Analyzing and explaining Ubiquiti (NYSE: UI) Q1 2025 financial results
UBIQUITI INC. reported financial results for 2025 Q3, 2024. Total revenues increased 19% to $505.344 million from $463.078 million in the same period last year.
UBIQUITI INC. reported financial results for 2025 Q3, 2024. Total revenues increased 19% to $505.344 million from $463.078 million in the same period last year.
Revenue: $550.3 million, an increase of 19% compared to $463.1 million in the same period last year.
Gross Profit: $231.6 million, up from $183.9 million, with gross margin improving to 42% from 40%.
Operating Income: $169.2 million, an increase from $128.3 million.
Net Income: $128.0 million, up 46% from $87.8 million.
Earnings Per Share (Diluted): $2.12, compared to $1.45.
Cash Flow from Operations: $233.7 million, significantly higher than $67.7 million in the prior year.
Consolidated Statements of Operations (In thousands, except per share data)
Item
Q1 FY2025
Q1 FY2024
Revenues
$550,344
$463,078
Cost of Revenues
318,726
279,203
Gross Profit
231,618
183,875
Research and Development Expenses
37,997
36,283
Sales, General, and Administrative Expenses
24,415
19,290
Total Operating Expenses
62,412
55,573
Income from Operations
169,206
128,302
Interest Expense and Other, Net
10,578
21,224
Income Before Income Taxes
158,628
107,078
Provision for Income Taxes
30,640
19,328
Net Income
127,988
87,750
Earnings Per Share – Basic
$2.12
$1.45
Earnings Per Share – Diluted
$2.12
$1.45
Consolidated Balance Sheets (In thousands)
Assets
Q1 FY2025
Q1 FY2024
Current Assets:
Cash and Cash Equivalents
$165,175
$126,342
Accounts Receivable, Net
174,501
169,147
Inventories
446,179
462,032
Vendor Deposits
97,424
123,461
Prepaid Expenses and Other Current Assets
43,218
35,031
Total Current Assets
926,497
916,013
Property and Equipment, Net
77,080
81,126
Operating Lease Right-of-Use Assets, Net
45,245
47,768
Deferred Tax Assets – Long-Term
35,835
35,934
Other Long-Term Assets
73,261
73,571
Total Assets
1,157,918
1,154,412
Liabilities and Stockholders’ Equity
Q1 FY2025
Q1 FY2024
Current Liabilities:
Accounts Payable
$52,603
$51,095
Income Taxes Payable
56,337
23,475
Debt – Short-Term
24,410
36,508
Other Current Liabilities
230,744
173,713
Total Current Liabilities
364,094
284,791
Debt – Long-Term
527,205
669,878
Other Long-Term Liabilities
78,480
104,683
Total Liabilities
969,779
1,059,352
Stockholders’ Equity
Common Stock and Additional Paid-In Capital
12,078
10,705
Retained Earnings
176,061
84,355
Total Stockholders’ Equity
188,139
95,060
Total Liabilities and Stockholders’ Equity
1,157,918
1,154,412
Consolidated Statements of Cash Flows (In thousands)
Cash Flow Items
Q1 FY2025
Q1 FY2024
Net Cash Provided by Operating Activities
$233,667
$67,682
Net Cash Used in Investing Activities
(2,604)
(3,025)
Net Cash Used in Financing Activities
(192,230)
(70,956)
Net Increase (Decrease) in Cash and Equivalents
38,833
(6,299)
Cash and Cash Equivalents at Beginning of Period
126,342
114,826
Cash and Cash Equivalents at End of Period
165,175
108,527
Revenue Breakdown by Product Type (In thousands, except percentages)
Product Type
Q1 FY2025
% of Revenue
Q1 FY2024
% of Revenue
Enterprise Technology
$470,184
85%
$380,095
82%
Service Provider Technology
80,160
15%
82,983
18%
Total Revenue
$550,344
100%
$463,078
100%
Revenue Breakdown by Geography (In thousands, except percentages)
Region
Q1 FY2025
% of Revenue
Q1 FY2024
% of Revenue
North America
$271,247
49%
$224,785
49%
EMEA
204,888
37%
172,394
37%
Asia Pacific
40,938
8%
36,086
8%
South America
33,271
6%
29,813
6%
Total Revenue
$550,344
100%
$463,078
100%
Operational Highlights
Enterprise Technology Growth: Revenue from Enterprise Technology products increased by 24%, reflecting strong market demand.
Service Provider Technology: Revenue slightly decreased by 3%, indicating a shift in product mix.
Gross Margin Improvement: Increased to 42% from 40%, due to favorable product mix and reduced tariffs.
Operating Expenses: Increased modestly, primarily due to higher personnel costs and marketing expenses.
Debt Repayment
Reduced Long-Term Debt: The company repaid a significant portion of its debt, decreasing long-term debt from $669.9 million to $527.2 million.
Debt Structure: Focused on strengthening the balance sheet and reducing interest expenses.
Cash and Liquidity
Strong Operating Cash Flow: Net cash provided by operating activities was $233.7 million, a substantial increase from the prior year.
Cash Position: Ended the quarter with $165.2 million in cash and cash equivalents.
Dividends
Dividend Payment: Paid $0.60 per share during the quarter, totaling $36.3 million.
Future Dividends: On November 8, 2024, the Board declared a quarterly cash dividend of $0.60 per share, payable on November 25, 2024.
In terms of sales by region, North America increased 21% from $224.785 million to $271.247 million, while the EMEA region increased 19% from $172.394 million to $204.888 million. The Asia Pacific and South America regions also recorded increases of 13% and 12%, respectively. North America’s share of total revenue was maintained at 49%, with sales growth in each region supporting overall growth.
On the cost side, cost of sales as a percentage of total revenues decreased to 58% from 60% in the same period last year, and gross margin improved to 42% from 40%. This was due to a favorable product mix and lower tariffs, which were partially offset by higher shipping and warehouse-related costs.
In operating expenses, R&D expenses increased 5% to $37.997 million from $36.283 million in the same period last year. Meanwhile, selling, general, and administrative expenses increased 27% from $19.29 million to $24.415 million, impacted by higher credit card processing fees, professional fees, and marketing expenses. However, operating expenses as a percentage of sales declined to 7% from 8% in the previous year.
Interest expenses decreased 50% to $10,578,000 from $21,224,000 in the previous year. This was due to lower borrowings, lower interest rates, and foreign exchange gains. Income before taxes increased 29% to $158,628 from $170,078 a year earlier, and net income increased 23% to $127,988 from $87,750,000.
In terms of cash flow, cash flow from operating activities increased significantly to $233,667,000 from $67,682,000 in the same period last year. On the other hand, investing activities used $2,604,000 for capital expenditures, and financing activities used $192.23 million for repayments from the credit facility and dividend payments, resulting in an increase in cash and cash equivalents from $112.634 million to $165.175 million in the same period last year.
On the liability side, short-term debt decreased to $244.1 million from $365.08 million in the previous year, and long-term debt decreased to $527.205 million from $669.878 million. Total debt increased from $1,069.79 million to $1,157.918 million, while shareholders’ equity increased significantly from $950.6 million to $188.139 million.
Ubiquiti Inc. also approved a quarterly dividend of $0.60 per share, payable on November 8, 2024, and announced that it will be paid on November 25.
The company warns of the risks, noting that it relies primarily on a limited number of distributors to sell its products, which makes it difficult to predict future performance. If distributors cannot properly manage inventory and accurately estimate customer demand, sales and profit margins could be affected.
With respect to inventory management, inaccurate demand forecasting can lead to excess inventory and component disposal, which can result in financial losses. The risk is especially heightened when new products are introduced, making it difficult to accurately predict market response.
In addition, the company relies on a limited number of contract manufacturers and suppliers, and any delays in component supply or quality issues could severely impact production. Geopolitical tensions, natural disasters, and pandemics could also disrupt the supply chain.
Cyber-attacks and data security threats are also increasing, and in the event of an information leak or system failure, there is a risk of loss of customer confidence and legal liability. In particular, the protection of customer data has become even more important with the expansion of online sales.
The company also recognizes the risks associated with the use of artificial intelligence (AI) technology: if the implementation of AI does not perform as expected or regulatory issues arise, business and reputation could be adversely affected.
Finally, the risk of an exodus of key management and professional personnel was also cited. In particular, the company is heavily dependent on its founder and CEO, whose departure would reportedly have a serious impact on the business.
In general, Ubiquiti Inc. achieved solid growth in both sales and net income in the third quarter, improving gross margins and reducing interest expenses. However, the company also faces challenges from supply constraints, geopolitical risks, and tax uncertainties, and the impact of these factors on future performance will be closely watched.
Source：finviz
