NETGEAR, Inc. News
NETGEAR(R) Reports First Quarter 2008 Results
Net revenue for the first quarter ended
Gross margin on a non-GAAP basis in the first quarter of 2008 was 32.9%, as compared to 34.7% in the year ago comparable quarter, and 32.4% in the fourth quarter of 2007. Non-GAAP operating margin was 9.5% in the first quarter of 2008, as compared to 12.3% in the first quarter of 2007, and 10.8% in the fourth quarter of 2007. In the first quarter of 2008, non-GAAP operating expenses were 23.4% of net revenue, as compared to 22.4% in the year ago comparable quarter, and 21.6% in the prior quarter.
Net income on a non-GAAP basis for the first quarter of 2008 was
Mr. Lo continued, "Product wise, our RangeMax(TM) Wireless-N and ReadyNAS(R) Network Attached Storage offerings continued to enjoy strong reception in the market in Q1. Among the 11 new products introduced in the first quarter, notable launches include: ReadyNAS Duo 500GB/750GB/1TB Home Media Servers, RangeMax Gigabit Wireless-N Router, the Emerging Market Internet Café high speed Router and our channel bonding voice cable gateway. While our RangeMax 11g and 11n WiFi products have been our strength in the retail consumer market, our ReadyNAS and Smart Switches continued to be the stars in our SMB offering. In a short period of three quarters, we have achieved the number two market share position in the US in the SMB NAS market and command significant price premium over our competitors. We continued to maintain our number one market share position worldwide in Smart Switches which is the fastest growing switch category. By focusing on technology and usability differentiation as well as innovation, as we always have, we are confident that we can continue to gain share and improve our operating margin. Channel wise, we continued to drive our service provider revenue to new heights, reaching approximately
The U.S. retail channel inventory ended the first quarter of 2008 at 10.0 weeks, compared to 10.4 weeks in the first quarter of 2007, and 7.6 weeks in the fourth quarter of 2007. U.S. distribution channel inventory ended the first quarter of 2008 at 4.3 weeks, compared to 4.4 weeks in the first quarter of 2007, and 5.2 weeks in the fourth quarter of 2007. European distribution channel inventory ended the first quarter of 2008 at approximately 5.7 weeks, compared to approximately 5.0 weeks in the first quarter of 2007, and 5.4 weeks in the fourth 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 March 30, 2008 April 1, 2007 December 31, 2007 North America $79,203 40% $66,059 38% $69,492 35% Europe, Middle-East and Africa 98,145 50% 92,552 53% 107,098 54% Asia Pacific 20,806 10% 14,961 9% 21,669 11% $198,154 100% $173,572 100% $198,259 100%
Looking forward, Mr. Lo added, "While we fully recognize that weakness in consumer demand and pricing pressure in our top 2 retail markets, the US and UK, has and will continue to adversely affect our operating results, we firmly believe our core strategy of continuously driving growth through expansion in product line-up, channel penetration, new geographic regions and profitably expanding our global market share remains sound. We entered 2008 with a strong new product lineup which has helped position us to price above our competitors while gaining market share. Importantly, we will maintain our product introduction momentum with approximately 12 new products planned for Q2. We plan to continue to penetrate the service provider channel as well as add on strategic new channel partners. We are also continuing to grow and gain share in
Investor Conference Call / Webcast Details
NETGEAR will review the first quarter 2008 results and discuss management's expectations for the second 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
(C) 2008 NETGEAR, Inc. NETGEAR(R), and the NETGEAR Logo are trademarks or registered trademarks of NETGEAR, Inc. in
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 I - Item 1A. Risk Factors," pages 12 through 24, in the Company's Annual Report on Form 10-K for the fiscal year 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
NETGEAR, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three months ended March 30, April 1, 2008 2007 Net revenue $198,154 $173,572 Cost of revenue 134,291 113,542 Gross profit 63,863 60,030 Operating expenses: Research and development 8,738 6,156 Sales and marketing 33,028 27,826 General and administrative 7,313 6,914 Litigation reserves 51 - Total operating expenses 49,130 40,896 Income from operations 14,733 19,134 Interest income 1,512 2,371 Other income 2,843 272 Income before income taxes 19,088 21,777 Provision for income taxes 7,862 7,756 Net income $11,226 $14,021 Net income per share: Basic $0.32 $0.41 Diluted $0.31 $0.40 Weighted average shares outstanding used to compute net income per share: Basic 35,316 34,308 Diluted 35,941 35,362 Stock-based compensation expense was allocated as follows: Cost of revenue $222 $133 Research and development 801 469 Sales and marketing 847 622 General and administrative 928 623 NETGEAR, INC. NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Excluding amortization of purchased intangibles, acquisition related retention bonuses, litigation reserves, and stock-based compensation, net of tax. (In thousands, except per share data) (Unaudited) Three months ended March 30, April 1, 2008 2007 Net revenue $198,154 $173,572 Cost of revenue 132,886 113,334 Gross profit 65,268 60,238 Operating expenses: Research and development 7,879 5,395 Sales and marketing 32,181 27,204 General and administrative 6,385 6,291 Total operating expenses 46,445 38,890 Income from operations 18,823 21,348 Interest income 1,512 2,371 Other income 2,843 272 Income before income taxes 23,178 23,991 Provision for income taxes 9,074 8,375 Net income $14,104 $15,616 Net income per share: Basic $ 0.40 $ 0.46 Diluted $ 0.39 $ 0.44 Weighted average shares outstanding used to compute net income per share: Basic 35,316 34,308 Diluted 35,941 35,362 NETGEAR, INC. GAAP TO NON-GAAP RECONCILIATION (In thousands, except per share data) (Unaudited) Three months ended March 30, 2008 GAAP Adjustments Non-GAAP Net revenue $198,154 $- $198,154 Cost of revenue 134,291 1,405 132,886 Gross profit 63,863 (1,405) 65,268 Operating expenses: Research and development 8,738 859 7,879 Sales and marketing 33,028 847 32,181 General and administrative 7,313 928 6,385 Litigation reserves 51 51 - Total operating expenses 49,130 2,685 46,445 Income from operations 14,733 (4,090) 18,823 Interest income 1,512 - 1,512 Other income 2,843 - 2,843 Income before income taxes 19,088 (4,090) 23,178 Provision for income taxes 7,862 (1,212) 9,074 Net income $11,226 $(2,878) $14,104 Net income per share: Basic $0.32 $0.40 Diluted $0.31 $0.39 Weighted average shares outstanding used to compute net income per share: Basic 35,316 35,316 Diluted 35,941 35,941 NETGEAR, INC. GAAP TO NON-GAAP RECONCILIATION (In thousands, except per share data) (Unaudited) Three months ended April 1, 2007 GAAP Adjustments Non-GAAP Net revenue $173,572 $- $173,572 Cost of revenue 113,542 208 113,334 Gross profit 60,030 (208) 60,238 Operating expenses: Research and development 6,156 761 5,395 Sales and marketing 27,826 622 27,204 General and administrative 6,914 623 6,291 Total operating expenses 40,896 2,006 38,890 Income from operations 19,134 (2,214) 21,348 Interest income 2,371 - 2,371 Other income 272 - 272 Income before income taxes 21,777 (2,214) 23,991 Provision for income taxes 7,756 (619) 8,375 Net income $14,021 $(1,595) $15,616 Net income per share: Basic $0.41 $0.46 Diluted $0.40 $0.44 Weighted average shares outstanding used to compute net income per share: Basic 34,308 34,308 Diluted 35,362 35,362 NETGEAR, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) March 30, December 31, 2008 2007 ASSETS Current assets: Cash and cash equivalents $179,706 $167,495 Short-term investments 21,087 37,848 Accounts receivable, net 155,843 157,765 Inventories 97,604 83,023 Deferred income taxes 13,222 13,091 Prepaid expenses and other current assets 22,391 20,367 Total current assets 489,853 479,589 Property and equipment, net 13,846 11,205 Intangibles, net 15,136 16,319 Goodwill 41,985 41,985 Other non-current assets 1,865 2,011 Total assets $562,685 $551,109 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $51,548 $55,333 Accrued employee compensation 11,183 16,085 Other accrued liabilities 89,451 89,470 Deferred revenue 7,453 7,619 Income taxes payable 3,322 - Total current liabilities 162,957 168,507 Deferred income tax liability 1,787 2,626 Non-current income taxes payable 9,577 8,272 Deferred rent 1,325 181 Total liabilities 175,646 179,586 Stockholders' equity: Common stock 35 35 Additional paid-in capital 256,883 252,421 Cumulative other comprehensive income 86 101 Retained earnings 130,035 118,966 Total stockholders' equity 387,039 371,523 Total liabilities and stockholders' equity $562,685 $551,109
SOURCE NETGEAR, Inc.
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