defrauded the company of 46.7 million, 8.1 million has been recovered, and the company expects to regain another 6.8 million, the remaining 31.8 million is uncertain.
seekingalpha.com
Software defined networking, the advent of the cloud and the advent of a host of new data center technologies have undercut most of the competitors in this space. | | is it a fraud? | looks like there is some badness but not rottenness | | comps in Ycharts | P/ TB 8 which is rather high even before the Synopsis liabilitiy\n[] upper quartile for EV/ Rev\n[] EV/ FCF is quite high"}"]cash/ cap unremarkable, low D/ E, they have one of the lower EV/ EBITDAs, opPE/ PE is on the lower end, profit margin/ ROE/ ROA/ ROIC are high end for this industry, rev and tbook growth among highest in industry
[] P/ TB 8 which is rather high even before the Synopsis liabilitiy
[] upper quartile for EV/ Rev
[] EV/ FCF is quite high | | valuation | I think they can grow their tbook over time | | | | SeekingAlpha all articles | it does seem like they are growing significantly slower than Arista -] is that a problem in terms of the valuation?\nThey are still growing faster than EBN.V\nAbout the only mainline networking vendor that has achieved significant growth recently has been Arista (NYSE:ANET) which has completely disrupted its market and gained substantial market share over the past few years.\nThe company was founded by and is run by a \"techie\" who has very specific ideas about how to run tech firms that are quite different than those of many other managers in the field. He still owns a majority of the shares and he also owns the Memphis Grizzlies basketball franchise.\nMost of the negative sentiment is based on concern that the company's moat isn't deep enough or that competition will eventually disturb its market position.\nAccording to management, principle competitors such as Cisco Meraki, HPE, Aruba and Ruckus have ASP's between $500-$1000 per access point. This company charges less than $100 per access point. I was a bit dubious as to how that could happen-but those are the prices.\nThe company's core product is called UniFi AC.\nStill a bit of head scratching for me-but it is hard to argue with the facts that this company sells its LAN's at a very disruptive prices and it is gaining significant market share.\nThe WLAN market has resumed its growth and current forecasts suggest that it will be able to achieve a CAGR of 14% through 2020.\nThe company recently introduced AmpliFi which is a totally new venture for the company. It is a consumer WLAN, although to be sure, the company's other products are sometimes used by consumers because of their very low cost. The consumer WLAN market, while quite sizeable is smaller than the enterprise market and is not growing at this point because of the relatively slow adoption of the latest \"802\" standard. AmpliFi is sold on Amazon and Google.\nAs has been typical for this company, the company has had a difficult and frustrating experience in executing on the production side. The CEO, Robert Pera, talked about demand for tens of thousands of units that have been shipped slowly. Perhaps in idiosyncratic fashion, Mr. Pera has threatened several members of the team with firing because of the miscues of the product launch.\nThe publication talks about the launch of a competitive product from a company call Cambium. Cambium is a spin-off from Motorola and its revenues have imploded significantly since it went independent. This is a competitive space and there will be competitive products. Cambium has not been particularly successful in the space and I have no reason to believe that a product from that source is a major challenge to the outlook for this company.\nIt has instead, brought on a new IR Director who will be responsible for external communications, a role often filled by a CFO.\nIn its latest quarterly report, the company basically said it didn't have enough inventory to fulfill all of the orders that it had and that its inventories to some extent were the product of a flawed manufacturing execution. Specifically, management said that, \"We have increased our inventory balance to compensate for reduced inventory in our distribution channel and to reduce our lead times."}">https://seekingalpha.com/article/4052966-ubiquiti-shares-sale-50-facts-prove-cheap
community.ubnt.com
I like Ubiquiti big time, however I believe at this time it is very risky due to the huge claim by Synopsis of unlawfully using their software. Synopsis seems to have very concrete numbers and times Ubiquiti has violated the use of their software and If the claim is awarded to Synopsis, Ubiquiti will likely have to pay in excess of 100 million dollars, depleting all its cash. You do realize that UBNT has over $600M in cash, right? The lawsuit is already public knowledge and your figure seems quite high to numbers I've seen. Either way it's not material to the value of the company longer term. They will likely generate about $300M of cash in the coming 12 months. Synopsis is claiming 39,000 violations with a max penalty fee (according to the Digital Millennium Copyright Act) of 2,500 per violation, that is 97.5 Million. Even if they generate $300 million cash in 2017, that's a third of their full year earnings. That will put a dent on the share price for at least a year. Additionally, if there is merit to the claim the courts could prevent Ubiquiti for using Synopsis software which could delay other product launches like airFiber LTU technology that needs to be designed with Synopsis ASIC design software
[] it does seem like they are growing significantly slower than Arista -> is that a problem in terms of the valuation?
They are still growing faster than EBN.V
About the only mainline networking vendor that has achieved significant growth recently has been Arista (NYSE:ANET) which has completely disrupted its market and gained substantial market share over the past few years.
The company was founded by and is run by a "techie" who has very specific ideas about how to run tech firms that are quite different than those of many other managers in the field. He still owns a majority of the shares and he also owns the Memphis Grizzlies basketball franchise.
Most of the negative sentiment is based on concern that the company's moat isn't deep enough or that competition will eventually disturb its market position.
According to management, principle competitors such as Cisco Meraki, HPE, Aruba and Ruckus have ASP's between $500-$1000 per access point. This company charges less than $100 per access point. I was a bit dubious as to how that could happen-but those are the prices.
The company's core product is called UniFi AC.
Still a bit of head scratching for me-but it is hard to argue with the facts that this company sells its LAN's at a very disruptive prices and it is gaining significant market share.
The WLAN market has resumed its growth and current forecasts suggest that it will be able to achieve a CAGR of 14% through 2020.
The company recently introduced AmpliFi which is a totally new venture for the company. It is a consumer WLAN, although to be sure, the company's other products are sometimes used by consumers because of their very low cost. The consumer WLAN market, while quite sizeable is smaller than the enterprise market and is not growing at this point because of the relatively slow adoption of the latest "802" standard. AmpliFi is sold on Amazon and Google.
As has been typical for this company, the company has had a difficult and frustrating experience in executing on the production side. The CEO, Robert Pera, talked about demand for tens of thousands of units that have been shipped slowly. Perhaps in idiosyncratic fashion, Mr. Pera has threatened several members of the team with firing because of the miscues of the product launch.
The publication talks about the launch of a competitive product from a company call Cambium. Cambium is a spin-off from Motorola and its revenues have imploded significantly since it went independent. This is a competitive space and there will be competitive products. Cambium has not been particularly successful in the space and I have no reason to believe that a product from that source is a major challenge to the outlook for this company.
It has instead, brought on a new IR Director who will be responsible for external communications, a role often filled by a CFO.
In its latest quarterly report, the company basically said it didn't have enough inventory to fulfill all of the orders that it had and that its inventories to some extent were the product of a flawed manufacturing execution. Specifically, management said that, "We have increased our inventory balance to compensate for reduced inventory in our distribution channel and to reduce our lead times. | | VIC articles | NA | | COBAF posts | http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/ubnt-ubiquiti-networks/
If I were building a WISP I would still consider UBNT gear because it is just so cheap and featurefull for what you get. But I would likely only use it for connecting end users and try to stick with something like DragonWave ( dragonwaveinc.com ) for backhaul links or links that just can’t go down. But alot of WISPs out there use UBNT and are very happy with it. They have a great edge in the WISP market.
It has gotten better over the years but if I were to do a production wifi network for end users (non wisp model) I would use cisco or aruba.
I realize that this probably doesn’t help with regards to buying or selling the stock. I looked at UBNT when it IPOed and threw it in the too hard pile, just really hard for me to get a good sense of what will happen to them.
I think UBNT's products make alot of sense in the frontier market. The price points allow for local entrepenuers or governments to bootstrap a WISP for a low cost and incrementally expand their networks. I have no idea however how big the demand is in the developing world.
This company is unloved by wall street for a variety of reasons, it doesn't have a CFO (how dare they) doesn't have a traditional sales force, and the CEO owns over 50%. It's a jockey stock the same way Apple was under Jobs. I'm not claiming this is the next apple, just that it's ran by a brilliant young CEO with an excellent track record. | | other articles | as above | | Yahoo app summary | short float nearly 50% | | FINVIZ | why is P/ FCF so high? -] why does FCF appear so low at the moment?\n71% insider owned, short float 43%"}">[] why is P/ FCF so high? -> why does FCF appear so low at the moment?
71% insider owned, short float 43% | | Key Stats (Ycharts) | what do the liabilities consist of? -] mostly LT debt -> and of course they have an OBS liability which is the potential payment to Synopsis"}">[] what do the liabilities consist of? -> mostly LT debt -> and of course they have an OBS liability which is the potential payment to Synopsis | | Financials (Ycharts) | why the big dip in their operating results in Q2 2015?\n[] why is cash down as of Q1 -] was that the giant cybertheft? -> if that was what did it I'm surprised it isn't more\nassets = current assets -> that is good\nLT debt is the bulk of liabilities\n[] looks like CFO/ FCF suffered due to the mishap last Q -> nonetheless they have been steadily building their cash position"}">[] why the big dip in their operating results in Q2 2015?
[] why is cash down as of Q1 -> was that the giant cybertheft? -> if that was what did it I'm surprised it isn't more
assets = current assets -> that is good
LT debt is the bulk of liabilities
[] looks like CFO/ FCF suffered due to the mishap last Q -> nonetheless they have been steadily building their cash position | | Nasdaq institutional holdings | most institutions are holding or growing their positions | | insider transactions | Pera is holding the vast majority of his shares | | | | 10K - Business | We started shipping AmpliFi products in the first quarter of fiscal 2017.
Historically, we have not employed a direct sales force, nor do we plan to in the future. We sell our products and solutions globally to
service providers and enterprises primarily through our extensive network of distributors, and, to a lesser extent, direct customers.
Sales in Europe, the Middle East and Africa accounted for 39%, 40%, and 43% of our revenues in fiscal 2016, fiscal 2015 and fiscal 2014, respectively. | | 10K - Risk Factors | how serious is the risk of interruption in the supply of Qualcomm chips?\nAh, so the cybertheft was in 2015 -] that was the source of the big charge to earnings back then\nWe receive a substantial majority of our revenues from the sale of outdoor wireless networking equipment and enterprise WLAN.\nThe Company\u2019s failure to maintain an effective control environment contributed to a second deficiency in the form of ineffectively designed and maintained controls required for safeguarding of the Company\u2019s funds and timely detection of improper transactions in the general ledger. Specifically, the Company\u2019s disbursement authorization policies were not updated timely for changes in personnel and positions, nor were authorization requirements clearly stated, including those for non-routine transactions."}">[] how serious is the risk of interruption in the supply of Qualcomm chips?
Ah, so the cybertheft was in 2015 -> that was the source of the big charge to earnings back then
We receive a substantial majority of our revenues from the sale of outdoor wireless networking equipment and enterprise WLAN.
The Company’s failure to maintain an effective control environment contributed to a second deficiency in the form of ineffectively designed and maintained controls required for safeguarding of the Company’s funds and timely detection of improper transactions in the general ledger. Specifically, the Company’s disbursement authorization policies were not updated timely for changes in personnel and positions, nor were authorization requirements clearly stated, including those for non-routine transactions. | | 10K - Financials | why did CFO and FCF worsen so much recently if the cybertheft was back in 2015?\n[] and why did NI come out fine in spite of that?\n[] why did they issue 100M in LT debt in 2015 and 72M in 2014?"}"][] why did CFO and FCF worsen so much recently if the cybertheft was back in 2015?
[] and why did NI come out fine in spite of that?
[] why did they issue 100M in LT debt in 2015 and 72M in 2014? | | 10K - Notes to Financial Statements | | | 10K - MD&A | If they would stop wasting cash on repurchases they would be building a much larger cash balance -] this is particularly bothersome when they have a significant amount of LT debt\nLooks like the majority (162M) of the notes come due 2020.\nSBC structure is very low along with overall OpEx\n78M in outstanding options vs 4B+ MC"}">The increase in revenues during fiscal 2016 was driven by increased adoption of our enterprise technologies products which represented 37% of our total revenue in fiscal 2016. Service provider products revenue were flat year over year and represented 63% of our total revenue in fiscal 2016. Enterprise Technology includes our UniFi and mFi platforms, including UniFi enterprise Wi-Fi products, Unifi Video products, and Unifi switching and routing solutions. Enterprise Technology also includes revenues that are attributable to PCS.
Our provision for income taxes increased $10.2 million from $16.1 million for fiscal 2015 to $26.3 million for fiscal 2016. Our effective tax rate remained flat at 11% in both fiscal 2016 and fiscal 2015 because the Company's ratio of domestic and foreign income remained relatively constant for fiscal 2015 and fiscal 2016. Overall, the rate benefit is due to income in foreign jurisdictions that have lower tax rates than the U.S.
[] If they would stop wasting cash on repurchases they would be building a much larger cash balance -> this is particularly bothersome when they have a significant amount of LT debt
Looks like the majority (162M) of the notes come due 2020.
SBC structure is very low along with overall OpEx
78M in outstanding options vs 4B+ MC |
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