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NETGEAR® reports third quarter 2012 results
- Third quarter 2012 net revenue of $315.2 million, as compared to $301.8 million in the comparable prior year quarter, 4.4% year-over-year growth
- Third quarter 2012 non-GAAP net income of $25.3 million, as compared to $29.9 million in the comparable prior year quarter, decrease of 15.4% year-over-year
- Third quarter 2012 non-GAAP diluted earnings per share of $0.65, as compared to $0.79 in the comparable prior year quarter, decrease of 17.7% year-over-year
- Company expects fourth quarter 2012 net revenue to be in the range of $300 million to $315 million, with non-GAAP operating margin in the range of 11% to 12%
NETGEAR, Inc. (NASDAQGM: NTGR), a global networking company that delivers innovative products to consumers, businesses and service providers, today reported financial results for the third quarter ended September 30, 2012.
Net revenue for the third quarter ended September 30, 2012 was $315.2 million, as compared to $301.8 million for the third quarter ended October 2, 2011, and $320.7 million in the second quarter ended July 1, 2012. Net income, computed in accordance with GAAP, for the third quarter of 2012 was $23.8 million, or $0.61 per diluted share. This compared to GAAP net income of $26.7 million, or $0.70 per diluted share, for the third quarter of 2011, and GAAP net income of $21.5 million, or $0.56 per diluted share, in the second quarter of 2012.
Gross margin on a non-GAAP basis in the third quarter of 2012 was 31.6%, as compared to 32.4% in the year ago comparable quarter, and 29.9% in the second quarter of 2012. Non-GAAP operating margin was 11.5% in the third quarter of 2012, as compared to 12.5% in the third quarter of 2011, and 11.0% in the second quarter of 2012. Non- GAAP net income was $0.65 per diluted share in the third quarter of 2012, as compared to non-GAAP net income of $0.79 per diluted share in the third quarter of 2011, and non-GAAP net income of $0.64 per diluted share in the second quarter of 2012. Our tax rate in the third quarter 2012 reflects a one-time benefit which accounts for an incremental $0.05 per diluted share of earnings. This compares to a one-time tax rate benefit in the third quarter 2011, which accounted for an incremental $0.09 per diluted share of earnings.
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 and other charges, acquisition related compensation, impact to cost of sales from acquisition accounting adjustments to inventory, litigation reserves, and gain on sale of cost method investment. 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, "NETGEAR's financial results for the third quarter of 2012 are a reflection of the current difficult economic climate. The uncertainty in the European and Australian markets has affected consumer, small business, and service provider sales for the quarter."
"Our Retail Business Unit revenue for the quarter ended September 30, 2012 was up 9% quarter-on-quarter, driven by back-to-school seasonal demand and market share gains in North America. On a year-over-year basis, Retail was down 3% as a result of the challenging European market. Commercial was down 2% on a sequential basis and down 13% year-over-year. This reflects the tightened spending of European and Australian businesses facing widespread 11% quarter-over-quarter as service providers reduced their purchases in Q3."
Christine Gorjanc, Chief Financial Officer of NETGEAR, said, "Despite the current challenges we are facing in Europe and Australia, we are continuing our increased investment in research and development. This increased investment positions us for the long term success we believe we can achieve in all geographies, especially when the economic environment improves. We expect that the continuous flow of innovative new products from our R&D team will enable us to gain market share worldwide now and in the future. However, facing the current weakened market demand in Europe, we are shifting our sales and marketing resources to the emerging markets where we believe there is growth to achieve and market share to be gained. We will continue to spend wisely and streamline our operations to achieve more efficiency. As always, we are very focused on managing expenses, inventory levels, and cash."
Mr. Lo added, "Looking forward, we expect to continue to face a challenging economic climate in Europe. We are also seeing a further reduction in capital expenditures budget for broadband gateways in Q4 among our service provider customers in Europe and Australia. Despite the difficult market situation, we continue to innovate and expect to release approximately 25 new products in Q4, setting us up for growth in 2013. Specifically, for the fourth quarter of 2012, we expect net revenue to be in the range of approximately $300 million to $315 million, with non-GAAP operating margin to be in the range of 11% to 12%."
Investor Conference Call / Webcast Details
NETGEAR will review the third quarter 2012 results and discuss management's expectations for the third quarter of 2012 today, Thursday, October 25, 2012 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 http://investor.netgear.com. A replay of the call will be available 2 hours following the call through midnight EDT (9 p.m. PDT) on Thursday, November 1, 2012 by telephone at (858) 384-5517 and via the web at http://investor.netgear.com.
The account number to access the phone replay is 401042.
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