Breaking News

Tweet TWEET

NETGEAR® Reports First Quarter 2013 Results

                 NETGEAR® Reports First Quarter 2013 Results

-- First quarter 2013 net revenue of $293.4 million, as compared to $325.6
million in the comparable prior year quarter, decrease of 9.9% year-over-year

-- First quarter 2013 non-GAAP net income of $19.4 million, as compared to
$28.1 million in the comparable prior year quarter, decrease of 31.0%
year-over-year

-- First quarter 2013 non-GAAP diluted earnings per share of $0.50, as
compared to $0.73 in the comparable prior year quarter, decrease of 31.5%
year-over-year

-- Company expects second quarter 2013 net revenue to be in the range of $345
million to $360 million, with non-GAAP operating margin in the range of 9.5%
to 10.5%

PR Newswire

SAN JOSE, Calif., April 25, 2013

SAN JOSE, Calif., April 25, 2013 /PRNewswire/ --NETGEAR, Inc. (NASDAQGM:
NTGR), a global networking company that delivers innovative products to
consumers, businesses and service providers, today reported financial results
for the first quarter ended March31, 2013.

Net revenue for the first quarter ended March31, 2013 was $293.4 million, as
compared to $325.6 million for the first quarter ended April1, 2012, and
$310.4 million in the fourth quarter ended December31, 2012. Net income,
computed in accordance with GAAP, for the first quarter of 2013 was $15.3
million, or $0.39 per diluted share. This compared to GAAP net income of
$25.1 million, or $0.65 per diluted share, for the first quarter of 2012, and
GAAP net income of $16.1 million, or $0.41 per diluted share, in the fourth
quarter of 2012.

Gross margin on a non-GAAP basis in the first quarter of 2013 was 30.5%, as
compared to 31.0% in the year ago comparable quarter, and 30.0% in the fourth
quarter of 2012. Non-GAAP operating margin was 10.0% in the first quarter of
2013, as compared to 12.5% in the first quarter of 2012, and 11.4% in the
fourth quarter of 2012. Non-GAAP net income was $0.50 per diluted share in the
first quarter of 2013, as compared to non-GAAP net income of $0.73 per diluted
share in the first quarter of 2012, and non-GAAP net income of $0.55 per
diluted share in the fourth quarter of 2012.

Our non-GAAP tax rate was 34.6% in the first quarter 2013, as compared to
30.1% in the year ago comparable quarter, and 39.4% in the fourth quarter of
2012. The higher tax rate in the first quarter 2013, as compared with the
comparable prior year quarter, reflects a shift in geographic mix of revenues,
and corresponding profits, towards the Americas.

The differences between GAAP and non-GAAP financial measures include
adjustments, net of any tax effect, for amortization of purchased intangibles,
stock-based compensation, restructuring and other charges, acquisition related
compensation and expense, and litigation reserves. 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, "The
lower than expected operating margin in the first quarter was driven by
product mix, primarily due to difficulties in the transition to our new
ReadyNAS line of products. The transition occurred late in the quarter and
difficulty securing components and some last minute bug fixes led to
unanticipated delays. This marked the first time we completely replaced an
entire line of products, which involved obsoleting ten models and replacing
them with seven brand new models. The execution was much harder than
anticipated and we learned a valuable lesson in engineering and manufacturing
planning. The good news is that our supply is now in full swing and customer
feedback on the new product line has been very positive."

"We continue to see large market opportunities created by the ever expanding
access to high speed Internet connectivity among consumers and businesses. We
are very focused today on building our product portfolios for intermediate and
long term growth in all three of our business units. In retail, we continue to
gain traction with the 11ac upgrade cycle and we are gaining share in the
Smart Home space, specifically with our Internet video streaming solutions. In
our Commercial Business Unit, the launches of the new ReadyNAS and 10GBaseT
switches in the first quarter were received enthusiastically by the market,
positioning us for growth in the months and years ahead. And in our Service
Provider Business Unit, we introduced our first LTE gateway into the North
American fixed mobile data market and have attracted interest from multiple
service providers."

Christine Gorjanc, Chief Financial Officer of NETGEAR, said, "As discussed on
our February earnings call, we anticipated a quarter-over-quarter decline of
net revenue in the first quarter caused by weaker sell-in to our channel and
service provider customers. We were further negatively impacted by our
inability to ship the backlog on our new line of ReadyNAS products. Our
non-GAAP operating margin came in at 10.0%, which is lower than our original
guidance of 11% to 12%. Even though the second quarter is seasonally weak for
retail, we expect sequential growth for both the commercial and service
provider business units."

Mr. Lo added, "Our outlook for the growth drivers of our core business remains
unchanged, as does our confidence in the superiority of our products. We
expect to continue to open up new channels, penetrate the developing markets
and enter new product categories. Looking forward, with a full quarter of
AirCard product shipments weighing in, and the supply of our new ReadyNAS
products back to normal, we expect second quarter 2013 net revenue to be in
the range of $345 to $360 million and non-GAAP operating margin to be between
9.5% and 10.5%. Furthermore, we expect our non-GAAP tax rate to be
approximately 38% in the second quarter 2013."

Investor Conference Call / Webcast Details
NETGEAR will review the first quarter 2013 results and discuss management's
expectations for the second quarter of 2013 today, Thursday, April 25, 2013 at
5 p.m. Eastern (2 p.m. Pacific). The dial-in number for the live audio call is
(201) 689-8471. A live webcast of the conference call will be available on
NETGEAR's website at http://investor.netgear.com. A replay of the call will
be available 2 hours following the call through midnight Eastern (9 p.m.
Pacific) on Thursday, May 2, 2013 by telephone at (858) 384-5517 and via the
web at http://investor.netgear.com. The account number to access the phone
replay is 412249.

About NETGEAR, Inc.
NETGEAR (NASDAQGM: NTGR) is a global networking company that delivers
innovative products to consumers, businesses and service providers. For
consumers, the company makes high performance, dependable and easy to use home
networking, storage and digital media products to connect people with the
Internet and their content and devices. For businesses, NETGEAR provides
networking, storage and security solutions without the cost and complexity of
Big IT. The company also supplies top service providers with retail proven,
whole home solutions for their customers. NETGEAR products are built on a
variety of proven technologies such as wireless, Ethernet and powerline, with
a focus on reliability and ease-of-use. NETGEAR products are sold in
approximately 36,000 retail locations around the globe, and through
approximately 43,000 value-added resellers. The company's headquarters are in
San Jose, Calif., with additional offices in over 25 countries. NETGEAR is an
ENERGY STAR partner. More information is available at
http://investor.netgear.comor by calling (408) 907-8000. Connect with NETGEAR
at http://twitter.com/NETGEARand http://www.facebook.com/NETGEAR.

© 2013 NETGEAR, Inc. NETGEAR, ReadyNAS, AirCard and the NETGEAR logo 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.

Contact:
NETGEAR Investor Relations
Christopher Genualdi
netgearIR@netgear.com
(408) 890-3520

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, among others, regarding expected net revenue and
non-GAAP operating margin and non-GAAP tax rate, expectations for intermediate
and long term growth in all three of our business units, expectations
regarding new product introductions which position the Company for growth,
sequential growth in the second quarter 2013 for both the commercial and
service provider business units, opening new channels, penetrating the
developing markets and entering new product categories. These statements are
based on management's current expectations and are subject to certain risks
and uncertainties, including, without limitation, 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 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; channel inventory
information reported is estimated based on the average number of weeks of
inventory on hand on the last Saturday of the quarter, as reported by certain
of NETGEAR's customers; changes in the level of NETGEAR's cash resources and
the Company's planned usage of such resources; 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 I - Item 1A. Risk Factors,"
pages 10 through 29, in the Company's annual report on Form 10-K for the
fiscal year ended December 31, 2012, filed with the Securities and Exchange
Commission on February 26, 2013. 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.

Use of Non-GAAP Financial Information:
To supplement our consolidated financial statements presented on a GAAP basis,
NETGEAR uses non-GAAP financial measures, which are adjusted to exclude
certain expenses and tax benefits, where applicable. We believe non-GAAP
financial measures are appropriate to enhance an overall understanding of our
past financial performance and also our prospects for the future. These
adjustments to our current period GAAP results are made with the intent of
providing both management and investors a more complete understanding of
NETGEAR's underlying operational results and trends and our marketplace
performance. For example, the non-GAAP results are an indication of our
baseline performance before charges that are considered by management to be
outside of our core operating results. In addition, these adjusted non-GAAP
results are among the primary indicators management uses as a basis for our
planning and forecasting of future periods. The presentation of this
additional information is not meant to be considered in isolation or as a
substitute for financial measures prepared in accordance with generally
accepted accounting principles in the United States.

-Financial Tables Attached-

NETGEAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
                                                    March31,     December31,
                                                    2013          2012
ASSETS
Current assets:
Cash and cash equivalents                           $ 279,098     $ 149,032
Short-term investments                              143,314       227,845
Accounts receivable, net                            237,896       256,014
Inventories                                         158,555       174,903
Deferred income taxes                               24,052        22,691
Prepaid expenses and other current assets           34,773        33,724
Total current assets                                877,688       864,209
Property and equipment, net                         18,387        19,025
Intangibles, net                                    26,079        27,621
Goodwill                                            100,880       100,880
Other non-current assets                            22,282        22,834
Total assets                                        $ 1,045,316   $ 1,034,569
 LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable                                    $ 82,410      $ 87,310
Accrued employee compensation                       14,103        18,338
Other accrued liabilities                           119,587       126,255
Deferred revenue                                    26,998        27,645
Income taxes payable                                4,667         1,382
Total current liabilities                           247,765       260,930
Non-current income taxes payable                    13,187        13,735
Other non-current liabilities                       6,987         5,293
Total liabilities                                   267,939       279,958
Stockholders' equity:
Common stock                                        39            38
Additional paid-in capital                          402,050       394,427
Cumulative other comprehensive income               139           4
Retained earnings                                   375,149       360,142
Total stockholders' equity                          777,377       754,611
Total liabilities and stockholders' equity          $ 1,045,316   $ 1,034,569



NETGEAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
                                          Three Months Ended
                                          March31,   December31,  April1,
                                          2013        2012          2012
Net revenue                               $ 293,399   $  310,436    $ 325,620
Cost of revenue                           205,662     219,058       225,771
Gross profit                              87,737      91,378        99,849
Operating expenses:
Research and development                  15,338      14,789        14,121
Sales and marketing                       36,389      35,519        38,970
General and administrative                12,327      11,507        10,413
Restructuring and other charges           (30)        1,190         —
Litigation reserves, net                  48          (30)          151
Total operating expenses                  64,072      62,975        63,655
Income from operations                    23,665      28,403        36,194
Interest income                           149         154           119
Other income (expense), net               74          (153)         (601)
Income before income taxes                23,888      28,404        35,712
Provision for income taxes                8,545       12,325        10,565
Net income                                $ 15,343    $  16,079     $ 25,147
Net income per share:
Basic                                     $ 0.40      $  0.42       $ 0.67
Diluted                                   $ 0.39      $  0.41       $ 0.65
Weighted average shares outstanding used
to

compute net income per share:
Basic                                     38,433      38,293        37,796
Diluted                                   39,050      38,924        38,576



NETGEAR, INC.
NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Excluding amortization of purchased intangibles, stock-based compensation,
restructuring and other charges, acquisition related compensation and expense,
and litigation reserves, net of tax.
(In thousands, except per share data)
(Unaudited)
                      Three Months Ended
                      March31,           December31,           April1,
                      2013                2012                   2012
Net revenue           $   293,399         $    310,436           $  325,620
Cost of revenue       204,002             217,286                224,554
Gross profit          89,397              93,150                 101,066
Operating expenses:
Research and          14,666              14,068                 13,510
development
Sales and marketing   35,159              34,391                 37,776
General and           10,118              9,283                  9,096
administrative
Total operating       59,943              57,742                 60,382
expenses
Income from           29,454              35,408                 40,684
operations
Interest income       149                 154                    119
Other income          74                  (153)                  (601)
(expense), net
Income before income  29,677              35,409                 40,202
taxes
Provision for income  10,263              13,951                 12,094
taxes
Net income            $   19,414          $    21,458            $  28,108
Net income per share:
Basic                 $   0.51            $    0.56              $  0.74
Diluted               $   0.50            $    0.55              $  0.73
Weighted average
shares outstanding
used to

compute net income
per share:
Basic                 38,433              38,293                 37,796
Diluted               39,050              38,924                 38,576



NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except per share data)
(Unaudited)
STATEMENT OF OPERATIONS DATA:
                                    Three Months Ended
                                    March31,   December31,  April1,
                                    2013        2012          2012
GAAP gross profit                   $ 87,737    $  91,378     $ 99,849
Amortization of intangible assets   1,471       1,446         947
Stock-based compensation expense    189         326           270
Non-GAAP gross profit               $ 89,397    $  93,150     $ 101,066
Non-GAAP gross margin               30.5     %  30.0       %  31.0      %
GAAP research and development       $ 15,338    $  14,789     $ 14,121
Stock-based compensation expense    (672)       (721)         (611)
Non-GAAP research and development   $ 14,666    $  14,068     $ 13,510
GAAP sales and marketing            $ 36,389    $  35,519     $ 38,970
Stock-based compensation expense    (1,230)     (1,128)       (1,194)
Non-GAAP sales and marketing        $ 35,159    $  34,391     $ 37,776
GAAP general and administrative     $ 12,327    $  11,507     $ 10,413
Stock-based compensation expense    (1,499)     (1,391)       (1,317)
Acquisition related expense         (710)       (833)         —
Non-GAAP general and administrative $ 10,118    $  9,283      $ 9,096
GAAP total operating expenses       $ 64,072    $  62,975     $ 63,655
Stock-based compensation expense    (3,401)     (3,240)       (3,122)
Restructuring and other charges     30          (1,190)       —
Acquisition related expense         (710)       (833)         —
Litigation reserves, net            (48)        30            (151)
Non-GAAP total operating expenses   $ 59,943    $  57,742     $ 60,382



NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)
(In thousands, except per share data)
(Unaudited)
STATEMENT OF OPERATIONS DATA (CONTINUED):
                                      Three Months Ended
                                      March31,   December31,  April1,
                                      2013        2012          2012
GAAP operating income                 $ 23,665    $  28,403     $ 36,194
Amortization of intangible assets     1,471       1,446         947
Stock-based compensation expense      3,590       3,566         3,392
Restructuring and other charges      (30)        1,190         —
Acquisition related expense           710         833           —
Litigation reserves, net              48          (30)          151
Non-GAAP operating income             $ 29,454    $  35,408     $ 40,684
Non-GAAP operating margin             10.0     %  11.4       %  12.5     %
GAAP net income                       $ 15,343    $  16,079     $ 25,147
Amortization of intangible assets     1,471       1,446         947
Stock-based compensation expense      3,590       3,566         3,392
Restructuring and other charges      (30)        1,190         —
Acquisition related expense           710         833           —
Litigation reserves, net              48          (30)          151
Tax effect                            (1,718)     (1,626)       (1,529)
Non-GAAP net income                   $ 19,414    $  21,458     $ 28,108
NET INCOME PER DILUTED SHARE:
GAAP net income per diluted share     $ 0.39      $  0.41       $ 0.65
Amortization of intangible assets     0.04        0.04          0.02
Stock-based compensation expense      0.09        0.09          0.09
Restructuring and other charges      0.00        0.03          —
Acquisition related expense           0.02        0.02          —
Litigation reserves, net              0.00        0.00          0.00
Tax effect                            (0.04)      (0.04)        (0.03)
Non-GAAP net income per diluted share $ 0.50      $  0.55       $ 0.73



SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands, except per share data, DSO, inventory turns, weeks of channel
inventory and headcount)
(Unaudited)
               Three Months Ended
               March31,   December31,  September30,  July1,     April1,
               2013        2012          2012           2012        2012
Cash, cash
equivalents    $ 422,412   $  376,877    $  362,420     $ 360,428   $ 369,420
and short-term
investments
Cash, cash
equivalents
and short-term
investments    $ 10.82     $  9.68       $  9.34        $ 9.34      $ 9.58
per

diluted share
Accounts
receivable,    $ 237,896   $  256,014    $  248,862     $ 271,769   $ 249,208
net
Days sales
outstanding    73          76            72             77          70
(DSO)
Inventories    $ 158,555   $  174,903    $  178,916     $ 152,820   $ 134,314
Ending
inventory      5.2         5.0           4.9            5.9         6.7
turns
Weeks of
channel
inventory:
U.S. retail    9.9         8.8           9.8            12.3        9.8
channel
U.S.
distribution   8.9         10.2          8.4            8.6         8.6
channel
EMEA
distribution   4.1         4.4           4.4            4.1         5.0
channel
APAC
distribution   7.2         7.2           4.7            5.7         5.6
channel
Deferred       $ 28,961    $  27,645     $  28,205      $ 25,478    $ 25,156
revenue
Headcount      866         850           854            818         810
Non-GAAP       39,050      38,924        38,802         38,595      38,576
diluted shares



NET REVENUE BY GEOGRAPHY
                     Three Months Ended
                     March31,          December31,         April1,
                     2013               2012                 2012
Americas  $ 156,676   53  %  $  169,979    54  %  $ 168,355   52  %
EMEA                 107,125     37  %  110,460       36  %  125,081     38  %
APAC                 29,598      10  %  29,997        10  %  32,184      10  %
Total                $ 293,399   100 %  $  310,436    100 %  $ 325,620   100 %



NET REVENUE BY SEGMENT
                    Three Months Ended
                    March31,          December31,         April1,
                    2013               2012                 2012
Retail              $ 126,322   43  %  $  138,539    44  %  $ 128,977   40  %
Commercial 70,851      24  %  73,447        24  %  74,632      23  %
Service Provider  96,226      33  %  98,450        32  %  122,011     37  %
Total               $ 293,399   100 %  $  310,436    100 %  $ 325,620   100 %



SOURCE NETGEAR, Inc.

Website: http://www.netgear.com