EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

NETGEAR® REPORTS RECORD SECOND QUARTER 2011 RESULTS

 

   

Second quarter 2011 net revenue of $291.2 million, as compared to $195.9 million in the comparable prior year quarter, 49% year-over-year growth

 
   

Second quarter 2011 non-GAAP net income of $24.7 million, as compared to $13.7 million in the comparable prior year quarter, 80% year-over-year growth

 
   

Second quarter 2011 non-GAAP diluted earnings per share of $0.65, as compared to $0.38 in the comparable prior year quarter, 71% year-over-year growth

 
   

Company expects third quarter 2011 net revenue to be in the range of $290 million to $300 million, with non-GAAP operating margin in the range of 11% to 12%

 

SAN JOSE, California – July 28, 2011 – NETGEAR, Inc. (NASDAQGM: NTGR), a global networking company that delivers innovative products to consumers, businesses and service providers, today reported financial results for the second quarter ended July 3, 2011.

Net revenue for the second quarter ended July 3, 2011 was $291.2 million, as compared to $195.9 million for the second quarter ended June 27, 2010, and as compared to $278.8 million in the first quarter ended April 3, 2011. Net income, computed in accordance with GAAP, for the second quarter of 2011 was $20.6 million, or $0.54 per diluted share. This compared to GAAP net income of $10.5 million, or $0.29 per diluted share, for the second quarter of 2010, and to GAAP net income of $21.2 million, or $0.57 per diluted share, in the first quarter of 2011.

Gross margin on a non-GAAP basis in the second quarter of 2011 was 31.7%, as compared to 36.3% in the year ago comparable quarter, and 32.1% in the first quarter of 2011. Non-GAAP operating margin was 11.9% in the second quarter of 2011, as compared to 13.1% in the second quarter of 2010, and 12.6% in the first quarter of 2011. Non-GAAP net income was $0.65 per diluted share in the second quarter of 2011, as compared to non-GAAP net income of $0.38 per diluted share in the second quarter of 2010, and non-GAAP net income of $0.65 per diluted share in the first quarter of 2011.

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 charges, acquisition related compensation and transitional expenses, 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, “For the second quarter of 2011, we are extremely pleased with our year-over-year growth in all three geographic regions, especially sequential double digit growth in the Americas and APAC. We continue to carry positive momentum out of a very strong first quarter, and our new products continue to exceed our expectations and enable us to gain market share. Q2 2011 also marks another quarter of record revenue. Q2 2011 was powered by triple digit revenue growth from service providers, which accounted for approximately 37% of the Company’s total revenue in the second quarter 2011, as compared to 16% in the prior year quarter and 29% in the first quarter of 2011. This includes revenue from our CNS division, which we acquired from Westell in mid-April 2011. Our service provider revenue in Q2 also benefited from a one-time $10 million order from a major service provider customer.”

“We introduced another 17 new products in Q2 2011 as we continue to build on our new product momentum. Notable new products include the compact WiFi repeater/booster for home use, the stackable 48 port Gigabit Smart Switch with 10Gig uplinks, and the mini travel router for the Asian market.”

 

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Christine Gorjanc, Chief Financial Officer of NETGEAR, said, “We ended the second quarter of 2011 with $277.9 million in cash, cash equivalents and short-term investments, compared to $231.0 million at the end of the second quarter of 2010, and $279.2 million at the end of the first quarter of 2011. Our net inventory ended at $137.8 million, compared to $125.7 million at the end of the second quarter of 2010, and $140.1 million at the end of the first quarter of 2011.”

Net revenue by geography comprises gross revenue less such items as marketing incentives paid to customers, sales returns and price protection. The following table shows net revenue by geography for the periods indicated:

 

     Three months ended  
     July 3, 2011     April 3, 2011     June 27, 2010  

Americas

   $ 149,526         51   $ 131,947         47   $ 103,567         53

Europe, Middle-East and Africa

     110,331         38     122,620         44     67,998         35

Asia Pacific

     31,383         11     24,256         9     24,384         12
   $ 291,240         100   $ 278,823         100   $ 195,949         100

As we previously announced, beginning this quarter, the Company’s business is now managed in three specific business units: retail, commercial, and service provider. Each business unit is managed by a Senior Vice President/General Manager. We believe this new structure enables us to better focus our efforts on our core customer segments and allows us to be more nimble and opportunistic as a company overall. The Company has included financial information specific to these business units in the accompanying tables. Additionally, the Company will provide disclosure of financial information specific to each of these three business units in its quarterly report on Form 10-Q for the quarter ended July 3, 2011.

Looking forward, Mr. Lo added, “We believe the third quarter 2011 will present sequential increase in market demand due to back to school for both our retail and commercial business units. However, we believe our service provider revenue will be down from Q2 which benefited from a one-time $10 million order. In the third quarter of 2011, we intend to roll out 20 new products to continue our momentum in innovation. For the third quarter of 2011, we expect net revenue in the range of approximately $290 million to $300 million, with non-GAAP operating margin to be in the range of 11% to 12%.”

Investor Conference Call / Webcast Details

NETGEAR will review the second quarter 2011 results and discuss management’s expectations for the third quarter of 2011 today, Thursday, July 28, 2011 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 www.netgear.com. A replay of the call will be available 2 hours following the call through midnight EDT (9 p.m. PDT) on Thursday, August 4, 2011 by telephone at (858) 384-5517 and via the web at www.netgear.com. The account number to access the phone replay is 375526.

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 27,000 retail locations around the globe, and through more than 37,000 value-added resellers. The company’s headquarters are in San Jose, Calif., with additional offices in 25 countries. NETGEAR is an ENERGY STAR partner. More information is available at http://www.netgear.com or by calling (408) 907-8000. Connect with NETGEAR at http://twitter.com/NETGEAR and http://www.facebook.com/NETGEAR.

© 2011 NETGEAR, Inc. NETGEAR and the NETGEAR logo are trademarks or registered trademarks of NETGEAR, Inc. 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.

 

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Contact:

Joseph Villalta

The Ruth Group

(646) 536-7003

jvillalta@theruthgroup.com

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 NETGEAR’s expected revenue, earnings, gross and operating margin and operating income on both a GAAP and non-GAAP basis, our ability and intent to launch new product offerings and continue product development efforts, our expectations regarding our new three-business unit structure, current and future demand for the Company’s existing and anticipated new products, and our ability to increase market share for the Company’s products globally. 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 II – Item 1A. Risk Factors,” pages 35 through 51, in the Company’s Quarterly Report on Form 10-Q for the quarter ended April 3, 2011, filed with the Securities and Exchange Commission on May 10, 2011. 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.

 

Page 3


NETGEAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

     July 3,
        2011         
     December 31,
    2010    
 

ASSETS

     

Current assets:

     

Cash and cash equivalents

     $ 129,423           $ 126,173     

Short-term investments

     148,473           144,564     

Accounts receivable, net

     209,960           226,731     

Inventories

     137,789           127,394     

Deferred income taxes

     19,940           19,332     

Prepaid expenses and other current assets

     36,313           23,850     
  

 

 

    

 

 

 

Total current assets

     681,898           668,044     

Property and equipment, net

     16,636           17,503     

Intangibles, net

     23,196           6,241     

Goodwill

     85,944           74,198     

Other non-current assets

     13,095           14,335     
  

 

 

    

 

 

 

Total assets

     $ 820,769           $ 780,321     
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Accounts payable

     $ 72,376           $ 89,155     

Accrued employee compensation

     19,676           24,130     

Other accrued liabilities

     102,293           110,413     

Deferred revenue

     22,843           27,538     

Income taxes payable

     -           3,487     
  

 

 

    

 

 

 

Total current liabilities

     217,188           254,723     

Non-current income taxes payable

     20,760           19,719     

Other non-current liabilities

     5,195           5,443     
  

 

 

    

 

 

 

Total liabilities

     243,143           279,885     

Stockholders’ equity:

     

Common stock

     37           36     

Additional paid-in capital

     352,628           316,108     

Cumulative other comprehensive income

     63           281     

Retained earnings

     224,898           184,011     
  

 

 

    

 

 

 

Total stockholders’ equity

     577,626           500,436     
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

     $     820,769           $     780,321     
  

 

 

    

 

 

 

 

Page 4


NETGEAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

     Three months ended      Six months ended  
         July 3,    
2011
         April 3,    
2011
         June 27,    
2010
         July 3,    
2011
         June 27,    
2010
 

Net revenue

     $     291,240           $     278,823           $     195,949           $     570,063           $     407,504     

Cost of revenue

     200,863           191,037           126,387           391,900           265,118     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross profit

     90,377           87,786           69,562           178,163           142,386     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating expenses:

              

Research and development

     11,350           11,014           9,945           22,364           19,250     

Sales and marketing

     39,036           36,648           30,358           75,684           61,147     

General and administrative

     10,548           9,645           8,397           20,193           17,339     

Restructuring

     2,094           -           (81)          2,094           (68)    

Litigation reserves, net

     (225)          (53)          143           (278)          211     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     62,803           57,254           48,762           120,057           97,879     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations

     27,574           30,532           20,800           58,106           44,507     

Interest income

     106           129           100           235           170     

Other income (expense), net

     (341)          (330)          132           (671)          (62)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     27,339           30,331           21,032           57,670           44,615     

Provision for income taxes

     6,742           9,142           10,567           15,884           20,423     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income

     $ 20,597           $ 21,189           $ 10,465           $ 41,786           $ 24,192     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income per share:

              

Basic

     $ 0.56           $ 0.58           $ 0.30           $ 1.14           $ 0.69     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

     $ 0.54           $ 0.57           $ 0.29           $ 1.11           $ 0.67     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding used to compute net income per share:

              

Basic

     37,017           36,414           35,237           36,712           35,095     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

     37,968           37,340           35,943           37,680           35,843     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Stock-based compensation expense was allocated as follows:

              

Cost of revenue

     $ 243           $ 235           $ 227           $ 478           $ 506     

Research and development

     606           661           572           $ 1,267           1,153     

Sales and marketing

     1,384           1,301           1,193           $ 2,685           2,405     

General and administrative

     1,275           1,175           1,131           $ 2,450           2,200     

 

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NETGEAR, INC.

NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Excluding amortization of purchased intangibles, stock-based compensation, restructuring, acquisition related compensation, 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  
     July 3,
2011
     April 3,
2011
     June 27,
2010
     July 3,
2011
     June 27,
2010
 

Net revenue

     $     291,240            $     278,823            $     195,949            $     570,063            $     407,504      

Cost of revenue

     198,822            189,445            124,835            388,267            261,986      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross profit

     92,418            89,378            71,114            181,796            145,518      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating expenses:

              

Research and development

     10,724            10,333            9,066            21,057            17,451      

Sales and marketing

     37,652            35,347            29,165            72,999            58,742      

General and administrative

     9,273            8,470            7,266            17,743            15,139      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     57,649            54,150            45,497            111,799            91,332      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations

     34,769            35,228            25,617            69,997            54,186      

Interest income

     106            129            100            235            170      

Other income (expense), net

     (341)           (330)           132            (671)           (62)     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     34,534            35,027            25,849            69,561            54,294      

Provision for income taxes

     9,873            10,866            12,121            20,739            23,507      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income

     $ 24,661            $ 24,161            $ 13,728            $ 48,822            $ 30,787      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income per share:

              

Basic

     $ 0.67            $ 0.66            $ 0.39            $ 1.33            $ 0.88      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

     $ 0.65            $ 0.65            $ 0.38            $ 1.30            $ 0.86      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding used to compute net income per share:

              

Basic

     37,017            36,414            35,237            36,712            35,095      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

     37,968            37,340            35,943            37,680            35,843      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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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  
     July 3,
2011
     April 3,
2011
     June 27,
2010
     July 3,
2011
     June 27,
    2010    
 

GAAP gross profit

     $ 90,377           $ 87,786           $ 69,562           $ 178,163           $ 142,386     

Amortization of intangible assets

     1,189           1,357           1,325           2,546           2,626     

Stock-based compensation expense

     243           235           227           478           506     

Impact to cost of sales from acquisition accounting adjustments to inventory

     609           -           -           609           -     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP gross profit

     $ 92,418           $ 89,378           $ 71,114           $ 181,796           $ 145,518     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP gross margin

     31.7%          32.1%          36.3%          31.9%          35.7%    

GAAP research and development

     $ 11,350           $ 11,014           $ 9,945           $ 22,364           $ 19,250     

Stock-based compensation expense

     (606)          (661)          (572)          (1,267)          (1,153)    

Acquisition related compensation

     (20)          (20)          (307)          (40)          (646)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP research and development

     $ 10,724           $ 10,333           $ 9,066           $ 21,057           $ 17,451     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

GAAP sales and marketing

     $ 39,036           $ 36,648           $ 30,358           $ 75,684           $ 61,147     

Stock-based compensation expense

     (1,384)          (1,301)          (1,193)          (2,685)          (2,405)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP sales and marketing

     $ 37,652           $ 35,347           $ 29,165           $ 72,999           $ 58,742     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

GAAP general and administrative

     $ 10,548           $ 9,645           $ 8,397           $ 20,193           $ 17,339     

Stock-based compensation expense

     (1,275)          (1,175)          (1,131)          (2,450)          (2,200)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP general and administrative

     $ 9,273           $ 8,470           $ 7,266           $ 17,743           $ 15,139     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

GAAP total operating expenses

     $ 62,803           $ 57,254           $ 48,762           $ 120,057           $ 97,879     

Stock-based compensation expense

     (3,265)          (3,137)          (2,896)          (6,402)          (5,758)    

Restructuring

     (2,094)          -           81           (2,094)          68     

Acquisition related compensation

     (20)          (20)          (307)          (40)          (646)    

Litigation reserves, net

     225           53           (143)          278           (211)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP total operating expenses

     $ 57,649           $ 54,150           $ 45,497           $ 111,799           $ 91,332     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Page 7


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  
     July 3,
    2011    
     April 3,
    2011    
     June 27,
    2010    
         July 3,
    2011    
     June 27,
    2010    
 

GAAP operating income

     $     27,574           $     30,532           $     20,800             $     58,106           $     44,507     

Amortization of intangible assets

     1,189           1,357           1,325             2,546           2,626     

Stock-based compensation expense

     3,508           3,372           3,123             6,880           6,264     

Restructuring

     2,094           -             (81)            2,094           (68)    

Acquisition related compensation

     20           20           307             40           646     

Impact to cost of sales from acquisition accounting adjustments to inventory

     609           -             -               609           -       

Litigation reserves, net

     (225)          (53)          143             (278)          211     
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

 

Non-GAAP operating income

     $ 34,769           $ 35,228           $ 25,617             $ 69,997           $ 54,186     
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

 

Non-GAAP operating margin

     11.9%          12.6%          13.1%            12.3%          13.3%    

GAAP net income

     $ 20,597           $ 21,189           $ 10,465             $ 41,786           $ 24,192     

Amortization of intangible assets

     1,189           1,357           1,325             2,546           2,626     

Stock-based compensation expense

     3,508           3,372           3,123             6,880           6,264     

Restructuring

     2,094           -             (81)            2,094           (68)    

Acquisition related compensation

     20           20           307             40           646     

Impact to cost of sales from acquisition accounting adjustments to inventory

     609           -             -               609           -       

Litigation reserves, net

     (225)          (53)          143             (278)          211     

Tax effect

     (3,131)          (1,724)          (1,554)            (4,855)          (3,084)    
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

 

Non-GAAP net income

     $ 24,661             $ 24,161           $ 13,728             $ 48,822           $ 30,787     
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

 

NET INCOME PER DILUTED SHARE:

                
     Three months ended          Six months ended  
     July 3,
    2011    
     April 3,
    2011    
     June 27,
    2010    
         July 3,
    2011    
     June 27,
    2010    
 

GAAP net income per diluted share

     $ 0.54           $ 0.57           $ 0.29             $ 1.11           $ 0.67     

Amortization of intangible assets

     0.03           0.04           0.04             0.07           0.07     

Stock-based compensation expense

     0.09           0.09           0.09             0.18           0.17     

Restructuring

     0.06           -             (0.00)            0.06           (0.00)    

Acquisition related compensation

     0.00           0.00           0.01             0.00           0.02     

Impact to cost of sales from acquisition accounting adjustments to inventory

     0.02           -             -               0.02           -       

Litigation reserves, net

     (0.01)          (0.00)          0.00             (0.01)          0.01     

Tax effect

     (0.08)          (0.05)          (0.05)            (0.13)          (0.08)    
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

 

Non-GAAP net income per diluted share

     $ 0.65           $ 0.65           $ 0.38             $ 1.30           $ 0.86     
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

 

 

Page 8


NETGEAR, INC.

SUPPLEMENTAL FINANCIAL INFORMATION

(In thousands, except per share data)

(Unaudited)

 

     Three months ended  
     July 3,
    2011    
     April 3,
    2011    
     December 31,
    2010    
     October 3,
    2010    
     June 27,
    2010    
 

Cash, cash equivalents and short-term investments

     $     277,896           $     279,173           $     270,737           $     243,509           $     231,030     

Cash, cash equivalents and short-term investments per diluted share

     $ 7.32           $ 7.48           $ 7.35           $ 6.76           $ 6.43     

Accounts receivable, net

     $ 209,960           $ 197,622           $ 226,731           $ 175,599           $ 138,730     

Days sales outstanding (DSO)

     66           66           78           73           64     

Inventories

     $ 137,789           $ 140,113           $ 127,394           $ 110,394           $ 125,687     

Ending inventory turns

     5.8           5.5           5.6           5.8           4.0     

Weeks of channel inventory:

              

U.S. retail channel

     10.6           9.3           9.0           10.0           9.9     

U.S. distribution channel

     6.6           5.4           4.7           6.7           6.1     

EMEA distribution channel

     5.5           4.2           3.6           4.5           6.0     

APAC distribution channel

     5.1           4.0           5.5           5.9           4.9     

Deferred revenue

     $ 22,843           $ 18,381           $ 27,538           $ 20,957           $ 17,405     

Headcount

     731           686           654           646           625     

Non-GAAP Diluted shares

     37,968           37,340           36,843           36,009           35,943     

 

Page 9


NETGEAR, INC.

QUARTERLY SEGMENT FINANCIAL INFORMATION

(In thousands, except percentage data)

(Unaudited)

 

     Three months ended  
     July 3,
2011
     April 3,
2011
     December 31,
2010
     October 3,
2010
     June 27,
2010
 

Retail

              

Net revenue

   $ 107,869         $ 117,125         $ 118,665         $ 115,165         $ 94,022     

Contribution income

     21,007           19,878           20,673           18,346           15,154     

Contribution margin

     19.5%          17.0%          17.4%          15.9%          16.1%    

Commercial

              

Net revenue

   $ 77,112         $ 79,622         $ 72,773         $ 75,532         $ 70,913     

Contribution income

     16,122           17,581           14,588           16,910           17,177     

Contribution margin

     20.9%          22.1%          20.0%          22.4%          24.2%    

Service Provider

              

Net revenue

   $ 106,259         $ 82,076         $ 67,093         $ 45,320         $ 31,014     

Contribution income

     9,020           8,381           4,827           997           2,423     

Contribution margin

     8.5%          10.2%          7.2%          2.2%          7.8%    

Total

              

Net revenue

   $ 291,240         $ 278,823         $ 258,531         $ 236,017         $ 195,949     

Contribution income

     46,149           45,840           40,088           36,253           34,754     

Contribution margin

     15.8%          16.4%          15.5%          15.4%          17.7%    
     Three months ended  
     July 3,
2011
     April 3,
2011
     December 31,
2010
     October 3,
2010
     June 27,
2010
 

Segment contribution income

     $ 46,149           $ 45,840           $ 40,088           $ 36,253           $ 34,754     

Corporate and unallocated costs

     (11,380)          (10,612)          (10,636)          (10,226)          (9,137)    

Amortization of intangible assets

     (1,189)          (1,357)          (1,323)          (1,344)          (1,325)    

Stock-based compensation expense

     (3,508)          (3,372)          (2,990)          (2,947)          (3,123)    

Restructuring

     (2,094)          -             12           8           81     

Acquisition related compensation

     (20)          (20)          (20)          (20)          (307)    

Impact to cost of sales from acquisition accounting adjustments to inventory

     (609)          -             -             -             -       

Litigation reserves, net

     225           53           -             -             (143)    

Interest income

     106           129           124           132           100     

Other income (expense), net

     (341)          (330)          (176)          (326)          132     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     $ 27,339           $ 30,331           $ 25,079           $ 21,530           $ 21,032     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Page 10


NETGEAR, INC.

ANNUAL SEGMENT FINANCIAL INFORMATION

(In thousands, except percentage data)

(Unaudited)

 

     Year ended  
     December 31,
2010
     December 31,
2009
 

Retail

     

Net revenue

     $     435,484           $     288,728     

Contribution income

     71,862           24,901     

Contribution margin

     16.5%          8.6%    

Commercial

     

Net revenue

     $ 284,539           $ 209,953     

Contribution income

     63,021           43,255     

Contribution margin

     22.1%          20.6%    

Service Provider

     

Net revenue

     $ 182,029           $ 187,914     

Contribution income

     14,026           19,697     

Contribution margin

     7.7%          10.5%    

Total

     

Net revenue

     $ 902,052           $ 686,595     

Contribution income

     148,909           87,853     

Contribution margin

     16.5%          12.8%    
     
     
     Year ended  
     December 31,      December 31,  
     2010      2009  

Segment contribution income

     $     148,909           $ 87,853     

Corporate and unallocated costs

     (39,244)          (34,248)    

Amortization of intangible assets

     (5,293)          (5,013)    

Stock-based compensation expense

     (12,201)          (11,024)    

Restructuring

     88           (809)    

Technology license arrangements

     -             (2,500)    

Acquisition related compensation

     (686)          (113)    

Litigation reserves, net

     (211)          (2,080)    

Interest income

     426           629     

Other income (expense), net

     (564)          (128)    
  

 

 

    

 

 

 

Income before income taxes

     $ 91,224           $ 32,567     
  

 

 

    

 

 

 

 

Page 11