NETGEAR Reports Second Quarter 2016 Results

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  • *Second quarter 2016 net revenue of $311.7 million, as compared to $288.8 million in the comparable prior year quarter, increase of 7.9%.
  • *Second quarter 2016 GAAP net income of $16.0 million, as compared to $3.7 million in the comparable prior year quarter.
  • *Second quarter 2016 non-GAAP net income of $24.1 million, as compared to $9.9 million in the comparable prior year quarter.
  • *Second quarter 2016 GAAP net income per diluted share of $0.48, as compared to $0.11 in the comparable prior year quarter.
  • *Second quarter 2016 non-GAAP net income per diluted share of $0.72, as compared to $0.29 in the comparable prior year quarter.
  • *Business outlook1: Company expects third quarter 2016 net revenue to be in the range of $315 million to $330 million, with non-GAAP operating margin in the range of 10.5% to 11.5%. Additionally, the Company expects the non-GAAP tax rate to be approximately 35%.

SAN JOSE, Calif. -- NETGEAR, Inc. (NASDAQ:NTGR), a global networking company that delivers innovative products to consumers, businesses and service providers, today reported financial results for the second quarter ended July 3, 2016.

Net revenue for the second quarter ended July 3, 2016 was $311.7 million, as compared to $288.8 million in the second quarter ended June 28, 2015, and $310.3 million in the first quarter ended April 3, 2016. Net income, computed in accordance with GAAP, for the second quarter of 2016 was $16.0 million, or $0.48 net income per diluted share. This compared to GAAP net income of $3.7 million, or $0.11 net income per diluted share, in the second quarter of 2015, and GAAP net income of $16.6 million, or $0.50 net income per diluted share, in the first quarter of 2016. Non-GAAP net income was $0.72 per diluted share in the second quarter of 2016, as compared to non-GAAP net income of $0.29 per diluted share in the second quarter of 2015 and $0.74 per diluted share in the first quarter of 2016.

Operating margin, computed in accordance with GAAP, for the second quarter of 2016 was 8.2%, as compared to 3.9% in the year ago comparable quarter, and 8.3% in the first quarter of 2016. Non-GAAP operating margin was 11.6% in the second quarter of 2016, as compared to 7.1% in the second quarter of 2015 and 11.9% in the first quarter of 2016.

The differences between GAAP and non-GAAP financial measures include adjustments for amortization of intangibles, stock-based compensation expense, restructuring and other charges, losses on inventory commitments due to restructuring, litigation reserves, net, gain on litigation settlements, loss pertaining to cost method investment and tax effect. 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 were pleased with our financial results for the second quarter of 2016, which came in higher than we had expected in revenue and non-GAAP operating margin. The Retail Business Unit and Commercial Business Unit both outperformed expectations by posting sequential growth despite typically slower second quarter seasonality. Overall, our financial results reinforce that the Company is on a strong trajectory in 2016.”

Mr. Lo continued, “During the quarter we once again saw continued strength in North America, slight year-over-year growth in APAC, while EMEA continued to be challenged, primarily due to significantly reduced service provider revenue."

Christine Gorjanc, Chief Financial Officer of NETGEAR, added, "During the second quarter of 2016, we continued to be opportunistic buyers of NETGEAR equity and repurchased approximately 314,000 shares of common stock, which makes our total repurchase amount since Q4 2013 approximately 9.2 million shares.”

Ms. Gorjanc continued, "Looking forward to the third quarter of 20161, we expect net revenue to be in the range of $315 million to $330 million. Our revenue outlook reflects back-to-school seasonality for the Retail Business Unit, but a reduced service provider revenue forecast. Non-GAAP operating margin is expected to be in the range of 10.5% to 11.5%. Our non-GAAP tax rate is expected to be approximately 35% for the third quarter of 2016.”

1 While a reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis, the company has provided a reconciliation of GAAP to non-GAAP financial measures in the accompanying schedules for its fiscal quarters ended July 3, 2016, June 28, 2015 and April 3, 2016, as well as the six month periods ended July 3, 2016 and June 28, 2015.

About NETGEAR, Inc.
NETGEAR (NASDAQ:NTGR) is a global networking company that delivers innovative products to consumers, businesses and service providers. The Company's products are built on a variety of proven technologies such as wireless (WiFi and LTE), Ethernet and powerline, with a focus on reliability and ease-of-use. The product line consists of wired and wireless devices that enable networking, broadband access and network connectivity. These products are available in multiple configurations to address the needs of the end-users in each geographic region in which the Company's products are sold. NETGEAR products are sold in approximately 28,000 retail locations around the globe, and through approximately 29,000 value-added resellers, as well as multiple major cable, mobile and wireline service providers around the world. The company's headquarters are in San Jose, Calif., with additional offices in approximately 25 countries. More information is available at http://investor.netgear.com or by calling (408) 907-8000. Connect with NETGEAR at http://twitter.com/NETGEAR and http://www.facebook.com/NETGEAR.

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