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NETGEAR® Reports Fourth Quarter and Full Year 2021 Results

February 02, 2022

SMB Growth of 8.6% year over year for the fourth quarter; 27.0% for the full year

Reached 584,000 Paid Subscribers for 33.6% Growth Year over Year

Releases World’s First Quadband WiFi 6E Mesh System

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, 2021.

  • Fourth quarter 2021 net revenue of $251.2 million, a decrease of 31.6% from the comparable prior year quarter.
  • Fourth quarter 2021 GAAP operating income of $0.9 million, or 0.3% of net revenue, as compared to $33.8 million, or 9.2% of net revenue, in the comparable prior year quarter.
    • Fourth quarter 2021 non-GAAP operating income of $6.9 million, or 2.7% of net revenue, as compared to $40.3 million, or 11.0% of net revenue, in the comparable prior year quarter.
  • Fourth quarter 2021 GAAP net loss per diluted share of $0.03, as compared to net income per diluted share of $0.99 in the comparable prior year quarter.
    • Fourth quarter 2021 non-GAAP net income per diluted share of $0.27, as compared to $0.99 in the comparable prior year quarter.
  • Fiscal 2021 net revenue of $1.17 billion, a decrease of 6.9% from the prior year.
  • Fiscal 2021 GAAP operating income of $66.6 million, or 5.7% of net revenue, as compared to $75.5 million, or 6.0% of net revenue, in the prior year.
    • Fiscal 2021 non-GAAP operating income of $95.1 million, or 8.1% of net revenue, as compared to $110.8 million, or 8.8% of net revenue in the prior year.
  • Fiscal 2021 GAAP net income per diluted share of $1.59, as compared to $1.90 in the prior year.
    • Fiscal 2021 non-GAAP net income per diluted share of $2.44, as compared to $2.88 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, “Our team continued to execute through a challenging supply environment to deliver fourth quarter revenue of $251.2 million, and non-GAAP operating margin of 2.7%, both within our guidance. The team delivered Q4 year over year revenue growth of 8.6% for SMB products, which contributed to growth of 27% for the full year, despite significant supply challenges that limited our ability to fully meet continued strong SMB demand. On the CHP side of the business, we successfully completed our efforts to optimize channel inventory in the fourth quarter and we are pleased to share that we saw the U.S. consumer WiFi market remain stable at 15% above 2019 levels.”

Mr. Lo continued, “In the fourth quarter, our CHP business took another step forward in our core long-term strategy of focusing on the premium, higher-margin segments of the market, where we demonstrate highly differentiated technology leadership. Our recently released $1,500 Quadband WiFi 6E Orbi has been met with great reception from both customers and industry experts alike. Additionally, accelerated momentum in Pro AV switching and WiFi 6 cloud managed mesh wireless access points fuels our confidence in the long-term growth potential of the SMB business. We also made progress in building out our paid service offerings in the fourth quarter, as consumers increasingly look to secure their home office environments and intelligently manage their devices. I’m pleased to share that we ended the year at 584,000 paid subscribers. We remain confident that we will reach 750,000 paid subscribers by the end of 2022, as our subscriber base grows in tandem with our increased penetration into the premium segment of the market.”

Bryan Murray, Chief Financial Officer of NETGEAR, added, “During the fourth quarter of 2021, we repurchased approximately 539,000 shares of common stock for $17.5 million. Preserving strong liquidity and generating cash remain paramount as the pandemic continues into 2022, and we plan to continue to opportunistically repurchase shares in future quarters.”

Business Outlook

Mr. Murray continued, “The U.S. consumer WiFi market seems to have stabilized and, with the material efforts to optimize our retail channel partners’ inventory levels in Q4 2021 completed, we expect the normal decline of our first quarter CHP revenue from the retail channels versus the fourth quarter of the prior year to be muted. Normal seasonality of the retail portion of the CHP business is expected to resume from the second quarter onwards. Due to the lumpy nature of our service provider business, we expect first quarter revenue from this channel will be approximately $20 million, below our normal $35 million a quarter run rate. In addition, revenue for our SMB business will continue to face supply constraints, limiting our ability to achieve its full topline potential. Together, these factors lead us to expect our first quarter net revenue to be in the range of $225 million to $240 million. We continue to face a number of near-term headwinds, starting with elongated transit times due to numerous disruptions on the logistics front. We are also expecting that sea transportation costs will remain significantly elevated through the first half of 2022 and we will continue to spend on air transportation to maximize supply for our SMB products. Additionally, the impact of higher component costs will take full effect. We are selectively increasing prices to offset higher sea transportation and component costs over time starting in the first quarter, but the margin benefit of these price increases will increase as the year progresses. As a result of these factors, plus reduced leverage from our topline, our GAAP operating margin for the first quarter is expected to be in the range of (1.5)% to (0.5)%, and non-GAAP operating margin is expected to be in the range of 1.0% to 2.0%. Our GAAP tax rate is expected to be approximately (29.0)%, and our non-GAAP tax rate is expected to be 29.0% for the first quarter of 2022. We remain hopeful that sea transportation costs will ease and our SMB supply will improve in the second half of the year, thus creating a much more favorable environment for our top and bottom lines. 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 supply chain conditions continuing to remain challenged and, should unforeseen events occur, in particular challenges related to closure of our manufacturing partners operations, increased transportation delays into any of our regional distribution centers, or greater than expected freight or component costs, 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

 

 

 

April 3, 2022

 

 

 

Operating Margin
Rate

 

 

Tax Rate

 

 

 

 

 

 

 

 

 

 

GAAP

 

(1.5)% - (0.5)%

 

 

(29.0)%

 

Estimated adjustments for1:

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

2.4%

 

 

-

 

Amortization of intangibles

 

0.1%

 

 

-

 

Non-GAAP tax adjustments

 

-

 

 

58.0%

 

Non-GAAP

 

1.0% - 2.0%

 

 

29.0%

 

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 fourth quarter and full year results and discuss management's expectations for the first quarter of 2022 today, Wednesday, February 2, 2022 at 5 p.m. ET (2 p.m. PT). The toll free dial-in number for the live audio call is (888) 660-6468. The international dial-in number for the live audio call is (929) 201-5709. 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.

© 2022 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 respond to this demand; the Company’s strategic shift to focusing on the premium, higher-margin segments of the market; 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; expectations regarding supply constraints and inventory management; expectations regarding the ability to participate in promotional activities leading to further market share gains; expectations regarding expected tax rates; expectations regarding changes in seasonality; expectations regarding the impact of higher transportation and component costs and corresponding price increases; expectations regarding changes in transportation costs; 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 distribution centers; future demand for the Company's products may be lower than anticipated; the Company’s shift in focus to premium products at the expense of lower end products may not prove to be successful; 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 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; the Company may fail to successfully manage channel inventory levels; 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 October 3, 2021, filed with the Securities and Exchange Commission on November 5, 2021. 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 (expenses), 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, 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: 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,
2021

 

 

December 31,
2020

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

263,772

 

 

$

346,460

 

Short-term investments

 

 

7,744

 

 

 

6,858

 

Accounts receivable, net

 

 

261,158

 

 

 

337,052

 

Inventories

 

 

315,667

 

 

 

172,112

 

Prepaid expenses and other current assets

 

 

34,752

 

 

 

30,696

 

Total current assets

 

 

883,093

 

 

 

893,178

 

Property and equipment, net

 

 

13,335

 

 

 

16,080

 

Operating lease right-of-use assets, net

 

 

23,176

 

 

 

29,411

 

Intangibles, net

 

 

1,856

 

 

 

3,899

 

Goodwill

 

 

80,721

 

 

 

80,721

 

Other non-current assets

 

 

76,350

 

 

 

82,750

 

Total assets

 

$

1,078,531

 

 

$

1,106,039

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

73,729

 

 

$

90,902

 

Accrued employee compensation

 

 

24,704

 

 

 

35,020

 

Other accrued liabilities

 

 

224,584

 

 

 

218,375

 

Deferred revenue

 

 

16,500

 

 

 

13,458

 

Income taxes payable

 

 

1,528

 

 

 

7,318

 

Total current liabilities

 

 

341,045

 

 

 

365,073

 

Non-current income taxes payable

 

 

18,990

 

 

 

19,174

 

Non-current operating lease liabilities

 

 

18,569

 

 

 

25,512

 

Other non-current liabilities

 

 

3,112

 

 

 

6,896

 

Total liabilities

 

 

381,716

 

 

 

416,655

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock

 

 

29

 

 

 

30

 

Additional paid-in capital

 

 

923,228

 

 

 

882,709

 

Accumulated other comprehensive income (loss)

 

 

149

 

 

 

(35

)

Accumulated deficit

 

 

(226,591

)

 

 

(193,320

)

Total stockholders’ equity

 

 

696,815

 

 

 

689,384

 

Total liabilities and stockholders’ equity

 

$

1,078,531

 

 

$

1,106,039

 

NETGEAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share and percentage data)
(Unaudited)

 

 

Three Months Ended

 

 

Twelve Months Ended

 

 

 

December 31,
2021

 

 

October 3,
2021

 

 

December 31,
2020

 

 

December 31,
2021

 

 

December 31,

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenue

 

$

251,187

 

 

$

290,150

 

 

$

367,073

 

 

$

1,168,073

 

 

$

1,255,202

 

Cost of revenue

 

 

176,488

 

 

 

203,309

 

 

 

255,957

 

 

 

802,236

 

 

 

883,050

 

Gross profit

 

 

74,699

 

 

 

86,841

 

 

 

111,116

 

 

 

365,837

 

 

 

372,152

 

Gross margin

 

 

29.7

%

 

 

29.9

%

 

 

30.3

%

 

 

31.3

%

 

 

29.6

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

23,080

 

 

 

23,472

 

 

 

23,376

 

 

 

92,967

 

 

 

88,788

 

Sales and marketing

 

 

36,230

 

 

 

36,176

 

 

 

40,645

 

 

 

145,961

 

 

 

147,854

 

General and administrative

 

 

14,575

 

 

 

14,056

 

 

 

16,066

 

 

 

59,659

 

 

 

61,148

 

Other operating expenses (income), net

 

 

(37

)

 

 

222

 

 

 

(2,813

)

 

 

653

 

 

 

(1,182

)

Total operating expenses

 

 

73,848

 

 

 

73,926

 

 

 

77,274

 

 

 

299,240

 

 

 

296,608

 

Income from operations

 

 

851

 

 

 

12,915

 

 

 

33,842

 

 

 

66,597

 

 

 

75,544

 

Operating margin

 

 

0.3

%

 

 

4.5

%

 

 

9.2

%

 

 

5.7

%

 

 

6.0

%

Other income (expenses), net

 

 

(1,108

)

 

 

(132

)

 

 

(363

)

 

 

(1,093

)

 

 

(4,741

)

Income (loss) before income taxes

 

 

(257

)

 

 

12,783

 

 

 

33,479

 

 

 

65,504

 

 

 

70,803

 

Provision for income taxes

 

 

734

 

 

 

3,199

 

 

 

2,531

 

 

 

16,117

 

 

 

12,510

 

Net income (loss)

 

$

(991

)

 

$

9,584

 

 

$

30,948

 

 

$

49,387

 

 

$

58,293

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.03

)

 

$

0.32

 

 

$

1.02

 

 

$

1.63

 

 

$

1.95

 

Diluted

 

$

(0.03

)

 

$

0.31

 

 

$

0.99

 

 

$

1.59

 

 

$

1.90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

29,456

 

 

 

30,301

 

 

 

30,331

 

 

 

30,241

 

 

 

29,897

 

Diluted

 

 

29,456

 

 

 

30,798

 

 

 

31,235

 

 

 

31,002

 

 

 

30,640

 

NETGEAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 

Twelve Months Ended

 

 

December 31,
2021

 

 

December 31,
2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

$

49,387

 

 

$

58,293

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

13,906

 

 

 

18,931

 

Stock-based compensation

 

25,995

 

 

 

30,505

 

Gain/loss on investments, net

 

1,362

 

 

 

6,222

 

Change in fair value of contingent consideration

 

(3,003

)

 

 

(2,928

)

Deferred income taxes

 

4,498

 

 

 

(9,386

)

Provision for excess and obsolete inventory

 

3,877

 

 

 

7,872

 

Other

 

 

 

 

74

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable, net

 

75,894

 

 

 

(59,885

)

Inventories

 

(147,432

)

 

 

55,505

 

Prepaid expenses and other assets

 

(4,127

)

 

 

4,833

 

Accounts payable

 

(16,493

)

 

 

9,744

 

Accrued employee compensation

 

(10,316

)

 

 

15,718

 

Other accrued liabilities

 

4,869

 

 

 

28,194

 

Deferred revenue

 

2,978

 

 

 

8,112

 

Income taxes payable

 

(5,974

)

 

 

9,346

 

Net cash provided by (used in) operating activities

 

(4,579

)

 

 

181,150

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property and equipment

 

(9,864

)

 

 

(10,296

)

Purchases of long-term investments

 

(685

)

 

 

(6,525

)

Other

 

564

 

 

 

(15

)

Net cash used in investing activities

 

(9,985

)

 

 

(16,836

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Repurchases of common stock

 

(75,000

)

 

 

(23,800

)

Restricted stock unit withholdings

 

(7,660

)

 

 

(5,090

)

Proceeds from exercise of stock options

 

9,620

 

 

 

16,950

 

Proceeds from issuance of common stock under employee stock purchase plan

 

4,916

 

 

 

3,878

 

Net cash used in financing activities

 

(68,124

)

 

 

(8,062

)

Net increase (decrease) in cash and cash equivalents

 

(82,688

)

 

 

156,252

 

Cash and cash equivalents, at beginning of period

 

346,460

 

 

 

190,208

 

Cash and cash equivalents, at end of period

$

263,772

 

 

$

346,460

 

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,
2021

 

 

October 3,
2021

 

 

December 31,
2020

 

 

December 31,
2021

 

 

December 31,
2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

74,699

 

 

$

86,841

 

 

$

111,116

 

 

$

365,837

 

 

$

372,152

 

GAAP gross margin

 

 

29.7

%

 

 

29.9

%

 

 

30.3

%

 

 

31.3

%

 

 

29.6

%

Amortization of intangibles

 

 

129

 

 

 

145

 

 

 

178

 

 

 

631

 

 

 

714

 

Stock-based compensation expense

 

 

477

 

 

 

430

 

 

 

962

 

 

 

2,103

 

 

 

4,091

 

Non-GAAP gross profit

 

$

75,305

 

 

$

87,416

 

 

$

112,256

 

 

$

368,571

 

 

$

376,957

 

Non-GAAP gross margin

 

 

30.0

%

 

 

30.1

%

 

 

30.6

%

 

 

31.6

%

 

 

30.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP research and development

 

$

23,080

 

 

$

23,472

 

 

$

23,376

 

 

$

92,967

 

 

$

88,788

 

Stock-based compensation expense

 

 

(1,329

)

 

 

(1,414

)

 

 

(1,304

)

 

 

(5,161

)

 

 

(5,183

)

Non-GAAP research and development

 

$

21,751

 

 

$

22,058

 

 

$

22,072

 

 

$

87,806

 

 

$

83,605

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP sales and marketing

 

$

36,230

 

 

$

36,176

 

 

$

40,645

 

 

$

145,961

 

 

$

147,854

 

Amortization of intangibles

 

 

 

 

 

 

 

 

(1,266

)

 

 

(1,266

)

 

 

(5,238

)

Stock-based compensation expense

 

 

(1,887

)

 

 

(2,008

)

 

 

(2,038

)

 

 

(7,628

)

 

 

(7,634

)

Non-GAAP sales and marketing

 

$

34,343

 

 

$

34,168

 

 

$

37,341

 

 

$

137,067

 

 

$

134,982

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative

 

$

14,575

 

 

$

14,056

 

 

$

16,066

 

 

$

59,659

 

 

$

61,148

 

Stock-based compensation expense

 

 

(2,230

)

 

 

(2,358

)

 

 

(3,475

)

 

 

(11,103

)

 

 

(13,597

)

Non-GAAP general and administrative

 

$

12,345

 

 

$

11,698

 

 

$

12,591

 

 

$

48,556

 

 

$

47,551

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP other operating expenses (income), net

 

$

(37

)

 

$

222

 

 

$

(2,813

)

 

$

653

 

 

$

(1,182

)

Change in fair value of contingent consideration

 

 

 

 

 

 

 

 

3,204

 

 

 

3,003

 

 

 

2,928

 

Restructuring and other charges

 

 

37

 

 

 

(222

)

 

 

(391

)

 

 

(3,341

)

 

 

(1,702

)

Litigation reserves, net

 

 

 

 

 

 

 

 

 

 

 

(315

)

 

 

(44

)

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,
2021

 

 

October 3,
2021

 

 

December 31,
2020

 

 

December 31,
2021

 

 

December 31,
2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP total operating expenses

 

$

73,848

 

 

$

73,926

 

 

$

77,274

 

 

$

299,240

 

 

$

296,608

 

Amortization of intangibles

 

 

 

 

 

 

 

 

(1,266

)

 

 

(1,266

)

 

 

(5,238

)

Stock-based compensation expense

 

 

(5,446

)

 

 

(5,780

)

 

 

(6,817

)

 

 

(23,892

)

 

 

(26,414

)

Change in fair value of contingent consideration

 

 

 

 

 

 

 

 

3,204

 

 

 

3,003

 

 

 

2,928

 

Restructuring and other charges

 

 

37

 

 

 

(222

)

 

 

(391

)

 

 

(3,341

)

 

 

(1,702

)

Litigation reserves, net

 

 

 

 

 

 

 

 

 

 

 

(315

)

 

 

(44

)

Non-GAAP total operating expenses

 

$

68,439

 

 

$

67,924

 

 

$

72,004

 

 

$

273,429

 

 

$

266,138

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income

 

$

851

 

 

$

12,915

 

 

$

33,842

 

 

$

66,597

 

 

$

75,544

 

GAAP operating margin

 

 

0.3

%

 

 

4.5

%

 

 

9.2

%

 

 

5.7

%

 

 

6.0

%

Amortization of intangibles

 

 

129

 

 

 

145

 

 

 

1,444

 

 

 

1,897

 

 

 

5,952

 

Stock-based compensation expense

 

 

5,923

 

 

 

6,210

 

 

 

7,779

 

 

 

25,995

 

 

 

30,505

 

Change in fair value of contingent consideration

 

 

 

 

 

 

 

 

(3,204

)

 

 

(3,003

)

 

 

(2,928

)

Restructuring and other charges

 

 

(37

)

 

 

222

 

 

 

391

 

 

 

3,341

 

 

 

1,702

 

Litigation reserves, net

 

 

 

 

 

 

 

 

 

 

 

315

 

 

 

44

 

Non-GAAP operating income

 

$

6,866

 

 

$

19,492

 

 

$

40,252

 

 

$

95,142

 

 

$

110,819

 

Non-GAAP operating margin

 

 

2.7

%

 

 

6.7

%

 

 

11.0

%

 

 

8.1

%

 

 

8.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP other income (expenses), net

 

$

(1,108

)

 

$

(132

)

 

$

(363

)

 

$

(1,093

)

 

$

(4,741

)

Gain/loss on investments, net

 

 

1,188

 

 

 

166

 

 

 

850

 

 

 

1,362

 

 

 

6,222

 

Non-GAAP other income (expenses), net

 

$

80

 

 

$

34

 

 

$

487

 

 

$

269

 

 

$

1,481

 

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,
2021

 

 

October 3,
2021

 

 

December 31,
2020

 

 

December 31,
2021

 

 

December 31,
2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss)

 

$

(991

)

 

$

9,584

 

 

$

30,948

 

 

$

49,387

 

 

$

58,293

 

Amortization of intangibles

 

 

129

 

 

 

145

 

 

 

1,444

 

 

 

1,897

 

 

 

5,952

 

Stock-based compensation expense

 

 

5,923

 

 

 

6,210

 

 

 

7,779

 

 

 

25,995

 

 

 

30,505

 

Change in fair value of contingent consideration

 

 

 

 

 

 

 

 

(3,204

)

 

 

(3,003

)

 

 

(2,928

)

Restructuring and other charges

 

 

(37

)

 

 

222

 

 

 

391

 

 

 

3,341

 

 

 

1,702

 

Litigation reserves, net

 

 

 

 

 

 

 

 

 

 

 

315

 

 

 

44

 

Gain/loss on investments, net

 

 

1,188

 

 

 

166

 

 

 

850

 

 

 

1,362

 

 

 

6,222

 

Non-GAAP tax adjustments

 

 

1,908

 

 

 

(1,026

)

 

 

(7,246

)

 

 

(3,505

)

 

 

(11,447

)

Non-GAAP net income

 

$

8,120

 

 

$

15,301

 

 

$

30,962

 

 

$

75,789

 

 

$

88,343

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER DILUTED SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss) per diluted share

 

$

(0.03

)

 

$

0.31

 

 

$

0.99

 

 

$

1.59

 

 

$

1.90

 

Amortization of intangibles

 

0.00

 

 

0.00

 

 

 

0.05

 

 

 

0.06

 

 

 

0.19

 

Stock-based compensation expense

 

 

0.20

 

 

 

0.20

 

 

 

0.25

 

 

 

0.84

 

 

 

1.00

 

Change in fair value of contingent consideration

 

 

 

 

 

 

 

 

(0.10

)

 

 

(0.10

)

 

 

(0.10

)

Restructuring and other charges

 

(0.00)

 

 

 

0.01

 

 

 

0.01

 

 

 

0.11

 

 

 

0.06

 

Litigation reserves, net

 

 

 

 

 

 

 

 

 

 

 

0.01

 

 

0.00

 

Gain/loss on investments, net

 

 

0.04

 

 

 

0.01

 

 

 

0.03

 

 

 

0.04

 

 

 

0.20

 

Non-GAAP tax adjustments

 

 

0.06

 

 

 

(0.03

)

 

 

(0.24

)

 

 

(0.11

)

 

 

(0.37

)

Non-GAAP net income per diluted share 1

 

$

0.27

 

 

$

0.50

 

 

$

0.99

 

 

$

2.44

 

 

$

2.88

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

29,456

 

 

 

30,798

 

 

 

31,235

 

 

 

31,002

 

 

 

30,640

 

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

 

 

29,822

 

 

 

30,798

 

 

 

31,235

 

 

 

31,002

 

 

 

30,640

 

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,
2021

 

 

October 3,
2021

 

 

June 27,
2021

 

 

March 28,
2021

 

 

December 31,
2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and short-term investments

 

$

271,516

 

 

$

292,195

 

 

$

335,319

 

 

$

370,656

 

 

$

353,318

 

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

 

$

9.10

 

 

$

9.49

 

 

$

10.66

 

 

$

11.65

 

 

$

11.31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

261,158

 

 

$

266,526

 

 

$

290,598

 

 

$

312,922

 

 

$

337,052

 

Days sales outstanding (DSO)

 

 

93

 

 

 

90

 

 

 

86

 

 

 

86

 

 

 

87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

$

315,667

 

 

$

305,129

 

 

$

251,764

 

 

$

215,705

 

 

$

172,112

 

Ending inventory turns

 

 

2.2

 

 

 

2.7

 

 

 

3.4

 

 

 

3.8

 

 

 

5.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weeks of channel inventory:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. retail channel

 

 

12.7

 

 

 

14.7

 

 

 

12.9

 

 

 

11.8

 

 

 

8.6

 

U.S. distribution channel

 

 

3.0

 

 

 

3.1

 

 

 

3.4

 

 

 

3.6

 

 

 

4.9

 

EMEA distribution channel

 

 

6.8

 

 

 

6.8

 

 

 

7.8

 

 

 

4.9

 

 

 

5.7

 

APAC distribution channel

 

 

13.4

 

 

 

9.6

 

 

 

11.5

 

 

 

7.6

 

 

 

8.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue (current and non-current)

 

$

19,600

 

 

$

18,684

 

 

$

18,482

 

 

$

18,116

 

 

$

16,623

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Headcount

 

 

771

 

 

 

780

 

 

 

769

 

 

 

775

 

 

 

818

 

Non-GAAP diluted shares

 

 

29,822

 

 

 

30,798

 

 

 

31,464

 

 

 

31,814

 

 

 

31,235

 

NET REVENUE BY GEOGRAPHY

 

 

Three Months Ended

 

 

Twelve Months Ended

 

 

 

December 31,
2021

 

 

October 3,
2021

 

 

December 31,
2020

 

 

December 31,
2021

 

 

December 31,
2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

159,419

 

 

 

63

%

 

$

195,123

 

 

 

67

%

 

$

259,644

 

 

 

71

%

 

$

786,326

 

 

 

67

%

 

$

897,971

 

 

 

71

%

EMEA

 

 

50,027

 

 

 

20

%

 

 

56,940

 

 

 

20

%

 

 

67,453

 

 

 

18

%

 

 

229,829

 

 

 

20

%

 

 

221,665

 

 

 

18

%

APAC

 

 

41,741

 

 

 

17

%

 

 

38,087

 

 

 

13

%

 

 

39,976

 

 

 

11

%

 

 

151,918

 

 

 

13

%

 

 

135,566

 

 

 

11

%

Total

 

$

251,187

 

 

 

100

%

 

$

290,150

 

 

 

100

%

 

$

367,073

 

 

 

100

%

 

$

1,168,073

 

 

 

100

%

 

$

1,255,202

 

 

 

100

%

NETGEAR, INC.
SUPPLEMENTAL FINANCIAL INFORMATION (CONTINUED)
(In thousands)
(Unaudited)

NET REVENUE BY SEGMENT

 

Three Months Ended

 

 

Twelve Months Ended

 

 

December 31,
2021

 

 

October 3,
2021

 

 

December 31,
2020

 

 

December 31,
2021

 

 

December 31,
2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Connected Home

$

174,152

 

 

$

208,539

 

 

$

296,126

 

 

$

853,472

 

 

$

1,007,545

 

SMB

 

77,035

 

 

 

81,611

 

 

 

70,947

 

 

 

314,601

 

 

 

247,657

 

Total net revenue

$

251,187

 

 

$

290,150

 

 

$

367,073

 

 

$

1,168,073

 

 

$

1,255,202

 

SERVICE PROVIDER NET REVENUE

 

Three Months Ended

 

 

Twelve Months Ended

 

 

December 31,

2021

 

 

October 3,

2021

 

 

December 31,

2020

 

 

December 31,

2021

 

 

December 31,

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Connected Home

$

29,697

 

 

$

41,726

 

 

$

48,532

 

 

$

129,052

 

 

$

192,714

 

SMB

 

711

 

 

 

449

 

 

 

770

 

 

 

2,481

 

 

 

3,150

 

Total service provider net revenue

$

30,408

 

 

$

42,175

 

 

$

49,302

 

 

$

131,533

 

 

$

195,864

 

 

NETGEAR Investor Relations
Erik Bylin
investors@netgear.com

Source: NETGEAR, Inc.

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