Founder, BWS Financial Inc

Hamed Khorsand

Founder

Independent Stock Specific Research

BWS Financial Inc

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Equity Bottom-Up

<ul>
<li>UI fiscal first-quarter results (September) fell short of consensus estimates, primarily due to underperforming sales in the enterprise segment.</li>
<li>Our initial expectations included the anticipation of soft demand for Ubiquiti, which was compounded by our belief in the enterprise spending momentum continuing</li>
<li>Ubiquiti's fiscal first-quarter revenue came in at $463.1 million, falling short of our estimate of $547.9 million. Historically, the quarter has been a strong period, making this deviation particularly noteworthy</li>
</ul>


UI fiscal first-quarter results (September) fell short of consensus estimates, primarily due to underperforming sales in the enterprise segment.
Our initial expectations included the anticipation of soft demand for Ubiquiti, which was compounded by our belief in the enterprise spending momentum continuing
Ubiquiti's fiscal first-quarter revenue came in at $463.1 million, falling short of our estimate of $547.9 million. Historically, the quarter has been a strong period, making this deviation particularly noteworthy


<ul>
<li>UI stock has come under pressure on fears UI could have exposure to an overstocked channel with the Company’s debt balance becoming a new concern in a rising rate environment</li>
<li>Prior to the inventory build, the biggest challenge for Ubiquiti was not having enough inventory</li>
<li>Ubiquiti was the premier sponsor for this year’s Wispapalooza conference. The sponsorship marks a return for the Company to the trade show in four years</li>
</ul>


UI stock has come under pressure on fears UI could have exposure to an overstocked channel with the Company’s debt balance becoming a new concern in a rising rate environment
Prior to the inventory build, the biggest challenge for Ubiquiti was not having enough inventory
Ubiquiti was the premier sponsor for this year’s Wispapalooza conference. The sponsorship marks a return for the Company to the trade show in four years


<ul>
<li>UI June quarter (fiscal year end) showcased how investment in more inventory has led to Ubiquiti growing revenue and the return of gross margin above 40 percent</li>
<li>UI reported revenue of $491.1 million for the June quarter compared to our forecast of $483.4 million. Ubiquiti having more product in stock on a regular basis led to outperformance</li>
<li>Ubiquiti is now on pace to grow revenue again in fiscal 2024 with greater possibility of free cash flow compared to fiscal 2023</li>
</ul>


UI June quarter (fiscal year end) showcased how investment in more inventory has led to Ubiquiti growing revenue and the return of gross margin above 40 percent
UI reported revenue of $491.1 million for the June quarter compared to our forecast of $483.4 million. Ubiquiti having more product in stock on a regular basis led to outperformance
Ubiquiti is now on pace to grow revenue again in fiscal 2024 with greater possibility of free cash flow compared to fiscal 2023


<ul>
<li>UI reported fiscal third quarter (March) results mostly in line with our lowered estimates. The business climate for network hardware has cooled in recent months and Ubiquiti is no different</li>
<li>Ubiquiti has spent the past year building inventory to meet demand after many quarters of not having adequate supply</li>
<li>Simultaneous with revenue growth has been an improvement in gross margin. Gross margin is beginning to revert to prior levels of 45 percent and higher</li>
</ul>


UI reported fiscal third quarter (March) results mostly in line with our lowered estimates. The business climate for network hardware has cooled in recent months and Ubiquiti is no different
Ubiquiti has spent the past year building inventory to meet demand after many quarters of not having adequate supply
Simultaneous with revenue growth has been an improvement in gross margin. Gross margin is beginning to revert to prior levels of 45 percent and higher


<ul>
<li>UI is coming off a strong performance in the December quarter but should continue to show improving margins as the Company maintains products in stock and at higher prices</li>
<li>The March quarter can be seasonally challenging. For Ubiquiti, it could end up being a period where customers are able to find the products they are looking for in stock </li>
<li>In the March quarter Ubiquiti has maintained a higher level of product availability than what we had been observing in the prior year</li>
</ul>


UI is coming off a strong performance in the December quarter but should continue to show improving margins as the Company maintains products in stock and at higher prices
The March quarter can be seasonally challenging. For Ubiquiti, it could end up being a period where customers are able to find the products they are looking for in stock 
In the March quarter Ubiquiti has maintained a higher level of product availability than what we had been observing in the prior year


UI: Product Availability & Free Cash Flow

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