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
second quarter ended June 30, 2019.
- Second quarter 2019 net revenue of $230.9 million, a decrease
of 9.6% from the comparable prior year quarter.
- Second quarter 2019 GAAP operating income of $0.3 million, or
0.1% of net revenue, as compared to net loss of $0.1 million, or
(0.0%) of net revenue, in the comparable prior year
quarter.◦ Second quarter 2019 non-GAAP operating income of
$10.0 million, or 4.4% of net revenue, as compared to $10.5
million, or 4.1% of net revenue in the comparable prior year
quarter.
- Second quarter 2019 GAAP net income per diluted share from
continuing operations of $0.03, as compared to $0.02 in the
comparable prior year quarter.◦ Second quarter 2019 non-GAAP
net income per diluted share from continuing operations of $0.28,
as compared to $0.29 in the comparable prior year quarter.
- Board authorizes incremental repurchase of up to 4,500,000
shares.
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, "During the second quarter of 2019, we saw
improvement in the U.S. retail WiFi market driven by the continued
roll out of our WiFi 6 Nighthawk routers and various channel
marketing activities. The improved market demand allowed us to
finish the quarter with healthy channel inventory levels. Our
financial results for the quarter came in slightly above the high
end of our guidance range for revenue, and in-line with the range
for non-GAAP operating margin."
Mr. Lo continued, “We are pleased to report that
we reached 11.2 million registered users in Q2, which represents
the foundation for building our paid subscriber base. Furthermore,
our number of registered app users reached 2.8 million in the
second quarter. We recently launched NETGEAR Armor Cyber Threat
Protection to our Orbi WiFi systems install base worldwide, and
have been encouraged by the initial traction with trial users. We
look forward to converting these users to paying customers in the
coming quarters."
Bryan Murray, Chief Financial Officer of
NETGEAR, added, "During the second quarter of 2019, we repurchased
approximately 570,000 shares of common stock for $17.0 million. In
addition, our Board of Directors has authorized the repurchase of
up to an incremental 4,500,000 shares of the Company’s common
stock, or approximately 14.5% of outstanding shares. We remain
confident in our ability to generate meaningful levels of cash, and
plan to continue to opportunistically repurchase shares in future
quarters."
Business Outlook
Mr. Murray continued, "Looking ahead to the
third quarter of 2019, in which we expect to launch more WiFi 6
products, net revenue is expected to be in the range of $265
million to $280 million. GAAP operating margin for the third
quarter is expected to be in the range of 5.2% to 6.2%, and
non-GAAP operating margin is expected to be in the range of 8.5% to
9.5%. Our GAAP tax rate is expected to be approximately 25.0%, and
our non-GAAP tax rate is expected to be 22.0% for the third quarter
of 2019.”
A reconciliation between the Business Outlook on
a GAAP and non-GAAP basis is provided in the following table:
|
|
Three months ending |
|
|
September 29, 2019 |
|
|
Operating Margin Rate |
|
Tax Rate |
GAAP |
|
5.2% - 6.2% |
|
25.0% |
Estimated adjustments
for1: |
|
|
|
|
Amortization of intangibles |
|
0.6% |
|
__ |
Stock-based compensation expense |
|
2.7% |
|
__ |
Tax effects of non-GAAP adjustments |
|
__ |
|
(3.0)% |
Non-GAAP |
|
8.5% - 9.5% |
|
22.0% |
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; 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
DetailsNETGEAR will review the second quarter results and
discuss management's expectations for the third quarter of 2019
today, Wednesday, July 24, 2019 at 5 p.m. ET (2 p.m. PT). The
toll free dial-in number for the live audio call is (844) 709-2008.
The international dial-in number for the live audio call is (647)
253-8663. The conference ID for the call is 1959478. 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.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 23,000
retail locations around the globe, and through approximately 21,000
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 20 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.
© 2019 NETGEAR, Inc. NETGEAR, the NETGEAR logo,
NETGEAR Armor, Orbi and Nighthawk 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, 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; expectations
regarding NETGEAR's paid subscriber base, registered users and
registered app users and their effect on NETGEAR's paid subscriber
base; 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 grow its number of
registered users and/or registered app users; the Company may be
unable to grow its paid subscriber base; 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 II - Item 1A. Risk Factors” in the Company's
quarterly report on Form 10-Q for the fiscal quarter ended March
31, 2019, filed with the Securities and Exchange Commission on May
3, 2019. 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 total operating expenses, non-GAAP
operating income, non-GAAP operating margin, Non-GAAP other income
(expense), net, non-GAAP net income and non-GAAP net income per
diluted share. These non-GAAP financial measures represent results
from continuing operations. These supplemental measures exclude
adjustments for amortization of intangibles, stock-based
compensation expense, separation expense, restructuring and other
charges, litigation reserves, net, impairment charges to
investments, and the related tax effects. 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: separation expense, restructuring and other charges,
litigation reserves, net, and impairment charges to investments. 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.
Tax effects consist of the various above
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) |
|
|
As of |
|
June 30, 2019 |
|
December 31, 2018 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
214,611 |
|
|
$ |
201,047 |
|
Short-term investments |
3,700 |
|
|
73,317 |
|
Accounts receivable, net |
238,635 |
|
|
303,667 |
|
Inventories |
276,316 |
|
|
243,871 |
|
Prepaid expenses and other current assets |
38,687 |
|
|
35,997 |
|
Total current assets |
771,949 |
|
|
857,899 |
|
Property and equipment,
net |
21,074 |
|
|
20,177 |
|
Operating lease right-of-use
assets, net |
34,063 |
|
|
— |
|
Intangibles, net |
13,297 |
|
|
17,146 |
|
Goodwill |
80,721 |
|
|
80,721 |
|
Other non-current assets |
71,403 |
|
|
67,433 |
|
Total assets |
$ |
992,507 |
|
|
$ |
1,043,376 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
108,444 |
|
|
$ |
139,748 |
|
Accrued employee compensation |
23,436 |
|
|
31,666 |
|
Other accrued liabilities |
171,873 |
|
|
199,472 |
|
Deferred Revenue |
10,093 |
|
|
11,086 |
|
Income taxes payable |
1,141 |
|
|
2,020 |
|
Total current liabilities |
314,987 |
|
|
383,992 |
|
Non-current income taxes
payable |
18,278 |
|
|
19,600 |
|
Non-current operating lease
liabilities |
29,263 |
|
|
— |
|
Other non-current
liabilities |
7,907 |
|
|
12,232 |
|
Total liabilities |
370,435 |
|
|
415,824 |
|
Stockholders' equity: |
|
|
|
Common stock |
31 |
|
|
32 |
|
Additional paid-in capital |
812,034 |
|
|
793,585 |
|
Accumulated other comprehensive income (loss) |
12 |
|
|
(15 |
) |
Accumulated deficit |
(190,005 |
) |
|
(166,050 |
) |
Total stockholders' equity |
622,072 |
|
|
627,552 |
|
Total liabilities and stockholders' equity |
$ |
992,507 |
|
|
$ |
1,043,376 |
|
|
NETGEAR, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(In thousands, except per share and percentage
data) |
(Unaudited) |
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, 2019 |
|
March 31, 2019 |
|
July 1, 2018 |
|
June 30, 2019 |
|
July 1, 2018 |
|
|
|
|
|
|
|
|
|
|
Net revenue |
$ |
230,852 |
|
|
$ |
249,082 |
|
|
$ |
255,276 |
|
|
$ |
479,934 |
|
|
$ |
500,477 |
|
Cost of revenue |
165,407 |
|
|
167,074 |
|
|
174,996 |
|
|
332,481 |
|
|
343,878 |
|
Gross profit |
65,445 |
|
|
82,008 |
|
|
80,280 |
|
|
147,453 |
|
|
156,599 |
|
Gross margin |
28.3 |
% |
|
32.9 |
% |
|
31.4 |
% |
|
30.7 |
% |
|
31.3 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
Research and development |
18,814 |
|
|
18,832 |
|
|
21,946 |
|
|
37,646 |
|
|
43,137 |
|
Sales and marketing |
34,541 |
|
|
35,855 |
|
|
38,552 |
|
|
70,396 |
|
|
76,426 |
|
General and administrative |
10,463 |
|
|
13,117 |
|
|
18,458 |
|
|
23,580 |
|
|
34,219 |
|
Separation expense |
— |
|
|
264 |
|
|
— |
|
|
264 |
|
|
— |
|
Restructuring and other charges |
1,291 |
|
|
(68 |
) |
|
1,376 |
|
|
1,223 |
|
|
1,367 |
|
Litigation reserves, net |
10 |
|
|
— |
|
|
5 |
|
|
10 |
|
|
5 |
|
Total operating expenses |
65,119 |
|
|
68,000 |
|
|
80,337 |
|
|
133,119 |
|
|
155,154 |
|
Income (loss) from
operations |
326 |
|
|
14,008 |
|
|
(57 |
) |
|
14,334 |
|
|
1,445 |
|
Operating margin |
0.1 |
% |
|
5.6 |
% |
|
(0.0 |
%) |
|
3.0 |
% |
|
0.3 |
% |
Interest income, net |
782 |
|
|
701 |
|
|
1,073 |
|
|
1,483 |
|
|
1,821 |
|
Other income (expense),
net |
487 |
|
|
341 |
|
|
788 |
|
|
828 |
|
|
(530 |
) |
Income before income
taxes |
1,595 |
|
|
15,050 |
|
|
1,804 |
|
|
16,645 |
|
|
2,736 |
|
Provision for income
taxes |
756 |
|
|
2,207 |
|
|
1,271 |
|
|
2,963 |
|
|
1,185 |
|
Net income from continuing
operations |
839 |
|
|
12,843 |
|
|
533 |
|
|
13,682 |
|
|
1,551 |
|
Net loss from discontinued
operations, net of tax (1) |
— |
|
|
— |
|
|
(5,763 |
) |
|
— |
|
|
(1,191 |
) |
Net income (loss) |
$ |
839 |
|
|
$ |
12,843 |
|
|
$ |
(5,230 |
) |
|
$ |
13,682 |
|
|
$ |
360 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share -
basic: |
|
|
|
|
|
|
|
|
|
Income from continuing operations |
$ |
0.03 |
|
|
$ |
0.41 |
|
|
$ |
0.02 |
|
|
$ |
0.44 |
|
|
$ |
0.05 |
|
Loss from discontinued operations |
— |
|
|
— |
|
|
(0.19 |
) |
|
— |
|
|
(0.04 |
) |
Net income (loss) |
$ |
0.03 |
|
|
$ |
0.41 |
|
|
$ |
(0.17 |
) |
|
$ |
0.44 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share -
Diluted: |
|
|
|
|
|
|
|
|
|
Income from continuing operations |
$ |
0.03 |
|
|
$ |
0.39 |
|
|
$ |
0.02 |
|
|
$ |
0.42 |
|
|
$ |
0.05 |
|
Loss from discontinued operations |
— |
|
|
— |
|
|
(0.18 |
) |
|
— |
|
|
(0.04 |
) |
Net income (loss) |
$ |
0.03 |
|
|
$ |
0.39 |
|
|
$ |
(0.16 |
) |
|
$ |
0.42 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used
to compute net income (loss) per share: |
|
|
|
|
|
|
|
|
|
Basic |
31,246 |
|
|
31,483 |
|
|
31,674 |
|
|
31,365 |
|
|
31,550 |
|
Diluted |
32,112 |
|
|
32,874 |
|
|
32,742 |
|
|
32,518 |
|
|
32,722 |
|
(1) Historical results of Arlo
Technologies, Inc. are reflected as discontinued operations for the
periods presented.
|
NETGEAR, INC. |
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP
MEASURES |
(In thousands, except percentage data) |
(Unaudited) |
|
STATEMENT
OF OPERATIONS DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, 2019 |
|
March 31, 2019 |
|
July 1, 2018 |
|
June 30, 2019 |
|
July 1, 2018 |
|
|
|
|
|
|
|
|
|
|
GAAP gross profit |
$ |
65,445 |
|
|
$ |
82,008 |
|
|
$ |
80,280 |
|
|
$ |
147,453 |
|
|
$ |
156,599 |
|
GAAP gross margin |
28.3 |
% |
|
32.9 |
% |
|
31.4 |
% |
|
30.7 |
% |
|
31.3 |
% |
Amortization of intangibles |
178 |
|
|
179 |
|
|
209 |
|
|
357 |
|
|
532 |
|
Stock-based compensation expense |
755 |
|
|
668 |
|
|
572 |
|
|
1,423 |
|
|
1,135 |
|
Non-GAAP gross profit |
$ |
66,378 |
|
|
$ |
82,855 |
|
|
$ |
81,061 |
|
|
$ |
149,233 |
|
|
$ |
158,266 |
|
Non-GAAP gross margin |
28.8 |
% |
|
33.3 |
% |
|
31.8 |
% |
|
31.1 |
% |
|
31.6 |
% |
|
|
|
|
|
|
|
|
|
|
GAAP research and
development |
$ |
18,814 |
|
|
$ |
18,832 |
|
|
$ |
21,946 |
|
|
$ |
37,646 |
|
|
$ |
43,137 |
|
Stock-based compensation expense |
(1,288 |
) |
|
(1,192 |
) |
|
(1,122 |
) |
|
(2,480 |
) |
|
(2,134 |
) |
Non-GAAP research and
development |
$ |
17,526 |
|
|
$ |
17,640 |
|
|
$ |
20,824 |
|
|
$ |
35,166 |
|
|
$ |
41,003 |
|
|
|
|
|
|
|
|
|
|
|
GAAP sales and marketing |
$ |
34,541 |
|
|
$ |
35,855 |
|
|
$ |
38,552 |
|
|
$ |
70,396 |
|
|
$ |
76,426 |
|
Amortization of intangibles |
(1,504 |
) |
|
(1,831 |
) |
|
(1,757 |
) |
|
(3,335 |
) |
|
(3,513 |
) |
Stock-based compensation expense |
(2,085 |
) |
|
(2,041 |
) |
|
(2,188 |
) |
|
(4,126 |
) |
|
(4,393 |
) |
Non-GAAP sales and
marketing |
$ |
30,952 |
|
|
$ |
31,983 |
|
|
$ |
34,607 |
|
|
$ |
62,935 |
|
|
$ |
68,520 |
|
|
|
|
|
|
|
|
|
|
|
GAAP general and
administrative |
$ |
10,463 |
|
|
$ |
13,117 |
|
|
$ |
18,458 |
|
|
$ |
23,580 |
|
|
$ |
34,219 |
|
Stock-based compensation expense |
(2,611 |
) |
|
(2,557 |
) |
|
(3,364 |
) |
|
(5,168 |
) |
|
(6,448 |
) |
Non-GAAP general and
administrative |
$ |
7,852 |
|
|
$ |
10,560 |
|
|
$ |
15,094 |
|
|
$ |
18,412 |
|
|
$ |
27,771 |
|
|
|
|
|
|
|
|
|
|
|
GAAP total operating
expenses |
$ |
65,119 |
|
|
$ |
68,000 |
|
|
$ |
80,337 |
|
|
$ |
133,119 |
|
|
$ |
155,154 |
|
Amortization of intangibles |
(1,504 |
) |
|
(1,831 |
) |
|
(1,757 |
) |
|
(3,335 |
) |
|
(3,513 |
) |
Stock-based compensation expense |
(5,984 |
) |
|
(5,790 |
) |
|
(6,674 |
) |
|
(11,774 |
) |
|
(12,975 |
) |
Separation expense |
— |
|
|
(264 |
) |
|
— |
|
|
(264 |
) |
|
— |
|
Restructuring and other charges |
(1,291 |
) |
|
68 |
|
|
(1,376 |
) |
|
(1,223 |
) |
|
(1,367 |
) |
Litigation reserves, net |
(10 |
) |
|
— |
|
|
(5 |
) |
|
(10 |
) |
|
(5 |
) |
Non-GAAP total operating
expenses |
$ |
56,330 |
|
|
$ |
60,183 |
|
|
$ |
70,525 |
|
|
$ |
116,513 |
|
|
$ |
137,294 |
|
|
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 |
|
Six Months Ended |
|
June 30, 2019 |
|
March 31, 2019 |
|
July 1, 2018 |
|
June 30, 2019 |
|
July 1, 2018 |
|
|
|
|
|
|
|
|
|
|
GAAP operating income (loss) |
$ |
326 |
|
|
$ |
14,008 |
|
|
$ |
(57 |
) |
|
$ |
14,334 |
|
|
$ |
1,445 |
|
GAAP operating margin |
0.1 |
% |
|
5.6 |
% |
|
(0.0 |
%) |
|
3.0 |
% |
|
0.3 |
% |
Amortization of intangibles |
1,682 |
|
|
2,010 |
|
|
1,966 |
|
|
3,692 |
|
|
4,045 |
|
Stock-based compensation expense |
6,739 |
|
|
6,458 |
|
|
7,246 |
|
|
13,197 |
|
|
14,110 |
|
Separation expense |
— |
|
|
264 |
|
|
— |
|
|
264 |
|
|
— |
|
Restructuring and other charges |
1,291 |
|
|
(68 |
) |
|
1,376 |
|
|
1,223 |
|
|
1,367 |
|
Litigation reserves, net |
10 |
|
|
— |
|
|
5 |
|
|
10 |
|
|
5 |
|
Non-GAAP operating income |
$ |
10,048 |
|
|
$ |
22,672 |
|
|
$ |
10,536 |
|
|
$ |
32,720 |
|
|
$ |
20,972 |
|
Non-GAAP operating margin |
4.4 |
% |
|
9.1 |
% |
|
4.1 |
% |
|
6.8 |
% |
|
4.2 |
% |
|
|
|
|
|
|
|
|
|
|
GAAP other income (expense),
net |
$ |
487 |
|
|
$ |
341 |
|
|
$ |
788 |
|
|
$ |
828 |
|
|
$ |
(530 |
) |
Impairment charges to investments |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,400 |
|
Non-GAAP other income
(expense), net |
$ |
487 |
|
|
$ |
341 |
|
|
$ |
788 |
|
|
$ |
828 |
|
|
$ |
870 |
|
|
|
|
|
|
|
|
|
|
|
GAAP net income from
continuing operations |
$ |
839 |
|
|
$ |
12,843 |
|
|
$ |
533 |
|
|
$ |
13,682 |
|
|
$ |
1,551 |
|
Amortization of intangibles |
1,682 |
|
|
2,010 |
|
|
1,966 |
|
|
3,692 |
|
|
4,045 |
|
Stock-based compensation expense |
6,739 |
|
|
6,458 |
|
|
7,246 |
|
|
13,197 |
|
|
14,110 |
|
Separation expense |
— |
|
|
264 |
|
|
— |
|
|
264 |
|
|
— |
|
Restructuring and other charges |
1,291 |
|
|
(68 |
) |
|
1,376 |
|
|
1,223 |
|
|
1,367 |
|
Litigation reserves, net |
10 |
|
|
— |
|
|
5 |
|
|
10 |
|
|
5 |
|
Impairment charges to investments |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,400 |
|
Tax effects of above non-GAAP adjustments |
(1,707 |
) |
|
(1,706 |
) |
|
(1,546 |
) |
|
(3,413 |
) |
|
(4,432 |
) |
Non-GAAP net income from
continuing operations |
$ |
8,854 |
|
|
$ |
19,801 |
|
|
$ |
9,580 |
|
|
$ |
28,655 |
|
|
$ |
18,046 |
|
|
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 |
|
Six Months Ended |
|
June 30, 2019 |
|
March 31, 2019 |
|
July 1, 2018 |
|
June 30, 2019 |
|
July 1, 2018 |
NET INCOME PER DILUTED
SHARE: |
|
|
|
|
|
|
|
|
|
GAAP net income per diluted share from continuing operations |
$ |
0.03 |
|
|
$ |
0.39 |
|
|
$ |
0.02 |
|
|
$ |
0.42 |
|
|
$ |
0.05 |
|
Amortization of intangibles |
0.05 |
|
|
0.06 |
|
|
0.06 |
|
|
0.11 |
|
|
0.12 |
|
Stock-based compensation expense |
0.21 |
|
|
0.20 |
|
|
0.22 |
|
|
0.41 |
|
|
0.43 |
|
Separation expense |
— |
|
|
0.01 |
|
|
— |
|
|
0.01 |
|
|
— |
|
Restructuring and other charges |
0.04 |
|
|
0.00 |
|
|
0.04 |
|
|
0.04 |
|
|
0.04 |
|
Litigation reserves, net |
0.00 |
|
|
— |
|
|
0.00 |
|
|
0.00 |
|
|
0.00 |
|
Impairment charges to investments |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0.04 |
|
Tax effects of above non-GAAP adjustments |
(0.05 |
) |
|
(0.06 |
) |
|
(0.05 |
) |
|
(0.11 |
) |
|
(0.13 |
) |
Non-GAAP net income per
diluted share from continuing operations |
$ |
0.28 |
|
|
$ |
0.60 |
|
|
$ |
0.29 |
|
|
$ |
0.88 |
|
|
$ |
0.55 |
|
|
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 |
|
June 30, 2019 |
|
March 31, 2019 |
|
December 31, 2018 |
|
September 30, 2018 |
|
July 1, 2018 |
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and short-term investments |
$ |
218,311 |
|
|
$ |
212,652 |
|
|
$ |
274,364 |
|
|
$ |
341,968 |
|
|
$ |
355,489 |
|
Cash, cash equivalents and
short-term investments per diluted share |
$ |
6.80 |
|
|
$ |
6.47 |
|
|
$ |
8.36 |
|
|
$ |
10.37 |
|
|
$ |
10.86 |
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
$ |
238,635 |
|
|
$ |
262,531 |
|
|
$ |
303,667 |
|
|
$ |
241,862 |
|
|
$ |
232,770 |
|
Days sales outstanding
(DSO) |
94 |
|
|
95 |
|
|
97 |
|
|
82 |
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
Inventories |
$ |
276,316 |
|
|
$ |
236,123 |
|
|
$ |
243,871 |
|
|
$ |
198,037 |
|
|
$ |
168,263 |
|
Ending inventory turns |
2.4 |
|
|
2.8 |
|
|
3.3 |
|
|
3.5 |
|
|
4.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weeks of channel
inventory: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. retail channel |
10.6 |
|
|
10.4 |
|
|
7.7 |
|
|
9.8 |
|
|
10.6 |
|
U.S. distribution channel |
5.5 |
|
|
5.7 |
|
|
5.2 |
|
|
4.1 |
|
|
4.3 |
|
EMEA distribution channel |
4.6 |
|
|
4.0 |
|
|
4.1 |
|
|
4.3 |
|
|
4.1 |
|
APAC distribution channel |
7.4 |
|
|
6.4 |
|
|
7.4 |
|
|
6.6 |
|
|
7.9 |
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue (current and
non-current) |
$ |
12,047 |
|
|
$ |
13,598 |
|
|
$ |
11,865 |
|
|
$ |
9,726 |
|
|
$ |
5,577 |
|
|
|
|
|
|
|
|
|
|
|
Headcount |
824 |
|
|
828 |
|
|
837 |
|
|
833 |
|
|
901 |
|
Non-GAAP diluted shares |
32,112 |
|
|
32,874 |
|
|
32,803 |
|
|
32,974 |
|
|
32,742 |
|
NET REVENUE BY GEOGRAPHY
|
Three Months Ended |
|
Six Months Ended |
|
June 30, 2019 |
|
March 31, 2019 |
|
July 1, 2018 |
|
June 30, 2019 |
|
July 1, 2018 |
Americas |
$ |
157,170 |
|
68 |
% |
|
$ |
148,029 |
|
59 |
% |
|
$ |
174,414 |
|
68 |
% |
|
$ |
305,199 |
|
63 |
% |
|
$ |
334,426 |
|
67 |
% |
EMEA |
43,091 |
|
19 |
% |
|
56,963 |
|
23 |
% |
|
48,209 |
|
19 |
% |
|
100,054 |
|
21 |
% |
|
95,643 |
|
19 |
% |
APAC |
30,591 |
|
13 |
% |
|
44,090 |
|
18 |
% |
|
32,653 |
|
13 |
% |
|
74,681 |
|
16 |
% |
|
70,408 |
|
14 |
% |
Total |
$ |
230,852 |
|
100 |
% |
|
$ |
249,082 |
|
100 |
% |
|
$ |
255,276 |
|
100 |
% |
|
$ |
479,934 |
|
100 |
% |
|
$ |
500,477 |
|
100 |
% |
NETGEAR, INC. |
SUPPLEMENTAL FINANCIAL INFORMATION
(CONTINUED) |
(In thousands) |
(Unaudited) |
NET REVENUE BY SEGMENT
|
Three Months Ended |
|
Six Months Ended |
|
June 30, 2019 |
|
March 31, 2019 |
|
July 1, 2018 |
|
June 30, 2019 |
|
July 1, 2018 |
Net revenue: |
|
|
|
|
|
|
|
|
|
Connected Home |
$ |
167,495 |
|
|
$ |
169,365 |
|
|
$ |
186,424 |
|
|
$ |
336,860 |
|
|
$ |
360,739 |
|
SMB |
63,357 |
|
|
79,717 |
|
|
68,852 |
|
|
143,074 |
|
|
139,738 |
|
Total net revenue |
$ |
230,852 |
|
|
$ |
249,082 |
|
|
$ |
255,276 |
|
|
$ |
479,934 |
|
|
$ |
500,477 |
|
SERVICE PROVIDER NET REVENUE
|
Three Months Ended |
|
Six Months Ended |
|
June 30, 2019 |
|
March 31, 2019 |
|
July 1, 2018 |
|
June 30, 2019 |
|
July 1, 2018 |
Connected Home |
$ |
26,901 |
|
|
$ |
36,818 |
|
|
$ |
46,333 |
|
|
$ |
63,719 |
|
|
$ |
88,130 |
|
SMB |
922 |
|
|
1,476 |
|
|
700 |
|
|
2,398 |
|
|
1,763 |
|
Total service provider net revenue |
$ |
27,823 |
|
|
$ |
38,294 |
|
|
$ |
47,033 |
|
|
$ |
66,117 |
|
|
$ |
89,893 |
|
Contact:
NETGEAR Investor Relations
Christopher Genualdi
netgearIR@netgear.com
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