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NETGEAR® Reports Fourth Quarter and Full Year 2020 Results

February 03, 2021

Fourth Quarter Revenue of $367 Million - 45% Growth Year over Year
SMB Returns to Year over Year Growth in Fourth Quarter

SAN JOSE, Calif.--(BUSINESS WIRE)-- 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 fourth quarter and full year ended December 31, 2020.

  • Fourth quarter 2020 net revenue of $367.1 million, an increase of 45.1% from the comparable prior year quarter.
  • Fourth quarter 2020 GAAP operating income of $33.8 million, or 9.2% of net revenue, as compared to operating loss of $0.2 million, or (0.1)% of net revenue, in the comparable prior year quarter.
    • Fourth quarter 2020 non-GAAP operating income of $40.3 million, or 11.0% of net revenue, as compared to $11.0 million, or 4.4% of net revenue in the comparable prior year quarter.
  • Fourth quarter 2020 GAAP net income per diluted share of $0.99, as compared to net loss per diluted share of $0.01 in the comparable prior year quarter.
    • Fourth quarter 2020 non-GAAP net income per diluted share of $0.99, as compared to $0.34 in the comparable prior year quarter.
  • Fiscal 2020 net revenue of $1.26 billion, an increase of 25.7% from the prior year.
  • Fiscal 2020 GAAP operating income of $75.5 million, or 6.0% of net revenue, as compared to $26.2 million, or 2.6% of net revenue, in the prior year.
    • Fiscal 2020 non-GAAP operating income of $110.8 million, or 8.8% of net revenue, as compared to $64.5 million, or 6.5% of net revenue in the prior year.
  • Fiscal 2020 GAAP net income per diluted share of $1.90, as compared to $0.81 in the prior year.
    • Fiscal 2020 non-GAAP net income per diluted share of $2.88, as compared to $1.87 in the prior year.

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, “NETGEAR ended 2020 with another outstanding quarter, delivering 45% revenue growth and 11% non-GAAP operating margin. In a year without parallel, the NETGEAR team rallied against countless obstacles to continually surpass our expectations while remaining efficient to produce strong operating leverage on our growth. At the heart of the strong demand for our products are families working and learning from home – these families need to solve for high speed, high-capacity bandwidth that stretches to every corner of the home. This is fueling rapid growth of a new premium segment that is defined by a WiFi 6 mesh system with tri-band architecture. At the forefront of this technology, NETGEAR has commanding share in this segment. We continued our pace of adding new subscribers, which were up by 68,000 in Q4 to 437,000 paid subscribers, and far surpassed our goal for the year. As a long-tenured market leader NETGEAR will continue to innovate to deliver the leading products and services that customers increasingly demand.”

Mr. Lo continued, “We sustained our strong momentum in Q4 in Connected Home and delivered more than 60% year over year growth in both the retail and service provider channels. On the SMB side, we continued to execute on our strategy to offer high performance ProAV and work-from-home solutions, with leading edge WiFi access points plus plug-and-play switches. This produced another quarter of strong sequential growth, coming in at 16%, and a return to year over year growth. We feel NETGEAR is on a great trajectory and are excited about 2021.”

Bryan Murray, Chief Financial Officer of NETGEAR, added, “We had another impressive quarter of strong cash flow, generating $46.1 million in cash from operations in the fourth quarter. Preserving strong liquidity and generating cash are paramount as the pandemic continues into 2021.”

Business Outlook

Mr. Murray continued, “As supply is expected to remain constrained, and with an anticipated sequential step-down in sales to service providers, our first quarter net revenue is expected to be in the range of $300 million to $315 million. Our GAAP operating margin for the first quarter is expected to be in the range of 4.5% to 5.5%, and non-GAAP operating margin is expected to be in the range of 8.0% to 9.0%. Our GAAP tax rate is expected to be approximately 28%, and our non-GAAP tax rate is expected to be 24.5% for the first quarter of 2021. While we are confident in our ability to provide guidance at this time, we do so with the caveat that considerable uncertainty remains in the market due to the COVID-19 pandemic, and should unforeseen events occur, in particular related to transportation delays in Southern California where our main distribution center is located, our actual results could differ from the foregoing guidance.”

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

 

 

Three months ending

 

 

 

March 28, 2021

 

 

 

Operating Margin
Rate

 

 

Tax Rate

 

 

 

 

 

 

 

 

 

 

GAAP

 

4.5% - 5.5%

 

 

28.0%

 

Estimated adjustments for1:

 

 

 

 

 

 

 

 

Amortization of intangibles

 

0.5%

 

 

-

 

Stock-based compensation expense

 

2.3%

 

 

-

 

Restructuring and other charges

 

0.7%

 

 

-

 

Non-GAAP tax adjustments

 

-

 

 

(3.5)%

 

Non-GAAP

 

8.0% - 9.0%

 

 

24.5%

 

  

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 fourth quarter and full year results and discuss management's expectations for the first quarter of 2021 today, Wednesday, February 3, 2021 at 5 p.m. ET (2 p.m. PT). The toll free dial-in number for the live audio call is (844) 709-2008. The international dial-in number for the live audio call is (647) 253-8663. The conference ID for the call is 7797905. 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.

© 2021 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 continued profitability and cash generation; expectations regarding continuing market demand for the Company’s products and the Company’s ability to innovate and respond to this demand; the timing, distribution, sales momentum and market acceptance of recent and anticipated new product introductions that position the Company for growth and market share gain; and expectations regarding NETGEAR's paid subscriber base growth. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: uncertainty surrounding the duration and impact of the global COVID-19 pandemic, including with respect to the Company’s supply chain and potential disruptions in the Company’s transportation network, including with respect to the Company’s main distribution center located in Southern California; future demand for the Company's products may be lower than anticipated; the Company may be unsuccessful, or experience delays, in manufacturing and distributing its new and existing products; consumers may choose not to adopt the Company's new product offerings or adopt competing products; the Company 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; the Company may fail to manage costs, including the cost of developing new products and manufacturing and distribution of its existing offerings; the Company may fail to successfully continue to effect operating expense savings; changes in the level of NETGEAR's cash resources and the Company's planned usage of such resources, including potential repurchases of the Company’s common stock; changes in the Company's stock price and developments in the business that could increase the Company's cash needs; fluctuations in foreign exchange rates; and the actions and financial health of the Company's customers, including the Company’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 the Company'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 the Company's quarterly report on Form 10-Q for the fiscal quarter ended September 27, 2020, filed with the Securities and Exchange Commission on October 30, 2020. 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 income, non-GAAP operating margin, non-GAAP other income (expense), net, non-GAAP net income and non-GAAP net income per diluted share. These supplemental measures exclude adjustments for amortization of intangibles, stock-based compensation expense, separation expense, change in fair value of contingent consideration, restructuring and other charges, litigation reserves, net, gain/loss on investments, net, 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: separation expense, change in fair value of contingent consideration, 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. We also 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.

Source: NETGEAR-F

NETGEAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

 

As of

 

 

 

December 31,
2020

 

 

December 31,
2019

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

346,460

 

 

$

190,208

 

Short-term investments

 

 

6,858

 

 

 

5,499

 

Accounts receivable, net

 

 

337,052

 

 

 

277,168

 

Inventories

 

 

172,112

 

 

 

235,489

 

Prepaid expenses and other current assets

 

 

30,696

 

 

 

35,745

 

Total current assets

 

 

893,178

 

 

 

744,109

 

Property and equipment, net

 

 

16,080

 

 

 

17,683

 

Operating lease right-of-use assets, net

 

 

29,411

 

 

 

28,917

 

Intangibles, net

 

 

3,899

 

 

 

10,104

 

Goodwill

 

 

80,721

 

 

 

80,721

 

Other non-current assets

 

 

82,750

 

 

 

74,279

 

Total assets

 

$

1,106,039

 

 

$

955,813

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

90,902

 

 

$

80,531

 

Accrued employee compensation

 

 

35,020

 

 

 

20,024

 

Other accrued liabilities

 

 

218,375

 

 

 

189,547

 

Deferred revenue

 

 

13,458

 

 

 

6,450

 

Income taxes payable

 

 

7,318

 

 

 

1,839

 

Total current liabilities

 

 

365,073

 

 

 

298,391

 

Non-current income taxes payable

 

 

19,174

 

 

 

15,307

 

Non-current operating lease liabilities

 

 

25,512

 

 

 

25,434

 

Other non-current liabilities

 

 

6,896

 

 

 

7,988

 

Total liabilities

 

 

416,655

 

 

 

347,120

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock

 

 

30

 

 

 

30

 

Additional paid-in capital

 

 

882,709

 

 

 

831,365

 

Accumulated other comprehensive income (loss)

 

 

(35

)

 

 

21

 

Accumulated deficit

 

 

(193,320

)

 

 

(222,723

)

Total stockholders’ equity

 

 

689,384

 

 

 

608,693

 

Total liabilities and stockholders’ equity

 

$

1,106,039

 

 

$

955,813

 

NETGEAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share and percentage data)

(Unaudited)

 

 

 

Three Months Ended

 

 

Twelve Months Ended

 

 

 

December 31,
2020

 

 

September 27,
2020

 

 

December 31,
2019

 

 

December 31,
2020

 

 

December 31,
2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenue

 

$

367,073

 

 

$

378,114

 

 

$

252,971

 

 

$

1,255,202

 

 

$

998,763

 

Cost of revenue

 

 

255,957

 

 

 

264,620

 

 

 

183,388

 

 

 

883,050

 

 

 

704,535

 

Gross profit

 

 

111,116

 

 

 

113,494

 

 

 

69,583

 

 

 

372,152

 

 

 

294,228

 

Gross margin

 

 

30.3

%

 

 

30.0

%

 

 

27.5

%

 

 

29.6

%

 

 

29.5

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

23,376

 

 

 

24,529

 

 

 

20,799

 

 

 

88,788

 

 

 

77,982

 

Sales and marketing

 

 

40,645

 

 

 

39,794

 

 

 

34,263

 

 

 

147,854

 

 

 

138,150

 

General and administrative

 

 

16,066

 

 

 

16,467

 

 

 

13,965

 

 

 

61,148

 

 

 

49,432

 

Other operating expenses (income), net

 

 

(2,813

)

 

 

538

 

 

 

767

 

 

 

(1,182

)

 

 

2,476

 

Total operating expenses

 

 

77,274

 

 

 

81,328

 

 

 

69,794

 

 

 

296,608

 

 

 

268,040

 

Income (loss) from operations

 

 

33,842

 

 

 

32,166

 

 

 

(211

)

 

 

75,544

 

 

 

26,188

 

Operating margin

 

 

9.2

%

 

 

8.5

%

 

 

(0.1

)%

 

 

6.0

%

 

 

2.6

%

Interest income

 

 

27

 

 

 

98

 

 

 

417

 

 

 

436

 

 

 

2,539

 

Other income (expense), net

 

 

(390

)

 

 

(515

)

 

 

419

 

 

 

(5,177

)

 

 

844

 

Income before income taxes

 

 

33,479

 

 

 

31,749

 

 

 

625

 

 

 

70,803

 

 

 

29,571

 

Provision for income taxes

 

 

2,531

 

 

 

6,214

 

 

 

1,045

 

 

 

12,510

 

 

 

3,780

 

Net income (loss)

 

$

30,948

 

 

$

25,535

 

 

$

(420

)

 

$

58,293

 

 

$

25,791

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.02

 

 

$

0.85

 

 

$

(0.01

)

 

$

1.95

 

 

$

0.83

 

Diluted

 

$

0.99

 

 

$

0.83

 

 

$

(0.01

)

 

$

1.90

 

 

$

0.81

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

30,331

 

 

 

30,037

 

 

 

30,103

 

 

 

29,897

 

 

 

30,936

 

Diluted

 

 

31,235

 

 

 

30,741

 

 

 

30,103

 

 

 

30,640

 

 

 

31,965

 

NETGEAR, INC.

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES

(In thousands, except percentage data)

(Unaudited)

         

STATEMENT OF OPERATIONS DATA:

   

 

 

Three Months Ended

 

 

Twelve Months Ended

 

 

 

December 31,
2020

 

 

September 27,
2020

 

 

December 31,
2019

 

 

December 31,
2020

 

 

December 31,
2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

111,116

 

 

$

113,494

 

 

$

69,583

 

 

$

372,152

 

 

$

294,228

 

GAAP gross margin

 

 

30.3

%

 

 

30.0

%

 

 

27.5

%

 

 

29.6

%

 

 

29.5

%

Amortization of intangibles

 

 

178

 

 

 

179

 

 

 

178

 

 

 

714

 

 

 

714

 

Stock-based compensation expense

 

 

962

 

 

 

923

 

 

 

714

 

 

 

4,091

 

 

 

2,843

 

Non-GAAP gross profit

 

$

112,256

 

 

$

114,596

 

 

$

70,475

 

 

$

376,957

 

 

$

297,785

 

Non-GAAP gross margin

 

 

30.6

%

 

 

30.3

%

 

 

27.9

%

 

 

30.0

%

 

 

29.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP research and development

 

$

23,376

 

 

$

24,529

 

 

$

20,799

 

 

$

88,788

 

 

$

77,982

 

Stock-based compensation expense

 

 

(1,304

)

 

 

(1,138

)

 

 

(2,556

)

 

 

(5,183

)

 

 

(6,532

)

Non-GAAP research and development

 

$

22,072

 

 

$

23,391

 

 

$

18,243

 

 

$

83,605

 

 

$

71,450

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP sales and marketing

 

$

40,645

 

 

$

39,794

 

 

$

34,263

 

 

$

147,854

 

 

$

138,150

 

Amortization of intangibles

 

 

(1,266

)

 

 

(1,291

)

 

 

(1,341

)

 

 

(5,238

)

 

 

(6,017

)

Stock-based compensation expense

 

 

(2,038

)

 

 

(1,927

)

 

 

(2,846

)

 

 

(7,634

)

 

 

(9,069

)

Non-GAAP sales and marketing

 

$

37,341

 

 

$

36,576

 

 

$

30,076

 

 

$

134,982

 

 

$

123,064

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative

 

$

16,066

 

 

$

16,467

 

 

$

13,965

 

 

$

61,148

 

 

$

49,432

 

Stock-based compensation expense

 

 

(3,475

)

 

 

(3,230

)

 

 

(2,838

)

 

 

(13,597

)

 

 

(10,693

)

Non-GAAP general and administrative

 

$

12,591

 

 

$

13,237

 

 

$

11,127

 

 

$

47,551

 

 

$

38,739

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP other operating expenses (income), net

 

$

(2,813

)

 

$

538

 

 

$

767

 

 

$

(1,182

)

 

$

2,476

 

Separation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(264

)

Change in fair value of contingent consideration

 

 

3,204

 

 

 

(187

)

 

 

224

 

 

 

2,928

 

 

 

25

 

Restructuring and other charges

 

 

(391

)

 

 

(329

)

 

 

(931

)

 

 

(1,702

)

 

 

(2,077

)

Litigation reserves, net

 

 

 

 

 

(22

)

 

 

(60

)

 

 

(44

)

 

 

(160

)

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

 

 

Twelve Months Ended

 

 

 

December 31,
2020

 

 

September 27,
2020

 

 

December 31,
2019

 

 

December 31,
2020

 

 

December 31,
2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP total operating expenses

 

$

77,274

 

 

$

81,328

 

 

$

69,794

 

 

$

296,608

 

 

$

268,040

 

Amortization of intangibles

 

 

(1,266

)

 

 

(1,291

)

 

 

(1,341

)

 

 

(5,238

)

 

 

(6,017

)

Stock-based compensation expense

 

 

(6,817

)

 

 

(6,295

)

 

 

(8,240

)

 

 

(26,414

)

 

 

(26,294

)

Separation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(264

)

Change in fair value of contingent consideration

 

 

3,204

 

 

 

(187

)

 

 

224

 

 

 

2,928

 

 

 

25

 

Restructuring and other charges

 

 

(391

)

 

 

(329

)

 

 

(931

)

 

 

(1,702

)

 

 

(2,077

)

Litigation reserves, net

 

 

 

 

 

(22

)

 

 

(60

)

 

 

(44

)

 

 

(160

)

Non-GAAP total operating expenses

 

$

72,004

 

 

$

73,204

 

 

$

59,446

 

 

$

266,138

 

 

$

233,253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income (loss)

 

$

33,842

 

 

$

32,166

 

 

$

(211

)

 

$

75,544

 

 

$

26,188

 

GAAP operating margin

 

 

9.2

%

 

 

8.5

%

 

 

(0.1

)%

 

 

6.0

%

 

 

2.6

%

Amortization of intangibles

 

 

1,444

 

 

 

1,470

 

 

 

1,519

 

 

 

5,952

 

 

 

6,731

 

Stock-based compensation expense

 

 

7,779

 

 

 

7,218

 

 

 

8,954

 

 

 

30,505

 

 

 

29,137

 

Separation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

264

 

Change in fair value of contingent consideration

 

 

(3,204

)

 

 

187

 

 

 

(224

)

 

 

(2,928

)

 

 

(25

)

Restructuring and other charges

 

 

391

 

 

 

329

 

 

 

931

 

 

 

1,702

 

 

 

2,077

 

Litigation reserves, net

 

 

 

 

 

22

 

 

 

60

 

 

 

44

 

 

 

160

 

Non-GAAP operating income

 

$

40,252

 

 

$

41,392

 

 

$

11,029

 

 

$

110,819

 

 

$

64,532

 

Non-GAAP operating margin

 

 

11.0

%

 

 

10.9

%

 

 

4.4

%

 

 

8.8

%

 

 

6.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP other income (expense), net

 

$

(390

)

 

$

(515

)

 

$

419

 

 

$

(5,177

)

 

$

844

 

Gain/loss on investments, net

 

 

850

 

 

 

842

 

 

 

 

 

 

6,222

 

 

 

223

 

Non-GAAP other income (expense), net

 

$

460

 

 

$

327

 

 

$

419

 

 

$

1,045

 

 

$

1,067

 

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

 

 

Twelve Months Ended

 

 

 

December 31,
2020

 

 

September 27,
2020

 

 

December 31,
2019

 

 

December 31,
2020

 

 

December 31,
2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss)

 

$

30,948

 

 

$

25,535

 

 

$

(420

)

 

$

58,293

 

 

$

25,791

 

Amortization of intangibles

 

 

1,444

 

 

 

1,470

 

 

 

1,519

 

 

 

5,952

 

 

 

6,731

 

Stock-based compensation expense

 

 

7,779

 

 

 

7,218

 

 

 

8,954

 

 

 

30,505

 

 

 

29,137

 

Separation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

264

 

Change in fair value of contingent consideration

 

 

(3,204

)

 

 

187

 

 

 

(224

)

 

 

(2,928

)

 

 

(25

)

Restructuring and other charges

 

 

391

 

 

 

329

 

 

 

931

 

 

 

1,702

 

 

 

2,077

 

Litigation reserves, net

 

 

 

 

 

22

 

 

 

60

 

 

 

44

 

 

 

160

 

Gain/loss on investments, net

 

 

850

 

 

 

842

 

 

 

 

 

 

6,222

 

 

 

223

 

Non-GAAP tax adjustments

 

 

(7,246

)

 

 

(912

)

 

 

(460

)

 

 

(11,447

)

 

 

(4,598

)

Non-GAAP net income

 

$

30,962

 

 

$

34,691

 

 

$

10,360

 

 

$

88,343

 

 

$

59,760

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER DILUTED SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss) per diluted share

 

$

0.99

 

 

$

0.83

 

 

$

(0.01

)

 

$

1.90

 

 

$

0.81

 

Amortization of intangibles

 

 

0.05

 

 

 

0.05

 

 

 

0.05

 

 

 

0.19

 

 

 

0.21

 

Stock-based compensation expense

 

 

0.25

 

 

 

0.23

 

 

 

0.29

 

 

 

1.00

 

 

 

0.91

 

Separation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.01

 

Change in fair value of contingent consideration

 

 

(0.10

)

 

 

0.01

 

 

 

(0.01

)

 

 

(0.10

)

 

(0.00)

 

Restructuring and other charges

 

 

0.01

 

 

 

0.01

 

 

 

0.03

 

 

 

0.06

 

 

 

0.06

 

Litigation reserves, net

 

 

 

 

0.00

 

 

0.00

 

 

0.00

 

 

 

0.01

 

Gain/loss on investments, net

 

 

0.03

 

 

 

0.03

 

 

 

 

 

 

0.20

 

 

 

0.01

 

Non-GAAP tax adjustments

 

 

(0.24

)

 

 

(0.03

)

 

 

(0.01

)

 

 

(0.37

)

 

 

(0.15

)

Non-GAAP net income per diluted share 1

 

$

0.99

 

 

$

1.13

 

 

$

0.34

 

 

$

2.88

 

 

$

1.87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

31,235

 

 

 

30,741

 

 

 

30,103

 

 

 

30,640

 

 

 

31,965

 

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

 

 

31,235

 

 

 

30,741

 

 

 

30,800

 

 

 

30,640

 

 

 

31,965

 

 

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

 

 

 

December 31,
2020

 

 

September 27,
2020

 

 

June 28,
2020

 

 

March 29,
2020

 

 

December 31,
2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and short-term investments

 

$

353,318

 

 

$

306,818

 

 

$

258,552

 

 

$

209,714

 

 

$

195,707

 

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

 

$

11.31

 

 

$

9.98

 

 

$

8.60

 

 

$

6.98

 

 

$

6.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

337,052

 

 

$

340,004

 

 

$

277,490

 

 

$

257,582

 

 

$

277,168

 

Days sales outstanding (DSO)

 

 

87

 

 

 

82

 

 

 

90

 

 

 

100

 

 

 

102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

$

172,112

 

 

$

144,302

 

 

$

150,585

 

 

$

180,602

 

 

$

235,489

 

Ending inventory turns

 

 

5.9

 

 

 

7.3

 

 

 

5.3

 

 

 

3.6

 

 

 

3.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weeks of channel inventory:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. retail channel

 

 

8.6

 

 

 

5.7

 

 

 

6.4

 

 

 

7.0

 

 

 

8.0

 

U.S. distribution channel

 

 

4.9

 

 

 

2.8

 

 

 

4.2

 

 

 

5.7

 

 

 

4.5

 

EMEA distribution channel

 

 

5.7

 

 

 

6.8

 

 

 

4.7

 

 

 

6.7

 

 

 

5.9

 

APAC distribution channel

 

 

8.2

 

 

 

10.1

 

 

 

11.9

 

 

 

8.3

 

 

 

9.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue (current and non-current)

 

$

16,623

 

 

$

13,813

 

 

$

10,792

 

 

$

8,963

 

 

$

8,511

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Headcount

 

 

818

 

 

 

803

 

 

 

788

 

 

 

797

 

 

 

809

 

Non-GAAP diluted shares

 

 

31,235

 

 

 

30,741

 

 

 

30,070

 

 

 

30,045

 

 

 

30,800

 

NET REVENUE BY GEOGRAPHY

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

December 31,
2020

 

September 27,
2020

 

December 31,
2019

 

December 31,
2020

 

December 31,
2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

259,644

 

 

 

71

%

 

$

277,891

 

 

 

73

%

 

$

169,128

 

 

 

67

%

 

$

897,971

 

 

 

71

%

 

$

653,006

 

 

 

65

%

EMEA

 

 

67,453

 

 

 

18

%

 

 

63,705

 

 

 

17

%

 

 

50,491

 

 

 

20

%

 

 

221,665

 

 

 

18

%

 

 

200,099

 

 

 

20

%

APAC

 

 

39,976

 

 

 

11

%

 

 

36,518

 

 

 

10

%

 

 

33,352

 

 

 

13

%

 

 

135,566

 

 

 

11

%

 

 

145,658

 

 

 

15

%

Total

 

$

367,073

 

 

 

100

%

 

$

378,114

 

 

 

100

%

 

$

252,971

 

 

 

100

%

 

$

1,255,202

 

 

 

100

%

 

$

998,763

 

 

 

100

%

NETGEAR, INC.

SUPPLEMENTAL FINANCIAL INFORMATION (CONTINUED)

(In thousands)

(Unaudited)

   

NET REVENUE BY SEGMENT

    

 

Three Months Ended

 

 

Twelve Months Ended

 

 

December 31,
2020

 

 

September 27,
2020

 

 

December 31,
2019

 

 

December 31,
2020

 

 

December 31,
2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Connected Home

$

296,126

 

 

$

316,739

 

 

$

183,859

 

 

$

1,007,545

 

 

$

711,391

 

SMB

 

70,947

 

 

 

61,375

 

 

 

69,112

 

 

 

247,657

 

 

 

287,372

 

Total net revenue

$

367,073

 

 

$

378,114

 

 

$

252,971

 

 

$

1,255,202

 

 

$

998,763

 

SERVICE PROVIDER NET REVENUE

    

 

Three Months Ended

 

 

Twelve Months Ended

 

 

December 31,
2020

 

 

September 27,
2020

 

 

December 31,
2019

 

 

December 31,
2020

 

 

December 31,
2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Connected Home

$

48,532

 

 

$

73,343

 

 

$

29,651

 

 

$

192,714

 

 

$

128,852

 

SMB

 

770

 

 

 

712

 

 

 

1,095

 

 

 

3,150

 

 

 

4,465

 

Total service provider net revenue

$

49,302

 

 

$

74,055

 

 

$

30,746

 

 

$

195,864

 

 

$

133,317

 

 

NETGEAR Investor Relations
Erik Bylin
investors@netgear.com

Source: NETGEAR, INC.

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