NETGEAR® Reports Second Quarter Results

                   NETGEAR® Reports Second Quarter Results

-- Second quarter 2013 net revenue of $357.7 million, as compared to $320.7
million in the comparable prior year quarter, increase of 11.6% year-over-year

-- Second quarter results reflect the full quarter effect of the acquired
AirCard business

-- Second quarter 2013 non-GAAP net income of $24.4 million, as compared to
$24.6 million in the comparable prior year quarter, decrease of 0.9%
year-over-year

-- Second quarter 2013 non-GAAP diluted earnings per share of $0.62, as
compared to $0.64 in the comparable prior year quarter, decrease of 3.1%
year-over-year

-- Company expects third 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., July 25, 2013

SAN JOSE, Calif., July 25, 2013 /PRNewswire/ --NETGEAR, Inc. (NASDAQGS:
NTGR), a global networking company that delivers innovative products to
consumers, businesses and service providers, today reported financial results
for the second quarter ended June30, 2013.

Net revenue for the second quarter ended June30, 2013 was $357.7 million, as
compared to $320.7 million for the second quarter ended July1, 2012, and
$293.4 million in the first quarter ended March31, 2013. The second quarter
2013 results reflect the full quarter effect of the AirCard business acquired
from Sierra Wireless. Net income, computed in accordance with GAAP, for the
second quarter of 2013 was $14.0 million, or $0.36 per diluted share. This
compared to GAAP net income of $21.5 million, or $0.56 per diluted share, for
the second quarter of 2012, and GAAP net income of $15.3 million, or $0.39 per
diluted share, in the first quarter of 2013.

Gross margin on a non-GAAP basis in the second quarter of 2013 was 29.8%, as
compared to 29.9% in the year ago comparable quarter, and 30.5% in the first
quarter of 2013. Non-GAAP operating margin was 10.3% in the second quarter of
2013, as compared to 11.0% in the second quarter of 2012, and 10.0% in the
first quarter of 2013. Non-GAAP net income was $0.62 per diluted share in the
second quarter of 2013, as compared to non-GAAP net income of $0.64 per
diluted share in the second quarter of 2012, and non-GAAP net income of $0.50
per diluted share in the first quarter of 2013.

The Company's non-GAAP tax rate was 32.9% in the second quarter 2013, as
compared to 31.4% in the second quarter of 2012, and 34.6% in the first
quarter of 2013.

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
expense, impact to cost of sales from acquisition accounting adjustments to
inventory, 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, "We are
pleased with our results for the second quarter of 2013. Our Retail Business
grew on a year-over-year basis, and we have confidence in the pace of the
802.11ac upgrade cycle, as well as the increasing realization of the Smart
Home for developed markets. The integration of the AirCard business into our
Service Provider Business Unit has been progressing very well, and we are
excited about our combined R&D capabilities in the fast growing LTE gateway
market segment. Our Commercial Business Unit generated impressive sequential
and year-over-year growth driven by the success of our new storage products
and 10 Gigabit switches."

"Our Retail Business Unit (RBU) revenue for the quarter ended June 30, 2013
was down 7% sequentially, which represents typical seasonality for the second
quarter. On a year-over-year basis, our Retail Business Unit revenue was up
3%. Our strong year on year growth for RBU in North America and Asia was
offset by weakness in the European region. Our Service Provider Business Unit
revenue was up 58% sequentially, and up 20% over the prior year quarter. This
substantial increase reflects the incremental revenue of the recent AirCard
acquisition. Our Commercial Business Unit revenue was up 25% sequentially, and
up 10% over the prior year quarter. Our new line of storage products was well
received by the market, and we believe that the unique product portfolio we
have built for storage, 10 Gigabit switches, Power over Ethernet switches and
wireless LAN will continue to drive growth for this business unit in future
quarters."

Christine Gorjanc, Chief Financial Officer of NETGEAR, said, "We ended the
second quarter of 2013 with $288.1 million in cash, cash equivalents and
short-term investments, compared to $360.4 million at the end of the second
quarter of 2012, and $422.4 million at the end of the first quarter of 2013.
The reduction in the cash level reflects the payment of $140.0 million to
Sierra Wireless, Inc. for the AirCard business. Our balance sheet remains
strong and provides plenty of flexibility for us to invest in the fast growing
markets of the Smart Home, access networks to cloud computing, and LTE
gateways and data devices."

Mr. Lo added, "The worldwide spread of broadband internet access and the
proliferation of connected devices continue to create opportunities for us to
put multiple NETGEAR products into every home and office. Looking forward, for
the third quarter of 2013, we expect 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 37% in the
third quarter of 2013."

Investor Conference Call / Webcast Details
NETGEAR will review the second quarter results and discuss management's
expectations for the second quarter of 2013 today, Thursday, July 25, 2013 at
5 p.m. EDT (2 p.m. PDT). 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, August 1, 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
417736.

About NETGEAR, Inc.
NETGEAR (NASDAQGS: 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 45,000 retail locations around the globe, and through
approximately 40,000 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 regarding: expected net revenue, non-GAAP operating
margin and non-GAAP tax rate; expectations for intermediate and long term
growth in our business units; expectations regarding new product introductions
that position the Company for growth; opening new channels; penetrating
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 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; 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 II - Item 1A. Risk
Factors," pages 42 through 63, in the Company's quarterly report on Form 10-Q
for the fiscal quarter ended March 31, 2013, filed with the Securities and
Exchange Commission on May 7, 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)
                                                    June30,      December31,
                                                    2013          2012
ASSETS
Current assets:
Cash and cash equivalents                           $ 146,934     $ 149,032
Short-term investments                              141,169       227,845
Accounts receivable, net                            288,483       256,014
Inventories                                         185,383       174,903
Deferred income taxes                               25,228        22,691
Prepaid expenses and other current assets  41,708        33,724
Total current assets                    828,905       864,209
Property and equipment, net                         26,397        19,025
Intangibles, net                                    95,149        27,621
Goodwill                                            155,405       100,880
Other non-current assets                            22,884        22,834
Total assets                            $ 1,128,740   $ 1,034,569
 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                                    $ 129,535     $ 87,310
Accrued employee compensation                       16,275        18,338
Other accrued liabilities                           134,884       126,255
Deferred revenue                                    31,838        27,645
Income taxes payable                                —             1,382
Total current liabilities               312,532       260,930
Non-current income taxes payable                    12,972        13,735
Other non-current liabilities                       6,657         5,293
Total liabilities                       332,161       279,958
Stockholders' equity:
Common stock                                        39            38
Additional paid-in capital                          407,505       394,427
Cumulative other comprehensive income               48            4
Retained earnings                                   388,987       360,142
Total stockholders' equity              796,579       754,611
Total liabilities and stockholders'     $ 1,128,740   $ 1,034,569
equity



NETGEAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
                    Three Months Ended                  Six Months Ended
                    June30,    March31,   July1,     June30,    July1,
                    2013        2013        2012        2013        2012
Net revenue         $ 357,719   $ 293,399   $ 320,655   $ 651,118   $ 646,275
Cost of revenue     254,289     205,662     226,017     459,951     451,788
Gross profit        103,430     87,737      94,638      191,167     194,487
Operating expenses:
Research and        23,981      15,338      14,757      39,319      28,878
development
Sales and marketing 40,406      36,389      37,677      76,795      76,647
General and         12,319      12,327      11,219      24,646      21,632
administrative
Restructuring and
other               1,587       (30)        —           1,557       —

charges
Litigation          3,555       48          —           3,603       151
reserves, net
Total
operating           81,848      64,072      63,653      145,920     127,308
expenses
Income from         21,582      23,665      30,985      45,247      67,179
operations
Interest income     95          149         116         244         235
Other income        (548)       74          354         (474)       (247)
(expense), net
Income before       21,129      23,888      31,455      45,017      67,167
income taxes
Provision for       7,144       8,545       9,933       15,689      20,498
income taxes
Net income          $ 13,985    $ 15,343    $ 21,522    $ 29,328    $ 46,669
Net income per
share:
Basic               $ 0.36      $ 0.40      $ 0.57      $ 0.76      $ 1.23
Diluted             $ 0.36      $ 0.39      $ 0.56      $ 0.75      $ 1.21
Weighted average
shares

outstanding used to
compute net

income per share:
Basic               38,539      38,433      37,978      38,493      37,886
Diluted             39,074      39,050      38,595      39,077      38,612



NETGEAR, INC.
NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Excluding amortization of purchased intangibles, stock-based compensation,
restructuring and other charges, acquisition related expense, impact to
cost of sales from acquisition accounting adjustments to inventory, and
litigation reserves, net of tax.
(In thousands, except per share data)
(Unaudited)
                    Three Months Ended                  Six Months Ended
                    June30,    March31,   July1,     June30,    July1,
                    2013        2013        2012        2013        2012
Net revenue         $ 357,719   $ 293,399   $ 320,655   $ 651,118   $ 646,275
Cost of revenue     251,061     204,002     224,723     455,063     449,277
Gross profit        106,658     89,397      95,932      196,055     196,998
Operating expenses:
Research and        22,846      14,666      14,080      37,512      27,590
development
Sales and marketing 36,478      35,159      36,486      71,637      74,262
General and         10,565      10,118      9,970       20,683      19,066
administrative
Total 69,889      59,943      60,536      129,832     120,918
operating expenses
Income from         36,769      29,454      35,396      66,223      76,080
operations
Interest income     95          149         116         244         235
Other income        (548)       74          354         (474)       (247)
(expense), net
Income before       36,316      29,677      35,866      65,993      76,068
income taxes
Provision for       11,944      10,263      11,262      22,207      23,356
income taxes
Net income          $ 24,372    $ 19,414    $ 24,604    $ 43,786    $ 52,712
Net income per
share:
Basic               $ 0.63      $ 0.51      $ 0.65      $ 1.14      $ 1.39
Diluted             $ 0.62      $ 0.50      $ 0.64      $ 1.12      $ 1.37
Weighted average
shares

outstanding used to
compute net

income per share:
Basic               38,539      38,433      37,978      38,493      37,886
Diluted             39,074      39,050      38,595      39,077      38,612



NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except per share data)
(Unaudited)
STATEMENT OF OPERATIONS DATA:
                 Three Months Ended                   Six Months Ended
                 June30,     March31,   July1,     June30,     July1,
                 2013         2013        2012        2013         2012
GAAP gross       $ 103,430    $ 87,737    $ 94,638    $ 191,167    $ 194,487
profit
Amortization of
intangible       2,254        1,471       1,016       3,725        1,963
assets
Stock-based
compensation     406          189         278         595          548
expense
Impact to cost
of sales from

acquisition      568          —           —           568          —
accounting
adjustments to

inventory
Non-GAAP gross   $ 106,658    $ 89,397    $ 95,932    $ 196,055    $ 196,998
profit
Non-GAAP gross   29.8      %  30.5     %  29.9     %  30.1      %  30.5      %
margin
GAAP research    $ 23,981     $ 15,338    $ 14,757    $ 39,319     $ 28,878
and development
Stock-based
compensation     (1,135)      (672)       (677)       (1,807)      (1,288)
expense
Non-GAAP
research and     $ 22,846     $ 14,666    $ 14,080    $ 37,512     $ 27,590
development
GAAP sales and   $ 40,406     $ 36,389    $ 37,677    $ 76,795     $ 76,647
marketing
Amortization of
intangible       (2,618)      —           —           (2,618)      —
assets
Stock-based
compensation     (1,310)      (1,230)     (1,191)     (2,540)      (2,385)
expense
Non-GAAP sales   $ 36,478     $ 35,159    $ 36,486    $ 71,637     $ 74,262
and marketing
GAAP general and $ 12,319     $ 12,327    $ 11,219    $ 24,646     $ 21,632
administrative
Stock-based
compensation     (1,540)      (1,499)     (1,249)     (3,039)      (2,566)
expense
Acquisition      (214)        (710)       —           (924)        —
related expense
Non-GAAP general
and              $ 10,565     $ 10,118    $ 9,970     $ 20,683     $ 19,066
administrative
GAAP total
operating        $ 81,848     $ 64,072    $ 63,653    $ 145,920    $ 127,308
expenses
Amortization of
intangible       (2,618)      —           —           (2,618)      —
assets
Stock-based
compensation     (3,985)      (3,401)     (3,117)     (7,386)      (6,239)
expense
Restructuring
and other        (1,587)      30          —           (1,557)      —
charges
Acquisition      (214)        (710)       —           (924)        —
related expense
Litigation       (3,555)      (48)        —           (3,603)      (151)
reserves, net
Non-GAAP total
operating        $ 69,889     $ 59,943    $ 60,536    $ 129,832    $ 120,918
expenses



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                  Six Months Ended
                    June30,    March31,   July1,     June30,    July1,
                    2013        2013        2012        2013        2012
GAAP operating      $ 21,582    $ 23,665    $ 30,985    $ 45,247    $ 67,179
income
Amortization of     4,872       1,471       1,016       6,343       1,963
intangible assets
Stock-based
compensation        4,391       3,590       3,395       7,981       6,787
expense
Restructuringand   1,587       (30)        —           1,557       —
other charges
Acquisition related 214         710         —           924         —
expense
Impact to cost of
sales from

acquisition         568         —           —           568         —
accounting
adjustments to

inventory
Litigation          3,555       48          —           3,603       151
reserves, net
Non-GAAP operating  $ 36,769    $ 29,454    $ 35,396    $ 66,223    $ 76,080
income
Non-GAAP operating  10.3     %  10.0     %  11.0     %  10.2     %  11.8     %
margin
GAAP net income     $ 13,985    $ 15,343    $ 21,522    $ 29,328    $ 46,669
Amortization of     4,872       1,471       1,016       6,343       1,963
intangible assets
Stock-based
compensation        4,391       3,590       3,395       7,981       6,787
expense
Restructuringand   1,587       (30)        —           1,557       —
other charges
Acquisition related 214         710         —           924         —
expense
Impact to cost of
sales from

acquisition         568         —           —           568         —
accounting
adjustments to

inventory
Litigation          3,555       48          —           3,603       151
reserves, net
Tax effect          (4,800)     (1,718)     (1,329)     (6,518)     (2,858)
Non-GAAP net income $ 24,372    $ 19,414    $ 24,604    $ 43,786    $ 52,712



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            Six Months Ended
                               June30,  March31,  July1,  June30,  July1,
                               2013      2013       2012     2013      2012
NET INCOME PER DILUTED SHARE:
GAAP net income per diluted    $  0.36   $  0.39    $ 0.56   $  0.75   $ 1.21
share
Amortization of intangible     0.12      0.04       0.03     0.16      0.05
assets
Stock-based compensation       0.11      0.09       0.09     0.20      0.18
expense
Restructuring and other       0.04      0.00       —        0.04      —
charges
Acquisition related expense    0.01      0.02       —        0.02      —
Impact to cost of sales from

acquisition accounting         0.01      —          —        0.01      —
adjustments to

inventory
Litigation reserves, net       0.09      0.00       —        0.09      0.00
Tax effect                     (0.12)    (0.04)     (0.04)   (0.15)    (0.07)
Non-GAAP net income per        $  0.62   $  0.50    $ 0.64   $  1.12   $ 1.37
diluted share



SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands, except per share data, DSO, inventory turns, weeks of channel
inventory and headcount)
(Unaudited)
               Three Months Ended
               June30,    March31,   December31,  September30,  July1,
               2013        2013        2012          2012           2012
Cash, cash
equivalents    $ 288,103   $ 422,412   $  376,877    $  362,420     $ 360,428
and short-term
investments
Cash, cash
equivalents
and short-term
investments    $ 7.37      $ 10.82     $  9.68       $  9.34        $ 9.34

per diluted
share
Accounts
receivable,    $ 288,483   $ 237,896   $  256,014    $  248,862     $ 271,769
net
Days sales
outstanding    73          73          76            72             77
(DSO)
Inventories    $ 185,383   $ 158,555   $  174,903    $  178,916     $ 152,820
Ending
inventory      5.5         5.2         5.0           4.9            5.9
turns
Weeks of
channel
inventory:
U.S. retail    10.4        9.9         8.8           9.8            12.3
channel
U.S.
distribution   9.0         8.9         10.2          8.4            8.6
channel
EMEA
distribution   5.1         4.1         4.4           4.4            4.1
channel
APAC
distribution   7.3         7.2         7.2           4.7            5.7
channel
Deferred       $ 33,717    $ 28,961    $  27,645     $  28,205      $ 25,478
revenue
Headcount      1,095       866         850           854            818
Non-GAAP       39,074      39,050      38,924        38,802         38,595
diluted shares



NET REVENUE BY GEOGRAPHY
         Three Months Ended                                       Six Months Ended
         June30,           March31,          July1,            June30,           July1,
         2013               2013               2012               2013               2012
Americas $ 200,848   56  %  $ 156,676   53  %  $ 163,438   51  %  $ 357,524   55  %  $ 331,793   51  %
EMEA     108,367     30  %  107,125     37  %  117,815     37  %  215,492     33  %  242,896     38  %
APAC     48,504      14  %  29,598      10  %  39,402      12  %  78,102      12  %  71,586      11  %
Total    $ 357,719   100 %  $ 293,399   100 %  $ 320,655   100 %  $ 651,118   100 %  $ 646,275   100 %



NET REVENUE BY SEGMENT
           Three Months Ended                                       Six Months Ended
           June30,           March31,          July1,            June30,           July1,
           2013               2013               2012               2013               2012
Retail     $ 117,395   33  %  $ 126,322   43  %  $ 113,824   36  %  $ 243,717   38  %  $ 242,801   38  %
Commercial 88,446      25  %  70,851      24  %  80,626      25  %  159,297     24  %  155,258     24  %
Service    151,878     42  %  96,226      33  %  126,205     39  %  248,104     38  %  248,216     38  %
Provider
Total      $ 357,719   100 %  $ 293,399   100 %  $ 320,655   100 %  $ 651,118   100 %  $ 646,275   100 %



SOURCE NETGEAR, Inc.

Website: http://www.netgear.com
 
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