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NETGEAR (NTGR) Q2 Loss Narrower Than Expected, Revenues Fall Y/Y
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NETGEAR, Inc (NTGR - Free Report) reported a second-quarter 2024 non-GAAP loss of 74 cents per share compared with the non-GAAP loss of 16 cents in the year-ago quarter. The reported figure was narrower than the Zacks Consensus Estimate of a loss of 82 cents per share.
NETGEAR generated net revenues of $143.9 million, down 17% year over year. The downtick resulted from weakness across the CHP and NFB businesses. Also, it experienced significant impacts from channel inventory destocking and costs associated with reducing legacy inventory during this period. However, the top line beat the consensus estimate by 8.45%.
Region-wise, net revenues from the Americas were $95.5 million (66% of total revenues), down 18% year over year. Europe, the Middle East and Africa generated revenues (19%) of $27.3 million, down 24.3%. Revenues from the Asia Pacific region (15%) increased 1.9% year over year to $21 million.
NETGEAR ended the quarter with 958,000 paid service subscribers, including 544,000 recurring subscribers, contributing to a 30% year-over-year increase in recurring subscriber revenues.
Following the announcement, shares of the company were up 2.3% in the after-market trading on Jul 31. The stock has gained 11% against the sub-industry’s decline of 9.1% in the past year.
Image Source: Zacks Investment Research
Segmental Details
Connected Home or CHP segment (which includes Orbi, Nighthawk and Armor brands) generated revenues of $84 million, down 14.6% year over year. Despite challenging conditions, the segment continues to drive growth in premium products and saw positive demand trends for new lower-priced Wi-Fi 7 products and cable modems. It aims to release a range of innovative products over the next 12 months to further expand its market footprint and subscription growth. Our estimate was pegged at $72.4 million.
Despite achieving record sales of ProAV managed switch products, revenues from NETGEAR for Business (NFB) revenues declined 20.2% year over year to $59.8 million. Traditional IT and WI-FI Lan markets underperformed.
Adjusted gross margin decreased to 22.4% from 31.6% year over year. Non-GAAP operating loss was $31.1 million compared with operating loss of $10.7 million in the year-ago quarter.
Non-GAAP operating expenses were $63.3 million, down 3.3%.
Cash Flow & Liquidity
For the quarter ended Jun 30, 2024, NETGEAR generated $35.6 million in cash from operations. It also had $177.1 million in cash and cash equivalents and $253 million of total current liabilities compared with $106.4 million and $264.4 million, respectively, in the quarter that ended on Jul 2, 2023.
NTGR repurchased 799,800 shares worth $21.4 million in the quarter under review. The board of directors authorized the repurchase of up to an additional 3,000,000 shares, bringing the total buyback program to 3,875,000 shares, valued at roughly $62 million based on recent share prices.
Q3 Guidance
Management projects net revenues in the band of $160-$175 million. The company expects to see more predictable performance following the completion of destocking for both NFB and CHP businesses. It anticipates revenues from the service provider channel to be nearly $15 million in the third quarter, with new 5G mobile hotspots expected to be launched in the fourth quarter.
Gross margins and operating margins are likely to remain affected by ongoing inventory reduction efforts and elevated transportation costs, including those related to the Red Sea shipping crisis.
GAAP operating margin is forecasted to be between (15.3)% and (12.3)%. Non-GAAP operating margin is estimated in the band of (11)-(8)%.
GAAP tax expense is expected to be between $1 million and $2 million, with a non-GAAP tax benefit projected to be between $1.5 million and $2.5 million for the third quarter of 2024.
BlackBerry’s (BB - Free Report) reported first-quarter fiscal 2025 adjusted loss per share of 3 cents was narrower than the company’s estimate of a loss of 4-6 cents. In the year-ago quarter, it reported non-GAAP earnings of 6 cents per share. The Zacks Consensus Estimate was pegged at a loss of 4 cents per share.
Shares of BB have lost 48.9% in the past year.
Badger Meter, Inc (BMI - Free Report) reported earnings per share (EPS) of $1.12 for second-quarter 2024, beating the Zacks Consensus Estimate by 14.3%. Also, the bottom line compared favorably with the year-ago quarter’s EPS of 76 cents.
Shares of BMI have gained 26% in the past year.
SAP SE (SAP - Free Report) reported second-quarter 2024 non-IFRS earnings of €1.10 ($1.18) per share, climbing 59% from the year-ago quarter’s levels. The Zacks Consensus Estimate was pegged at $1.01.
In the past year, shares of SAP have gained 58.9%.
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NETGEAR (NTGR) Q2 Loss Narrower Than Expected, Revenues Fall Y/Y
NETGEAR, Inc (NTGR - Free Report) reported a second-quarter 2024 non-GAAP loss of 74 cents per share compared with the non-GAAP loss of 16 cents in the year-ago quarter. The reported figure was narrower than the Zacks Consensus Estimate of a loss of 82 cents per share.
NETGEAR generated net revenues of $143.9 million, down 17% year over year. The downtick resulted from weakness across the CHP and NFB businesses. Also, it experienced significant impacts from channel inventory destocking and costs associated with reducing legacy inventory during this period. However, the top line beat the consensus estimate by 8.45%.
Region-wise, net revenues from the Americas were $95.5 million (66% of total revenues), down 18% year over year. Europe, the Middle East and Africa generated revenues (19%) of $27.3 million, down 24.3%. Revenues from the Asia Pacific region (15%) increased 1.9% year over year to $21 million.
NETGEAR ended the quarter with 958,000 paid service subscribers, including 544,000 recurring subscribers, contributing to a 30% year-over-year increase in recurring subscriber revenues.
Following the announcement, shares of the company were up 2.3% in the after-market trading on Jul 31. The stock has gained 11% against the sub-industry’s decline of 9.1% in the past year.
Image Source: Zacks Investment Research
Segmental Details
Connected Home or CHP segment (which includes Orbi, Nighthawk and Armor brands) generated revenues of $84 million, down 14.6% year over year. Despite challenging conditions, the segment continues to drive growth in premium products and saw positive demand trends for new lower-priced Wi-Fi 7 products and cable modems. It aims to release a range of innovative products over the next 12 months to further expand its market footprint and subscription growth. Our estimate was pegged at $72.4 million.
Despite achieving record sales of ProAV managed switch products, revenues from NETGEAR for Business (NFB) revenues declined 20.2% year over year to $59.8 million. Traditional IT and WI-FI Lan markets underperformed.
NETGEAR, Inc. Price, Consensus and EPS Surprise
NETGEAR, Inc. price-consensus-eps-surprise-chart | NETGEAR, Inc. Quote
Other Details
Adjusted gross margin decreased to 22.4% from 31.6% year over year. Non-GAAP operating loss was $31.1 million compared with operating loss of $10.7 million in the year-ago quarter.
Non-GAAP operating expenses were $63.3 million, down 3.3%.
Cash Flow & Liquidity
For the quarter ended Jun 30, 2024, NETGEAR generated $35.6 million in cash from operations. It also had $177.1 million in cash and cash equivalents and $253 million of total current liabilities compared with $106.4 million and $264.4 million, respectively, in the quarter that ended on Jul 2, 2023.
NTGR repurchased 799,800 shares worth $21.4 million in the quarter under review. The board of directors authorized the repurchase of up to an additional 3,000,000 shares, bringing the total buyback program to 3,875,000 shares, valued at roughly $62 million based on recent share prices.
Q3 Guidance
Management projects net revenues in the band of $160-$175 million. The company expects to see more predictable performance following the completion of destocking for both NFB and CHP businesses. It anticipates revenues from the service provider channel to be nearly $15 million in the third quarter, with new 5G mobile hotspots expected to be launched in the fourth quarter.
Gross margins and operating margins are likely to remain affected by ongoing inventory reduction efforts and elevated transportation costs, including those related to the Red Sea shipping crisis.
GAAP operating margin is forecasted to be between (15.3)% and (12.3)%. Non-GAAP operating margin is estimated in the band of (11)-(8)%.
GAAP tax expense is expected to be between $1 million and $2 million, with a non-GAAP tax benefit projected to be between $1.5 million and $2.5 million for the third quarter of 2024.
Zacks Rank
NETGEAR currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Companies
BlackBerry’s (BB - Free Report) reported first-quarter fiscal 2025 adjusted loss per share of 3 cents was narrower than the company’s estimate of a loss of 4-6 cents. In the year-ago quarter, it reported non-GAAP earnings of 6 cents per share. The Zacks Consensus Estimate was pegged at a loss of 4 cents per share.
Shares of BB have lost 48.9% in the past year.
Badger Meter, Inc (BMI - Free Report) reported earnings per share (EPS) of $1.12 for second-quarter 2024, beating the Zacks Consensus Estimate by 14.3%. Also, the bottom line compared favorably with the year-ago quarter’s EPS of 76 cents.
Shares of BMI have gained 26% in the past year.
SAP SE (SAP - Free Report) reported second-quarter 2024 non-IFRS earnings of €1.10 ($1.18) per share, climbing 59% from the year-ago quarter’s levels. The Zacks Consensus Estimate was pegged at $1.01.
In the past year, shares of SAP have gained 58.9%.