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Netgear® Reports First Quarter 2010 ResultsSAN JOSE, California, )
- Net revenue of $211.6 million, compared to $152.0 million in the comparable prior year quarter, 39% yearoveryear growth
- Non-GAAP net income of $17.1 million, compared to net income of $1.4 million in the comparable prior year quarter
- Non-GAAP diluted earnings per share of $0.48, compared to diluted earnings per share of $0.04 in the comparable prior year quarter
- Company expects second quarter 2010 net revenue to be in the range of $190 million to $200 million, with non-GAAP operating margin in the range of 11% to 12%
NETGEAR, Inc. (NASDAQGM: NTGR), a worldwide provider of technologically innovative, branded networking products, today reported financial results for the first quarter ended March 28, 2010.
Net revenue for the first quarter ended March 28, 2010 was $211.6 million, as compared to $152.0 million for the first quarter ended March 29, 2009, and as compared to $218.8 million in the fourth quarter ended December 31, 2009.
Net income, computed in accordance with GAAP, for the first quarter of 2010 was $13.7 million, or $0.38 per diluted share. This compared to GAAP net loss of $3.8 million, or $0.11 per diluted share for the first quarter of 2009, and to GAAP net income of $7.9 million, or $0.22 per diluted share, in the fourth quarter of 2009.
Gross margin on a non-GAAP basis in the first quarter of 2010 was 35.2%, as compared to 29.2% in the first quarter of 2009, and 31.1% in the fourth quarter of 2009. Non-GAAP operating margin was 13.5% in the first quarter of 2010, as compared to 3.7% in the first quarter of 2009, and 11.2% in the fourth quarter of 2009. Non-GAAP net income was $0.48 per diluted share in the first quarter of 2010, as compared to non-GAAP net income of $0.04 per diluted share in the first quarter of 2009, and non-GAAP net income of $0.34 per diluted share in the fourth quarter of 2009.
The differences between GAAP and non-GAAP financial measures include adjustments, net of any tax effect, for technology license arrangements, amortization of purchased intangibles, stockbased compensation, restructuring, acquisition related compensation, 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, "We are extremely pleased to report net revenue of $211.6 million for the first quarter 2010, exceeding our expectations. During the quarter, we experienced yearoveryear revenue growth in all three geographic regions based on increased end market demand and further market share gains. We are happy to report that component shortages are largely behind us and channel inventory is up to very good levels in all regions. Our net revenue from service providers was approximately 19% of total net revenue in the first quarter 2010, as compared to 27% in the first quarter of 2009, and 28% in the fourth quarter of 2009. This lower percentage of service provider revenue on a relative basis was largely the result of record revenue from our retail business which exceeded our expectations.
In the first quarter 2010, we introduced 16 new products. Notable new products include our thirdgeneration Powerline AV home network adaptor, a 3G signal repeater to enhance inbuilding 3G coverage, a 200user firewall router for medium size businesses, and the industry's first sub-$1,000 wireless LAN (Local Area Network) management system for small businesses. With these new products, we have been able to continue the momentum of the new products we introduced in 2009 such as the Ultimate Networking Machine, the ReadyNAS® 12 Bay Rackmount, NETGEAR StoraTM and especially Push2TVTM, which performed above expectations in Best Buy in the first quarter 2010. All of these 2010 and 2009 new product introductions have contributed to our market share gains worldwide."
Christine Gorjanc, Chief Financial Officer of NETGEAR, said, "We ended the first quarter of 2010 with $240.9 million in cash, cash equivalents and shortterm investments, compared to $200.3 million at the end of the first quarter of 2009, and $247.1 million at the end of the fourth quarter of 2009. Our net inventory ended at $109.9 million, compared to $92.0 million at the end of the first quarter of 2009, and $90.6 million at the end of the fourth quarter of 2009."
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:
Three months ended
March 28, 2010 December 31, 2009 March 29, 2009 North America $106,278 50% $104,327 48% $65,219 43%
Europe, Middle-East and Africa 81,135 38% 91,177 42% 74,166 49%
Asia Pacific 24,142 12% 23,328 10% 12,633 8%
$211,555 100% $218,832 100% $152,018 1 00%
Looking forward, Mr. Lo added, "In the second quarter 2010 we expect to have the typical second quarter seasonal slowdown, along with lower service provider revenue due to our customers' transitioning to Docsis 3.0. However, we look to gain share in the retail and SMB channels with recently introduced new products, including those from the prior two quarters. We expect to have larger revenue share for the service provider channel during the second half of 2010 when Docsis 3.0 deployment among our customers should be in full swing. We entered 2010 with a strong new product lineup and we remain focused on continuously driving growth through new products and channel presence expansion, leading to gains in our market share globally. We also intend to roll out another 16-18 new products in the second quarter 2010. Specifically, for the second quarter 2010, we expect net revenue in the range of approximately $190 million to $200 million, with non-GAAP operating margin to be in the range of 11% to 12%."
Investor Conference Call / Webcast Details
NETGEAR will review the first quarter 2010 results and discuss management's expectations for the second quarter of 2010 today, Wednesday, April 21, 2010 at 5 p.m. EDT (2 p.m. PDT). The dialin 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 28, 2010 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 349096.
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