Q3 net revenue of $197.8 million, above the
high end of guidance
Q3 GAAP gross margin of 34.8%; non-GAAP gross
margin of 35.0%
Q3 GAAP operating margin of (0.3)%; non-GAAP
operating margin of 2.7%, above the high end of guidance
844,000 paid subscribers for 26.7% 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
third quarter ended October 1, 2023.
- Third quarter 2023 net revenue of $197.8 million, a decrease of
20.7% from the comparable prior-year quarter.
- Third quarter 2023 GAAP operating loss of $0.6 million, or
(0.3)% of net revenue, as compared to operating loss of $2.2
million, or (0.9)% of net revenue, in the comparable prior-year
quarter.
- Third quarter 2023 non-GAAP operating income of $5.3 million,
or 2.7% of net revenue, as compared to operating income of $1.8
million, or 0.7% of net revenue, in the comparable prior-year
quarter.
- Third quarter 2023 GAAP net loss per diluted share of $2.87, as
compared to net income per diluted share of $0.10 in the comparable
prior-year quarter.
- Third quarter 2023 non-GAAP net income per diluted share of
$0.23, as compared to net income per diluted share of $0.21 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, “I’m very pleased with our performance in the third
quarter, as NETGEAR delivered results that exceeded our guidance
ranges for both the top and bottom lines. Our revenue performance
during the seasonally strong back-to-school quarter was bolstered
by strong demand for our premium CHP products in both the retail
and service provider channels, namely our Orbi 8 and Orbi 9 and 5G
mobile hotspots. We are excited by the market’s reception to the
launch of our industry-leading WiFi 7 products, the Orbi 97x mesh
system at $2299 and the Nighthawk RS700 router at $699, which began
shipping in the final two weeks of the quarter. Furthermore, with
the retail networking market showing signs that it is stabilizing,
we are encouraged by our retail channel partners maintaining,
rather than depleting, their inventories. On the SMB side, we
continue to be encouraged by growth in our ProAV managed switch
products. However, the uncertain macro environment created by high
interest rates, geopolitical tensions, and stagnant or negative GDP
growth in major markets such as Greater China, Germany and Japan
weighed on our SMB business. Accordingly, our SMB channel partners
continue to reduce their inventory carrying levels, which will
limit our top line potential for this business in the coming
quarters.”
Mr. Lo continued, “We grew our paid subscribers to 844,000 in
the third quarter, which drove service revenue up by 25% year over
year, and remain on track to end the year with 875,000 paid
subscribers. Our CHP strategy of focusing on the high margin,
premium end of the market and growing service revenue is proving to
be effective in improving the gross margin of our CHP business. As
a result, our overall non-GAAP gross margin reached 35% in the
third quarter.”
Bryan Murray, Chief Financial Officer of NETGEAR, added, “We
made tremendous progress in reducing our own inventory levels in
the third quarter, which helped us generate meaningful cash in the
quarter. We expect this trend to continue over the next couple of
quarters as we aim to return inventory levels to pre-pandemic
levels of three to four months. We also expect these efforts to
continue to lead to further cash generation.”
Business Outlook
Mr. Murray continued, “We expect to continue to experience
strong underlying demand in the premium portion of our CHP product
portfolio, riding on the success of our WiFi 7 launch well into
2024. We are also encouraged that our retail channel partners are
now maintaining rather than depleting their inventories. However,
as interest rates remain high, we will continue to work with our
SMB channel partners to optimize their inventory carrying levels
during the next few quarters. Accordingly, we expect CHP to be
approximately flat sequentially, in line with market seasonality,
and SMB to be down sequentially which would result in overall
fourth quarter net revenue in the range of $175 million to $190
million. As we continue to make meaningful progress in reducing our
own inventory levels, we will be consuming older, higher cost
inventory. We expect we will be back to normal inventory levels and
normal inventory costs by the middle of next year. Accordingly, we
expect fourth quarter GAAP operating margin to be in the range of
(4.4)% to (1.4)%, and non-GAAP operating margin to be in the range
of (2.0)% to 1.0%. Our GAAP tax expense is expected to be in the
range of $1 million to $2 million, and our non-GAAP tax expense is
expected to be in the range of $0 to $1 million for the fourth
quarter of 2023. We expect we will continue to generate meaningful
cash in Q4 and beyond.”
A reconciliation between the Business Outlook on a GAAP and
non-GAAP basis is provided in the following table:
Three months ending
December 31, 2023
(in millions, except for percentage
data)
Operating Margin Rate
Tax Expense (Benefit)
GAAP
(4.4)% - (1.4)%
$1.0 - $2.0
Estimated adjustments for1:
Stock-based compensation expense
2.4%
-
Non-GAAP tax adjustments
-
$(1.0)
Non-GAAP
(2.0)% - 1.0%
$0.0-$1.0
1 Business 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 third quarter results and discuss
management's expectations for the fourth quarter of 2023 today,
Wednesday, October 25, 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, gross
margin, continued profitability and cash generation; expectations
regarding continuing market demand for the NETGEAR’s products and
services, including SMB and premium CHP products and subscription
services, 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 growing service revenue; 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 inventory
management and inventory costs and its impact to business segment
growth and cash generation; expectations regarding expected tax
rates or tax expenses; 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, paid
subscriber base growth and service revenue. 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 and
service revenue; 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 July 2, 2023,
filed with the Securities and Exchange Commission on August 4,
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, intangibles 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, intangibles 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 income (loss). We believe
providing financial information with and without the income tax
effects relating to our non-GAAP financial measures, as well as
adjustments for valuation allowances on deferred tax assets,
provides our management and users of the financial statements with
better clarity regarding both current period performance and the
on-going performance of our business. Non-GAAP income tax expense
(benefit) is computed on a current and deferred basis with non-GAAP
income (loss) consistent with use of non-GAAP income (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, as well as adjustments for
valuation allowances on deferred tax assets. The tax valuation
allowance is a non-cash adjustment primarily reflecting our
expectations of, and assumptions as to, future operating results
and applicable tax laws, that are not directly attributable to the
current quarter’s operating performance. 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 nine months ended October 1, 2023,
are adjustments to tax expense related to changes in our forecasts
and the effects of a valuation allowance computed in accordance
with GAAP.
Source: NETGEAR-F
NETGEAR, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
October 1, 2023
December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
131,459
$
146,500
Short-term investments
96,586
80,925
Accounts receivable, net
200,900
277,485
Inventories
280,918
299,614
Prepaid expenses and other current
assets
30,713
29,767
Total current assets
740,576
834,291
Property and equipment, net
8,274
9,225
Operating lease right-of-use assets
39,773
40,868
Intangibles, net
—
1,329
Goodwill
36,279
36,279
Other non-current assets
17,563
97,793
Total assets
$
842,465
$
1,019,785
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
47,133
$
85,550
Accrued employee compensation
19,179
24,132
Other accrued liabilities
167,713
213,476
Deferred revenue
25,090
21,128
Income taxes payable
767
1,685
Total current liabilities
259,882
345,971
Non-current income taxes payable
12,760
14,972
Non-current operating lease
liabilities
32,330
34,085
Other non-current liabilities
4,706
3,902
Total liabilities
309,678
398,930
Stockholders’ equity:
Common stock
30
29
Additional paid-in capital
963,350
946,123
Accumulated other comprehensive income
(loss)
9
(535
)
Accumulated deficit
(430,602
)
(324,762
)
Total stockholders’ equity
532,787
620,855
Total liabilities and stockholders’
equity
$
842,465
$
1,019,785
NETGEAR, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except per
share and percentage data)
(Unaudited)
Three Months Ended
Nine Months Ended
October 1, 2023
July 2, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Net revenue
$
197,845
$
173,413
$
249,587
$
552,166
$
683,369
Cost of revenue
128,911
119,113
181,058
368,550
494,516
Gross profit
68,934
54,300
68,529
183,616
188,853
Gross margin
34.8
%
31.3
%
27.5
%
33.3
%
27.6
%
Operating expenses:
Research and development
20,738
20,831
22,167
63,703
68,193
Sales and marketing
30,865
32,482
34,203
97,226
104,335
General and administrative
16,364
16,536
13,949
49,136
41,698
Goodwill impairment
—
—
—
—
44,442
Intangibles impairment
1,071
—
—
1,071
—
Other operating expenses (income), net
544
2,229
361
2,881
931
Total operating expenses
69,582
72,078
70,680
214,017
259,599
Loss from operations
(648
)
(17,778
)
(2,151
)
(30,401
)
(70,746
)
Operating margin
(0.3
)%
(10.3
)%
(0.9
)%
(5.5
)%
(10.4
)%
Other income (expenses), net
2,280
7,999
638
11,685
(1,164
)
Income (loss) before income taxes
1,632
(9,779
)
(1,513
)
(18,716
)
(71,910
)
Provision for (benefit from) income
taxes
86,431
(1,192
)
(4,314
)
84,382
(8,967
)
Net income (loss)
$
(84,799
)
$
(8,587
)
$
2,801
$
(103,098
)
$
(62,943
)
Net income (loss) per share:
Basic
$
(2.87
)
$
(0.29
)
$
0.10
$
(3.52
)
$
(2.17
)
Diluted
$
(2.87
)
$
(0.29
)
$
0.10
$
(3.52
)
$
(2.17
)
Weighted average shares used to compute
net income (loss) per share:
Basic
29,524
29,319
28,891
29,266
29,023
Diluted
29,524
29,319
29,029
29,266
29,023
NETGEAR, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
October 1, 2023
October 2, 2022
Cash flows from operating
activities:
Net loss
$
(103,098
)
$
(62,943
)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization
5,491
7,845
Stock-based compensation
13,637
13,266
Gain/loss on investments, net
(2,301
)
342
Goodwill impairment
—
44,442
Intangibles impairment
1,071
—
Deferred income taxes
82,205
(13,895
)
Provision for excess and obsolete
inventory
2,841
3,005
Changes in assets and liabilities:
Accounts receivable, net
76,585
1,250
Inventories
15,855
14,572
Prepaid expenses and other assets
(3,020
)
(2,858
)
Accounts payable
(38,443
)
13,432
Accrued employee compensation
(4,952
)
(4,329
)
Other accrued liabilities
(46,930
)
(23,504
)
Deferred revenue
4,771
3,268
Income taxes payable
(3,130
)
(2,692
)
Net cash provided by (used in) operating
activities
582
(8,799
)
Cash flows from investing
activities:
Purchases of short-term investments
(97,291
)
(143,933
)
Proceeds from maturities of short-term
investments
85,006
50,418
Purchases of property and equipment
(3,601
)
(4,133
)
Purchases of long-term investments
(585
)
(450
)
Net cash used in investing activities
(16,471
)
(98,098
)
Cash flows from financing
activities:
Repurchases of common stock
—
(24,377
)
Restricted stock unit withholdings
(2,742
)
(4,731
)
Proceeds from exercise of stock
options
—
743
Proceeds from issuance of common stock
under employee stock purchase plan
3,590
4,418
Net cash provided by (used in) financing
activities
848
(23,947
)
Net decrease in cash and cash
equivalents
(15,041
)
(130,844
)
Cash and cash equivalents, at beginning of
period
146,500
263,772
Cash and cash equivalents, at end of
period
$
131,459
$
132,928
NETGEAR, INC.
RECONCILIATIONS OF GAAP
MEASURES TO NON-GAAP MEASURES
(In thousands, except
percentage data)
(Unaudited)
STATEMENT OF OPERATIONS
DATA:
Three Months Ended
Nine Months Ended
October 1, 2023
July 2, 2023
October 2, 2022
October 1, 2023
October 2, 2022
GAAP gross profit
$
68,934
$
54,300
$
68,529
$
183,616
$
188,853
GAAP gross margin
34.8
%
31.3
%
27.5
%
33.3
%
27.6
%
Amortization of intangibles
—
128
129
257
386
Stock-based compensation expense
354
342
283
1,047
1,027
Non-GAAP gross profit
$
69,288
$
54,770
$
68,941
$
184,920
$
190,266
Non-GAAP gross margin
35.0
%
31.6
%
27.6
%
33.5
%
27.8
%
GAAP research and development
$
20,738
$
20,831
$
22,167
$
63,703
$
68,193
Stock-based compensation expense
(841
)
(1,144
)
(968
)
(3,050
)
(3,150
)
Non-GAAP research and development
$
19,897
$
19,687
$
21,199
$
60,653
$
65,043
GAAP sales and marketing
$
30,865
$
32,482
$
34,203
$
97,226
$
104,335
Stock-based compensation expense
(1,271
)
(1,397
)
(1,249
)
(4,099
)
(4,275
)
Non-GAAP sales and marketing
$
29,594
$
31,085
$
32,954
$
93,127
$
100,060
GAAP general and administrative
$
16,364
$
16,536
$
13,949
$
49,136
$
41,698
Stock-based compensation expense
(1,819
)
(1,804
)
(940
)
(5,441
)
(4,814
)
Non-GAAP general and administrative
$
14,545
$
14,732
$
13,009
$
43,695
$
36,884
GAAP other operating expenses (income),
net
$
544
$
2,229
$
361
$
2,881
$
931
Restructuring and other charges
(366
)
(2,229
)
(361
)
(2,703
)
(911
)
Litigation reserves, net
(178
)
—
—
(178
)
(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
Nine Months Ended
October 1, 2023
July 2, 2023
October 2, 2022
October 1, 2023
October 2, 2022
GAAP total operating expenses
$
69,582
$
72,078
$
70,680
$
214,017
$
259,599
Stock-based compensation expense
(3,931
)
(4,345
)
(3,157
)
(12,590
)
(12,239
)
Goodwill impairment
—
—
—
—
(44,442
)
Intangibles impairment
(1,071
)
—
—
(1,071
)
—
Restructuring and other charges
(366
)
(2,229
)
(361
)
(2,703
)
(911
)
Litigation reserves, net
(178
)
—
—
(178
)
(20
)
Non-GAAP total operating expenses
$
64,036
$
65,504
$
67,162
$
197,475
$
201,987
GAAP operating loss
$
(648
)
$
(17,778
)
$
(2,151
)
$
(30,401
)
$
(70,746
)
GAAP operating margin
(0.3
)%
(10.3
)%
(0.9
)%
(5.5
)%
(10.4
)%
Amortization of intangibles
—
128
129
257
386
Stock-based compensation expense
4,285
4,687
3,440
13,637
13,266
Goodwill impairment
—
—
—
—
44,442
Intangibles impairment
1,071
—
—
1,071
—
Restructuring and other charges
366
2,229
361
2,703
911
Litigation reserves, net
178
—
—
178
20
Non-GAAP operating income (loss)
$
5,252
$
(10,734
)
$
1,779
$
(12,555
)
$
(11,721
)
Non-GAAP operating margin
2.7
%
(6.2
)%
0.7
%
(2.3
)%
(1.7
)%
GAAP other income (expenses), net
$
2,280
$
7,999
$
638
$
11,685
$
(1,164
)
Gain/loss on investments, net
(14
)
19
(52
)
16
251
Gain on litigation settlements
—
(6,000
)
—
(6,000
)
—
Non-GAAP other income (expenses), net
$
2,266
$
2,018
$
586
$
5,701
$
(913
)
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
Nine Months Ended
October 1, 2023
July 2, 2023
October 2, 2022
October 1, 2023
October 2, 2022
GAAP net income (loss)
$
(84,799
)
$
(8,587
)
$
2,801
$
(103,098
)
$
(62,943
)
Amortization of intangibles
—
128
129
257
386
Stock-based compensation expense
4,285
4,687
3,440
13,637
13,266
Goodwill impairment
—
—
—
—
44,442
Intangibles impairment
1,071
—
—
1,071
—
Restructuring and other charges
366
2,229
361
2,703
911
Litigation reserves, net
178
—
—
178
20
Gain/loss on investments, net
(14
)
19
(52
)
16
251
Gain on litigation settlements
—
(6,000
)
—
(6,000
)
—
Non-GAAP tax adjustments
85,781
2,781
(715
)
87,724
(3,976
)
Non-GAAP net income (loss)
$
6,868
$
(4,743
)
$
5,964
$
(3,512
)
$
(7,643
)
NET INCOME (LOSS) PER DILUTED
SHARE:
GAAP net income (loss) per diluted
share
$
(2.87
)
$
(0.29
)
$
0.10
$
(3.52
)
$
(2.17
)
Amortization of intangibles
—
—
—
0.01
0.01
Stock-based compensation expense
0.14
0.16
0.12
0.47
0.46
Goodwill impairment
—
—
—
—
1.53
Intangibles impairment
0.04
—
—
0.04
—
Restructuring and other charges
0.01
0.08
0.01
0.09
0.03
Litigation reserves, net
0.01
—
—
0.01
—
Gain/loss on investments, net
—
—
—
—
0.01
Gain on litigation settlements
—
(0.20
)
—
(0.21
)
—
Non-GAAP tax adjustments
2.90
0.09
(0.02
)
2.99
(0.13
)
Non-GAAP net income (loss) per diluted
share
$
0.23
$
(0.16
)
$
0.21
$
(0.12
)
$
(0.26
)
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
October 1, 2023
July 2, 2023
April 2, 2023
December 31, 2022
October 2, 2022
Cash, cash equivalents and short-term
investments
$
228,045
$
202,836
$
239,210
$
227,425
$
233,197
Cash, cash equivalents and short-term
investments per diluted share
$
7.71
$
6.92
$
8.24
$
7.85
$
8.03
Accounts receivable, net
$
200,900
$
179,496
$
192,540
$
277,485
$
259,908
Days sales outstanding (DSO)
92
94
98
100
95
Inventories
$
280,918
$
324,483
$
337,187
$
299,614
$
298,090
Ending inventory turns
1.8
1.5
1.4
2.5
2.4
Weeks of channel inventory:
U.S. retail channel
11.8
12.0
12.7
10.4
13.5
U.S. distribution channel
5.8
5.1
4.4
5.2
3.6
EMEA distribution channel
7.4
6.9
8.5
8.7
5.3
APAC distribution channel
13.1
12.4
14.0
18.5
16.0
Deferred revenue (current and
non-current)
$
29,796
$
27,689
$
26,634
$
25,025
$
22,868
Headcount
644
653
702
691
731
Non-GAAP diluted shares
29,581
29,319
29,040
28,959
29,029
NET REVENUE BY GEOGRAPHY
Three Months Ended
Nine Months Ended
October 1, 2023
July 2, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Americas
$141,018
71%
$116,611
67%
$169,360
68%
$379,551
69%
$458,036
67%
EMEA
35,684
18%
36,161
21%
44,827
18%
111,023
20%
126,643
19%
APAC
21,143
11%
20,641
12%
35,400
14%
61,592
11%
98,690
14%
Total
$197,845
100%
$173,413
100%
$249,587
100%
$552,166
100%
$683,369
100%
NETGEAR, INC.
SUPPLEMENTAL FINANCIAL
INFORMATION (CONTINUED)
(In thousands)
(Unaudited)
NET REVENUE BY SEGMENT
Three Months Ended
Nine Months Ended
October 1, 2023
July 2, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Connected Home
$
127,335
$
98,406
$
150,581
$
328,487
$
409,787
SMB
70,510
75,007
99,006
223,679
273,582
Total net revenue
$
197,845
$
173,413
$
249,587
$
552,166
$
683,369
SERVICE PROVIDER NET REVENUE
Three Months Ended
Nine Months Ended
October 1, 2023
July 2, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Connected Home
$
32,403
$
24,916
$
40,448
$
71,346
$
92,544
SMB
219
18
1,171
427
3,515
Total service provider net revenue
$
32,622
$
24,934
$
41,619
$
71,773
$
96,059
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231025326888/en/
NETGEAR Investor Relations Erik Bylin investors@netgear.com
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