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Netgear® Reports Third Quarter Results
- Third quarter 2013 net revenue of $361.9 million, as compared to $315.2 million in the comparable prior year quarter, increase of 14.8% year-over-year
- Third quarter 2013 non-GAAP net income of $22.9 million, as compared to $25.3 million in the comparable prior year quarter, decrease of 9.4% year-over-year
- Third quarter 2013 non-GAAP diluted earnings per share of $0.58, as compared to $0.65 in the comparable prior year quarter, decrease of 10.8% year-over-year
- Company expects fourth quarter 2013 net revenue to be in the range of $340 million to $355 million, with non-GAAP operating margin in the range of 9.5% to 10.5%
NETGEAR, Inc. (NASDAQGS: NTGR), a global networking company that delivers innovative products to consumers, businesses and service providers, today reported financial results for the third quarter ended September 29, 2013.
Net revenue for the third quarter ended September 29, 2013 was $361.9 million, as compared to $315.2 million for the third quarter ended September 30, 2012, and $357.7 million in the second quarter ended June 30, 2013. The second and third quarter 2013 results reflect the full quarter effect of the AirCard business acquired from Sierra Wireless at the beginning of the second quarter of 2013. Net income, computed in accordance with GAAP, for the third quarter of 2013 was $14.5 million, or $0.37 per diluted share. This compared to GAAP net income of $23.8 million, or $0.61 per diluted share, for the third quarter of 2012, and GAAP net income of $14.0 million, or $0.36 per diluted share, in the second quarter of 2013.
Gross margin on a non-GAAP basis in the third quarter of 2013 was 28.9%, as compared to 31.6% in the year ago comparable quarter, and 29.8% in the second quarter of 2013. Non-GAAP operating margin was 9.9% in the third quarter of 2013, as compared to 11.5% in the third quarter of 2012, and 10.3% in the second quarter of 2013. Non-GAAP net income was $0.58 per diluted share in the third quarter of 2013, as compared to non-GAAP net income of $0.65 per diluted share in the third quarter of 2012, and non-GAAP net income of $0.62 per diluted share in the second quarter of 2013. The third quarter 2012 non-GAAP tax rate included a one-time tax rate benefit, which accounted for an incremental $0.05 per diluted share of earnings, which did not occur in the third quarter of 2013. The Company's non-GAAP tax rate was 37.2% in the third quarter 2013, as compared to 30.3% in the third quarter of 2012, and 32.9% in the second 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, gain on sale of cost method investment, impairment charges, 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, "Our Retail Business Unit had a successful back-to-school season and continued to take advantage of the 802.11ac upgrade cycle. Our Service Provider Business Unit performed well during the quarter exceeding initial forecast. Our Commercial Business Unit performed below expectations as demand for our storage products was weaker than expected during the quarter. However, we recently introduced additional products in this category, which we believe will strengthen our position in the market."
"We are looking forward to some exciting new product introductions in the fourth quarter. We just introduced the world's fastest 802.11ac router, the Nighthawk. The market excitement generated to date is the highest in NETGEAR history. We believe such ground breaking WiFi routers will help continue to increase our market share. We also recently introduced two high performance rack mount ReadyNAS storage products and an iPhone App for mobile access to ReadyNAS. We believe these new introductions will continue to strengthen our market position in the storage area. We believe leading edge products that satisfy customers' needs better than our competition is what has made us successful in the past and will propel our growth in the future."
Christine Gorjanc, Chief Financial Officer of NETGEAR, added, "Non-GAAP gross margin for the third quarter was down as compared to the comparable prior year quarter, due to the revenue mix being weighted more toward service provider. Looking forward, we have limited visibility driven by the lumpy nature of the service provider business and continued economic headwinds in Europe negatively affecting end-market demand. As such, we are expecting fourth quarter 2013 revenue to be in the range of approximately $340 million to $355 million and operating margin in the range of 9.5% to 10.5%. Additionally, during the fourth quarter we expect to incur a restructuring charge between $3 and $4 million dollars, as we will be realigning resources to better focus on the key growth markets we are pursuing."
Investor Conference Call / Webcast Details
NETGEAR will review the third quarter results and discuss management's expectations for the third quarter of 2013 today, Thursday, October 24, 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, October 31, 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 10000607.
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