NETGEAR® Reports Fourth Quarter and Full Year 2023 Results

Rhea-AI Summary

NETGEAR, Inc. reported Q4 net revenue of $188.7 million, at the high end of guidance, with 877,000 paid subscribers and Q4 service revenue growth of 27.7% year over year. Cash and short-term investments increased $55.6 million sequentially. However, net revenue decreased by 24.3% from the prior year, resulting in a GAAP operating loss of $2.9 million. Despite these challenges, the company's CFO highlighted the strong market reception of their leading WiFi 7 products, stabilization of their SMB business, and disciplined expense management. The company also exceeded its paid subscriber target for the year, ending the fourth quarter with 877,000 paid subscribers and service revenue of over $11 million in Q4. NETGEAR expects a seasonal decline in the retail portion of its CHP business and first quarter net revenue to be in the range of $155 million to $170 million.

Positive

• Q4 net revenue at the high end of guidance
• 877,000 paid subscribers
• Q4 service revenue growth of 27.7% year over year
• Cash and short-term investments increased $55.6 million sequentially
• Strong market reception of WiFi 7 products
• Exceeded paid subscriber target for the year

Negative

• Q4 net revenue decrease of 24.3% from the prior year
• GAAP operating loss of $2.9 million
• Expected seasonal decline in retail portion of CHP business

Insights

Financial Analyst

An analysis of NETGEAR's Q4 and full-year financial results reveals several key points of interest for investors and market observers. The reported Q4 net revenue of $188.7 million, despite being at the high end of guidance, represents a significant year-over-year decrease of 24.3%. Such a decline may reflect market saturation, increased competition, or a shift in consumer demand, all of which could impact the company's future revenue streams.

The improvement in both GAAP and non-GAAP operating margins compared to the previous year indicates a degree of successful cost management. However, the reported GAAP operating loss of $33.3 million for the fiscal year and a net loss per diluted share of $3.57 suggest that the company is still facing challenges in achieving profitability. The non-GAAP measures, which exclude certain expenses, offer a somewhat more favorable view but still indicate a loss. Investors should note that non-GAAP measures can provide a different perspective on a company's financial health, but they are not a substitute for GAAP metrics.

NETGEAR's focus on high-margin WiFi 7 products and the growth in paid subscribers are positive indicators for potential future revenue growth. However, the company's outlook suggests continued margin pressure in the short term due to the consumption of higher-cost inventory. The anticipated seasonal decline in Q1 and the ongoing high interest rates may further impact NETGEAR's performance, making near-term financial forecasting for the company challenging.

Market Research Analyst

The resilience of NETGEAR's premium CHP products in a promotional U.S. retail networking market is noteworthy. The double-digit sequential growth and over 30% year-over-year increase suggest a strong consumer appetite for high-performance networking products. The success of the Orbi 97x WiFi 7 mesh system illustrates the market's readiness to adopt the latest technology, which could be a driving force for the industry's growth.

Furthermore, the increase in paid subscribers to 877,000 and the growth in service revenue by 27.7% year-over-year highlight a strategic shift towards recurring revenue models. This pivot is in line with broader industry trends where hardware companies are seeking to bolster their revenue streams with services and subscriptions. Such a model can provide more predictable, stable income over time and may increase customer lifetime value.

However, the mention of channel inventory compression suggests that NETGEAR is facing challenges in managing supply chain and inventory levels. This issue, combined with the expectation of SMB growth constraints in the coming quarters, could signal potential headwinds for the company's sales and distribution strategy.

Economist

The context of high interest rates, as mentioned in NETGEAR's business outlook, is critical for understanding the broader economic environment in which the company operates. High interest rates can increase the cost of capital, potentially slowing down investment and consumer spending. For NETGEAR, this could mean reduced demand for their products and services, especially within the SMB sector where capital expenditures are more sensitive to financing costs.

The company's efforts to work with SMB channel partners to optimize inventory carrying levels in light of these economic conditions indicate a strategic response to external economic pressures. The ability to generate cash in such an environment is a positive sign of operational efficiency, but it remains to be seen how sustainable this will be if high interest rates persist.

NETGEAR's plan to return to 'historically normal inventory costs' in the second half of the year suggests optimism about overcoming current cost challenges. However, investors should consider the potential for continued economic volatility and its impact on consumer and business spending patterns, which could affect NETGEAR's performance beyond the immediate future.

Q4 net revenue of $188.7 million, at the high end of guidance

Q4 GAAP gross margin of 34.8%; non-GAAP gross margin of 35.0%

877,000 paid subscribers; Q4 service revenue growth of 27.7% year over year

Cash and short-term investments increased $55.6 million sequentially

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, 2023.

• Fourth quarter 2023 net revenue of $188.7 million, a decrease of 24.3% from the comparable prior-year quarter.
• Fourth quarter 2023 GAAP operating loss of $2.9 million, or (1.5)% of net revenue, as compared to operating loss of $12.2 million, or (4.9)% of net revenue, in the comparable prior-year quarter.
  • Fourth quarter 2023 non-GAAP operating income of $2.7 million, or 1.4% of net revenue, as compared to non-GAAP operating loss of $3.9 million, or (1.6)% of net revenue, in the comparable prior-year quarter.
• Fourth quarter 2023 GAAP net loss per diluted share of $0.06, as compared to net loss per diluted share of $0.21 in the comparable prior-year quarter.
  • Fourth quarter 2023 non-GAAP net income per diluted share of $0.09, as compared to non-GAAP net loss per diluted share of $0.03 in the comparable prior-year quarter.
• Fiscal 2023 net revenue of $740.8 million, a decrease of 20.6% from the prior year.
• Fiscal 2023 GAAP operating loss of $33.3 million, or (4.5)% of net revenue, as compared to operating loss of $82.9 million, or (8.9)% of net revenue, in the prior year.
  • Fiscal 2023 non-GAAP operating loss of $9.9 million, or (1.3)% of net revenue, as compared to non-GAAP operating loss of $15.6 million, or (1.7)% of net revenue, in the prior year.
• Fiscal 2023 GAAP net loss per diluted share of $3.57, as compared to net loss per diluted share of $2.38 in the prior year.
  • Fiscal 2023 non-GAAP net loss per diluted share of $0.03, as compared to non-GAAP net loss per diluted share of $0.29 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.

Bryan Murray, Chief Financial Officer of NETGEAR, commented, “I’m pleased with our fourth quarter results where NETGEAR delivered revenue and operating margin near the high end of our updated guidance. Thanks to the strong market reception of our leading WiFi 7 products, stabilization of our SMB business and our continued disciplined expense management, this quarter demonstrates the progress in our core long-term growth and profitability strategy. Despite a more promotional environment in the U.S. retail networking market, our premium CHP products remain resilient and once again outperformed the market, growing double digits sequentially and more than 30% year over year. Spurred by the success of our recently released Orbi 97x WiFi 7 mesh system, our premium products increased to approximately 25% of our CHP retail business. In addition to the solid performance of our products, we were able to exceed our paid subscriber target for the year, ending the fourth quarter with 877,000 paid subscribers and service revenue of over $11 million in Q4.”

Mr. Murray continued, “Although channel inventory compression constrained the topline across both our CHP and SMB businesses during the year, the strong contribution of our premium products powered us to equal our highest annual gross margin performance since 2007. As we progress through the WiFi 7 upgrade cycle, we believe our CHP product mix will continue to shift towards our higher-margin products. While channel inventory compression will continue to constrain SMB growth in the next few quarters, we are confident in the business’ ability to generate long-term revenue and margin expansion for NETGEAR.”

Mr. Murray added, “We continued to make progress in reducing our own inventory levels in the fourth quarter, which helped us generate meaningful cash once again. I’m pleased to report that we grew our cash and short-term investments by over $55 million during the quarter. We expect to continue to generate meaningful cash in the first quarter of 2024 as we continue to optimize our inventory levels.”

Business Outlook

Mr. Murray continued, “We expect the retail portion of our CHP business to experience a seasonal decline coming off the holiday period. Revenue from the service provider channel is expected to be approximately $25 million in the first quarter. As interest rates remain high, we will continue to work with our SMB channel partners to optimize their inventory carrying levels during the next few quarters. Accordingly, we expect first quarter net revenue to be in the range of $155 million to $170 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 in the second half of this year. Accordingly, we expect our first quarter GAAP operating margin to be in the range of (11.4)% to (8.4)%, and non-GAAP operating margin to be in the range of (8.5)% to (5.5)%. Our GAAP tax expense is expected to be in the range of $6.5 million to $7.5 million, and our non-GAAP tax benefit is expected to be in the range of $0.0 to $1.0 million for the first quarter of 2024. We expect to continue to generate meaningful cash in the first 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
		March 31, 2024
(In millions, except for percentage data)		Operating Margin Rate		Tax Expense (Benefit)
GAAP		(11.4)% - (8.4)%		$6.5 - $7.5
Estimated adjustments for1:
Stock-based compensation expense		2.9%		-
Non-GAAP tax adjustments		-		$(7.5)
Non-GAAP		(8.5)% - (5.5)%		$(1.0) - $0.0

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 2024 today, Wednesday, February 7, 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; expectations regarding continuing market demand for the NETGEAR’s products and services, including SMB and premium CHP products and subscription services, and NETGEAR’s ability to respond to this demand; NETGEAR’s strategic shift to focusing on the premium, higher-margin segments of the market and growing service revenue; expectations regarding the mix of NETGEAR’s premium, higher margin products and services; 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, paid subscriber base growth 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’s shift in focus to premium products at the expense of lower end products may not prove to be successful; 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 II - Item 1A. Risk Factors" in NETGEAR’s quarterly report on Form 10-Q for the fiscal quarter ended October 1, 2023, filed with the Securities and Exchange Commission on November 3, 2023. 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, goodwill impairment, intangibles impairment, restructuring and other charges, litigation reserves, net, gain/loss on investments, net, gain on litigation settlements, 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: goodwill impairment, intangibles impairment, restructuring and other charges, litigation reserves, net, gain on litigation settlements, 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. Included in the non-GAAP tax adjustments for the three and twelve months ended December 31, 2023 are adjustments to tax expense (benefit) related to differences between our prior forecasts and actual results for the twelve months ended. In addition, included in the non-GAAP tax adjustments for the twelve months ended December 31, 2023 are adjustments to tax expenses (benefit) related to the effects of a valuation allowance computed in accordance with GAAP.

Source: NETGEAR-F

NETGEAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
		December 31, 2023				December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents		$	176,717			$	146,500
Short-term investments			106,931				80,925
Accounts receivable, net			185,059				277,485
Inventories			248,851				299,614
Prepaid expenses and other current assets			30,421				29,767
Total current assets			747,979				834,291
Property and equipment, net			8,273				9,225
Operating lease right-of-use assets			37,285				40,868
Intangibles, net			—				1,329
Goodwill			36,279				36,279
Other non-current assets			17,326				97,793
Total assets		$	847,142			$	1,019,785
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	46,850			$	85,550
Accrued employee compensation			21,286				24,132
Other accrued liabilities			168,084				213,476
Deferred revenue			27,091				21,128
Income taxes payable			1,037				1,685
Total current liabilities			264,348				345,971
Non-current income taxes payable			12,695				14,972
Non-current operating lease liabilities			29,698				34,085
Other non-current liabilities			4,906				3,902
Total liabilities			311,647				398,930
Stockholders’ equity:
Common stock			30				29
Additional paid-in capital			967,651				946,123
Accumulated other comprehensive income (loss)			136				(535	)
Accumulated deficit			(432,322	)			(324,762	)
Total stockholders’ equity			535,495				620,855
Total liabilities and stockholders’ equity		$	847,142			$	1,019,785

NETGEAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share and percentage data)
(Unaudited)
		Three Months Ended												Twelve Months Ended
		December 31, 2023				October 1, 2023				December 31, 2022				December 31, 2023				December 31, 2022
Net revenue		$	188,674			$	197,845			$	249,103			$	740,840			$	932,472
Cost of revenue			123,038				128,911				187,407				491,588				681,923
Gross profit			65,636				68,934				61,696				249,252				250,549
Gross margin			34.8	%			34.8	%			24.8	%			33.6	%			26.9	%
Operating expenses:
Research and development			19,592				20,738				20,250				83,295				88,443
Sales and marketing			30,552				30,865				35,340				127,778				139,675
General and administrative			17,107				16,364				14,618				66,243				56,316
Goodwill impairment			—				—				—				—				44,442
Intangibles impairment			—				1,071				—				1,071				—
Other operating expenses, net			1,259				544				3,666				4,140				4,597
Total operating expenses			68,510				69,582				73,874				282,527				333,473
Loss from operations			(2,874	)			(648	)			(12,178	)			(33,275	)			(82,924	)
Operating margin			(1.5	)%			(0.3	)%			(4.9	)%			(4.5	)%			(8.9	)%
Other income (expenses), net			2,454				2,280				2,066				14,139				902
Income (loss) before income taxes			(420	)			1,632				(10,112	)			(19,136	)			(82,022	)
Provision for (benefit from) income taxes			1,249				86,431				(4,068	)			85,631				(13,035	)
Net loss		$	(1,669	)		$	(84,799	)		$	(6,044	)		$	(104,767	)		$	(68,987	)
Net loss per share:
Basic		$	(0.06	)		$	(2.87	)		$	(0.21	)		$	(3.57	)		$	(2.38	)
Diluted		$	(0.06	)		$	(2.87	)		$	(0.21	)		$	(3.57	)		$	(2.38	)
Weighted average shares used to compute net income (loss) per share:
Basic			29,623				29,524				28,959				29,355				29,007
Diluted			29,623				29,524				28,959				29,355				29,007

NETGEAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
	Twelve Months Ended
	December 31, 2023				December 31, 2022
Cash flows from operating activities:
Net loss	$	(104,767	)		$	(68,987	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		7,161				10,070
Stock-based compensation		17,938				17,734
Gain/loss on investments, net		(3,226	)			(87	)
Goodwill impairment		—				44,442
Intangibles impairment		1,071				—
Deferred income taxes		82,319				(21,842	)
Provision for excess and obsolete inventory		3,168				3,657
Changes in assets and liabilities:
Accounts receivable, net		92,425				(16,327	)
Inventories		47,595				12,396
Prepaid expenses and other assets		(3,189	)			5,696
Accounts payable		(38,947	)			11,857
Accrued employee compensation		(2,846	)			(572	)
Other accrued liabilities		(45,893	)			(13,332	)
Deferred revenue		6,969				5,425
Income taxes payable		(2,925	)			(3,862	)
Net cash provided by (used in) operating activities		56,853				(13,732	)
Cash flows from investing activities:
Purchases of short-term investments		(135,920	)			(153,577	)
Proceeds from maturities of short-term investments		115,006				80,417
Purchases of property and equipment		(5,799	)			(5,757	)
Purchases of long-term investments		(720	)			(600	)
Net cash used in investing activities		(27,433	)			(79,517	)
Cash flows from financing activities:
Repurchases of common stock		—				(24,377	)
Restricted stock unit withholdings		(2,793	)			(4,807	)
Proceeds from exercise of stock options		—				743
Proceeds from issuance of common stock under employee stock purchase plan		3,590				4,418
Net cash provided by (used in) financing activities		797				(24,023	)
Net increase (decrease) in cash and cash equivalents		30,217				(117,272	)
Cash and cash equivalents, at beginning of period		146,500				263,772
Cash and cash equivalents, at end of period	$	176,717			$	146,500

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, 2023				October 1, 2023				December 31, 2022				December 31, 2023				December 31, 2022
GAAP gross profit		$	65,636			$	68,934			$	61,696			$	249,252			$	250,549
GAAP gross margin			34.8	%			34.8	%			24.8	%			33.6	%			26.9	%
Amortization of intangibles			—				—				128				257				514
Stock-based compensation expense			358				354				326				1,405				1,353
Non-GAAP gross profit		$	65,994			$	69,288			$	62,150			$	250,914			$	252,416
Non-GAAP gross margin			35.0	%			35.0	%			24.9	%			33.9	%			27.1	%
GAAP research and development		$	19,592			$	20,738			$	20,250			$	83,295			$	88,443
Stock-based compensation expense			(885	)			(841	)			(1,027	)			(3,935	)			(4,177	)
Non-GAAP research and development		$	18,707			$	19,897			$	19,223			$	79,360			$	84,266
GAAP sales and marketing		$	30,552			$	30,865			$	35,340			$	127,778			$	139,675
Stock-based compensation expense			(1,237	)			(1,271	)			(1,328	)			(5,336	)			(5,603	)
Non-GAAP sales and marketing		$	29,315			$	29,594			$	34,012			$	122,442			$	134,072
GAAP general and administrative		$	17,107			$	16,364			$	14,618			$	66,243			$	56,316
Stock-based compensation expense			(1,821	)			(1,819	)			(1,787	)			(7,262	)			(6,601	)
Non-GAAP general and administrative		$	15,286			$	14,545			$	12,831			$	58,981			$	49,715
GAAP other operating expenses, net		$	1,259			$	544			$	3,666			$	4,140			$	4,597
Restructuring and other charges			(1,259	)			(366	)			(3,666	)			(3,962	)			(4,577	)
Litigation reserves, net			—				(178	)			—				(178	)			(20	)
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, 2023				October 1, 2023				December 31, 2022				December 31, 2023				December 31, 2022
GAAP total operating expenses		$	68,510			$	69,582			$	73,874			$	282,527			$	333,473
Stock-based compensation expense			(3,943	)			(3,931	)			(4,142	)			(16,533	)			(16,381	)
Goodwill impairment			—				—				—				—				(44,442	)
Intangibles impairment			—				(1,071	)			—				(1,071	)			—
Restructuring and other charges			(1,259	)			(366	)			(3,666	)			(3,962	)			(4,577	)
Litigation reserves, net			—				(178	)			—				(178	)			(20	)
Non-GAAP total operating expenses		$	63,308			$	64,036			$	66,066			$	260,783			$	268,053
GAAP operating loss		$	(2,874	)		$	(648	)		$	(12,178	)		$	(33,275	)		$	(82,924	)
GAAP operating margin			(1.5	)%			(0.3	)%			(4.9	)%			(4.5	)%			(8.9	)%
Amortization of intangibles			—				—				128				257				514
Stock-based compensation expense			4,301				4,285				4,468				17,938				17,734
Goodwill impairment			—				—				—				—				44,442
Intangibles impairment			—				1,071				—				1,071				—
Restructuring and other charges			1,259				366				3,666				3,962				4,577
Litigation reserves, net			—				178				—				178				20
Non-GAAP operating income (loss)		$	2,686			$	5,252			$	(3,916	)		$	(9,869	)		$	(15,637	)
Non-GAAP operating margin			1.4	%			2.7	%			(1.6	)%			(1.3	)%			(1.7	)%
GAAP other income (expenses), net		$	2,454			$	2,280			$	2,066			$	14,139			$	902
Gain/loss on investments, net			(8	)			(14	)			20				8				271
Gain on litigation settlements			—				—				—				(6,000	)			—
Non-GAAP other income (expenses), net		$	2,446			$	2,266			$	2,086			$	8,147			$	1,173

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, 2023				October 1, 2023				December 31, 2022				December 31, 2023				December 31, 2022
GAAP net loss		$	(1,669	)		$	(84,799	)		$	(6,044	)		$	(104,767	)		$	(68,987	)
Amortization of intangibles			—				—				128				257				514
Stock-based compensation expense			4,301				4,285				4,468				17,938				17,734
Goodwill impairment			—				—				—				—				44,442
Intangibles impairment			—				1,071				—				1,071				—
Restructuring and other charges			1,259				366				3,666				3,962				4,577
Litigation reserves, net			—				178				—				178				20
Gain/loss on investments, net			(8	)			(14	)			20				8				271
Gain on litigation settlements			—				—				—				(6,000	)			—
Non-GAAP tax adjustments			(1,138	)			85,781				(3,109	)			86,586				(7,085	)
Non-GAAP net income (loss)		$	2,745			$	6,868			$	(871	)		$	(767	)		$	(8,514	)
NET INCOME (LOSS) PER DILUTED SHARE:
GAAP net loss per diluted share		$	(0.06	)		$	(2.87	)		$	(0.21	)		$	(3.57	)		$	(2.38	)
Amortization of intangibles			—				—				—				0.01				0.02
Stock-based compensation expense			0.14				0.14				0.15				0.61				0.61
Goodwill impairment			—				—				—				—				1.53
Intangibles impairment			—				0.04				—				0.04				—
Restructuring and other charges			0.04				0.01				0.13				0.13				0.16
Litigation reserves, net			—				0.01				—				0.01				—
Gain/loss on investments, net			—				—				—				—				0.01
Gain on litigation settlements			—				—				—				(0.20	)			—
Non-GAAP tax adjustments			(0.03	)			2.90				(0.10	)			2.94				(0.24	)
Non-GAAP net income (loss) per diluted share		$	0.09			$	0.23			$	(0.03	)		$	(0.03	)		$	(0.29	)
Shares used in computing GAAP net loss per diluted share		29,623				29,524				28,959				29,355				29,007
Shares used in computing non-GAAP net income (loss) per diluted share		29,683				29,581				28,959				29,355				29,007

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, 2023				October 1, 2023				July 2, 2023				April 2, 2023				December 31, 2022
Cash, cash equivalents and short-term investments		$	283,648			$	228,045			$	202,836			$	239,210			$	227,425
Cash, cash equivalents and short-term investments per diluted share		$	9.56			$	7.71			$	6.92			$	8.24			$	7.85
Accounts receivable, net		$	185,059			$	200,900			$	179,496			$	192,540			$	277,485
Days sales outstanding (DSO)			89				92				94				98				100
Inventories		$	248,851			$	280,918			$	324,483			$	337,187			$	299,614
Ending inventory turns			2.0				1.8				1.5				1.4				2.5
Weeks of channel inventory:
U.S. retail channel			10.8				11.8				12.0				12.7				10.4
U.S. distribution channel			7.9				5.8				5.1				4.4				5.2
EMEA distribution channel			6.4				7.4				6.9				8.5				8.7
APAC distribution channel			10.0				13.1				12.4				14.0				18.5
Deferred revenue (current and non-current)		$	31,994			$	29,796			$	27,689			$	26,634			$	25,025
Headcount			635				644				653				702				691
Non-GAAP diluted shares			29,683				29,581				29,319				29,040				28,959

NET REVENUE BY GEOGRAPHY
		Three Months Ended																		Twelve Months Ended
		December 31, 2023						October 1, 2023						December 31, 2022						December 31, 2023						December 31, 2022
Americas		$	124,798		66	%		$	141,018		71	%		$	159,175		64	%		$	504,349		68	%		$	617,211		66	%
EMEA			37,899		20	%			35,684		18	%			52,715		21	%			148,922		20	%			179,358		19	%
APAC			25,977		14	%			21,143		11	%			37,213		15	%			87,569		12	%			135,903		15	%
Total		$	188,674		100	%		$	197,845		100	%		$	249,103		100	%		$	740,840		100	%		$	932,472		100	%

NETGEAR, INC.
SUPPLEMENTAL FINANCIAL INFORMATION (CONTINUED)
(In thousands)
(Unaudited)
NET REVENUE BY SEGMENT
	Three Months Ended												Twelve Months Ended
	December 31, 2023				October 1, 2023				December 31, 2022				December 31, 2023				December 31, 2022
Connected Home	$	118,378			$	127,335			$	149,036			$	446,865			$	558,823
SMB		70,296				70,510				100,067				293,975				373,649
Total net revenue	$	188,674			$	197,845			$	249,103			$	740,840			$	932,472

SERVICE PROVIDER NET REVENUE
	Three Months Ended												Twelve Months Ended
	December 31, 2023				October 1, 2023				December 31, 2022				December 31, 2023				December 31, 2022
Connected Home	$	27,313			$	32,403			$	55,787			$	98,659			$	148,331
SMB		152				219				719				579				4,234
Total service provider net revenue	$	27,465			$	32,622			$	56,506			$	99,238			$	152,565

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240207265135/en/

NETGEAR Investor Relations

Erik Bylin

investors@netgear.com

Source: NETGEAR, Inc.

FAQ

What was NETGEAR's Q4 net revenue?

NETGEAR's Q4 net revenue was $188.7 million.

How many paid subscribers did NETGEAR have in Q4?

NETGEAR had 877,000 paid subscribers in Q4.

What was the Q4 service revenue growth year over year?

The Q4 service revenue growth was 27.7% year over year.

How much did NETGEAR's cash and short-term investments increase sequentially?

NETGEAR's cash and short-term investments increased $55.6 million sequentially.

What was the GAAP operating loss in Q4?

The GAAP operating loss in Q4 was $2.9 million.

What is NETGEAR's stock ticker symbol?

NETGEAR's stock ticker symbol is NTGR.

What is the expected range of first quarter net revenue for NETGEAR?

NETGEAR expects first quarter net revenue to be in the range of $155 million to $170 million.