NETGEAR(US:NTGR)2023-04-27 00:36Financial Data and Key Metrics Changes - For Q1 2023, net revenue was $180.9 million, down 14.1% year-over-year and down 27.4% sequentially [2][9] - Non-GAAP gross margin improved to 33.6%, up 540 basis points year-over-year and 870 basis points sequentially, marking the second highest gross margin since 2019 [12][28] - Non-GAAP operating loss was $7.1 million, with an operating margin of negative 3.9%, below the low end of guidance [21] Business Line Data and Key Metrics Changes - The Connected Home segment generated net revenue of $102.7 million, down 21.2% year-over-year and down 31.1% sequentially [17] - SMB net revenue was $78.2 million, a decline of 2.6% year-over-year and 21.9% sequentially, despite strong end-user sales growth in ProAV managed switch products [18] - Service revenue grew to $9.6 million, up 26.3% year-over-year and 7.9% sequentially [49] Market Data and Key Metrics Changes - Americas net revenue was $121.9 million, down 15.7% year-over-year and down 23.4% sequentially [9] - EMEA net revenue was $39.2 million, up 6.3% year-over-year but down 25.7% quarter-over-quarter [9] - APAC net revenue was $19.8 million, down 31.8% year-over-year and down 46.8% sequentially, impacted by a COVID surge in China [9] Company Strategy and Development Direction - The company is focusing on premium products to improve profitability, moving away from less profitable lower-end products [28] - Continued investment in R&D is emphasized, with non-GAAP R&D expense at 11.6% of net revenue [16] - The introduction of WiFi 7 products is expected to capitalize on technological advancements and expand the addressable market [30] Management's Comments on Operating Environment and Future Outlook - Management noted broad-based inflationary pressures and an uncertain macroeconomic environment affecting consumers [27] - Despite challenges, there is confidence in the long-term growth strategy, particularly in the premium segment [62] - The company expects second quarter net revenue to be in the range of $150 million to $165 million [35] Other Important Information - The company ended Q1 2023 with $239.2 million in cash and short-term investments, up $11.8 million from the prior quarter [23] - The net revenue split between home and business products was approximately 57% and 43%, respectively [22] Q&A Session Summary Question: What has been the biggest challenge regarding inventory demand imbalance? - Management highlighted the surprise factor in inventory reductions from channel partners, particularly from a major service provider [39][45] Question: How is the company managing inventory given current revenue levels? - The company is taking a conservative approach to inventory estimates and slowing down production rates to balance inventory levels [57] Question: Any changes regarding share repurchases and capital allocation? - Management stated they are opportunistic buyers of stock and are considering cash balances and operational cash outlays in their capital allocation discussions [61]