NETGEAR (NTGR) Q2 Loss Narrower Than Expected, Revenues Fall Y/Y

Core Insights - NETGEAR, Inc reported a second-quarter 2024 non-GAAP loss of 74 cents per share, which is wider than the non-GAAP loss of 16 cents in the same quarter last year but narrower than the Zacks Consensus Estimate of a loss of 82 cents per share [1] - The company generated net revenues of $143.9 million, down 17% year over year, primarily due to weakness in the Connected Home Products (CHP) and NETGEAR for Business (NFB) segments, although the revenue beat the consensus estimate by 8.45% [2] Revenue Breakdown - Revenues from the Americas were $95.5 million, accounting for 66% of total revenues, down 18% year over year [3] - Europe, the Middle East, and Africa generated revenues of $27.3 million, down 24.3%, while revenues from the Asia Pacific region increased by 1.9% year over year to $21 million [3] - The Connected Home segment generated revenues of $84 million, down 14.6% year over year, but saw positive demand trends for new lower-priced Wi-Fi 7 products [4] - NFB revenues declined 20.2% year over year to $59.8 million despite record sales of ProAV managed switch products [5] Financial Performance - Adjusted gross margin decreased to 22.4% from 31.6% year over year, and non-GAAP operating loss was $31.1 million compared to a loss of $10.7 million in the previous year [6] - Non-GAAP operating expenses were $63.3 million, down 3.3% [6] Cash Flow and Liquidity - For the quarter ended June 30, 2024, NETGEAR generated $35.6 million in cash from operations, with cash and cash equivalents totaling $177.1 million [7] - Total current liabilities were $253 million, compared to $264.4 million in the same quarter last year [7] Share Repurchase Program - The company repurchased 799,800 shares worth $21.4 million during the quarter and has authorized an additional buyback of up to 3,000,000 shares, bringing the total program to 3,875,000 shares valued at approximately $62 million [8] Q3 Guidance - Management projects net revenues in the range of $160-$175 million for Q3, expecting more predictable performance following destocking efforts [9] - Anticipated revenues from the service provider channel are expected to be nearly $15 million in Q3, with new 5G mobile hotspots expected to launch in Q4 [9] Margin Forecast - Gross margins and operating margins are expected to be affected by ongoing inventory reduction efforts and elevated transportation costs [10] - GAAP operating margin is forecasted to be between (15.3)% and (12.3)%, while non-GAAP operating margin is estimated in the range of (11)% to (8)% [10] Tax Expense Projections - GAAP tax expense is expected to be between $1 million and $2 million, with a non-GAAP tax benefit projected to be between $1.5 million and $2.5 million for Q3 2024 [11]