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NETGEAR® Reports Fourth Quarter and Full Year 2023 Results

Q4 net revenue of $188.7 million, at the high end of guidance

Q4 GAAP gross margin of 34.8%; non-GAAP gross margin of 35.0%

877,000 paid subscribers; Q4 service revenue growth of 27.7% year over year

Cash and short-term investments increased $55.6 million sequentially

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, 2023.

  • Fourth quarter 2023 net revenue of $188.7 million, a decrease of 24.3% from the comparable prior-year quarter.
  • Fourth quarter 2023 GAAP operating loss of $2.9 million, or (1.5)% of net revenue, as compared to operating loss of $12.2 million, or (4.9)% of net revenue, in the comparable prior-year quarter.
    • Fourth quarter 2023 non-GAAP operating income of $2.7 million, or 1.4% of net revenue, as compared to non-GAAP operating loss of $3.9 million, or (1.6)% of net revenue, in the comparable prior-year quarter.
  • Fourth quarter 2023 GAAP net loss per diluted share of $0.06, as compared to net loss per diluted share of $0.21 in the comparable prior-year quarter.
    • Fourth quarter 2023 non-GAAP net income per diluted share of $0.09, as compared to non-GAAP net loss per diluted share of $0.03 in the comparable prior-year quarter.
  • Fiscal 2023 net revenue of $740.8 million, a decrease of 20.6% from the prior year.
  • Fiscal 2023 GAAP operating loss of $33.3 million, or (4.5)% of net revenue, as compared to operating loss of $82.9 million, or (8.9)% of net revenue, in the prior year.
    • Fiscal 2023 non-GAAP operating loss of $9.9 million, or (1.3)% of net revenue, as compared to non-GAAP operating loss of $15.6 million, or (1.7)% of net revenue, in the prior year.
  • Fiscal 2023 GAAP net loss per diluted share of $3.57, as compared to net loss per diluted share of $2.38 in the prior year.
    • Fiscal 2023 non-GAAP net loss per diluted share of $0.03, as compared to non-GAAP net loss per diluted share of $0.29 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.

Bryan Murray, Chief Financial Officer of NETGEAR, commented, “I’m pleased with our fourth quarter results where NETGEAR delivered revenue and operating margin near the high end of our updated guidance. Thanks to the strong market reception of our leading WiFi 7 products, stabilization of our SMB business and our continued disciplined expense management, this quarter demonstrates the progress in our core long-term growth and profitability strategy. Despite a more promotional environment in the U.S. retail networking market, our premium CHP products remain resilient and once again outperformed the market, growing double digits sequentially and more than 30% year over year. Spurred by the success of our recently released Orbi 97x WiFi 7 mesh system, our premium products increased to approximately 25% of our CHP retail business. In addition to the solid performance of our products, we were able to exceed our paid subscriber target for the year, ending the fourth quarter with 877,000 paid subscribers and service revenue of over $11 million in Q4.”

Mr. Murray continued, “Although channel inventory compression constrained the topline across both our CHP and SMB businesses during the year, the strong contribution of our premium products powered us to equal our highest annual gross margin performance since 2007. As we progress through the WiFi 7 upgrade cycle, we believe our CHP product mix will continue to shift towards our higher-margin products. While channel inventory compression will continue to constrain SMB growth in the next few quarters, we are confident in the business’ ability to generate long-term revenue and margin expansion for NETGEAR.”

Mr. Murray added, “We continued to make progress in reducing our own inventory levels in the fourth quarter, which helped us generate meaningful cash once again. I’m pleased to report that we grew our cash and short-term investments by over $55 million during the quarter. We expect to continue to generate meaningful cash in the first quarter of 2024 as we continue to optimize our inventory levels.”

Business Outlook

Mr. Murray continued, “We expect the retail portion of our CHP business to experience a seasonal decline coming off the holiday period. Revenue from the service provider channel is expected to be approximately $25 million in the first quarter. As interest rates remain high, we will continue to work with our SMB channel partners to optimize their inventory carrying levels during the next few quarters. Accordingly, we expect first quarter net revenue to be in the range of $155 million to $170 million. As we continue to make meaningful progress in reducing our own inventory levels, we will be consuming higher cost inventory. We expect we will be back to our historically normal inventory costs in the second half of this year. Accordingly, we expect our first quarter GAAP operating margin to be in the range of (11.4)% to (8.4)%, and non-GAAP operating margin to be in the range of (8.5)% to (5.5)%. Our GAAP tax expense is expected to be in the range of $6.5 million to $7.5 million, and our non-GAAP tax benefit is expected to be in the range of $0.0 to $1.0 million for the first quarter of 2024. We expect to continue to generate meaningful cash in the first quarter of 2024.”

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

 

 

Three months ending

 

 

March 31, 2024

(In millions, except for percentage data)

 

Operating Margin

Rate

 

Tax Expense

(Benefit)

 

 

 

 

 

GAAP

 

(11.4)% - (8.4)%

 

$6.5 - $7.5

Estimated adjustments for1:

 

 

 

 

Stock-based compensation expense

 

2.9%

 

-

Non-GAAP tax adjustments

 

-

 

$(7.5)

Non-GAAP

 

(8.5)% - (5.5)%

 

$(1.0) - $0.0

1 Business outlook does not include estimates for any currently unknown income and expense items which, by their nature, could arise late in a quarter, including: litigation reserves, net; acquisition related charges; impairment charges; restructuring and other charges and discrete tax benefits or detriments that cannot be forecasted (e.g., windfalls or shortfalls from equity awards or items related to the resolution of uncertain tax positions). New material income and expense items such as these could have a significant effect on our guidance and future GAAP results.

Investor Conference Call / Webcast Details

NETGEAR will review the fourth quarter and full year results and discuss management's expectations for the first quarter of 2024 today, Wednesday, February 7, 2024 at 5 p.m. ET (2 p.m. PT). The toll-free dial-in number for the live audio call is (888) 660-6392. The international dial-in number for the live audio call is (929) 203-0899. The conference ID for the call is 1030183. A live webcast of the conference call will be available on NETGEAR's Investor Relations website at http://investor.netgear.com. A replay of the call will be available via the web at http://investor.netgear.com.

About NETGEAR, Inc.

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.

© 2024 NETGEAR, Inc. NETGEAR and the NETGEAR logo are trademarks or registered trademarks of NETGEAR, Inc. and its affiliates in the United States and/or other countries. Other brand and product names are trademarks or registered trademarks of their respective holders. The information contained herein is subject to change without notice. NETGEAR shall not be liable for technical or editorial errors or omissions contained herein. All rights reserved.

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

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. The words “anticipate,” “expect,” “believe,” “will,” “may,” “should,” “estimate,” “project,” “outlook,” “forecast” or other similar words are used to identify such forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. The forward-looking statements represent NETGEAR, Inc.’s expectations or beliefs concerning future events based on information available at the time such statements were made and include statements regarding: NETGEAR’s future operating performance and financial condition, including expectations regarding growth, revenue, operating margin, gross margin, continued profitability and cash generation; expectations regarding continuing market demand for the NETGEAR’s products and services, including SMB and premium CHP products and subscription services, and NETGEAR’s ability to respond to this demand; NETGEAR’s strategic shift to focusing on the premium, higher-margin segments of the market and growing service revenue; expectations regarding the mix of NETGEAR’s premium, higher margin products and services; expectations regarding inventory management, inventory levels and inventory costs and its impact to long term revenue, margin expansion and cash generation; expectations regarding expected tax rates or tax expenses; expectations regarding seasonal shifts in market demand; and expectations regarding NETGEAR's subscription services, paid subscriber base growth and service revenue. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: future demand for NETGEAR’s products and services may be lower than anticipated; NETGEAR’s shift in focus to premium products at the expense of lower end products may not prove to be successful; NETGEAR may be unsuccessful, or experience delays, in manufacturing and distributing its new and existing products and services; consumers may choose not to adopt NETGEAR’s new product and services offerings or adopt competing products and services; NETGEAR may be unable to continue to grow its number of registered users, its number of registered app users and/or its paid subscriber base and service revenue; product performance may be adversely affected by real world operating conditions; NETGEAR may fail to manage costs, including the cost of key components, the cost of air freight and ocean freight, and the cost of developing new products and manufacturing and distribution of its existing offerings; NETGEAR may fail to successfully manage channel inventory levels; NETGEAR may fail to successfully continue to effect operating expense savings; changes in the level of NETGEAR's cash resources and NETGEAR’s planned usage of such resources, including potential repurchases of NETGEAR’s common stock; changes in NETGEAR’s stock price and developments in the business that could increase NETGEAR’s cash needs; fluctuations in foreign exchange rates; and the actions and financial health of NETGEAR’s customers, including NETGEAR’s ability to collect receivables as they become due. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Further information on potential risk factors that could affect NETGEAR and its business are detailed in NETGEAR’s periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled "Part II - Item 1A. Risk Factors" in NETGEAR’s quarterly report on Form 10-Q for the fiscal quarter ended October 1, 2023, filed with the Securities and Exchange Commission on November 3, 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 income (loss), non-GAAP operating margin, non-GAAP other income (expenses), net, non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share. These supplemental measures exclude adjustments for amortization of intangibles, stock-based compensation expense, goodwill impairment, intangibles impairment, restructuring and other charges, litigation reserves, net, gain/loss on investments, net, gain on litigation settlements, and adjust for effects related to non-GAAP tax adjustments. These non-GAAP measures are not in accordance with or an alternative for GAAP, and may be different from non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance.

In calculating non-GAAP financial measures, we exclude certain items to facilitate a review of the comparability of our operating performance on a period-to-period basis because such items are not, in our view, related to our ongoing operational performance. We use non-GAAP measures to evaluate the operating performance of our business, for comparison with forecasts and strategic plans, and for benchmarking performance externally against competitors. In addition, management’s incentive compensation is determined using certain non-GAAP measures. Since we find these measures to be useful, we believe that investors benefit from seeing results “through the eyes” of management in addition to seeing GAAP results. We believe that these non-GAAP measures, when read in conjunction with our GAAP financials, provide useful information to investors by offering:

  • the ability to make more meaningful period-to-period comparisons of our on-going operating results;
  • the ability to better identify trends in our underlying business and perform related trend analyses;
  • a better understanding of how management plans and measures our underlying business; and
  • an easier way to compare our operating results against analyst financial models and operating results of competitors that supplement their GAAP results with non-GAAP financial measures.

The following are explanations of the adjustments that we incorporate into non-GAAP measures, as well as the reasons for excluding them in the reconciliations of these non-GAAP financial measures:

Amortization of intangibles consists primarily of non-cash charges that can be impacted by, among other things, the timing and magnitude of acquisitions. We consider our operating results without these charges when evaluating our ongoing performance and forecasting our earnings trends, and therefore exclude such charges when presenting non-GAAP financial measures. We believe that the assessment of our operations excluding these costs is relevant to our assessment of internal operations and comparisons to the performance of our competitors.

Stock-based compensation expense consists of non-cash charges for the estimated fair value of stock options, restricted stock units, performance shares and shares under the employee stock purchase plan granted to employees. We believe that the exclusion of these charges provides for more accurate comparisons of our operating results to peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, we believe it is useful to investors to understand the specific impact stock-based compensation expense has on our operating results.

Other items consist of certain items that are the result of either unique or unplanned events, including, when applicable: goodwill impairment, intangibles impairment, restructuring and other charges, litigation reserves, net, gain on litigation settlements, and gain/loss on investments, net. It is difficult to predict the occurrence or estimate the amount or timing of these items in advance. Although these events are reflected in our GAAP financial statements, these unique transactions may limit the comparability of our on-going operations with prior and future periods. The amounts result from events that often arise from unforeseen circumstances, which often occur outside of the ordinary course of continuing operations. Therefore, the amounts do not accurately reflect the underlying performance of our continuing business operations for the period in which they are incurred.

Non-GAAP tax adjustments consist of adjustments that we incorporate into non-GAAP measures in order to provide a more meaningful measure on non-GAAP net income (loss). We believe providing financial information with and without the income tax effects relating to our non-GAAP financial measures, as well as adjustments for valuation allowances on deferred tax assets, provides our management and users of the financial statements with better clarity regarding both current period performance and the on-going performance of our business. Non-GAAP income tax expense (benefit) is computed on a current and deferred basis with non-GAAP income (loss) consistent with use of non-GAAP income (loss) as a performance measure. The Non-GAAP tax provision (benefit) is calculated by adjusting the GAAP tax provision (benefit) for the impact of the non-GAAP adjustments, with specific tax provisions such as state income tax and Base-erosion and Anti-Abuse Tax recomputed on a non-GAAP basis, as well as adjustments for valuation allowances on deferred tax assets. The tax valuation allowance is a non-cash adjustment primarily reflecting our expectations of, and assumptions as to, future operating results and applicable tax laws, that are not directly attributable to the current quarter’s operating performance. For interim periods, the non-GAAP income tax provision (benefit) is calculated based on the forecasted annual non-GAAP tax rate before discrete items and adjusted for interim discrete items. Included in the non-GAAP tax adjustments for the three and twelve months ended December 31, 2023 are adjustments to tax expense (benefit) related to differences between our prior forecasts and actual results for the twelve months ended. In addition, included in the non-GAAP tax adjustments for the twelve months ended December 31, 2023 are adjustments to tax expenses (benefit) related to the effects of a valuation allowance computed in accordance with GAAP.

Source: NETGEAR-F

 

NETGEAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

December 31, 2023

 

December 31, 2022

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

176,717

 

 

$

146,500

 

Short-term investments

 

 

106,931

 

 

 

80,925

 

Accounts receivable, net

 

 

185,059

 

 

 

277,485

 

Inventories

 

 

248,851

 

 

 

299,614

 

Prepaid expenses and other current assets

 

 

30,421

 

 

 

29,767

 

Total current assets

 

 

747,979

 

 

 

834,291

 

Property and equipment, net

 

 

8,273

 

 

 

9,225

 

Operating lease right-of-use assets

 

 

37,285

 

 

 

40,868

 

Intangibles, net

 

 

 

 

 

1,329

 

Goodwill

 

 

36,279

 

 

 

36,279

 

Other non-current assets

 

 

17,326

 

 

 

97,793

 

Total assets

 

$

847,142

 

 

$

1,019,785

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

46,850

 

 

$

85,550

 

Accrued employee compensation

 

 

21,286

 

 

 

24,132

 

Other accrued liabilities

 

 

168,084

 

 

 

213,476

 

Deferred revenue

 

 

27,091

 

 

 

21,128

 

Income taxes payable

 

 

1,037

 

 

 

1,685

 

Total current liabilities

 

 

264,348

 

 

 

345,971

 

Non-current income taxes payable

 

 

12,695

 

 

 

14,972

 

Non-current operating lease liabilities

 

 

29,698

 

 

 

34,085

 

Other non-current liabilities

 

 

4,906

 

 

 

3,902

 

Total liabilities

 

 

311,647

 

 

 

398,930

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock

 

 

30

 

 

 

29

 

Additional paid-in capital

 

 

967,651

 

 

 

946,123

 

Accumulated other comprehensive income (loss)

 

 

136

 

 

 

(535

)

Accumulated deficit

 

 

(432,322

)

 

 

(324,762

)

Total stockholders’ equity

 

 

535,495

 

 

 

620,855

 

Total liabilities and stockholders’ equity

 

$

847,142

 

 

$

1,019,785

 

NETGEAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share and percentage data)

(Unaudited)

 

 

Three Months Ended

 

Twelve Months Ended

 

 

December 31,

2023

 

October 1,

2023

 

December 31,

2022

 

December 31,

2023

 

December 31,

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenue

 

$

188,674

 

 

$

197,845

 

 

$

249,103

 

 

$

740,840

 

 

$

932,472

 

Cost of revenue

 

 

123,038

 

 

 

128,911

 

 

 

187,407

 

 

 

491,588

 

 

 

681,923

 

Gross profit

 

 

65,636

 

 

 

68,934

 

 

 

61,696

 

 

 

249,252

 

 

 

250,549

 

Gross margin

 

 

34.8

%

 

 

34.8

%

 

 

24.8

%

 

 

33.6

%

 

 

26.9

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

19,592

 

 

 

20,738

 

 

 

20,250

 

 

 

83,295

 

 

 

88,443

 

Sales and marketing

 

 

30,552

 

 

 

30,865

 

 

 

35,340

 

 

 

127,778

 

 

 

139,675

 

General and administrative

 

 

17,107

 

 

 

16,364

 

 

 

14,618

 

 

 

66,243

 

 

 

56,316

 

Goodwill impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

44,442

 

Intangibles impairment

 

 

 

 

 

1,071

 

 

 

 

 

 

1,071

 

 

 

 

Other operating expenses, net

 

 

1,259

 

 

 

544

 

 

 

3,666

 

 

 

4,140

 

 

 

4,597

 

Total operating expenses

 

 

68,510

 

 

 

69,582

 

 

 

73,874

 

 

 

282,527

 

 

 

333,473

 

Loss from operations

 

 

(2,874

)

 

 

(648

)

 

 

(12,178

)

 

 

(33,275

)

 

 

(82,924

)

Operating margin

 

 

(1.5

)%

 

 

(0.3

)%

 

 

(4.9

)%

 

 

(4.5

)%

 

 

(8.9

)%

Other income (expenses), net

 

 

2,454

 

 

 

2,280

 

 

 

2,066

 

 

 

14,139

 

 

 

902

 

Income (loss) before income taxes

 

 

(420

)

 

 

1,632

 

 

 

(10,112

)

 

 

(19,136

)

 

 

(82,022

)

Provision for (benefit from) income taxes

 

 

1,249

 

 

 

86,431

 

 

 

(4,068

)

 

 

85,631

 

 

 

(13,035

)

Net loss

 

$

(1,669

)

 

$

(84,799

)

 

$

(6,044

)

 

$

(104,767

)

 

$

(68,987

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.06

)

 

$

(2.87

)

 

$

(0.21

)

 

$

(3.57

)

 

$

(2.38

)

Diluted

 

$

(0.06

)

 

$

(2.87

)

 

$

(0.21

)

 

$

(3.57

)

 

$

(2.38

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

29,623

 

 

 

29,524

 

 

 

28,959

 

 

 

29,355

 

 

 

29,007

 

Diluted

 

 

29,623

 

 

 

29,524

 

 

 

28,959

 

 

 

29,355

 

 

 

29,007

 

NETGEAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

Twelve Months Ended

 

December 31, 2023

 

December 31, 2022

Cash flows from operating activities:

 

 

 

 

 

Net loss

$

(104,767

)

 

$

(68,987

)

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

 

 

 

 

 

Depreciation and amortization

 

7,161

 

 

 

10,070

 

Stock-based compensation

 

17,938

 

 

 

17,734

 

Gain/loss on investments, net

 

(3,226

)

 

 

(87

)

Goodwill impairment

 

 

 

 

44,442

 

Intangibles impairment

 

1,071

 

 

 

 

Deferred income taxes

 

82,319

 

 

 

(21,842

)

Provision for excess and obsolete inventory

 

3,168

 

 

 

3,657

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable, net

 

92,425

 

 

 

(16,327

)

Inventories

 

47,595

 

 

 

12,396

 

Prepaid expenses and other assets

 

(3,189

)

 

 

5,696

 

Accounts payable

 

(38,947

)

 

 

11,857

 

Accrued employee compensation

 

(2,846

)

 

 

(572

)

Other accrued liabilities

 

(45,893

)

 

 

(13,332

)

Deferred revenue

 

6,969

 

 

 

5,425

 

Income taxes payable

 

(2,925

)

 

 

(3,862

)

Net cash provided by (used in) operating activities

 

56,853

 

 

 

(13,732

)

Cash flows from investing activities:

 

 

 

 

 

Purchases of short-term investments

 

(135,920

)

 

 

(153,577

)

Proceeds from maturities of short-term investments

 

115,006

 

 

 

80,417

 

Purchases of property and equipment

 

(5,799

)

 

 

(5,757

)

Purchases of long-term investments

 

(720

)

 

 

(600

)

Net cash used in investing activities

 

(27,433

)

 

 

(79,517

)

Cash flows from financing activities:

 

 

 

 

 

Repurchases of common stock

 

 

 

 

(24,377

)

Restricted stock unit withholdings

 

(2,793

)

 

 

(4,807

)

Proceeds from exercise of stock options

 

 

 

 

743

 

Proceeds from issuance of common stock under employee stock purchase plan

 

3,590

 

 

 

4,418

 

Net cash provided by (used in) financing activities

 

797

 

 

 

(24,023

)

Net increase (decrease) in cash and cash equivalents

 

30,217

 

 

 

(117,272

)

Cash and cash equivalents, at beginning of period

 

146,500

 

 

 

263,772

 

Cash and cash equivalents, at end of period

$

176,717

 

 

$

146,500

 

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,

2023

 

October 1,

2023

 

December 31,

2022

 

December 31,

2023

 

December 31,

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

65,636

 

 

$

68,934

 

 

$

61,696

 

 

$

249,252

 

 

$

250,549

 

GAAP gross margin

 

 

34.8

%

 

 

34.8

%

 

 

24.8

%

 

 

33.6

%

 

 

26.9

%

Amortization of intangibles

 

 

 

 

 

 

 

 

128

 

 

 

257

 

 

 

514

 

Stock-based compensation expense

 

 

358

 

 

 

354

 

 

 

326

 

 

 

1,405

 

 

 

1,353

 

Non-GAAP gross profit

 

$

65,994

 

 

$

69,288

 

 

$

62,150

 

 

$

250,914

 

 

$

252,416

 

Non-GAAP gross margin

 

 

35.0

%

 

 

35.0

%

 

 

24.9

%

 

 

33.9

%

 

 

27.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP research and development

 

$

19,592

 

 

$

20,738

 

 

$

20,250

 

 

$

83,295

 

 

$

88,443

 

Stock-based compensation expense

 

 

(885

)

 

 

(841

)

 

 

(1,027

)

 

 

(3,935

)

 

 

(4,177

)

Non-GAAP research and development

 

$

18,707

 

 

$

19,897

 

 

$

19,223

 

 

$

79,360

 

 

$

84,266

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP sales and marketing

 

$

30,552

 

 

$

30,865

 

 

$

35,340

 

 

$

127,778

 

 

$

139,675

 

Stock-based compensation expense

 

 

(1,237

)

 

 

(1,271

)

 

 

(1,328

)

 

 

(5,336

)

 

 

(5,603

)

Non-GAAP sales and marketing

 

$

29,315

 

 

$

29,594

 

 

$

34,012

 

 

$

122,442

 

 

$

134,072

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative

 

$

17,107

 

 

$

16,364

 

 

$

14,618

 

 

$

66,243

 

 

$

56,316

 

Stock-based compensation expense

 

 

(1,821

)

 

 

(1,819

)

 

 

(1,787

)

 

 

(7,262

)

 

 

(6,601

)

Non-GAAP general and administrative

 

$

15,286

 

 

$

14,545

 

 

$

12,831

 

 

$

58,981

 

 

$

49,715

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP other operating expenses, net

 

$

1,259

 

 

$

544

 

 

$

3,666

 

 

$

4,140

 

 

$

4,597

 

Restructuring and other charges

 

 

(1,259

)

 

 

(366

)

 

 

(3,666

)

 

 

(3,962

)

 

 

(4,577

)

Litigation reserves, net

 

 

 

 

 

(178

)

 

 

 

 

 

(178

)

 

 

(20

)

Non-GAAP other operating expenses, net

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

NETGEAR, INC.

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

(In thousands, except percentage data)

(Unaudited)

STATEMENT OF OPERATIONS DATA (CONTINUED):

 

 

Three Months Ended

 

Twelve Months Ended

 

 

December 31,

2023

 

October 1,

2023

 

December 31,

2022

 

December 31,

2023

 

December 31,

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP total operating expenses

 

$

68,510

 

 

$

69,582

 

 

$

73,874

 

 

$

282,527

 

 

$

333,473

 

Stock-based compensation expense

 

 

(3,943

)

 

 

(3,931

)

 

 

(4,142

)

 

 

(16,533

)

 

 

(16,381

)

Goodwill impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(44,442

)

Intangibles impairment

 

 

 

 

 

(1,071

)

 

 

 

 

 

(1,071

)

 

 

 

Restructuring and other charges

 

 

(1,259

)

 

 

(366

)

 

 

(3,666

)

 

 

(3,962

)

 

 

(4,577

)

Litigation reserves, net

 

 

 

 

 

(178

)

 

 

 

 

 

(178

)

 

 

(20

)

Non-GAAP total operating expenses

 

$

63,308

 

 

$

64,036

 

 

$

66,066

 

 

$

260,783

 

 

$

268,053

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating loss

 

$

(2,874

)

 

$

(648

)

 

$

(12,178

)

 

$

(33,275

)

 

$

(82,924

)

GAAP operating margin

 

 

(1.5

)%

 

 

(0.3

)%

 

 

(4.9

)%

 

 

(4.5

)%

 

 

(8.9

)%

Amortization of intangibles

 

 

 

 

 

 

 

 

128

 

 

 

257

 

 

 

514

 

Stock-based compensation expense

 

 

4,301

 

 

 

4,285

 

 

 

4,468

 

 

 

17,938

 

 

 

17,734

 

Goodwill impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

44,442

 

Intangibles impairment

 

 

 

 

 

1,071

 

 

 

 

 

 

1,071

 

 

 

 

Restructuring and other charges

 

 

1,259

 

 

 

366

 

 

 

3,666

 

 

 

3,962

 

 

 

4,577

 

Litigation reserves, net

 

 

 

 

 

178

 

 

 

 

 

 

178

 

 

 

20

 

Non-GAAP operating income (loss)

 

$

2,686

 

 

$

5,252

 

 

$

(3,916

)

 

$

(9,869

)

 

$

(15,637

)

Non-GAAP operating margin

 

 

1.4

%

 

 

2.7

%

 

 

(1.6

)%

 

 

(1.3

)%

 

 

(1.7

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP other income (expenses), net

 

$

2,454

 

 

$

2,280

 

 

$

2,066

 

 

$

14,139

 

 

$

902

 

Gain/loss on investments, net

 

 

(8

)

 

 

(14

)

 

 

20

 

 

 

8

 

 

 

271

 

Gain on litigation settlements

 

 

 

 

 

 

 

 

 

 

 

(6,000

)

 

 

 

Non-GAAP other income (expenses), net

 

$

2,446

 

 

$

2,266

 

 

$

2,086

 

 

$

8,147

 

 

$

1,173

 

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,

2023

 

October 1,

2023

 

December 31,

2022

 

December 31,

2023

 

December 31,

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(1,669

)

 

$

(84,799

)

 

$

(6,044

)

 

$

(104,767

)

 

$

(68,987

)

Amortization of intangibles

 

 

 

 

 

 

 

 

128

 

 

 

257

 

 

 

514

 

Stock-based compensation expense

 

 

4,301

 

 

 

4,285

 

 

 

4,468

 

 

 

17,938

 

 

 

17,734

 

Goodwill impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

44,442

 

Intangibles impairment

 

 

 

 

 

1,071

 

 

 

 

 

 

1,071

 

 

 

 

Restructuring and other charges

 

 

1,259

 

 

 

366

 

 

 

3,666

 

 

 

3,962

 

 

 

4,577

 

Litigation reserves, net

 

 

 

 

 

178

 

 

 

 

 

 

178

 

 

 

20

 

Gain/loss on investments, net

 

 

(8

)

 

 

(14

)

 

 

20

 

 

 

8

 

 

 

271

 

Gain on litigation settlements

 

 

 

 

 

 

 

 

 

 

 

(6,000

)

 

 

 

Non-GAAP tax adjustments

 

 

(1,138

)

 

 

85,781

 

 

 

(3,109

)

 

 

86,586

 

 

 

(7,085

)

Non-GAAP net income (loss)

 

$

2,745

 

 

$

6,868

 

 

$

(871

)

 

$

(767

)

 

$

(8,514

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER DILUTED SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net loss per diluted share

 

$

(0.06

)

 

$

(2.87

)

 

$

(0.21

)

 

$

(3.57

)

 

$

(2.38

)

Amortization of intangibles

 

 

 

 

 

 

 

 

 

 

 

0.01

 

 

 

0.02

 

Stock-based compensation expense

 

 

0.14

 

 

 

0.14

 

 

 

0.15

 

 

 

0.61

 

 

 

0.61

 

Goodwill impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.53

 

Intangibles impairment

 

 

 

 

 

0.04

 

 

 

 

 

 

0.04

 

 

 

 

Restructuring and other charges

 

 

0.04

 

 

 

0.01

 

 

 

0.13

 

 

 

0.13

 

 

 

0.16

 

Litigation reserves, net

 

 

 

 

 

0.01

 

 

 

 

 

 

0.01

 

 

 

 

Gain/loss on investments, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.01

 

Gain on litigation settlements

 

 

 

 

 

 

 

 

 

 

 

(0.20

)

 

 

 

Non-GAAP tax adjustments

 

 

(0.03

)

 

 

2.90

 

 

 

(0.10

)

 

 

2.94

 

 

 

(0.24

)

Non-GAAP net income (loss) per diluted share

 

$

0.09

 

 

$

0.23

 

 

$

(0.03

)

 

$

(0.03

)

 

$

(0.29

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing GAAP net loss per diluted share

29,623

29,524

28,959

29,355

29,007

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

29,683

29,581

28,959

29,355

29,007

 

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, 2023

 

October 1, 2023

 

July 2, 2023

 

April 2, 2023

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and short-term investments

 

$

283,648

 

 

$

228,045

 

 

$

202,836

 

 

$

239,210

 

 

$

227,425

 

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

 

$

9.56

 

 

$

7.71

 

 

$

6.92

 

 

$

8.24

 

 

$

7.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

185,059

 

 

$

200,900

 

 

$

179,496

 

 

$

192,540

 

 

$

277,485

 

Days sales outstanding (DSO)

 

 

89

 

 

 

92

 

 

 

94

 

 

 

98

 

 

 

100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

$

248,851

 

 

$

280,918

 

 

$

324,483

 

 

$

337,187

 

 

$

299,614

 

Ending inventory turns

 

 

2.0

 

 

 

1.8

 

 

 

1.5

 

 

 

1.4

 

 

 

2.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weeks of channel inventory:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. retail channel

 

 

10.8

 

 

 

11.8

 

 

 

12.0

 

 

 

12.7

 

 

 

10.4

 

U.S. distribution channel

 

 

7.9

 

 

 

5.8

 

 

 

5.1

 

 

 

4.4

 

 

 

5.2

 

EMEA distribution channel

 

 

6.4

 

 

 

7.4

 

 

 

6.9

 

 

 

8.5

 

 

 

8.7

 

APAC distribution channel

 

 

10.0

 

 

 

13.1

 

 

 

12.4

 

 

 

14.0

 

 

 

18.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue (current and non-current)

 

$

31,994

 

 

$

29,796

 

 

$

27,689

 

 

$

26,634

 

 

$

25,025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Headcount

 

 

635

 

 

 

644

 

 

 

653

 

 

 

702

 

 

 

691

 

Non-GAAP diluted shares

 

 

29,683

 

 

 

29,581

 

 

 

29,319

 

 

 

29,040

 

 

 

28,959

 

NET REVENUE BY GEOGRAPHY

 

 

Three Months Ended

 

Twelve Months Ended

 

 

December 31, 2023

 

October 1, 2023

 

December 31, 2022

 

December 31, 2023

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

124,798

 

66

%

 

$

141,018

 

71

%

 

$

159,175

 

64

%

 

$

504,349

 

68

%

 

$

617,211

 

66

%

EMEA

 

 

37,899

 

20

%

 

 

35,684

 

18

%

 

 

52,715

 

21

%

 

 

148,922

 

20

%

 

 

179,358

 

19

%

APAC

 

 

25,977

 

14

%

 

 

21,143

 

11

%

 

 

37,213

 

15

%

 

 

87,569

 

12

%

 

 

135,903

 

15

%

Total

 

$

188,674

 

100

%

 

$

197,845

 

100

%

 

$

249,103

 

100

%

 

$

740,840

 

100

%

 

$

932,472

 

100

%

NETGEAR, INC.

SUPPLEMENTAL FINANCIAL INFORMATION (CONTINUED)

(In thousands)

(Unaudited)

NET REVENUE BY SEGMENT

 

Three Months Ended

 

 

Twelve Months Ended

 

 

December 31, 2023

 

 

October 1, 2023

 

 

December 31, 2022

 

 

December 31, 2023

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Connected Home

$

118,378

 

 

$

127,335

 

 

$

149,036

 

 

$

446,865

 

 

$

558,823

 

SMB

 

70,296

 

 

 

70,510

 

 

 

100,067

 

 

 

293,975

 

 

 

373,649

 

Total net revenue

$

188,674

 

 

$

197,845

 

 

$

249,103

 

 

$

740,840

 

 

$

932,472

 

SERVICE PROVIDER NET REVENUE

 

Three Months Ended

 

 

Twelve Months Ended

 

 

December 31, 2023

 

 

October 1, 2023

 

 

December 31, 2022

 

 

December 31, 2023

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Connected Home

$

27,313

 

 

$

32,403

 

 

$

55,787

 

 

$

98,659

 

 

$

148,331

 

SMB

 

152

 

 

 

219

 

 

 

719

 

 

 

579

 

 

 

4,234

 

Total service provider net revenue

$

27,465

 

 

$

32,622

 

 

$

56,506

 

 

$

99,238

 

 

$

152,565

 

 

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