NETGEAR® Reports First Quarter 2024 Results

Rhea-AI Summary

NETGEAR, Inc. reported Q1 2024 results with net revenue of $164.6 million, above guidance midpoint, but a decrease of 9.0% from the prior year. The company faced challenges due to high inflation and low channel inventories, resulting in an operating loss. Despite the short-term impact on profitability, NETGEAR plans to expedite destocking in Q2 and align revenue with sell-through to ensure long-term growth and profitability. The company aims to emerge stronger in the second half of 2024 by focusing on strategic adjustments and improving channel efficiency.

Positive

• Q1 net revenue of $164.6 million exceeded midpoint guidance expectations.

• Service revenue growth of 21.2% year over year showcases positive business development.

• Cashflow from operations increased by 88.4% year over year to $17.2 million, indicating strong financial performance.

• The company repurchased approximately 783,000 shares of common stock, reflecting confidence in its future prospects.

• NETGEAR is making progress in reducing inventory levels and generating cash, with short-term investments up $5.8 million sequentially.

• CEO's strategic plan to expedite destocking and align revenue with sell-through demonstrates a focus on long-term growth and profitability.

Negative

• First quarter 2024 net revenue declined by 9.0% compared to the prior year, impacting overall financial performance.

• GAAP operating loss of $21.6 million in Q1 indicates challenges in maintaining profitability.

• Higher channel destocking, mix shift to lower-margin products, and promotional retail market negatively impacted profitability in Q1.

• Q2 revenue expectations face a headwind of $25-30 million due to destocking activities, affecting short-term financial results.

• Company's second quarter GAAP operating margin is projected to be in the range of (30.9)% to (27.9)%, indicating near-term financial pressures.

• More aggressive inventory actions in Q2 may put margin pressure, with GAAP operating margin projected to be (25.0)% to (22.0)%.

Insights

Financial Analyst

The reported decrease in net revenue by 9.0% for NETGEAR in Q1 2024 is a significant figure for investors, indicating a contraction in sales compared to the prior year. A more concerning figure is the reported increased operating loss both on a GAAP and non-GAAP basis, with GAAP operating loss growing from (6.6)% to (13.2)% of net revenue and non-GAAP from (3.9)% to (9.7)%. This can be attributed to broader macroeconomic conditions including high inflation and interest rates as commented by the CEO, which are impacting the consumer and B2B channels. The stock repurchase program has returned value directly to shareholders by reducing the number of shares outstanding and potentially increasing the earnings per share (EPS).

Market Analyst

The strategic decision to expedite channel destocking in Q2, despite its potential negative impact on NETGEAR's short-term financials, may suggest that the company is prioritizing long-term operational efficiency. Given the reference to a challenging retail market and the shift towards service provider products, investors might view this as an effort to rebalance the company's product portfolio. However, the forecasted pressure on Q2 margins and planned aggressive inventory reduction could risk short-term profitability for a leaner, potentially more agile operational model. If successful, these steps could help stabilize the company's performance in a volatile market environment.

Tech Industry Analyst

The impending launch of next-generation 5G mobile hotspots in the latter half of the year is a notable development. While current financial indicators show strain, the anticipation of new product releases could stimulate growth and renew investor interest. This is a key area where NETGEAR could differentiate itself, particularly with the growing demand for 5G technology. The anticipated product launch, if well-received, might counterbalance the present downtrends and solidify NETGEAR's market position. However, the success of this strategy is reliant on timely and effective product rollouts and market adoption.

Q1 net revenue of $164.6 million, above midpoint of guidance

Q1 service revenue growth of 21.2% year over year

Cashflow from operations of $17.2 million; growth of 88.4% year over year

Repurchased approximately 783,000 shares of common stock

Transformation Effort Underway

SAN JOSE, Calif.--(BUSINESS WIRE)-- NETGEAR, Inc. (NASDAQ: NTGR), a global networking company that delivers innovative networking and Internet connected products to consumers and businesses, today reported preliminary financial results for the first quarter ended March 31, 2024.

• First quarter 2024 net revenue of $164.6 million, a decrease of 9.0% from the comparable prior-year quarter.
• First quarter 2024 GAAP operating loss of $21.6 million, or (13.2)% of net revenue, as compared to operating loss of $12.0 million, or (6.6)% of net revenue, in the comparable prior-year quarter.
  • First quarter 2024 non-GAAP operating loss of $16.0 million, or (9.7)% of net revenue, as compared to non-GAAP operating loss of $7.1 million, or (3.9)% of net revenue, in the comparable prior-year quarter.
• First quarter 2024 GAAP net loss per diluted share of $0.63, as compared to net loss per diluted share of $0.33 in the comparable prior-year quarter.
  • First quarter 2024 non-GAAP net loss per diluted share of $0.28, as compared to non-GAAP net loss per diluted share of $0.19 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.

CJ Prober, Chief Executive Officer of NETGEAR, commented, “I am pleased that we were able to deliver revenue within our guidance range in the first quarter. However, the challenging macroeconomic environment coupled with continued high inflation and interest rates are pressuring our channel partners to drive inventory to historical lows across both our consumer and B2B businesses. While we have been working to bring down channel inventories, this higher level of destocking, combined with a mix shift from our premium consumer products to our service provider products and a slightly more promotional retail market, unfavorably impacted our profitability in the first quarter.”

“As we saw channel destocking come in higher than expected in Q1, we developed a plan to expedite the remaining destocking in Q2. While this creates a near-term challenge in terms of expected financial results for Q2, it is the right action for the long-term health of the business and clears the way for a stronger second half of the year. Going forward, we will work to closely align sell through with our revenue, which will allow us to become a more predictable and profitable company in subsequent quarters. We will also more aggressively lower our own inventory through the rest of the year to reduce our working capital and generate cash.”

Mr. Prober continued, “After my first 90 days as CEO of NETGEAR, which included an expansive global tour meeting dozens of customers, partners and NETGEAR teams, I am sincerely excited about our growth opportunities and plans for returning to profitability. We remain fully committed to creating long-term value for our shareholders and these decisive near-term strategy adjustments enable this. We expect to emerge from Q2 with a solid foundation as we formalize our long-term strategy and capital allocation priorities throughout the rest of 2024.”

Bryan Murray, Chief Financial Officer of NETGEAR, added, “We continued to make progress in reducing our own inventory levels, which were down $37.6 million in the first quarter, and we continue to drive towards our desired level of three months of supply. Our cash and short-term investments increased $5.8 million sequentially and we generated 88.4% greater cash from operations compared to the first quarter of 2023 while also repurchasing approximately 783,000 shares of NETGEAR common stock.”

Business Outlook

Mr. Murray continued, “We expect to accelerate our way through NFB and CHP destocking activities within the second quarter. We expect this effort to represent a headwind of between $25 million to $30 million to our Q2 topline, which is reflected in our guidance. We believe taking this immediate action, as compared to spreading it over multiple future quarters, will allow us to align our revenue with our sell through and ultimately manage a more efficient channel in future quarters. Revenue from the service provider channel is expected to be approximately $15 million in the second quarter as our partners await our next generation 5G mobile hotspots expected to launch in the second half of the year. Accordingly, we expect second quarter net revenue to be in the range of $125 million to $140 million. As we continue to make meaningful progress in reducing our own inventory levels, we will be consuming higher cost inventory. We expect we will be back to our historically normal inventory costs after we reach our target inventory levels of three months. We are also taking more aggressive action to consume some of our slower moving products in an accelerated fashion which will put pressure on our Q2 margins. Accordingly, we expect our second quarter GAAP operating margin to be in the range of (30.9)% to (27.9)%, and non-GAAP operating margin to be in the range of (25.0)% to (22.0)%. Our GAAP tax expense is expected to be in the range of $1.0 million to $2.0 million, and our non-GAAP tax benefit is expected to be in the range of $7.0 million to $8.0 million for the second quarter of 2024.”

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

		Three months ending
		June 30, 2024
(In millions, except for percentage data)		Operating Margin Rate		Tax Expense (Benefit)
GAAP		(30.9)% - (27.9)%		$1.0 - $2.0
Estimated adjustments for1:
Stock-based compensation expense		4.0%		-
Restructuring and other charges		1.9%		-
Non-GAAP tax adjustments		-		$(9.0)
Non-GAAP		(25.0)% - (22.0)%		$ (8.0) - $ (7.0)
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 2024 today, Wednesday, May 1, 2024 at 5 p.m. ET (2 p.m. PT). The toll-free dial-in number for the live audio call is (888) 660-6392. The international dial-in number for the live audio call is (929) 203-0899. The conference ID for the call is 1030183. A live webcast of the conference call will be available on NETGEAR's Investor Relations website at http://investor.netgear.com. A replay of the call will be available via the web at http://investor.netgear.com.

About NETGEAR, Inc.

For more than 25 years, NETGEAR® (NASDAQ: NTGR) has been the innovative leader in connecting the world to the internet with advanced networking technologies for homes, businesses and service providers around the world. As staying connected has become more important than ever, NETGEAR delivers award-winning network solutions for remote work, distance learning, ultra high def streaming, online game play and more. To enable people to collaborate and connect to a world of information and entertainment, NETGEAR is dedicated to providing a range of connected solutions. From ultra-premium Orbi Mesh WiFi systems and high performance Nighthawk routers, to high-speed cable modems and 5G mobile wireless products to cloud-based subscription services for network management and security, to smart networking products and Video over Ethernet for Pro AV applications, NETGEAR keeps you connected. NETGEAR is headquartered in San Jose, California. Learn more on the NETGEAR Investor Page or by calling (408) 907-8000. Connect with NETGEAR: Twitter, Facebook, Instagram, LinkedIn and the NETGEAR blog at NETGEAR.com.

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

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

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. The words “anticipate,” “expect,” “believe,” “will,” “may,” “should,” “estimate,” “project,” “outlook,” “forecast” or other similar words are used to identify such forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. The forward-looking statements represent NETGEAR, Inc.’s expectations or beliefs concerning future events based on information available at the time such statements were made and include statements regarding: NETGEAR’s future operating performance and financial condition, including expectations regarding growth, revenue, operating margin, gross margin, continued profitability and cash generation; creating long-term value for shareholders; NETGEAR’s plan to closely align end sales with revenue and expected efficiency, predictability and profitability; NETGEAR’s desired level of inventory supply; NETGEAR’s expected launch of next generation 5G mobile hotspots; expectations regarding continuing market demand for the NETGEAR’s products and services, including NFB and CHP products and subscription services, and NETGEAR’s ability to respond to this demand; NETGEAR’s strategic adjustments, long-term strategy and capital allocation priorities; expectations regarding the mix of NETGEAR’s products and services; expectations regarding accelerated destocking and its impact to NETGEAR’s financials; expectations regarding growth opportunities and plans for returning to profitability expectations regarding inventory management, inventory levels and inventory costs and its impact to long term revenue, margin expansion and cash generation; expectations regarding expected tax rates or tax expenses; expectations regarding seasonal shifts in market demand; and expectations regarding NETGEAR's subscription services and service revenue. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: future demand for NETGEAR’s products and services may be lower than anticipated; NETGEAR may be unsuccessful, or experience delays, in manufacturing and distributing its new and existing products and services; consumers may choose not to adopt NETGEAR’s new product and services offerings or adopt competing products and services; NETGEAR may be unable to continue to grow its number of registered users, its number of registered app users and/or its paid subscriber base and service revenue; product performance may be adversely affected by real world operating conditions; NETGEAR may fail to manage costs, including the cost of key components, the cost of air freight and ocean freight, and the cost of developing new products and manufacturing and distribution of its existing offerings; NETGEAR may fail to successfully manage channel inventory levels; NETGEAR may fail to successfully continue to effect operating expense savings; changes in the level of NETGEAR's cash resources and NETGEAR’s planned usage of such resources, including potential repurchases of NETGEAR’s common stock; changes in NETGEAR’s stock price and developments in the business that could increase NETGEAR’s cash needs; fluctuations in foreign exchange rates; and the actions and financial health of NETGEAR’s customers, including NETGEAR’s ability to collect receivables as they become due. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Further information on potential risk factors that could affect NETGEAR and its business are detailed in NETGEAR’s periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled "Part I - Item 1A. Risk Factors" in NETGEAR’s annual report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission on February 16, 2024. 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, and gain/loss on investments, net. It is difficult to predict the occurrence or estimate the amount or timing of these items in advance. Although these events are reflected in our GAAP financial statements, these unique transactions may limit the comparability of our on-going operations with prior and future periods. The amounts result from events that often arise from unforeseen circumstances, which often occur outside of the ordinary course of continuing operations. Therefore, the amounts do not accurately reflect the underlying performance of our continuing business operations for the period in which they are incurred.

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

Source: NETGEAR-F

-Financial Tables Attached-

NETGEAR, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
		March 31, 2024				December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents		$	172,656			$	176,717
Short-term investments			116,765				106,931
Accounts receivable, net			172,771				185,059
Inventories			211,270				248,851
Prepaid expenses and other current assets			30,178				30,421
Total current assets			703,640				747,979
Property and equipment, net			9,353				8,273
Operating lease right-of-use assets			34,713				37,285
Goodwill			36,279				36,279
Other non-current assets			17,294				17,326
Total assets		$	801,279			$	847,142
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	38,451			$	46,850
Accrued employee compensation			22,193				21,286
Other accrued liabilities			154,567				168,084
Deferred revenue			28,393				27,091
Income taxes payable			713				1,037
Total current liabilities			244,317				264,348
Non-current income taxes payable			11,885				12,695
Non-current operating lease liabilities			26,742				29,698
Other non-current liabilities			6,973				4,906
Total liabilities			289,917				311,647
Stockholders’ equity:
Common stock			29				30
Additional paid-in capital			974,181				967,651
Accumulated other comprehensive income			21				136
Accumulated deficit			(462,869	)			(432,322	)
Total stockholders’ equity			511,362				535,495
Total liabilities and stockholders’ equity		$	801,279			$	847,142

NETGEAR, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share and percentage data) (Unaudited)
		Three Months Ended
		March 31, 2024				December 31, 2023				April 2, 2023
Net revenue		$	164,586			$	188,674			$	180,908
Cost of revenue			116,349				123,038				120,526
Gross profit			48,237				65,636				60,382
Gross margin			29.3	%			34.8	%			33.4	%
Operating expenses:
Research and development			20,227				19,592				22,134
Sales and marketing			30,529				30,552				33,879
General and administrative			18,067				17,107				16,236
Other operating expenses, net			1,062				1,259				108
Total operating expenses			69,885				68,510				72,357
Loss from operations			(21,648	)			(2,874	)			(11,975	)
Operating margin			(13.2	)%			(1.5	)%			(6.6	)%
Other income, net			2,850				2,454				1,406
Loss before income taxes			(18,798	)			(420	)			(10,569	)
Provision for (benefit from) income taxes			(148	)			1,249				(857	)
Net loss		$	(18,650	)		$	(1,669	)		$	(9,712	)
Net loss per share:
Basic		$	(0.63	)		$	(0.06	)		$	(0.33	)
Diluted		$	(0.63	)		$	(0.06	)		$	(0.33	)
Weighted average shares used to compute net loss per share:
Basic			29,395				29,623				29,040
Diluted			29,395				29,623				29,040

NETGEAR, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
	Three Months Ended
	March 31, 2024				April 2, 2023
Cash flows from operating activities:
Net loss	$	(18,650	)		$	(9,712	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		1,488				2,011
Stock-based compensation		4,544				4,665
Gain/loss on investments, net		(883	)			(663	)
Deferred income taxes		84				(4,629	)
Provision for excess and obsolete inventory		1,132				1,174
Changes in assets and liabilities:
Accounts receivable, net		12,288				84,945
Inventories		36,449				(38,747	)
Prepaid expenses and other assets		367				(1,778	)
Accounts payable		(8,516	)			(5,922	)
Accrued employee compensation		907				(2,425	)
Other accrued liabilities		(12,605	)			(23,665	)
Deferred revenue		1,719				1,609
Income taxes payable		(1,134	)			2,259
Net cash provided by operating activities		17,190				9,122
Cash flows from investing activities:
Purchases of short-term investments		(38,829	)			(38,733	)
Proceeds from maturities of short-term investments		30,000				25,006
Purchases of property and equipment		(2,510	)			(870	)
Net cash used in investing activities		(11,339	)			(14,597	)
Cash flows from financing activities:
Repurchases of common stock		(11,444	)			—
Restricted stock unit withholdings		(454	)			(120	)
Proceeds from issuance of common stock under employee stock purchase plan		1,986				2,286
Net cash provided by (used in) financing activities		(9,912	)			2,166
Net decrease in cash and cash equivalents		(4,061	)			(3,309	)
Cash and cash equivalents, at beginning of period		176,717				146,500
Cash and cash equivalents, at end of period	$	172,656			$	143,191

NETGEAR, INC. RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (In thousands, except percentage data) (Unaudited)
STATEMENT OF OPERATIONS DATA:
		Three Months Ended
		March 31, 2024				December 31, 2023				April 2, 2023
GAAP gross profit		$	48,237			$	65,636			$	60,382
GAAP gross margin			29.3	%			34.8	%			33.4	%
Amortization of intangibles			—				—				129
Stock-based compensation expense			365				358				351
Non-GAAP gross profit		$	48,602			$	65,994			$	60,862
Non-GAAP gross margin			29.5	%			35.0	%			33.6	%
GAAP research and development		$	20,227			$	19,592			$	22,134
Stock-based compensation expense			(698	)			(885	)			(1,065	)
Non-GAAP research and development		$	19,529			$	18,707			$	21,069
GAAP sales and marketing		$	30,529			$	30,552			$	33,879
Stock-based compensation expense			(1,237	)			(1,237	)			(1,431	)
Non-GAAP sales and marketing		$	29,292			$	29,315			$	32,448
GAAP general and administrative		$	18,067			$	17,107			$	16,236
Stock-based compensation expense			(2,244	)			(1,821	)			(1,818	)
Non-GAAP general and administrative		$	15,823			$	15,286			$	14,418
GAAP other operating expenses, net		$	1,062			$	1,259			$	108
Restructuring and other charges			(1,032	)			(1,259	)			(108	)
Litigation reserves, net			(30	)			—				—
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
		March 31, 2024				December 31, 2023				April 2, 2023
GAAP total operating expenses		$	69,885			$	68,510			$	72,357
Stock-based compensation expense			(4,179	)			(3,943	)			(4,314	)
Restructuring and other charges			(1,032	)			(1,259	)			(108	)
Litigation reserves, net			(30	)			—				—
Non-GAAP total operating expenses		$	64,644			$	63,308			$	67,935
GAAP operating loss		$	(21,648	)		$	(2,874	)		$	(11,975	)
GAAP operating margin			(13.2	)%			(1.5	)%			(6.6	)%
Amortization of intangibles			—				—				129
Stock-based compensation expense			4,544				4,301				4,665
Restructuring and other charges			1,032				1,259				108
Litigation reserves, net			30				—				—
Non-GAAP operating income (loss)		$	(16,042	)		$	2,686			$	(7,073	)
Non-GAAP operating margin			(9.7	)%			1.4	%			(3.9	)%
GAAP other income, net		$	2,850			$	2,454			$	1,406
Gain/loss on investments, net			101				(8	)			11
Non-GAAP other income, net		$	2,951			$	2,446			$	1,417

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
		March 31, 2024				December 31, 2023				April 2, 2023
GAAP net loss		$	(18,650	)		$	(1,669	)		$	(9,712	)
Amortization of intangibles			—				—				129
Stock-based compensation expense			4,544				4,301				4,665
Restructuring and other charges			1,032				1,259				108
Litigation reserves, net			30				—				—
Gain/loss on investments, net			101				(8	)			11
Non-GAAP tax adjustments			4,588				(1,138	)			(838	)
Non-GAAP net income (loss)		$	(8,355	)		$	2,745			$	(5,637	)
NET INCOME (LOSS) PER DILUTED SHARE:
GAAP net loss per diluted share		$	(0.63	)		$	(0.06	)		$	(0.33	)
Amortization of intangibles			—				—				—
Stock-based compensation expense			0.15				0.14				0.16
Restructuring and other charges			0.04				0.04				—
Litigation reserves, net			—				—				—
Gain/loss on investments, net			—				—				—
Non-GAAP tax adjustments			0.16				(0.03	)			(0.02	)
Non-GAAP net income (loss) per diluted share		$	(0.28	)		$	0.09			$	(0.19	)
Shares used in computing GAAP net loss per diluted share			29,395				29,623				29,040
Shares used in computing non-GAAP net income (loss) per diluted share			29,395				29,683				29,040

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
		March 31, 2024				December 31, 2023				October 1, 2023				July 2, 2023				April 2, 2023
Cash, cash equivalents and short-term investments		$	289,421			$	283,648			$	228,045			$	202,836			$	239,210
Cash, cash equivalents and short-term investments per diluted share		$	9.85			$	9.56			$	7.71			$	6.92			$	8.24
Accounts receivable, net		$	172,771			$	185,059			$	200,900			$	179,496			$	192,540
Days sales outstanding (DSO)			96				89				92				94				98
Inventories		$	211,270			$	248,851			$	280,918			$	324,483			$	337,187
Ending inventory turns			2.2				2.0				1.8				1.5				1.4
Weeks of channel inventory:
U.S. retail channel			11.2				10.8				11.8				12.0				12.7
U.S. distribution channel			4.0				7.9				5.8				5.1				4.4
EMEA distribution channel			5.9				6.4				7.4				6.9				8.5
APAC distribution channel			8.0				10.0				13.1				12.4				14.0
Deferred revenue (current and non-current)		$	33,714			$	31,994			$	29,796			$	27,689			$	26,634
Headcount			628				635				644				653				702
Non-GAAP diluted shares			29,395				29,683				29,581				29,319				29,040

NET REVENUE BY GEOGRAPHY
		Three Months Ended
		March 31, 2024				December 31, 2023				April 2, 2023
Americas		$109,928		67%		$124,798		66%		$121,922		67%
EMEA		31,187		19%		37,899		20%		39,178		22%
APAC		23,471		14%		25,977		14%		19,808		11%
Total		$164,586		100%		$188,674		100%		$180,908		100%

NETGEAR, INC. SUPPLEMENTAL FINANCIAL INFORMATION (CONTINUED) (In thousands) (Unaudited)
NET REVENUE BY SEGMENT
	Three Months Ended
	March 31, 2024				December 31, 2023				April 2, 2023
Connected Home	$	95,963			$	118,378			$	102,746
NETGEAR for Business		68,623				70,296				78,162
Total net revenue	$	164,586			$	188,674			$	180,908

SERVICE PROVIDER NET REVENUE
	Three Months Ended
	March 31, 2024				December 31, 2023				April 2, 2023
Connected Home	$	27,553			$	27,313			$	14,027
NETGEAR for Business		243				152				190
Total service provider net revenue	$	27,796			$	27,465			$	14,217

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240501764421/en/

NETGEAR Investor Relations

Erik Bylin

investors@netgear.com

Source: NETGEAR, Inc.

FAQ

What was NETGEAR's Q1 2024 net revenue?

NETGEAR reported Q1 2024 net revenue of $164.6 million.

How did NETGEAR's Q1 service revenue grow year over year?

NETGEAR's Q1 service revenue grew by 21.2% year over year.

What was the first quarter 2024 GAAP operating loss for NETGEAR?

NETGEAR reported a Q1 2024 GAAP operating loss of $21.6 million.

How many shares of common stock did NETGEAR repurchase?

NETGEAR repurchased approximately 783,000 shares of common stock.

What are NETGEAR's second quarter 2024 revenue expectations?

NETGEAR expects second quarter net revenue to be in the range of $125 million to $140 million.