Prospectus Summary
PROSPECTUS SUMMARY This summary highlights the information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and financial statements set forth elsewhere. Because this is only a summary, it does not contain all of the information that may be important to you. For a more complete understanding of the information that you may consider important in making your investment decision, we encourage you to read this entire prospectus.Business Overview
We are a product driven company that leverages innovative proprietary technologies to deliver wireless networking solutions with compelling price-performance characteristics to both start-up and established network operators and service providers. Our products bridge the digital divide by fundamentally changing the economics of deploying high performance wireless networking solutions in underserved and underpenetrated markets globally. These markets include emerging markets and other areas where individual users and small and medium sized enterprises do not have access to the benefits of carrier class broadband networking. Our business model has enabled us to break down traditional barriers such as high product and network deployment costs that are driven by business model inefficiencies and achieve rapid market adoption of our products and solutions in previously underserved and underpenetrated markets. Our business model and proprietary technologies provide us with a significant and sustainable competitive advantage over incumbents, who we believe are unable to respond effectively due to their higher cost business models.
We offer a broad and expanding portfolio of wireless networking products and solutions. Our products and solutions, based on our proprietary technologies, include high performance radios, antennas and management tools that have been designed to deliver carrier class performance for wireless networking and other applications in the unlicensed radio frequency, or RF, spectrum. Our products and solutions are integrated and flexible, which substantially reduces the cost and complexity of installation, maintenance and management of wireless networks. Our products and solutions meet the demanding performance requirements of video, voice and data applications, have a low total cost of ownership and are broadly adopted by network operators and service providers to deploy fast, scalable and reliable wireless networks.
Our business model is driven by a large, growing and engaged community of network operators, service providers and distributors, which we refer to as the Ubiquiti Community. The Ubiquiti Community is a critical element of our business strategy as it has enabled us to redefine the traditional models for product development, sales and marketing and product support in the following key ways:
The savings we achieve by relying on the Ubiquiti Community in the areas of product development, sales and marketing and product support are passed along to network operators and service providers in the form of prices that are a fraction of those of existing alternative solutions.
Building on our leadership in the underserved and underpenetrated segments of the wireless broadband access market, we intend to expand our product offerings in our existing market and enter adjacent markets by relying on the combination of our efficient business model and proprietary technologies to provide products and solutions with compelling price-performance characteristics to customers in those markets.
Our revenues were $22.4 million, $63.1 million, $137.0 million and $130.3 million in the fiscal years ended June 30, 2008, 2009 and 2010 and the nine months ended March 31, 2011, respectively. In accordance with accounting standards generally accepted in the United States of America, or GAAP, we had net income (loss) of $4.7 million, $9.9 million, $(5.5) million and $31.6 million in the fiscal years ended June 30, 2008, 2009 and 2010 and the nine months ended March 31, 2011, respectively. Our GAAP net loss in fiscal 2010 reflected a one time compensation charge of $35.9 million related to a repurchase of our common stock and options in connection with the sale of our Series A preferred stock, which we refer to collectively as the Summit transaction and a $1.6 million charge for a regulatory export compliance issue. On a non-GAAP basis, we have been profitable since fiscal 2006. In this prospectus, we refer to the fiscal years ended June 30, 2008, 2009 and 2010 as fiscal 2008, fiscal 2009 and fiscal 2010, respectively, and the fiscal year ending June 30, 2011 as fiscal 2011. As of March 31, 2011, we had 84 full time equivalent employees in four offices worldwide.
Industry Overview
Wired networking solutions have traditionally been used to address increasing consumer and enterprise bandwidth needs. However, the high capital and operating costs and long market lead times associated with building and installing infrastructure for wired networks has severely limited the widespread deployment of these networks in underserved and underpenetrated areas of developed countries and emerging markets. Wireless networks are emerging as an attractive alternative for addressing both the broadband access needs of underserved and underpenetrated markets and for offering a host of other services and solutions. According to Gartner, Inc.,1 an independent market research firm, aggregate end-user spending on wireless networking equipment for enterprise local area network, or WLAN, wireless broadband access, and Long Term Evolution, or LTE, solutions are expected to grow from $5.2 billion in 2010 to $22.5 billion in 2015, representing a compound annual growth rate, or CAGR, of 34%.
Underserved and underpenetrated markets. Emerging markets and remote areas in developed markets remain significantly underserved and underpenetrated for broadband access. According to a forecast by Gartner Inc., an independent market research firm, fixed wireless household broadband penetration rates for 2009 and 2010 in emerging countries was a fifth of the broadband penetration in developed countries, whereas the aggregate number of households in emerging countries was approximately four times the aggregate number of households of developed countries.2 We believe this is due to the lack of an established network infrastructure and the high initial deployment costs.
Limitation of existing solutions. Existing wireless networking technologies such as 802.11 standard based Wi-Fi, WiMAX and LTE have been designed to satisfy the increasing demand for broadband access and support mobility, but often fail to meet the price-performance requirements of wireless networking in emerging markets, which in turn has led to low penetration and large populations of unaddressed users in these areas.
Increasing use of the unlicensed spectrum. In the absence of affordable broadband access in the licensed spectrum, the number of users of the unlicensed RF spectrum has increased for communications equipment, as well as consumer devices such as cordless phones, baby monitors and microwave ovens. As a result of high
demand for the unlicensed RF spectrum, use of this spectrum to provide high quality wireless networking has become more challenging and congestion is limiting the growth of wireless networks.
Government incentives for broadband access. Governments around the world are increasingly taking both regulatory and financial steps to expand access to broadband networks and increase availability of advanced broadband services to consumers and businesses.
To provide robust wireless networks that meet the price-performance needs of individuals and businesses in underserved and underpenetrated markets, vendors of wireless networking solutions must solve some of the problems facing existing solutions:
Our Solution
Our products and solutions enable both start-up and established network operators and service providers to deploy fast, scalable and reliable wireless networks cost effectively. Our wireless networking solutions offer the following key benefits:
unlicensed RF spectrum. The combination of our key proprietary technologies enables us to deliver reliable network performance that scales efficiently with an increase in the number of subscribers, range of service delivery, network size and number of applications for video, voice and data.
Our Strategy
Our goal is to become a dominant player in the market for communications technology for underserved and underpenetrated markets. Key elements of our strategy include the following:
Risks Associated with our Business
Our business is subject to numerous risks. You should carefully read “Risk Factors” beginning on page 10 for an explanation of these risks before investing in our common stock.
Corporate Information
We incorporated in the State of California in 2003 as Pera Networks, Inc. and we commenced our current operations in 2005 and changed our name to Ubiquiti Networks, Inc. at that time. In June 2010, Ubiquiti Networks, Inc., a California corporation, changed its state of organization to Delaware by merging with and into Ubiquiti Networks, Inc., a Delaware corporation. Our executive offices are located at 91 E. Tasman Drive, San Jose, California 95134, and our telephone number is (408) 942-3085. Our website address is www.ubnt.com. The information on, or that can be accessed through, our website is not part of this prospectus.
Unless the context requires otherwise, the words “we,” “us,” “our” and “Ubiquiti” refer to Ubiquiti Networks, Inc. and its subsidiaries as a whole.
We own the Ubiquiti Networks trademark and a trademark for our logo, registered with the European Union, or the EU. We own trademarks for AirControl, AirGrid, AirMax, AirView, UBNT and for our AirOs logo, in each case registered with the U.S. Patent and Trademark Office. Additionally, we have trademark applications pending with the U.S. Patent and Trademark Office for AirSync, AirSelect, AirVision, AirBeam, UniFi, AirFiber, AirWire, Ubiquiti Networks and AirBlast. We also have trademark applications pending in China for Ubiquiti Networks and UBNT. Other trademarks and trade names appearing in this prospectus are the property of their respective owners.