NETGEAR® Reports Second Quarter Results

SAN JOSE, Calif., July 25, 2013 /PRNewswire/ -- NETGEAR, Inc. (NASDAQGS: NTGR), a global networking company that delivers innovative products to consumers, businesses and service providers, today reported financial results for the second quarter ended June 30, 2013.

Net revenue for the second quarter ended June 30, 2013 was $357.7 million, as compared to $320.7 million for the second quarter ended July 1, 2012, and $293.4 million in the first quarter ended March 31, 2013. The second quarter 2013 results reflect the full quarter effect of the AirCard business acquired from Sierra Wireless. Net income, computed in accordance with GAAP, for the second quarter of 2013 was $14.0 million, or $0.36 per diluted share.  This compared to GAAP net income of $21.5 million, or $0.56 per diluted share, for the second quarter of 2012, and GAAP net income of $15.3 million, or $0.39 per diluted share, in the first quarter of 2013. 

Gross margin on a non-GAAP basis in the second quarter of 2013 was 29.8%, as compared to 29.9% in the year ago comparable quarter, and 30.5% in the first quarter of 2013.  Non-GAAP operating margin was 10.3% in the second quarter of 2013, as compared to 11.0% in the second quarter of 2012, and 10.0% in the first quarter of 2013. Non-GAAP net income was $0.62 per diluted share in the second quarter of 2013, as compared to non-GAAP net income of $0.64 per diluted share in the second quarter of 2012, and non-GAAP net income of $0.50 per diluted share in the first quarter of 2013.

The Company's non-GAAP tax rate was 32.9% in the second quarter 2013, as compared to 31.4% in the second quarter of 2012, and 34.6% in the first quarter of 2013.

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 expense, impact to cost of sales from acquisition accounting adjustments to inventory, 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 pleased with our results for the second quarter of 2013. Our Retail Business grew on a year-over-year basis, and we have confidence in the pace of the 802.11ac upgrade cycle, as well as the increasing realization of the Smart Home for developed markets. The integration of the AirCard business into our Service Provider Business Unit has been progressing very well, and we are excited about our combined R&D capabilities in the fast growing LTE gateway market segment. Our Commercial Business Unit generated impressive sequential and year-over-year growth driven by the success of our new storage products and 10 Gigabit switches."

"Our Retail Business Unit (RBU) revenue for the quarter ended June 30, 2013 was down 7% sequentially, which represents typical seasonality for the second quarter. On a year-over-year basis, our Retail Business Unit revenue was up 3%. Our strong year on year growth for RBU in North America and Asia was offset by weakness in the European region. Our Service Provider Business Unit revenue was up 58% sequentially, and up 20% over the prior year quarter. This substantial increase reflects the incremental revenue of the recent AirCard acquisition. Our Commercial Business Unit revenue was up 25% sequentially, and up 10% over the prior year quarter.  Our new line of storage products was well received by the market, and we believe that the unique product portfolio we have built for storage, 10 Gigabit switches, Power over Ethernet switches and wireless LAN will continue to drive growth for this business unit in future quarters."

Christine Gorjanc, Chief Financial Officer of NETGEAR, said, "We ended the second quarter of 2013 with $288.1 million in cash, cash equivalents and short-term investments, compared to $360.4 million at the end of the second quarter of 2012, and $422.4 million at the end of the first quarter of 2013. The reduction in the cash level reflects the payment of $140.0 million to Sierra Wireless, Inc. for the AirCard business. Our balance sheet remains strong and provides plenty of flexibility for us to invest in the fast growing markets of the Smart Home, access networks to cloud computing, and LTE gateways and data devices."

Mr. Lo added, "The worldwide spread of broadband internet access and the proliferation of connected devices continue to create opportunities for us to put multiple NETGEAR products into every home and office. Looking forward, for the third quarter of 2013, we expect net revenue to be in the range of $345 to $360 million and non-GAAP operating margin to be between 9.5% and 10.5%. Furthermore, we expect our non-GAAP tax rate to be approximately 37% in the third quarter of 2013."

Investor Conference Call / Webcast Details 
NETGEAR will review the second quarter results and discuss management's expectations for the second quarter of 2013 today, Thursday, July 25, 2013 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 Eastern (9 p.m. Pacific) on Thursday, August 1, 2013 by telephone at (858) 384-5517 and via the web at http://investor.netgear.com.  The account number to access the phone replay is 417736.

About NETGEAR, Inc. 
NETGEAR (NASDAQGS: NTGR) is a global networking company that delivers innovative products to consumers, businesses and service providers. For consumers, the company makes high performance, dependable and easy to use home networking, storage and digital media products to connect people with the Internet and their content and devices. For businesses, NETGEAR provides networking, storage and security solutions without the cost and complexity of Big IT. The company also supplies top service providers with retail proven, whole home solutions for their customers. NETGEAR products are built on a variety of proven technologies such as wireless, Ethernet and powerline, with a focus on reliability and ease-of-use. NETGEAR products are sold in approximately 45,000 retail locations around the globe, and through approximately 40,000 value-added resellers. The company's headquarters are in San Jose, Calif., with additional offices in over 25 countries. NETGEAR is an ENERGY STAR partner. 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.

© 2013 NETGEAR, Inc. NETGEAR, ReadyNAS, AirCard and the NETGEAR logo are trademarks or registered trademarks of NETGEAR, Inc. and its affiliates in the United States and/or other countries. Other brand and product names are trademarks or registered trademarks of their respective holders.  The information contained herein is subject to change without notice. NETGEAR shall not be liable for technical or editorial errors or omissions contained herein.  All rights reserved.

Contact: 
NETGEAR Investor Relations 
Christopher Genualdi 
netgearIR@netgear.com 
(408) 890-3520

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. The words "anticipate", "expect", "believe", "will", "may", "should", "estimate", "project", "outlook", "forecast" or other similar words are used to identify such forward-looking statements.  However, the absence of these words does not mean that the statements are not forward-looking.  The forward-looking statements represent NETGEAR, Inc.'s expectations or beliefs concerning future events based on information available at the time such statements were made and include statements regarding: expected net revenue, non-GAAP operating margin and non-GAAP tax rate; expectations for intermediate and long term growth in our business units; expectations regarding new product introductions that position the Company for growth; opening new channels; penetrating developing markets; and entering new product categories. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: future demand for the Company's products may be lower than anticipated; consumers may choose not to adopt the Company's new product offerings or adopt competing products; product performance may be adversely affected by real world operating conditions; the Company may be unsuccessful or experience delays in manufacturing and distributing its new and existing products; telecommunications service providers may choose to slow their deployment of the Company's products or utilize competing products; the Company may be unable to collect receivables as they become due; the Company may fail to manage costs, including the cost of developing new products and manufacturing and distribution of its existing offerings; the Company may fail to successfully continue to effect operating expense savings; changes in the level of NETGEAR's cash resources and the Company's planned usage of such resources; changes in the Company's stock price and developments in the business that could increase the Company's cash needs; fluctuations in foreign exchange rates; and the actions and financial health of the Company's customers. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. 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 42 through 63, in the Company's quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2013, filed with the Securities and Exchange Commission on May 7, 2013.  NETGEAR undertakes no obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Use of Non-GAAP Financial Information: 
To supplement our consolidated financial statements presented on a GAAP basis, NETGEAR uses non-GAAP financial measures, which are adjusted to exclude certain expenses and tax benefits, where applicable.  We believe non-GAAP financial measures are 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 financial measures prepared in accordance with generally accepted accounting principles in the United States.               

-Financial Tables Attached-

SOURCE NETGEAR, Inc.