NETGEAR® Reports Fourth Quarter and Full Year 2018 Results

- NASDAQ Companies
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• Fourth quarter 2018 net revenue of $288.9 million, an increase of 5.4% from the comparable prior year quarter.

• Fourth quarter 2018 GAAP operating income of $17.4 million, or 6.0% of net revenue, as compared to $5.6 million, or 2.0% of net revenue, in the comparable prior year quarter.

  • Fourth quarter 2018 non-GAAP operating income of $27.1 million, or 9.4% of net revenue, as compared to $12.6 million, or 4.6% of net revenue, in the comparable prior year quarter.

• Fourth quarter 2018 GAAP net income per diluted share from continuing operations of $0.03, as compared to net loss per diluted share from continuing operations of $1.33 in the comparable prior year quarter.

  • Fourth quarter 2018 non-GAAP net income per diluted share from continuing operations of $0.68, as compared to $0.34 in the comparable prior year quarter.

• Fiscal 2018 net revenue of $1.06 billion, an increase of 1.9% from the prior year.

• Fiscal 2018 GAAP operating income of $38.7 million, or 3.7% of net revenue, as compared to $42.6 million, or 4.1% of net revenue in the prior year.

  • Fiscal 2018 non-GAAP operating income of $76.3 million, or 7.2% of net revenue, as compared to $72.4 million, or 7.0% of net revenue, in the prior year.

• Fiscal 2018 GAAP net income per diluted share from continuing operations of $0.57, as compared to net loss per diluted share from continuing operations of $0.35 in 2017.

  • Fiscal 2018 non-GAAP net income per diluted share from continuing operations of $1.94, as compared to $1.68 in 2017.

• The Company distributed its remaining 84.2% ownership of Arlo Technologies, Inc. on December 31, 2018.

• Business outlook1: Company expects first quarter of 2019 net revenue to be in the range of $235 million to $250 million, with GAAP operating margin in the range of 4.5% to 5.5% and non-GAAP operating margin in the range of 8.0% to 9.0%.

SAN JOSE, Calif., Feb. 06, 2019 (GLOBE NEWSWIRE) — 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, 2018.

Net revenue for the fourth quarter ended December 31, 2018 was $288.9 million, as compared to $274.1 million in the fourth quarter ended December 31, 2017, and $269.4 million in the third quarter ended September 30, 2018. Net income from continuing operations, computed in accordance with GAAP, for the fourth quarter of 2018 was $1.1 million, or $0.03 net income per diluted share from continuing operations. This compared to GAAP net loss from continuing operations of $41.8 million, or $1.33 net loss per diluted share from continuing operations, in the fourth quarter of 2017, and GAAP net income from continuing operations of $16.3 million, or $0.49 net income per diluted share, in the third quarter of 2018. Non-GAAP net income from continuing operations was $0.68 per diluted share in the fourth quarter of 2018, as compared to non-GAAP net income from continuing operations of $0.34 per diluted share in the fourth quarter of 2017 and $0.73 per diluted share in the third quarter of 2018.

Operating margin, computed in accordance with GAAP, for the fourth quarter of 2018 was 6.0%, as compared to 2.0% in the year ago comparable quarter, and 7.4% in the third quarter of 2018. Non-GAAP operating margin was 9.4% in the fourth quarter of 2018, as compared to 4.6% in the fourth quarter of 2017 and 10.5% in the third quarter of 2018.

Net revenue for the full year of 2018 was $1.06 billion, a 1.9% increase as compared to $1.04 billion for 2017. Net income from continuing operations, computed in accordance with GAAP, for the full year 2018 was $19.0 million, or $0.57 per diluted share. This compared to GAAP net loss from continuing operations of $11.1 million, or $0.35 net loss per diluted share, for 2017. Non-GAAP net income from continuing operations was $1.94 per diluted share for the full year of 2018, as compared to non-GAAP net income from continuing operations of $1.68 per diluted share for 2017. Operating margin, computed in accordance with GAAP, for the full year of 2018 was 3.7%, as compared to 4.1% for 2017. Non-GAAP operating margin was 7.2% in the full year of 2018, as compared to 7.0% for 2017.

On December 31, 2018, the Company completed the distribution of 62,500,000 shares of the outstanding common stock of Arlo Technologies, Inc. (“Arlo”) to NETGEAR’s shareholders (the “Distribution”). Prior to the Distribution, NETGEAR owned approximately 84.2% of Arlo common stock. Following the completion of the Distribution, NETGEAR no longer owns any shares of Arlo common stock.

Beginning in the fourth quarter of 2018, Arlo’s historical financial results for periods prior to the Distribution will be reflected in NETGEAR’s consolidated financial statements as discontinued operations. Supplemental financial tables for NETGEAR’s prior twelve quarters, excluding Arlo, are provided in this release.

The accompanying schedules provide a reconciliation of financial measures computed on a GAAP basis to financial measures computed on a non-GAAP basis.

Patrick Lo, Chairman and Chief Executive Officer of NETGEAR, commented, “We had a successful fourth quarter of 2018, driven by Orbi, Nighthawk Pro Gaming, cable modems and gateways, and our SMB switching portfolio, in particular the PoE and ProAV switches. Our financial results for the quarter came in at the high end of our guidance range for revenue and operating margin. We delivered a healthy profit in Q4 and saw year-over-year top line growth for both the CHP and SMB segments.”

Mr. Lo continued, “We are pleased to report that we reached 9.7 million registered users in Q4, which represents the foundation for building our paid subscriber base. We are also thrilled to report that our number of registered app users reached 1.4 million for the fourth quarter, which is over double the amount that we last shared in September of 2018.”

“On the product front, we had two significant product launches during the quarter, which were our industry-leading Wi-Fi 6 router, as well as the world’s first millimeter wave 5G device with AT&T. We were also pleased with the reception that Meural, the world’s leading smart digital canvas, received during the holiday season and at the Consumer Electronics Show.”

Bryan Murray, Chief Financial Officer of NETGEAR, added, “On December 31st, we completed the spin-off of the Arlo business through a distribution of Arlo Technologies common stock to NETGEAR’s shareholders. Upon the completion of the distribution, NETGEAR no longer owns any shares of Arlo common stock. Arlo’s financial results for all historical periods, including the quarter in which the distribution occurred, will now be reclassified into NETGEAR discontinued operations. We’d like to acknowledge all of the hard work from both the NETGEAR and Arlo teams that went into completing the spin.”

Business Outlook

Bryan Murray, Chief Financial Officer of NETGEAR, added, “Looking forward to the first quarter of 2019, in line with the seasonality we described previously, we expect net revenue to be in the range of $235 million to $250 million. GAAP operating margin is expected to be in the range of 4.5% to 5.5%. Non-GAAP operating margin is expected to be in the range of 8.0% to 9.0%. Our GAAP tax rate is expected to be approximately 27.0% and our non-GAAP tax rate is expected to be 24.5% for the first quarter of 2019.”

A reconciliation between the Business Outlook on a GAAP and non-GAAP basis is provided in the following table:

  Three months ending
  March 30, 2019
  Operating Margin
Rate		   Tax Rate
GAAP 4.5% – 5.5%   27.0%
Estimated adjustments for1:      
Amortization of intangibles 0.9%   __
Stock-based compensation expense 2.6%   __
Tax effects of non-GAAP adjustments __   (2.5)%
Non-GAAP 8.0% – 9.0%   24.5%
       

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; and discrete tax benefits or detriments relating to tax windfalls or shortfalls from equity awards. 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 2019 today, Wednesday, February 6, 2019 at 5 p.m. ET (2 p.m. PT). The toll free dial-in number for the live audio call is (866) 393-4306. The international dial-in number for the live audio call is (734) 385-2616. The conference ID for the call is 6598729. 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.

NETGEAR (NASDAQ: NTGR) is a global networking company that delivers innovative products to consumers, businesses and service providers. The Company’s products are built on a variety of proven technologies such as wireless (Wi-Fi and LTE), Ethernet and powerline, with a focus on reliability and ease-of-use. The product line consists of wired and wireless devices that enable networking, broadband access and network connectivity. These products are available in multiple configurations to address the needs of the end-users in each geographic region in which the Company’s products are sold. NETGEAR products are sold in approximately 23,000 retail locations around the globe, and through approximately 22,000 value-added resellers, as well as multiple major cable, mobile and wireline service providers around the world. The company’s headquarters are in San Jose, Calif., with additional offices in approximately 25 countries. More information is available at http://investor.netgear.com or by calling (408) 907-8000. Connect with NETGEAR at http://twitter.com/NETGEAR and http://www.facebook.com/NETGEAR.

© 2019 NETGEAR, Inc. NETGEAR, the NETGEAR logo, Orbi and Nighthawk 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, expected net revenue, GAAP and non-GAAP operating margins, and GAAP and non-GAAP tax rates; expectations regarding the timing, distribution, sales momentum and market acceptance of recent and anticipated new product introductions that position the Company for growth;expectations regarding NETGEAR’s paid subscriber base, registered users and registered app users and their effect on NETGEAR’s paid subscriber base; and expectations regarding seasonal changes in the Company’s business performance. These statements are based on management’s current expectations and are subject to certain risks and uncertainties, including the following: future demand for the Company’s products may be lower than anticipated; consumers may choose not to adopt the Company’s new product offerings or adopt competing products; product performance may be adversely affected by real world operating conditions; the Company may be unsuccessful or experience delays in manufacturing and distributing its new and existing products; telecommunications service providers may choose to slow their deployment of the Company’s products or utilize competing products; the Company may be unable to grow its number of registered users and/or registered app users; the Company may be unable to grow its paid subscriber base; the Company may be unable to collect receivables as they become due; the Company may fail to manage costs, including the cost of developing new products and manufacturing and distribution of its existing offerings; the Company may fail to successfully continue to effect operating expense savings; changes in the level of NETGEAR’s cash resources and the Company’s planned usage of such resources, including potential repurchases of the Company’s common stock; changes in the Company’s stock price and developments in the business that could increase the Company’s cash needs; fluctuations in foreign exchange rates; and the actions and financial health of the Company’s customers. 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 the Company’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 the Company’s quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2018, filed with the Securities and Exchange Commission on November 2, 2018. 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 total operating expenses, non-GAAP operating income, non-GAAP operating margin, non-GAAP other income (expense), net, non-GAAP net income and non-GAAP net income per diluted share. These non-GAAP financial measures represent results from continuing operations. These supplemental measures exclude adjustments for amortization of intangibles, stock-based compensation expense, separation expense, restructuring and other charges, litigation reserves, net, gain (loss) on investments, impairment charges to investments, gain on litigation settlements, and the related tax effects. 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 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: separation expense, restructuring and other charges, litigation reserves, net, gain on litigation settlements, gain (loss) on investments, and impairment charges to investments. 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.

Tax effects consist of the various above adjustments that we incorporate into non-GAAP measures in order to provide a more meaningful measure on non-GAAP net income. We also believe providing financial information with and without the income tax effects relating to our non-GAAP financial measures provides our management and users of the financial statements with better clarity regarding the on-going performance of our business.

Source: NETGEAR-F

 
NETGEAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
  As of
  December 31,
2018		   December 31,
2017
ASSETS      
Current assets:      
Cash and cash equivalents $ 201,047     $ 202,727  
Short-term investments 73,317     126,926  
Accounts receivable, net 303,667     255,118  
Inventories 243,871     162,942  
Prepaid expenses and other current assets 35,997     24,826  
Current assets of discontinued operations —     243,125  
Total current assets 857,899     1,015,664  
Property and equipment, net 20,177     17,349  
Intangibles, net 17,146     20,640  
Goodwill 80,721     64,314  
Other non-current assets 67,433     49,471  
Non-current assets of discontinued operations —     41,126  
Total assets $ 1,043,376     $ 1,208,564  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 139,748     $ 91,205  
Accrued employee compensation 31,666     24,520  
Other accrued liabilities 199,472     149,821  
Deferred revenue 11,086     21,212  
Income taxes payable 2,020     7,015  
Current liabilities of discontinued operations —     130,663  
Total current liabilities 383,992     424,436  
Non-current income taxes payable 19,600     31,544  
Other non-current liabilities 12,232     8,766  
Non-current liabilities of discontinued operations —     13,333  
Total liabilities 415,824     478,079  
Stockholders’ equity:      
Common stock 32     31  
Additional paid-in capital 793,585     603,137  
Accumulated other comprehensive loss (15 )   (851 )
Retained earnings (losses) (166,050 )   128,168  
Total stockholders’ equity 627,552     730,485  
Total liabilities and stockholders’ equity $ 1,043,376     $ 1,208,564  
               

 
NETGEAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share and percentage data)
(Unaudited)
 
  Three Months Ended   Twelve Months Ended
  December 31,
 2018		   September 30,
 2018		   December 31,
 2017		   December 31,
 2018		   December 31,
 2017
                   
Net revenue $ 288,928     $ 269,411     $ 274,149     $ 1,058,816     $ 1,039,169  
Cost of revenue 198,274     174,966     198,020     717,118     731,453  
Gross profit 90,654     94,445     76,129     341,698     307,716  
Gross margin 31.4 %   35.1 %   27.8 %   32.3 %   29.6 %
Operating expenses:                  
Research and development 19,143     20,136     19,397     82,416     71,893  
Sales and marketing 38,251     37,892     36,667     152,569     138,679  
General and administrative 14,454     16,184     14,385     64,857     54,346  
Separation expense 550     379     —     929     —  
Restructuring and other charges 830     1     19     2,198     97  
Litigation reserves, net 10     —     108     15     148  
Total operating expenses 73,238     74,592     70,576     302,984     265,163  
Income from operations 17,416     19,853     5,553     38,714     42,553  
Operating margin 6.0 %   7.4 %   2.0 %   3.7 %   4.1 %
Interest income 1,174     985     725     3,980     2,114  
Other income (expense), net 85     955     440     510     1,557  
Income before income taxes 18,675     21,793     6,718     43,204     46,224  
Provision for income taxes 17,548     5,483     48,496     24,216     57,357  
Net income (loss) from continuing operations 1,127     16,310     (41,778 )   18,988     (11,133 )
Net income (loss) from discontinued operations, net of tax (21,861 )   (7,160 )   9,844     (30,212 )   30,569  
Net income (loss) (20,734 )   9,150     (31,934 )   (11,224 )   19,436  
Net loss attributable to non-controlling interest in discontinued operations (7,786 )   (799 )   —     (8,585 )   —  
Net income (loss) attributable to NETGEAR, Inc. $ (12,948 )   $ 9,949     $ (31,934 )   $ (2,639 )   $ 19,436  
                   
Net income (loss) per share – basic:                  
Income (loss) from continuing operations attributable to NETGEAR, Inc. $ 0.04     $ 0.51     $ (1.33 )   $ 0.60     $ (0.35 )
Income (loss) from discontinued operations attributable to NETGEAR,Inc. (0.45 )   (0.20 )   0.31     (0.68 )   0.96  
Net income (loss) per share attributable to NETGEAR, Inc. $ (0.41 )   $ 0.31     $ (1.02 )   $ (0.08 )   $ 0.61  
                   
Net income (loss) per share – diluted:                  
Income (loss) from continuing operations attributable to NETGEAR, Inc. $ 0.03     $ 0.49     $ (1.33 )   $ 0.57     $ (0.35 )
Income (loss) from discontinued operations attributable to NETGEAR,Inc. (0.42 )   (0.19 )   0.31     (0.65 )   0.96  
Net income (loss) per share attributable to NETGEAR, Inc. $ (0.39 )   $ 0.30     $ (1.02 )   $ (0.08 )   $ 0.61  
                   
Weighted average shares used to compute net income (loss) per share – Basic: 31,604     31,802     31,379     31,626     32,097  
Weighted average shares used to compute net income (loss) per share – Diluted 32,803     32,974     31,379     33,137     32,097  
                             

 
NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except percentage data)
(Unaudited)
 
STATEMENT OF OPERATIONS DATA, FISCAL 2018
                   
  Three Months Ended   Twelve Months
Ended
  December 31,
 2018		   September 30,
 2018		   July 1,
 2018		   April 1,
 2018		   December 31,
 2018
                   
GAAP gross profit $ 90,654     $ 94,445     $ 80,280     $ 76,319     $ 341,698  
GAAP gross margin 31.4 %   35.1 %   31.4 %   31.1 %   32.3 %
Amortization of intangibles 181     116     209     323     829  
Stock-based compensation expense 681     619     572     563     2,435  
Non-GAAP gross profit $ 91,516     $ 95,180     $ 81,061     $ 77,205     $ 344,962  
Non-GAAP gross margin 31.7 %   35.3 %   31.8 %   31.5 %   32.6 %
                   
GAAP research and development $ 19,143     $ 20,136     $ 21,946     $ 21,191     $ 82,416  
Stock-based compensation expense (1,112 )   (1,037 )   (1,122 )   (1,012 )   (4,283 )
Non-GAAP research and development $ 18,031     $ 19,099     $ 20,824     $ 20,179     $ 78,133  
                   
GAAP sales and marketing $ 38,251     $ 37,892     $ 38,552     $ 37,874     $ 152,569  
Amortization of intangibles (1,831 )   (1,806 )   (1,757 )   (1,756 )   (7,150 )
Stock-based compensation expense (1,904 )   (1,970 )   (2,188 )   (2,205 )   (8,267 )
Non-GAAP sales and marketing $ 34,516     $ 34,116     $ 34,607     $ 33,913     $ 137,152  
                   
GAAP general and administrative $ 14,454     $ 16,184     $ 18,458     $ 15,761     $ 64,857  
Stock-based compensation expense (2,536 )   (2,492 )   (3,364 )   (3,084 )   (11,476 )
Non-GAAP general and administrative $ 11,918     $ 13,692     $ 15,094     $ 12,677     $ 53,381  
                   
GAAP total operating expenses $ 73,238     $ 74,592     $ 80,337     $ 74,817     $ 302,984  
Amortization of intangibles (1,831 )   (1,806 )   (1,757 )   (1,756 )   (7,150 )
Stock-based compensation expense (5,552 )   (5,499 )   (6,674 )   (6,301 )   (24,026 )
Separation expense (550 )   (379 )   —     $ —     (929 )
Restructuring and other charges (830 )   (1 )   (1,376 )   9     (2,198 )
Litigation reserves, net (10 )   —     (5 )   —     (15 )
Non-GAAP total operating expenses $ 64,465     $ 66,907     $ 70,525     $ 66,769     $ 268,666  
                                       

 
NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except percentage data)
(Unaudited)
 
STATEMENT OF OPERATIONS DATA, FISCAL 2018
(CONTINUED)
       
  Three Months Ended   Twelve Months
Ended
  December 31,
 2018		   September 30,
 2018		   July 1,
 2018		   April 1,
 2018		   December 31,
 2018
                   
GAAP operating income $ 17,416     $ 19,853     $ (57 )   $ 1,502     $ 38,714  
GAAP operating margin 6.0 %   7.4 %   0.0 %   0.6 %   3.7 %
Amortization of intangibles 2,012     1,922     1,966     2,079     7,979  
Stock-based compensation expense 6,233     6,118     7,246     6,864     26,461  
Separation expense 550     379     —     —     929  
Restructuring and other charges 830     1     1,376     (9 )   2,198  
Litigation reserves, net 10     —     5     —     15  
Non-GAAP operating income $ 27,051     $ 28,273     $ 10,536     $ 10,436     $ 76,296  
Non-GAAP operating margin 9.4 %   10.5 %   4.1 %   4.3 %   7.2 %
                   
GAAP other income (expense), net $ 85     $ 955     $ 788     $ (1,318 )   $ 510  
Gain on investments (190 )   (349 )   —     —     (539 )
Impairment charges to investments —     —     —     1,400     1,400  
Non-GAAP other income (expense), net $ (105 )   $ 606     $ 788     $ 82     $ 1,371  
                   
GAAP net income from continuing operations $ 1,127     $ 16,310     $ 533     $ 1,018     $ 18,988  
Amortization of intangibles 2,012     1,922     1,966     2,079     7,979  
Stock-based compensation expense 6,233     6,118     7,246     6,864     26,461  
Separation expense 550     379     —     —     929  
Restructuring and other charges 830     1     1,376     (9 )   2,198  
Litigation reserves, net 10     —     5     —     15  
Gain on investments (190 )   (349 )   —     —     (539 )
Impairment charges to investments —     —     —     1,400     1,400  
Tax effects of above non-GAAP adjustments 11,762     (312 )   (1,546 )   (2,886 )   7,018  
Non-GAAP net income from continuing operations $ 22,334     $ 24,069     $ 9,580     $ 8,466     $ 64,449  
                                       

 
NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except per share data)
(Unaudited)
 
STATEMENT OF OPERATIONS DATA, FISCAL 2018
(CONTINUED)
                   
  Three Months Ended   Twelve Months
Ended
  December 31,
 2018		   September 30,
 2018		   July 1,
 2018		   April 1,
 2018		   December 31,
 2018
NET INCOME PER DILUTED SHARE:                  
GAAP net income per diluted share from continuing operations $ 0.03     $ 0.49     $ 0.02     $ 0.03     $ 0.57  
Amortization of intangibles 0.06     0.06     0.06     0.06     0.24  
Stock-based compensation expense 0.19     0.19     0.22     0.21     0.80  
Separation expense 0.02     0.01     —     —     0.03  
Restructuring and other charges 0.03     0.00     0.04     0.00     0.07  
Litigation reserves, net 0.00     —     0.00     —     0.00  
Gain on investments (0.01 )   (0.01 )   —     —     (0.02 )
Impairment charges to investments —     —     —     0.04     0.04  
Tax effects of above non-GAAP adjustments 0.36     (0.01 )   (0.05 )   (0.08 )   0.21  
Non-GAAP net income per diluted share from continuing operations $ 0.68     $ 0.73     $ 0.29     $ 0.26     $ 1.94  
                                       

 
NETGEAR, INC.
SUPPLEMENTAL FINANCIAL INFORMATION, FISCAL 2018
(In thousands, except per share data, DSO, inventory turns, weeks of channel inventory, headcount and percentage data)
(Unaudited)
 
  Three Months Ended
  December 31,
 2018		   September 30,
 2018		   July 1,
 2018		   April 1,
 2018
               
Cash, cash equivalents and short-term investments $ 274,364     $ 341,968     $ 355,489     $ 386,032  
Cash, cash equivalents and short-term investments per diluted share $ 8.36     $ 10.37     $ 10.86     $ 11.82  
               
Accounts receivable, net $ 303,667     $ 241,862     $ 232,770     $ 214,843  
Days sales outstanding (DSO)   97       82       83       80  
               
Inventories $ 243,871     $ 198,037     $ 168,263     $ 162,497  
Ending inventory turns   3.3       3.5       4.2       4.2  
                               
Weeks of channel inventory:                              
U.S. retail channel   7.7       9.8       10.6       8.9  
U.S. distribution channel   5.2       4.1       4.3       4.2  
EMEA distribution channel   4.1       4.3       4.1       4.4  
APAC distribution channel   7.4       6.6       7.9       6.0  
               
Deferred revenue (current and non-current) $ 11,865     $ 9,726     $ 5,577     $ 6,075  
               
Headcount 837     833     901     903  
Non-GAAP diluted shares 32,803     32,974     32,742     32,660  
                       

NET REVENUE BY GEOGRAPHY

   
  Three Months Ended   Twelve Months
Ended
  December 31,
 2018		   September 30,
 2018		   July 1,
 2018		   April 1,
 2018		   December 31,
 2018
Americas $ 190,335   66%     $ 175,932   65%     $ 174,414   68%     $ 160,012   66%     $ 700,693   66%  
EMEA 58,798   20%     53,158   20%     48,209   19%     47,434   19%     207,599   20%  
APAC 39,795   14%     40,321   15%     32,653   13%     37,755   15%     150,524   14%  
Total $ 288,928   100%     $ 269,411   100%     $ 255,276   100%     $ 245,201   100%     $ 1,058,816   100%  
                                                           

 
NETGEAR, INC.
SEGMENT FINANCIAL INFORMATION, FISCAL 2018
(In thousands, except percentage data)
(Unaudited)
 
  Three Months Ended   Twelve Months
Ended
  December 31,
 2018		   September 30,
 2018		   July 1,
 2018		   April 1,
 2018		   December 31,
 2018
Net revenue:                  
Connected Home $ 215,638     $ 194,683     $ 186,424     $ 174,315     $ 771,060  
SMB 73,290     74,728     68,852     70,886     287,756  
Total net revenue $ 288,928     $ 269,411     $ 255,276     $ 245,201     $ 1,058,816  
Contribution income:                  
Connected Home $ 29,118     $ 30,071     $ 20,939     $ 16,212     $ 96,340  
Connected Home contribution margin 13.5 %   15.4 %   11.2 %   9.3 %   12.5 %
SMB $ 18,392     $ 20,593     $ 14,635     $ 16,522     $ 70,142  
SMB contribution margin 25.1 %   27.6 %   21.3 %   23.3 %   24.4 %
Total segment contribution income $ 47,510     $ 50,664     $ 35,574     $ 32,734     $ 166,482  
Corporate and unallocated costs (20,459 )   (22,391 )   (25,038 )   (22,298 )   (90,186 )
Amortization of intangibles (1) (2,012 )   (1,922 )   (1,966 )   (2,079 )   (7,979 )
Stock-based compensation expense (6,233 )   (6,118 )   (7,246 )   (6,864 )   (26,461 )
Separation expense (550 )   (379 )   —     —     (929 )
Restructuring and other charges (830 )   (1 )   (1,376 )   9     (2,198 )
Litigation reserves, net (10 )   —     (5 )   —     (15 )
Interest income 1,174     985     1,073     748     3,980  
Other income (expense), net 85     955     788     (1,318 )   510  
Income before income taxes $ 18,675     $ 21,793     $ 1,804     $ 932     $ 43,204  
                                       

___________________
(1)  Amount excludes amortization expense related to patents within purchased intangibles in cost of revenue.

SERVICE PROVIDER NET REVENUE

  Three Months Ended   Twelve Months
Ended
  December 31,
 2018		   September 30,
 2018		   July 1,
 2018		   April 1,
 2018		   December 31,
 2018
Connected Home $ 37,772     $ 30,769     $ 46,333     $ 41,797     $ 156,671  
SMB 670     1,191     700     1,063     3,624  
Total service provider net revenue $ 38,442     $ 31,960     $ 47,033     $ 42,860     $ 160,295  
                                       

 
NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except percentage data)
(Unaudited)
 
STATEMENT OF OPERATIONS DATA, FISCAL 2017
                   
  Three Months Ended   Twelve Months
Ended
  December 31,
 2017		   October 1,
 2017		   July 2,
 2017		   April 2,
 2017		   December 31,
 2017
                   
GAAP gross profit $ 76,129     $ 76,096     $ 75,380     $ 80,111     $ 307,716  
GAAP gross margin 27.8 %   30.2 %   30.0 %   30.6 %   29.6 %
Amortization of intangibles 323     471     808     2,036     3,638  
Stock-based compensation expense 347     331     401     327     1,406  
Non-GAAP gross profit $ 76,799     $ 76,898     $ 76,589     $ 82,474     $ 312,760  
Non-GAAP gross margin 28.0 %   30.5 %   30.4 %   31.6 %   30.1 %
                   
GAAP research and development $ 19,397     $ 17,958     $ 17,840     $ 16,698     $ 71,893  
Stock-based compensation expense (764 )   (743 )   (766 )   (695 )   (2,968 )
Non-GAAP research and development $ 18,633     $ 17,215     $ 17,074     $ 16,003     $ 68,925  
                   
GAAP sales and marketing $ 36,667     $ 34,405     $ 32,532     $ 35,075     $ 138,679  
Amortization of intangibles (1,756 )   (1,756 )   (1,757 )   (1,756 )   (7,025 )
Stock-based compensation expense (1,438 )   (1,464 )   (1,374 )   (1,205 )   (5,481 )
Non-GAAP sales and marketing $ 33,473     $ 31,185     $ 29,401     $ 32,114     $ 126,173  
                   
GAAP general and administrative $ 14,385     $ 14,120     $ 12,725     $ 13,116     $ 54,346  
Stock-based compensation expense (2,339 )   (2,349 )   (2,323 )   (2,103 )   (9,114 )
Non-GAAP general and administrative $ 12,046     $ 11,771     $ 10,402     $ 11,013     $ 45,232  
                   
GAAP total operating expenses $ 70,576     $ 66,517     $ 63,144     $ 64,926     $ 265,163  
Amortization of intangibles (1,756 )   (1,756 )   (1,757 )   (1,756 )   (7,025 )
Stock-based compensation expense (4,541 )   (4,556 )   (4,463 )   (4,003 )   (17,563 )
Restructuring and other charges (19 )   (19 )   (22 )   (37 )   (97 )
Litigation reserves, net (108 )   (15 )   (25 )   —     (148 )
Non-GAAP total operating expenses $ 64,152     $ 60,171     $ 56,877     $ 59,130     $ 240,330  
                                       

 
NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except percentage data)
(Unaudited)
 
STATEMENT OF OPERATIONS DATA, FISCAL 2017
(CONTINUED) 
       
  Three Months Ended   Twelve Months
Ended
  December 31,
 2017		   October 1,
 2017		   July 2,
 2017		   April 2,
 2017		   December 31,
 2017
                   
GAAP operating income $ 5,553     $ 9,579     $ 12,236     $ 15,185     $ 42,553  
GAAP operating margin 2.0 %   3.8 %   4.9 %   5.8 %   4.1 %
Amortization of intangibles 2,079     2,227     2,565     3,792     10,663  
Stock-based compensation expense 4,888     4,887     4,864     4,330     18,969  
Restructuring and other charges 19     19     22     37     97  
Litigation reserves, net 108     15     25     —     148  
Non-GAAP operating income $ 12,647     $ 16,727     $ 19,712     $ 23,344     $ 72,430  
Non-GAAP operating margin 4.6 %   6.6 %   7.8 %   8.9 %   7.0 %
                   
GAAP net income (loss) from continuing operations $ (41,778 )   $ 9,624     $ 9,989     $ 11,032     $ (11,133 )
Amortization of intangibles 2,079     2,227     2,565     3,792     10,663  
Stock-based compensation expense 4,888     4,887     4,864     4,330     18,969  
Restructuring and other charges 19     19     22     37     97  
Litigation reserves, net 108     15     25     —     148  
Tax effects of above non-GAAP adjustments 45,814     (2,321 )   (3,274 )   (3,483 )   36,736  
Non-GAAP net income from continuing operations $ 11,130     $ 14,451     $ 14,191     $ 15,708     $ 55,480  
                                       

 
NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except percentage data)
(Unaudited)
 
STATEMENT OF OPERATIONS DATA, FISCAL 2017
 (CONTINUED)
                   
  Three Months Ended   Twelve Months
Ended
  December 31,
 2017		   October 1,
 2017		   July 2,
 2017		   April 2,
 2017		   December 31,
 2017
NET INCOME (LOSS) PER DILUTED SHARE:                  
GAAP net income (loss) per diluted share from continuing operations $ (1.33 )   $ 0.30     $ 0.30     $ 0.32     $ (0.35 )
Amortization of intangibles 0.06     0.07     0.08     0.11     0.32  
Stock-based compensation expense 0.15     0.15     0.15     0.13     0.57  
Restructuring and other charges 0.00     0.00     0.00     0.00     0.00  
Litigation reserves, net 0.00     0.00     0.00     —     0.00  
Tax effects of above non-GAAP adjustments 1.42     (0.07 )   (0.10 )   (0.10 )   1.11  
Non-GAAP net income per diluted share from continuing operations* $ 0.34     $ 0.45     $ 0.43     $ 0.46     $ 1.68  
                   
Shares used in computing GAAP net income (loss) per diluted share 31,379     32,393     33,116     34,136     32,097  
Shares used in computing non-GAAP net income per diluted share 32,270     32,393     33,116     34,136     33,044  
                             

* The per share reconciliation of GAAP to non-GAAP may not aggregate due to both calculations utilizing a different share basis. The GAAP net loss per diluted share calculation uses a lower share count as it excludes potentially dilutive shares included in the non-GAAP net income per diluted share calculation.

 
NETGEAR, INC.
SUPPLEMENTAL FINANCIAL INFORMATION, FISCAL 2017
(In thousands, except per share data, DSO, inventory turns, weeks of channel inventory, headcount and percentage data)
(Unaudited)
 
  Three Months Ended
  December 31,
 2017		   October 1,
 2017		   July 2,
 2017		   April 2,
 2017
               
Cash, cash equivalents and short-term investments $ 329,653     $ 372,580     $ 305,455     $ 361,083  
Cash, cash equivalents and short-term investments per diluted share $ 10.22     $ 11.50     $ 9.22     $ 10.58  
               
Accounts receivable, net $ 255,118     $ 201,458     $ 227,068     $ 204,053  
Days sales outstanding (DSO)   85       73       82       72  
               
Inventories $ 162,942     $ 173,896     $ 193,446     $ 200,530  
Ending inventory turns   4.9       4.0       3.6       3.6  
                               
Weeks of channel inventory:                              
U.S. retail channel   7.4       10.1       8.2       7.8  
U.S. distribution channel   5.0       6.3       4.3       5.6  
EMEA distribution channel   6.0       5.3       4.7       4.7  
APAC distribution channel   5.0       6.1       7.0       5.8  
               
Deferred revenue (current and non-current) $ 21,995     $ 17,750     $ 14,923     $ 14,860  
               
Headcount 901     884     861     856  
Non-GAAP diluted shares 32,270     32,393     33,116     34,136  
                       

NET REVENUE BY GEOGRAPHY

  Three Months Ended   Twelve Months
Ended
  December 31,
 2017		   October 1,
 2017		   July 2,
 2017		   April 2,
 2017		   December 31,
 2017
Americas $ 176,880   64%     $ 160,405   64%     $ 159,730   64%     $ 168,074   65%     $ 665,089   64%  
EMEA 59,207   22%     46,491   18%     45,800   18%     45,576   17%     197,074   19%  
APAC 38,062   14%     45,054   18%     46,155   18%     47,735   18%     177,006   17%  
Total $ 274,149   100%     $ 251,950   100%     $ 251,685   100%     $ 261,385   100%     $ 1,039,169   100%  
                                                           

 
NETGEAR, INC.
SEGMENT FINANCIAL INFORMATION, FISCAL 2017
(In thousands, except percentage data)
(Unaudited)
 
  Three Months Ended   Twelve Months
Ended
  December 31,
 2017		   October 1,
 2017		   July 2,
 2017		   April 2,
 2017		   December 31,
 2017
Net revenue:                  
Connected Home $ 203,548     $ 187,270     $ 183,701     $ 193,742     $ 768,261  
SMB 70,601     64,680     67,984     67,643     270,908  
Total net revenue $ 274,149     $ 251,950     $ 251,685     $ 261,385     $ 1,039,169  
Contribution income:                  
Connected Home $ 17,035     $ 22,087     $ 19,654     $ 25,094     $ 83,870  
Connected Home contribution margin 8.4 %   11.8 %   10.7 %   13.0 %   10.9 %
SMB $ 15,975     $ 13,778     $ 17,435     $ 16,677     $ 63,865  
SMB contribution margin 22.6 %   21.3 %   25.6 %   24.7 %   23.6 %
Total segment contribution income $ 33,010     $ 35,865     $ 37,089     $ 41,771     $ 147,735  
Corporate and unallocated costs (20,363 )   (19,138 )   (17,377 )   (18,427 )   (75,305 )
Amortization of intangibles (1) (2,079 )   (2,227 )   (2,565 )   (3,792 )   (10,663 )
Stock-based compensation expense (4,888 )   (4,887 )   (4,864 )   (4,330 )   (18,969 )
Restructuring and other charges (19 )   (19 )   (22 )   (37 )   (97 )
Litigation reserves, net (108 )   (15 )   (25 )   —     (148 )
Interest income 725     502     482     405     2,114  
Other income (expense), net 440     493     332     292     1,557  
Income before income taxes $ 6,718     $ 10,574     $ 13,050     $ 15,882     $ 46,224  
                                       

___________________
(1) Amount excludes amortization expense related to patents within purchased intangibles in cost of revenue.

SERVICE PROVIDER NET REVENUE

  Three Months Ended   Twelve Months
Ended
  December 31,
 2017		   October 1,
 2017		   July 2,
 2017		   April 2,
 2017		   December 31,
 2017
Connected Home $ 43,877     $ 44,631     $ 48,485     $ 53,193     $ 190,186  
SMB 776     1,114     588     790     3,268  
Total service provider net revenue $ 44,653     $ 45,745     $ 49,073     $ 53,983     $ 193,454  
                                       

 
NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except percentage data)
(Unaudited)
 
STATEMENT OF OPERATIONS DATA, FISCAL 2016
                   
  Three Months Ended   Twelve Months
Ended
  December 31,
 2016		   October 2,
 2016		   July 3,
 2016		   April 3,
 2016		   December 31,
 2016
                   
GAAP gross profit $ 98,398     $ 92,149     $ 86,897     $ 96,458     $ 373,902  
GAAP gross margin 33.6 %   31.6 %   31.9 %   33.7 %   32.7 %
Amortization of intangibles 2,084     2,084     2,084     2,084     8,336  
Stock-based compensation expense 316     364     403     390     1,473  
Non-GAAP gross profit $ 100,798     $ 94,597     $ 89,384     $ 98,932     $ 383,711  
Non-GAAP gross margin 34.4 %   32.4 %   32.8 %   34.6 %   33.6 %
                   
GAAP research and development $ 18,465     $ 17,224     $ 17,171     $ 18,044     $ 70,904  
Stock-based compensation expense (712 )   (750 )   (735 )   (529 )   (2,726 )
Non-GAAP research and development $ 17,753     $ 16,474     $ 16,436     $ 17,515     $ 68,178  
                   
GAAP sales and marketing $ 35,840     $ 34,153     $ 34,195     $ 35,403     $ 139,591  
Amortization of intangibles (1,756 )   (1,756 )   (1,757 )   (1,756 )   (7,025 )
Stock-based compensation expense (1,194 )   (1,263 )   (1,307 )   (1,170 )   (4,934 )
Non-GAAP sales and marketing $ 32,890     $ 31,134     $ 31,131     $ 32,477     $ 127,632  
                   
GAAP general and administrative $ 14,107     $ 14,070     $ 12,989     $ 12,830     $ 53,996  
Stock-based compensation expense (1,976 )   (2,040 )   (2,095 )   (1,897 )   (8,008 )
Non-GAAP general and administrative $ 12,131     $ 12,030     $ 10,894     $ 10,933     $ 45,988  
                   
GAAP total operating expenses $ 68,448     $ 65,334     $ 65,658     $ 68,965     $ 268,405  
Amortization of intangibles (1,756 )   (1,756 )   (1,757 )   (1,756 )   (7,025 )
Stock-based compensation expense (3,882 )   (4,053 )   (4,137 )   (3,596 )   (15,668 )
Restructuring and other charges (21 )   126     (1,268 )   (2,678 )   (3,841 )
Litigation reserves, net (15 )   (13 )   (35 )   (10 )   (73 )
Non-GAAP total operating expenses $ 62,774     $ 59,638     $ 58,461     $ 60,925     $ 241,798  
                                       

 
NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except percentage data)
(Unaudited)
 
STATEMENT OF OPERATIONS DATA, FISCAL 2016
(CONTINUED)
       
  Three Months Ended   Twelve Months
Ended
  December 31,
 2016		   October 2,
 2016		   July 3,
 2016		   April 3,
 2016		   December 31,
 2016
                   
GAAP operating income $ 29,950     $ 26,815     $ 21,239     $ 27,493     $ 105,497  
GAAP operating margin 10.2 %   9.2 %   7.8 %   9.6 %   9.2 %
Amortization of intangibles 3,840     3,840     3,841     3,840     15,361  
Stock-based compensation expense 4,198     4,417     4,540     3,986     17,141  
Restructuring and other charges 21     (126 )   1,268     2,678     3,841  
Litigation reserves, net 15     13     35     10     73  
Non-GAAP operating income $ 38,024     $ 34,959     $ 30,923     $ 38,007     $ 141,913  
Non-GAAP operating margin 13.0 %   12.0 %   11.4 %   13.3 %   12.4 %
                   
GAAP other income (expense), net $ 383     $ 110     $ (338 )   $ (321 )   $ (166 )
Gain on litigation settlements —     —     —     (5 )   (5 )
Loss pertaining to investments —     68     479     —     547  
Non-GAAP other income (expense), net $ 383     $ 178     $ 141     $ (326 )   $ 376  
                   
GAAP net income from continuing operations $ 20,050     $ 19,154     $ 13,277     $ 17,831     $ 70,312  
Amortization of intangibles 3,840     3,840     3,841     3,840     15,361  
Stock-based compensation expense 4,198     4,417     4,540     3,986     17,141  
Restructuring and other charges 21     (126 )   1,268     2,678     3,841  
Litigation reserves, net 15     13     35     10     73  
Gain on litigation settlements —     —     —     (5 )   (5 )
Loss pertaining to investments —     68     479     —     547  
Tax effects of above non-GAAP adjustments (1,049 )   (4,014 )   (2,776 )   (2,953 )   (10,792 )
Non-GAAP net income from continuing operations $ 27,075     $ 23,352     $ 20,664     $ 25,387     $ 96,478  
                                       

 
NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except percentage data)
(Unaudited)
 
STATEMENT OF OPERATIONS DATA, FISCAL 2016
(CONTINUED):
  Three Months Ended   Twelve Months
Ended
  December 31,
 2016		   October 2,
 2016		   July 3,
 2016		   April 3,
 2016		   December 31,
 2016
NET INCOME PER DILUTED SHARE:                  
GAAP net income per diluted share from continuing operations $ 0.59     $ 0.56     $ 0.40     $ 0.54     $ 2.08  
Amortization of intangibles 0.11     0.11     0.11     0.12     0.46  
Stock-based compensation expense 0.12     0.13     0.14     0.12     0.51  
Restructuring and other charges 0.00     0.00     0.04     0.08     0.11  
Litigation reserves, net 0.00     0.00     0.00     0.00     0.00  
Gain on litigation settlements —     —     —     0.00     0.00  
Loss pertaining to investments —     0.00     0.01     —     0.02  
Tax effects of above non-GAAP adjustments (0.02 )   (0.11 )   (0.08 )   (0.10 )   (0.32 )
Non-GAAP net income per diluted share from continuing operations $ 0.80     $ 0.69     $ 0.62     $ 0.76     $ 2.86  
                                       

 
NETGEAR, INC.
SUPPLEMENTAL FINANCIAL INFORMATION, FISCAL 2016
(In thousands, except per share data, DSO, inventory turns, weeks of channel inventory, headcount and percentage data)
(Unaudited)
 
  Three Months Ended
  December 31,
 2016		   October 2,
 2016		   July 3,
 2016		   April 3,
 2016
               
Cash, cash equivalents and short-term investments $ 365,728     $ 402,991     $ 352,647     $ 333,270  
Cash, cash equivalents and short-term investments per diluted share $ 10.78     $ 11.88     $ 10.53     $ 10.02  
               
Accounts receivable, net $ 231,997     $ 196,134     $ 196,971     $ 197,222  
Days sales outstanding (DSO)   71       61       66       65  
               
Inventories $ 200,144     $ 186,352     $ 179,538     $ 182,486  
Ending inventory turns   3.9       4.3       4.1       4.2  
                               
Weeks of channel inventory:                              
U.S. retail channel   6.3       8.8       9.1       8.6  
U.S. distribution channel   7.2       4.4       5.0       5.5  
EMEA distribution channel   4.9       4.2       3.7       4.5  
APAC distribution channel   7.4       4.4       6.6       6.3  
               
Deferred revenue (current and non-current) $ 19,554     $ 14,378     $ 19,657     $ 19,487  
               
Headcount 877     881     866     877  
Non-GAAP diluted shares 33,925     33,913     33,493     33,269  
                       

NET REVENUE BY GEOGRAPHY

  Three Months Ended   Twelve Months
Ended
  December 31,
 2016		   October 2,
 2016		   July 3,
 2016		   April 3,
 2016		   December 31,
 2016
Americas $ 190,259   64%     $ 188,441   64%     $ 180,021   66%     $ 176,259   61%     $ 734,980   64%  
EMEA 60,298   21%     51,909   18%     45,806   17%     59,541   21%     217,554   19%  
APAC 42,584   15%     51,578   18%     46,378   17%     50,371   18%     190,911   17%  
Total $ 293,141   100%     $ 291,928   100%     $ 272,205   100%     $ 286,171   100%     $ 1,143,445   100%  
                                                           

 
NETGEAR, INC.
SEGMENT FINANCIAL INFORMATION, FISCAL 2016
(In thousands, except percentage data)
(Unaudited)
 
  Three Months Ended   Twelve Months
Ended
  December 31,
 2016		   October 2,
 2016		   July 3,
 2016		   April 3,
 2016		   December 31,
 2016
Net revenue:                  
Connected Home $ 215,597     $ 218,323     $ 197,293     $ 215,716     $ 846,929  
SMB 77,544     73,605     74,912     70,455     296,516  
Total net revenue $ 293,141     $ 291,928     $ 272,205     $ 286,171     $ 1,143,445  
Contribution income:                  
Connected Home $ 36,670     $ 34,305     $ 28,945     $ 39,077     $ 138,997  
Connected Home contribution margin 17.0 %   15.7 %   14.7 %   18.1 %   16.4 %
SMB $ 19,770     $ 18,444     $ 18,598     $ 15,727     $ 72,539  
SMB contribution margin 25.5 %   25.1 %   24.8 %   22.3 %   24.5 %
Total segment contribution income $ 56,440     $ 52,749     $ 47,543     $ 54,804     $ 211,536  
Corporate and unallocated costs (18,416 )   (17,790 )   (16,620 )   (16,797 )   (69,623 )
Amortization of intangibles (1) (3,840 )   (3,840 )   (3,841 )   (3,840 )   (15,361 )
Stock-based compensation expense (4,198 )   (4,417 )   (4,540 )   (3,986 )   (17,141 )
Restructuring and other charges (21 )   126     (1,268 )   (2,678 )   (3,841 )
Litigation reserves, net (15 )   (13 )   (35 )   (10 )   (73 )
Interest income 360     291     280     233     1,164  
Other income (expense), net 383     110     (338 )   (321 )   (166 )
Income before income taxes $ 30,693     $ 27,216     $ 21,181     $ 27,405     $ 106,495  
                                       

___________________
(1) Amount excludes amortization expense related to patents within purchased intangibles in cost of revenue.

SERVICE PROVIDER NET REVENUE

  Three Months Ended   Twelve Months
Ended
  December 31,
 2016		   October 2,
 2016		   July 3,
 2016		   April 3,
 2016		   December 31,
 2016
Connected Home $ 45,730     $ 66,042     $ 61,356     $ 76,852     $ 249,980  
SMB 686     1,295     746     1,448     4,175  
Total service provider net revenue $ 46,416     $ 67,337     $ 62,102     $ 78,300     $ 254,155  
                                        
CONTACT: Contact:
NETGEAR Investor Relations
Christopher Genualdi
[email protected]