NETGEAR, Inc. (NASDAQ:NTGR), a global networking company that
delivers innovative networking and Internet connected products to
consumers and growing businesses, today reported financial results
for the first quarter ended April 2, 2017.
Net revenue for the first quarter ended
April 2, 2017 was $323.7 million, as compared to $310.3
million in the first quarter ended April 3, 2016, and $367.9
million in the fourth quarter ended December 31, 2016. Net
income, computed in accordance with GAAP, for the first quarter of
2017 was $16.0 million, or $0.47 net income per diluted share. This
compared to GAAP net income of $16.6 million, or $0.50 net income
per diluted share, in the first quarter of 2016, and GAAP net
income of $22.1 million, or $0.65 net income per diluted share, in
the fourth quarter of 2016. Non-GAAP net income was $0.64 per
diluted share in the first quarter of 2017, as compared to non-GAAP
net income of $0.74 per diluted share in the first quarter of 2016
and $0.88 per diluted share in the fourth quarter of 2016.
Operating margin, computed in accordance with
GAAP, for the first quarter of 2017 was 7.0%, as compared to 8.3%
in the year ago comparable quarter, and 9.0% in the fourth quarter
of 2016. Non-GAAP operating margin was 10.0% in the first quarter
of 2017, as compared to 11.9% in the first quarter of 2016 and
11.4% in the fourth quarter of 2016.
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, "The first quarter of 2017 marks a strong
start to the new year for NETGEAR, driven by an impressive 150%
year-over-year growth in our Arlo segment. We believe we can
continue to outpace this fast growing market with continued strong
investment in R&D, channel and brand marketing.”
Christine Gorjanc, Chief Financial Officer of
NETGEAR, added, "We are debuting a modified segment structure this
quarter that reflects our current view of the NETGEAR business. We
have included nine quarters of financial results for the modified
segments in the tables contained within this release. To summarize
these modifications, the performance of our home WiFi networking
products, which includes the industry-leading Nighthawk and Orbi
brands, as well as all the WiFi and LTE products sold to service
providers, will now be reported under the new Connected Home
segment. The performance of our Arlo cameras and associated
services and accessories is now reported under the new Arlo
segment. While sales of Arlo to service providers has been
relatively low, we expect such sales to expand in coming quarters.
And our Commercial Business Unit will now be called the SMB
segment. Sales of SMB products to service providers has been
minimal and we don’t expect future expansion. We believe that this
new structure reflects our current operational and financial
management, and provides the best structure for us to focus on the
growth opportunities for both Connected Home and Arlo while
maintaining our financial discipline.”
Mr. Lo continued, "Despite a $28.3 million
year-over-year decline in sales to service providers during Q1, we
were able to grow our overall revenue by $13.4 million on the
strength of Arlo and Orbi sales in the retail channel. We continue
to expand our product offerings, most recently with the release of
two new Orbi Tri-Band AC2200 WiFi Systems that are designed to
deliver seamless mesh WiFi to small and mid-sized homes at lower
price points than the original AC3000 Orbi. We also expect Arlo
Baby and Arlo Go to hit the shelves in Q2, which we are
particularly excited about as they bring the security and
convenience of the Arlo system to new users everywhere. These are
just a few examples of the many innovative products that we have in
our pipeline for 2017."
The Company also announced that its Board of
Directors has authorized a program to repurchase up to 3,000,000
shares of the Company’s common stock, or approximately 9.1% of the
outstanding shares. This is incremental to the approximate
1,123,000 shares remaining on the Company’s previous share
repurchase program. “We continue to believe that stock repurchases
are an effective way of returning capital to shareholders, and plan
to be opportunistic buyers of our stock in the coming quarters,”
said Ms. Gorjanc.
Business Outlook
Christine Gorjanc, Chief Financial Officer of
NETGEAR, added, "Looking forward to the second quarter of 2017, we
expect net revenue to be in the range of $315 million to $330
million. GAAP operating margin is expected to be in the range of
5.3% to 6.3% and non-GAAP operating margin is expected to be in the
range of 8.0% to 9.0%. Our GAAP tax rate is expected to be
approximately 37.0% and our non-GAAP tax rate is expected to be
34.5% for the second quarter of 2017.”
A reconciliation between the Business Outlook on
a GAAP and non-GAAP basis is provided in the following table:
|
|
Three months ended |
|
|
July 2, 2017 |
|
|
Operating Margin Rate |
|
Tax Rate |
GAAP |
|
5.3% - 6.3% |
|
37.0 |
% |
Estimated adjustments
for1: |
|
|
|
|
Amortization of intangibles |
|
1.0 |
% |
|
__ |
Stock-based compensation expense |
|
1.7 |
% |
|
__ |
Tax
effect of non-GAAP adjustments |
|
__ |
|
(2.5 |
)% |
Non-GAAP |
|
8.0% - 9.0% |
|
34.5 |
% |
|
|
|
|
|
|
1 Business
outlook does not include estimates for any currently unknown income
and expense items which, by their nature, could arise late in a
quarter, including: restructuring and other charges; litigation
reserves, net; acquisition-related charges; impairment charges; and
discrete tax benefits or detriments relating to tax windfalls or
shortfalls from equity awards. 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
DetailsNETGEAR will review the first quarter results and
discuss management's expectations for the second quarter of 2017
today, Wednesday, April 26, 2017 at 5 p.m. ET (2 p.m. PT). The
dial-in number for the live audio call is (201) 689-8471. 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 2 hours following the call
through midnight ET (9 p.m. PT) on Wednesday, May 3, 2017 by
telephone at (412) 317-6671 and via the web at
http://investor.netgear.com. The account number to access the phone
replay is 13659534.
About NETGEAR, Inc.NETGEAR
(NASDAQ:NTGR) is a global networking company that delivers
innovative products to consumers, businesses and service providers.
The Company's products are built on a variety of proven
technologies such as wireless (WiFi and LTE), Ethernet and
powerline, with a focus on reliability and ease-of-use. The product
line consists of wired and wireless devices that enable networking,
broadband access and network connectivity. These products are
available in multiple configurations to address the needs of the
end-users in each geographic region in which the Company's products
are sold. NETGEAR products are sold in approximately 31,000
retail locations around the globe, and through approximately 28,000
value-added resellers, as well as multiple major cable, mobile and
wireline service providers around the world. The company's
headquarters are in San Jose, Calif., with additional offices in
approximately 25 countries. More information is available at
http://investor.netgear.com or by calling (408) 907-8000.
Connect with NETGEAR at http://twitter.com/NETGEAR and
http://www.facebook.com/NETGEAR.
© 2017 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: expected net revenue, GAAP and
non-GAAP operating margins, and GAAP and non-GAAP tax rates;
expectations regarding the timing, distribution, sales momentum and
market acceptance of recent and anticipated new product
introductions that position the Company for growth; and
expectations regarding seasonal changes in the Company’s business
performance. These statements are based on management's current
expectations and are subject to certain risks and uncertainties,
including the following: future demand for the Company's products
may be lower than anticipated; consumers may choose not to adopt
the Company's new product offerings or adopt competing products;
product performance may be adversely affected by real world
operating conditions; the Company may be unsuccessful or experience
delays in manufacturing and distributing its new and existing
products; telecommunications service providers may choose to slow
their deployment of the Company's products or utilize competing
products; the Company may be unable to collect receivables as they
become due; the Company may fail to manage costs, including the
cost of developing new products and manufacturing and distribution
of its existing offerings; the Company may fail to successfully
continue to effect operating expense savings; changes in the level
of NETGEAR's cash resources and the Company's planned usage of such
resources, including potential repurchases of the Company’s common
stock; changes in the Company's stock price and developments in the
business that could increase the Company's cash needs; fluctuations
in foreign exchange rates; and the actions and financial health of
the Company's customers. 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,” pages 10 through 31, in the Company's annual report
on Form 10-K for the fiscal year ended December 31, 2016, filed
with the Securities and Exchange Commission on February 24, 2017.
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.
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 total operating expenses, non-GAAP
operating income, non-GAAP operating margin, non-GAAP other income
(expense), net, non-GAAP segment contribution income, non-GAAP
segment contribution margin, non-GAAP net income and non-GAAP net
income per diluted share. These supplemental measures exclude
adjustments for amortization of intangibles, stock-based
compensation expense, restructuring and other charges, losses on
inventory commitments due to restructuring, litigation reserves,
net, gain on litigation settlements and the related tax effects.
Additionally, non-GAAP segment contribution income, which is used,
in part, to evaluate the performance of, and allocate resources to,
each of the segments, includes all product line segment revenues
less the related cost of sales, research and development, and sales
and marketing costs. 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 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, and gain on litigation settlements. 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 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.
Tax effects consist of various adjustments that
we incorporate into non-GAAP measures in order to provide a more
meaningful measure on non-GAAP net income. We also believe
providing financial information with and without the income tax
effects relating to our non-GAAP financial measures provides our
management and users of the financial statements with better
clarity regarding the on-going performance of our business.
Source: NETGEAR-F
-Financial Tables Attached-
NETGEAR, INC. |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(In thousands) |
(Unaudited) |
|
|
|
|
|
April 2, 2017 |
|
December 31, 2016 |
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
235,668 |
|
|
$ |
240,468 |
|
Short-term investments |
125,567 |
|
|
125,514 |
|
Accounts
receivable, net |
265,254 |
|
|
313,839 |
|
Inventories |
267,826 |
|
|
247,862 |
|
Prepaid
expenses and other current assets |
29,959 |
|
|
35,102 |
|
Total
current assets |
924,274 |
|
|
962,785 |
|
Property and equipment,
net |
19,348 |
|
|
19,473 |
|
Intangibles, net |
33,438 |
|
|
37,899 |
|
Goodwill |
85,463 |
|
|
85,463 |
|
Other non-current
assets |
79,620 |
|
|
78,836 |
|
Total
assets |
$ |
1,142,143 |
|
|
$ |
1,184,456 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
89,765 |
|
|
$ |
112,436 |
|
Accrued
employee compensation |
20,514 |
|
|
33,096 |
|
Other
accrued liabilities |
149,282 |
|
|
170,674 |
|
Deferred
revenue |
32,507 |
|
|
35,301 |
|
Income
taxes payable |
9,855 |
|
|
5,146 |
|
Total
current liabilities |
301,923 |
|
|
356,653 |
|
Non-current income
taxes payable |
15,734 |
|
|
15,119 |
|
Other non-current
liabilities |
16,456 |
|
|
15,865 |
|
Total
liabilities |
334,113 |
|
|
387,637 |
|
Stockholders'
equity: |
|
|
|
Common
stock |
33 |
|
|
33 |
|
Additional paid-in capital |
576,862 |
|
|
566,307 |
|
Accumulated other comprehensive income |
402 |
|
|
1,938 |
|
Retained
earnings |
230,733 |
|
|
228,541 |
|
Total
stockholders' equity |
808,030 |
|
|
796,819 |
|
Total
liabilities and stockholders' equity |
$ |
1,142,143 |
|
|
$ |
1,184,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NETGEAR, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(In thousands, except per share and percentage
data) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
April 2, 2017 |
|
|
|
December 31, 2016 |
|
|
|
April 3, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
$ |
323,657 |
|
|
$ |
367,929 |
|
|
$ |
310,256 |
|
Cost of revenue |
226,725 |
|
|
257,219 |
|
|
209,691 |
|
Gross profit |
96,932 |
|
|
110,710 |
|
|
100,565 |
|
Gross
margin |
29.9 |
% |
|
30.1 |
% |
|
32.4 |
% |
Operating
expenses: |
|
|
|
|
|
Research
and development |
22,683 |
|
|
23,491 |
|
|
22,137 |
|
Sales and
marketing |
38,229 |
|
|
39,652 |
|
|
37,277 |
|
General
and administrative |
13,194 |
|
|
14,487 |
|
|
12,849 |
|
Restructuring and other charges |
37 |
|
|
22 |
|
|
2,678 |
|
Litigation reserves, net |
— |
|
|
15 |
|
|
10 |
|
Total
operating expenses |
74,143 |
|
|
77,667 |
|
|
74,951 |
|
Income from
operations |
22,789 |
|
|
33,043 |
|
|
25,614 |
|
Operating
margin |
7.0 |
% |
|
9.0 |
% |
|
8.3 |
% |
Interest income |
405 |
|
|
359 |
|
|
234 |
|
Other income (expense),
net |
335 |
|
|
461 |
|
|
(366 |
) |
Income before income
taxes |
23,529 |
|
|
33,863 |
|
|
25,482 |
|
Provision for income
taxes |
7,535 |
|
|
11,754 |
|
|
8,893 |
|
Net income |
$ |
15,994 |
|
|
$ |
22,109 |
|
|
$ |
16,589 |
|
|
|
|
|
|
|
Net income per
share: |
|
|
|
|
|
Basic |
$ |
0.49 |
|
|
$ |
0.67 |
|
|
$ |
0.51 |
|
Diluted |
$ |
0.47 |
|
|
$ |
0.65 |
|
|
$ |
0.50 |
|
|
|
|
|
|
|
Weighted average shares
used to compute net income per share: |
|
|
|
|
|
Basic |
32,944 |
|
|
32,973 |
|
|
32,519 |
|
Diluted |
34,136 |
|
|
33,925 |
|
|
33,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2017 |
|
|
|
December 31, 2016 |
|
|
|
April 3, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP gross profit |
$ |
96,932 |
|
|
$ |
110,710 |
|
|
$ |
100,565 |
|
GAAP gross margin |
29.9 |
% |
|
30.1 |
% |
|
32.4 |
% |
Amortization of intangibles |
2,611 |
|
|
2,466 |
|
|
2,394 |
|
Stock-based compensation expense |
436 |
|
|
424 |
|
|
439 |
|
Non-GAAP gross
profit |
$ |
99,979 |
|
|
$ |
113,600 |
|
|
$ |
103,398 |
|
Non-GAAP gross
margin |
30.9 |
% |
|
30.9 |
% |
|
33.3 |
% |
|
|
|
|
|
|
GAAP research and
development |
$ |
22,683 |
|
|
$ |
23,491 |
|
|
$ |
22,137 |
|
Stock-based compensation expense |
(1,319 |
) |
|
(1,004 |
) |
|
(866 |
) |
Non-GAAP research and
development |
$ |
21,364 |
|
|
$ |
22,487 |
|
|
$ |
21,271 |
|
|
|
|
|
|
|
GAAP sales and
marketing |
$ |
38,229 |
|
|
$ |
39,652 |
|
|
$ |
37,277 |
|
Amortization of intangibles |
(1,771 |
) |
|
(1,771 |
) |
|
(1,771 |
) |
Stock-based compensation expense |
(1,247 |
) |
|
(1,230 |
) |
|
(1,197 |
) |
Non-GAAP sales and
marketing |
$ |
35,211 |
|
|
$ |
36,651 |
|
|
$ |
34,309 |
|
|
|
|
|
|
|
GAAP general and
administrative |
$ |
13,194 |
|
|
$ |
14,487 |
|
|
$ |
12,849 |
|
Stock-based compensation expense |
(2,126 |
) |
|
(1,991 |
) |
|
(1,909 |
) |
Non-GAAP general and
administrative |
$ |
11,068 |
|
|
$ |
12,496 |
|
|
$ |
10,940 |
|
|
|
|
|
|
|
GAAP total operating
expenses |
$ |
74,143 |
|
|
$ |
77,667 |
|
|
$ |
74,951 |
|
Amortization of intangibles |
(1,771 |
) |
|
(1,771 |
) |
|
(1,771 |
) |
Stock-based compensation expense |
(4,692 |
) |
|
(4,225 |
) |
|
(3,972 |
) |
Restructuring and other charges |
(37 |
) |
|
(22 |
) |
|
(2,678 |
) |
Litigation reserves, net |
— |
|
|
(15 |
) |
|
(10 |
) |
Non-GAAP total
operating expenses |
$ |
67,643 |
|
|
$ |
71,634 |
|
|
$ |
66,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2017 |
|
|
|
December 31, 2016 |
|
|
|
April 3, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating
income |
$ |
22,789 |
|
|
$ |
33,043 |
|
|
$ |
25,614 |
|
GAAP operating
margin |
7.0 |
% |
|
9.0 |
% |
|
8.3 |
% |
Amortization of intangibles |
4,382 |
|
|
4,237 |
|
|
4,165 |
|
Stock-based compensation expense |
5,128 |
|
|
4,649 |
|
|
4,411 |
|
Restructuring and other charges |
37 |
|
|
22 |
|
|
2,678 |
|
Litigation reserves, net |
— |
|
|
15 |
|
|
10 |
|
Non-GAAP operating
income |
$ |
32,336 |
|
|
$ |
41,966 |
|
|
$ |
36,878 |
|
Non-GAAP operating
margin |
10.0 |
% |
|
11.4 |
% |
|
11.9 |
% |
|
|
|
|
|
|
GAAP other income
(expense), net |
$ |
335 |
|
|
$ |
461 |
|
|
$ |
(366 |
) |
Gain on
litigation settlements |
— |
|
|
— |
|
|
(5 |
) |
Non-GAAP other income
(expense), net |
$ |
335 |
|
|
$ |
461 |
|
|
$ |
(371 |
) |
|
|
|
|
|
|
GAAP net income |
$ |
15,994 |
|
|
$ |
22,109 |
|
|
$ |
16,589 |
|
Amortization of intangibles |
4,382 |
|
|
4,237 |
|
|
4,165 |
|
Stock-based compensation expense |
5,128 |
|
|
4,649 |
|
|
4,411 |
|
Restructuring and other charges |
37 |
|
|
22 |
|
|
2,678 |
|
Litigation reserves, net |
— |
|
|
15 |
|
|
10 |
|
Gain on
litigation settlements |
— |
|
|
— |
|
|
(5 |
) |
Tax
effect of non-GAAP adjustments |
(3,850 |
) |
|
(1,163 |
) |
|
(3,243 |
) |
Non-GAAP net
income |
$ |
21,691 |
|
|
$ |
29,869 |
|
|
$ |
24,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2017 |
|
|
December 31, 2016 |
|
April 3, 2016 |
NET
INCOME PER DILUTED SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net
income per diluted share |
$ |
0.47 |
|
|
$ |
0.65 |
|
|
$ |
0.50 |
|
Amortization of intangibles |
0.13 |
|
|
0.12 |
|
|
0.13 |
|
Stock-based compensation expense |
0.15 |
|
|
0.14 |
|
|
0.13 |
|
Restructuring and other charges |
0.00 |
|
|
0.00 |
|
|
0.08 |
|
Litigation reserves, net |
— |
|
|
0.00 |
|
|
0.00 |
|
Gain on litigation settlements |
— |
|
|
— |
|
|
0.00 |
|
Tax effect of non-GAAP adjustments |
(0.11 |
) |
|
(0.03 |
) |
|
(0.10 |
) |
Non-GAAP
net income per diluted share |
$ |
0.64 |
|
|
$ |
0.88 |
|
|
$ |
0.74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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, |
|
December 31, |
|
October 2, |
|
July 3, |
|
April 3, |
|
2017 |
2016 |
2016 |
2016 |
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents
and short-term investments |
$ |
361,235 |
|
|
$ |
365,982 |
|
|
$ |
403,016 |
|
|
$ |
352,672 |
|
|
$ |
333,304 |
|
|
Cash, cash equivalents
and short-term investments per diluted share |
$ |
10.58 |
|
|
$ |
10.79 |
|
|
$ |
11.88 |
|
|
$ |
10.53 |
|
|
$ |
10.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable,
net |
$ |
265,254 |
|
|
$ |
313,839 |
|
|
$ |
233,911 |
|
|
$ |
230,550 |
|
|
$ |
218,421 |
|
|
Days sales outstanding
(DSO) |
|
75 |
|
|
|
77 |
|
|
|
63 |
|
|
|
67 |
|
|
|
66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories |
$ |
267,826 |
|
|
$ |
247,862 |
|
|
$ |
217,621 |
|
|
$ |
207,841 |
|
|
$ |
215,307 |
|
|
Ending inventory
turns |
|
3.4 |
|
|
|
4.2 |
|
|
|
4.3 |
|
|
|
4.1 |
|
|
|
3.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weeks of channel
inventory: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
retail channel |
|
8.2 |
|
|
|
7.2 |
|
|
|
8.9 |
|
|
|
8.8 |
|
|
|
8.8 |
|
|
U.S.
distribution channel |
|
5.8 |
|
|
|
6.2 |
|
|
|
4.5 |
|
|
|
5.0 |
|
|
|
5.6 |
|
|
EMEA
distribution channel |
|
5.1 |
|
|
|
5.3 |
|
|
|
4.5 |
|
|
|
3.8 |
|
|
|
4.4 |
|
|
APAC
distribution channel |
|
5.9 |
|
|
|
7.4 |
|
|
|
6.8 |
|
|
|
6.7 |
|
|
|
6.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue
(current and non-current) |
$ |
40,225 |
|
|
$ |
42,947 |
|
|
$ |
31,526 |
|
|
$ |
32,973 |
|
|
$ |
29,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Headcount |
951 |
|
|
945 |
|
|
944 |
|
|
928 |
|
|
937 |
|
|
Non-GAAP diluted
shares |
34,136 |
|
|
33,925 |
|
|
33,913 |
|
|
33,493 |
|
|
33,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET REVENUE BY GEOGRAPHY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
April 2, |
|
December 31, |
|
April 3, |
2017 |
2016 |
2016 |
Americas |
$ |
211,629 |
|
65 |
% |
|
$ |
253,655 |
|
69 |
% |
|
$ |
193,850 |
|
62 |
% |
EMEA |
|
58,445 |
|
18 |
% |
|
|
69,213 |
|
19 |
% |
|
|
64,505 |
|
21 |
% |
APAC |
|
53,583 |
|
17 |
% |
|
|
45,061 |
|
12 |
% |
|
|
51,901 |
|
17 |
% |
Total |
$ |
323,657 |
|
100 |
% |
|
$ |
367,929 |
|
100 |
% |
|
$ |
310,256 |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NETGEAR, INC. |
SEGMENT FINANCIAL INFORMATION |
(In thousands, except percentage
data) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 2, 2017 |
|
|
December 31, 2016 |
|
|
October 2, 2016 |
|
|
July 3, 2016 |
|
|
April 3, 2016 |
|
|
December 31, 2015 |
|
|
September 27, 2015 |
|
|
June 28, 2015 |
|
|
March 29, 2015 |
|
Net revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arlo |
$ |
60,712 |
|
$ |
76,977 |
|
$ |
48,642 |
|
$ |
38,585 |
|
$ |
24,265 |
|
$ |
36,459 |
|
$ |
25,143 |
|
$ |
18,759 |
|
$ |
11,275 |
|
Connected Home |
194,361 |
|
214,938 |
|
215,116 |
|
198,654 |
|
216,110 |
|
258,928 |
|
249,836 |
|
205,012 |
|
223,439 |
|
SMB |
68,584 |
|
76,014 |
|
74,700 |
|
74,416 |
|
69,881 |
|
65,476 |
|
66,914 |
|
65,011 |
|
74,443 |
|
Total net
revenue |
$ |
323,657 |
|
$ |
367,929 |
|
$ |
338,458 |
|
$ |
311,655 |
|
$ |
310,256 |
|
$ |
360,863 |
|
$ |
341,893 |
|
$ |
288,782 |
|
$ |
309,157 |
|
|
|
|
|
|
|
|
|
|
|
Contribution
income: |
|
|
|
|
|
|
|
|
|
Arlo |
321 |
|
(1,006 |
) |
(771 |
) |
389 |
|
(3,830 |
) |
1,659 |
|
475 |
|
(1,010 |
) |
(1,250 |
) |
Arlo contribution
margin |
0.5 |
% |
(1.3 |
)% |
(1.6 |
)% |
1.0 |
% |
(15.8 |
)% |
4.6 |
% |
1.9 |
% |
(5.4 |
)% |
(11.1 |
)% |
|
|
|
|
|
|
|
|
|
|
Connected Home |
31,712 |
|
40,973 |
|
36,330 |
|
33,228 |
|
42,029 |
|
40,882 |
|
34,717 |
|
20,466 |
|
25,680 |
|
Connected Home
contribution margin |
16.3 |
% |
19.1 |
% |
16.9 |
% |
16.7 |
% |
19.4 |
% |
15.8 |
% |
13.9 |
% |
10.0 |
% |
11.5 |
% |
|
|
|
|
|
|
|
|
|
|
SMB |
18,504 |
|
20,473 |
|
20,747 |
|
18,846 |
|
15,395 |
|
11,540 |
|
14,476 |
|
13,250 |
|
16,890 |
|
SMB contribution
margin |
27.0 |
% |
26.9 |
% |
27.8 |
% |
25.3 |
% |
22.0 |
% |
17.6 |
% |
21.6 |
% |
20.4 |
% |
22.7 |
% |
Total
segment contribution income |
50,537 |
|
60,440 |
|
56,306 |
|
52,463 |
|
53,594 |
|
54,081 |
|
49,668 |
|
32,706 |
|
41,320 |
|
|
|
|
|
|
|
|
|
|
|
Corporate and
unallocated costs |
(18,201 |
) |
(18,474 |
) |
(17,532 |
) |
(16,418 |
) |
(16,716 |
) |
(14,942 |
) |
(14,363 |
) |
(12,230 |
) |
(12,966 |
) |
Amortization of
intangibles (1) |
(4,382 |
) |
(4,237 |
) |
(4,165 |
) |
(4,166 |
) |
(4,165 |
) |
(4,165 |
) |
(4,165 |
) |
(4,243 |
) |
(4,396 |
) |
Stock-based
compensation expense |
(5,128 |
) |
(4,649 |
) |
(4,870 |
) |
(5,019 |
) |
(4,411 |
) |
(4,308 |
) |
(4,111 |
) |
(4,058 |
) |
(4,348 |
) |
Restructuring and other
charges |
(37 |
) |
(22 |
) |
130 |
|
(1,311 |
) |
(2,678 |
) |
(14 |
) |
(1,016 |
) |
(974 |
) |
(4,394 |
) |
Losses on inventory
commitments due to restructuring |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(407 |
) |
Litigation reserves,
net |
— |
|
(15 |
) |
(13 |
) |
(35 |
) |
(10 |
) |
(8 |
) |
— |
|
— |
|
2,690 |
|
Interest income |
405 |
|
359 |
|
291 |
|
279 |
|
234 |
|
111 |
|
65 |
|
67 |
|
52 |
|
Other income (expense),
net |
335 |
|
461 |
|
116 |
|
(332 |
) |
(366 |
) |
(21 |
) |
(199 |
) |
(343 |
) |
475 |
|
Income
before income taxes |
$ |
23,529 |
|
$ |
33,863 |
|
$ |
30,263 |
|
$ |
25,461 |
|
$ |
25,482 |
|
$ |
30,734 |
|
$ |
25,879 |
|
$ |
10,925 |
|
$ |
18,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Amount excludes amortization expense related to patents within
purchased intangibles in cost of revenue. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NETGEAR, INC. |
SERVICE PROVIDER NET REVENUE |
(In thousands) |
(Unaudited) |
|
|
Three Months Ended |
|
April 2, |
December 31, |
October 2, |
July 3, |
April 3, |
December 31, |
September 27, |
June 28, |
March 29, |
2017 |
2016 |
2016 |
2016 |
2016 |
2015 |
2015 |
2015 |
2015 |
Arlo |
$ |
1,977 |
|
|
5,028 |
|
|
3,513 |
|
|
5,236 |
|
|
5,981 |
|
|
5,822 |
|
|
4,632 |
|
|
4,160 |
|
|
3,971 |
|
Connected Home |
|
53,193 |
|
|
45,730 |
|
|
66,042 |
|
|
61,356 |
|
|
76,852 |
|
|
92,045 |
|
|
106,267 |
|
|
87,802 |
|
|
109,786 |
|
SMB |
|
790 |
|
|
686 |
|
|
1,295 |
|
|
746 |
|
|
1,448 |
|
|
1,565 |
|
|
1,726 |
|
|
1,994 |
|
|
1,712 |
|
Total |
$ |
55,960 |
|
$ |
51,444 |
|
$ |
70,850 |
|
$ |
67,338 |
|
$ |
84,281 |
|
$ |
99,432 |
|
$ |
112,625 |
|
$ |
93,956 |
|
$ |
115,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the first quarter of fiscal 2017, we reorganized our
operating segment structure, resulting in a change to our
reportable segments. The former Service Provider segment was
integrated into our new segments, with the new segments organized
on product group. The following segments were established:
- Arlo: Focused on intelligent internet-connected products for
consumers and business that provide security and safety;
- Connected Home: Focused on consumers and consists of
high-performance, dependable and easy-to-use LTE and WiFi internet
networking solutions; and
- SMB: Focused on small and medium-sized businesses and consists
of business networking, storage and security solutions that bring
enterprise-class functionality down to small and medium-sized
businesses at an affordable price.
The table above provides quarterly recast
segment revenue and contribution income (loss) for the years ended
December 31, 2016 and 2015. The recasting of previously issued
financial information does not represent a restatement of
previously issued financial statements and does not impact the
previously reported consolidated net revenue, income from
operations, net income per share, total assets or stockholders’
equity. From Q1 2017, it is our intention to disclose service
provider net revenue within each of the reportable segments as
supplementary data.
Contact:
NETGEAR Investor Relations
Christopher Genualdi
netgearIR@netgear.com
(408) 890-3520
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