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NETGEAR® Reports First Quarter 2023 Results

April 26, 2023

Q1 GAAP gross margin of 33.4%; Non-GAAP gross margin of 33.6%

772,000 paid subscribers for 23.1% growth year over year

NETGEAR, Inc. (NASDAQ: NTGR), a global networking company that delivers innovative networking and Internet connected products to consumers and businesses, today reported financial results for the first quarter ended April 2, 2023.

  • First quarter 2023 net revenue of $180.9 million, a decrease of 14.1% from the comparable prior-year quarter.
  • First quarter 2023 GAAP operating loss of $12.0 million, or (6.6)% of net revenue, as compared to operating loss of $58.5 million, or (27.8)% of net revenue, in the comparable prior-year quarter.
    • First quarter 2023 non-GAAP operating loss of $7.1 million, or (3.9)% of net revenue, as compared to operating loss of $9.3 million, or (4.4)% of net revenue, in the comparable prior-year quarter.
  • First quarter 2023 GAAP net loss per diluted share of $0.33, as compared to net loss per diluted share of $1.95 in the comparable prior-year quarter.
    • First quarter 2023 non-GAAP net loss per diluted share of $0.19, as compared to net loss per diluted share of $0.28 in the comparable prior-year quarter.

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

Patrick Lo, Chairman and Chief Executive Officer of NETGEAR, commented, “Due to unprecedented inventory reduction by our largest Service Provider partner, as well as a similar reduction in SMB inventory by our largest e-commerce partner, our first quarter revenue and operating margin came in below our expectations. As a result of the uncertain macroeconomic environment and concerns over their own operations, our channel partners continue to materially reduce their inventory to historically low levels, greatly impacting our top line and resulting in lost operating leverage. However, propelled by ProAV, SMB end user sales grew by double digits year over year, and our premium CHP products again vastly outperformed the broader market, growing sequentially despite normal seasonal patterns. Buoyed by the shift to our higher-margin, premium products, and improved transportation costs, NETGEAR delivered an impressive non-GAAP gross margin of 33.6% for an improvement of 540 basis points year over year.”

Mr. Lo continued, “The continued outperformance of our premium products represented by our Orbi 8 and Orbi 9, 5G mobile hotspots, and ProAV managed switches clearly demonstrates the sustainability of the margin expansion potential of our core long-term growth thesis even in the face of macroeconomic headwinds. With the upcoming move to WiFi 7, we are once again at the forefront of bringing the newest technology to market with our recently launched Nighthawk RS700, NETGEAR’s first WiFi 7 router. Our services business continues to gain traction, ending the quarter with 772,000 paid subscribers, as our paid subscriber base continues to grow with the demand for our premium WiFi products and comprehensive Armor security service. We remain encouraged by this progress and are on pace to reach our full year target of 875,000 subscribers.”

Business Outlook

Bryan Murray, Chief Financial Officer of NETGEAR, added, “We expect to continue to experience strong underlying demand in the SMB business and the premium portion of our CHP product portfolio, even in the face of ongoing broad-based inflationary pressures and an uncertain macroeconomic environment. We will continue to work with our channel partners across both businesses to optimize their inventory carrying levels, and expect a revenue impact from these efforts to be at a similar level as experienced in the first quarter. Accordingly, we expect our second quarter net revenue to be in the range of $150 million to $165 million. We expect second quarter GAAP operating margin to be in the range of (13.4)% to (10.4)%, and non-GAAP operating margin is expected to be in the range of (9.0)% to (6.0)%. Our GAAP tax rate is expected to be approximately 11.0%, and our non-GAAP tax rate is expected to be 6.0% for the second quarter of 2023.

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

 

 

Three months ending

 

 

July 2, 2023

 

 

Operating Margin
Rate

 

Tax Rate

 

 

 

 

 

GAAP

 

(13.4)% - (10.4)%

 

11.0%

Estimated adjustments for1:

 

 

 

 

Stock-based compensation expense

 

3.2%

 

-

Amortization of intangibles

 

0.1%

 

-

Restructuring and other charges

 

1.1%

 

-

Non-GAAP tax adjustments

 

-

 

(5.0)%

Non-GAAP

 

(9.0)% - (6.0)%

 

6.0%

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 first quarter results and discuss management's expectations for the second quarter of 2023 today, Wednesday, April 26, 2023 at 5 p.m. ET (2 p.m. PT). The toll-free dial-in number for the live audio call is (888) 660-6468. 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.

© 2023 NETGEAR, Inc. NETGEAR and the NETGEAR logo are trademarks or registered trademarks of NETGEAR, Inc. and its affiliates in the United States and/or other countries. Other brand and product names are trademarks or registered trademarks of their respective holders. The information contained herein is subject to change without notice. NETGEAR shall not be liable for technical or editorial errors or omissions contained herein. All rights reserved.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 for NETGEAR, Inc .:

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. The words “anticipate,” “expect,” “believe,” “will,” “may,” “should,” “estimate,” “project,” “outlook,” “forecast” or other similar words are used to identify such forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. The forward-looking statements represent NETGEAR, Inc.’s expectations or beliefs concerning future events based on information available at the time such statements were made and include statements regarding: NETGEAR’s future operating performance and financial condition, including expectations regarding growth, revenue, continued profitability and cash generation; expectations regarding continuing market demand for the Company’s products, including SMB and premium CHP 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 and targeting affluent consumers and consumers with the highest propensity to subscribe to NETGEAR’s service offerings; the timing, distribution, sales momentum and market acceptance of recent and anticipated new product introductions that position 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 the impact of higher transportation and component costs and corresponding price increases; expectations regarding spending in transportation costs to maximize revenue; expectations regarding repurchases of the Company’s common stock; expectations regarding the Company’s small and medium business and service provider channels; expectations regarding price increases on NETGEAR’s products; expectations regarding retail channel partners’ inventory levels; expectations regarding seasonal shifts in market demand; expectations regarding revenue from the service provider channel; and expectations regarding NETGEAR's 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, closures affecting the operations of the Company’s manufacturing partners 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 I - Item 1A. Risk Factors” in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission on February 17, 2023. Given these circumstances, you should not place undue reliance on these forward-looking statements. NETGEAR undertakes no obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.

Non-GAAP Financial Information:

To supplement our unaudited selected financial data presented on a basis consistent with Generally Accepted Accounting Principles (“GAAP”), we disclose certain non-GAAP financial measures that exclude certain charges, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development, non-GAAP sales and marketing, non-GAAP general and administrative, non-GAAP other operating expenses, net, non-GAAP total operating expenses, non-GAAP operating loss, non-GAAP operating margin, non-GAAP other income (expenses), net, non-GAAP net loss and non-GAAP net loss per diluted share. These supplemental measures exclude adjustments for amortization of intangibles, stock-based compensation expense, goodwill impairment, restructuring and other charges, litigation reserves, net, gain/loss on investments, net, 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, goodwill impairment, 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 loss. We believe providing financial information with and without the income tax effects relating to our non-GAAP financial measures provides our management and users of the financial statements with better clarity regarding the on-going performance of our business. Non-GAAP income tax expense (benefit) is computed on a current and deferred basis with non-GAAP loss consistent with use of non-GAAP loss as a performance measure. The Non-GAAP tax provision (benefit) is calculated by adjusting the GAAP tax provision (benefit) for the impact of the non-GAAP adjustments, with specific tax provisions such as state income tax and Base-erosion and Anti-Abuse Tax recomputed on a non-GAAP basis. For interim periods, the non-GAAP income tax provision (benefit) is calculated based on the forecasted annual non-GAAP tax rate before discrete items and adjusted for interim discrete items.

Source: NETGEAR-F

NETGEAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

 

April 2, 2023

 

December 31, 2022

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

143,191

 

 

$

146,500

 

Short-term investments

 

 

96,019

 

 

 

80,925

 

Accounts receivable, net

 

 

192,540

 

 

 

277,485

 

Inventories

 

 

337,187

 

 

 

299,614

 

Prepaid expenses and other current assets

 

 

30,487

 

 

 

29,767

 

Total current assets

 

 

799,424

 

 

 

834,291

 

Property and equipment, net

 

 

8,266

 

 

 

9,225

 

Operating lease right-of-use assets

 

 

39,908

 

 

 

40,868

 

Intangibles, net

 

 

1,200

 

 

 

1,329

 

Goodwill

 

 

36,279

 

 

 

36,279

 

Other non-current assets

 

 

103,030

 

 

 

97,793

 

Total assets

 

$

988,107

 

 

$

1,019,785

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

79,637

 

 

$

85,550

 

Accrued employee compensation

 

 

21,706

 

 

 

24,132

 

Other accrued liabilities

 

 

190,276

 

 

 

213,476

 

Deferred revenue

 

 

22,439

 

 

 

21,128

 

Income taxes payable

 

 

3,702

 

 

 

1,685

 

Total current liabilities

 

 

317,760

 

 

 

345,971

 

Non-current income taxes payable

 

 

15,214

 

 

 

14,972

 

Non-current operating lease liabilities

 

 

32,372

 

 

 

34,085

 

Other non-current liabilities

 

 

4,199

 

 

 

3,902

 

Total liabilities

 

 

369,545

 

 

 

398,930

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock

 

 

29

 

 

 

29

 

Additional paid-in capital

 

 

953,074

 

 

 

946,123

 

Accumulated other comprehensive income (loss)

 

 

53

 

 

 

(535

)

Accumulated deficit

 

 

(334,594

)

 

 

(324,762

)

Total stockholders’ equity

 

 

618,562

 

 

 

620,855

 

Total liabilities and stockholders’ equity

 

$

988,107

 

 

$

1,019,785

 

NETGEAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share and percentage data)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

April 2, 2023

 

December 31, 2022

 

April 3, 2022

 

 

 

 

 

 

 

 

 

 

Net revenue

 

$

180,908

 

 

$

249,103

 

 

$

210,558

 

Cost of revenue

 

 

120,526

 

 

 

187,407

 

 

 

151,655

 

Gross profit

 

 

60,382

 

 

 

61,696

 

 

 

58,903

 

Gross margin

 

 

33.4

%

 

 

24.8

%

 

 

28.0

%

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

 

22,134

 

 

 

20,250

 

 

 

23,821

 

Sales and marketing

 

 

33,879

 

 

 

35,340

 

 

 

35,586

 

General and administrative

 

 

16,236

 

 

 

14,618

 

 

 

13,602

 

Goodwill impairment

 

 

 

 

 

 

 

 

44,442

 

Other operating expenses (income), net

 

 

108

 

 

 

3,666

 

 

 

(3

)

Total operating expenses

 

 

72,357

 

 

 

73,874

 

 

 

117,448

 

Loss from operations

 

 

(11,975

)

 

 

(12,178

)

 

 

(58,545

)

Operating margin

 

 

(6.6

)%

 

 

(4.9

)%

 

 

(27.8

)%

Other income (expenses), net

 

 

1,406

 

 

 

2,066

 

 

 

(982

)

Loss before income taxes

 

 

(10,569

)

 

 

(10,112

)

 

 

(59,527

)

Benefit from income taxes

 

 

(857

)

 

 

(4,068

)

 

 

(2,317

)

Net loss

 

$

(9,712

)

 

$

(6,044

)

 

$

(57,210

)

 

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.33

)

 

$

(0.21

)

 

$

(1.95

)

Diluted

 

$

(0.33

)

 

$

(0.21

)

 

$

(1.95

)

 

 

 

 

 

 

 

 

 

 

Weighted average shares used to compute net loss per share:

 

 

 

 

 

 

 

 

 

Basic

 

 

29,040

 

 

 

28,959

 

 

 

29,350

 

Diluted

 

 

29,040

 

 

 

28,959

 

 

 

29,350

 

NETGEAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

April 2, 2023

 

April 3, 2022

Cash flows from operating activities:

 

 

 

 

 

Net loss

$

(9,712

)

 

$

(57,210

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

2,011

 

 

 

2,807

 

Stock-based compensation

 

4,665

 

 

 

4,697

 

Gain/loss on investments, net

 

(663

)

 

 

622

 

Goodwill impairment

 

 

 

 

44,442

 

Deferred income taxes

 

(4,629

)

 

 

(7,626

)

Provision for excess and obsolete inventory

 

1,174

 

 

 

1,460

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable, net

 

84,945

 

 

 

41,247

 

Inventories

 

(38,747

)

 

 

(13,102

)

Prepaid expenses and other assets

 

(1,778

)

 

 

7,889

 

Accounts payable

 

(5,922

)

 

 

(9,012

)

Accrued employee compensation

 

(2,425

)

 

 

(3,743

)

Other accrued liabilities

 

(23,665

)

 

 

(13,155

)

Deferred revenue

 

1,609

 

 

 

1,705

 

Income taxes payable

 

2,259

 

 

 

273

 

Net cash provided by operating activities

 

9,122

 

 

 

1,294

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of short-term investments

 

(38,733

)

 

 

(50,202

)

Proceeds from maturities of short-term investments

 

25,006

 

 

 

417

 

Purchases of property and equipment

 

(870

)

 

 

(957

)

Purchases of long-term investments

 

 

 

 

(210

)

Net cash used in investing activities

 

(14,597

)

 

 

(50,952

)

Cash flows from financing activities:

 

 

 

 

 

Repurchases of common stock

 

 

 

 

(9,377

)

Restricted stock unit withholdings

 

(120

)

 

 

(1,262

)

Proceeds from exercise of stock options

 

 

 

 

593

 

Proceeds from issuance of common stock under employee stock purchase plan

 

2,286

 

 

 

2,758

 

Net cash provided by (used in) financing activities

 

2,166

 

 

 

(7,288

)

Net decrease in cash and cash equivalents

 

(3,309

)

 

 

(56,946

)

Cash and cash equivalents, at beginning of period

 

146,500

 

 

 

263,772

 

Cash and cash equivalents, at end of period

$

143,191

 

 

$

206,826

 

NETGEAR, INC.

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES

(In thousands, except percentage data)

(Unaudited)

 

STATEMENT OF OPERATIONS DATA:

 

 

 

Three Months Ended

 

 

April 2, 2023

 

December 31, 2022

 

April 3, 2022

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

60,382

 

 

$

61,696

 

 

$

58,903

 

GAAP gross margin

 

 

33.4

%

 

 

24.8

%

 

 

28.0

%

Amortization of intangibles

 

 

129

 

 

 

128

 

 

 

129

 

Stock-based compensation expense

 

 

351

 

 

 

326

 

 

 

386

 

Non-GAAP gross profit

 

$

60,862

 

 

$

62,150

 

 

$

59,418

 

Non-GAAP gross margin

 

 

33.6

%

 

 

24.9

%

 

 

28.2

%

 

 

 

 

 

 

 

 

 

 

GAAP research and development

 

$

22,134

 

 

$

20,250

 

 

$

23,821

 

Stock-based compensation expense

 

 

(1,065

)

 

 

(1,027

)

 

 

(1,087

)

Non-GAAP research and development

 

$

21,069

 

 

$

19,223

 

 

$

22,734

 

 

 

 

 

 

 

 

 

 

 

GAAP sales and marketing

 

$

33,879

 

 

$

35,340

 

 

$

35,586

 

Stock-based compensation expense

 

 

(1,431

)

 

 

(1,328

)

 

 

(1,456

)

Non-GAAP sales and marketing

 

$

32,448

 

 

$

34,012

 

 

$

34,130

 

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative

 

$

16,236

 

 

$

14,618

 

 

$

13,602

 

Stock-based compensation expense

 

 

(1,818

)

 

 

(1,787

)

 

 

(1,768

)

Non-GAAP general and administrative

 

$

14,418

 

 

$

12,831

 

 

$

11,834

 

 

 

 

 

 

 

 

 

 

 

GAAP other operating expenses (income), net

 

$

108

 

 

$

3,666

 

 

$

(3

)

Restructuring and other charges

 

 

(108

)

 

 

(3,666

)

 

 

23

 

Litigation reserves, net

 

 

 

 

 

 

 

 

(20

)

Non-GAAP other operating expenses, net

 

$

 

 

$

 

 

$

 

NETGEAR, INC.

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)

(In thousands, except percentage data)

(Unaudited)

 

STATEMENT OF OPERATIONS DATA (CONTINUED):

 

 

 

Three Months Ended

 

 

April 2, 2023

 

December 31, 2022

 

April 3, 2022

 

 

 

 

 

 

 

 

 

 

GAAP total operating expenses

 

$

72,357

 

 

$

73,874

 

 

$

117,448

 

Stock-based compensation expense

 

 

(4,314

)

 

 

(4,142

)

 

 

(4,311

)

Goodwill impairment

 

 

 

 

 

 

 

 

(44,442

)

Restructuring and other charges

 

 

(108

)

 

 

(3,666

)

 

 

23

 

Litigation reserves, net

 

 

 

 

 

 

 

 

(20

)

Non-GAAP total operating expenses

 

$

67,935

 

 

$

66,066

 

 

$

68,698

 

 

 

 

 

 

 

 

 

 

 

GAAP operating loss

 

$

(11,975

)

 

$

(12,178

)

 

$

(58,545

)

GAAP operating margin

 

 

(6.6

)%

 

 

(4.9

)%

 

 

(27.8

)%

Amortization of intangibles

 

 

129

 

 

 

128

 

 

 

129

 

Stock-based compensation expense

 

 

4,665

 

 

 

4,468

 

 

 

4,697

 

Goodwill impairment

 

 

 

 

 

 

 

 

44,442

 

Restructuring and other charges

 

 

108

 

 

 

3,666

 

 

 

(23

)

Litigation reserves, net

 

 

 

 

 

 

 

 

20

 

Non-GAAP operating loss

 

$

(7,073

)

 

$

(3,916

)

 

$

(9,280

)

Non-GAAP operating margin

 

 

(3.9

)%

 

 

(1.6

)%

 

 

(4.4

)%

 

 

 

 

 

 

 

 

 

 

GAAP other income (expenses), net

 

$

1,406

 

 

$

2,066

 

 

$

(982

)

Gain/loss on investments, net

 

 

11

 

 

 

20

 

 

 

519

 

Non-GAAP other income (expenses), net

 

$

1,417

 

 

$

2,086

 

 

$

(463

)

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

 

 

April 2, 2023

 

December 31, 2022

 

April 3, 2022

 

 

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(9,712

)

 

$

(6,044

)

 

$

(57,210

)

Amortization of intangibles

 

 

129

 

 

 

128

 

 

 

129

 

Stock-based compensation expense

 

 

4,665

 

 

 

4,468

 

 

 

4,697

 

Goodwill impairment

 

 

 

 

 

 

 

 

44,442

 

Restructuring and other charges

 

 

108

 

 

 

3,666

 

 

 

(23

)

Litigation reserves, net

 

 

 

 

 

 

 

 

20

 

Gain/loss on investments, net

 

 

11

 

 

 

20

 

 

 

519

 

Non-GAAP tax adjustments

 

 

(838

)

 

 

(3,109

)

 

 

(709

)

Non-GAAP net loss

 

$

(5,637

)

 

$

(871

)

 

$

(8,135

)

 

 

 

 

 

 

 

 

 

 

NET LOSS PER DILUTED SHARE:

 

 

 

 

 

 

 

 

 

GAAP net loss per diluted share

 

$

(0.33

)

 

$

(0.21

)

 

$

(1.95

)

Amortization of intangibles

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

0.16

 

 

 

0.15

 

 

 

0.16

 

Goodwill impairment

 

 

 

 

 

 

 

 

1.51

 

Restructuring and other charges

 

 

 

 

 

0.13

 

 

 

 

Litigation reserves, net

 

 

 

 

 

 

 

 

 

Gain/loss on investments, net

 

 

 

 

 

 

 

 

0.02

 

Non-GAAP tax adjustments

 

 

(0.02

)

 

 

(0.10

)

 

 

(0.02

)

Non-GAAP net loss per diluted share

 

$

(0.19

)

 

$

(0.03

)

 

$

(0.28

)

 

 

 

 

 

 

 

 

 

 

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

 

 

April 2,
2023

 

December
31, 2022

 

October 2, 2022

 

July 3, 2022

 

April 3, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and short-term investments

 

$

239,210

 

 

$

227,425

 

 

$

233,197

 

 

$

250,137

 

 

$

263,788

 

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

 

$

8.24

 

 

$

7.85

 

 

$

8.03

 

 

$

8.66

 

 

$

8.99

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

192,540

 

 

$

277,485

 

 

$

259,908

 

 

$

217,873

 

 

$

219,911

 

Days sales outstanding (DSO)

 

 

98

 

 

 

100

 

 

 

95

 

 

 

89

 

 

 

97

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

$

337,187

 

 

$

299,614

 

 

$

298,090

 

 

$

300,796

 

 

$

327,309

 

Ending inventory turns

 

 

1.4

 

 

 

2.5

 

 

 

2.4

 

 

 

2.2

 

 

 

1.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weeks of channel inventory:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. retail channel

 

 

12.7

 

 

 

10.4

 

 

 

13.5

 

 

 

18.2

 

 

 

19.6

 

U.S. distribution channel

 

 

4.4

 

 

 

5.2

 

 

 

3.6

 

 

 

3.8

 

 

 

4.1

 

EMEA distribution channel

 

 

8.5

 

 

 

8.7

 

 

 

5.3

 

 

 

6.2

 

 

 

6.6

 

APAC distribution channel

 

 

14.0

 

 

 

18.5

 

 

 

16.0

 

 

 

14.0

 

 

 

14.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue (current and non-current)

 

$

26,634

 

 

$

25,025

 

 

$

22,868

 

 

$

21,593

 

 

$

21,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Headcount

 

 

702

 

 

 

691

 

 

 

731

 

 

 

740

 

 

 

766

 

Non-GAAP diluted shares

 

 

29,040

 

 

 

28,959

 

 

 

29,029

 

 

 

28,891

 

 

 

29,350

 

NET REVENUE BY GEOGRAPHY

 

 

 

Three Months Ended

 

 

April 2, 2023

 

December 31, 2022

 

April 3, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

121,922

 

 

 

67

%

 

$

159,175

 

 

 

64

%

 

$

144,649

 

 

 

68

%

EMEA

 

 

39,178

 

 

 

22

%

 

 

52,715

 

 

 

21

%

 

 

36,865

 

 

 

18

%

APAC

 

 

19,808

 

 

 

11

%

 

 

37,213

 

 

 

15

%

 

 

29,044

 

 

 

14

%

Total

 

$

180,908

 

 

 

100

%

 

$

249,103

 

100

%

 

$

210,558

 

100

%

NETGEAR, INC.

SUPPLEMENTAL FINANCIAL INFORMATION (CONTINUED)

(In thousands)

(Unaudited)

NET REVENUE BY SEGMENT

 

 

Three Months Ended

 

April 2, 2023

 

December 31, 2022

 

April 3, 2022

 

 

 

 

 

 

 

 

 

Connected Home

$

102,746

 

 

$

149,036

 

 

$

130,342

 

SMB

 

78,162

 

 

 

100,067

 

 

 

80,216

 

Total net revenue

$

180,908

 

 

$

249,103

 

 

$

210,558

 

SERVICE PROVIDER NET REVENUE

 

 

Three Months Ended

 

April 2, 2023

 

December 31, 2022

 

April 3, 2022

 

 

 

 

 

 

 

 

 

Connected Home

$

14,027

 

 

$

55,787

 

 

$

18,121

 

SMB

 

190

 

 

 

719

 

 

 

729

 

Total service provider net revenue

$

14,217

 

 

$

56,506

 

 

$

18,850

 

 

NETGEAR Investor Relations
Erik Bylin
investors@netgear.com

Source: NETGEAR, Inc.