Q2 net revenue of $173.4 million, above the
high end of guidance
Q2 GAAP gross margin of 31.3%; non-GAAP gross
margin of 31.6%
804,000 paid subscribers for 22.9% growth year
over year
NETGEAR, Inc. (NASDAQ: NTGR), a global networking company that
delivers innovative networking and Internet connected products to
consumers and businesses, today reported financial results for the
second quarter ended July 2, 2023.
- Second quarter 2023 net revenue of $173.4 million, a decrease
of 22.3% from the comparable prior-year quarter.
- Second quarter 2023 GAAP operating loss of $17.8 million, or
(10.3)% of net revenue, as compared to operating loss of $10.1
million, or (4.5)% of net revenue, in the comparable prior-year
quarter.
- Second quarter 2023 non-GAAP operating loss of $10.7 million,
or (6.2)% of net revenue, as compared to operating loss of $4.2
million, or (1.9)% of net revenue, in the comparable prior-year
quarter.
- Second quarter 2023 GAAP net loss per diluted share of $0.29,
as compared to net loss per diluted share of $0.30 in the
comparable prior-year quarter.
- Second quarter 2023 non-GAAP net loss per diluted share of
$0.16, as compared to net loss per diluted share of $0.19 in the
comparable prior-year quarter.
The accompanying schedules provide a reconciliation of financial
measures computed on a GAAP basis to financial measures computed on
a non-GAAP basis.
Patrick Lo, Chairman and Chief Executive Officer of NETGEAR,
commented, “In the second quarter, NETGEAR delivered revenue of
$173.4 million, above the high end of our guidance, and non-GAAP
operating margin at the high end of our guidance. Sales to our
service provider partners outperformed our original expectations
and appear to be stabilizing due to increased demand as well as
improved inventory carrying levels held by our largest partner.
More importantly, momentum behind our premium CHP products,
represented by our Orbi 8 and Orbi 9 and 5G mobile hotspots, again
materially outperformed the broader market. As expected, CHP retail
partners continued to reduce their inventory levels, but we believe
the market is starting to stabilize. In the SMB business, while we
continue to be challenged by channel inventory compression to
historically low levels as partners navigate through the uncertain
macroeconomic environment, overall end user demand growth for our
SMB products remained strong. Our ProAV managed switch products
continued to impress, with end user sales growing 44% year over
year.”
Mr. Lo continued, “We are excited about the imminent launch of
WiFi 7 and stand ready with a number of compelling new product
introductions, across both the Orbi and Nighthawk brands. The
innovation is just as robust in the SMB business – as we are adding
support for video broadcasting protocol SMPTE 2110 with the
introduction of our M4350 line of our Pro AV managed switch
products. Demand is also growing for our comprehensive Armor
security service as we reached 804,000 total paid subscribers in
the quarter and we are on track to reach 875,000 paid subscribers
by year’s end. We expect the improved mix of our premium products
and services in both businesses, together with our channel
partners' stabilizing inventory carrying levels by year’s end, will
put our topline and profitability in a much improved position
exiting the year and heading into 2024.”
Business Outlook
Bryan Murray, Chief Financial Officer of NETGEAR, added, “We
expect to continue to experience strong underlying demand in the
SMB business and the premium portion of our CHP product portfolio,
even in the face of ongoing broad-based inflationary pressures and
an uncertain macroeconomic environment. We are starting to see
indicators that the broader consumer retail networking market is
beginning to stabilize. However, as interest rates remain high, we
will continue to work with our channel partners across both
businesses to optimize their inventory carrying levels, but expect
a revenue impact from these efforts to be at a lesser level than
experienced in the second quarter. Accordingly, we expect our third
quarter net revenue to be in the range of $175 million to $190
million. We expect third quarter GAAP operating margin to be in the
range of (7.0)% to (4.0)%, and non-GAAP operating margin to be in
the range of (4.0)% to (1.0)%. Our GAAP tax rate is expected to be
approximately 15.0%, and our non-GAAP tax rate is expected to be
25.0% for the third quarter of 2023.”
A reconciliation between the Business Outlook on a GAAP and
non-GAAP basis is provided in the following table:
Three months ending
October 1, 2023
Operating Margin Rate
Tax Rate
GAAP
(7.0)% - (4.0)%
15.0%
Estimated adjustments for1:
Stock-based compensation expense
2.6%
-
Amortization of intangibles
0.1%
-
Restructuring and other charges
0.3%
-
Non-GAAP tax adjustments
-
10.0%
Non-GAAP
(4.0)% - (1.0)%
25.0%
1Business outlook does not include
estimates for any currently unknown income and expense items which,
by their nature, could arise late in a quarter, including:
litigation reserves, net; acquisition-related charges; impairment
charges; restructuring and other charges and discrete tax benefits
or detriments that cannot be forecasted (e.g., windfalls or
shortfalls from equity awards or items related to the resolution of
uncertain tax positions). New material income and expense items
such as these could have a significant effect on our guidance and
future GAAP results.
Investor Conference Call / Webcast Details
NETGEAR will review the second quarter results and discuss
management's expectations for the third quarter of 2023 today,
Wednesday, July 26, 2023 at 5 p.m. ET (2 p.m. PT). The toll-free
dial-in number for the live audio call is (888) 660-6392. The
international dial-in number for the live audio call is (929)
203-0899. The conference ID for the call is 1030183. A live webcast
of the conference call will be available on NETGEAR's Investor
Relations website at http://investor.netgear.com. A replay of the
call will be available via the web at
http://investor.netgear.com.
About NETGEAR, Inc.
For more than 25 years, NETGEAR® (NASDAQ: NTGR) has been the
innovative leader in connecting the world to the internet with
advanced networking technologies for homes, businesses and service
providers around the world. As staying connected has become more
important than ever, NETGEAR delivers award-winning network
solutions for remote work, distance learning, ultra high def
streaming, online game play and more. To enable people to
collaborate and connect to a world of information and
entertainment, NETGEAR is dedicated to providing a range of
connected solutions. From ultra-premium Orbi Mesh WiFi systems and
high performance Nighthawk routers, to high-speed cable modems and
5G mobile wireless products to cloud-based subscription services
for network management and security, to smart networking products
and Video over Ethernet for Pro AV applications, NETGEAR keeps you
connected. NETGEAR is headquartered in San Jose, California. Learn
more on the NETGEAR Investor Page or by calling (408) 907-8000.
Connect with NETGEAR: Twitter, Facebook, Instagram, LinkedIn and
the NETGEAR blog at NETGEAR.com.
© 2023 NETGEAR, Inc. NETGEAR and the NETGEAR logo are trademarks
or registered trademarks of NETGEAR, Inc. and its affiliates in the
United States and/or other countries. Other brand and product names
are trademarks or registered trademarks of their respective
holders. The information contained herein is subject to change
without notice. NETGEAR shall not be liable for technical or
editorial errors or omissions contained herein. All rights
reserved.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995 for NETGEAR, Inc.:
This press release contains forward-looking statements within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995. The words “anticipate,” “expect,” “believe,” “will,” “may,”
“should,” “estimate,” “project,” “outlook,” “forecast” or other
similar words are used to identify such forward-looking statements.
However, the absence of these words does not mean that the
statements are not forward-looking. The forward-looking statements
represent NETGEAR, Inc.’s expectations or beliefs concerning future
events based on information available at the time such statements
were made and include statements regarding: NETGEAR’s future
operating performance and financial condition, including
expectations regarding growth, revenue, operating margin, continued
profitability and cash generation; expectations regarding
continuing market demand for the NETGEAR’s products, including SMB
and premium CHP products, and NETGEAR’s ability to respond to this
demand; NETGEAR’s strategic shift to focusing on the premium,
higher-margin segments of the market and consumers with the highest
propensity to subscribe to NETGEAR’s service offerings; the timing,
distribution, sales momentum and market acceptance of recent and
anticipated new product introductions that position NETGEAR for
growth and market share gain; expectations regarding the mix of
NETGEAR’s premium products and services; expectations regarding the
consumer retail networking market; expectations regarding supply
constraints and inventory management; expectations regarding the
ability to participate in promotional activities leading to further
market share gains; expectations regarding expected tax rates;
expectations regarding the impact of higher transportation and
component costs and corresponding price increases; expectations
regarding spending in transportation costs to maximize revenue;
expectations regarding repurchases of NETGEAR’s common stock;
expectations regarding NETGEAR’s small and medium business and
service provider channels; expectations regarding price increases
on NETGEAR’s products; expectations regarding service partners’ and
retail channel partners’ inventory levels; expectations regarding
seasonal shifts in market demand; expectations regarding revenue
from the service provider channel; and expectations regarding
NETGEAR's subscription services and paid subscriber base growth.
These statements are based on management's current expectations and
are subject to certain risks and uncertainties, including the
following: future demand for NETGEAR’s products may be lower than
anticipated; NETGEAR’s shift in focus to premium products at the
expense of lower end products may not prove to be successful;
NETGEAR may be unsuccessful, or experience delays, in manufacturing
and distributing its new and existing products and services;
consumers may choose not to adopt NETGEAR’s new product and
services offerings or adopt competing products and services;
NETGEAR may be unable to continue to grow its number of registered
users, its number of registered app users and/or its paid
subscriber base; product performance may be adversely affected by
real world operating conditions; NETGEAR may fail to manage costs,
including the cost of key components, the cost of air freight and
ocean freight, and the cost of developing new products and
manufacturing and distribution of its existing offerings; NETGEAR
may fail to successfully manage channel inventory levels; NETGEAR
may fail to successfully continue to effect operating expense
savings; changes in the level of NETGEAR's cash resources and
NETGEAR’s planned usage of such resources, including potential
repurchases of NETGEAR’s common stock; changes in NETGEAR’s stock
price and developments in the business that could increase
NETGEAR’s cash needs; fluctuations in foreign exchange rates; and
the actions and financial health of NETGEAR’s customers, including
NETGEAR’s ability to collect receivables as they become due.
Further, certain forward-looking statements are based on
assumptions as to future events that may not prove to be accurate.
Therefore, actual outcomes and results may differ materially from
what is expressed or forecast in such forward-looking statements.
Further information on potential risk factors that could affect
NETGEAR and its business are detailed in NETGEAR’s periodic filings
with the Securities and Exchange Commission, including, but not
limited to, those risks and uncertainties listed in the section
entitled "Part II - Item 1A. Risk Factors" in NETGEAR’s quarterly
report on Form 10-Q for the fiscal quarter ended April 2, 2023,
filed with the Securities and Exchange Commission on May 5, 2023.
Given these circumstances, you should not place undue reliance on
these forward-looking statements. NETGEAR undertakes no obligation
to release publicly any revisions to any forward-looking statements
contained herein to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events, except
as required by law.
Non-GAAP Financial Information:
To supplement our unaudited selected financial data presented on
a basis consistent with Generally Accepted Accounting Principles
(“GAAP”), we disclose certain non-GAAP financial measures that
exclude certain charges, including non-GAAP gross profit, non-GAAP
gross margin, non-GAAP research and development, non-GAAP sales and
marketing, non-GAAP general and administrative, non-GAAP other
operating expenses, net, non-GAAP total operating expenses,
non-GAAP operating loss, non-GAAP operating margin, non-GAAP other
income (expenses), net, non-GAAP net loss and non-GAAP net loss per
diluted share. These supplemental measures exclude adjustments for
amortization of intangibles, stock-based compensation expense,
goodwill impairment, restructuring and other charges, litigation
reserves, net, gain/loss on investments, net, gain on litigation
settlements, and adjust for effects related to non-GAAP tax
adjustments. These non-GAAP measures are not in accordance with or
an alternative for GAAP, and may be different from non-GAAP
measures used by other companies. We believe that these non-GAAP
measures have limitations in that they do not reflect all of the
amounts associated with our results of operations as determined in
accordance with GAAP and that these measures should only be used to
evaluate our results of operations in conjunction with the
corresponding GAAP measures. The presentation of this additional
information is not meant to be considered in isolation or as a
substitute for the most directly comparable GAAP measures. We
compensate for the limitations of non-GAAP financial measures by
relying upon GAAP results to gain a complete picture of our
performance.
In calculating non-GAAP financial measures, we exclude certain
items to facilitate a review of the comparability of our operating
performance on a period-to-period basis because such items are not,
in our view, related to our ongoing operational performance. We use
non-GAAP measures to evaluate the operating performance of our
business, for comparison with forecasts and strategic plans, and
for benchmarking performance externally against competitors. In
addition, management’s incentive compensation is determined using
certain non-GAAP measures. Since we find these measures to be
useful, we believe that investors benefit from seeing results
“through the eyes” of management in addition to seeing GAAP
results. We believe that these non-GAAP measures, when read in
conjunction with our GAAP financials, provide useful information to
investors by offering:
- the ability to make more meaningful period-to-period
comparisons of our on-going operating results;
- the ability to better identify trends in our underlying
business and perform related trend analyses;
- a better understanding of how management plans and measures our
underlying business; and
- an easier way to compare our operating results against analyst
financial models and operating results of competitors that
supplement their GAAP results with non-GAAP financial
measures.
The following are explanations of the adjustments that we
incorporate into non-GAAP measures, as well as the reasons for
excluding them in the reconciliations of these non-GAAP financial
measures:
Amortization of intangibles consists primarily of non-cash
charges that can be impacted by, among other things, the timing and
magnitude of acquisitions. We consider our operating results
without these charges when evaluating our ongoing performance and
forecasting our earnings trends, and therefore exclude such charges
when presenting non-GAAP financial measures. We believe that the
assessment of our operations excluding these costs is relevant to
our assessment of internal operations and comparisons to the
performance of our competitors.
Stock-based compensation expense consists of non-cash charges
for the estimated fair value of stock options, restricted stock
units, performance shares and shares under the employee stock
purchase plan granted to employees. We believe that the exclusion
of these charges provides for more accurate comparisons of our
operating results to peer companies due to the varying available
valuation methodologies, subjective assumptions and the variety of
award types. In addition, we believe it is useful to investors to
understand the specific impact stock-based compensation expense has
on our operating results.
Other items consist of certain items that are the result of
either unique or unplanned events, including, when applicable:
goodwill impairment, restructuring and other charges, litigation
reserves, net, gain on litigation settlements, and gain/loss on
investments, net. It is difficult to predict the occurrence or
estimate the amount or timing of these items in advance. Although
these events are reflected in our GAAP financial statements, these
unique transactions may limit the comparability of our on-going
operations with prior and future periods. The amounts result from
events that often arise from unforeseen circumstances, which often
occur outside of the ordinary course of continuing operations.
Therefore, the amounts do not accurately reflect the underlying
performance of our continuing business operations for the period in
which they are incurred.
Non-GAAP tax adjustments consist of adjustments that we
incorporate into non-GAAP measures in order to provide a more
meaningful measure on non-GAAP net loss. We believe providing
financial information with and without the income tax effects
relating to our non-GAAP financial measures provides our management
and users of the financial statements with better clarity regarding
the on-going performance of our business. Non-GAAP income tax
expense (benefit) is computed on a current and deferred basis with
non-GAAP loss consistent with use of non-GAAP loss as a performance
measure. The Non-GAAP tax provision (benefit) is calculated by
adjusting the GAAP tax provision (benefit) for the impact of the
non-GAAP adjustments, with specific tax provisions such as state
income tax and Base-erosion and Anti-Abuse Tax recomputed on a
non-GAAP basis. For interim periods, the non-GAAP income tax
provision (benefit) is calculated based on the forecasted annual
non-GAAP tax rate before discrete items and adjusted for interim
discrete items. Included in the non-GAAP tax adjustments for the
three and six months ended July 2, 2023 are adjustments to tax
expense related to changes in our forecasts.
Source: NETGEAR-F
NETGEAR, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
July 2, 2023
December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
106,353
$
146,500
Short-term investments
96,483
80,925
Accounts receivable, net
179,496
277,485
Inventories
324,483
299,614
Prepaid expenses and other current
assets
26,829
29,767
Total current assets
733,644
834,291
Property and equipment, net
8,044
9,225
Operating lease right-of-use assets
40,370
40,868
Intangibles, net
1,071
1,329
Goodwill
36,279
36,279
Other non-current assets
107,100
97,793
Total assets
$
926,508
$
1,019,785
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
35,895
$
85,550
Accrued employee compensation
22,262
24,132
Other accrued liabilities
177,867
213,476
Deferred revenue
23,207
21,128
Income taxes payable
5,200
1,685
Total current liabilities
264,431
345,971
Non-current income taxes payable
12,445
14,972
Non-current operating lease
liabilities
32,410
34,085
Other non-current liabilities
4,486
3,902
Total liabilities
313,772
398,930
Stockholders’ equity:
Common stock
29
29
Additional paid-in capital
957,761
946,123
Accumulated other comprehensive income
(loss)
112
(535
)
Accumulated deficit
(345,166
)
(324,762
)
Total stockholders’ equity
612,736
620,855
Total liabilities and stockholders’
equity
$
926,508
$
1,019,785
NETGEAR, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except per
share and percentage data)
(Unaudited)
Three Months Ended
Six Months Ended
July 2, 2023
April 2, 2023
July 3, 2022
July 2, 2023
July 3, 2022
Net revenue
$
173,413
$
180,908
$
223,224
$
354,321
$
433,782
Cost of revenue
119,113
120,526
161,803
239,639
313,458
Gross profit
54,300
60,382
61,421
114,682
120,324
Gross margin
31.3
%
33.4
%
27.5
%
32.4
%
27.7
%
Operating expenses:
Research and development
20,831
22,134
22,205
42,965
46,026
Sales and marketing
32,482
33,879
34,546
66,361
70,132
General and administrative
16,536
16,236
14,147
32,772
27,749
Goodwill impairment
—
—
—
—
44,442
Other operating expenses (income), net
2,229
108
573
2,337
570
Total operating expenses
72,078
72,357
71,471
144,435
188,919
Loss from operations
(17,778
)
(11,975
)
(10,050
)
(29,753
)
(68,595
)
Operating margin
(10.3
)%
(6.6
)%
(4.5
)%
(8.4
)%
(15.8
)%
Other income (expenses), net
7,999
1,406
(820
)
9,405
(1,802
)
Loss before income taxes
(9,779
)
(10,569
)
(10,870
)
(20,348
)
(70,397
)
Benefit from income taxes
(1,192
)
(857
)
(2,336
)
(2,049
)
(4,653
)
Net loss
$
(8,587
)
$
(9,712
)
$
(8,534
)
$
(18,299
)
$
(65,744
)
Net loss per share:
Basic
$
(0.29
)
$
(0.33
)
$
(0.30
)
$
(0.63
)
$
(2.26
)
Diluted
$
(0.29
)
$
(0.33
)
$
(0.30
)
$
(0.63
)
$
(2.26
)
Weighted average shares used to compute
net loss per share:
Basic
29,319
29,040
28,891
29,170
29,114
Diluted
29,319
29,040
28,891
29,170
29,114
NETGEAR, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
July 2, 2023
July 3, 2022
Cash flows from operating
activities:
Net loss
$
(18,299
)
$
(65,744
)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization
3,866
5,398
Stock-based compensation
9,352
9,826
Gain/loss on investments, net
(1,464
)
593
Goodwill impairment
—
44,442
Deferred income taxes
(7,839
)
(10,862
)
Provision for excess and obsolete
inventory
1,531
2,561
Changes in assets and liabilities:
Accounts receivable, net
97,989
43,285
Inventories
(26,401
)
12,310
Prepaid expenses and other assets
962
4,920
Accounts payable
(49,747
)
(5,322
)
Accrued employee compensation
(1,870
)
(2,937
)
Other accrued liabilities
(37,200
)
(31,299
)
Deferred revenue
2,664
1,992
Income taxes payable
988
(2,717
)
Net cash provided by (used in) operating
activities
(25,468
)
6,446
Cash flows from investing
activities:
Purchases of short-term investments
(68,042
)
(114,631
)
Proceeds from maturities of short-term
investments
55,006
20,417
Purchases of property and equipment
(1,599
)
(2,037
)
Purchases of long-term investments
(225
)
(330
)
Net cash used in investing activities
(14,860
)
(96,581
)
Cash flows from financing
activities:
Repurchases of common stock
—
(24,377
)
Restricted stock unit withholdings
(2,105
)
(3,581
)
Proceeds from exercise of stock
options
—
612
Proceeds from issuance of common stock
under employee stock purchase plan
2,286
2,758
Net cash provided by (used in) financing
activities
181
(24,588
)
Net decrease in cash and cash
equivalents
(40,147
)
(114,723
)
Cash and cash equivalents, at beginning of
period
146,500
263,772
Cash and cash equivalents, at end of
period
$
106,353
$
149,049
NETGEAR, INC.
RECONCILIATIONS OF GAAP
MEASURES TO NON-GAAP MEASURES
(In thousands, except
percentage data)
(Unaudited)
STATEMENT OF OPERATIONS DATA:
Three Months Ended
Six Months Ended
July 2, 2023
April 2, 2023
July 3, 2022
July 2, 2023
July 3, 2022
GAAP gross profit
$
54,300
$
60,382
$
61,421
$
114,682
$
120,324
GAAP gross margin
31.3
%
33.4
%
27.5
%
32.4
%
27.7
%
Amortization of intangibles
128
129
128
257
257
Stock-based compensation expense
342
351
358
693
744
Non-GAAP gross profit
$
54,770
$
60,862
$
61,907
$
115,632
$
121,325
Non-GAAP gross margin
31.6
%
33.6
%
27.7
%
32.6
%
28.0
%
GAAP research and development
$
20,831
$
22,134
$
22,205
$
42,965
$
46,026
Stock-based compensation expense
(1,144
)
(1,065
)
(1,095
)
(2,209
)
(2,182
)
Non-GAAP research and development
$
19,687
$
21,069
$
21,110
$
40,756
$
43,844
GAAP sales and marketing
$
32,482
$
33,879
$
34,546
$
66,361
$
70,132
Stock-based compensation expense
(1,397
)
(1,431
)
(1,570
)
(2,828
)
(3,026
)
Non-GAAP sales and marketing
$
31,085
$
32,448
$
32,976
$
63,533
$
67,106
GAAP general and administrative
$
16,536
$
16,236
$
14,147
$
32,772
$
27,749
Stock-based compensation expense
(1,804
)
(1,818
)
(2,106
)
(3,622
)
(3,874
)
Non-GAAP general and administrative
$
14,732
$
14,418
$
12,041
$
29,150
$
23,875
GAAP other operating expenses (income),
net
$
2,229
$
108
$
573
$
2,337
$
570
Restructuring and other charges
(2,229
)
(108
)
(573
)
(2,337
)
(550
)
Litigation reserves, net
—
—
—
—
(20
)
Non-GAAP other operating expenses, net
$
—
$
—
$
—
$
—
$
—
NETGEAR, INC.
RECONCILIATIONS OF GAAP
MEASURES TO NON-GAAP MEASURES (CONTINUED)
(In thousands, except
percentage data)
(Unaudited)
STATEMENT OF OPERATIONS DATA
(CONTINUED):
Three Months Ended
Six Months Ended
July 2, 2023
April 2, 2023
July 3, 2022
July 2, 2023
July 3, 2022
GAAP total operating expenses
$
72,078
$
72,357
$
71,471
$
144,435
$
188,919
Stock-based compensation expense
(4,345
)
(4,314
)
(4,771
)
(8,659
)
(9,082
)
Goodwill impairment
—
—
—
—
(44,442
)
Restructuring and other charges
(2,229
)
(108
)
(573
)
(2,337
)
(550
)
Litigation reserves, net
—
—
—
—
(20
)
Non-GAAP total operating expenses
$
65,504
$
67,935
$
66,127
$
133,439
$
134,825
GAAP operating loss
$
(17,778
)
$
(11,975
)
$
(10,050
)
$
(29,753
)
$
(68,595
)
GAAP operating margin
(10.3
)%
(6.6
)%
(4.5
)%
(8.4
)%
(15.8
)%
Amortization of intangibles
128
129
128
257
257
Stock-based compensation expense
4,687
4,665
5,129
9,352
9,826
Goodwill impairment
—
—
—
—
44,442
Restructuring and other charges
2,229
108
573
2,337
550
Litigation reserves, net
—
—
—
—
20
Non-GAAP operating loss
$
(10,734
)
$
(7,073
)
$
(4,220
)
$
(17,807
)
$
(13,500
)
Non-GAAP operating margin
(6.2
)%
(3.9
)%
(1.9
)%
(5.0
)%
(3.1
)%
GAAP other income (expenses), net
$
7,999
$
1,406
$
(820
)
$
9,405
$
(1,802
)
Gain/loss on investments, net
19
11
(216
)
30
303
Gain on litigation settlements
(6,000
)
—
—
(6,000
)
—
Non-GAAP other income (expenses), net
$
2,018
$
1,417
$
(1,036
)
$
3,435
$
(1,499
)
NETGEAR, INC.
RECONCILIATIONS OF GAAP
MEASURES TO NON-GAAP MEASURES (CONTINUED)
(In thousands, except per
share data)
(Unaudited)
STATEMENT OF OPERATIONS DATA
(CONTINUED):
Three Months Ended
Six Months Ended
July 2, 2023
April 2, 2023
July 3, 2022
July 2, 2023
July 3, 2022
GAAP net loss
$
(8,587
)
$
(9,712
)
$
(8,534
)
$
(18,299
)
$
(65,744
)
Amortization of intangibles
128
129
128
257
257
Stock-based compensation expense
4,687
4,665
5,129
9,352
9,826
Goodwill impairment
—
—
—
—
44,442
Restructuring and other charges
2,229
108
573
2,337
550
Litigation reserves, net
—
—
—
—
20
Gain/loss on investments, net
19
11
(216
)
30
303
Gain on litigation settlements
(6,000
)
—
—
(6,000
)
—
Non-GAAP tax adjustments
2,781
(838
)
(2,552
)
1,943
(3,261
)
Non-GAAP net loss
$
(4,743
)
$
(5,637
)
$
(5,472
)
$
(10,380
)
$
(13,607
)
NET LOSS PER DILUTED SHARE:
GAAP net loss per diluted share
$
(0.29
)
$
(0.33
)
$
(0.30
)
$
(0.63
)
$
(2.26
)
Amortization of intangibles
—
—
—
0.01
0.01
Stock-based compensation expense
0.16
0.16
0.18
0.32
0.34
Goodwill impairment
—
—
—
—
1.53
Restructuring and other charges
0.08
—
0.02
0.08
0.02
Litigation reserves, net
—
—
—
—
—
Gain/loss on investments, net
—
—
(0.01
)
—
0.01
Gain on litigation settlements
(0.20
)
—
—
(0.21
)
—
Non-GAAP tax adjustments
0.09
(0.02
)
(0.08
)
0.07
(0.12
)
Non-GAAP net loss per diluted share
$
(0.16
)
$
(0.19
)
$
(0.19
)
$
(0.36
)
$
(0.47
)
NETGEAR, INC.
SUPPLEMENTAL FINANCIAL
INFORMATION
(In thousands, except per
share data, DSO, inventory turns, weeks of channel inventory,
headcount and percentage data)
(Unaudited)
Three Months Ended
July 2, 2023
April 2, 2023
December 31, 2022
October 2, 2022
July 3, 2022
Cash, cash equivalents and short-term
investments
$
202,836
$
239,210
$
227,425
$
233,197
$
250,137
Cash, cash equivalents and short-term
investments per diluted share
$
6.92
$
8.24
$
7.85
$
8.03
$
8.66
Accounts receivable, net
$
179,496
$
192,540
$
277,485
$
259,908
$
217,873
Days sales outstanding (DSO)
94
98
100
95
89
Inventories
$
324,483
$
337,187
$
299,614
$
298,090
$
300,796
Ending inventory turns
1.5
1.4
2.5
2.4
2.2
Weeks of channel inventory:
U.S. retail channel
12.0
12.7
10.4
13.5
18.2
U.S. distribution channel
5.1
4.4
5.2
3.6
3.8
EMEA distribution channel
6.9
8.5
8.7
5.3
6.2
APAC distribution channel
12.4
14.0
18.5
16.0
14.0
Deferred revenue (current and
non-current)
$
27,689
$
26,634
$
25,025
$
22,868
$
21,593
Headcount
653
702
691
731
740
Non-GAAP diluted shares
29,319
29,040
28,959
29,029
28,891
NET REVENUE BY GEOGRAPHY
Three Months Ended
Six Months Ended
July 2, 2023
April 2, 2023
July 3, 2022
July 2, 2023
July 3, 2022
Americas
$
116,611
67
%
$
121,922
67
%
$
144,027
65
%
$
238,533
68
%
$
288,676
66
%
EMEA
36,161
21
%
39,178
22
%
44,951
20
%
75,339
21
%
81,816
19
%
APAC
20,641
12
%
19,808
11
%
34,246
15
%
40,449
11
%
63,290
15
%
Total
$
173,413
100
%
$
180,908
100
%
$
223,224
100
%
$
354,321
100
%
$
433,782
100
%
NETGEAR, INC.
SUPPLEMENTAL FINANCIAL
INFORMATION (CONTINUED)
(In thousands)
(Unaudited)
NET REVENUE BY SEGMENT
Three Months Ended
Six Months Ended
July 2, 2023
April 2, 2023
July 3, 2022
July 2, 2023
July 3, 2022
Connected Home
$
98,406
$
102,746
$
128,864
$
201,152
$
259,206
SMB
75,007
78,162
94,360
153,169
174,576
Total net revenue
$
173,413
$
180,908
$
223,224
$
354,321
$
433,782
SERVICE PROVIDER NET REVENUE
Three Months Ended
Six Months Ended
July 2, 2023
April 2, 2023
July 3, 2022
July 2, 2023
July 3, 2022
Connected Home
$
24,916
$
14,027
$
33,975
$
38,943
$
52,096
SMB
18
190
1,615
208
2,344
Total service provider net revenue
$
24,934
$
14,217
$
35,590
39,151
$
54,440
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230726060790/en/
NETGEAR Investor Relations Erik Bylin investors@netgear.com
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