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NETGEAR® Reports Third Quarter 2024 Results

Q3 net revenue of $182.9 million, above the high end of guidance

Achieved GAAP and non-GAAP profitability, above the high end of guidance

Fifth consecutive quarter of free cash flow generation

Added more than $100 million to cash and cash equivalents to end Q3 with $395.7 million

NETGEAR, Inc. (NASDAQ: NTGR), a global leader in intelligent networking solutions for businesses, homes, and service providers, today reported financial results for the third quarter ended September 29, 2024.

  • Third quarter 2024 net revenue of $182.9 million, a decrease of 7.6% from the comparable prior-year quarter.
  • Third quarter 2024 GAAP operating income of $95.8 million, or 52.4% of net revenue, as compared to operating loss of $0.6 million, or (0.3)% of net revenue, in the comparable prior-year quarter.
    • Third quarter 2024 non-GAAP operating income of $1.6 million, or 0.9% of net revenue, as compared to non-GAAP operating income of $5.3 million, or 2.7% of net revenue, in the comparable prior-year quarter.
  • Third quarter 2024 GAAP net income per diluted share of $2.90, as compared to net loss per diluted share of $2.87 in the comparable prior-year quarter.
    • Third quarter 2024 non-GAAP net income per diluted share of $0.17, as compared to non-GAAP net income per diluted share of $0.23 in the comparable prior-year quarter.
  • Cash, cash equivalents and short-term investments ended at $395.7 million, up $101.4 million from the previous quarter.

The accompanying schedules provide a reconciliation of financial measures computed on a GAAP basis to financial measures computed on a non-GAAP basis.

CJ Prober, Chief Executive Officer of NETGEAR, commented, "Today marks my nine-month anniversary with NETGEAR, and I am thrilled with our progress and the speed at which we are executing on our transformation. Q3 was an excellent quarter where we exceeded revenue and operating income guidance, achieved profitability, and increased our cash balance by over $100 million.”

Mr. Prober continued, “Our ProAV business had another record quarter in end user sales, and we added over 30 new manufacturing partners to strengthen our differentiation and software leadership in this category. We also launched several innovative products, including the M7 Pro, the industry’s first mobile hotspot that combines 5G and WIFI 7. With great executives joining the team and already driving positive early results, we are confident that we are positioning NETGEAR to fully capitalize on numerous market opportunities to generate long-term growth and profitability and we remain focused on creating long-term value for shareholders.”

Bryan Murray, Chief Financial Officer of NETGEAR, added, “We continued to execute on our plan to reduce our inventory, which declined by $27.0 million sequentially and represents less than 4 months of inventory, including finished goods and components, for the first time in over 3 years. Gross margin for the quarter exceeded 30% and NFB topline grew over 10% year over year and returned to historical levels on contribution margin. In Q3 we also delivered a fifth consecutive quarter of free cash flow generation, even after removing the effect of the TP-Link settlement, and we exited the quarter with $395.7 million in cash and cash equivalents, a $101.4 million sequential increase. In addition, we repurchased approximately $1.5 million of NETGEAR common stock before being restricted from further repurchases in the quarter due to trading restrictions associated with our TP-Link settlement negotiations. We expect to resume our share repurchase program in Q4 as we continue to believe that share repurchases are an important part of our capital allocation plan.”

Business Outlook

Mr. Murray continued, “As we experienced in the third quarter, we expect to continue to see more predictable performance that is aligned with the market for both of our businesses. Within NFB, we expect to experience continued growth led by our ProAV line of managed switches. While we are seeing the signs of market recovery in CHP, we expect increased promotional activity within our retail business due in part to the holiday period. As we were able to pull forward the launch of our M7 Pro mobile hotspot into the third quarter, we expect revenue from the service provider channel to be approximately $20 million in Q4, down slightly on a sequential basis. Accordingly, we expect fourth quarter net revenue to be in the range of $160 million to $175 million. We expect gross margins and operating margins to continue to be impacted by our inventory reduction efforts and higher than expected transportation costs due to a variety of factors, including the Red Sea shipping crisis. We also expect margins to be impacted from the increased promotional activities within our CHP retail business. Accordingly, we expect our fourth quarter GAAP operating margin to be in the range of (12.4)% to (9.4)%, and non-GAAP operating margin to be in the range of (8.0)% to (5.0)%. Our GAAP tax benefit is expected to be in the range of $2.0 million to $3.0 million, and our non-GAAP tax benefit is expected to be in the range of $0.0 million to $1.0 million for the fourth quarter of 2024.”

A reconciliation between the Business Outlook on a GAAP and non-GAAP basis is provided in the following table:

 

 

Three months ending

 

 

December 31, 2024

(In millions, except for percentage data)

 

Operating Margin Rate

 

Tax Expense (Benefit)

 

 

 

 

 

GAAP

 

(12.4)% - (9.4)%

 

$(3.0) - $(2.0)

Estimated adjustments for1:

 

 

 

 

Stock-based compensation expense

 

3.9%

 

-

Restructuring and other charges

 

0.5%

 

-

Non-GAAP tax adjustments

 

-

 

$2.0

Non-GAAP

 

(8.0)% - (5.0)%

 

$(1.0) - $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 2024 today, Wednesday, October 30, 2024 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.

Founded in 1996 and headquartered in the USA, NETGEAR® (NASDAQ: NTGR) is a global leader in innovative networking technologies for businesses, homes, and service providers. NETGEAR delivers a wide range of award-winning, intelligent solutions designed to unleash the full potential of connectivity and power extraordinary experiences. For businesses, NETGEAR offers reliable, easy-to-use, high-performance networking solutions, including switches, routers, access points, software, and AV over IP technologies, tailored to meet the diverse needs of organizations of all sizes. NETGEAR’s Connected Home products deliver advanced connectivity, powerful performance, and enhanced security features right out of the box, designed to keep families safe online, whether at home or on the go. More information is available from the NETGEAR Press Room or by calling (408) 907-8000. Connect with NETGEAR: Facebook, Instagram and the NETGEAR blog at NETGEAR.com.

© 2024 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.

Source: NETGEAR-F

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 and gross margin; creating long-term value for shareholders; positioning NETGEAR for long term success; long-term potential and profitable growth; NETGEAR’s continued NFB growth led by the ProAV line of managed switches; expectations regarding more predictable performance that is aligned to the market; expectations regarding volatility from shifting channel inventory levels; expectations regarding gross margins and operating margins being impacted by inventory reduction efforts and transportation costs; revenue from the service provider channel; timing of the launch of next generation 5G mobile hotspots; expectations regarding continuing market demand for the NETGEAR’s products and services; expectations regarding expected tax benefits or tax expenses; and plans to repurchase shares of NETGEAR common stock. 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 and services may be lower than anticipated; 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 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; loss of services of key personnel may affect NETGEAR’s ability to executive on business strategy effectively; 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 June 30, 2024, filed with the Securities and Exchange Commission on August 2, 2024. 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 total operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP other income (expenses), net, non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share. These supplemental measures exclude adjustments for amortization of intangibles, stock-based compensation expense, 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: restructuring and other charges, litigation reserves, net, 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.

Source: NETGEAR-F

-Financial Tables Attached-

NETGEAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

 

September 29, 2024

 

December 31, 2023

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

273,767

 

 

$

176,717

 

Short-term investments

 

 

121,965

 

 

 

106,931

 

Accounts receivable, net

 

 

177,326

 

 

 

185,059

 

Inventories

 

 

161,976

 

 

 

248,851

 

Prepaid expenses and other current assets

 

 

34,302

 

 

 

30,421

 

Total current assets

 

 

769,336

 

 

 

747,979

 

Property and equipment, net

 

 

10,640

 

 

 

8,273

 

Operating lease right-of-use assets

 

 

30,758

 

 

 

37,285

 

Goodwill

 

 

36,279

 

 

 

36,279

 

Other non-current assets

 

 

15,623

 

 

 

17,326

 

Total assets

 

$

862,636

 

 

$

847,142

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

52,035

 

 

$

46,850

 

Accrued employee compensation

 

 

19,964

 

 

 

21,286

 

Other accrued liabilities

 

 

155,193

 

 

 

168,084

 

Deferred revenue

 

 

29,596

 

 

 

27,091

 

Income taxes payable

 

 

14,569

 

 

 

1,037

 

Total current liabilities

 

 

271,357

 

 

 

264,348

 

Non-current income taxes payable

 

 

8,510

 

 

 

12,695

 

Non-current operating lease liabilities

 

 

22,016

 

 

 

29,698

 

Other non-current liabilities

 

 

10,423

 

 

 

4,906

 

Total liabilities

 

 

312,306

 

 

 

311,647

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock

 

 

29

 

 

 

30

 

Additional paid-in capital

 

 

987,576

 

 

 

967,651

 

Accumulated other comprehensive income

 

 

152

 

 

 

136

 

Accumulated deficit

 

 

(437,427

)

 

 

(432,322

)

Total stockholders’ equity

 

 

550,330

 

 

 

535,495

 

Total liabilities and stockholders’ equity

 

$

862,636

 

 

$

847,142

 

NETGEAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share and percentage data)

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 29, 2024

 

June 30, 2024

 

October 1, 2023

 

September 29, 2024

 

October 1, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenue

 

$

182,854

 

 

$

143,900

 

 

$

197,845

 

 

$

491,340

 

 

$

552,166

 

Cost of revenue

 

 

126,371

 

 

 

112,077

 

 

 

128,911

 

 

 

354,797

 

 

 

368,550

 

Gross profit

 

 

56,483

 

 

 

31,823

 

 

 

68,934

 

 

 

136,543

 

 

 

183,616

 

Gross margin

 

 

30.9

%

 

 

22.1

%

 

 

34.8

%

 

 

27.8

%

 

 

33.3

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

20,905

 

 

 

19,851

 

 

 

20,738

 

 

 

60,983

 

 

 

63,703

 

Sales and marketing

 

 

31,196

 

 

 

29,757

 

 

 

30,865

 

 

 

91,482

 

 

 

97,226

 

General and administrative

 

 

8,357

 

 

 

19,186

 

 

 

16,364

 

 

 

45,610

 

 

 

49,136

 

Litigation reserves, net

 

 

(100,855

)

 

 

8,200

 

 

 

178

 

 

 

(92,625

)

 

 

178

 

Restructuring and other charges

 

 

1,072

 

 

 

1,688

 

 

 

366

 

 

 

3,792

 

 

 

2,703

 

Intangibles impairment

 

 

 

 

 

 

 

 

1,071

 

 

 

 

 

 

1,071

 

Total operating expenses

 

 

(39,325

)

 

 

78,682

 

 

 

69,582

 

 

 

109,242

 

 

 

214,017

 

Income (loss) from operations

 

 

95,808

 

 

 

(46,859

)

 

 

(648

)

 

 

27,301

 

 

 

(30,401

)

Operating margin

 

 

52.4

%

 

 

(32.6

)%

 

 

(0.3

)%

 

 

5.6

%

 

 

(5.5

)%

Other income, net

 

 

3,485

 

 

 

2,713

 

 

 

2,280

 

 

 

9,048

 

 

 

11,685

 

Income (loss) before income taxes

 

 

99,293

 

 

 

(44,146

)

 

 

1,632

 

 

 

36,349

 

 

 

(18,716

)

Provision for income taxes

 

 

14,219

 

 

 

1,029

 

 

 

86,431

 

 

 

15,100

 

 

 

84,382

 

Net income (loss)

 

$

85,074

 

 

$

(45,175

)

 

$

(84,799

)

 

$

21,249

 

 

$

(103,098

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.96

 

 

$

(1.56

)

 

$

(2.87

)

 

$

0.73

 

 

$

(3.52

)

Diluted

 

$

2.90

 

 

$

(1.56

)

 

$

(2.87

)

 

$

0.72

 

 

$

(3.52

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used to compute net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

28,705

 

 

 

28,883

 

 

 

29,524

 

 

 

28,992

 

 

 

29,266

 

Diluted

 

 

29,364

 

 

 

28,883

 

 

 

29,524

 

 

 

29,389

 

 

 

29,266

 

NETGEAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Nine Months Ended

 

September 29, 2024

 

October 1, 2023

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

$

21,249

 

 

$

(103,098

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

4,761

 

 

 

5,491

 

Stock-based compensation

 

16,052

 

 

 

13,637

 

Gain on investments, net

 

(2,971

)

 

 

(2,301

)

Intangibles impairment

 

 

 

 

1,071

 

Deferred income taxes

 

254

 

 

 

82,205

 

Provision for excess and obsolete inventory

 

5,084

 

 

 

2,705

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable, net

 

7,733

 

 

 

76,585

 

Inventories

 

81,790

 

 

 

15,990

 

Prepaid expenses and other assets

 

3,146

 

 

 

(3,020

)

Accounts payable

 

4,727

 

 

 

(38,443

)

Accrued employee compensation

 

(1,322

)

 

 

(4,952

)

Other accrued liabilities

 

(9,608

)

 

 

(46,929

)

Deferred revenue

 

3,073

 

 

 

4,771

 

Income taxes payable

 

9,347

 

 

 

(3,130

)

Net cash provided by operating activities

 

143,315

 

 

 

582

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of short-term investments

 

(107,454

)

 

 

(97,291

)

Proceeds from maturities of short-term investments

 

90,290

 

 

 

85,006

 

Purchases of property and equipment

 

(6,502

)

 

 

(3,601

)

Purchases of long-term investments

 

(225

)

 

 

(585

)

Net cash used in investing activities

 

(23,891

)

 

 

(16,471

)

Cash flows from financing activities:

 

 

 

 

 

Repurchases of common stock

 

(22,917

)

 

 

 

Restricted stock unit withholdings

 

(3,330

)

 

 

(2,742

)

Proceeds from exercise of stock options

 

308

 

 

 

 

Proceeds from issuance of common stock under employee stock purchase plan

 

3,565

 

 

 

3,590

 

Net cash (used in) provided by financing activities

 

(22,374

)

 

 

848

 

Net increase (decrease) in cash and cash equivalents

 

97,050

 

 

 

(15,041

)

Cash and cash equivalents, at beginning of period

 

176,717

 

 

 

146,500

 

Cash and cash equivalents, at end of period

$

273,767

 

 

$

131,459

 

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

 

 

September 29, 2024

 

June 30, 2024

 

October 1, 2023

 

September 29, 2024

 

October 1, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

56,483

 

 

$

31,823

 

 

$

68,934

 

 

$

136,543

 

 

$

183,616

 

GAAP gross margin

 

 

30.9

%

 

 

22.1

%

 

 

34.8

%

 

 

27.8

%

 

 

33.3

%

Amortization of intangibles

 

 

 

 

 

 

 

 

 

 

 

 

 

 

257

 

Stock-based compensation expense

 

 

444

 

 

 

413

 

 

 

354

 

 

 

1,222

 

 

 

1,047

 

Non-GAAP gross profit

 

$

56,927

 

 

$

32,236

 

 

$

69,288

 

 

$

137,765

 

 

$

184,920

 

Non-GAAP gross margin

 

 

31.1

%

 

 

22.4

%

 

 

35.0

%

 

 

28.0

%

 

 

33.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP research and development

 

$

20,905

 

 

$

19,851

 

 

$

20,738

 

 

$

60,983

 

 

$

63,703

 

Stock-based compensation expense

 

 

(868

)

 

 

(844

)

 

 

(841

)

 

 

(2,410

)

 

 

(3,050

)

Non-GAAP research and development

 

$

20,037

 

 

$

19,007

 

 

$

19,897

 

 

$

58,573

 

 

$

60,653

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP sales and marketing

 

$

31,196

 

 

$

29,757

 

 

$

30,865

 

 

$

91,482

 

 

$

97,226

 

Stock-based compensation expense

 

 

(1,520

)

 

 

(1,235

)

 

 

(1,271

)

 

 

(3,992

)

 

 

(4,099

)

Non-GAAP sales and marketing

 

$

29,676

 

 

$

28,522

 

 

$

29,594

 

 

$

87,490

 

 

$

93,127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative

 

$

8,357

 

 

$

19,186

 

 

$

16,364

 

 

$

45,610

 

 

$

49,136

 

Stock-based compensation expense

 

 

(2,788

)

 

 

(3,396

)

 

 

(1,819

)

 

 

(8,428

)

 

 

(5,441

)

Non-GAAP general and administrative

 

$

5,569

 

 

$

15,790

 

 

$

14,545

 

 

$

37,182

 

 

$

43,695

 

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

 

 

September 29, 2024

 

June 30, 2024

 

October 1, 2023

 

September 29, 2024

 

October 1, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP total operating expenses

 

$

(39,325

)

 

$

78,682

 

 

$

69,582

 

 

$

109,242

 

 

$

214,017

 

Stock-based compensation expense

 

 

(5,176

)

 

 

(5,475

)

 

 

(3,931

)

 

 

(14,830

)

 

 

(12,590

)

Intangibles impairment

 

 

 

 

 

 

 

 

(1,071

)

 

 

 

 

 

(1,071

)

Restructuring and other charges

 

 

(1,072

)

 

 

(1,688

)

 

 

(366

)

 

 

(3,792

)

 

 

(2,703

)

Litigation reserves, net

 

 

100,855

 

 

 

(8,200

)

 

 

(178

)

 

 

92,625

 

 

 

(178

)

Non-GAAP total operating expenses

 

$

55,282

 

 

$

63,319

 

 

$

64,036

 

 

$

183,245

 

 

$

197,475

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income (loss)

 

$

95,808

 

 

$

(46,859

)

 

$

(648

)

 

$

27,301

 

 

$

(30,401

)

GAAP operating margin

 

 

52.4

%

 

 

(32.6

)%

 

 

(0.3

)%

 

 

5.6

%

 

 

(5.5

)%

Amortization of intangibles

 

 

 

 

 

 

 

 

 

 

 

 

 

 

257

 

Stock-based compensation expense

 

 

5,620

 

 

 

5,888

 

 

 

4,285

 

 

 

16,052

 

 

 

13,637

 

Intangibles impairment

 

 

 

 

 

 

 

 

1,071

 

 

 

 

 

 

1,071

 

Restructuring and other charges

 

 

1,072

 

 

 

1,688

 

 

 

366

 

 

 

3,792

 

 

 

2,703

 

Litigation reserves, net

 

 

(100,855

)

 

 

8,200

 

 

 

178

 

 

 

(92,625

)

 

 

178

 

Non-GAAP operating income (loss)

 

$

1,645

 

 

$

(31,083

)

 

$

5,252

 

 

$

(45,480

)

 

$

(12,555

)

Non-GAAP operating margin

 

 

0.9

%

 

 

(21.6

)%

 

 

2.7

%

 

 

(9.3

)%

 

 

(2.3

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP other income, net

 

$

3,485

 

 

$

2,713

 

 

$

2,280

 

 

$

9,048

 

 

$

11,685

 

Gain/loss on investments, net

 

 

(49

)

 

 

(69

)

 

 

(14

)

 

 

(17

)

 

 

16

 

Gain on litigation settlements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,000

)

Non-GAAP other income, net

 

$

3,436

 

 

$

2,644

 

 

$

2,266

 

 

$

9,031

 

 

$

5,701

 

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

 

 

September 29, 2024

 

June 30, 2024

 

October 1, 2023

 

September 29, 2024

 

October 1, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss)

 

$

85,074

 

 

$

(45,175

)

 

$

(84,799

)

 

$

21,249

 

 

$

(103,098

)

Amortization of intangibles

 

 

 

 

 

 

 

 

 

 

 

 

 

 

257

 

Stock-based compensation expense

 

 

5,620

 

 

 

5,888

 

 

 

4,285

 

 

 

16,052

 

 

 

13,637

 

Intangibles impairment

 

 

 

 

 

 

 

 

1,071

 

 

 

 

 

 

1,071

 

Restructuring and other charges

 

 

1,072

 

 

 

1,688

 

 

 

366

 

 

 

3,792

 

 

 

2,703

 

Litigation reserves, net

 

 

(100,855

)

 

 

8,200

 

 

 

178

 

 

 

(92,625

)

 

 

178

 

Gain/loss on investments, net

 

 

(49

)

 

 

(69

)

 

 

(14

)

 

 

(17

)

 

 

16

 

Gain on litigation settlements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,000

)

Non-GAAP tax adjustments

 

 

14,203

 

 

 

8,025

 

 

 

85,781

 

 

 

26,816

 

 

 

87,724

 

Non-GAAP net income (loss)

 

$

5,065

 

 

$

(21,443

)

 

$

6,868

 

 

$

(24,733

)

 

$

(3,512

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER DILUTED SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss) per diluted share

 

$

2.90

 

 

$

(1.56

)

 

$

(2.87

)

 

$

0.72

 

 

$

(3.52

)

Amortization of intangibles

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.01

 

Stock-based compensation expense

 

 

0.19

 

 

 

0.20

 

 

 

0.14

 

 

 

0.55

 

 

 

0.47

 

Intangibles impairment

 

 

 

 

 

 

 

 

0.04

 

 

 

 

 

 

0.04

 

Restructuring and other charges

 

 

0.04

 

 

 

0.06

 

 

 

0.01

 

 

 

0.13

 

 

 

0.09

 

Litigation reserves, net

 

 

(3.43

)

 

 

0.28

 

 

 

0.01

 

 

 

(3.19

)

 

 

0.01

 

Gain/loss on investments, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on litigation settlements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.21

)

Non-GAAP tax adjustments

 

 

0.47

 

 

 

0.28

 

 

 

2.90

 

 

 

0.94

 

 

 

2.99

 

Non-GAAP net income (loss) per diluted share 1

 

$

0.17

 

 

$

(0.74

)

 

$

0.23

 

 

$

(0.85

)

 

$

(0.12

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing GAAP net income (loss) per diluted share

 

 

29,364

 

 

 

28,883

 

 

 

29,524

 

 

 

29,389

 

 

 

29,266

 

Shares used in computing non-GAAP net income (loss) per diluted share

 

 

29,364

 

 

 

28,883

 

 

 

29,581

 

 

 

28,992

 

 

 

29,266

 

1

 

The per share reconciliation of GAAP to non-GAAP may not aggregate due to both calculations utilizing a different share basis. The net loss per diluted share calculation uses a lower share count as it excludes potentially dilutive shares included in the net income per diluted share calculation.

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

 

 

September 29, 2024

 

June 30, 2024

 

March 31, 2024

 

December 31, 2023

 

October 1, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and short-term investments

 

$

395,732

 

 

$

294,339

 

 

$

289,421

 

 

$

283,648

 

 

$

228,045

 

Cash, cash equivalents and short-term investments per diluted share

 

$

13.48

 

 

$

10.19

 

 

$

9.85

 

 

$

9.56

 

 

$

7.71

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

177,326

 

 

$

147,069

 

 

$

172,771

 

 

$

185,059

 

 

$

200,900

 

Days sales outstanding (DSO)

 

 

88

 

 

 

93

 

 

 

96

 

 

 

89

 

 

 

92

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

$

161,976

 

 

$

188,936

 

 

$

211,270

 

 

$

248,851

 

 

$

280,918

 

Ending inventory turns

 

 

3.1

 

 

 

2.4

 

 

 

2.2

 

 

 

2.0

 

 

 

1.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weeks of channel inventory:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. retail channel

 

 

9.5

 

 

 

9.5

 

 

 

11.2

 

 

 

10.8

 

 

 

11.8

 

U.S. distribution channel

 

 

2.4

 

 

 

2.8

 

 

 

4.0

 

 

 

7.9

 

 

 

5.8

 

EMEA distribution channel

 

 

5.3

 

 

 

5.2

 

 

 

5.9

 

 

 

6.4

 

 

 

7.4

 

APAC distribution channel

 

 

9.5

 

 

 

8.3

 

 

 

8.0

 

 

 

10.0

 

 

 

13.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue (current and non-current)

 

$

35,068

 

 

$

34,216

 

 

$

33,714

 

 

$

31,994

 

 

$

29,796

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Headcount

 

 

638

 

 

 

622

 

 

 

628

 

 

 

635

 

 

 

644

 

Non-GAAP diluted shares

 

 

29,364

 

 

 

28,883

 

 

 

29,395

 

 

 

29,683

 

 

 

29,581

 

NET REVENUE BY GEOGRAPHY

 
 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 29, 2024

 

June 30, 2024

 

October 1, 2023

 

September 29, 2024

 

October 1, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

127,752

 

70

%

 

$

95,503

 

66

%

 

$

141,018

 

71

%

 

$

333,183

 

67

%

 

$

379,551

 

69

%

EMEA

 

 

32,798

 

18

%

 

 

27,355

 

19

%

 

 

35,684

 

18

%

 

 

91,340

 

19

%

 

 

111,023

 

20

%

APAC

 

 

22,304

 

12

%

 

 

21,042

 

15

%

 

 

21,143

 

11

%

 

 

66,817

 

14

%

 

 

61,592

 

11

%

Total

 

$

182,854

 

100

%

 

$

143,900

 

100

%

 

$

197,845

 

100

%

 

$

491,340

 

100

%

 

$

552,166

 

100

%

NETGEAR, INC.

SUPPLEMENTAL FINANCIAL INFORMATION (CONTINUED)

(In thousands)

(Unaudited)

 

NET REVENUE BY SEGMENT

 

 

Three Months Ended

 

Nine Months Ended

 

September 29, 2024

 

June 30, 2024

 

October 1, 2023

 

September 29, 2024

 

October 1, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NETGEAR for Business

$

78,530

 

 

$

59,867

 

 

$

70,510

 

 

$

207,020

 

 

$

223,679

 

Connected Home

 

104,324

 

 

 

84,033

 

 

 

127,335

 

 

 

284,320

 

 

 

328,487

 

Total net revenue

$

182,854

 

 

$

143,900

 

 

$

197,845

 

 

$

491,340

 

 

$

552,166

 

SERVICE PROVIDER NET REVENUE

 

 

Three Months Ended

 

Nine Months Ended

 

September 29, 2024

 

June 30, 2024

 

October 1, 2023

 

September 29, 2024

 

October 1, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NETGEAR for Business

$

268

 

 

$

202

 

 

$

219

 

 

$

713

 

 

$

427

 

Connected Home

 

22,949

 

 

 

19,732

 

 

 

32,403

 

 

 

70,234

 

 

 

71,346

 

Total service provider net revenue

$

23,217

 

 

$

19,934

 

 

$

32,622

 

 

$

70,947

 

 

$

71,773

 

 

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