Ubiquiti(UI) - 2026 Q2 - Quarterly Report

Revenue and Sales Performance - The company operates as a single reportable segment, with revenues primarily derived from the sale of networking hardware [103]. - For the six months ended December 31, 2025, sales to distributors accounted for 55% of revenues, while direct sales contributed 45% [105]. - Total revenues increased by $215.0 million, or 36%, from $599.9 million in Q4 2024 to $814.9 million in Q4 2025 [116]. - Enterprise Technology revenue increased by $210.8 million, or 41%, from $518.2 million in Q4 2024 to $729.0 million in Q4 2025 [118]. - Revenues in North America increased by $121.9 million, or 38%, from $321.6 million in Q4 2024 to $443.6 million in Q4 2025 [123]. - Revenues in EMEA increased by $72.1 million, or 35%, from $208.6 million in Q4 2024 to $280.7 million in Q4 2025 [125]. - Revenues in Asia Pacific increased by $11.4 million, or 26%, from $43.1 million in Q4 2024 to $54.5 million in Q4 2025 [127]. - Revenues in South America increased by $9.5 million, or 36%, from $26.6 million in Q4 2024 to $36.1 million in Q4 2025 [129]. Cost and Expense Management - Gross profit margins may be affected by factors such as product mix, tariffs, and competitive pricing pressures, with recent tariff changes increasing product costs significantly [109]. - Research and development expenses are expected to rise as the company continues to invest in new product development and enhancements to existing products [112]. - Operating expenses are classified into research and development and sales, general and administrative expenses, with an anticipated increase in absolute dollars due to growth in headcount and market expansion [110]. - Research and Development expenses increased by $10.9 million, or 27%, from $40.0 million in Q4 2024 to $50.8 million in Q4 2025 [132]. - Sales, General and Administrative expenses increased by $1.8 million, or 6%, from $28.5 million in Q4 2024 to $30.3 million in Q4 2025 [135]. - I&O expenses decreased by $17.2 million, or 78%, from $22.0 million in the six months ended December 31, 2024, to $4.8 million in the six months ended December 31, 2025, representing 0% of revenue [139]. Financial Position and Cash Flow - Net cash provided by operating activities for the six months ended December 31, 2025, was $462.4 million, compared to $386.1 million for the same period in 2024, reflecting a significant increase [145]. - Cash and cash equivalents increased to $302.8 million as of December 31, 2025, from $149.7 million as of June 30, 2025 [144]. - Net cash used in financing activities was $300.5 million during the six months ended December 31, 2025, which included $202.5 million repaid under credit facilities and $96.8 million for dividends [149]. - The company had $1,263.8 million in purchase commitments with third-party manufacturers as of December 31, 2025 [159]. Tax and Interest Rate Implications - Provision for income taxes increased by $27.1 million, or 89%, from $30.6 million for the three months ended December 31, 2024, to $57.7 million for the three months ended December 31, 2025, with an effective tax rate increase to 19.8% [141]. - The effective tax rate increase was primarily driven by changes in the mix of income earned in various tax jurisdictions [143]. - An instantaneous and sustained 200-basis-point increase in interest rates would result in an incremental charge of approximately $1.0 million to income before income taxes over the next twelve months [167]. - A 10% appreciation or depreciation in the value of the U.S. dollar relative to other currencies would result in a charge or benefit of approximately $5.5 million for income before income taxes for the three months ended December 31, 2025 [168]. - A 10% appreciation or depreciation in the value of the U.S. dollar relative to other currencies in bank accounts would result in a charge or benefit of approximately $3.3 million for income before income taxes for the three months ended December 31, 2025 [169]. Operational Challenges and Market Conditions - The company has experienced periodic volatility in the supply of components, leading to increased delivery lead times and costs, which may impact future operations [100]. - The company is monitoring geopolitical tensions, including the Russia-Ukraine conflict and China-Taiwan tensions, which may impact operations and supply chains [101][102]. - The company has a broad portfolio of networking products targeting wireless internet service providers, enterprises, and smart homes, differentiated by proprietary software and hardware design [95]. - The company does not employ a traditional sales force but relies on online marketing and community engagement to drive brand awareness and customer interaction [94].