NETGEAR(NTGR) - 2025 Q2 - Quarterly Results

Q2 2025 Financial and Operational Highlights Overall Performance The company reported strong Q2 2025 results, exceeding revenue and operating margin guidance while achieving record gross margins Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $170.5M | $143.9M | +18.5% YoY | | GAAP Gross Margin | 37.5% | 22.1% | +1,540 bps YoY | | Non-GAAP Gross Margin | 37.8% | 22.4% | +1,540 bps YoY | | GAAP Operating Income | $(9.5)M | $(46.9)M | Improvement | | Non-GAAP Operating Income | $(1.2)M | $(31.1)M | Improvement | | GAAP EPS | $(0.22) | $(1.56) | Improvement | | Non-GAAP EPS | $0.06 | $(0.74) | Improvement | - The company's transformation is accelerating due to proactive strategic investments, streamlined operating costs, and strong demand for new products[4] - Completed the acquisition of Exium to integrate its SASE platform and add security offerings to the NETGEAR For Business (NFB) segment[1][6] Management Commentary Management highlighted record gross margins, improved profitability, and a strong cash position despite recent acquisitions - The company delivered results above the high end of guidance and achieved record gross margins, with each business unit showing significant year-over-year contribution margin increases[4] - Days Sales Outstanding (DSOs) reached an eight-year low of 77 days, and the company ended the quarter with nearly $364 million in cash and short-term investments[4] Segment Performance Analysis NETGEAR For Business (NFB) The NFB segment delivered strong results with significant year-over-year revenue growth driven by high demand for ProAV solutions NFB Segment Q2 2025 Performance | Metric | Q2 2025 | YoY Change | | :--- | :--- | :--- | | Revenue | $82.6M | +38.0% | | Non-GAAP Gross Margin | 46.7% | +1,300 bps | | Non-GAAP Contribution Margin | 19.3% | +1,590 bps | - ProAV solutions saw double-digit year-over-year sell-through growth across all geographies, leading to a significant backlog entering Q3[6] Home Networking The Home Networking segment exceeded expectations in revenue and profitability, aided by a favorable product mix and inventory management Home Networking Segment Q2 2025 Performance | Metric | Q2 2025 | YoY Change | | :--- | :--- | :--- | | Revenue | $67.5M | +13.1% | | Non-GAAP Gross Margin | 29.5% | +1,800 bps | | Non-GAAP Contribution Margin | 4.7% | +2,590 bps | - The company launched the Orbi 370, its most affordable WiFi 7 mesh system, to broaden its market reach[7] Mobile The Mobile segment's revenue declined due to softer demand from service providers, though the retail channel performed ahead of expectations Mobile Segment Q2 2025 Performance | Metric | Q2 2025 | YoY Change | | :--- | :--- | :--- | | Revenue | $20.4M | -16.1% | | Non-GAAP Gross Margin | 29.1% | +750 bps | | Non-GAAP Contribution Margin | 0.7% | +550 bps | - Softer service provider demand led to a muted performance, though the retail channel exceeded expectations[8] Q3 2025 Business Outlook Guidance for Third Quarter 2025 The company anticipates Q3 2025 net revenue between $165 million and $180 million, with increased investments in the NFB business Q3 2025 Financial Guidance | Metric | Guidance Range | | :--- | :--- | | Net Revenue | $165M - $180M | | GAAP Operating Margin | (11.0)% to (8.0)% | | Non-GAAP Operating Margin | (5.5)% to (2.5)% | | GAAP Tax Expense | $0.8M to $1.8M | | Non-GAAP Tax Expense | $(0.5)M to $0.5M | - The company expects continued strong demand for its NFB ProAV line but faces lengthy supply lead times[13] Financial Statements and Supplemental Data Condensed Consolidated Balance Sheets Total assets stood at $803.6 million as of June 29, 2025, with cash, cash equivalents, and short-term investments totaling $363.5 million Balance Sheet Summary (in thousands) | Account | June 29, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and short-term investments | $363,472 | $408,690 | | Accounts receivable, net | $144,871 | $156,210 | | Inventories | $157,305 | $162,539 | | Total Assets | $803,550 | $850,230 | | Total current liabilities | $243,141 | $270,083 | | Total Liabilities | $280,392 | $309,164 | | Total Stockholders' Equity | $523,158 | $541,066 | Condensed Consolidated Statements of Operations The company reported Q2 2025 net revenue of $170.5 million and a significantly improved GAAP net loss of $6.4 million Statement of Operations Summary - Q2 (in thousands) | Account | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net revenue | $170,532 | $143,900 | | Gross profit | $63,978 | $31,823 | | Gross margin | 37.5% | 22.1% | | Loss from operations | $(9,540) | $(46,859) | | Net loss | $(6,428) | $(45,175) | | Net loss per share, diluted | $(0.22) | $(1.56) | Condensed Consolidated Statements of Cash Flows For the first six months of 2025, net cash used in operating activities was $10.5 million, primarily due to business and financing activities Cash Flow Summary - Six Months Ended (in thousands) | Activity | June 29, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(10,520) | $35,635 | | Net cash used in investing activities | $(16,900) | $(12,905) | | Net cash used in financing activities | $(18,004) | $(22,343) | | Net decrease in cash | $(45,424) | $387 | | Cash at end of period | $241,020 | $177,104 | Reconciliation of GAAP to Non-GAAP Measures Non-GAAP figures are provided to clarify ongoing operational performance by excluding items like stock-based compensation and acquisition expenses Q2 2025 GAAP to Non-GAAP Reconciliation (in thousands) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Gross Profit | $63,978 | $456 | $64,434 | | Operating Loss | $(9,540) | $8,317 | $(1,223) | | Net Loss | $(6,428) | $8,109 | $1,681 | Supplemental Financial Information Supplemental data shows improved DSOs, with the Americas remaining the largest market and NFB leading segment revenue - Days Sales Outstanding (DSO) improved to 77 days in Q2 2025 from 93 days in Q2 2024[37] Q2 2025 Net Revenue by Geography | Region | Revenue (in thousands) | Percentage | | :--- | :--- | :--- | | Americas | $116,279 | 68% | | EMEA | $34,375 | 20% | | APAC | $19,878 | 12% | | Total | $170,532 | 100% | Q2 2025 Segment Data (Non-GAAP, in thousands) | Segment | Net Revenue | Gross Profit | Contribution Income | | :--- | :--- | :--- | :--- | | NETGEAR for Business | $82,621 | $38,585 | $15,962 | | Mobile | $20,408 | $5,932 | $133 | | Home Networking | $67,503 | $19,917 | $3,154 | Notes on Financial Reporting Use of Non-GAAP Financial Measures Non-GAAP measures supplement GAAP results to provide a better understanding of the company's ongoing operational performance - Non-GAAP measures are used for performance evaluation, strategic planning, and determining management incentive compensation[21] - Key adjustments to GAAP results include excluding stock-based compensation, acquisition-related expenses, and restructuring charges[19][21][22]