Have you evaluated the performance of NETGEAR, Inc.'s (NTGR) international operations during the quarter that concluded in March 2024? Considering the extensive worldwide presence of this company, analyzing the patterns in international revenues is crucial for understanding its financial resilience and potential for growth.In today's increasingly interconnected global economy, a company's ability to tap into international markets can be a pivotal factor in shaping its overall financial health and growth tra ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2024 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission file number: 000-50350 NETGEAR, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporati ...

NETGEAR, Inc (NTGR) reported first-quarter 2024 non-GAAP loss of 28 cents per share compared with non-GAAP loss of 19 cents recorded in the year-ago quarter. The reported figure was wider than the Zacks Consensus Estimate of a loss of 27 cents.NTGR generated net revenues of $164.6 million, down 9% year over year. However, the top line beat the consensus estimate by 0.4%.Management noted that tough macroeconomic conditions along with inflationary pressure and high interest rates compelled channel partners to ...

Financial Data and Key Metrics - Non-GAAP gross margin in Q1 2024 was 29.5%, down 410 basis points YoY and 550 basis points QoQ [17] - Non-GAAP operating expenses in Q1 were $64.6 million, down 4.8% YoY and up 2.1% sequentially [19] - Non-GAAP net loss in Q1 was $8.4 million, with a diluted loss per share of $0.28 [21] - Cash and short-term investments at the end of Q1 were $289.4 million, up $5.8 million from the prior quarter [103] - Inventory reduction efforts are ongoing, with a target of reaching three months of supply by the end of the year [23][71] Business Line Performance - Connected Home Products (CHP) segment revenue was $96 million in Q1, down 6.6% YoY and 18.9% sequentially [41] - NETGEAR for Business (NFB) segment revenue was $68.6 million in Q1, down 2.4% sequentially, with strong demand in pro AV managed switches [42] - Service provider channel revenue was $28 million in Q1, partially offsetting retail challenges [95] - Premium products accounted for over 25% of CHP retail sales, up 500 basis points YoY [106] Market Performance - Americas revenue in Q1 was $109.9 million, down 9.8% YoY and 11.9% sequentially [97] - EMEA revenue was $31.2 million, down 20.4% YoY and 17.7% sequentially [97] - APAC revenue was $23.5 million, up 18.5% YoY but down 9.6% sequentially [97] Strategy and Industry Competition - The company is shifting away from product bundles to improve margins and recurring revenue [6][87] - New partnerships with home security providers and professional audio companies aim to enhance customer experience and expand market reach [5][8] - The company is focusing on a "good, better, best" product strategy to compete more effectively, especially on Amazon [86] - Efforts are being made to streamline operations and improve organizational efficiency [11][118] Management Commentary on Operating Environment and Future Outlook - The macroeconomic environment remains challenging, with higher-than-expected inflation and interest rates impacting channel inventory levels [62][120] - The company expects to generate cash in Q2 and the rest of the year, driven by inventory reductions [23][38] - Long-term growth opportunities are seen in pro AV managed switches, premium Wi-Fi mesh systems, 5G mobile hotspots, and subscription services [101] - The company is accelerating destocking efforts, expecting a $25 million to $30 million revenue headwind in Q2 [83][108] Other Important Information - The company exited the Meural business, writing off $500,000 of non-finished goods inventory in Q1 [74] - Share repurchases totaled $11.4 million in Q1, with 783,000 shares bought at an average price of $14.62 [105] - The company is implementing AI transformation efforts to enhance operations and product development [118] Q&A Session Summary Question: Why the hard reset in strategy? - The company is acting quickly to address COVID-related market conditions and set up for long-term success, pulling forward challenges to improve the second half of the year [29] Question: State of the consumer and inventory build-up? - The company is not seeing trade-down activity but is struggling to pull customers up to premium products [32] - Slower-moving inventory includes wireless LAN products on the SMB side, with efforts to transition to Wi-Fi 7 [33][34] Question: Cash generation and share repurchases? - Cash generation in Q2 is expected to be around half of Q1 levels, with inventory reduction being a key driver [38] - The company remains committed to opportunistic share repurchases [56]

NETGEAR, Inc. (NTGR) came out with a quarterly loss of $0.28 per share versus the Zacks Consensus Estimate of a loss of $0.27. This compares to loss of $0.19 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -3.70%. A quarter ago, it was expected that this company would post earnings of $0.04 per share when it actually produced earnings of $0.09, delivering a surprise of 125%.Over the last four quarters, the company has surpasse ...

[Q1 2024 Financial Performance and Management Commentary](index=1&type=section&id=Q1%202024%20Financial%20Performance%20and%20Management%20Commentary) This section presents NETGEAR's Q1 2024 financial performance and management's strategic commentary on the quarter's results [First Quarter 2024 Financial Highlights](index=1&type=section&id=First%20Quarter%202024%20Financial%20Highlights) NETGEAR reported a 9.0% year-over-year revenue decrease in Q1 2024, alongside wider operating losses, despite strong service revenue growth and improved cash flow from operations Q1 2024 Key Financial Results (vs. Q1 2023) | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $164.6M | $180.9M | -9.0% | | GAAP Operating Loss | $(21.6)M | $(12.0)M | -80.0% | | Non-GAAP Operating Loss | $(16.0)M | $(7.1)M | -125.4% | | GAAP Net Loss per Diluted Share | $(0.63) | $(0.33) | -90.9% | | Non-GAAP Net Loss per Diluted Share | $(0.28) | $(0.19) | -47.4% | - Service revenue grew **21.2%** year over year, indicating strength in the company's subscription-based offerings[1](index=1&type=chunk) - Cash flow from operations was **$17.2 million**, an increase of **88.4%** year over year, demonstrating improved working capital management[1](index=1&type=chunk) - The company repurchased approximately **783,000 shares** of its common stock during the quarter[1](index=1&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management attributed Q1 challenges to macroeconomic pressures and channel destocking, outlining a plan to expedite destocking in Q2 while highlighting progress in inventory reduction and cash generation - Performance was pressured by a challenging macroeconomic environment, high inflation, and interest rates, leading channel partners to reduce inventory to historical lows[3](index=3&type=chunk) - A plan is in place to expedite remaining channel destocking in Q2, which is expected to create a near-term financial challenge but benefit the long-term health of the business[3](index=3&type=chunk) - The company is focused on aligning its revenue with channel sell-through to become more predictable and profitable in subsequent quarters[3](index=3&type=chunk) - NETGEAR's own inventory levels were reduced by **$37.6 million** in Q1, and the company generated strong cash from operations while repurchasing **783,000 shares**[4](index=4&type=chunk) [Business Outlook for Q2 2024](index=2&type=section&id=Business%20Outlook) This section outlines NETGEAR's financial guidance for Q2 2024, including revenue and operating margin projections, and reconciles GAAP to non-GAAP outlook [Q2 2024 Guidance](index=2&type=section&id=Q2%202024%20Guidance) The company projects Q2 2024 net revenue between $125 million and $140 million, anticipating deeply negative operating margins due to accelerated channel destocking and inventory actions Q2 2024 Financial Guidance | Metric | Guidance Range | | :--- | :--- | | Net Revenue | $125M - $140M | | GAAP Operating Margin | (30.9)% - (27.9)% | | Non-GAAP Operating Margin | (25.0)% - (22.0)% | | GAAP Tax Expense | $1.0M - $2.0M | | Non-GAAP Tax Benefit | $(8.0)M - $(7.0)M | - Accelerated destocking activities are expected to create a topline headwind of **$25 million to $30 million** in Q2[5](index=5&type=chunk) - Revenue from the service provider channel is expected to be approximately **$15 million** in Q2, pending the launch of next-generation 5G mobile hotspots in the second half of the year[5](index=5&type=chunk) [GAAP to Non-GAAP Outlook Reconciliation](index=2&type=section&id=GAAP%20to%20Non-GAAP%20Outlook%20Reconciliation) This section reconciles NETGEAR's Q2 2024 forward-looking GAAP guidance to non-GAAP figures by adjusting for estimated stock-based compensation, restructuring charges, and tax-related items Q2 2024 GAAP to Non-GAAP Outlook Reconciliation | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | **Operating Margin** | (30.9)% - (27.9)% | | (25.0)% - (22.0)% | | Stock-based compensation | | 4.0% | | | Restructuring and other charges | | 1.9% | | | **Tax Expense (Benefit)** | $1.0M - $2.0M | | $(8.0)M - $(7.0)M | | Non-GAAP tax adjustments | | $(9.0)M | | [Use of Non-GAAP Financial Information](index=4&type=section&id=Non-GAAP%20Financial%20Information) This section explains the rationale and application of non-GAAP financial measures to provide a clearer understanding of the company's operational performance [Explanation of Non-GAAP Measures](index=4&type=section&id=Explanation%20of%20Non-GAAP%20Measures) The company utilizes non-GAAP financial measures to supplement GAAP results, excluding specific charges to enhance understanding of ongoing operational performance for internal evaluation and investor comparison - Non-GAAP measures exclude charges such as amortization of intangibles, stock-based compensation, restructuring charges, and litigation reserves to facilitate a review of comparable operating performance[11](index=11&type=chunk)[12](index=12&type=chunk) - Management uses these non-GAAP measures internally to evaluate business performance, for strategic planning, and for benchmarking against competitors[12](index=12&type=chunk) - The company believes these measures help investors by enabling more meaningful period-to-period comparisons, identifying underlying business trends, and showing results 'through the eyes' of management[12](index=12&type=chunk)[15](index=15&type=chunk) [Financial Statements and GAAP to Non-GAAP Reconciliation](index=6&type=section&id=Financial%20Statements%20and%20GAAP%20to%20Non-GAAP%20Reconciliation) This section provides NETGEAR's condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows, alongside detailed GAAP to non-GAAP reconciliations [Condensed Consolidated Balance Sheets](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of March 31, 2024, total assets decreased to **$801.3 million**, primarily due to a **$37.6 million** reduction in inventories, with corresponding decreases in total liabilities and stockholders' equity Selected Balance Sheet Items (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $172,656 | $176,717 | | Short-term investments | $116,765 | $106,931 | | Inventories | $211,270 | $248,851 | | **Total assets** | **$801,279** | **$847,142** | | **Total liabilities** | **$289,917** | **$311,647** | | **Total stockholders' equity** | **$511,362** | **$535,495** | [Condensed Consolidated Statements of Operations](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) In Q1 2024, NETGEAR reported a net loss of **$18.7 million** on **$164.6 million** net revenue, with gross margin declining to **29.3%** and operating loss widening to **$21.6 million** Statement of Operations Highlights (in thousands, except per share data) | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Net revenue | $164,586 | $188,674 | $180,908 | | Gross profit | $48,237 | $65,636 | $60,382 | | Gross margin | 29.3% | 34.8% | 33.4% | | Loss from operations | $(21,648) | $(2,874) | $(11,975) | | Net loss | $(18,650) | $(1,669) | $(9,712) | | Diluted net loss per share | $(0.63) | $(0.06) | $(0.33) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) In Q1 2024, the company generated **$17.2 million** in cash from operating activities, primarily due to a **$36.4 million** inventory reduction, while using **$9.9 million** in financing activities for share repurchases Cash Flow Summary (in thousands) | Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $17,190 | $9,122 | | Net cash used in investing activities | $(11,339) | $(14,597) | | Net cash provided by (used in) financing activities | $(9,912) | $2,166 | | **Net decrease in cash and cash equivalents** | **$(4,061)** | **$(3,309)** | [Reconciliations of GAAP to Non-GAAP Measures](index=9&type=section&id=RECONCILIATIONS%20OF%20GAAP%20MEASURES%20TO%20NON-GAAP%20MEASURES) This section provides detailed reconciliations of Q1 2024 GAAP results to non-GAAP metrics, adjusting for items such as stock-based compensation and restructuring charges to derive non-GAAP operating and net losses Q1 2024 GAAP to Non-GAAP Operating Loss Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | **GAAP operating loss** | **$(21,648)** | | Stock-based compensation expense | $4,544 | | Restructuring and other charges | $1,032 | | Litigation reserves, net | $30 | | **Non-GAAP operating loss** | **$(16,042)** | Q1 2024 GAAP to Non-GAAP Net Loss Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | **GAAP net loss** | **$(18,650)** | | Stock-based compensation expense | $4,544 | | Restructuring and other charges | $1,032 | | Litigation reserves, net | $30 | | Gain/loss on investments, net | $101 | | Non-GAAP tax adjustments | $4,588 | | **Non-GAAP net loss** | **$(8,355)** | [Supplemental Financial Information](index=12&type=section&id=SUPPLEMENTAL%20FINANCIAL%20INFORMATION) This section provides additional financial details, including key operating metrics, net revenue breakdown by geography, and segment performance [Key Operating Metrics](index=12&type=section&id=Key%20Operating%20Metrics) Key operating metrics indicate continued inventory reduction to **$211.3 million**, improved inventory turns to **2.2**, reduced headcount to **628**, and decreased channel inventory weeks across several regions Key Metrics Trend | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Inventories | $211,270K | $248,851K | $337,187K | | Ending inventory turns | 2.2 | 2.0 | 1.4 | | Headcount | 628 | 635 | 702 | Weeks of Channel Inventory | Channel | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | U.S. retail | 11.2 | 10.8 | 12.7 | | U.S. distribution | 4.0 | 7.9 | 4.4 | | EMEA distribution | 5.9 | 6.4 | 8.5 | | APAC distribution | 8.0 | 10.0 | 14.0 | [Net Revenue by Geography](index=12&type=section&id=NET%20REVENUE%20BY%20GEOGRAPHY) In Q1 2024, the Americas remained the largest market at **67%** of net revenue, while EMEA's contribution decreased to **19%** and APAC's share grew to **14%** Net Revenue by Geography (in thousands) | Region | Q1 2024 Revenue | Q1 2024 % | Q1 2023 Revenue | Q1 2023 % | | :--- | :--- | :--- | :--- | :--- | | Americas | $109,928 | 67% | $121,922 | 67% | | EMEA | $31,187 | 19% | $39,178 | 22% | | APAC | $23,471 | 14% | $19,808 | 11% | | **Total** | **$164,586** | **100%** | **$180,908** | **100%** | [Net Revenue by Segment](index=13&type=section&id=NET%20REVENUE%20BY%20SEGMENT) In Q1 2024, Connected Home segment revenue was **$96.0 million**, while NETGEAR for Business segment revenue was **$68.6 million**, both showing year-over-year declines Net Revenue by Segment (in thousands) | Segment | Q1 2024 | Q4 2023 | Q1 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](index=13&type=section&id=SERVICE%20PROVIDER%20NET%20REVENUE) Total service provider net revenue nearly doubled year-over-year to **$27.8 million** in Q1 2024, primarily driven by the Connected Home segment's growth to **$27.6 million** Service Provider Net Revenue (in thousands) | Segment | Q1 2024 | Q4 2023 | Q1 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** |

Revenue and Financial Performance - Net revenue for the year ended December 31, 2023, was $740.84 million, a decrease of 20.5% compared to $932.47 million in 2022[341]. - The total revenue for the year ended December 31, 2023, is $740.840 million, a decrease from $932.472 million in 2022, representing a decline of approximately 20.5%[414]. - Revenue from the United States decreased to $489,968,000 in 2023, down 18.2% from $598,649,000 in 2022[488]. - The company reported a net loss for 2023 of $104.77 million, compared to a net loss of $68.99 million in 2022, indicating a worsening of 52%[341]. - The company reported a basic net loss per share of $3.57 for 2023, compared to a loss of $2.38 per share in 2022[341]. - The company reported a loss before income taxes of $19.14 million for the year ended December 31, 2023, compared to a loss of $82.02 million in 2022[486]. Assets and Liabilities - Total current assets decreased to $747.98 million in 2023 from $834.29 million in 2022, reflecting a decline of 10.3%[339]. - Total liabilities decreased to $311.65 million in 2023 from $398.93 million in 2022, a reduction of 21.8%[339]. - Total stockholders' equity decreased to $535.50 million in 2023 from $620.86 million in 2022, a decline of 13.7%[339]. - The company's accounts receivable, net, decreased to $185.059 million as of December 31, 2023, from $277.485 million in 2022, indicating a reduction of about 33.3%[409]. - The total amount of unrecognized tax benefits (UTB) as of December 31, 2023, was $8.618 million, with a net UTB of $6.2 million that could affect the effective tax rate if recognized[447]. Cash Flow and Investments - Cash and cash equivalents increased to $176.72 million in 2023 from $146.50 million in 2022, an increase of 20.6%[339]. - Cash flows from operating activities provided $56.85 million in 2023, a significant improvement from a cash outflow of $13.73 million in 2022[350]. - The company reported a net cash used in investing activities of $27.43 million in 2023, a decrease from $79.52 million in 2022[350]. - The company’s available-for-sale investments had an estimated fair value of $98.627 million as of December 31, 2023, compared to $74.152 million in 2022, reflecting an increase of approximately 33%[415]. Research and Development - The company has made substantial investments in software research and development, which could materially adversely affect its business if these investments are unsuccessful[14]. - Research and development expenses for 2023 were $83.30 million, down from $88.44 million in 2022, a decrease of 5%[341]. - The company has invested in research and development for new technologies, including WiFi 7 and audio/video over Ethernet[352]. Inventory and Cost Management - The provision for excess and obsolete inventory was recorded at $3.2 million for the year ended December 31, 2023[334]. - The company recorded provisions for excess and obsolete inventory amounting to $3.2 million for the year ended December 31, 2023, down from $3.7 million in 2022[418]. - The company’s total inventory decreased to $248.851 million as of December 31, 2023, from $299.614 million in 2022, representing a decline of about 17%[418]. Foreign Exchange and Risk Management - As of December 31, 2023, 24% of total net revenue was denominated in currencies other than the U.S. dollar, indicating exposure to foreign currency exchange rate fluctuations[322]. - A hypothetical 10% movement in foreign exchange rates could result in a before-tax impact of approximately $0.7 million on net income as of December 31, 2023[322]. - The company faces risks associated with foreign exchange rate fluctuations due to international sales and operating activities, which could negatively impact financial condition[320]. Customer Concentration and Credit Risk - The company reported a significant reliance on a limited number of traditional and online retailers, which poses a risk to net revenue if these customers reduce purchases or refuse to pay requested prices[11]. - As of December 31, 2023, Best Buy, Inc. and affiliates accounted for approximately 21% of total accounts receivable[367]. - The company evaluates its customers' ability to pay based on historical payment experience, financial metrics, and customer credit scores[379]. Stock and Equity Management - As of December 31, 2023, the company has 2.5 million shares authorized for repurchase under its stock repurchase program, but did not repurchase any shares during the year[463]. - The company repurchased approximately 1.0 million and 2.1 million shares at a cost of approximately $24.4 million and $75.0 million during the years ended December 31, 2022 and 2021, respectively[463]. - The total stock-based compensation expense for the year ended December 31, 2023, was $17.94 million, slightly up from $17.73 million in 2022[480]. Taxation and Deferred Taxes - The company recorded a valuation allowance of $99.8 million against U.S. federal and state tax attributes in 2023, indicating uncertainty in the recovery of these assets[442]. - The effective tax rate for 2023 was impacted by a valuation allowance of (474.3)%, significantly affecting the overall tax provision[443]. - The total non-current deferred income taxes decreased from $85.7 million as of December 31, 2022, to $3.3 million as of December 31, 2023[426]. Other Financial Metrics - Total advertising and promotional expenses were $28.9 million, $27.0 million, and $25.2 million for the years ended December 31, 2023, 2022, and 2021 respectively[391]. - The company incurred shipping and handling costs associated with outbound freight totaling $8.8 million, $16.9 million, and $16.4 million for the years ended December 31, 2023, 2022, and 2021 respectively[389]. - The company recognized revenue from contracts with customers when control of the promised goods or services is transferred, primarily from product sales and subscriptions[378][379].

Financial Data and Key Metrics Changes - For Q4 2023, revenue was $188.7 million, down 4.6% sequentially and down 24.3% year-over-year [8] - Full year 2023 net revenues were $740.8 million, a decline of 20.6% compared to 2022 [20] - Non-GAAP gross margin for Q4 was 35%, up 1,010 basis points from the prior year [64] - Non-GAAP operating income for Q4 was $2.7 million, with a non-GAAP operating margin of 1.4% [23] Business Line Data and Key Metrics Changes - The Connected Homes segment generated net revenue of $118.4 million for Q4, down 20.6% year-over-year [40] - SMB net revenue was $70.3 million in Q4, slightly above expectations, but faced challenges from high interest rates and stagnant growth in major markets [10] - Service revenue for Q4 was $11.4 million, a year-over-year increase of 27.7% [69] Market Data and Key Metrics Changes - Americas net revenue for Q4 was $124.8 million, down 21.6% year-over-year [36] - EMEA net revenue was $37.9 million, a decrease of 28.1% year-over-year [36] - APAC net revenue was $26 million, down 30.2% from the prior year [36] Company Strategy and Development Direction - The company aims to strengthen its core business and focus on premium, higher-margin products [18] - There is a strategic emphasis on the Pro AV market, leveraging partnerships and unique solutions to drive growth [71] - The company plans to capitalize on the WiFi 7 upgrade cycle and the growing demand for connectivity solutions [35] Management's Comments on Operating Environment and Future Outlook - Management noted that macroeconomic conditions, including elevated interest rates, continue to impact growth prospects [20] - The company expects first quarter net revenue to be in the range of $155 million to $170 million, reflecting seasonal declines [45] - Management expressed confidence in the stabilization of the retail market and the potential for growth as new WiFi 7 devices are launched [49] Other Important Information - The company ended Q4 2023 with $283.7 million in cash, up $55.6 million from the prior year [39] - The company is committed to continued investment in R&D, with non-GAAP R&D expense at 9.9% of net revenue for Q4 [65] - The company has a stock repurchase program with 2.5 million shares remaining [82] Q&A Session Summary Question: What organizational shift will enable from a strategy and capital allocation perspective long term? - Management indicated that they are exploring growth adjacencies and will provide more details in future calls [46] Question: What gives confidence that the retail market will stabilize? - Management noted a return to normal seasonal behavior and the upcoming WiFi 7 product launches as factors contributing to stabilization [48][80] Question: How does the company reconcile the guidance for Q1 with the stabilization comment? - Management explained that the seasonal decline is typical and does not contradict the stabilization narrative, as they expect a return to growth later in the year [50][81]

NETGEAR NETGEAR® INVESTOR OVERVIEW JULY 2023 ဖိအိဇီအိမ်အိမ်အိမ် orbi NETGEAR NETGEAR 0 8 日 5 NETGEAR 9 a NETGEAR &&&&&&&&&&& o a a NETGEAR ................ a a SAFE HARBOR DISCLOSURE This presentation 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. Ho ...

Financial Data and Key Metrics Changes - For Q2 2023, the company reported revenue of $173.4 million, a decrease of 22.3% year-over-year and down 4.1% sequentially [16] - Non-GAAP operating loss was $10.7 million, with a non-GAAP operating margin of negative 6.2%, down 430 basis points year-over-year and 230 basis points sequentially [18] - Non-GAAP gross margin improved to 31.6%, up 390 basis points year-over-year but down 200 basis points compared to Q1 2023 [20] Business Line Data and Key Metrics Changes - The Connected Home segment generated net revenue of $98.4 million, down 23.6% year-over-year and down 4.2% sequentially [47] - The SMB segment reported net revenue of $75 million, with strong demand for ProAV managed switch products, showing high single-digit year-over-year growth [48] - Service revenue grew to $10.3 million, up 29.6% year-over-year and 7.2% sequentially [30] Market Data and Key Metrics Changes - Net revenue for the Americas was $116.6 million, a decline of 19% year-over-year and down 4.4% sequentially [43] - EMEA net revenue was $36.2 million, a decrease of 19.6% year-over-year and down 7.7% quarter-over-quarter [43] - APAC net revenue was $20.6 million, down 39.7% year-over-year but up 4.2% sequentially, with significant declines attributed to Greater China and Korea [43] Company Strategy and Development Direction - The company is focusing on premium WiFi mesh systems, 5G mobile hotspots, and paid service subscriptions as key growth areas [51] - Strategic investments in the ProAV market are expected to yield long-term growth and profitability [56] - The company anticipates a return to positive free cash flow in the second half of the year as inventory levels are reduced [22] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing inflationary pressures and an uncertain macroeconomic environment but expressed confidence in strong underlying demand for SMB and premium CHP products [2] - There are signs of stabilization in the broader consumer retail networking market, which is expected to improve predictability in business [27] - The company expects third quarter net revenue to be in the range of $175 million to $190 million [33] Other Important Information - The company ended Q2 2023 with $202.8 million in cash and short-term investments, down $36.4 million from the prior quarter [22] - The company shipped approximately 1.6 million units in Q2 2023, with a revenue split of 57% home products and 43% business products [19] - The company is committed to continued investment in R&D, with non-GAAP R&D expense at 11.4% of net revenue [21] Q&A Session Summary Question: Could you talk about the service provider order and its impact on revenue outlook? - Management indicated that the service provider order contributed positively, with expectations for service provider revenue to stabilize around $25 million per quarter moving forward [60][71] Question: What are the expectations for operating margins in Q4? - Management expects a step-up in Q4, likely leading to non-GAAP profitability in the low single-digit margin level [74] Question: Can you provide insights on the stabilization of the retail networking market? - Management noted that the market is stabilizing relative to pre-pandemic levels, with expectations for normal seasonality to return [76]