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    NETGEAR Reports First Quarter 2022 Results

    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 3, 2022.

    • First quarter 2022 net revenue of $210.6 million, a decrease of 33.8% from the comparable prior year quarter.
    • First quarter 2022 GAAP operating loss of $58.5 million impacted by non-cash impairment charges of $44.4 million, or (27.8)% of net revenue, as compared to operating income of $31.3 million, or 9.9% of net revenue, in the comparable prior year quarter.
      • First quarter 2022 non-GAAP operating loss of $9.3 million, or (4.4)% of net revenue, as compared to operating income of $42.3 million, or 13.3% of net revenue, in the comparable prior year quarter.
    • First quarter 2022 GAAP net loss per diluted share of $1.95, as compared to net income per diluted share of $0.72 in the comparable prior year quarter.
      • First quarter 2022 non-GAAP net loss per diluted share of $0.28, as compared to net income per diluted share of $0.99 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, “We ended the first quarter with net revenue of $210.6 million and non-GAAP operating margin of (4.4)%, within the range of our recently revised guidance. We continued to experience strong demand for our SMB products, especially on our ProAV switches; however, our ability to deliver meaningfully higher revenue was constrained by COVID-induced lockdowns in China which impacted supply of components to our supply chain partners. On the CHP side, we saw the continued year over year and sequential growth in end user sales of our super-premium mesh products represented by our Orbi 8 and Orbi 9. Meanwhile overall CHP sales were negatively impacted by the U.S. consumer WiFi market contracting from approximately 15% above 2019 levels entering the first quarter to roughly flat to 2019 exiting the first quarter. The lower top line performance negatively impacted our operating leverage and resulting margin performance in the quarter.”

    Mr. Lo continued, “In spite of these challenges, it’s clear that our core long-term strategy of focusing on the premium, higher-margin segments of the WiFi mesh market and the ProAV revolution remains intact. As the pioneer of the Tri and Quad band WiFi segment we are seeing great reception of our $1,500 Quadband WiFi 6E Orbi. Buoyed by the success of our premium WiFi products, we ended the quarter with 627,000 paid subscribers for our services business and remain encouraged by this progress towards our full year target of 750,000 subscribers.”

    Bryan Murray, Chief Financial Officer of NETGEAR, added, “During the first quarter of 2022, we repurchased approximately 354,000 shares of common stock for $9.4 million. Preserving strong liquidity and generating cash remain paramount as the pandemic and its related supply chain challenges continue to persist. We expect to continue to opportunistically repurchase shares in future periods.”

    Business Outlook

    Mr. Murray continued, “The U.S. consumer WiFi market is currently roughly flat to 2019 levels, lower than our expectations to start the year. Given the smaller market, we will be taking actions to optimize our retail channel partners’ inventory levels in the coming quarters to align them to current demand expectations. We will also be taking steps to better align the cost structure of the CHP business with its current projected revenue levels. Even in the face of significant supply chain challenges we expect second quarter revenue from the service provider channel to be approximately $30 million and SMB to perform slightly above Q1’22. Together, these factors lead us to expect our second quarter net revenue to be in the range of $205 million to $220 million. As a result of these factors, plus reduced leverage from our topline, our GAAP operating margin for the second quarter is expected to be in the range of (6.5)% to (5.5)%, and non-GAAP operating margin is expected to be in the range of (4.0)% to (3.0)%. Our GAAP tax rate is expected to be approximately 17.0%, and our non-GAAP tax rate is expected to be 16.0% for the second 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 and these factors will combine with our cost reduction efforts to create 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 closures affecting our manufacturing partners operations, increased transportation delays into any of our regional distribution or manufacturing centers, greater than expected freight or component costs, or lower than expected end market demand, 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

     

     

    July 3, 2022

     

     

    Operating Margin
    Rate

     

    Tax Rate

     

     

     

     

     

    GAAP

     

    (6.5)% - (5.5)%

     

    17.0

    %

    Estimated adjustments for1:

     

     

     

     

    Stock-based compensation expense

     

    2.4

    %

     

    -

     

    Amortization of intangibles

     

    0.1

    %

     

    -

     

    Non-GAAP tax adjustments

     

    -

     

     

    (1.0

    )%

    Non-GAAP

     

    (4.0)% - (3.0)%

     

    16.0

    %

    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 2022 today, Wednesday, April 27, 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 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 I - Item 1A. Risk Factors” in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission on February 18, 2022. 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, 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: restructuring and other charges, litigation reserves, net, goodwill impairment charges, 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 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

     

     

    April 3,
    2022

     

    December 31,
    2021

     

     

     

     

     

     

     

     

     

    ASSETS

     

     

     

     

     

     

     

     

    Current assets:

     

     

     

     

     

     

     

     

    Cash and cash equivalents

     

    $

    206,826

     

     

    $

    263,772

     

    Short-term investments

     

     

    56,962

     

     

     

    7,744

     

    Accounts receivable, net

     

     

    219,911

     

     

     

    261,158

     

    Inventories

     

     

    327,309

     

     

     

    315,667

     

    Prepaid expenses and other current assets

     

     

    27,130

     

     

     

    34,752

     

    Total current assets

     

     

    838,138

     

     

     

    883,093

     

    Property and equipment, net

     

     

    11,984

     

     

     

    13,335

     

    Operating lease right-of-use assets

     

     

    42,013

     

     

     

    23,176

     

    Intangibles, net

     

     

    1,719

     

     

     

    1,856

     

    Goodwill

     

     

    36,279

     

     

     

    80,721

     

    Other non-current assets

     

     

    83,912

     

     

     

    76,350

     

    Total assets

     

    $

    1,014,045

     

     

    $

    1,078,531

     

     

     

     

     

     

     

     

     

     

    LIABILITIES AND STOCKHOLDERS’ EQUITY

     

     

     

     

     

     

     

     

    Current liabilities:

     

     

     

     

     

     

     

     

    Accounts payable

     

    $

    64,803

     

     

    $

    73,729

     

    Accrued employee compensation

     

     

    20,960

     

     

     

    24,704

     

    Other accrued liabilities

     

     

    212,267

     

     

     

    224,584

     

    Deferred revenue

     

     

    17,861

     

     

     

    16,500

     

    Income taxes payable

     

     

    1,638

     

     

     

    1,528

     

    Total current liabilities

     

     

    317,529

     

     

     

    341,045

     

    Non-current income taxes payable

     

     

    19,154

     

     

     

    18,990

     

    Non-current operating lease liabilities

     

     

    36,888

     

     

     

    18,569

     

    Other non-current liabilities

     

     

    3,453

     

     

     

    3,112

     

    Total liabilities

     

     

    377,024

     

     

     

    381,716

     

    Stockholders’ equity:

     

     

     

     

     

     

     

     

    Common stock

     

     

    29

     

     

     

    29

     

    Additional paid-in capital

     

     

    931,276

     

     

     

    923,228

     

    Accumulated other comprehensive income

     

     

    156

     

     

     

    149

     

    Accumulated deficit

     

     

    (294,440

    )

     

     

    (226,591

    )

    Total stockholders’ equity

     

     

    637,021

     

     

     

    696,815

     

    Total liabilities and stockholders’ equity

     

    $

    1,014,045

     

     

    $

    1,078,531

     

    NETGEAR, INC.

    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

    (In thousands, except per share and percentage data)

    (Unaudited)

     

     

    Three Months Ended

     

     

    April 3,
    2022

     

    December 31,
    2021

     

    March 28,
    2021

     

     

     

     

     

     

     

     

     

     

     

     

     

    Net revenue

     

    $

    210,558

     

     

    $

    251,187

     

     

    $

    317,925

     

    Cost of revenue

     

     

    151,655

     

     

     

    176,488

     

     

     

    206,984

     

    Gross profit

     

     

    58,903

     

     

     

    74,699

     

     

     

    110,941

     

    Gross margin

     

     

    28.0

    %

     

     

    29.7

    %

     

     

    34.9

    %

    Operating expenses:

     

     

     

     

     

     

     

     

     

     

     

     

    Research and development

     

     

    23,821

     

     

     

    23,080

     

     

     

    23,829

     

    Sales and marketing

     

     

    35,586

     

     

     

    36,230

     

     

     

    37,815

     

    General and administrative

     

     

    13,602

     

     

     

    14,575

     

     

     

    15,405

     

    Goodwill impairment charges

     

     

    44,442

     

     

     

     

     

     

     

    Other operating expenses (income), net

     

     

    (3

    )

     

     

    (37

    )

     

     

    2,565

     

    Total operating expenses

     

     

    117,448

     

     

     

    73,848

     

     

     

    79,614

     

    Income (loss) from operations

     

     

    (58,545

    )

     

     

    851

     

     

     

    31,327

     

    Operating margin

     

     

    -27.8

    %

     

     

    0.3

    %

     

     

    9.9

    %

    Other income (expenses), net

     

     

    (982

    )

     

     

    (1,108

    )

     

     

    (552

    )

    Income (loss) before income taxes

     

     

    (59,527

    )

     

     

    (257

    )

     

     

    30,775

     

    Provision for (benefit from) for income taxes

     

     

    (2,317

    )

     

     

    734

     

     

     

    7,815

     

    Net income (loss)

     

    $

    (57,210

    )

     

    $

    (991

    )

     

    $

    22,960

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Net income (loss) per share:

     

     

     

     

     

     

     

     

     

     

     

     

    Basic

     

    $

    (1.95

    )

     

    $

    (0.03

    )

     

    $

    0.75

     

    Diluted

     

    $

    (1.95

    )

     

    $

    (0.03

    )

     

    $

    0.72

     

     

     

     

     

     

     

     

     

     

     

     

     

     

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

     

     

     

     

     

     

     

     

     

     

     

     

    Basic

     

     

    29,350

     

     

     

    29,456

     

     

     

    30,665

     

    Diluted

     

     

    29,350

     

     

     

    29,456

     

     

     

    31,814

     

    NETGEAR, INC.

    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

    (In thousands)

    (Unaudited)

     

    Three Months Ended

     

    April 3,
    2022

     

    March 28,
    2021

    Cash flows from operating activities:

     

     

     

     

     

     

     

    Net income (loss)

    $

    (57,210

    )

     

    $

    22,960

     

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

     

     

     

     

     

     

     

    Depreciation and amortization

     

    2,807

     

     

     

    4,661

     

    Stock-based compensation

     

    4,697

     

     

     

    6,960

     

    Gain/loss on investments, net

     

    622

     

     

     

    49

     

    Goodwill impairment charges

     

    44,442

     

     

     

     

    Deferred income taxes

     

    (7,626

    )

     

     

    2,803

     

    Provision for excess and obsolete inventory

     

    1,460

     

     

     

    1,201

     

    Changes in assets and liabilities:

     

     

     

     

     

     

     

    Accounts receivable, net

     

    41,247

     

     

     

    24,130

     

    Inventories

     

    (13,102

    )

     

     

    (44,794

    )

    Prepaid expenses and other assets

     

    7,889

     

     

     

    (1,877

    )

    Accounts payable

     

    (9,012

    )

     

     

    (3,197

    )

    Accrued employee compensation

     

    (3,743

    )

     

     

    (8,371

    )

    Other accrued liabilities

     

    (13,155

    )

     

     

    1,428

     

    Deferred revenue

     

    1,705

     

     

     

    1,494

     

    Income taxes payable

     

    273

     

     

     

    6,290

     

    Net cash provided by operating activities

     

    1,294

     

     

     

    13,737

     

    Cash flows from investing activities:

     

     

     

     

     

     

     

    Purchases of short-term investments

     

    (50,202

    )

     

     

    (7

    )

    Proceeds from maturities/sale of short-term investments

     

    417

     

     

     

    165

     

    Purchases of property and equipment

     

    (957

    )

     

     

    (1,588

    )

    Purchases of long-term investments

     

    (210

    )

     

     

    (340

    )

    Net cash used in investing activities

     

    (50,952

    )

     

     

    (1,770

    )

    Cash flows from financing activities:

     

     

     

     

     

     

     

    Repurchases of common stock

     

    (9,377

    )

     

     

     

    Restricted stock unit withholdings

     

    (1,262

    )

     

     

    (1,964

    )

    Proceeds from exercise of stock options

     

    593

     

     

     

    4,146

     

    Proceeds from issuance of common stock under employee stock purchase plan

     

    2,758

     

     

     

    2,905

     

    Net cash provided by (used in) financing activities

     

    (7,288

    )

     

     

    5,087

     

    Net increase (decrease) in cash and cash equivalents

     

    (56,946

    )

     

     

    17,054

     

    Cash and cash equivalents, at beginning of period

     

    263,772

     

     

     

    346,460

     

    Cash and cash equivalents, at end of period

    $

    206,826

     

     

    $

    363,514

     

    NETGEAR, INC.

    RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES

    (In thousands, except percentage data)

    (Unaudited)

    STATEMENT OF OPERATIONS DATA:

     

    Three Months Ended

     

    April 3,
    2022

     

    December 31,
    2021

     

    March 28,
    2021

     

     

     

     

     

     

     

     

     

     

     

     

     

    GAAP gross profit

     

    $

    58,903

     

     

    $

    74,699

     

     

    $

    110,941

     

    GAAP gross margin

     

     

    28.0

    %

     

     

    29.7

    %

     

     

    34.9

    %

    Amortization of intangibles

     

     

    129

     

     

     

    129

     

     

     

    179

     

    Stock-based compensation expense

     

     

    386

     

     

     

    477

     

     

     

    834

     

    Non-GAAP gross profit

     

    $

    59,418

     

     

    $

    75,305

     

     

    $

    111,954

     

    Non-GAAP gross margin

     

     

    28.2

    %

     

     

    30.0

    %

     

     

    35.2

    %

     

     

     

     

     

     

     

     

     

     

     

     

     

    GAAP research and development

     

    $

    23,821

     

     

    $

    23,080

     

     

    $

    23,829

     

    Stock-based compensation expense

     

     

    (1,087

    )

     

     

    (1,329

    )

     

     

    (1,146

    )

    Non-GAAP research and development

     

    $

    22,734

     

     

    $

    21,751

     

     

    $

    22,683

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    GAAP sales and marketing

     

    $

    35,586

     

     

    $

    36,230

     

     

    $

    37,815

     

    Amortization of intangibles

     

     

     

     

     

     

     

     

    (1,266

    )

    Stock-based compensation expense

     

     

    (1,456

    )

     

     

    (1,887

    )

     

     

    (1,780

    )

    Non-GAAP sales and marketing

     

    $

    34,130

     

     

    $

    34,343

     

     

    $

    34,769

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    GAAP general and administrative

     

    $

    13,602

     

     

    $

    14,575

     

     

    $

    15,405

     

    Stock-based compensation expense

     

     

    (1,768

    )

     

     

    (2,230

    )

     

     

    (3,200

    )

    Non-GAAP general and administrative

     

    $

    11,834

     

     

    $

    12,345

     

     

    $

    12,205

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    GAAP other operating expenses (income), net

     

    $

    (3

    )

     

    $

    (37

    )

     

    $

    2,565

     

    Restructuring and other charges

     

     

    23

     

     

     

    37

     

     

     

    (2,270

    )

    Litigation reserves, net

     

     

    (20

    )

     

     

     

     

     

    (295

    )

    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 3,
    2022

     

    December 31,
    2021

     

    March 28,
    2021

     

     

     

     

     

     

     

     

     

     

     

     

     

    GAAP total operating expenses

     

    $

    117,448

     

     

    $

    73,848

     

     

    $

    79,614

     

    Amortization of intangibles

     

     

     

     

     

     

     

     

    (1,266

    )

    Stock-based compensation expense

     

     

    (4,311

    )

     

     

    (5,446

    )

     

     

    (6,126

    )

    Goodwill impairment charges

     

     

    (44,442

    )

     

     

     

     

     

     

    Restructuring and other charges

     

     

    23

     

     

     

    37

     

     

     

    (2,270

    )

    Litigation reserves, net

     

     

    (20

    )

     

     

     

     

     

    (295

    )

    Non-GAAP total operating expenses

     

    $

    68,698

     

     

    $

    68,439

     

     

    $

    69,657

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    GAAP operating income (loss)

     

    $

    (58,545

    )

     

    $

    851

     

     

    $

    31,327

     

    GAAP operating margin

     

     

    (27.8

    )%

     

     

    0.3

    %

     

     

    9.9

    %

    Amortization of intangibles

     

     

    129

     

     

     

    129

     

     

     

    1,445

     

    Stock-based compensation expense

     

     

    4,697

     

     

     

    5,923

     

     

     

    6,960

     

    Goodwill impairment charges

     

     

    44,442

     

     

     

     

     

     

     

    Restructuring and other charges

     

     

    (23

    )

     

     

    (37

    )

     

     

    2,270

     

    Litigation reserves, net

     

     

    20

     

     

     

     

     

     

    295

     

    Non-GAAP operating income (loss)

     

    $

    (9,280

    )

     

    $

    6,866

     

     

    $

    42,297

     

    Non-GAAP operating margin

     

     

    (4.4

    )%

     

     

    2.7

    %

     

     

    13.3

    %

     

     

     

     

     

     

     

     

     

     

     

     

     

    GAAP other income (expenses), net

     

    $

    (982

    )

     

    $

    (1,108

    )

     

    $

    (552

    )

    Gain/loss on investments, net

     

     

    519

     

     

     

    1,188

     

     

     

    49

     

    Non-GAAP other income (expenses), net

     

    $

    (463

    )

     

    $

    80

     

     

    $

    (503

    )

    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 3,
    2022

     

    December 31,
    2021

     

    March 28,
    2021

     

     

     

     

     

     

     

     

     

     

     

     

     

    GAAP net income (loss)

     

    $

    (57,210

    )

     

    $

    (991

    )

     

    $

    22,960

     

    Amortization of intangibles

     

     

    129

     

     

     

    129

     

     

     

    1,445

     

    Stock-based compensation expense

     

     

    4,697

     

     

     

    5,923

     

     

     

    6,960

     

    Goodwill impairment charges

     

     

    44,442

     

     

     

     

     

     

     

    Restructuring and other charges

     

     

    (23

    )

     

     

    (37

    )

     

     

    2,270

     

    Litigation reserves, net

     

     

    20

     

     

     

     

     

     

    295

     

    Gain/loss on investments, net

     

     

    519

     

     

     

    1,188

     

     

     

    49

     

    Non-GAAP tax adjustments

     

     

    (709

    )

     

     

    1,908

     

     

     

    (2,416

    )

    Non-GAAP net income (loss)

     

    $

    (8,135

    )

     

    $

    8,120

     

     

    $

    31,563

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    NET INCOME (LOSS) PER DILUTED SHARE:

     

     

     

     

     

     

     

     

     

     

     

     

    GAAP net income (loss) per diluted share

     

    $

    (1.95

    )

     

    $

    (0.03

    )

     

    $

    0.72

     

    Amortization of intangibles

     

    0.00

     

     

    0.00

     

     

     

    0.05

     

    Stock-based compensation expense

     

     

    0.16

     

     

     

    0.20

     

     

     

    0.22

     

    Goodwill impairment charges

     

     

    1.51

     

     

     

     

     

     

     

    Restructuring and other charges

     

    (0.00)

     

     

    (0.00)

     

     

     

    0.07

     

    Litigation reserves, net

     

    0.00

     

     

     

     

     

     

    0.01

     

    Gain/loss on investments, net

     

     

    0.02

     

     

     

    0.04

     

     

    0.00

     

    Non-GAAP tax adjustments

     

     

    (0.02

    )

     

     

    0.06

     

     

     

    (0.08

    )

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

     

    $

    (0.28

    )

     

    $

    0.27

     

     

    $

    0.99

     

     

     

     

     

     

     

     

     

     

     

     

     

     

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

     

     

    29,350

     

     

     

    29,456

     

     

     

    31,814

     

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

     

     

    29,350

     

     

     

    29,822

     

     

     

    31,814

     

    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

     

     

    April 3,
    2022

     

    December 31,
    2021

     

    October 3,
    2021

     

    June 27,
    2021

     

    March 28,
    2021

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Cash, cash equivalents and short-term investments

     

    $

    263,788

     

     

    $

    271,516

     

     

    $

    292,195

     

     

    $

    335,319

     

     

    $

    370,656

     

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

     

    $

    8.99

     

     

    $

    9.10

     

     

    $

    9.49

     

     

    $

    10.66

     

     

    $

    11.65

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Accounts receivable, net

     

    $

    219,911

     

     

    $

    261,158

     

     

    $

    266,526

     

     

    $

    290,598

     

     

    $

    312,922

     

    Days sales outstanding (DSO)

     

     

    97

     

     

     

    93

     

     

     

    90

     

     

     

    86

     

     

     

    86

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Inventories

     

    $

    327,309

     

     

    $

    315,667

     

     

    $

    305,129

     

     

    $

    251,764

     

     

    $

    215,705

     

    Ending inventory turns

     

     

    1.9

     

     

     

    2.2

     

     

     

    2.7

     

     

     

    3.4

     

     

     

    3.8

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Weeks of channel inventory:

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    U.S. retail channel

     

     

    19.6

     

     

     

    12.7

     

     

     

    14.7

     

     

     

    12.9

     

     

     

    11.8

     

    U.S. distribution channel

     

     

    4.1

     

     

     

    3.0

     

     

     

    3.1

     

     

     

    3.4

     

     

     

    3.6

     

    EMEA distribution channel

     

     

    6.6

     

     

     

    6.8

     

     

     

    6.8

     

     

     

    7.8

     

     

     

    4.9

     

    APAC distribution channel

     

     

    14.4

     

     

     

    13.4

     

     

     

    9.6

     

     

     

    11.5

     

     

     

    7.6

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Deferred revenue (current and non-current)

     

    $

    21,305

     

     

    $

    19,600

     

     

    $

    18,684

     

     

    $

    18,482

     

     

    $

    18,116

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Headcount

     

     

    766

     

     

     

    771

     

     

     

    780

     

     

     

    769

     

     

     

    775

     

    Non-GAAP diluted shares

     

     

    29,350

     

     

     

    29,822

     

     

     

    30,798

     

     

     

    31,464

     

     

     

    31,814

     

    NET REVENUE BY GEOGRAPHY

     

     

    Three Months Ended

     

     

    April 3,
    2022

     

    December 31,
    2021

     

    March 28,
    2021

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Americas

     

    $

    144,649

     

     

     

    68

    %

     

    $

    159,419

     

     

     

    63

    %

     

    $

    219,150

     

     

     

    69

    %

    EMEA

     

     

    36,865

     

     

     

    18

    %

     

     

    50,027

     

     

     

    20

    %

     

     

    61,090

     

     

     

    19

    %

    APAC

     

     

    29,044

     

     

     

    14

    %

     

     

    41,741

     

     

     

    17

    %

     

     

    37,685

     

     

     

    12

    %

    Total

     

    $

    210,558

     

     

     

    100

    %

     

    $

    251,187

     

     

     

    100

    %

     

    $

    317,925

     

     

     

    100

    %

    NETGEAR, INC.

    SUPPLEMENTAL FINANCIAL INFORMATION (CONTINUED)

    (In thousands)

    (Unaudited)

    NET REVENUE BY SEGMENT

     

    Three Months Ended

     

    April 3,
    2022

     

    December 31,
    2021

     

    March 28,
    2021

     

     

     

     

     

     

     

     

     

     

     

     

    Connected Home

    $

    130,342

     

     

    $

    174,152

     

     

    $

    240,918

     

    SMB

     

    80,216

     

     

     

    77,035

     

     

     

    77,007

     

    Total net revenue

    $

    210,558

     

     

    $

    251,187

     

     

    $

    317,925

     

    SERVICE PROVIDER NET REVENUE

     

    Three Months Ended

     

    April 3,
    2022

     

    December 31,
    2021

     

    March 28,
    2021

     

     

     

     

     

     

     

     

     

     

     

     

    Connected Home

    $

    18,121

     

     

    $

    29,697

     

     

    $

    22,238

     

    SMB

     

    729

     

     

     

    711

     

     

     

    799

     

    Total service provider net revenue

    $

    18,850

     

     

    $

    30,408

     

     

    $

    23,037

     

     




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    NETGEAR Reports First Quarter 2022 Results 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 3, 2022. First quarter 2022 …