Ubiquiti Inc

Previous wording

We sell our products and solutions globally to enterprises and service providers primarily through our extensive network of distributors and through direct sales through our webstores. Sales to distributors accounted for 57% of our revenues during the three months ended September 30, 2024. Direct sales accounted for 43% of our revenue during the three months ended September 30, 2024.

Current wording

We sell our products and solutions globally to enterprises and service providers primarily through our extensive network of distributors and through direct sales through our webstores. Sales to distributors accounted for 55% of our revenues during the six months ended December 31, 2024. Direct sales accounted for 45% of our revenue during the six months ended December 31, 2024.

Previous wording

Our gross profit has been, and may in the future be, influenced by several factors including changes in product mix, target end markets for our products, channel inventory levels, tariffs, pricing due to competitive pressure, production costs and global demand for electronic components. Although we procure and sell our products mostly in U.S. dollars, our contract manufacturers incur many costs, including labor costs, in other currencies. To the extent that the exchange rates move unfavorably for our contract manufacturers, they may try to pass these additional costs on to us, which could have a material impact on our future average selling prices and unit costs. In June 2018, the Office of the United States Trade Representative announced new proposed tariffs for certain products imported into the U.S. from China. The vast majority of our products that are imported into the U.S. from China are currently subject to tariffs that range between 7.5% and 25%. These tariffs have affected our operating results and margins. For so long as such tariffs are in effect, we expect it will continue to affect our operating results and margins. As a result, our historical and current gross profit margins may not be indicative of our gross profit margins for future periods. Refer to “Part II—Item 1A. Risk Factors—Risks Related to Our International Operations—Our business may be negatively affected by political events and foreign policy responses” for additional information.

Current wording

Our gross profit has been, and may in the future be, influenced by several factors including changes in product mix, target end markets for our products, channel inventory levels, tariffs, pricing due to competitive pressure, production costs and global demand for electronic components. Although we procure and sell our products mostly in U.S. dollars, our contract manufacturers incur many costs, including labor costs, in other currencies. To the extent that the exchange rates move unfavorably for our contract manufacturers, they may try to pass these additional costs on to us, which could have a material impact on our future average selling prices and unit costs. In February 2025, the Office of the United States Customs and Border Protection, Department of Homeland Security announced an incremental 10% tariff for products imported into the U.S. from China. This will result in the products that are imported into the U.S. from China after the effective date having additional tariffs imposed on them between 10% and 35%. These tariffs have affected our operating results and margins. For so long as such tariffs are in effect, we expect it will continue to affect our operating results and margins. As a result, our historical and current gross profit margins may not be indicative of our gross profit margins for future periods. Refer to “Part II—Item 1A. Risk Factors—Risks Related to Our International Operations—Our business may be negatively affected by political events and foreign policy responses” for additional information.

Previous wording

Comparison of Three Months Ended September 30, 2024 and 2023

Current wording

Comparison of Three and Six Months Ended December 31, 2024 and 2023

Previous wording

Enterprise Technology revenue increased $90.1 million, or 24%, from $380.1 million in the three months ended September 30, 2023 to $470.2 million in the three months ended September 30, 2024.

Current wording

Total revenues increased $222.2 million, or 24%, from $928.0 million in the six months ended December 31, 2023 to $1,150.2 million in the six months ended December 31, 2024.

Previous wording

The increase in revenues for the three months ended September 30, 2024, as compared to the same period in the prior year, was primarily driven by an increase in revenue from our Enterprise Technology platform, offset in part by a decrease in revenue from our Service Provider Technology platform.

Current wording

The increase in revenues for the three months and six months ended December 31, 2024, as compared to the same periods in the prior year, was driven by an increase in revenue from both our Enterprise Technology platform and our Service Provider Technology platform.

Previous wording

The increase in Enterprise Technology revenue during the three months ended September 30, 2024, as compared to the same period in the prior year, was primarily due to an increase in revenue from our Enterprise Technology platform across all regions except South America.

Current wording

The increase in Enterprise Technology revenue during the three months and six months ended December 31, 2024, as compared to the same periods in the prior year, was due to an increase in revenue from our Enterprise Technology platform across all regions except South America.

Previous wording

The decrease in Service Provider Technology in the three months ended September 30, 2024, as compared to the same period in the prior year, was primarily due to decline in revenues in the North America and EMEA regions.

Current wording

The increase in Service Provider Technology in the three months and six months ended December 31, 2024, as compared to the same periods in the prior year, was due to an increase in revenues in the North America and South America regions.

Previous wording

We have determined the geographical distribution of our product revenues based on our customers’ ship-to destinations. A majority of our sales are to distributors who either sell to resellers or directly to end customers, who may be located in different countries than the initial ship-to destination. The following are our revenues by geography for the three months ended September 30, 2024 and 2023 (in thousands, except percentages):

Current wording

We have determined the geographical distribution of our product revenues based on our customers’ ship-to destinations. A majority of our sales are to distributors who either sell to resellers or directly to end customers, who may be located in different countries than the initial ship-to destination. The following are our revenues by geography for the three and six months ended December 31, 2024 and 2023 (in thousands, except percentages):

Previous wording

(1) Revenue for the United States was $248.7 million and $209.2 million for the three months ended September 30, 2024 and 2023, respectively.

Current wording

(1) Revenue for the United States was $296.1 million and $210.4 million for the three months ended December 31, 2024 and 2023, respectively. Revenue for the United States was $544.8 million and $419.6 million for the six months ended December 31, 2024 and 2023, respectively.

Previous wording

The increase in Asia Pacific revenues during the three months ended September 30, 2024, as compared to the same period in the prior year, was due to increased revenue from both our Enterprise Technology products and our Service Provider Technology products.

Current wording

The increase in North America revenues during the three months and six months ended December 31, 2024, as compared to the same periods in the prior year, was due to increased revenue from both our Enterprise Technology products and our Service Provider Technology products.

Previous wording

The increase in EMEA revenues during the three months ended September 30, 2024, as compared to the same period in the prior year, was primarily due to increased revenue from our Enterprise Technology products, offset in part by decreased revenue from our Service Provider Technology products.

Current wording

The increase in EMEA revenues during the three months and six months ended December 31, 2024, as compared to the same periods in the prior year, was due to increased revenue from our Enterprise Technology products, offset in part by decreased revenue from our Service Provider Technology products.

Previous wording

Revenues in the Asia Pacific region increased by $4.9 million, or 13%, from $36.1 million in the three months ended September 30, 2023 to $40.9 million in the three months ended September 30, 2024.

Current wording

Revenues in the Asia Pacific region increased by $9.8 million, or 29%, from $33.3 million in the three months ended December 31, 2023 to $43.1 million in the three months ended December 31, 2024 and increased by $14.7 million, or 21%, from $69.4 million in the six months ended December 31, 2023 to $84.0 million in the six months ended December 31, 2024.

Previous wording

The increase in North America revenues during the three months ended September 30, 2024, as compared to the same period in the prior year, was due to increased revenue from our Enterprise Technology products, offset in part by decreased revenue from our Service Provider Technology products.

Current wording

The increase in Asia Pacific revenues during the three months and six months ended December 31, 2024, as compared to the same periods in the prior year, was due to increased revenue from our Enterprise Technology products, offset in part by decreased revenue from our Service Provider Technology products.

Previous wording

The increase in South America revenues during the three months ended September 30, 2024, as compared to the same period in the prior year, was due to increased revenue from our Service Provider Technology products, partially offset by a decrease in revenue from our Enterprise Technology products.

Current wording

The decrease in South America revenues during the three months and six months ended December 31, 2024, as compared to the same periods in the prior year, was due to a decrease in revenue from our Enterprise Technology products, offset in part by increased revenue from our Service Provider Technology products.

Previous wording

Gross profit margin increased to 42.1% in the three months ended September 30, 2024, compared to 39.7% in the three months ended September 30, 2023. The increase in gross profit margin for the three months ended September 30, 2024, as compared to the comparable prior year period, was primarily driven by favorable product mix and lower tariffs, offset in part by higher shipping costs, warehouse related expenses and incremental excess and obsolete inventory charges.

Current wording

Gross profit margin increased to 41% in the three months ended December 31, 2024, compared to 38% in the three months ended December 31, 2023 and increased to 42% in the six months ended December 31, 2024, compared to 39% in the six months ended December 31, 2023. The increase in gross profit margin for the three months ended December 31, 2024, as compared to the comparable prior year period, was primarily driven by favorable product mix, lower warehouse related expenses and excess and obsolete inventory charges, offset in part by higher shipping and tariff costs. The increase in gross profit margin for the six months ended December 31, 2024, as compared to the comparable prior year period, was primarily driven by favorable product mix, lower warehouse-related expenses, excess and obsolete inventory charges and tariff costs, offset in part by higher shipping costs.

Previous wording

Research and development (“R&D”) expenses increased by $1.7 million, or 5%, from $36.3 million in the three months ended September 30, 2023 to $38.0 million in the three months ended September 30, 2024. As a percentage of revenues, R&D expenses decreased from 8% for the three months ended September 30, 2023 to 7% for the three months ended September 30, 2024.

Current wording

Research and development (“R&D”) expenses increased by $3.0 million, or 8%, from $36.9 million in the three months ended December 31, 2023 to $40.0 million in the three months ended December 31, 2024. As a percentage of revenues, R&D expenses decreased from 8% for the three months ended December 31, 2023 to 7% for the three months ended December 31, 2024.

Previous wording

The increase in R&D expenses during the three months ended September 30, 2024, as compared to the comparable prior year period, was primarily driven by higher employee-related expenses, depreciation and software costs, offset in part by lower prototype-related expenses.

Current wording

The increase in R&D expenses during the three months ended December 31, 2024, as compared to the comparable prior year period, was primarily driven by higher prototype-related expenses and employee-related expenses. The increase in R&D expenses during the six months ended December 31, 2024, as compared to the comparable prior year period, was primarily driven by higher employee-related expenses, assets written off, software costs, and prototype-related expenses.

Previous wording

Sales, general and administrative (“SG&A”) expenses increased by $5.1 million, or 27%, from $19.3 million in the three months ended September 30, 2023 to $24.4 million in the three months ended September 30, 2024. As a percentage of revenues, SG&A expenses remained consistent at 4% for the three months ended September 30, 2023, compared to the three months ended September 30, 2024.

Current wording

Sales, general and administrative (“SG&A”) expenses increased by $8.8 million, or 45%, from $19.6 million in the three months ended December 31, 2023 to $28.5 million in the three months ended December 31, 2024. As a percentage of revenues, SG&A expenses increased from 4% for the three months ended December 31, 2023 to 5%, for the three months ended December 31, 2024.

Previous wording

The increase in SG&A for the three months ended September 30, 2024, as compared to the comparable prior year period, was primarily due to higher fees associated with webstore credit card processing, professional fees and marketing expenses.

Current wording

The increase in SG&A for the three months ended December 31, 2024, as compared to the comparable prior year period, was primarily due to higher bad debt expenses relating to a customer default and higher fees associated with webstore credit card processing. The increase in SG&A for the six months ended December 31, 2024, as compared to the comparable prior year period, was primarily due to higher bad debt expenses relating to a customer default, higher fees associated with webstore credit card processing, professional fees, marketing expenses and payroll expenses driven primarily by increase in number of employees.

Previous wording

Interest expense and other, net ("I&O") expenses decreased $10.6 million, or 50% from $21.2 million in the three months ended September 30, 2023 to $10.6 million in the three months ended September 30, 2024. As a percentage of revenue, I&O decreased from 5% for the three months ended September 30, 2023 to 2% for the three months ended September 30, 2024.

Current wording

Interest expense and other, net ("I&O") expenses decreased $6.8 million, or 37% from $18.3 million in the three months ended December 31, 2023 to $11.4 million in the three months ended December 31, 2024. As a percentage of revenue, I&O decreased from 4% for the three months ended December 31, 2023 to 2% for the three months ended December 31, 2024.

Previous wording

The decrease in I&O expenses during the three months ended September 30, 2024, as compared to the comparable prior year period, was primarily due to lower interest expense driven by a decrease in borrowings and lower interest rates and foreign exchange gains.

Current wording

The decrease in I&O expenses during both the three and six months ended December 31, 2024, as compared to the comparable prior year periods, was primarily due to lower interest expense driven by a decrease in borrowings and lower interest rates, partly offset by higher foreign exchange losses.

Previous wording

Our provision for income taxes increased $11.3 million, or 59%, from $19.3 million for the three months ended September 30, 2023 to $30.6 million for the three months ended September 30, 2024. Our effective tax rate increased to 19.3% for the three months ended September 30, 2024 as compared to 18.1% for the three months ended September 30, 2023.

Current wording

Our provision for income taxes increased $9.9 million, or 48%, from $20.7 million for the three months ended December 31, 2023 to $30.6 million for the three months ended December 31, 2024. Our effective tax rate decreased to 18.3% for the three months ended December 31, 2024 as compared to 20.2% for the three months ended December 31, 2023.

Previous wording

The change in effective tax rates for the three months ended September 30, 2024, as compared to the same period in the prior year, was primarily driven by a change in the mix of income earned in various tax jurisdictions.

Current wording

The change in effective tax rates for the three and six months ended December 31, 2024, as compared to the same periods in the prior year, was primarily driven by a change in the mix of income earned in various tax jurisdictions as well as a U.S. state adjustment recorded in the three months ended December 31, 2023.

Previous wording

Our principal source of liquidity are cash and cash equivalents, cash generated by operations, the availability of additional funds under the Facilities and short-term investments. We had cash and cash equivalents of $165.2 million and $126.3 million as of September 30, 2024 and June 30, 2024, respectively.

Current wording

Our principal source of liquidity are cash and cash equivalents, cash generated by operations, the availability of additional funds under the Facilities and short-term investments. We had cash and cash equivalents of $133.1 million and $126.3 million as of December 31, 2024 and June 30, 2024, respectively.

Previous wording

Net cash provided by operating activities during the three months ended September 30, 2024 consisted primarily of net income of $128.0 million, and the benefit of decreasing vendor deposits of $21.7 million, decreasing inventories of $8.5 million and non-cash adjustments of $15.9 million, further augmented by other changes in operating assets and liabilities that resulted in net cash inflows of $59.7 million. This net change in operating assets and liabilities consisted primarily of a $58.7 million increase in net accounts payable and accrued liabilities, a $6.2 million increase in taxes payable and $5.4 million decrease in accounts receivable.

Current wording

Net cash provided by operating activities during the six months ended December 31, 2024 consisted primarily of net income of $264.8 million, the benefit of decreasing vendor deposits of $42.9 million and non-cash adjustments of $30.1 million, further augmented by other changes in operating assets and liabilities that resulted in net cash inflows of $48.4 million. This net change in operating assets and liabilities consisted primarily of a $149.3 million increase in net accounts payable and accrued liabilities and $9.0 million increase in deferred revenue, partially offset by a $78.6 million increase in inventory, a $16.7 million decrease in taxes payable, a $10.3 million increase in prepaid expenses and other assets and a $4.3 million increase in accounts receivable.

Previous wording

Net cash provided by operating activities during the three months ended September 30, 2023 consisted primarily of net income of $87.8 million, partially offset by changes in operating assets and liabilities that resulted in net cash outflows of $31.2 million. This net change consisted primarily of a $33.5 million decrease in net accounts payable and accrued liabilities, a $25.7 million increase in vendor deposits, partially offset by a $28.6 million decrease in inventory.

Current wording

Net cash provided by operating activities during the six months ended December 31, 2023 consisted primarily of net income of $169.9 million, a $50.1 million decrease in inventory, partially offset by changes in operating assets and liabilities that resulted in net cash outflows of $48.6 million. This net change consisted primarily of a $53.6 million decrease in net accounts payable and accrued liabilities, 29.3 million decrease in taxes payable, and a $17.0 million increase in vendor deposits.

Previous wording

We used $2.6 million of cash in investing activities during the three months ended September 30, 2024. Our investing activities consisted primarily of $2.6 million of capital expenditures.

Current wording

We used $4.6 million of cash in investing activities during the six months ended December 31, 2024. Our investing activities consisted primarily of $4.6 million of capital expenditures.

Previous wording

We used $3.0 million of cash in investing activities during the three months ended September 30, 2023. Our investing activities consisted primarily of $3.0 million of capital expenditures.

Current wording

We used $6.9 million of cash in investing activities during the six months ended December 31, 2023. Our investing activities consisted primarily of $6.9 million of capital expenditures.

Previous wording

We used $192.2 million of cash in financing activities during the three months ended September 30, 2024. During the three months ended September 30, 2024, we repaid $155.6 million under the Company's credit Facilities and used $36.3 million related to dividends paid on our common stock.

Current wording

We used $374.8 million of cash in financing activities during the six months ended December 31, 2024. During the six months ended December 31, 2024, we repaid $301.9 million under the Company's credit Facilities and used $72.6 million related to dividends paid on our common stock.

Previous wording

We used $71.0 million of cash in financing activities during the three months ended September 30, 2023. During the three months ended September 30, 2023, we repaid $34.4 million under the Company’s credit Facilities and used $36.3 million related to dividends paid on our common stock.

Current wording

We used $156.6 million of cash in financing activities during the six months ended December 31, 2023. During the six months ended December 31, 2023, we repaid $83.8 million under the Company’s credit Facilities and used $72.5 million related to dividends paid on our common stock.

Previous wording

Our products are generally accompanied by a twelve to twenty-four month warranty from date of purchase, which covers both parts and labor. Generally, the distributor is responsible for the freight costs associated with warranty returns, and we absorb the freight costs of replacing items under warranty. In accordance with the Financial Accounting Standards Board’s ("FASB's"), Accounting Standards Codification ("ASC"), 450-20, Loss Contingencies, we record an accrual when we believe it is reasonably estimable and probable based upon historical experience. We record a provision for estimated future warranty work in cost of goods sold upon recognition of revenues, and we review the resulting accrual regularly and periodically adjust it to reflect changes in warranty estimates.

Current wording

Our products are generally accompanied by a twelve to twenty-four month warranty from date of purchase, which covers both parts and labor. Generally, the distributor is responsible for the freight costs associated with warranty returns, and we absorb the freight costs of replacing items under warranty. In accordance with FASB's, Accounting Standards Codification ("ASC"), 450-20, Loss Contingencies, we record an accrual when we believe it is reasonably estimable and probable based upon historical experience. We record a provision for estimated future warranty work in cost of goods sold upon recognition of revenues, and we review the resulting accrual regularly and periodically adjust it to reflect changes in warranty estimates.

Previous wording

We subcontract with third parties to manufacture our products and supply key components. As of September 30, 2024, we had $1,134.3 million of purchase commitments with these third parties. If we cancel all or part of the orders, we may still be liable to the contract manufacturers for the cost of the components purchased by the subcontractors to manufacture our products. There have been no significant liabilities for current or anticipated cancellations recorded as of September 30, 2024. Our consolidated financial position and results of operations could be negatively impacted if we were required to compensate these third parties. In addition, we may be subject to additional purchase obligations to our contract manufacturers for supply agreements and components ordered by them based on manufacturing forecasts we provide them each month.

Current wording

We subcontract with third parties to manufacture our products and supply key components. As of December 31, 2024, we had $1,150.2 million of purchase commitments with these third parties. If we cancel all or part of the orders, we may still be liable to the contract manufacturers for the cost of the components purchased by the subcontractors to manufacture our products. There have been no significant liabilities for current or anticipated cancellations recorded as of December 31, 2024. Our consolidated financial position and results of operations could be negatively impacted if we were required to compensate these third parties. In addition, we may be subject to additional purchase obligations to our contract manufacturers for supply agreements and components ordered by them based on manufacturing forecasts we provide them each month.

Previous wording

We had other obligations of $6.2 million as of September 30, 2024, which consisted primarily of commitments related to research and development projects.

Current wording

We had other obligations of $6.9 million as of December 31, 2024, which consisted primarily of commitments related to research and development projects.

Previous wording

As of September 30, 2024, we had $34.6 million of unrecognized tax benefits and an additional $5.4 million for accrued interest classified as non-current liabilities. At this time, we are unable to make a reasonably reliable estimate of timing of payments in individual years in connection with these tax liabilities.

Current wording

As of December 31, 2024, we had $36.1 million of unrecognized tax benefits and an additional $5.9 million for accrued interest classified as non-current liabilities. At this time, we are unable to make a reasonably reliable estimate of timing of payments in individual years in connection with these tax liabilities.