NETGEAR, Inc. News
NETGEAR(R) Reports Fourth Quarter and 2007 Results
SANTA CLARA, Calif.,
Net revenue for the fourth quarter ended
Gross margin on a non-GAAP basis in the fourth quarter of 2007 was 32.4%, as compared to 32.5% in the year ago comparable quarter, and 34.0% in the third quarter of 2007. Non-GAAP operating margin was 10.8% in the fourth quarter of 2007, as compared to 11.6% in the fourth quarter of 2006, and 11.7% in the third quarter of 2007. In the fourth quarter of 2007, non-GAAP operating expenses were 21.6% of net revenue, as compared to 20.9% in the year ago comparable quarter, and 22.3% in the prior quarter.
Net income on a non-GAAP basis for the fourth quarter of 2007 was
Net revenue for 2007 was
Non-GAAP net income for 2007 was
Christine Gorjanc, Chief Financial Officer of NETGEAR, said, "We ended the fourth quarter of 2007 with net inventory at
The U.S. retail channel inventory ended the fourth quarter of 2007 at 7.6 weeks, compared to 8.4 weeks in the fourth quarter of 2006, and 8.8 weeks in the third quarter of 2007. U.S. distribution channel inventory ended the fourth quarter of 2007 at 5.2 weeks, compared to 3.5 weeks in the fourth quarter of 2006, and 4.2 weeks in the third quarter of 2007. European distribution channel inventory ended the fourth quarter of 2007 at approximately 5.4 weeks, compared to approximately 5.1 weeks in the fourth quarter of 2006, and 4.9 weeks in the third quarter of 2007. Asia Pacific distribution channel inventory ended the fourth quarter of 2007 at approximately 5.2 weeks, compared to approximately 4.2 weeks in the fourth quarter of 2006, and 4.7 weeks in the third quarter of 2007.
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 December 31, December 31, September 30, 2007 2006 2007 North America $69,492 35% $51,414 31% $76,357 40% Europe, Middle-East and Africa 107,098 54% 99,963 61% 95,549 50% Asia Pacific 21,669 11% 12,625 8% 19,775 10% $198,259 100% $164,002 100% $191,681 100% Year ended December 31, December 31, 2007 2006 North America $273,695 38% $220,440 38% Europe, Middle-East and Africa 380,354 52% 298,234 52% Asia Pacific 73,738 10% 54,896 10% $727,787 100% $573,570 100%
Looking forward,
Investor Conference Call / Webcast Details
NETGEAR will review the fourth quarter 2007 results and discuss management's expectations for the first quarter of 2008 today,
About NETGEAR, Inc.
NETGEAR (Nasdaq: NTGR) designs technologically advanced, branded networking solutions that address the specific needs of small and medium business and home users. The Company's product offerings enable users to share Internet access, peripherals, files, digital multimedia content and applications among multiple personal computers and other Internet-enabled devices. As an ENERGY STAR(R) partner, NETGEAR offers products that prevent greenhouse gas emissions by meeting strict energy-efficiency specifications set by the U.S. government. NETGEAR is headquartered in
NETGEAR(R), and the NETGEAR Logo are trademarks or registered trademarks of NETGEAR, Inc. in the
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. Specifically, statements concerning the expected performance characteristics, specifications, market acceptance, market growth, specific uses, user feedback and market position of NETGEAR's products and technology are forward-looking statements within the meaning of the Safe Harbor. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including, without limitation, the following: the actual price, performance and ease of use of NETGEAR's products may not meet the price, performance and ease of use requirements of customers, product performance may be adversely affected by real world operating conditions, new viruses or Internet threats may develop that challenge the effectiveness of security features in NETGEAR's products, the ability of NETGEAR to market and sell its products and technology, the impact and pricing of competing products and the introduction of alternative technological solutions. 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 27 through 38, in the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
Use of Non-GAAP Financial Information:
To supplement our consolidated financial statements presented on a GAAP basis, NETGEAR uses non-GAAP measures of operating results, net income and income per share, which are adjusted to exclude certain expenses and tax benefits we believe 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 net income or diluted net income per share prepared in accordance with generally accepted accounting principles in the
NETGEAR, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three months ended Year ended December December December December 31, 31, 31, 31, 2007 2006 2007 2006 Net revenue $198,259 $164,002 $727,787 $573,570 Cost of revenue 135,414 110,826 485,180 379,911 Gross profit 62,845 53,176 242,607 193,659 Operating expenses: Research and development 7,189 5,247 28,070 18,443 Sales and marketing 31,182 24,937 117,938 91,881 General and administrative 6,577 5,729 27,220 20,905 In-process research and development - - 4,100 2,900 Litigation reserves (35) - 167 - Total operating expenses 44,913 35,913 177,495 134,129 Income from operations 17,932 17,263 65,112 59,530 Interest income, net 2,002 1,957 8,426 6,974 Other income 146 1,889 3,298 2,495 Income before income taxes 20,080 21,109 76,836 68,999 Provision for income taxes 7,546 7,660 30,882 27,867 Net income $12,534 $13,449 $45,954 $41,132 Net income per share: Basic $0.36 $0.40 $1.32 $1.23 Diluted $0.35 $0.38 $1.28 $1.19 Weighted average shares outstanding used to compute net income per share: Basic 35,193 33,789 34,809 33,381 Diluted 36,101 34,995 35,839 34,553 Stock-based compensation expense was allocated as follows: Cost of revenue $185 $119 $633 $430 Research and development 699 394 2,391 1,119 Sales and marketing 694 450 3,013 1,405 General and administrative 744 455 2,842 1,551 NETGEAR, INC. NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Excluding amortization of purchased intangibles, in-process research and development, acquisition related retention bonuses, impact to cost of sales from purchase accounting adjustments to inventory, litigation reserves and stock-based compensation, net of tax. (In thousands, except per share data) (Unaudited) Three months ended Year ended December December December December 31, 31, 31, 31, 2007 2006 2007 2006 Net revenue $198,259 $164,002 $727,787 $573,570 Cost of revenue 134,045 110,632 479,965 379,356 Gross profit 64,214 53,370 247,822 194,214 Operating expenses: Research and development 6,431 4,523 24,901 16,838 Sales and marketing 30,488 24,487 114,925 90,476 General and administrative 5,833 5,274 24,378 19,354 In-process research and development - - - - Litigation reserves - - - - Total operating expenses 42,752 34,284 164,204 126,668 Income from operations 21,462 19,086 83,618 67,546 Interest income, net 2,002 1,957 8,426 6,974 Other income 146 1,889 3,298 2,495 Income before income taxes 23,610 22,932 95,342 77,015 Provision for income taxes 8,841 8,000 35,305 29,168 Net income $14,769 $14,932 $60,037 $47,847 Net income per share: Basic $0.42 $0.44 $1.72 $1.43 Diluted $0.41 $0.43 $1.68 $1.38 Weighted average shares outstanding used to compute net income per share: Basic 35,193 33,789 34,809 33,381 Diluted 36,101 34,995 35,839 34,553 NETGEAR, INC. GAAP TO NON-GAAP RECONCILIATION (In thousands, except per share data) (Unaudited) Three months ended December 31, 2007 GAAP Adjustments Non-GAAP Net revenue $198,259 $- $198,259 Cost of revenue 135,414 1,369 134,045 Gross profit 62,845 (1,369) 64,214 Operating expenses: Research and development 7,189 758 6,431 Sales and marketing 31,182 694 30,488 General and administrative 6,577 744 5,833 In-process research and development - - - Litigation reserves (35) (35) - Total operating expenses 44,913 2,161 42,752 Income from operations 17,932 (3,530) 21,462 Interest income, net 2,002 - 2,002 Other income 146 - 146 Income before income taxes 20,080 (3,530) 23,610 Provision for income taxes 7,546 (1,295) 8,841 Net income $12,534 $(2,235) $14,769 Net income per share: Basic $0.36 $0.42 Diluted $0.35 $0.41 Weighted average shares outstanding used to compute net income per share: Basic 35,193 35,193 Diluted 36,101 36,101 Year ended December 31, 2007 GAAP Adjustments Non-GAAP Net revenue $727,787 $- $727,787 Cost of revenue 485,180 5,215 479,965 Gross profit 242,607 (5,215) 247,822 Operating expenses: Research and development 28,070 3,169 24,901 Sales and marketing 117,938 3,013 114,925 General and administrative 27,220 2,842 24,378 In-process research and development 4,100 4,100 - Litigation reserves 167 167 - Total operating expenses 177,495 13,291 164,204 Income from operations 65,112 (18,506) 83,618 Interest income, net 8,426 - 8,426 Other income 3,298 - 3,298 Income before income taxes 76,836 (18,506) 95,342 Provision for income taxes 30,882 (4,423) 35,305 Net income $45,954 $(14,083) $60,037 Net income per share: Basic $1.32 $1.72 Diluted $1.28 $1.68 Weighted average shares outstanding used to compute net income per share: Basic 34,809 34,809 Diluted 35,839 35,839 NETGEAR, INC. GAAP TO NON-GAAP RECONCILIATION (in thousands, except per share data) (Unaudited) Three months ended December 31, 2006 GAAP Adjustments Non-GAAP Net revenue $164,002 $- $164,002 Cost of revenue 110,826 194 110,632 Gross profit 53,176 (194) 53,370 Operating expenses: Research and development 5,247 724 4,523 Sales and marketing 24,937 450 24,487 General and administrative 5,729 455 5,274 In-process research and development - - - Litigation reserves - - - Total operating expenses 35,913 1,629 34,284 Income from operations 17,263 (1,823) 19,086 Interest income 1,957 - 1,957 Other income 1,889 - 1,889 Income before income taxes 21,109 (1,823) 22,932 Provision for income taxes 7,660 (340) 8,000 Net income $13,449 $(1,483) $14,932 Net income per share: Basic $0.40 $0.44 Diluted $0.38 $0.43 Weighted average shares outstanding used to compute net income per share: Basic 33,789 33,789 Diluted 34,995 34,995 Year ended December 31, 2006 GAAP Adjustments Non-GAAP Net revenue $573,570 $- $573,570 Cost of revenue 379,911 555 379,356 Gross profit 193,659 (555) 194,214 Operating expenses: Research and development 18,443 1,605 16,838 Sales and marketing 91,881 1,405 90,476 General and administrative 20,905 1,551 19,354 In-process research and development 2,900 2,900 - Litigation reserves - - - Total operating expenses 134,129 7,461 126,668 Income from operations 59,530 (8,016) 67,546 Interest income 6,974 - 6,974 Other income 2,495 - 2,495 Income before income taxes 68,999 (8,016) 77,015 Provision for income taxes 27,867 (1,301) 29,168 Net income $41,132 $(6,715) $47,847 Net income per share: Basic $1.23 $1.43 Diluted $1.19 $1.38 Weighted average shares outstanding used to compute net income per share: Basic 33,381 33,381 Diluted 34,553 34,553 NETGEAR, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) December 31, December 31, 2007 2006 ASSETS Current assets: Cash and cash equivalents $167,495 $87,736 Short-term investments 37,848 109,729 Accounts receivable, net 157,765 119,601 Inventories 83,023 77,932 Deferred income taxes 13,091 13,415 Prepaid expenses and other current assets 20,367 15,946 Total current assets 479,589 424,359 Property and equipment, net 11,205 6,568 Intangibles, net 16,319 975 Goodwill 41,985 3,800 Other non-current assets 2,011 2,202 Total assets $551,109 $437,904 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $55,333 $39,818 Accrued employee compensation 16,085 11,803 Other accrued liabilities 89,470 75,909 Deferred revenue 7,619 8,215 Income taxes payable - 7,737 Total current liabilities 168,507 143,482 Deferred income tax liability 2,626 - Non-current income taxes payable 8,272 - Deferred rent 181 - Total liabilities 179,586 143,482 Stockholders' equity: Common stock 35 33 Additional paid-in capital 252,421 221,487 Cumulative other comprehensive gain (loss) 101 (5) Retained earnings 118,966 72,907 Total stockholders' equity 371,523 294,422 Total liabilities and stockholders' equity $551,109 $437,904
SOURCE NETGEAR, Inc.
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