NETGEAR® Reports Fourth Quarter and Full Year 2022 Results

Rhea-AI Summary

NETGEAR (NASDAQ: NTGR) reported financial results for Q4 and fiscal 2022, revealing a net revenue of $249.1 million for Q4, a decrease of 0.8% year-over-year. For fiscal 2022, net revenue fell to $932.5 million, down 20.2%. The company posted a GAAP operating loss of $12.2 million in Q4 and $82.9 million for the year, marking significant declines from the previous year. Despite challenges, NETGEAR's SMB business saw record quarterly and annual growth, with a 29.9% rise in Q4 revenue. They gained 81,000 paid subscribers, totaling 747,000, with expectations to reach 875,000 by year-end 2023.

Positive

• SMB business achieved record quarterly revenue for three consecutive quarters.
• Q4 revenue growth of 29.9% year-over-year in the SMB segment.
• Added 81,000 paid subscribers in Q4, totaling 747,000, up 27.9% year-over-year.

Negative

• Q4 net revenue decreased by 0.8% year-over-year.
• Fiscal 2022 net revenue declined by 20.2% from the prior year.
• GAAP operating loss of $12.2 million in Q4, compared to a profit of $0.9 million the previous year.

SMB business delivers record quarterly and annual revenue; Q4 surpasses $100 million for 29.9% year over year growth contributing to 18.8% growth for the full year

747,000 paid subscribers for 27.9% growth year over year

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 financial results for the fourth quarter and full year ended December 31, 2022.

• Fourth quarter 2022 net revenue of $249.1 million, a decrease of 0.8% from the comparable prior year quarter.
• Fourth quarter 2022 GAAP operating loss of $12.2 million, or (4.9)% of net revenue, as compared to operating income of $0.9 million, or 0.3% of net revenue, in the comparable prior year quarter.
  • Fourth quarter 2022 non-GAAP operating loss of $3.9 million, or (1.6)% of net revenue, as compared to non-GAAP operating income of $6.9 million, or 2.7% of net revenue, in the comparable prior year quarter.
• Fourth quarter 2022 GAAP net loss per diluted share of $0.21, as compared to $0.03 in the comparable prior year quarter.
  • Fourth quarter 2022 non-GAAP net loss per diluted share of $0.03, as compared to non-GAAP net income per diluted share of $0.27 in the comparable prior year quarter.
• Fiscal 2022 net revenue of $932.5 million, a decrease of 20.2% from the prior year.
• Fiscal 2022 GAAP operating loss of $82.9 million, or (8.9)% of net revenue, as compared to operating income of $66.6 million, or 5.7% of net revenue, in the prior year.
  • Fiscal 2022 non-GAAP operating loss of $15.6 million, or (1.7)% of net revenue, as compared to non-GAAP operating income of $95.1 million, or 8.1% of net revenue, in the prior year.
• Fiscal 2022 GAAP net loss per diluted share of $2.38, as compared to net income per diluted share of $1.59 in the prior year.
  • Fiscal 2022 non-GAAP net loss per diluted share of $0.29, as compared to non-GAAP net income per diluted share of $2.44 in the prior year.

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, “In the fourth quarter, we delivered revenue of $249.1 million, near the high end of our guidance, enabled by our team’s strong execution in securing supply in a challenging environment and continuing strong demand for our SMB products. Our SMB business achieved record revenue for the third quarter in a row, contributing to a record level of annual revenue for that business as well. The nearly 30% year-on-year growth in the quarter was propelled by continued strong momentum in our ProAV managed switches as the transition of Audio Visual from analog to digital IP-based over ethernet connections progresses.”

Mr. Lo continued, “On the CHP side, while the overall U.S. consumer retail market contracted approximately 20% year on year in the fourth quarter, our premium, high end WiFi mesh systems and 5G mobile hotspots continued to grow and considerably outperformed the market, further validating our core long-term strategy of focusing primarily on the premium, higher-margin segments of the market. These affluent consumers are also more likely to subscribe to our value-added services and appear resilient in the face of a worsening macroeconomic environment. We added 81,000 paid subscribers in the fourth quarter, bringing our total paid subscriber count to 747,000, for 27.9% growth year-on-year. As we further expand the premium segment of the market, we anticipate our subscriber base growing in tandem and are confident in our ability to reach 875,000 paid subscribers by the end of 2023.”

Business Outlook

Bryan Murray, Chief Financial Officer of NETGEAR, added, “We expect to continue to experience strong underlying demand in the SMB business and the premium portion of our CHP product portfolio. However, on the retail portion of CHP we expect a normal seasonal decline coming off the holiday period, and we will continue to work with our retail channel partners to optimize their inventory levels. This should lead to improving results in CHP retail as we progress through the year. Given the strong performance in the fourth quarter, which allowed our service provider customers to improve their supply positions, we expect first quarter revenue from the service provider channel to decrease to approximately $25 million. Given these factors we expect our first quarter net revenue to be in the range of $185 million to $200 million. We expect the SMB business to continue to see improving supply which should allow us to lower our reliance on higher-cost air freight spend. This will offset the impact of reduced topline leverage relative to our recently completed fourth quarter. Accordingly, our GAAP operating margin for the first quarter is expected to be in the range of (4.7)% to (3.7)%, and non-GAAP operating margin is expected to be in the range of (2.0)% to (1.0)%. Our GAAP tax rate is expected to be approximately 30.0%, and our non-GAAP tax rate is expected to be 5.0% for the first quarter of 2023.

While we are confident in our ability to provide guidance at this time, we do so with the caveat that considerable uncertainty remains in the market due to the COVID-19 pandemic and supply chain conditions continuing to remain challenged and, should unforeseen events occur, in particular challenges related to closures affecting our manufacturing partners’ operations, increased transportation delays into any of our regional distribution or manufacturing centers, greater than expected freight or component costs, or lower than expected end market demand, our actual results could differ from the foregoing guidance.”

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

		Three months ending
		April 2, 2023
		Operating Margin Rate		Tax Rate
GAAP		(4.7)% - (3.7)%		30.0%
Estimated adjustments for1:
Stock-based compensation expense		2.6%		-
Amortization of intangibles		0.1%		-
Non-GAAP tax adjustments		-		(25.0)%
Non-GAAP		(2.0)% - (1.0)%		5.0%

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 fourth quarter and full year results and discuss management's expectations for the first quarter of 2023 today, Wednesday, February 1, 2023 at 5 p.m. ET (2 p.m. PT). The toll-free dial-in number for the live audio call is (888) 660-6468. The international dial-in number for the live audio call is (929) 201-5709. The conference ID for the call is 1030183. A live webcast of the conference call will be available on NETGEAR's Investor Relations website at http://investor.netgear.com. A replay of the call will be available via the web at http://investor.netgear.com.

About NETGEAR, Inc.

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

© 2023 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, continued profitability and cash generation; expectations regarding continuing market demand for the Company’s products, including SMB and premium CHP products, and the Company’s ability to respond to this demand; the Company’s strategic shift to focusing on the premium, higher-margin segments of the market and targeting affluent consumers and consumers with the highest propensity to subscribe to NETGEAR’s service offerings; the timing, distribution, sales momentum and market acceptance of recent and anticipated new product introductions that position the Company for growth and market share gain; expectations regarding supply constraints and inventory management; expectations regarding the ability to participate in promotional activities leading to further market share gains; expectations regarding expected tax rates; expectations regarding the impact of higher transportation and component costs and corresponding price increases; expectations regarding spending in transportation costs to maximize revenue; expectations regarding repurchases of the Company’s common stock; expectations regarding the Company’s small and medium business and service provider channels; expectations regarding price increases on NETGEAR’s products; expectations regarding retail channel partners’ inventory levels; expectations regarding seasonal shifts in market demand; expectations regarding revenue from the service provider channel; and expectations regarding NETGEAR's paid subscriber base growth. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: uncertainty surrounding the duration and impact of the global COVID-19 pandemic, including with respect to the Company’s supply chain, closures affecting the operations of the Company’s manufacturing partners and potential disruptions in the Company’s transportation network, including with respect to the Company’s distribution centers; future demand for the Company's products may be lower than anticipated; the Company’s shift in focus to premium products at the expense of lower end products may not prove to be successful; the Company may be unsuccessful, or experience delays, in manufacturing and distributing its new and existing products; consumers may choose not to adopt the Company's new product offerings or adopt competing products; the Company may be unable to continue to grow its number of registered users, its number of registered app users and/or its paid subscriber base; product performance may be adversely affected by real world operating conditions; the Company may fail to manage costs, including the cost of key components, the cost of air freight and ocean freight, and the cost of developing new products and manufacturing and distribution of its existing offerings; the Company may fail to successfully manage channel inventory levels; the Company may fail to successfully continue to effect operating expense savings; changes in the level of NETGEAR's cash resources and the Company's planned usage of such resources, including potential repurchases of the Company’s common stock; changes in the Company's stock price and developments in the business that could increase the Company's cash needs; fluctuations in foreign exchange rates; and the actions and financial health of the Company's customers, including the Company’s ability to collect receivables as they become due. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Further information on potential risk factors that could affect NETGEAR and its business are detailed in the Company's periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled “Part II - Item 1A. Risk Factors” in the Company's quarterly report on Form 10-Q for the fiscal quarter ended October 2, 2022, filed with the Securities and Exchange Commission on November 4, 2022. Given these circumstances, you should not place undue reliance on these forward-looking statements. NETGEAR undertakes no obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.

Non-GAAP Financial Information:

To supplement our unaudited selected financial data presented on a basis consistent with Generally Accepted Accounting Principles (“GAAP”), we disclose certain non-GAAP financial measures that exclude certain charges, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development, non-GAAP sales and marketing, non-GAAP general and administrative, non-GAAP other operating expenses, net, non-GAAP total operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP other income (expenses), net, non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share. These supplemental measures exclude adjustments for amortization of intangibles, stock-based compensation expense, change in fair value of contingent consideration, goodwill impairment, 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: change in fair value of contingent consideration, goodwill impairment, 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 provides our management and users of the financial statements with better clarity regarding 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. 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. Included in the non-GAAP tax adjustments for the three and twelve months ended December 31, 2022 are adjustments to tax expense (benefit) related to differences between our prior forecasts and actual results for the twelve months ended.

Source: NETGEAR-F

NETGEAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

		December 31, 2022				December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents		$	146,500			$	263,772
Short-term investments			80,925				7,744
Accounts receivable, net			277,485				261,158
Inventories			299,614				315,667
Prepaid expenses and other current assets			29,767				34,752
Total current assets			834,291				883,093
Property and equipment, net			9,225				13,335
Operating lease right-of-use assets			40,868				23,176
Intangibles, net			1,329				1,856
Goodwill			36,279				80,721
Other non-current assets			97,793				76,350
Total assets		$	1,019,785			$	1,078,531
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	85,550			$	73,729
Accrued employee compensation			24,132				24,704
Other accrued liabilities			213,476				224,584
Deferred revenue			21,128				16,500
Income taxes payable			1,685				1,528
Total current liabilities			345,971				341,045
Non-current income taxes payable			14,972				18,990
Non-current operating lease liabilities			34,085				18,569
Other non-current liabilities			3,902				3,112
Total liabilities			398,930				381,716
Stockholders’ equity:
Common stock			29				29
Additional paid-in capital			946,123				923,228
Accumulated other comprehensive income (loss)			(535	)			149
Accumulated deficit			(324,762	)			(226,591	)
Total stockholders’ equity			620,855				696,815
Total liabilities and stockholders’ equity		$	1,019,785			$	1,078,531

NETGEAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share and percentage data)
(Unaudited)

		Three Months Ended												Twelve Months Ended
		December 31, 2022				October 2, 2022				December 31, 2021				December 31, 2022				December 31, 2021
Net revenue		$	249,103			$	249,587			$	251,187			$	932,472			$	1,168,073
Cost of revenue			187,407				181,058				176,488				681,923				802,236
Gross profit			61,696				68,529				74,699				250,549				365,837
Gross margin			24.8	%			27.5	%			29.7	%			26.9	%			31.3	%
Operating expenses:
Research and development			20,250				22,167				23,080				88,443				92,967
Sales and marketing			35,340				34,203				36,230				139,675				145,961
General and administrative			14,618				13,949				14,575				56,316				59,659
Goodwill impairment			—				—				—				44,442				—
Other operating expenses (income), net			3,666				361				(37	)			4,597				653
Total operating expenses			73,874				70,680				73,848				333,473				299,240
Income (loss) from operations			(12,178	)			(2,151	)			851				(82,924	)			66,597
Operating margin			(4.9	)%			(0.9	)%			0.3	%			(8.9	)%			5.7	%
Other income (expenses), net			2,066				638				(1,108	)			902				(1,093	)
Income (loss) before income taxes			(10,112	)			(1,513	)			(257	)			(82,022	)			65,504
Provision for (benefit from) income taxes			(4,068	)			(4,314	)			734				(13,035	)			16,117
Net income (loss)		$	(6,044	)		$	2,801			$	(991	)		$	(68,987	)		$	49,387
Net income (loss) per share:
Basic		$	(0.21	)		$	0.10			$	(0.03	)		$	(2.38	)		$	1.63
Diluted		$	(0.21	)		$	0.10			$	(0.03	)		$	(2.38	)		$	1.59
Weighted average shares used to compute net income (loss) per share:
Basic			28,959				28,891				29,456				29,007				30,241
Diluted			28,959				29,029				29,456				29,007				31,002

NETGEAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Twelve Months Ended
	December 31, 2022				December 31, 2021
Cash flows from operating activities:
Net income (loss)	$	(68,987	)		$	49,387
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		10,070				13,906
Stock-based compensation		17,734				25,995
Gain/loss on investments, net		(87	)			1,362
Goodwill impairment		44,442				—
Change in fair value of contingent consideration		—				(3,003	)
Deferred income taxes		(21,842	)			4,498
Provision for excess and obsolete inventory		3,657				3,877
Changes in assets and liabilities:
Accounts receivable, net		(16,327	)			75,894
Inventories		12,396				(147,432	)
Prepaid expenses and other assets		5,696				(4,127	)
Accounts payable		11,857				(16,493	)
Accrued employee compensation		(572	)			(10,316	)
Other accrued liabilities		(13,333	)			4,869
Deferred revenue		5,425				2,978
Income taxes payable		(3,862	)			(5,974	)
Net cash used in operating activities		(13,733	)			(4,579	)
Cash flows from investing activities:
Purchases of short-term investments		(153,577	)			(146	)
Proceeds from maturities of short-term investments		80,417				710
Purchases of property and equipment		(5,757	)			(9,864	)
Purchases of long-term investments		(600	)			(685	)
Net cash used in investing activities		(79,517	)			(9,985	)
Cash flows from financing activities:
Repurchases of common stock		(24,377	)			(75,000	)
Restricted stock unit withholdings		(4,806	)			(7,660	)
Proceeds from exercise of stock options		743				9,620
Proceeds from issuance of common stock under employee stock purchase plan		4,418				4,916
Net cash used in financing activities		(24,022	)			(68,124	)
Net decrease in cash and cash equivalents		(117,272	)			(82,688	)
Cash and cash equivalents, at beginning of period		263,772				346,460
Cash and cash equivalents, at end of period	$	146,500			$	263,772

NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except percentage data)
(Unaudited)

STATEMENT OF OPERATIONS DATA:

		Three Months Ended												Twelve Months Ended
		December 31, 2022				October 2, 2022				December 31, 2021				December 31, 2022				December 31, 2021
GAAP gross profit		$	61,696			$	68,529			$	74,699			$	250,549			$	365,837
GAAP gross margin			24.8	%			27.5	%			29.7	%			26.9	%			31.3	%
Amortization of intangibles			128				129				129				514				631
Stock-based compensation expense			326				283				477				1,353				2,103
Non-GAAP gross profit		$	62,150			$	68,941			$	75,305			$	252,416			$	368,571
Non-GAAP gross margin			24.9	%			27.6	%			30.0	%			27.1	%			31.6	%
GAAP research and development		$	20,250			$	22,167			$	23,080			$	88,443			$	92,967
Stock-based compensation expense			(1,027	)			(968	)			(1,329	)			(4,177	)			(5,161	)
Non-GAAP research and development		$	19,223			$	21,199			$	21,751			$	84,266			$	87,806
GAAP sales and marketing		$	35,340			$	34,203			$	36,230			$	139,675			$	145,961
Amortization of intangibles			—				—				—				—				(1,266	)
Stock-based compensation expense			(1,328	)			(1,249	)			(1,887	)			(5,603	)			(7,628	)
Non-GAAP sales and marketing		$	34,012			$	32,954			$	34,343			$	134,072			$	137,067
GAAP general and administrative		$	14,618			$	13,949			$	14,575			$	56,316			$	59,659
Stock-based compensation expense			(1,787	)			(940	)			(2,230	)			(6,601	)			(11,103	)
Non-GAAP general and administrative		$	12,831			$	13,009			$	12,345			$	49,715			$	48,556
GAAP other operating expenses (income), net		$	3,666			$	361			$	(37	)		$	4,597			$	653
Change in fair value of contingent consideration			—				—				—				—				3,003
Restructuring and other charges			(3,666	)			(361	)			37				(4,577	)			(3,341	)
Litigation reserves, net			—				—				—				(20	)			(315	)
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												Twelve Months Ended
		December 31, 2022				October 2, 2022				December 31, 2021				December 31, 2022				December 31, 2021
GAAP total operating expenses		$	73,874			$	70,680			$	73,848			$	333,473			$	299,240
Amortization of intangibles			—				—				—				—				(1,266	)
Stock-based compensation expense			(4,142	)			(3,157	)			(5,446	)			(16,381	)			(23,892	)
Change in fair value of contingent consideration			—				—				—				—				3,003
Goodwill impairment			—				—				—				(44,442	)			—
Restructuring and other charges			(3,666	)			(361	)			37				(4,577	)			(3,341	)
Litigation reserves, net			—				—				—				(20	)			(315	)
Non-GAAP total operating expenses		$	66,066			$	67,162			$	68,439			$	268,053			$	273,429
GAAP operating income (loss)		$	(12,178	)		$	(2,151	)		$	851			$	(82,924	)		$	66,597
GAAP operating margin			(4.9	)%			(0.9	)%			0.3	%			(8.9	)%			5.7	%
Amortization of intangibles			128				129				129				514				1,897
Stock-based compensation expense			4,468				3,440				5,923				17,734				25,995
Change in fair value of contingent consideration			—				—				—				—				(3,003	)
Goodwill impairment			—				—				—				44,442				—
Restructuring and other charges			3,666				361				(37	)			4,577				3,341
Litigation reserves, net			—				—				—				20				315
Non-GAAP operating income (loss)		$	(3,916	)		$	1,779			$	6,866			$	(15,637	)		$	95,142
Non-GAAP operating margin			(1.6	)%			0.7	%			2.7	%			(1.7	)%			8.1	%
GAAP other income (expenses), net		$	2,066			$	638			$	(1,108	)		$	902			$	(1,093	)
Gain/loss on investments, net			20				(52	)			1,188				271				1,362
Non-GAAP other income (expenses), net		$	2,086			$	586			$	80			$	1,173			$	269

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												Twelve Months Ended
		December 31, 2022				October 2, 2022				December 31, 2021				December 31, 2022				December 31, 2021
GAAP net income (loss)		$	(6,044	)		$	2,801			$	(991	)		$	(68,987	)		$	49,387
Amortization of intangibles			128				129				129				514				1,897
Stock-based compensation expense			4,468				3,440				5,923				17,734				25,995
Change in fair value of contingent consideration			—				—				—				—				(3,003	)
Goodwill impairment			—				—				—				44,442				—
Restructuring and other charges			3,666				361				(37	)			4,577				3,341
Litigation reserves, net			—				—				—				20				315
Gain/loss on investments, net			20				(52	)			1,188				271				1,362
Non-GAAP tax adjustments			(3,109	)			(715	)			1,908				(7,085	)			(3,505	)
Non-GAAP net income (loss)		$	(871	)		$	5,964			$	8,120			$	(8,514	)		$	75,789
NET INCOME (LOSS) PER DILUTED SHARE:
GAAP net income (loss) per diluted share		$	(0.21	)		$	0.10			$	(0.03	)		$	(2.38	)		$	1.59
Amortization of intangibles		0.00				0.00				0.00					0.02				0.06
Stock-based compensation expense			0.15				0.12				0.20				0.61				0.84
Change in fair value of contingent consideration			—				—				—				—				(0.10	)
Goodwill impairment			—				—				—				1.53				—
Restructuring and other charges			0.13				0.01			(0.00)					0.16				0.11
Litigation reserves, net			—				—				—				0.00				0.01
Gain/loss on investments, net		0.00				(0.00)					0.04				0.01				0.04
Non-GAAP tax adjustments			(0.10	)			(0.02	)			0.06				(0.24	)			(0.11	)
Non-GAAP net income (loss) per diluted share1		$	(0.03	)		$	0.21			$	0.27			$	(0.29	)		$	2.44
Shares used in computing GAAP net income (loss) per diluted share			28,959				29,029				29,456				29,007				31,002
Shares used in computing non-GAAP net income (loss) per diluted share			28,959				29,029				29,822				29,007				31,002

¹ The per share reconciliation of GAAP to non-GAAP may not aggregate due to both calculations utilizing a different share basis. The GAAP net loss per diluted share calculation uses a lower share count as it excludes potentially dilutive shares included in the non-GAAP net income per diluted share calculation.

NETGEAR, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands, except per share data, DSO, inventory turns, weeks of channel inventory, headcount and percentage data)
(Unaudited)

		Three Months Ended
		December 31, 2022				October 2, 2022				July 3, 2022				April 3, 2022				December 31, 2021
Cash, cash equivalents and short-term investments		$	227,425			$	233,197			$	250,137			$	263,788			$	271,516
Cash, cash equivalents and short-term investments per diluted share		$	7.85			$	8.03			$	8.66			$	8.99			$	9.10
Accounts receivable, net		$	277,485			$	259,908			$	217,873			$	219,911			$	261,158
Days sales outstanding (DSO)			100				95				89				97				93
Inventories		$	299,614			$	298,090			$	300,796			$	327,309			$	315,667
Ending inventory turns			2.5				2.4				2.2				1.9				2.2
Weeks of channel inventory:
U.S. retail channel			10.4				13.5				18.2				19.6				12.7
U.S. distribution channel			5.2				3.6				3.8				4.1				3.0
EMEA distribution channel			8.7				5.3				6.2				6.6				6.8
APAC distribution channel			18.5				16.0				14.0				14.4				13.4
Deferred revenue (current and non-current)		$	25,025			$	22,868			$	21,593			$	21,305			$	19,600
Headcount			691				731				740				766				771
Non-GAAP diluted shares			28,959				29,029				28,891				29,350				29,822

NET REVENUE BY GEOGRAPHY

		Three Months Ended																								Twelve Months Ended
		December 31, 2022								October 2, 2022								December 31, 2021								December 31, 2022								December 31, 2021
Americas		$	159,175				64	%		$	169,360				68	%		$	159,419				63	%		$	617,211				66	%		$	786,326				67	%
EMEA			52,715				21	%			44,827				18	%			50,027				20	%			179,358				19	%			229,829				20	%
APAC			37,213				15	%			35,400				14	%			41,741				17	%			135,903				15	%			151,918				13	%
Total		$	249,103				100	%		$	249,587				100	%		$	251,187				100	%		$	932,472				100	%		$	1,168,073				100	%

NETGEAR, INC.
SUPPLEMENTAL FINANCIAL INFORMATION (CONTINUED)
(In thousands)
(Unaudited)

NET REVENUE BY SEGMENT

	Three Months Ended												Twelve Months Ended
	December 31, 2022				October 2, 2022				December 31, 2021				December 31, 2022				December 31, 2021
Connected Home	$	149,036			$	150,581			$	174,152			$	558,823			$	853,472
SMB		100,067				99,006				77,035				373,649				314,601
Total net revenue	$	249,103			$	249,587			$	251,187			$	932,472			$	1,168,073

SERVICE PROVIDER NET REVENUE

	Three Months Ended												Twelve Months Ended
	December 31, 2022				October 2, 2022				December 31, 2021				December 31, 2022				December 31, 2021
Connected Home	$	55,787			$	40,448			$	29,697				148,331			$	129,052
SMB		719				1,171				711				4,234				2,481
Total service provider net revenue	$	56,506			$	41,619			$	30,408				152,565			$	131,533

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230201005450/en/

NETGEAR Investor Relations

Erik Bylin

investors@netgear.com

Source: NETGEAR, Inc.

FAQ

What were NETGEAR's Q4 results for 2022?

NETGEAR reported Q4 net revenue of $249.1 million, a slight decline of 0.8% year-over-year.

What is the total paid subscriber count for NETGEAR as of Q4 2022?

As of Q4 2022, NETGEAR has a total of 747,000 paid subscribers, reflecting a 27.9% year-over-year growth.

What are NETGEAR's revenue expectations for Q1 2023?

For Q1 2023, NETGEAR expects net revenue in the range of $185 million to $200 million.

How much did NETGEAR's net revenue decrease in fiscal 2022?

In fiscal 2022, NETGEAR's net revenue decreased by 20.2% compared to the prior year.

What was NETGEAR's GAAP operating loss in Q4 2022?

NETGEAR reported a GAAP operating loss of $12.2 million in Q4 2022.