Segment Information

3 Months Ended

Mar. 31, 2024

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 internet networking solutions such as WiFi 6, WiFi 6E and WiFi 7 Tri-band and Quad-band mesh systems, and routers, 4G/5G mobile products, 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 small and medium sized 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 (loss). Segment contribution income (loss) 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, restructuring and other charges, litigation reserves, net, and other income (expenses), net.

Effective on January 1, 2024, resulting from certain segment structure changes, the Company revised its allocation method by allocating certain historically unallocated operating expenses to its individual operating segments. The prior-year segment financial information has been recast to conform to the current-year presentation. Financial information for each reportable segment and a reconciliation of segment contribution income (loss) to loss before income taxes is as follows:

	Three Months Ended
(In thousands)	March 31, 2024			April 2, 2023*
Net Revenue:
Connected Home	$	95,963		$	102,746
NETGEAR for Business		68,623			78,162
Total net revenue	$	164,586		$	180,908
Contribution Income (loss):
Connected Home	$	(6,140	)	$	(1,756	)
Contribution margin		(6.4	)%		(1.7	)%
NETGEAR for Business	$	9,904		$	14,057
Contribution margin		14.4	%		18.0	%
Total segment contribution income	$	3,764		$	12,301
Corporate and unallocated costs		(19,806	)		(19,374	)
Amortization of intangibles		—			(129	)
Stock-based compensation expense		(4,544	)		(4,665	)
Restructuring and other charges		(1,032	)		(108	)
Litigation reserves, net		(30	)		—
Other income, net (1)		2,850			1,406
Loss before income taxes	$	(18,798	)	$	(10,569	)

(1)Amounts included gain/(loss), net from derivatives not designated as hedging instruments of $1.5 million and $(0.2) million, for the three months ended March 31, 2024 and April 2, 2023, respectively.

* Financial information for each reportable segment were recast to conform to the current reportable segment structure.

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:

	Three Months Ended
(In thousands)	March 31, 2024		April 2, 2023
United States (U.S.)	$	107,289	$	117,798
Americas (excluding U.S.)		2,639		4,124
EMEA (1)		31,187		39,178
APAC (1)		23,471		19,808
Total net revenue	$	164,586	$	180,908

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

Long-lived assets by Geographic Region

The following table presents 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)	March 31, 2024		December 31, 2023
United States (U.S.)	$	23,757	$	25,051
Canada		4,712		4,714
Americas (excluding U.S. and Canada)		64		68
EMEA		3,582		3,739
Singapore		5,995		6,218
APAC (excluding Singapore) (1)		5,956		5,768
Total	$	44,066	$	45,558

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