Segment Information

12 Months Ended

Dec. 31, 2023

Segment Reporting [Abstract]

Segment Information

Note 11. Segment Information

Operating segments are components of an enterprise about which separate financial information is available and is evaluated quarterly by management, namely the Chief Operating Decision Maker (“CODM”) of an organization, in order to determine operating and resource allocation decisions. By this definition, the Company has identified its CEO as the CODM. The Company operates and reports in two segments: Connected Home and NETGEAR for Business:

•Connected Home: Focuses on consumers and provides high-performance, dependable and easy-to-use premium WiFi networking solutions such as WiFi 6, WiFi 6E and WiFi 7 Tri-band and Quad-band mesh systems, 4G/5G mobile products, smart devices such as Meural digital displays, and subscription services that provide consumers a range of value-added services focused on performance, security, privacy and premium support; and

•NETGEAR for Business: Focuses on businesses and provides solutions for business networking, wireless local area network (“LAN”), audio and video over Ethernet for Pro AV applications, security and remote management providing enterprise-class functionality at an affordable price.

The Company believes that this structure reflects its current operational and financial management, and that it provides the best structure for the Company to focus on growth opportunities while maintaining financial discipline. The leadership team of each segment is focused on product and service development efforts, both from a product marketing and engineering standpoint, to service the unique needs of their customers.

The results of the reportable segments are derived directly from the Company’s management reporting system. The results are based on the Company’s method of internal reporting and are not necessarily in conformity with accounting principles generally accepted in the United States. Management measures the performance of each segment based on several metrics, including contribution income. Segment contribution income includes all product line

segment revenues less the related cost of sales, research and development and sales and marketing costs. Contribution income (loss) is used, in part, to evaluate the performance of, and allocate resources to, each of the segments. Certain operating expenses are not allocated to segments because they are separately managed at the corporate level. These unallocated indirect costs include corporate costs, such as corporate research and development, corporate marketing expense and general and administrative costs, amortization of intangibles, stock-based compensation expense, change in fair value of contingent consideration, goodwill impairment, intangibles impairment, restructuring and other charges, litigation reserves, net, and other income (expenses), net.

Financial information for each reportable segment and a reconciliation of segment contribution income to income (loss) before income taxes is as follows:

	Year ended December 31,
(In thousands)	2023			2022			2021
Net Revenue:
Connected Home	$	446,865		$	558,823		$	853,472
NETGEAR for Business		293,975			373,649			314,601
Total net revenue	$	740,840		$	932,472		$	1,168,073
Contribution Income (loss):
Connected Home	$	19,052		$	(8,539	)	$	116,889
Contribution margin		4.3	%		(1.5	)%		13.7	%
NETGEAR for Business	$	58,532		$	75,790		$	62,136
Contribution margin		19.9	%		20.3	%		19.8	%
Total segment contribution income	$	77,584		$	67,251		$	179,025
Corporate and unallocated costs		(87,453	)		(82,888	)		(83,883	)
Amortization of intangibles (1)		(257	)		(514	)		(1,897	)
Stock-based compensation expense		(17,938	)		(17,734	)		(25,995	)
Change in fair value of contingent consideration		—			—			3,003
Goodwill impairment		—			(44,442	)		—
Intangibles impairment		(1,071	)		—			—
Restructuring and other charges		(3,962	)		(4,577	)		(3,341	)
Litigation reserves, net		(178	)		(20	)		(315	)
Other income (expenses), net (2)		14,139			902			(1,093	)
Income (loss) before income taxes	$	(19,136	)	$	(82,022	)	$	65,504

(1)Amounts excluded amortization expense related to patents within purchased intangibles in cost of revenue.

(2)Amounts included gain/(loss), net from litigation settlement of $6.0 million for the year ended December 31, 2023, and gain/(loss), net from derivatives not designated as hedging instruments of $0.3 million, $2.7 million and $4.2 million, for the years ended December 31, 2023, 2022 and 2021, respectively.

The CODM does not evaluate operating segments using discrete asset information.

Operations by Geographic Region

For reporting purposes, revenue is generally attributed to each geographic region based on the location of the customer. The following table shows net revenue by geography:

	Year Ended December 31,
(In thousands)	2023		2022		2021
United States (U.S.)	$	489,968	$	598,649	$	759,865
Americas (excluding U.S.)		14,381		18,562		26,461
EMEA (1)		148,922		179,358		229,829
APAC (1)		87,569		135,903		151,918
Total net revenue	$	740,840	$	932,472	$	1,168,073

_______________________

(1)No individual country, other than disclosed above, represented more than 10% of the Company’s total net revenue in the periods presented.

Long-lived assets by Geographic Region

The following table represents the Company’s long-lived assets located in geographic areas, which consist of property and equipment, net and operating lease right-of-use assets:

(In thousands)	December 31, 2023		December 31, 2022
United States (U.S.)	$	25,051	$	32,142
Americas (excluding U.S.)		4,782		2,367
EMEA		3,739		3,564
Singapore		6,218		4,032
APAC (excluding Singapore) (1)		5,768		7,988
Total	$	45,558	$	50,093

_______________________

(1)No individual country, other than disclosed above, represented more than 10% of the Company’s total long-lived assets in the periods presented.

Significant Customers

For the year ended December 31, 2023, the Company had two customers, that each individually accounted for 17% and 12% of net revenue. For the year ended December 31, 2022, the Company had two customers, that each individually accounted for 15% and 11% of net revenue. For the year ended December 31, 2021, the Company had two customers, that each individually accounted for 15% and 13% of net revenue. All of the customers were primarily within the Connected Home segment.