NETGEAR(R) Reports First Quarter 2015 Results SAN JOSE,

SAN JOSE, CA--(Marketwired - Apr 23, 2015) - NETGEAR, Inc. ( NASDAQ : NTGR )

• First quarter 2015 net revenue of $309.2 million, as compared to $349.4 million in the comparable prior year quarter, decrease of 11.5% year over year. 
• First quarter 2015 GAAP net income of $8.0 million, as compared to $14.4 million in the comparable prior year quarter.
  • First quarter 2015 non-GAAP net income of $16.3 million, as compared to $22.0 million in the comparable prior year quarter.
• First quarter 2015 GAAP net income per diluted share of $0.23, as compared to $0.39 in the comparable prior year quarter.
  • First quarter 2015 non-GAAP net income per diluted share of $0.46, as compared to $0.59 in the comparable prior year quarter.
• Company expects second quarter 2015 net revenue to be in the range of $270 million to $285 million, with non-GAAP operating margin in the range of 6.0% to 7.0%.

NETGEAR, Inc. ( NASDAQ : NTGR ), a global networking company that delivers innovative products to consumers, businesses and service providers, today reported financial results for the first quarter ended March 29, 2015.

Net revenue for the first quarter ended March 29, 2015 was $309.2 million, as compared to $349.4 million in the first quarter ended March 30, 2014, and $353.2 million in the fourth quarter ended December 31, 2014. Net income, computed in accordance with GAAP, for the first quarter of 2015 was $8.0 million, or $0.23 net income per diluted share. This compared to GAAP net income of $14.4 million, or $0.39 net income per diluted share, in the first quarter of 2014, and GAAP net loss of $40.4 million, or net loss of $1.16 per diluted share, in the fourth quarter of 2014. Non-GAAP net income was $0.46 per diluted share in the first quarter of 2015, as compared to non-GAAP net income of $0.59 per diluted share in the first quarter of 2014 and $0.65 per diluted share in the fourth quarter of 2014.

Operating margin, computed in accordance with GAAP, for the first quarter of 2015 was 5.7%, as compared to 6.7% in the year ago comparable quarter, and -13.2% in the fourth quarter of 2014. Non-GAAP operating margin was 9.2% in the first quarter of 2015, as compared to 9.7% in the first quarter of 2014 and 10.1% in the fourth quarter of 2014.

The differences between GAAP and non-GAAP financial measures include adjustments, net of any tax effect, for amortization of intangibles, stock-based compensation expense, restructuring and other charges, acquisition-related expense, losses on inventory commitments due to restructuring, litigation reserves, net, goodwill impairment charges, and the establishment of a valuation allowance associated with certain deferred tax assets. 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, "Our revenues and operating margin for the first quarter of 2015 were in line with guidance, which was heavily influenced by our service provider business restructuring as well as the strengthening of the U.S. dollar. This is especially evident in the decline of our EMEA revenues and the flattening of our APAC revenues."

Mr. Lo continued, "We were very pleased with the successful launch of our Arlo smart home security camera during the quarter, which represents a strong entry for NETGEAR into the market of the Internet of Things for homes. Within the limited channels where Arlo has launched, sales have been very encouraging. We expect to continue this momentum by further expanding Arlo's channel and regional distribution, as well as releasing additional unique smart products under the Arlo brand in the coming quarters."

Christine Gorjanc, Chief Financial Officer of NETGEAR, added, "With the greater than expected decrease of international revenues, and corresponding profits, during the first quarter, our tax rate increased meaningfully, negatively impacting our net income and EPS results for the quarter."

Ms. Gorjanc continued, "During the first quarter of 2015, we continued to leverage the strength of our balance sheet and cash position by repurchasing approximately 266,000 shares of NETGEAR common stock for $8.3 million, at an average price of $31.39 per share. We continue to believe that stock repurchases are an effective way of returning capital to shareholders and plan to be active buyers of our stock in the coming quarters."

Mr. Lo continued, "We expect to see our typical seasonality in the second quarter for our Retail and Commercial Business Units coupled with the impact of the strengthening U.S. dollar. Meanwhile, we expect SPBU to continue to align with our restructuring plan. We are expecting second quarter net revenue to be in the range of $270 million to $285 million. Non-GAAP operating margin is expected to be in the range of 6.0% to 7.0%. Looking ahead, we believe that we will see significant improvement in the second half of 2015 when we expect the SPBU restructuring to be complete, Arlo to be fully distributed worldwide, and the usual second half seasonal uptick in RBU and CBU."

Investor Conference Call / Webcast Details NETGEAR will review the first quarter results and discuss management's expectations for the second quarter of 2015 today, Thursday, April 23, 2015 at 5 p.m. ET (2 p.m. PT). 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 ET (9 p.m. PT) on Thursday, April 30, 2015 by telephone at (858) 384-5517 and via the web at http://investor.netgear.com . The account number to access the phone replay is 13606518.

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, 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 44,000 retail locations around the globe, and through approximately 33,000 value-added resellers. 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 .

© 2015 NETGEAR, Inc. NETGEAR 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.

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 and non-GAAP operating margin; expectations regarding the timing, distribution, sales momentum and market acceptance of recent and anticipated new product introductions that position the Company for growth; expectations regarding the timing and impact of restructuring activities; expectations regarding seasonal changes in the Company's business unit performance; and expectations regarding repurchases of the Company's common stock. 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, including potential repurchases of the Company's common stock; 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 I - Item IA. Risk Factors," pages 9 through 30, in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2014, filed with the Securities and Exchange Commission on February 20, 2015. 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 adjustments, 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.  

NETGEAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
				March 29,  2015			December 31,  2014
ASSETS
Current assets:
	Cash and cash equivalents			$	146,401		$	141,234
	Short-term investments				101,004			115,895
	Accounts receivable, net				254,745			275,689
	Inventories				200,948			222,883
	Deferred income taxes				28,703			29,039
	Prepaid expenses and other current assets				38,080			38,225
		Total current assets			769,881			822,965
Property and equipment, net					27,849			29,694
Intangibles, net					61,755			66,230
Goodwill					81,721			81,721
Other non-current assets					48,653			48,077
		Total assets		$	989,859		$	1,048,687
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	66,654		$	106,357
	Accrued employee compensation				19,908			21,588
	Other accrued liabilities				122,168			143,742
	Deferred revenue				23,746			30,023
	Income taxes payable				4,892			2,406
		Total current liabilities			237,368			304,116
Non-current income taxes payable					14,892			15,252
Other non-current liabilities					7,784			7,754
		Total liabilities			260,044			327,122
Stockholders' equity:
	Common stock				35			35
	Additional paid-in capital				462,973			454,144
	Accumulated other comprehensive income				20			38
	Retained earnings				266,787			267,348
		Total stockholders' equity			729,815			721,565
		Total liabilities and stockholders' equity		$	989,859		$	1,048,687

NETGEAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share and percentage data)
(Unaudited)
				Three Months Ended
				March 29,  2015				December 31,  2014				March 30,  2014
Net revenue				$	309,157			$	353,182			$	349,391
Cost of revenue					220,877				252,708				251,466
Gross profit					88,280				100,474				97,925
	Gross margin				28.6	%			28.4	%			28.0	%
Operating expenses:
	Research and development				20,452				22,908				22,181
	Sales and marketing				37,602				39,644				39,911
	General and administrative				11,023				11,557				11,375
	Restructuring and other charges				4,394				19				842
	Litigation reserves, net				(2,690	)			(1,265	)			117
	Goodwill impairment charges				--				74,196				--
		Total operating expenses			70,781				147,059				74,426
Income (loss) from operations					17,499				(46,585	)			23,499
	Operating margin				5.7	%			(13.2	) %			6.7	%
Interest income					52				79				57
Other income (expense), net					475				544				(108	)
Income (loss) before income taxes					18,026				(45,962	)			23,448
Provision (benefit) for income taxes					10,015				(5,609	)			9,037
Net income (loss)				$	8,011			$	(40,353	)		$	14,411
Net income (loss) per share:
	Basic			$	0.23			$	(1.16	)		$	0.39
	Diluted			$	0.23			$	(1.16	)		$	0.39
Weighted average shares used to compute net income (loss) per share:
	Basic				34,678				34,726				36,630
	Diluted				35,285				34,726				37,305

NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except percentage data)
(Unaudited)
STATEMENT OF OPERATIONS DATA:
			Three Months Ended
			March 29,  2015				December 31,  2014				March 30,  2014
GAAP gross profit			$	88,280			$	100,474			$	97,925
	Amortization of intangibles			2,590				2,625				2,619
	Stock-based compensation expense			496				504				471
	Losses on inventory commitments due to restructuring			407				--				--
Non-GAAP gross profit			$	91,773			$	103,603			$	101,015
Non-GAAP gross margin				29.7	%			29.3	%			28.9	%
GAAP research and development			$	20,452			$	22,908			$	22,181
	Stock-based compensation expense			(845	)			(1,038	)			(1,396	)
Non-GAAP research and development			$	19,607			$	21,870			$	20,785
GAAP sales and marketing			$	37,602			$	39,644			$	39,911
	Amortization of intangibles			(1,806	)			(1,771	)			(1,771	)
	Stock-based compensation expense			(1,393	)			(1,409	)			(1,949	)
Non-GAAP sales and marketing			$	34,403			$	36,464			$	36,191
GAAP general and administrative			$	11,023			$	11,557			$	11,375
	Stock-based compensation expense			(1,614	)			(1,837	)			(1,314	)
	Acquisition related expense			--				--				(8	)
Non-GAAP general and administrative			$	9,409			$	9,720			$	10,053
GAAP total operating expenses			$	70,781			$	147,059			$	74,426
	Amortization of intangibles			(1,806	)			(1,771	)			(1,771	)
	Stock-based compensation expense			(3,852	)			(4,284	)			(4,659	)
	Restructuring and other charges			(4,394	)			(19	)			(842	)
	Acquisition related expense			--				--				(8	)
	Litigation reserves, net			2,690				1,265				(117	)
	Goodwill impairment charges			--				(74,196	)			--
Non-GAAP total operating expenses			$	63,419			$	68,054			$	67,029

NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)
(In thousands, except percentage data)
(Unaudited)
STATEMENT OF OPERATIONS DATA (CONTINUED):
			Three Months Ended
			March 29,  2015				December 31,  2014				March 30,  2014
GAAP operating income (loss)			$	17,499			$	(46,585	)		$	23,499
	Amortization of intangibles			4,396				4,396				4,390
	Stock-based compensation expense			4,348				4,788				5,130
	Restructuring and other charges			4,394				19				842
	Acquisition-related expense			--				--				8
	Losses on inventory commitments due to restructuring			407				--				--
	Litigation reserves, net			(2,690	)			(1,265	)			117
	Goodwill impairment charges			--				74,196				--
Non-GAAP operating income			$	28,354			$	35,549			$	33,986
Non-GAAP operating margin				9.2	%			10.1	%			9.7	%
GAAP net income (loss)			$	8,011			$	(40,353	)		$	14,411
	Amortization of intangibles			4,396				4,396				4,390
	Stock-based compensation expense			4,348				4,788				5,130
	Restructuring and other charges			4,394				19				842
	Acquisition-related expense			--				--				8
	Losses on inventory commitments due to restructuring			407				--				--
	Litigation reserves, net			(2,690	)			(1,265	)			117
	Goodwill impairment charges			--				74,196				--
	Tax effect and tax related adjustments			(2,571	)			(18,898	)			(2,904	)
Non-GAAP net income			$	16,295			$	22,883			$	21,994

NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)
(In thousands, except per share data)
(Unaudited)
STATEMENT OF OPERATIONS DATA (CONTINUED):
			Three Months Ended
			March 29,  2015				December 31,  2014				March 30,  2014
NET INCOME (LOSS) PER DILUTED SHARE:
GAAP net income (loss) per diluted share			$	0.23			$	(1.16	)		$	0.39
	Amortization of intangibles			0.12				0.12				0.12
	Stock-based compensation expense			0.12				0.14				0.14
	Restructuring and other charges			0.12				0.00				0.02
	Acquisition-related expense			--				--				0.00
	Losses on inventory commitments due to restructuring			0.01				--				--
	Litigation reserves, net			(0.08	)			(0.04	)			0.00
	Goodwill impairment charges			--				2.10				--
	Tax effect and tax related adjustments			(0.06	)			(0.53	)			(0.08	)
Non-GAAP net income per diluted share *			$	0.46			$	0.65			$	0.59
Shares used in computing GAAP net income (loss) per diluted share				35,285				34,726				37,305
Shares used in computing non-GAAP net income per diluted share				35,285				35,348				37,305

*The sum of per diluted share impact may not total to non-GAAP net income per diluted share due to different share counts used in calculating GAAP net loss per diluted share and non-GAAP net income per diluted share. The GAAP net loss per diluted share calculation used a lower share count as it excluded potentially dilutive shares which are included in calculating non-GAAP net income per diluted share.

SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands, except per share data, DSO, inventory turns, weeks of channel inventory, headcount and percentage data)
(Unaudited)
			Three Months Ended
		March 29,  2015			December 31,  2014			September 28,  2014			June 29,  2014			March 30,  2014
Cash, cash equivalents and short-term investments			$	247,405		$	257,129		$	242,648		$	242,729		$	240,261
Cash, cash equivalents and short-term investments per diluted share			$	7.01		$	7.40		$	6.69		$	6.59		$	6.44
Accounts receivable, net			$	254,745		$	275,689		$	278,568		$	282,900		$	291,251
Days sales outstanding (DSO)				73			73			72			76			74
Inventories			$	200,948		$	222,883		$	206,494		$	194,533		$	201,630
Ending inventory turns				4.4			4.5			4.9			4.9			5.0
Weeks of channel inventory:
	U.S. retail channel			7.7			7.8			7.7			10.5			9.7
	U.S. distribution channel			11.5			12.0			10.6			12.0			9.8
	EMEA distribution channel			4.4			5.4			4.4			4.0			4.1
	APAC distribution channel			7.4			7.2			6.8			9.0			7.1
Deferred revenue (current and non-current)			$	25,802		$	31,621		$	35,654		$	35,229		$	32,070
Headcount				979			1,038			1,047			1,033			1,023
Non-GAAP diluted shares				35,285			35,348			36,250			36,808			37,305

NET REVENUE BY GEOGRAPHY
		Three Months Ended
		March 29,  2015						December 31,  2014						March 30,  2014
Americas		$	173,786		56	%		$	194,673		55	%		$	194,779		55	%
EMEA			89,109		29	%			106,237		30	%			106,793		31	%
APAC			46,262		15	%			52,272		15	%			47,819		14	%
Total		$	309,157		100	%		$	353,182		100	%		$	349,391		100	%

NET REVENUE BY SEGMENT
		Three Months Ended
		March 29,  2015						December 31,  2014						March 30,  2014
Retail		$	120,957		39	%		$	147,864		42	%		$	118,232		33	%
Commercial			72,731		24	%			79,393		22	%			78,863		23	%
Service Provider			115,469		37	%			125,925		36	%			152,296		44	%
Total		$	309,157		100	%		$	353,182		100	%		$	349,391		100	%