Revenue Recognition

12 Months Ended

Dec. 31, 2023

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Note 2. Revenue Recognition

Revenue from contracts with customers is recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

Transaction Price Allocated to the Remaining Performance Obligations

Remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and partially unsatisfied performance obligations consist of contract liabilities, in-transit orders with destination terms, and non-cancellable backlog. Non-cancellable backlog includes goods for which customer purchase orders have been accepted, that are scheduled or in the process of being scheduled for shipment, and that are not yet invoiced.

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that were unsatisfied or partially unsatisfied as of December 31, 2023:

(In thousands)	Less than 1 year		1 to 2 years		Beyond 2 years		Total
Performance obligations	$	58,983	$	2,427	$	2,486	$	63,896

Contract Costs

Costs to fulfill a contract are capitalized when they relate directly to an existing contract or specific anticipated contract, generate or enhance resources that will be used to fulfill performance obligations and are recoverable. These costs include direct cost incurred at inception of a contract which enables the fulfillment of the performance obligation and totaled $6.0 million and $5.3 million as of December 31, 2023 and 2022, respectively. There was no impairment of capitalized contract costs during the years ended December 31, 2023, 2022 and 2021.

Applying the practical expedient, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that otherwise would have been recognized is one year or less. These costs are included in Sales and marketing and General and administrative expenses. If the incremental direct costs of obtaining a contract, which consist of sales commissions, relate to a service recognized over a period longer than one year, costs are deferred and amortized in line with the related services over the period of benefit. Deferred commissions are classified as non-current based on the original amortization period of over one year. As of December 31, 2023 and 2022, deferred commissions were not significant.

Contract Balances

The Company records accounts receivable when it has an unconditional right to consideration. Contract liabilities are recorded when cash payments are received or due in advance of performance, where the Company has unsatisfied performance obligations. Contract liabilities are mainly classified as Deferred revenue on the consolidated balance sheets.

Payment terms vary by customer. The time between invoicing and when payment is due is not significant. For certain products or services and customer types, payment is required before the products or services are delivered to the customer.

The following table reflects the contract balances:

(In thousands)	Balance Sheet Location	December 31, 2023		December 31, 2022
Accounts receivable, net	Accounts receivable, net	$	185,059	$	277,485
Contract liabilities - current	Deferred revenue	$	27,091	$	21,128
Contract liabilities - non-current	Other non-current liabilities	$	4,903	$	3,897

The difference in the balances of the Company’s contract assets and liabilities as of December 31, 2023 and 2022 primarily results from the timing difference between the Company’s performance and the customer’s payment.

During the years ended December 31, 2023, 2022 and 2021, $48.4 million, $38.5 million and $31.9 million, respectively, of revenue were deferred due to unsatisfied performance obligations for service contracts and undelivered product commitments, $41.4 million, $33.1 million and $28.9 million, respectively, of revenue were recognized for the satisfaction of performance obligations, and $21.5 million, $16.9 million and $13.6 million, respectively, of this recognized revenue were included in the contract liability balance at the beginning of the period, respectively.

There were no significant changes in estimates during the periods that would affect the contract balances.

Disaggregation of Revenue

In the following table, net revenue is disaggregated by geographic region and sales channel. The Company conducts business across three geographic regions: Americas; Europe, Middle East, and Africa (“EMEA”); and Asia Pacific (“APAC”). The table also includes reconciliations of the disaggregated revenue by reportable segment. The Company operates and reports in two segments: Connected Home, and NETGEAR for Business (formerly known as Small and Medium Business, or SMB). Sales and usage-based taxes are excluded from net revenue.

	Year Ended December 31,
	2023			2022			2021
(In thousands)	Connected Home	NETGEAR for Business	Total	Connected Home	NETGEAR for Business	Total	Connected Home	NETGEAR for Business	Total
Geographic regions (1):
Americas	$358,304	$146,045	$504,349	$443,612	$173,599	$617,211	$651,936	$134,390	$786,326
EMEA	46,083	102,839	148,922	49,732	129,626	179,358	112,368	117,461	229,829
APAC	42,478	45,091	87,569	65,479	70,424	135,903	89,168	62,750	151,918
Total	$446,865	$293,975	$740,840	$558,823	$373,649	$932,472	$853,472	$314,601	$1,168,073
Sales channels:
Service provider	$98,659	$579	$99,238	$148,331	$4,234	$152,565	$129,052	$2,481	$131,533
Non-service provider	348,206	293,396	641,602	410,492	369,415	779,907	724,420	312,120	1,036,540
Total	$446,865	$293,975	$740,840	$558,823	$373,649	$932,472	$853,472	$314,601	$1,168,073