Quarterly Report (10-q)
October 30 2020 - 05:22PM
Edgar (US Regulatory)
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
|
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
|
For the quarterly period ended September 27, 2020.
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
|
For the transition period from
to
Commission file number: 000-50350
NETGEAR, Inc.
(Exact name of registrant as specified in its charter)
|
Delaware
|
|
77-0419172
|
|
(State or other jurisdiction of
incorporation or organization)
|
|
(IRS Employer
Identification No.)
|
|
|
|
|
|
|
350 East Plumeria Drive,
|
|
|
|
San Jose,
|
California
|
|
95134
|
|
(Address of principal executive offices)
|
|
(Zip Code)
|
(Registrant’s telephone number including area code)
|
Securities registered pursuant to Section 12(b) of the Act:
|
|
|
|
|
|
Title of each class
|
|
Trading symbol(s):
|
|
Name of each exchange on which registered
|
|
Common Stock, $0.001 par value
|
|
NTGR
|
|
The Nasdaq Stock Market LLC
|
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90
days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See
definition of “large accelerated filer,” “accelerated filer,”
“smaller reporting company”, and "emerging growth company" in Rule
12b-2 of the Exchange Act.
|
Large Accelerated filer
|
|
☐
|
|
Accelerated filer
|
|
☒
|
|
Non-Accelerated filer
|
|
☐
|
|
Smaller reporting company
|
|
☐
|
|
|
|
|
|
Emerging growth company
|
|
☐
|
|
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
|
|
☐
|
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No ☒
The number of outstanding shares of the registrant’s Common Stock,
$0.001 par value, was 30,282,095 as of October 23, 2020.
Table of Contents
TABLE OF
CONTENTS
2
Table of Contents
PART I:
FINANCIAL INFORMATION
|
Item 1.
|
Financial Statements
|
NETGEAR, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
|
As of
|
|
|
|
|
September 27,
2020
|
|
|
December 31,
2019
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
300,492
|
|
|
$
|
190,208
|
|
|
Short-term investments
|
|
|
6,326
|
|
|
|
5,499
|
|
|
Accounts receivable, net of allowance for doubtful accounts of
$1,079 and $1,079 as of September 27, 2020 and December 31, 2019,
respectively
|
|
|
340,004
|
|
|
|
277,168
|
|
|
Inventories
|
|
|
144,302
|
|
|
|
235,489
|
|
|
Prepaid expenses and other current assets
|
|
|
31,588
|
|
|
|
35,745
|
|
|
Total current assets
|
|
|
822,712
|
|
|
|
744,109
|
|
|
Property and equipment, net
|
|
|
15,313
|
|
|
|
17,683
|
|
|
Operating lease right-of-use assets, net
|
|
|
31,181
|
|
|
|
28,917
|
|
|
Intangibles, net
|
|
|
5,390
|
|
|
|
10,104
|
|
|
Goodwill
|
|
|
80,721
|
|
|
|
80,721
|
|
|
Other non-current assets
|
|
|
72,954
|
|
|
|
74,279
|
|
|
Total assets
|
|
$
|
1,028,271
|
|
|
$
|
955,813
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
87,747
|
|
|
$
|
80,531
|
|
|
Accrued employee compensation
|
|
|
29,772
|
|
|
|
20,024
|
|
|
Other accrued liabilities
|
|
|
196,297
|
|
|
|
189,547
|
|
|
Deferred revenue
|
|
|
10,883
|
|
|
|
6,450
|
|
|
Income taxes payable
|
|
|
1,299
|
|
|
|
1,839
|
|
|
Total current liabilities
|
|
|
325,998
|
|
|
|
298,391
|
|
|
Non-current income taxes payable
|
|
|
18,290
|
|
|
|
15,307
|
|
|
Non-current operating lease liabilities
|
|
|
27,395
|
|
|
|
25,434
|
|
|
Other non-current liabilities
|
|
|
10,321
|
|
|
|
7,988
|
|
|
Total liabilities
|
|
|
382,004
|
|
|
|
347,120
|
|
|
Commitments and contingencies (Note 8)
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
30
|
|
|
|
30
|
|
|
Additional paid-in capital
|
|
|
868,985
|
|
|
|
831,365
|
|
|
Accumulated other comprehensive income (loss)
|
|
|
(112
|
)
|
|
|
21
|
|
|
Accumulated deficit
|
|
|
(222,636
|
)
|
|
|
(222,723
|
)
|
|
Total stockholders’ equity
|
|
|
646,267
|
|
|
|
608,693
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
1,028,271
|
|
|
$
|
955,813
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
3
Table of Contents
NETGEAR, INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 27,
2020
|
|
|
September 29,
2019
|
|
|
September 27,
2020
|
|
|
September 29,
2019
|
|
|
Net revenue
|
|
$
|
378,114
|
|
|
$
|
265,858
|
|
|
$
|
888,129
|
|
|
$
|
745,792
|
|
|
Cost of revenue
|
|
|
264,620
|
|
|
|
188,666
|
|
|
|
627,093
|
|
|
|
521,147
|
|
|
Gross profit
|
|
|
113,494
|
|
|
|
77,192
|
|
|
|
261,036
|
|
|
|
224,645
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
24,529
|
|
|
|
19,537
|
|
|
|
65,412
|
|
|
|
57,183
|
|
|
Sales and marketing
|
|
|
39,794
|
|
|
|
33,491
|
|
|
|
107,209
|
|
|
|
103,887
|
|
|
General and administrative
|
|
|
16,467
|
|
|
|
11,887
|
|
|
|
45,082
|
|
|
|
35,467
|
|
|
Other operating expenses, net
|
|
|
538
|
|
|
|
212
|
|
|
|
1,631
|
|
|
|
1,709
|
|
|
Total operating expenses
|
|
|
81,328
|
|
|
|
65,127
|
|
|
|
219,334
|
|
|
|
198,246
|
|
|
Income from operations
|
|
|
32,166
|
|
|
|
12,065
|
|
|
|
41,702
|
|
|
|
26,399
|
|
|
Interest income
|
|
|
98
|
|
|
|
639
|
|
|
|
409
|
|
|
|
2,122
|
|
|
Other income (expense), net
|
|
|
(515
|
)
|
|
|
(403
|
)
|
|
|
(4,787
|
)
|
|
|
425
|
|
|
Income before income taxes
|
|
|
31,749
|
|
|
|
12,301
|
|
|
|
37,324
|
|
|
|
28,946
|
|
|
Provision (benefit) for income taxes
|
|
|
6,214
|
|
|
|
(228
|
)
|
|
|
9,979
|
|
|
|
2,735
|
|
|
Net income
|
|
$
|
25,535
|
|
|
$
|
12,529
|
|
|
$
|
27,345
|
|
|
$
|
26,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.85
|
|
|
$
|
0.41
|
|
|
$
|
0.92
|
|
|
$
|
0.84
|
|
|
Diluted
|
|
$
|
0.83
|
|
|
$
|
0.39
|
|
|
$
|
0.90
|
|
|
$
|
0.81
|
|
|
Weighted average shares used to compute net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
30,037
|
|
|
|
30,933
|
|
|
|
29,746
|
|
|
|
31,221
|
|
|
Diluted
|
|
|
30,741
|
|
|
|
31,819
|
|
|
|
30,341
|
|
|
|
32,327
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
4
Table of Contents
NETGEAR, INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 27,
2020
|
|
|
September 29,
2019
|
|
|
September 27,
2020
|
|
|
September 29,
2019
|
|
|
Net income
|
|
$
|
25,535
|
|
|
$
|
12,529
|
|
|
$
|
27,345
|
|
|
$
|
26,211
|
|
|
Other comprehensive loss, before tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gains and losses on derivatives
|
|
|
(137
|
)
|
|
|
(37
|
)
|
|
|
(152
|
)
|
|
|
(16
|
)
|
|
Change in unrealized gains and losses on available-for-sale
investments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16
|
|
|
Other comprehensive loss, before tax
|
|
|
(137
|
)
|
|
|
(37
|
)
|
|
|
(152
|
)
|
|
|
—
|
|
|
Tax benefit related to derivatives
|
|
|
18
|
|
|
|
7
|
|
|
|
19
|
|
|
|
1
|
|
|
Tax provision related to available-for-sale investments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4
|
)
|
|
Other comprehensive loss, net of tax
|
|
|
(119
|
)
|
|
|
(30
|
)
|
|
|
(133
|
)
|
|
|
(3
|
)
|
|
Comprehensive income
|
|
$
|
25,416
|
|
|
$
|
12,499
|
|
|
$
|
27,212
|
|
|
$
|
26,208
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
5
Table of Contents
NETGEAR, INC.
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid-In
Capital
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholder's
Equity
|
|
|
Balance as of December 31, 2019
|
|
|
29,925
|
|
|
$
|
30
|
|
|
$
|
831,365
|
|
|
$
|
21
|
|
|
$
|
(222,723
|
)
|
|
$
|
608,693
|
|
|
Change in unrealized gains and losses on derivatives, net of
tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
350
|
|
|
|
—
|
|
|
|
350
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,173
|
)
|
|
|
(4,173
|
)
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
6,336
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,336
|
|
|
Repurchase of common stock
|
|
|
(584
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(15,008
|
)
|
|
|
(15,008
|
)
|
|
Restricted stock unit withholdings
|
|
|
(54
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,347
|
)
|
|
|
(1,347
|
)
|
|
Issuance of common stock under stock-based compensation plans
|
|
|
305
|
|
|
|
—
|
|
|
|
2,940
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,940
|
|
|
Balance as of March 29, 2020
|
|
|
29,592
|
|
|
|
30
|
|
|
|
840,641
|
|
|
|
371
|
|
|
|
(243,251
|
)
|
|
|
597,791
|
|
|
Change in unrealized gains and losses on derivatives, net of
tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(364
|
)
|
|
|
—
|
|
|
|
(364
|
)
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,983
|
|
|
|
5,983
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
9,172
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,172
|
|
|
Repurchase of common stock
|
|
|
(315
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,500
|
)
|
|
|
(7,500
|
)
|
|
Restricted stock unit withholdings
|
|
|
(95
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,260
|
)
|
|
|
(2,260
|
)
|
|
Issuance of common stock under stock-based compensation plans
|
|
|
502
|
|
|
|
—
|
|
|
|
3,324
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,324
|
|
|
Balance as of June 28, 2020
|
|
|
29,684
|
|
|
|
30
|
|
|
|
853,137
|
|
|
|
7
|
|
|
|
(247,028
|
)
|
|
|
606,146
|
|
|
Change in unrealized gains and losses on derivatives, net of
tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(119
|
)
|
|
|
—
|
|
|
|
(119
|
)
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25,535
|
|
|
|
25,535
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
7,218
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,218
|
|
|
Restricted stock unit withholdings
|
|
|
(39
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,143
|
)
|
|
|
(1,143
|
)
|
|
Issuance of common stock under stock-based compensation plans
|
|
|
521
|
|
|
|
—
|
|
|
|
8,630
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,630
|
|
|
Balance as of September 27, 2020
|
|
|
30,166
|
|
|
$
|
30
|
|
|
$
|
868,985
|
|
|
$
|
(112
|
)
|
|
$
|
(222,636
|
)
|
|
$
|
646,267
|
|
6
Table of Contents
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid-In
Capital
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholder's
Equity
|
|
|
Balance as of December 31, 2018
|
|
|
31,562
|
|
|
$
|
32
|
|
|
$
|
793,585
|
|
|
$
|
(15
|
)
|
|
$
|
(166,050
|
)
|
|
$
|
627,552
|
|
|
Change in unrealized gains and losses on available-for-sale
investments, net of tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12
|
|
|
|
—
|
|
|
|
12
|
|
|
Change in unrealized gains and losses on derivatives, net of
tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
17
|
|
|
|
—
|
|
|
|
17
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,843
|
|
|
|
12,843
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
6,457
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,457
|
|
|
Repurchase of common stock
|
|
|
(436
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(15,000
|
)
|
|
|
(15,000
|
)
|
|
Restricted stock unit withholdings
|
|
|
(89
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,344
|
)
|
|
|
(3,344
|
)
|
|
Issuance of common stock under stock-based compensation plans
|
|
|
430
|
|
|
|
—
|
|
|
|
4,371
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,371
|
|
|
Balance as of March 31, 2019
|
|
|
31,467
|
|
|
|
32
|
|
|
|
804,413
|
|
|
|
14
|
|
|
|
(171,551
|
)
|
|
|
632,908
|
|
|
Change in unrealized gains and losses on derivatives, net of
tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
839
|
|
|
|
839
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
6,739
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,739
|
|
|
Repurchase of common stock
|
|
|
(570
|
)
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(16,979
|
)
|
|
|
(16,980
|
)
|
|
Restricted stock unit withholdings
|
|
|
(79
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,314
|
)
|
|
|
(2,314
|
)
|
|
Issuance of common stock under stock-based compensation plans
|
|
|
292
|
|
|
|
—
|
|
|
|
882
|
|
|
|
—
|
|
|
|
—
|
|
|
|
882
|
|
|
Balance as of June 30, 2019
|
|
|
31,110
|
|
|
|
31
|
|
|
|
812,034
|
|
|
|
12
|
|
|
|
(190,005
|
)
|
|
|
622,072
|
|
|
Change in unrealized gains and losses on derivatives, net of
tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(30
|
)
|
|
|
—
|
|
|
|
(30
|
)
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,529
|
|
|
|
12,529
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
6,986
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,986
|
|
|
Repurchase of common stock
|
|
|
(679
|
)
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(21,965
|
)
|
|
|
(21,966
|
)
|
|
Restricted stock unit withholdings
|
|
|
(12
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(400
|
)
|
|
|
(400
|
)
|
|
Issuance of common stock under stock-based compensation plans
|
|
|
162
|
|
|
|
1
|
|
|
|
2,946
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,947
|
|
|
Balance as of September 29, 2019
|
|
|
30,581
|
|
|
$
|
31
|
|
|
$
|
821,966
|
|
|
$
|
(18
|
)
|
|
$
|
(199,841
|
)
|
|
$
|
622,138
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
7
Table of Contents
NETGEAR, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
Nine Months Ended
|
|
|
|
|
September 27,
2020
|
|
|
September 29,
2019
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
27,345
|
|
|
$
|
26,211
|
|
|
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
14,243
|
|
|
|
14,577
|
|
|
Stock-based compensation
|
|
|
22,726
|
|
|
|
20,183
|
|
|
Impairment of long-term investments
|
|
|
5,372
|
|
|
|
—
|
|
|
Deferred income taxes
|
|
|
1,574
|
|
|
|
503
|
|
|
Provision for excess and obsolete inventory
|
|
|
6,353
|
|
|
|
2,921
|
|
|
Other
|
|
|
278
|
|
|
|
253
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(62,837
|
)
|
|
|
55,597
|
|
|
Inventories
|
|
|
84,834
|
|
|
|
(34,634
|
)
|
|
Prepaid expenses and other assets
|
|
|
3,975
|
|
|
|
2,960
|
|
|
Accounts payable
|
|
|
6,862
|
|
|
|
(54,574
|
)
|
|
Accrued employee compensation
|
|
|
10,924
|
|
|
|
(13,562
|
)
|
|
Other accrued liabilities
|
|
|
5,668
|
|
|
|
(45,240
|
)
|
|
Deferred revenue
|
|
|
5,302
|
|
|
|
(4,152
|
)
|
|
Income taxes payable
|
|
|
2,443
|
|
|
|
(7,087
|
)
|
|
Net cash provided by (used in) operating activities
|
|
|
135,062
|
|
|
|
(36,044
|
)
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchases of short-term investments
|
|
|
(288
|
)
|
|
|
(282
|
)
|
|
Proceeds from maturities of short-term investments
|
<