x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 32-0097377 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer | x | Accelerated filer | ¨ | |
Non-accelerated filer | ¨ | (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Page | ||
PART I – FINANCIAL INFORMATION | ||
Item 1. | ||
Consolidated Statements of Operations and Comprehensive Income | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II – OTHER INFORMATION | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
September 30, 2016 | June 30, 2016 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 573,644 | $ | 551,031 | |||
Accounts receivable, net of allowance for doubtful accounts of $35 and $48 at September 30, 2016 and June 30, 2016, respectively | 95,728 | 82,790 | |||||
Inventories | 79,841 | 57,113 | |||||
Vendor deposits | 30,088 | 30,255 | |||||
Prepaid income taxes | 314 | 299 | |||||
Prepaid expenses and other current assets | 5,987 | 6,896 | |||||
Total current assets | 785,602 | 728,384 | |||||
Property and equipment, net | 12,520 | 12,953 | |||||
Long-term deferred tax assets | 4,195 | 4,195 | |||||
Other long-term assets | 1,656 | 1,576 | |||||
Total assets | $ | 803,973 | $ | 747,108 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 42,540 | $ | 51,510 | |||
Income taxes payable | 2,038 | 1,488 | |||||
Debt - short-term | 12,243 | 10,993 | |||||
Other current liabilities | 20,300 | 26,672 | |||||
Total current liabilities | 77,121 | 90,663 | |||||
Long-term taxes payable | 24,494 | 23,202 | |||||
Debt - long-term | 187,879 | 191,564 | |||||
Deferred revenues - long-term | 1,498 | 1,303 | |||||
Total liabilities | 290,992 | 306,732 | |||||
Commitments and contingencies (Note 8) | |||||||
Stockholders’ equity: | |||||||
Common stock—$0.001 par value; 500,000,000 shares authorized: | |||||||
82,123,043 and 81,667,129 outstanding at September 30, 2016 and June 30, 2016, respectively | 82 | 82 | |||||
Additional paid–in capital | 817 | — | |||||
Retained earnings | 512,082 | 440,294 | |||||
Total stockholders’ equity | 512,981 | 440,376 | |||||
Total liabilities and stockholders’ equity | $ | 803,973 | $ | 747,108 |
Three Months Ended September 30, | ||||||||
2016 | 2015 | |||||||
Revenues | $ | 204,757 | $ | 151,415 | ||||
Cost of revenues | 106,453 | 77,911 | ||||||
Gross profit | 98,304 | 73,504 | ||||||
Operating expenses: | ||||||||
Research and development | 14,539 | 13,561 | ||||||
Sales, general and administrative | 8,863 | 8,142 | ||||||
Business e-mail compromise (“BEC”) fraud loss/(recovery) | — | (8,034 | ) | |||||
Total operating expenses | 23,402 | 13,669 | ||||||
Income from operations | 74,902 | 59,835 | ||||||
Interest expense and other, net | (1,099 | ) | (116 | ) | ||||
Income before provision for income taxes | 73,803 | 59,719 | ||||||
Provision for income taxes | 2,015 | 5,960 | ||||||
Net income and comprehensive income | $ | 71,788 | $ | 53,759 | ||||
Net income per share of common stock: | ||||||||
Basic | $ | 0.88 | $ | 0.62 | ||||
Diluted | $ | 0.86 | $ | 0.61 | ||||
Weighted average shares used in computing net income per share of common stock: | ||||||||
Basic | 81,812 | 87,062 | ||||||
Diluted | 83,854 | 88,465 |
Three Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Cash Flows from Operating Activities: | |||||||
Net income | $ | 71,788 | $ | 53,759 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 1,541 | 1,617 | |||||
Provision for inventory obsolescence | 80 | 1,091 | |||||
(Recovery)/Provision for loss on vendor deposits | (676 | ) | 5 | ||||
Stock-based compensation | 927 | 1,027 | |||||
Excess tax benefit from employee stock-based awards | — | (333 | ) | ||||
Other, net | 135 | 122 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (12,925 | ) | 2,519 | ||||
Inventories | (22,442 | ) | 5,229 | ||||
Vendor deposits | 843 | — | |||||
Prepaid income taxes | (15 | ) | 2,566 | ||||
Prepaid expenses and other assets | 807 | (5,020 | ) | ||||
Accounts payable | (9,026 | ) | (20,546 | ) | |||
Income taxes payable | 1,842 | 2,347 | |||||
Deferred revenues | 466 | 109 | |||||
Accrued liabilities and other current liabilities | (576 | ) | 3,235 | ||||
Net cash provided by operating activities | 32,769 | 47,727 | |||||
Cash Flows from Investing Activities: | |||||||
Purchase of property and equipment and other long-term assets | (1,064 | ) | (1,830 | ) | |||
Net cash used in investing activities | (1,064 | ) | (1,830 | ) | |||
Cash Flows from Financing Activities: | |||||||
Repayments of term loan | (2,500 | ) | (2,500 | ) | |||
Repurchases of common stock | (6,483 | ) | (53,818 | ) | |||
Proceeds from exercise of stock options | 682 | 301 | |||||
Excess tax benefit from employee stock-based awards | — | 333 | |||||
Tax withholdings related to net share settlements of restricted stock units | (791 | ) | (534 | ) | |||
Net cash (used in) provided by financing activities | (9,092 | ) | (56,218 | ) | |||
Net increase (decrease) in cash and cash equivalents | 22,613 | (10,321 | ) | ||||
Cash and cash equivalents at beginning of period | 551,031 | 446,401 | |||||
Cash and cash equivalents at end of period | $ | 573,644 | $ | 436,080 | |||
Non-Cash Investing and Financing Activities: | |||||||
Unpaid property and equipment and other long-term assets | $ | 413 | $ | — | |||
Unpaid stock repurchases | $ | — | $ | 9,488 |
September 30, 2016 | June 30, 2016 | ||||||||||||||||||||||||||||||
Fair Value | Level 1 | Level 2 | Level 3 | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
Debt | $ | 201,000 | $ | — | $ | 201,000 | $ | — | $ | 203,500 | $ | — | $ | 203,500 | $ | — |
Three Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Numerator: | |||||||
Net income and comprehensive income | $ | 71,788 | $ | 53,759 | |||
Denominator: | |||||||
Weighted-average shares used in computing basic net income per share | 81,812 | 87,062 | |||||
Add—dilutive potential common shares: | |||||||
Stock options(1) | 1,920 | 1,302 | |||||
Restricted stock units(1) | 122 | 101 | |||||
Weighted-average shares used in computing diluted net income per share | 83,854 | 88,465 | |||||
Net income per share of common stock: | |||||||
Basic | $ | 0.88 | $ | 0.62 | |||
Diluted | $ | 0.86 | $ | 0.61 |
Three Months Ended September 30, | |||||
2016 | 2015 | ||||
Restricted stock units | 4 | 39 | |||
4 | 39 |
September 30, 2016 | June 30, 2016 | ||||||
Finished goods | $ | 71,040 | $ | 50,987 | |||
Raw materials | 8,801 | 6,126 | |||||
Total | $ | 79,841 | $ | 57,113 |
September 30, 2016 | June 30, 2016 | ||||||
Testing equipment | $ | 6,481 | $ | 6,051 | |||
Computer and other equipment | 5,013 | 4,857 | |||||
Tooling equipment | 6,036 | 5,801 | |||||
Furniture and fixtures | 1,325 | 1,325 | |||||
Leasehold improvements | 5,164 | 5,136 | |||||
Software | 2,540 | 2,488 | |||||
Software in development | 2,811 | 2,739 | |||||
Property and Equipment, Gross | 29,370 | 28,397 | |||||
Less: Accumulated depreciation and amortization | (16,850 | ) | (15,444 | ) | |||
Property and Equipment, Net | $ | 12,520 | $ | 12,953 |
September 30, 2016 | June 30, 2016 | ||||||
Intangible assets, net (1) | $ | 594 | $ | 616 | |||
Other long-term assets | 1,062 | 960 | |||||
Total | $ | 1,656 | $ | 1,576 |
September 30, 2016 | June 30, 2016 | ||||||
Accrued expenses | $ | 6,948 | $ | 5,749 | |||
Accrued compensation and benefits | 2,048 | 1,589 | |||||
Warranty accrual | 3,028 | 2,236 | |||||
Deferred revenue - short term | 3,188 | 2,917 | |||||
Customer deposits | 684 | 856 | |||||
Reserve for sales returns | 3,334 | 2,820 | |||||
Other payables | 1,070 | 10,505 | |||||
Total | $ | 20,300 | $ | 26,672 |
Three Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Beginning balance | $ | 2,236 | $ | 2,750 | |||
Accruals for warranties issued during the period | 2,031 | 120 | |||||
Settlements made during the period | (1,239 | ) | (715 | ) | |||
Ending balance | $ | 3,028 | $ | 2,155 |
September 30, 2016 | June 30, 2016 | ||||||
Term Loan - short term | $ | 12,500 | $ | 11,250 | |||
Debt Issuance costs, net (1) | (257 | ) | (257 | ) | |||
Total Debt - short term | 12,243 | 10,993 | |||||
Term Loan - long term | 72,500 | 76,250 | |||||
Revolver - long term | 116,000 | 116,000 | |||||
Debt issuance costs, net (1) | (621 | ) | (686 | ) | |||
Total Debt - long term | $ | 187,879 | $ | 191,564 |
Interest Rate as of | ||||||
Debt Payment Obligations | September 30, 2016 | Rate Reset Date | Reset Rate | |||
$15 Million Revolver | 2.42% | 01/09/2017 | * | |||
$18 Million Revolver | 2.48% | 01/18/2017 | * | |||
$16 Million Revolver | 2.70% | 02/13/2017 | * | |||
$19 Million Revolver | 2.41% | 01/03/2017 | * | |||
$48 Million Revolver | 2.48% | 11/30/2016 | * |
2017 (remainder) | 2018 | 2019 | 2020 | Thereafter | Total | ||||||||||||||||||
Debt payment obligations | $ | 8,750 | $ | 15,000 | $ | 15,000 | $ | 162,250 | $ | — | $ | 201,000 | |||||||||||
Interest and other payments on debt payment obligations (1) | 3,754 | 4,712 | 4,361 | 2,781 | — | 15,608 | |||||||||||||||||
Total | $ | 12,504 | $ | 19,712 | $ | 19,361 | $ | 165,031 | $ | — | $ | 216,608 |
2017 (remainder) | 2018 | 2019 | 2020 | 2021 | Thereafter | Total | |||||||||||||||||||||
Operating leases | $ | 5,340 | $ | 5,153 | $ | 2,576 | $ | 1,744 | $ | 1,085 | $ | 375 | $ | 16,273 |
Three Months Ended September 30, | ||||||||
2016 | 2015 | |||||||
Cost of revenues | $ | 144 | $ | 113 | ||||
Research and development | 560 | 624 | ||||||
Sales, general and administrative | 223 | 290 | ||||||
$ | 927 | $ | 1,027 |
Common Stock Options Outstanding | ||||||||||||
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value (In thousands) | |||||||||
Balance, June 30, 2016 | 2,125,307 | $ | 2.03 | 2.65 | $ | 77,850 | ||||||
Exercised | (412,202 | ) | $ | 1.65 | ||||||||
Forfeitures and cancellations | (417 | ) | $ | 12.14 | ||||||||
Balance, September 30, 2016 | 1,712,688 | $ | 2.12 | 2.37 | $ | 88,002 | ||||||
Vested and expected to vest as of September 30, 2016 | 1,712,569 | $ | 2.12 | 2.37 | $ | 87,997 | ||||||
Vested and exercisable as of September 30, 2016 | 1,696,901 | $ | 2.03 | 2.34 | $ | 87,342 |
Number of Shares | Weighted Average Grant Date Fair Value Per Share | |||||
Non-vested RSUs, June 30, 2016 | 271,971 | $ | 28.72 | |||
RSUs granted | 24,330 | $ | 45.83 | |||
RSUs vested | (60,728 | ) | $ | 20.36 | ||
RSUs canceled | (10,928 | ) | $ | 32.60 | ||
Non-vested RSUs, September 30,2016 | 224,645 | $ | 32.64 |
• | Service Provider Technology includes the Company’s airMAX, EdgeMAX and airFiber platforms, as well as embedded radio products and other 802.11 standard products including base stations, radios, backhaul equipment and Customer Premise Equipment (“CPE”). Additionally, Service Provider Technology includes antennas and other products in the 0.9 to 6.0 GHz spectrum and miscellaneous products such as mounting brackets, cables and power over Ethernet adapters. Service Provider Technology also includes solar products (sales of which have not been material to date) and revenues that are attributable to post-contract customer support (“PCS”). |
• | Enterprise Technology includes the Company’s UniFi and mFi platforms, including UniFi Access Point (“UAP”) products, AmpliFi, UniFi Video products, UniFi Voice Over IP (“VOIP”) phones and UniFi switch products. Enterprise Technology also includes revenues that are attributable to PCS. |
Three Months Ended September 30, | ||||||||||||||
2016 | 2015 | |||||||||||||
Service provider technology | $ | 120,632 | 59 | % | $ | 103,399 | 68 | % | ||||||
Enterprise technology | 84,125 | 41 | % | 48,016 | 32 | % | ||||||||
Total revenues | $ | 204,757 | 100 | % | $ | 151,415 | 100 | % |
Three Months Ended September 30, | ||||||||||||||
2016 | 2015 | |||||||||||||
North America(1) | $ | 74,165 | 36 | % | $ | 53,234 | 35 | % | ||||||
South America | 24,184 | 12 | % | 22,148 | 15 | % | ||||||||
Europe, the Middle East and Africa ("EMEA") | 81,375 | 40 | % | 60,503 | 40 | % | ||||||||
Asia Pacific | 25,033 | 12 | % | 15,530 | 10 | % | ||||||||
Total revenues | $ | 204,757 | 100 | % | $ | 151,415 | 100 | % |
(1) | Revenue for the United States was $70.6 million and $50.6 million for the three months ended September 30, 2016 and 2015, respectively. |
Percentage of Revenues | Percentage of Accounts Receivable | ||||||
Three Months Ended September 30, | September 30, | June 30, | |||||
2016 | 2015 | 2016 | 2016 | ||||
Customer A | * | * | * | 11% | |||
Customer B | * | * | * | 13% | |||
Customer C | 10% | * | 16% | 18% |
• | Rapid customer and community driven product development. We have an active, loyal community built by our customers that we believe is a sustainable competitive advantage. Our solutions benefit from the active engagement between the Ubiquiti Community and our development engineers throughout the product development cycle, which |
• | Scalable sales and marketing model. We do not currently have, nor do we plan to hire, a direct sales force, but instead utilize the Ubiquiti Community to drive market awareness and demand for our products and solutions. This community-propagated, viral marketing enables us to reach underserved and underpenetrated markets far more efficiently and cost-effectively than is possible through traditional sales models. Leveraging the information transparency of the Internet allows customers to research, evaluate and validate our solutions with the Ubiquiti Community and via third-party web sites. This allows us to operate a scalable sales and marketing model and effectively create awareness for our brand and products. Word-of-mouth referrals from the Ubiquiti Community generate high quality leads for our distributors at relatively little cost. |
• | Self-sustaining product support. The engaged members of the Ubiquiti Community have enabled us to foster a large, cost efficient, highly-scalable and, we believe, self-sustaining mechanism for rapid product support and dissemination of information. |
• | Service Provider Technology includes our airMAX, EdgeMAX and airFiber platforms, as well as embedded radio products and other 802.11 standard products including base stations, radios, backhaul equipment and CPE. Additionally, Service Provider Technology includes antennas and other products in the 0.9 to 6.0 GHz spectrum and miscellaneous products such as mounting brackets, cables and power over Ethernet adapters. Service Provider Technology also includes solar products (sales of which have not been material to date) and revenues that are attributable to PCS. |
• | Enterprise Technology includes our UniFi and mFi platforms, including UniFi enterprise Wi-Fi, UniFi Video Products, AmpliFi, UniFi switching and routing solutions. Enterprise Technology also includes revenues that are attributable to PCS. Enterprise Technology also includes revenues that are attributable to PCS. |
• | Research and development expenses consist primarily of salary and benefit expenses, including stock-based compensation, for employees and costs for contractors engaged in research, design and development activities, as well as costs for prototypes, purchased Intellectual Property (“IP”), facilities and travel. Over time, we expect our research and development costs to increase as we continue making significant investments in developing new products in addition to new versions of our existing products. |
• | Sales, general and administrative expenses include salary and benefit expenses, including stock-based compensation, for employees and costs for contractors engaged in sales, marketing and general and administrative activities, as well as the costs of legal expenses, trade shows, marketing programs, promotional materials, bad debt expense, professional services, facilities, general liability insurance and travel. As our product portfolio and targeted markets expand, we may need to employ different sales models, such as building a direct sales force. These sales models would likely increase our costs. Over time, we expect our sales, general and administrative expenses to increase in absolute dollars due to continued growth in headcount, expansion of our efforts to register and defend trademarks and patents and to support our business and operations. |
Three Months Ended September 30, | |||||||||||||
2016 | 2015 | ||||||||||||
(In thousands, except percentages) | |||||||||||||
Revenues | $ | 204,757 | 100 | % | $ | 151,415 | 100 | % | |||||
Cost of revenues(1) | 106,453 | 52 | % | 77,911 | 51 | % | |||||||
Gross profit | 98,304 | 48 | % | 73,504 | 49 | % | |||||||
Operating expenses: | |||||||||||||
Research and development(1) | 14,539 | 7 | % | 13,561 | 9 | % | |||||||
Sales, general and administrative(1) | 8,863 | 4 | % | 8,142 | 5 | % | |||||||
Business e-mail compromise (“BEC”) fraud loss/(recovery) | — | * | (8,034 | ) | (5 | )% | |||||||
Total operating expenses | 23,402 | 11 | % | 13,669 | 9 | % | |||||||
Income from operations | 74,902 | 37 | % | 59,835 | 40 | % | |||||||
Interest expense and other, net | (1,099 | ) | (1 | )% | (116 | ) | * | ||||||
Income before provision for income taxes | 73,803 | 36 | % | 59,719 | 39 | % | |||||||
Provision for income taxes (2) | 2,015 | 1 | % | 5,960 | 4 | % | |||||||
Net income and comprehensive income | $ | 71,788 | 35 | % | $ | 53,759 | 35 | % | |||||
* Less than 1% | |||||||||||||
(1) Includes stock-based compensation as follows: | |||||||||||||
Cost of revenues | $ | 144 | $ | 113 | |||||||||
Research and development | 560 | 624 | |||||||||||
Sales, general and administrative | 223 | 290 | |||||||||||
Total stock-based compensation | $ | 927 | $ | 1,027 | |||||||||
(2) Includes the excess tax benefits resulting from the adoption of ASU 2016-09 Stock Compensation | $ | (6,820 | ) | $ | — |
Three Months Ended September 30, | |||||||||||||
2016 | 2015 | ||||||||||||
(in thousands, except percentages) | |||||||||||||
Service provider technology | $ | 120,632 | 59 | % | $ | 103,399 | 68 | % | |||||
Enterprise technology | 84,125 | 41 | % | 48,016 | 32 | % | |||||||
Total revenues | $ | 204,757 | 100 | % | $ | 151,415 | 100 | % |
Three Months Ended September 30, | |||||||||||||
2016 | 2015 | ||||||||||||
North America(1) | $ | 74,165 | 36 | % | $ | 53,234 | 35 | % | |||||
South America | 24,184 | 12 | % | 22,148 | 15 | % | |||||||
Europe, the Middle East and Africa ("EMEA") | 81,375 | 40 | % | 60,503 | 40 | % | |||||||
Asia Pacific | 25,033 | 12 | % | 15,530 | 10 | % | |||||||
Total revenues | $ | 204,757 | 100 | % | $ | 151,415 | 100 | % |
(1) | Revenue for the United States was $70.6 million and $50.6 million for the three months ended September 30, 2016 and 2015, respectively. |
Three Months Ended September 30, | |||||||
2016 | 2015 | ||||||
(In thousands) | |||||||
Net cash provided by operating activities | $ | 32,769 | $ | 47,727 | |||
Net cash used in investing activities | (1,064 | ) | (1,830 | ) | |||
Net cash (used in) provided by financing activities | (9,092 | ) | (56,218 | ) | |||
Net increase (decrease) in cash and cash equivalents | $ | 22,613 | $ | (10,321 | ) |
2017 (remainder) | 2018 | 2019 | 2020 | 2021 | Thereafter | Total | |||||||||||||||||||||
Operating leases | $ | 5,340 | $ | 5,153 | $ | 2,576 | $ | 1,744 | $ | 1,085 | $ | 375 | $ | 16,273 | |||||||||||||
Debt payment obligations | 8,750 | 15,000 | 15,000 | 162,250 | — | — | 201,000 | ||||||||||||||||||||
Interest and other payments on debt payment obligations | 3,754 | 4,712 | 4,361 | 2,781 | — | — | 15,608 | ||||||||||||||||||||
Purchase obligations | 25,796 | — | — | — | — | — | 25,796 | ||||||||||||||||||||
Other obligations | 10,025 | — | — | — | — | — | 10,025 | ||||||||||||||||||||
Total | $ | 53,665 | $ | 24,865 | $ | 21,937 | $ | 166,775 | $ | 1,085 | $ | 375 | $ | 268,702 |
• | varying demand for our products due to the financial and operating condition of our distributors and their customers, distributor inventory management practices and general economic conditions; |
• | shifts in our fulfillment practices including increasing inventory levels as part of efforts to decrease our delivery lead times; |
• | failure of our suppliers to provide chips or other components; |
• | failure of our contract manufacturers and suppliers to meet our demand; |
• | success and timing of new product introductions by us, and our competitors; |
• | increased warranty costs; |
• | announcements by us or our competitors regarding products, promotions or other transactions; |
• | costs related to legal proceedings or responding to government inquiries; |
• | our ability to control and reduce product costs; and |
• | expenses of our entry into new markets. |
• | our ability to rapidly develop and introduce new high performance integrated solutions; |
• | the price and total cost of ownership and return on investment associated with the solutions; |
• | the simplicity of deployment and use of the solutions; |
• | the reliability and scalability of the solutions; |
• | the market awareness of a particular brand; |
• | our ability to provide secure access to wireless networks; |
• | our ability to offer a suite of products and solutions; |
• | our ability to allow centralized management of the solutions; and |
• | our ability to provide quality product support. |
• | assure the quality of our products; |
• | manage capacity during periods of volatile demand; |
• | qualify appropriate component suppliers; |
• | ensure adequate supplies of components and materials; |
• | deliver finished products at agreed upon prices and schedules; and |
• | safeguard materials and finished goods. |
• | the burdens of complying with a wide variety of foreign laws and regulations, and the risks of non-compliance; |
• | fluctuations in currency exchange rates; |
• | increasing labor costs, especially in China; |
• | difficulties in managing the geographically remote personnel; |
• | the complexities of foreign tax systems and changes in their tax rates and rules; |
• | stringent consumer protection and product compliance regulations that are costly to comply with and may vary from country to country; |
• | limited protection and enforcement regimes for intellectual property rights in some countries; |
• | increased financial accounting and reporting burdens and complexity; and |
• | political, social and economic instability in some jurisdictions. |
• | bearing the fixed costs of these activities; |
• | directly procuring components and materials; |
• | regulatory and other compliance requirements; |
• | exposure to casualty loss and other disruptions; |
• | quality control; |
• | labor relations; and |
• | our limited experience in operating manufacturing facilities. |
• | adversely affect our relationships with our current or future users, customers and suppliers; |
• | cause delays or stoppages in the shipment of our products; |
• | cause us to modify or redesign our products; |
• | divert management’s attention and resources; |
• | subject us to significant damages or settlements; |
• | require us to enter into costly licensing agreements; or |
• | require us to cease offering certain of our products or services. |
• | requiring a substantial portion of cash flows from operations to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flows to fund our operations and capital expenditures, and pursue business opportunities; |
• | increasing our vulnerability to general industry and economic conditions; |
• | limiting our ability to make strategic acquisitions or causing us to make non-strategic divestitures; |
• | limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes; and |
• | limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to competitors who are less highly leveraged or have access to more capital. |
• | difficulties in integrating and managing the operations, technologies and products of the companies we acquire, particularly in light of our lean organizational structure; |
• | diversion of our management’s attention from normal daily operation of our business; |
• | our inability to maintain the key business relationships and the brand equity of the businesses we acquire; |
• | our inability to retain key personnel of the acquired business, particularly in light of the demands we place on individual contributors; |
• | uncertainty of entry into markets in which we have limited or no prior experience and in which competitors have stronger market positions; |
• | our dependence on unfamiliar affiliates and partners of the companies we acquire; |
• | insufficient revenues to offset our increased expenses associated with acquisitions; |
• | our responsibility for the liabilities of the businesses we acquire, including those which we may not anticipate; and |
• | our inability to maintain internal standards, controls, procedures and policies, particularly in light of our lean organizational structure. |
Exhibit Number | Incorporated by Reference from Form | Incorporated by Reference from Exhibit Number | Date Filed | ||||
31.1 | Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. | ||||||
31.2 | Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. | ||||||
32.1 | Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350. | ||||||
101.INS(1) | XBRL Instance Document | ||||||
101.SCH(1) | XBRL Taxonomy Schema Linkbase Document | ||||||
101.CAL(1) | XBRL Taxonomy Calculation Linkbase Document | ||||||
101.DEF(1) | XBRL Taxonomy Definition Linkbase Document | ||||||
101.LAB(1) | XBRL Taxonomy Labels Linkbase Document | ||||||
101.PRE(1) | XBRL Taxonomy Presentation Linkbase Document |
(1) | In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Exchange Act of 1934, and otherwise is not subject to liability under these sections. |
UBIQUITI NETWORKS, INC. | |||||
Dated: | November 7, 2016 | By: | /s/ Robert J. Pera | ||
Robert J. Pera | |||||
Chief Executive Officer and Director (Principal Executive Officer) | |||||
Dated: | November 7, 2016 | By: | /s/ Kevin Radigan | ||
Kevin Radigan | |||||
Chief Accounting Officer (Principal Financial Officer) |
Exhibit Number | Incorporated by Reference from Form | Incorporated by Reference from Exhibit Number | Date Filed | ||||
31.1 | Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. | ||||||
31.2 | Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. | ||||||
32.1 | Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350. | ||||||
101.INS(1) | XBRL Instance Document | ||||||
101.SCH(1) | XBRL Taxonomy Schema Linkbase Document | ||||||
101.CAL(1) | XBRL Taxonomy Calculation Linkbase Document | ||||||
101.DEF(1) | XBRL Taxonomy Definition Linkbase Document | ||||||
101.LAB(1) | XBRL Taxonomy Labels Linkbase Document | ||||||
101.PRE(1) | XBRL Taxonomy Presentation Linkbase Document |
(1) | In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Exchange Act of 1934, and otherwise is not subject to liability under these sections. |
Date: | November 7, 2016 |
/s/ Robert J. Pera | |
Robert J. Pera Chief Executive Officer and Director (Principal Executive Officer) |
Date: | November 7, 2016 |
/s/ Kevin Radigan | |
Kevin Radigan Chief Accounting Officer (Principal Financial Officer) |
By: | /s/ Robert J. Pera | |
Name: | Robert J. Pera | |
Title: | Chief Executive Officer and Director (Principal Executive Officer) |
By: | /s/ Kevin Radigan | |
Name: | Kevin Radigan | |
Title: | Chief Accounting Officer (Principal Financial Officer) |
Document and Entity Information - shares |
3 Months Ended | |
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Sep. 30, 2016 |
Nov. 01, 2016 |
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Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Focus | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | UBNT | |
Entity Registrant Name | Ubiquiti Networks, Inc. | |
Entity Central Index Key | 0001511737 | |
Current Fiscal Year End Date | --06-30 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 82,130,312 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Jun. 30, 2016 |
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Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 35 | $ 48 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares outstanding (in shares) | 82,123,043 | 81,667,129 |
Consolidated Statements of Operations and Comprehensive Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
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Sep. 30, 2016 |
Sep. 30, 2015 |
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Income Statement [Abstract] | ||
Revenues | $ 204,757 | $ 151,415 |
Cost of revenues | 106,453 | 77,911 |
Gross profit | 98,304 | 73,504 |
Operating expenses: | ||
Research and development | 14,539 | 13,561 |
Sales, general and administrative | 8,863 | 8,142 |
Business e-mail compromise (“BEC”) fraud loss/(recovery) | 0 | (8,034) |
Total operating expenses | 23,402 | 13,669 |
Income from operations | 74,902 | 59,835 |
Interest expense and other, net | (1,099) | (116) |
Income before provision for income taxes | 73,803 | 59,719 |
Provision for income taxes | 2,015 | 5,960 |
Net income and comprehensive income | $ 71,788 | $ 53,759 |
Net income per share of common stock: | ||
Basic (in usd per share) | $ 0.88 | $ 0.62 |
Diluted (in usd per share) | $ 0.86 | $ 0.61 |
Weighted average shares used in computing net income per share of common stock: | ||
Basic (in shares) | 81,812 | 87,062 |
Diluted (in shares) | 83,854 | 88,465 |
BUSINESS AND BASIS OF PRESENTATION |
3 Months Ended |
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Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BUSINESS AND BASIS OF PRESENTATION | BUSINESS AND BASIS OF PRESENTATION Business— Ubiquiti Networks, Inc. was incorporated in the State of California in 2003 as Pera Networks, Inc. In 2005 Pera Networks, Inc. changed its name to Ubiquiti Networks, Inc. and commenced its current operations. In June 2010, Ubiquiti Networks, Inc. was re-incorporated in Delaware. Ubiquiti Networks, Inc. and its wholly owned subsidiaries (collectively, “Ubiquiti” or the “Company”) develop high performance networking technology for service providers and enterprises. The Company operates on a fiscal year ending June 30. In this Quarterly Report, the fiscal year ending June 30, 2017 is referred to as “fiscal 2017” and the fiscal year ended June 30, 2016 is referred to as “fiscal 2016.” Basis of Presentation— The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) related to interim financial statements based on applicable Securities and Exchange Commission (“SEC”) rules and regulations. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. These consolidated financial statements reflect all adjustments, which are, in the opinion of the Company, of a normal and recurring nature and those necessary to state fairly the statements of financial position, results of operations and cash flows for the dates and periods presented. The June 30, 2016 balance sheet was derived from the audited financial statements as of that date. All significant intercompany transactions and balances have been eliminated. The Company has reclassified certain amounts reported in the previous period to conform to the current period presentation. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2016, included in its Annual Report on Form 10-K, as filed with the SEC on August 22, 2016 (the “Annual Report”). The results of operations for the three months ended September 30, 2016 are not necessarily indicative of the results to be expected for any future periods. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company’s significant accounting policies are disclosed in its audited consolidated financial statements for the year ended June 30, 2016 included in the Annual Report. Except as noted below, there have been no changes to the Company’s significant accounting policies as discussed in the Annual Report. New Accounting Updates Recently Adopted Effective July 1, 2016, the Company adopted Accounting Standards Update (“ASU”) 2015-03 regarding simplifying the presentation of debt issuance costs. The guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Previously the Company reported these costs as assets on its balance sheet. The guidance is applied on a retrospective basis whereby prior-period financial statements must be adjusted to reflect the adoption of the new guidance. The Company has reclassified $0.3 million from "prepaid expenses and other current assets" to "Debt - short-term", and $0.7 million from "Other long-term assets" to "Debt - long-term" on the June 30, 2016 consolidated balance sheet. Effective July 1, 2016, the Company adopted ASU 2015-11 regarding simplifying the measurement of inventory. The guidance requires an entity to measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company adopted this update prospectively, and it did not have a material impact on the Company's Consolidated Financial Statements. Effective July 1, 2016, the Company early adopted ASU 2016-09 regarding the Improvements to Employee Share-Based Payment Accounting. The Company applied the guidance relating to accounting for excess tax benefits and the presentation of excess tax benefits for share-based payments in the consolidated statement of cash flows on a prospective basis; according prior period amounts have not been adjusted. The Company recognized the excess tax benefits of $6.8 million within the provision for income taxes rather than additional paid-in capital during the three months ended September 30, 2016. The Company classified the excess tax benefits for share-based payments within cash flows from operating activities for the three months ended September 30, 2016 rather than within cash flows from financing activities. In regards to the forfeiture policy election, we will continue to estimate the number of awards expected to be forfeited, rather than electing to account for forfeitures as they occur. No other terms of the adopted guidance resulted in an impact on the Company's Consolidated Financial Statements. Recent Accounting Standards or Updates Not Yet Effective In June 2014, the FASB issued a new accounting standard update on revenue from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative information is required about contracts with customers, significant judgments and any assets recognized from the costs to obtain or fulfill a contract. The guidance was to be effective for annual and interim reporting periods beginning after December 15, 2016. However, in July 2015, the FASB deferred the effective date by one year, to December 15, 2017, to provide adequate time to effectively implement the new standard, though the early adoption as of the original effective date is allowed. The Company is currently assessing the impact of this new guidance and has not selected the transition method. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize assets and liabilities on the balance sheet for leases with lease terms greater than twelve months and disclose key information about leasing arrangements. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years, with early application permitted. The Company is evaluating the impact that adoption of this new standard will have on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606) Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” (“ASU 2016-08”). ASU 2016-08 further clarifies principal and agent relationships within ASU 2014-09. The amendment is effective beginning after December 14, 2017, including interim reporting periods within that reporting year. The Company is evaluating the impact that adoption of this new standard will have on its consolidated financial statements. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing." This ASU addresses certain implementation issues that have surfaced since the issuance of ASU 2014-09 in May 2014. The ASU provides guidance in identifying performance obligations and determining the appropriate accounting for licensing arrangements. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements for ASU 2014-09. The Company is in the process of assessing the impact that adoption of this new standard will have on its consolidated financial statements. In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”. (“ASU 2016-12”). ASU 2016-12 will affect all entities that enter into contracts with customers to transfer goods or services (that are an output of the entity’s ordinary activities) in exchange for consideration. The amendments in this update affect the guidance in ASU 2014-09 which is not yet effective. The amendments in this update also affect narrow aspects of Topic 606 including among others: assessing collectability criterion, noncash consideration, and presentation of sales taxes and other similar taxes collected from customers. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements for ASU 2014-09. The Company is evaluating the impact that adoption of this new standard will have on its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses On Financial Instruments”. (“ASU 2016-13”). ASU 2016-13 implements a comprehensive change in estimating the allowances for loan losses from the current model of losses inherent in the loan portfolio to a current expected credit loss model that generally is expected to result in earlier recognition of allowances for losses. Additionally, purchase accounting rules have been modified as well as credit losses on held-to-maturity debt securities. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. The Company is in the process of assessing the impact that adoption of this new standard will have on its consolidated financial statements. In October 2016, the FASB issued ASU 2016-16, the FASB issued ASU 2016-16, "Income Taxes (Topic 740): Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other Than Inventory". (“ASU 2016-16”). ASU 2016-16 eliminates the exception for all intra-entity sales of assets other than inventory. As a result, a reporting entity would recognize the tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. ASU 2016-16 is effective for fiscal years beginning after December 15, 2017, and early adoption is permitted but can only be adopted in the first interim period of a fiscal year. The Company is in the process of assessing the impact that adoption of this new standard will have on its consolidated financial statements. |
FAIR VALUE OF FINANCIAL INSTRUMENTS |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS Pursuant to the accounting guidance for fair value measurements and its subsequent updates, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The accounting guidance establishes a three-tier fair value hierarchy that requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The fair value hierarchy prioritizes the inputs into three levels that may be used in measuring fair value as follows: Level 1—observable inputs which include quoted prices in active markets for identical assets or liabilities. Level 2—inputs which include observable inputs other than Level 1, such as quoted prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. Level 3—inputs which include unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation. For certain of the Company’s financial instruments, including cash, accounts receivable, accounts payable and other current liabilities, the carrying amounts approximate fair value due to their short maturities. Additionally, as of September 30, 2016, we held $530.2 million of our $573.6 million of cash and cash equivalents in accounts of our subsidiaries outside of the United States and we could incur material tax liabilities if we were to repatriate those amounts. As of September 30, 2016 and June 30, 2016 the Company had debt associated with its Amended Credit Agreement with Wells Fargo Bank (See Note 7). The fair value of the Company’s debt was estimated based on the current rates offered to the Company for debt with similar terms and remaining maturities and was a Level 2 measurement. As of September 30, 2016 and June 30, 2016, the fair value hierarchy of the Company’s debt carried at historical cost was as follows (in thousands):
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EARNINGS PER SHARE |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE | EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share for the periods indicated (in thousands, except per share data):
(1) Effective July 1, 2016, the Company early adopted ASU 2016-09 regarding the Improvements to Employee Share-Based Payment Accounting, the adoption increased the number of diluted stock options and restricted stock units by 774 thousand shares. The Company excludes potentially dilutive securities from its diluted net income per share calculation when their effect would be anti-dilutive to net income per share amounts. The following table summarizes the total potential shares of common stock that were excluded from the diluted per share calculation as including them would have been anti-dilutive for the period (in thousands):
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BALANCE SHEET COMPONENTS |
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Balance Sheet Related Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BALANCE SHEET COMPONENTS | BALANCE SHEET COMPONENTS Inventories Inventories consisted of the following (in thousands):
Property and Equipment, Net Property and equipment, net consisted of the following (in thousands):
Other Long-term Assets Other long-term assets consisted of the following (in thousands):
(1) - Accumulated amortization was $1,025 thousand and $955 thousand as of September 30, 2016 and June 30, 2016, respectively. Other Current Liabilities Other current liabilities consisted of the following (in thousands):
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ACCRUED WARRANTY |
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ACCRUED WARRANTY | ACCRUED WARRANTY The Company offers warranties on certain products and records a liability for the estimated future costs associated with potential warranty claims. The warranty costs are reflected in the Company’s consolidated statement of operations and comprehensive income within cost of revenues. The warranties are typically in effect for twelve months from the distributor’s purchase date of the product. The Company’s estimate of future warranty costs is largely based on historical factors including product failure rates, material usage, and service delivery cost incurred in replacing products. In certain circumstances, the Company may have recourse from its contract manufacturers for replacement cost of defective products, which it also factors into its warranty liability assessment. Warranty obligations, included in other current liabilities, were as follows (in thousands):
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DEBT |
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DEBT | DEBT On March 3, 2015, Ubiquiti Networks, Inc. and Ubiquiti International Holding Company Limited (the “Cayman Borrower”) amended and restated its original credit agreement (the “Amended Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”), the other financial institutions named as lenders therein, and Wells Fargo as administrative agent for the lenders. The Amended Credit Agreement provides for a $200.0 million senior secured revolving credit facility and a $100.0 million senior secured term loan facility (collectively, the “Facilities”), with an option to request increases in the amounts of such credit facilities by up to an additional $50.0 million in the aggregate (any such increase to be in each lender’s sole discretion), and matures on March 3, 2020. The $100.0 million term loan facility of the Amended Credit Agreement was fully drawn at closing, and $72.3 million was used to repay the outstanding balance under its original credit agreement. Our Debt consisted of the following (in thousands):
(1) On July 1 2016, the Company retrospectively adopted ASU 2015-03, which requires unamortized debt issuance costs to be included as a direct deduction from the related debt liability on the balance sheet. Under previous guidance, all unamortized debt issuance costs were reported as assets on the balance sheet. See Note 2 for information on the impact of the retrospective adoption of ASU 2015-03. As of September 30, 2016, the interest rate on the term loan was 2.34%. The table below shows the respective interest rates as of September 30, 2016 in addition to interest rate reset dates and rates as available for each revolver draw.
* - Reset rate not available as of filing date. The revolving credit facility includes a sub-limit of $10.0 million for letters of credit and a sub-limit of $25.0 million for swingline loans. The Facilities replaced the Company’s $150.0 million senior secured revolving credit facility under its original credit agreement. The Facilities are available for working capital and general corporate purposes that comply with the terms of the Amended Credit Agreement. Under the Amended Credit Agreement, revolving loans and swingline loans may be borrowed, repaid and reborrowed until March 3, 2020, at which time all amounts borrowed must be repaid. The term loan is payable in quarterly installments of 2.50% of the original principal amount of the term loan until March 31, 2017, thereafter increasing to 3.75% of the original principal amount of the term loan, in each case plus accrued and unpaid interest. Revolving, swingline and term loans may be prepaid at any time without penalty. Revolving and term loans bear interest, at the Company’s option, at either (i) a floating rate per annum equal to the base rate plus a margin of between 0.50% and 1.25%, depending on the Company’s leverage ratio as of the most recently ended fiscal quarter or (ii) a floating per annum rate equal to the applicable LIBOR rate for a specified period, plus a margin of between 1.50% and 2.25%, depending on the Company’s leverage ratio as of the most recently ended fiscal quarter. Swingline loans bear interest at a floating rate per annum equal to the base rate plus a margin of between 0.50% and 1.25%, depending on the Company’s leverage ratio as of the most recently ended fiscal quarter. The Amended Credit Agreement requires the Company to maintain during the term of the Facilities (i) a maximum leverage ratio of 2.50 to 1.00 and (ii) minimum liquidity of $225.0 million, increasing to $250.0 million in the event of an incremental increase in the size of the Facilities, which can be satisfied with unrestricted cash and cash equivalents and up to $50.0 million of availability under the revolving credit facility. In addition, the Amended Credit Agreement contains customary affirmative and negative covenants and includes customary events of default. The occurrence of an event of default could result in the acceleration of the obligations under the Amended Credit Agreement. The obligations of Ubiquiti Networks, Inc. and certain domestic subsidiaries, if any, under the Amended Credit Agreement are required to be guaranteed by such domestic subsidiaries (the “Domestic Guarantors”) and are collateralized by substantially all assets (excluding intellectual property) of Ubiquiti Networks, Inc. and the Domestic Guarantors. The obligations of the Cayman Borrower and certain foreign subsidiaries under the Amended Credit Agreement are required to be guaranteed by certain domestic and material foreign subsidiaries (the “Guarantors”) and are collateralized by substantially all assets (excluding intellectual property) of the Cayman Borrower and the Guarantors. During the three months ended September 30, 2016, the Company made a payment of $3.0 million against the term loan facility under the Amended Credit Agreement, of which $2.5 million was a repayment of principal and $0.5 million was payment of interest. During the three months ended September 30, 2016, the Company made a payment of $0.4 million interest against the revolver loan facility under the Amended Credit Agreement. As of September 30, 2016, excluding debt issuance costs, the Company classified $12.5 million and $188.5 million as short-term and as long-term debt, respectively, on its consolidated balance sheet. On September 2, 2015, the Company accessed a letter of credit under its revolving credit facility in the amount of $237 thousand for the benefit of the landlord pursuant to a new lease of office space. The landlord can draw against the letter of credit in the event of default by the Company. The letter of credit expires on September 2, 2017, subject to automatic renewal for additional one-year periods. The following table summarizes our estimated debt and interest payment obligations as of September 30, 2016, for the remainder of fiscal 2017 and future fiscal years (in thousands):
(1) - Interest payments are calculated based on the applicable rates and payment dates as of September 30, 2016. Furthermore, two to three-month payment intervals on the revolving debt have been assumed, consistent with the Company's elections to date. |
COMMITMENTS AND CONTINGENCIES |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Operating Leases Certain facilities and equipment are leased under non-cancelable operating leases. The Company generally pays taxes, insurance and maintenance costs on leased facilities and equipment. The Company leases its headquarters in San Jose, California and other locations under non-cancelable operating leases that expire at various dates through fiscal 2022. At September 30, 2016, future minimum annual payments under operating leases for the remainder of fiscal 2017 and future fiscal years are as follows (in thousands):
Purchase Obligations The Company primarily subcontracts with other companies to manufacture its products. During the normal course of business, the Company’s contract manufacturers procure components based upon orders placed by the Company. If the Company cancels all or part of the orders, it may still be liable to the contract manufacturers for the cost of the components purchased by them to manufacture the Company’s products. The Company periodically reviews the potential liability under its orders, and no significant accruals have been recorded as of September 30, 2016. The Company had inventory purchase obligations of $25.8 million as of September 30, 2016. Other Obligations The Company had other obligations of $10.0 million as of September 30, 2016, which consisted primarily of commitments related to research and development projects. Indemnification Obligations The Company enters into standard indemnification agreements with many of its business partners in the ordinary course of business. These agreements include provisions for indemnifying the business partner against any claim brought by a third-party to the extent any such claim alleges that a Company product infringes a patent, copyright or trademark, or violates any other proprietary rights of that third-party. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is not estimable and the Company has not incurred any material costs to defend lawsuits or settle claims related to these indemnification agreements to date. Legal Matters The Company may be involved, from time to time, in a variety of claims, lawsuits, investigations, and proceedings relating to contractual disputes, intellectual property rights, employment matters, regulatory compliance matters and other litigation matters relating to various claims that arise in the normal course of business. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. The Company assesses its potential liability by analyzing specific litigation and regulatory matters using available information. The Company develops its views on estimated losses in consultation with inside and outside counsel, which involves a subjective analysis of potential results and outcomes, assuming various combinations of appropriate litigation and settlement strategies. Taking all of the above factors into account, the Company records an amount where it is probable that the Company will incur a loss and where that loss can be reasonably estimated. However, the Company’s estimates may be incorrect and the Company could ultimately incur more or less than the amounts initially recorded. The Company may also incur significant legal fees, which are expensed as incurred, in defending against these claims. The Company is not currently aware of any pending or threatened litigation that would have a material adverse effect on the Company's financial statements. Shareholder Class Action Lawsuits Beginning on September 7, 2012, two class action lawsuits were filed in the United States District Court for the Northern District of California against Ubiquiti Networks, Inc., certain of its officers and directors, and the underwriters of its initial public offering, alleging claims under U.S. securities laws. On January 30, 2013, the plaintiffs filed an amended consolidated complaint. On March 26, 2014, the court issued an order granting a motion to dismiss the complaint with leave to amend. Following the plaintiffs’ decision not to file an amended complaint, on April 16, 2014, the court ordered the dismissal of the lawsuit with prejudice, and entered judgment in favor of the Company and the other defendants, and against the plaintiffs. On May 15, 2014, the plaintiffs filed a notice of appeal from the judgment of the court. The Ninth Circuit heard oral arguments on August 10, 2016. On October 24, 2016, the Ninth Circuit issued an unpublished opinion, reaffirming the district court’s dismissal of the alleged violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and reversing the district court’s dismissal of the alleged violations of Sections 11 and 15 of the Securities Act of 1933. The Company plans to file a petition for rehearing with the Ninth Circuit and to vigorously defend itself against these claims. There can be no assurance that the Company will prevail. The Company cannot currently estimate the possible loss, if any, that it may experience in connection with this litigation. |
COMMON STOCK AND TREASURY STOCK |
3 Months Ended |
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Sep. 30, 2016 | |
Equity [Abstract] | |
COMMON STOCK AND TREASURY STOCK | COMMON STOCK AND TREASURY STOCK As of September 30, 2016 and June 30, 2016, the authorized capital of the Company included 500,000,000 shares of common stock. As of September 30, 2016 and June 30, 2016, there were 82,123,043 and 81,667,129 shares of common stock outstanding, respectively. Common Stock Repurchases On May 4, 2016, the Board of Directors of the Company approved a $50 million stock repurchase program. Under the stock repurchase program, the Company was authorized to repurchase up to $50 million of its common stock. During the fourth quarter of fiscal 2016, the Company repurchased 1,309,606 shares of its common stock at an average price per share of $38.18 for an aggregate amount of $50 million. This included unpaid stock repurchases of $6.5 million relating to repurchases executed on or prior to June 30, 2016 for trades that settled in the first quarter of fiscal 2017. On August 3, 2016, the Board of Directors of the Company approved a $50 million stock repurchase program. Under the new stock repurchase program, the Company may repurchase up to $50 million of its common stock. The program expires on September 30, 2017. As of September 30, 2016, the Company has not repurchased any of its common stock under this plan. |
STOCK BASED COMPENSATION |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK BASED COMPENSATION | STOCK BASED COMPENSATION Stock-Based Compensation Plans The Company’s 2010 Equity Incentive Plan and 2005 Equity Incentive Plan are described in its Annual Report. As of September 30, 2016, the Company had 10,022,225 authorized shares available for future issuance under all of its stock incentive plans. Stock-Based Compensation The following table shows total stock-based compensation expense included in the Consolidated Statements of Operations for the three months ended September 30, 2016 and 2015 (in thousands):
Stock Options The following is a summary of option activity for the Company’s stock incentive plans for the three months ended September 30, 2016:
During the three months ended September 30, 2016 and 2015, the aggregate intrinsic value of options exercised under the Company’s stock incentive plans was $20.7 million and $1.5 million, respectively, as determined as of the date of option exercise. As of September 30, 2016, the Company had unrecognized compensation costs of $0.1 million related to stock options which the Company expects to recognize over a weighted-average period of 0.3 years. Future option grants will increase the amount of compensation expense to be recorded in these periods. The Company estimates the fair value of employee stock options using the Black-Scholes option pricing model. The fair value of employee stock options is amortized on a straight-line basis over the requisite service period of the awards. The Company did not grant any employee stock options during the three months ended September 30, 2016 and 2015. Restricted Stock Units (“RSUs”) The following table summarizes the activity of the RSUs made by the Company:
The intrinsic value of RSUs vested in the three months ended September 30, 2016 and 2015 was $2.9 million and $1.9 million, respectively. As of September 30, 2016, there were unrecognized compensation costs related to RSUs of $8.0 million which the Company expects to recognize over a weighted average period of 2.9 years. |
INCOME TAXES |
3 Months Ended |
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Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The Company recorded a tax provision of $2.0 million for the three months ended September 30, 2016. The Company’s estimated fiscal year 2017 effective tax rate differs from the U.S. statutory rate primarily due to profits earned in jurisdictions where the tax rate is lower than the U.S. tax rate and share-based compensation excess tax benefit. Effective July 1, 2016, the Company early adopted ASU 2016-09 regarding the Improvements to Employee Share-Based Payment Accounting. In accordance with the new guidance, the Company recognized excess tax benefits for share-based payments of $6.8 million as a discrete item within the provision for income taxes rather than additional paid-in capital for the three months ended September 30, 2016. See Note 2 for information on the impact of the adoption of ASU 2016-09. As of September 30, 2016, the Company had approximately $24.0 million of unrecognized tax benefits, substantially all of which would, if recognized, affect its tax expense. The Company has elected to include interest and penalties related to uncertain tax positions as a component of tax expense. At September 30, 2016, an immaterial amount of interest and penalties are included in long-term income tax payable. The Company recorded a net increase of its unrecognized tax benefits of $1.2 million for the three months ended September 30, 2016. The Company does not expect any significant increases or decreases to its unrecognized tax benefits in the next twelve months. The Company files U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. The Company’s tax filings from fiscal year 2010 and onwards could be subject to examinations by tax authorities. On July 27, 2015, in Altera Corp. v. Commissioner, the U.S. Tax Court issued an opinion related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. On February 19, 2016, the U.S. Department of the Treasury filed a notice of appeal and has not withdrawn the requirement to include stock-based compensation from its regulations. We have reviewed this case and its potential impact on Ubiquiti and concluded that no adjustment to the consolidated financial statements is appropriate at this time. We will continue to monitor ongoing developments and potential impacts to our consolidated financial statements. |
SEGMENT INFORMATION, REVENUES BY GEOGRAPHY AND SIGNIFICANT CUSTOMERS |
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SEGMENT INFORMATION, REVENUES BY GEOGRAPHY AND SIGNIFICANT CUSTOMERS | SEGMENT INFORMATION, REVENUES BY GEOGRAPHY AND SIGNIFICANT CUSTOMERS Management has determined that the Company operates as one reportable and operating segment as it only reports financial information on an aggregate and consolidated basis to its chief executive officer, who is the Company’s chief operating decision maker. Furthermore, the Company does not organize or report its costs on a segment basis. The Company presents its revenues by product type in two primary categories, including Service Provider Technology and Enterprise Technology.
Revenues by product type are as follows (in thousands, except percentages):
Revenues by geography based on customer’s ship-to destinations were as follows (in thousands, except percentages):
Customers with an accounts receivable balance of 10% or greater of total accounts receivable and customers with net revenues of 10% or greater of total revenues are presented below for the periods indicated:
* denotes less than 10% |
RELATED PARTY TRANSACTIONS AND CERTAIN OTHER TRANSACTIONS |
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Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS AND CERTAIN OTHER TRANSACTIONS | RELATED PARTY TRANSACTIONS AND CERTAIN OTHER TRANSACTIONS Aircraft Lease Agreement On November 13, 2013, the Company entered into an aircraft lease agreement (the “Aircraft Lease Agreement”) with RJP Manageco LLC (the “Lessor”), a limited liability company owned by the Company’s CEO, Robert J. Pera. Pursuant to the Aircraft Lease Agreement, the Company may lease an aircraft owned by the Lessor for Company business purposes. Under the Aircraft Lease Agreement, the aircraft may be leased at a rate of $5,000 per flight hour. This hourly rate does not include the cost of flight crew or on-board services, which the Company purchases from a third-party provider. The Company recognized a total of approximately $650 thousand and $213 thousand in expenses pursuant to the Aircraft Lease Agreement during the three months ended September 30, 2016 and 2015, respectively. All expenses pursuant to the Aircraft Lease Agreement have been included in the Company’s sales, general and administrative expenses in the Consolidated Statements of Operations. |
BUSINESS EMAIL COMPROMISE FRAUD LOSS |
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Sep. 30, 2016 | |
Unusual or Infrequent Items, or Both [Abstract] | |
BUSINESS EMAIL COMPROMISE FRAUD LOSS | BUSINESS EMAIL COMPROMISE FRAUD LOSS As disclosed in June 2015 and 2016, the Company determined that it was the victim of a criminal fraud known to law enforcement authorities as business e-mail compromise fraud which involved employee impersonation and fraudulent requests targeting our finance department. The fraud resulted in transfers of funds aggregating $46.7 million held by a Company subsidiary incorporated in Hong Kong to other overseas accounts held by third parties. To date, the Company has recovered $16.7 million. The Company recovered $8.1 million in fiscal 2015, resulting in a charge of $39.1 million in the fourth quarter of fiscal 2015, including additional expenses consisting of professional service fees associated with the fraud loss. In fiscal 2016, the Company recorded a net recovery of an additional $8.3 million, comprised of the $8.6 million recovery less $0.3 million of professional service fees associated with the recovery. No additional recoveries were made during the three months ended September 30, 2016. The Company is continuing to pursue the recovery of the remaining $30.0 million and is cooperating with U.S. federal and numerous overseas law enforcement authorities who are actively pursuing a multi-agency criminal investigation. Any additional recoveries are likely remote and therefore cannot be assured. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
3 Months Ended |
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Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation— The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) related to interim financial statements based on applicable Securities and Exchange Commission (“SEC”) rules and regulations. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. These consolidated financial statements reflect all adjustments, which are, in the opinion of the Company, of a normal and recurring nature and those necessary to state fairly the statements of financial position, results of operations and cash flows for the dates and periods presented. The June 30, 2016 balance sheet was derived from the audited financial statements as of that date. All significant intercompany transactions and balances have been eliminated. The Company has reclassified certain amounts reported in the previous period to conform to the current period presentation. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2016, included in its Annual Report on Form 10-K, as filed with the SEC on August 22, 2016 (the “Annual Report”). The results of operations for the three months ended September 30, 2016 are not necessarily indicative of the results to be expected for any future periods. |
Recent Accounting Pronouncements | New Accounting Updates Recently Adopted Effective July 1, 2016, the Company adopted Accounting Standards Update (“ASU”) 2015-03 regarding simplifying the presentation of debt issuance costs. The guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Previously the Company reported these costs as assets on its balance sheet. The guidance is applied on a retrospective basis whereby prior-period financial statements must be adjusted to reflect the adoption of the new guidance. The Company has reclassified $0.3 million from "prepaid expenses and other current assets" to "Debt - short-term", and $0.7 million from "Other long-term assets" to "Debt - long-term" on the June 30, 2016 consolidated balance sheet. Effective July 1, 2016, the Company adopted ASU 2015-11 regarding simplifying the measurement of inventory. The guidance requires an entity to measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company adopted this update prospectively, and it did not have a material impact on the Company's Consolidated Financial Statements. Effective July 1, 2016, the Company early adopted ASU 2016-09 regarding the Improvements to Employee Share-Based Payment Accounting. The Company applied the guidance relating to accounting for excess tax benefits and the presentation of excess tax benefits for share-based payments in the consolidated statement of cash flows on a prospective basis; according prior period amounts have not been adjusted. The Company recognized the excess tax benefits of $6.8 million within the provision for income taxes rather than additional paid-in capital during the three months ended September 30, 2016. The Company classified the excess tax benefits for share-based payments within cash flows from operating activities for the three months ended September 30, 2016 rather than within cash flows from financing activities. In regards to the forfeiture policy election, we will continue to estimate the number of awards expected to be forfeited, rather than electing to account for forfeitures as they occur. No other terms of the adopted guidance resulted in an impact on the Company's Consolidated Financial Statements. Recent Accounting Standards or Updates Not Yet Effective In June 2014, the FASB issued a new accounting standard update on revenue from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative information is required about contracts with customers, significant judgments and any assets recognized from the costs to obtain or fulfill a contract. The guidance was to be effective for annual and interim reporting periods beginning after December 15, 2016. However, in July 2015, the FASB deferred the effective date by one year, to December 15, 2017, to provide adequate time to effectively implement the new standard, though the early adoption as of the original effective date is allowed. The Company is currently assessing the impact of this new guidance and has not selected the transition method. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize assets and liabilities on the balance sheet for leases with lease terms greater than twelve months and disclose key information about leasing arrangements. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years, with early application permitted. The Company is evaluating the impact that adoption of this new standard will have on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606) Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” (“ASU 2016-08”). ASU 2016-08 further clarifies principal and agent relationships within ASU 2014-09. The amendment is effective beginning after December 14, 2017, including interim reporting periods within that reporting year. The Company is evaluating the impact that adoption of this new standard will have on its consolidated financial statements. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing." This ASU addresses certain implementation issues that have surfaced since the issuance of ASU 2014-09 in May 2014. The ASU provides guidance in identifying performance obligations and determining the appropriate accounting for licensing arrangements. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements for ASU 2014-09. The Company is in the process of assessing the impact that adoption of this new standard will have on its consolidated financial statements. In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”. (“ASU 2016-12”). ASU 2016-12 will affect all entities that enter into contracts with customers to transfer goods or services (that are an output of the entity’s ordinary activities) in exchange for consideration. The amendments in this update affect the guidance in ASU 2014-09 which is not yet effective. The amendments in this update also affect narrow aspects of Topic 606 including among others: assessing collectability criterion, noncash consideration, and presentation of sales taxes and other similar taxes collected from customers. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements for ASU 2014-09. The Company is evaluating the impact that adoption of this new standard will have on its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses On Financial Instruments”. (“ASU 2016-13”). ASU 2016-13 implements a comprehensive change in estimating the allowances for loan losses from the current model of losses inherent in the loan portfolio to a current expected credit loss model that generally is expected to result in earlier recognition of allowances for losses. Additionally, purchase accounting rules have been modified as well as credit losses on held-to-maturity debt securities. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. The Company is in the process of assessing the impact that adoption of this new standard will have on its consolidated financial statements. In October 2016, the FASB issued ASU 2016-16, the FASB issued ASU 2016-16, "Income Taxes (Topic 740): Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other Than Inventory". (“ASU 2016-16”). ASU 2016-16 eliminates the exception for all intra-entity sales of assets other than inventory. As a result, a reporting entity would recognize the tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. ASU 2016-16 is effective for fiscal years beginning after December 15, 2017, and early adoption is permitted but can only be adopted in the first interim period of a fiscal year. The Company is in the process of assessing the impact that adoption of this new standard will have on its consolidated financial statements. |
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value hierarchy for company's financial assets and liabilities | As of September 30, 2016 and June 30, 2016, the fair value hierarchy of the Company’s debt carried at historical cost was as follows (in thousands):
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EARNINGS PER SHARE (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of basic and diluted earnings per share | The following table sets forth the computation of basic and diluted earnings per share for the periods indicated (in thousands, except per share data):
(1) Effective July 1, 2016, the Company early adopted ASU 2016-09 regarding the Improvements to Employee Share-Based Payment Accounting, the adoption increased the number of diluted stock options and restricted stock units by 774 thousand shares. |
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Potential shares of common stock excluded from diluted per share calculation | The following table summarizes the total potential shares of common stock that were excluded from the diluted per share calculation as including them would have been anti-dilutive for the period (in thousands):
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BALANCE SHEET COMPONENTS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Related Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories consisted of the following (in thousands):
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Property and equipment, net | Property and equipment, net consisted of the following (in thousands):
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Other Long-term Assets | Other long-term assets consisted of the following (in thousands):
(1) - Accumulated amortization was $1,025 thousand and $955 thousand as of September 30, 2016 and June 30, 2016, respectively. |
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Other Current Liabilities | Other current liabilities consisted of the following (in thousands):
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ACCRUED WARRANTY (Tables) |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warranty obligations | Warranty obligations, included in other current liabilities, were as follows (in thousands):
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DEBT (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt | The following table summarizes our estimated debt and interest payment obligations as of September 30, 2016, for the remainder of fiscal 2017 and future fiscal years (in thousands):
(1) - Interest payments are calculated based on the applicable rates and payment dates as of September 30, 2016. Furthermore, two to three-month payment intervals on the revolving debt have been assumed, consistent with the Company's elections to date. Our Debt consisted of the following (in thousands):
(1) On July 1 2016, the Company retrospectively adopted ASU 2015-03, which requires unamortized debt issuance costs to be included as a direct deduction from the related debt liability on the balance sheet. Under previous guidance, all unamortized debt issuance costs were reported as assets on the balance sheet. See Note 2 for information on the impact of the retrospective adoption of ASU 2015-03. |
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Summary of interest rates | The table below shows the respective interest rates as of September 30, 2016 in addition to interest rate reset dates and rates as available for each revolver draw.
* - Reset rate not available as of filing date. |
COMMITMENTS AND CONTINGENCIES (Tables) |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Future minimum annual payments under operating leases | At September 30, 2016, future minimum annual payments under operating leases for the remainder of fiscal 2017 and future fiscal years are as follows (in thousands):
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STOCK BASED COMPENSATION (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | The following table shows total stock-based compensation expense included in the Consolidated Statements of Operations for the three months ended September 30, 2016 and 2015 (in thousands):
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Summary of option activity for the company's stock incentive plans | The following is a summary of option activity for the Company’s stock incentive plans for the three months ended September 30, 2016:
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Activity of RSUs | The following table summarizes the activity of the RSUs made by the Company:
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SEGMENT INFORMATION, REVENUES BY GEOGRAPHY AND SIGNIFICANT CUSTOMERS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues by product | Revenues by product type are as follows (in thousands, except percentages):
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Revenues by geography | Revenues by geography based on customer’s ship-to destinations were as follows (in thousands, except percentages):
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Percentage of revenue and accounts receivable | Customers with an accounts receivable balance of 10% or greater of total accounts receivable and customers with net revenues of 10% or greater of total revenues are presented below for the periods indicated:
* denotes less than 10% |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Summary of Significant Accounting Policies (Details) $ in Millions |
3 Months Ended |
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Sep. 30, 2016
USD ($)
| |
New Accounting Pronouncement, Early Adoption [Line Items] | |
Employee service share-based compensation, tax benefit realized from exercise of stock options | $ (6.8) |
Prepaid expenses and other current assets | Accounting Standards Update 2015-03 | |
New Accounting Pronouncement, Early Adoption [Line Items] | |
Debt issuance costs, net | (0.3) |
Other noncurrent assets | Accounting Standards Update 2015-03 | |
New Accounting Pronouncement, Early Adoption [Line Items] | |
Debt issuance costs, net | (0.7) |
Short-term debt | Accounting Standards Update 2015-03 | |
New Accounting Pronouncement, Early Adoption [Line Items] | |
Debt issuance costs, net | 0.3 |
Long-term debt | Accounting Standards Update 2015-03 | |
New Accounting Pronouncement, Early Adoption [Line Items] | |
Debt issuance costs, net | $ 0.7 |
FAIR VALUE OF FINANCIAL INSTRUMENTS - Fair Value Hierarchy (Detail) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Jun. 30, 2016 |
---|---|---|
Liabilities: | ||
Debt | $ 201,000 | $ 203,500 |
Level 1 | ||
Liabilities: | ||
Debt | 0 | 0 |
Level 2 | ||
Liabilities: | ||
Debt | 201,000 | 203,500 |
Level 3 | ||
Liabilities: | ||
Debt | $ 0 | $ 0 |
FAIR VALUE OF FINANCIAL INSTRUMENTS - Additional Information (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Jun. 30, 2016 |
Sep. 30, 2015 |
Jun. 30, 2015 |
---|---|---|---|---|
Fair Value Disclosures [Abstract] | ||||
Deposits of cash outside the United States | $ 530,200 | |||
Cash and cash equivalents | $ 573,644 | $ 551,031 | $ 436,080 | $ 446,401 |
EARNINGS PER SHARE - Computation of basic and diluted earnings per share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Jul. 01, 2016 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Numerator: | |||
Net income and comprehensive income | $ 71,788 | $ 53,759 | |
Denominator: | |||
Weighted-average shares used in computing basic net income per share (in shares) | 81,812 | 87,062 | |
Add—dilutive potential common shares: | |||
Weighted-average shares used in computing diluted net income per share (in shares) | 83,854 | 88,465 | |
Net income per share of common stock: | |||
Basic (in usd per share) | $ 0.88 | $ 0.62 | |
Diluted (in usd per share) | $ 0.86 | $ 0.61 | |
Stock options(1) | |||
Add—dilutive potential common shares: | |||
Dilutive potential common shares (in shares) | 1,920 | 1,302 | |
Restricted stock units(1) | |||
Add—dilutive potential common shares: | |||
Dilutive potential common shares (in shares) | 122 | 101 | |
Employee stock option and restricted stock units | |||
Add—dilutive potential common shares: | |||
Dilutive potential common shares (in shares) | 774 |
EARNINGS PER SHARE - Anti-dilutive Securities (Detail) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potential shares of common stock excluded from the EPS calculation (in shares) | 4 | 39 |
Restricted stock units(1) | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potential shares of common stock excluded from the EPS calculation (in shares) | 4 | 39 |
BALANCE SHEET COMPONENTS - Inventory (Detail) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Jun. 30, 2016 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
Finished goods | $ 71,040 | $ 50,987 |
Raw materials | 8,801 | 6,126 |
Inventories | $ 79,841 | $ 57,113 |
BALANCE SHEET COMPONENTS - Other Long-term Assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Jun. 30, 2016 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
Intangible assets, net (1) | $ 594 | $ 616 |
Other long-term assets | 1,062 | 960 |
Total | 1,656 | 1,576 |
Accumulated amortization, intangible assets | $ 1,025 | $ 955 |
BALANCE SHEET COMPONENTS - Other Current Liabilities (Detail) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Jun. 30, 2016 |
Sep. 30, 2015 |
Jun. 30, 2015 |
---|---|---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||||
Accrued expenses | $ 6,948 | $ 5,749 | ||
Accrued compensation and benefits | 2,048 | 1,589 | ||
Warranty accrual | 3,028 | 2,236 | $ 2,155 | $ 2,750 |
Deferred revenue - short term | 3,188 | 2,917 | ||
Customer deposits | 684 | 856 | ||
Reserve for sales returns | 3,334 | 2,820 | ||
Other payables | 1,070 | 10,505 | ||
Total | $ 20,300 | $ 26,672 |
ACCRUED WARRANTY - Additional Information (Detail) |
3 Months Ended |
---|---|
Sep. 30, 2016 | |
Product Warranties Disclosures [Abstract] | |
Warranty period (in years) | 12 months |
ACCRUED WARRANTY - Warranty Obligations (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Movement in Standard and Extended Product Warranty, Increase (Decrease) [Roll Forward] | ||
Warranty accrual beginning balance | $ 2,236 | $ 2,750 |
Accruals for warranties issued during the period | 2,031 | 120 |
Settlements made during the period | (1,239) | (715) |
Warranty accrual ending balance | $ 3,028 | $ 2,155 |
DEBT - Schedule of Debt (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Jun. 30, 2016 |
---|---|---|
Debt Instrument [Line Items] | ||
Term Loan - short term | $ 12,243 | $ 10,993 |
Debt issuance costs, current, net | (257) | (257) |
Debt - long-term | 187,879 | 191,564 |
Debt issuance cost, noncurrent, net | (621) | (686) |
Term loan facility | ||
Debt Instrument [Line Items] | ||
Term Loan - short term | 12,500 | 11,250 |
Debt - long-term | 72,500 | 76,250 |
Revolving credit facility | Line of credit | ||
Debt Instrument [Line Items] | ||
Debt - long-term | $ 116,000 | $ 116,000 |
DEBT - Summary of debt and interest payment obligations (Detail) $ in Thousands |
Sep. 30, 2016
USD ($)
|
---|---|
Debt payment obligations | |
2017 (remainder) | $ 8,750 |
2018 | 15,000 |
2019 | 15,000 |
2020 | 162,250 |
Thereafter | 0 |
Total | 201,000 |
Interest and other payments on debt payment obligations (1) | |
2017 (remainder) | 3,754 |
2018 | 4,712 |
2019 | 4,361 |
2020 | 2,781 |
Thereafter | 0 |
Total | 15,608 |
Total | |
2017 (remainder) | 12,504 |
2018 | 19,712 |
2019 | 19,361 |
2020 | 165,031 |
Thereafter | 0 |
Total | $ 216,608 |
COMMITMENTS AND CONTINGENCIES - Additional Information (Detail) $ in Millions |
3 Months Ended | |
---|---|---|
Sep. 07, 2012
claim
|
Sep. 30, 2016
USD ($)
|
|
Property Subject to or Available for Operating Lease [Line Items] | ||
Inventory purchase obligation | $ 25.8 | |
Other obligations | $ 10.0 | |
Shareholder class action complaints filed against Company | claim | 2 | |
San Jose, CA | ||
Property Subject to or Available for Operating Lease [Line Items] | ||
Noncancelable operating leases expiration period | through fiscal 2022 |
COMMITMENTS AND CONTINGENCIES - Future minimum annual payments under operating leases (Detail) $ in Thousands |
Sep. 30, 2016
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2017 (remainder) | $ 5,340 |
2018 | 5,153 |
2019 | 2,576 |
2020 | 1,744 |
2021 | 1,085 |
Thereafter | 375 |
Total | $ 16,273 |
COMMON STOCK AND TREASURY STOCK (Detail) - USD ($) |
3 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2016 |
Sep. 30, 2016 |
Aug. 03, 2016 |
May 04, 2016 |
|
Equity, Class of Treasury Stock [Line Items] | |||||
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 | 500,000,000 | ||
Common stock, shares outstanding (in shares) | 81,667,129 | 81,667,129 | 82,123,043 | ||
Total number of shares repurchased | 1,309,606 | ||||
Average price paid per share (in usd per share) | $ 38.18 | ||||
Value of total number of shares purchased | $ 50,000,000 | ||||
Stock repurchase cost incurred but not yet paid | $ 6,500,000 | ||||
Common Stock | |||||
Equity, Class of Treasury Stock [Line Items] | |||||
Repurchase of common stock | $ 50,000,000 | $ 50,000,000 |
STOCK BASED COMPENSATION - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Authorized shares, stock incentive plans | 10,022,225 | |
Stock options(1) | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Aggregate intrinsic value of options exercised | $ 20.7 | $ 1.5 |
Unrecognized compensation costs | $ 0.1 | |
Weighted-average period recognized (in years) | 3 months 29 days | |
Restricted stock units(1) | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Weighted-average period recognized (in years) | 2 years 11 months 9 days | |
Intrinsic value of RSUs vested | $ 2.9 | $ 1.9 |
Unrecognized compensation costs, RSUs | $ 8.0 |
STOCK BASED COMPENSATION - Stock-based compensation expense (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Stock-based compensation expense | $ 927 | $ 1,027 |
Cost of revenues | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Stock-based compensation expense | 144 | 113 |
Research and development | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Stock-based compensation expense | 560 | 624 |
Sales, general and administrative | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Stock-based compensation expense | $ 223 | $ 290 |
STOCK BASED COMPENSATION - Summary of RSU activity (Detail) - Restricted stock units(1) |
3 Months Ended |
---|---|
Sep. 30, 2016
$ / shares
shares
| |
Number of Shares | |
Non-vested RSUs, beginning balance (in shares) | shares | 271,971 |
RSUs granted (in shares) | shares | 24,330 |
RSUs vested (in shares) | shares | (60,728) |
RSUs canceled (in shares) | shares | (10,928) |
Non-vested RSUs, ending balance (in shares) | shares | 224,645 |
Weighted Average Grant Date Fair Value Per Share | |
Non-vested RSUs, weighted average grant date fair value, beginning balance (in usd per share) | $ / shares | $ 28.72 |
RSUs granted, weighted average grant date fair value (in usd per share) | $ / shares | 45.83 |
RSUs vested, weighted average grant date fair value (in usd per share) | $ / shares | 20.36 |
RSUs canceled, weighted average grant date fair value (in usd per share) | $ / shares | 32.60 |
Non-vested RSUs, weighted average grant date fair value, ending balance (in usd per share) | $ / shares | $ 32.64 |
INCOME TAXES (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Tax Disclosure [Abstract] | ||
Provision for income taxes | $ 2,015 | $ 5,960 |
Employee service share-based compensation, tax benefit realized from exercise of stock options | (6,800) | |
Unrecognized tax benefits | 24,000 | |
Net increase in unrecognized tax benefits | $ 1,200 |
SEGMENT INFORMATION, REVENUES BY GEOGRAPHY AND SIGNIFICANT CUSTOMERS - Additional Information (Detail) |
3 Months Ended |
---|---|
Sep. 30, 2016
segment
revenue_category
| |
Segment Reporting [Abstract] | |
Number of reportable segments | 1 |
Number of operating segments | 1 |
Number of primary categories | revenue_category | 2 |
SEGMENT INFORMATION, REVENUES BY GEOGRAPHY AND SIGNIFICANT CUSTOMERS - Revenues by product (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Segment Reporting Information [Line Items] | ||
Total revenues | $ 204,757 | $ 151,415 |
Revenues | ||
Segment Reporting Information [Line Items] | ||
Revenue percentage | 100.00% | 100.00% |
Service Provider Technology | ||
Segment Reporting Information [Line Items] | ||
Total revenues | $ 120,632 | $ 103,399 |
Service Provider Technology | Revenues | ||
Segment Reporting Information [Line Items] | ||
Revenue percentage | 59.00% | 68.00% |
Enterprise Technology | ||
Segment Reporting Information [Line Items] | ||
Total revenues | $ 84,125 | $ 48,016 |
Enterprise Technology | Revenues | ||
Segment Reporting Information [Line Items] | ||
Revenue percentage | 41.00% | 32.00% |
SEGMENT INFORMATION, REVENUES BY GEOGRAPHY AND SIGNIFICANT CUSTOMERS - Percentage of Revenues, Accounts Receivable (Detail) |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Jun. 30, 2016 |
|
Revenues | |||
Revenue, Major Customer [Line Items] | |||
Revenue percentage | 100.00% | 100.00% | |
Revenues | Customer C | |||
Revenue, Major Customer [Line Items] | |||
Revenue percentage | 10.00% | ||
Accounts Receivable | Customer A | |||
Revenue, Major Customer [Line Items] | |||
Revenue percentage | 11.00% | ||
Accounts Receivable | Customer B | |||
Revenue, Major Customer [Line Items] | |||
Revenue percentage | 13.00% | ||
Accounts Receivable | Customer C | |||
Revenue, Major Customer [Line Items] | |||
Revenue percentage | 16.00% | 18.00% |
RELATED PARTY TRANSACTIONS AND CERTAIN OTHER TRANSACTIONS (Details) - Chief Executive Officer - Aircraft lease agreement - USD ($) |
3 Months Ended | ||
---|---|---|---|
Nov. 13, 2013 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Related Party Transaction [Line Items] | |||
Rate to lease aircraft | $ 5,000 | ||
Sales, general and administrative | |||
Related Party Transaction [Line Items] | |||
Aircraft leasing expenses | $ 650,000 | $ 213,000 |
BUSINESS EMAIL COMPROMISE FRAUD LOSS (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 12 Months Ended | 27 Months Ended | |||
---|---|---|---|---|---|---|---|
Jun. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Sep. 30, 2016 |
|
Unusual or Infrequent Item [Line Items] | |||||||
Business e-mail compromise (“BEC”) fraud loss/(recovery) | $ 0 | $ (8,034,000) | |||||
Business Email Compromise Fraud Loss | |||||||
Unusual or Infrequent Item [Line Items] | |||||||
Aggregate funds transferred overseas in fraud loss | $ 46,700,000 | ||||||
Amount recovered from fraud loss | $ 8,600,000 | $ 8,100,000 | $ 16,700,000 | ||||
Business e-mail compromise (“BEC”) fraud loss/(recovery) | $ 39,100,000 | ||||||
Net recovery | 0 | 8,300,000 | |||||
Unusual or Infrequent Item, Professional Service Fees | $ 300,000 | ||||||
Remaining amount to be recovered | $ 30,000,000 |
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