Highlights:
- Net revenue of $152.0 million, compared to $198.2 million in the comparable prior year quarter
- Non-GAAP net income of $1.8 million, compared to net income of $14.1 million in the comparable prior year quarter
- Non-GAAP diluted earnings per share of $0.05, compared to diluted earnings per share of $0.39 in the comparable prior year quarter
- Second quarter 2009 net revenue guidance in the range of $135 million to $145 million, with non-GAAP operating margin guidance in the range of 3% to 5%
NETGEAR, Inc. (NASDAQGM: NTGR), a worldwide provider of technologically innovative, branded networking products, today reported financial results for the first quarter ended March 29, 2009.
Net revenue for the first quarter ended March 29, 2009 was $152.0 million, compared to $198.2 million for the first quarter ended March 30, 2008, and $161.4 million in the fourth quarter ended December 31, 2008. Net income, computed in accordance with GAAP, for the first quarter of 2009 was $42,000, or $0.00 per diluted share. This compared to net income of $11.2 million for the first quarter of 2008 and to a net loss of $7.3 million in the fourth quarter of 2008. Diluted earnings per share, computed in accordance with GAAP, was $0.31 for the first quarter of 2008 and a loss of $0.21 for the fourth quarter of 2008.
Gross margin on a non-GAAP basis in the first quarter of 2009 was 29.2%, compared to 32.9% in the year ago quarter, and 31.2% in the fourth quarter of 2008. The gross margin decline in the first quarter of 2009 was primarily attributed to the continued impact of the strengthening U.S. dollar. Non-GAAP operating margin was 3.7% in the first quarter of 2009, compared to 9.5% in the first quarter of 2008, and 5.6% in the fourth quarter of 2008. Non-GAAP net income was $0.05 per diluted share in the first quarter of 2009, compared to non-GAAP net income of $0.39 per diluted share in the first quarter of 2008, and $0.07 net loss per diluted share in the fourth quarter of 2008.
The differences between GAAP and non-GAAP financial measures include adjustments, net of any tax effect, for amortization of purchased intangibles, stock-based compensation, impairment of certain long-lived assets, restructuring, in-process research and development, acquisition related compensation and litigation reserves.
Specifically excluded from non-GAAP income from operations in the first quarter of 2009 is $2.5 million in charges relating to three patent litigation settlements recently entered into by the Company. 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, "In the first quarter of 2009, as expected, we experienced continued weakening in the macroeconomic environment and end market demand. In light of this economic slowdown, we achieved net revenue of $152.0 million, a slight decline from the fourth quarter of 2008, but above our initial guidance of $135 million to $145 million. During the quarter, we experienced stabilization in consumer retail sales and an incremental decline in SMB sales. Product wise, we continued to see a strong market shift to 11n Wifi products. Our net revenue from service providers was approximately 27% of total net revenue, as compared to 18% in the fourth quarter of 2008, and 28% in the first quarter of 2008. We were pleased to add Telkom South Africa to our service provider customer list in the first quarter.
On the innovation front, we enjoyed significant success in the first quarter introducing 14 new products to the marketplace. Among the notable launches, we introduced ProSecure Web/Email Security Appliance STM150, High Performance 4 Bay Desktop Network Attached Storage ReadyNAS Xtra, High Power Hot Spot Access Points for service providers and 50 port Layer 3 10/100 stackable switch. Well received in the current market, we believe that the sales volume of these new products will ramp quickly in the coming quarters. In spite of the present economic environment, we are confident that with our winning combination of consistent innovation, variety in product offerings and focused channel programs, we will continue to gain on our competitors and further our market share."
Christine Gorjanc, Chief Financial Officer of NETGEAR, said, "We ended the first quarter of 2009 with $200.3 million in cash, cash equivalents and short-term investments, compared to $203.0 million at the end of the fourth quarter of 2008, and $200.8 million at the end of the first quarter of 2008. Our net inventory ended at $92.0 million, compared to $112.2 million at the end of the fourth quarter of 2008, and $97.6 million at the end of the first quarter of 2008. We expect our US and European distributors to continue to reduce their inventory in the second quarter. However, we anticipate that US retailers will increase their stock levels towards the end of the second quarter, in preparation for the back to school season beginning in mid-July."
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:Net revenue by geography.
Looking ahead, Mr. Lo commented, "We expect end market demand will continue to be constrained in the second quarter, especially with the typical seasonal weakness. We anticipate that the reduction in distributors' channel inventory will continue. However, we foresee improvement of our gross margin in the second quarter 2009 due to our consistent efforts in product cost reduction and slight improvement in foreign currency pricing. For the second quarter 2009, we expect revenue in the range of approximately $135 million to $145 million and non-GAAP operating margin to be in the range of 3% to 5%."
Investor Conference Call / Webcast Details
NETGEAR will review the first quarter 2009 results and discuss management's expectations for the second quarter of 2009 today, Wednesday, April 22, 2009 at 5 p.m. EDT (2 p.m. PDT). The dial-in number for the live audio call is(201) 689-8560. 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 Wednesday, April 29, 2009 by telephone at (201) 612-7415 and via the web at www.netgear.com. The account number to access the phone replay is 3055 and the conference ID number is 319005.
- Net revenue of $152.0 million, compared to $198.2 million in the comparable prior year quarter
- Non-GAAP net income of $1.8 million, compared to net income of $14.1 million in the comparable prior year quarter
- Non-GAAP diluted earnings per share of $0.05, compared to diluted earnings per share of $0.39 in the comparable prior year quarter
- Second quarter 2009 net revenue guidance in the range of $135 million to $145 million, with non-GAAP operating margin guidance in the range of 3% to 5%
NETGEAR, Inc. (NASDAQGM: NTGR), a worldwide provider of technologically innovative, branded networking products, today reported financial results for the first quarter ended March 29, 2009.
Net revenue for the first quarter ended March 29, 2009 was $152.0 million, compared to $198.2 million for the first quarter ended March 30, 2008, and $161.4 million in the fourth quarter ended December 31, 2008. Net income, computed in accordance with GAAP, for the first quarter of 2009 was $42,000, or $0.00 per diluted share. This compared to net income of $11.2 million for the first quarter of 2008 and to a net loss of $7.3 million in the fourth quarter of 2008. Diluted earnings per share, computed in accordance with GAAP, was $0.31 for the first quarter of 2008 and a loss of $0.21 for the fourth quarter of 2008.
Gross margin on a non-GAAP basis in the first quarter of 2009 was 29.2%, compared to 32.9% in the year ago quarter, and 31.2% in the fourth quarter of 2008. The gross margin decline in the first quarter of 2009 was primarily attributed to the continued impact of the strengthening U.S. dollar. Non-GAAP operating margin was 3.7% in the first quarter of 2009, compared to 9.5% in the first quarter of 2008, and 5.6% in the fourth quarter of 2008. Non-GAAP net income was $0.05 per diluted share in the first quarter of 2009, compared to non-GAAP net income of $0.39 per diluted share in the first quarter of 2008, and $0.07 net loss per diluted share in the fourth quarter of 2008.
The differences between GAAP and non-GAAP financial measures include adjustments, net of any tax effect, for amortization of purchased intangibles, stock-based compensation, impairment of certain long-lived assets, restructuring, in-process research and development, acquisition related compensation and litigation reserves.
Specifically excluded from non-GAAP income from operations in the first quarter of 2009 is $2.5 million in charges relating to three patent litigation settlements recently entered into by the Company. 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, "In the first quarter of 2009, as expected, we experienced continued weakening in the macroeconomic environment and end market demand. In light of this economic slowdown, we achieved net revenue of $152.0 million, a slight decline from the fourth quarter of 2008, but above our initial guidance of $135 million to $145 million. During the quarter, we experienced stabilization in consumer retail sales and an incremental decline in SMB sales. Product wise, we continued to see a strong market shift to 11n Wifi products. Our net revenue from service providers was approximately 27% of total net revenue, as compared to 18% in the fourth quarter of 2008, and 28% in the first quarter of 2008. We were pleased to add Telkom South Africa to our service provider customer list in the first quarter.
On the innovation front, we enjoyed significant success in the first quarter introducing 14 new products to the marketplace. Among the notable launches, we introduced ProSecure Web/Email Security Appliance STM150, High Performance 4 Bay Desktop Network Attached Storage ReadyNAS Xtra, High Power Hot Spot Access Points for service providers and 50 port Layer 3 10/100 stackable switch. Well received in the current market, we believe that the sales volume of these new products will ramp quickly in the coming quarters. In spite of the present economic environment, we are confident that with our winning combination of consistent innovation, variety in product offerings and focused channel programs, we will continue to gain on our competitors and further our market share."
Christine Gorjanc, Chief Financial Officer of NETGEAR, said, "We ended the first quarter of 2009 with $200.3 million in cash, cash equivalents and short-term investments, compared to $203.0 million at the end of the fourth quarter of 2008, and $200.8 million at the end of the first quarter of 2008. Our net inventory ended at $92.0 million, compared to $112.2 million at the end of the fourth quarter of 2008, and $97.6 million at the end of the first quarter of 2008. We expect our US and European distributors to continue to reduce their inventory in the second quarter. However, we anticipate that US retailers will increase their stock levels towards the end of the second quarter, in preparation for the back to school season beginning in mid-July."
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:Net revenue by geography.
Looking ahead, Mr. Lo commented, "We expect end market demand will continue to be constrained in the second quarter, especially with the typical seasonal weakness. We anticipate that the reduction in distributors' channel inventory will continue. However, we foresee improvement of our gross margin in the second quarter 2009 due to our consistent efforts in product cost reduction and slight improvement in foreign currency pricing. For the second quarter 2009, we expect revenue in the range of approximately $135 million to $145 million and non-GAAP operating margin to be in the range of 3% to 5%."
Investor Conference Call / Webcast Details
NETGEAR will review the first quarter 2009 results and discuss management's expectations for the second quarter of 2009 today, Wednesday, April 22, 2009 at 5 p.m. EDT (2 p.m. PDT). The dial-in number for the live audio call is(201) 689-8560. 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 Wednesday, April 29, 2009 by telephone at (201) 612-7415 and via the web at www.netgear.com. The account number to access the phone replay is 3055 and the conference ID number is 319005.
