NETGEAR (NTGR) Posts Loss in Q2, Revenues Beat Estimates
NETGEAR, Inc NTGR reported second-quarter 2023 non-GAAP loss of 16 cents per share compared with the non-GAAP loss of 19 cents recorded in the year-ago quarter. The reported figure was also narrower than the Zacks Consensus Estimate of a loss of 35 cents per share.
NETGEAR generated net revenues of $173.4 million, down 22.3% year over year. The downtick resulted from inventory reduction by CHP retail as well as SMB business partners amid volatile macroeconomic environment. However, the top line beat the consensus estimate by 10.8%.
NTGR noted sales to the service provider partners outperformed anticipation and are now somewhat stabilized due to increased demand.
NETGEAR, Inc. Price, Consensus and EPS Surprise
NETGEAR, Inc. price-consensus-eps-surprise-chart | NETGEAR, Inc. Quote
Region-wise, net revenues from the Americas were $116.6 million (67% of total revenues), down 19% year over year. Europe, the Middle East and Africa generated revenues (21%) of $36.2 million, down 19.6%. Revenues from the Asia Pacific region (12%) were down 39.7% to $20.6 million.
NETGEAR ended the quarter with 804,000 paid service subscribers, up 22.9% year over year.
Following the announcement, shares of the company were up 3.1% in the after-market trading on Jul 26. The stock has lost 28.8% compared with the sub-industry’s gain of 18.8% in the past year.
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Segmental Performance
Connected Home (including Orbi, Nighthawk, Nighthawk Pro Gaming, Armor, and Meural Brands) delivered revenues of $98.4 million, down 23.6% year over year. The downtick was due to softness in the retail and service business, which had witnessed pandemic-led elevated consumer demand in the prior-year period. Our estimate for the segment’s revenues was pegged at $75.4 million. Continued momentum in premium CHP products, like Orbi 8, Orbi 9 Wi-Fi mesh and 5G mobile hotspots acted as a tailwind.
NETGEAR holds about 37% share in the U.S. retail Wi-Fi market including mesh, routers, gateways and extenders.
Despite strong demand for ProAV-managed switched products, revenues from SMB declined 20.5% year over year to $75 million. The downtick was caused by continued channel inventory reductions by partners, owing to a volatile macroeconomic environment. Our estimate for segmental revenues was $80.7 million.
Other Details
Adjusted gross margin increased to 31.6% from 27.7% year over year. Non-GAAP operating loss was $10.7 million compared with operating loss of $4.2 million in the year-ago quarter.
Cash Flow & Liquidity
For Q2, NETGEAR used $34.6 million in cash from operations. It also had $106.4 million in cash and cash equivalents and $264.4 million of total current liabilities compared with $143.2 million and $317.7 million, respectively, in the quarter that ended Apr 2, 2023.
NTGR did not repurchase any shares in the quarter under review.
Q3 Outlook
For the third quarter of 2023, NETGEAR anticipates net revenues in the range of $175-$190 million. Management remains optimistic owing to healthy underlying demand trends in the SMB segment and the premium portion of CHP business amid volatile macroeconomic conditions.
GAAP operating margin is estimated to be between (7)% and (4)%. Non-GAAP operating margin is expected in the (4)-(1)% band.
NETGEAR currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks worth consideration in the broader technology space are Woodward WWD, Salesforce CRM and Adobe ADBE. Salesforce sports a Zacks Rank #1 (Strong Buy) while each of Adobe and Woodward carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Woodward’s fiscal 2023 earnings has increased 0.8% in the past 60 days to $3.61 per share. WWD’s long-term earnings growth rate is anticipated to be 13.5%. Shares of WWD have risen 17.4% in the past year.
The consensus mark for Salesforce’s fiscal 2024 earnings is pegged at $7.44 per share, up 4.6% in the past 60 days. The long-term earnings growth rate is anticipated to be 19.3%.
CRM’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average surprise being 15.5%. Shares of CRM have increased 25.2% in the past year.
The consensus estimate for Adobe’s fiscal 2023 earnings is pegged at $15.70 per share, up 1.8% in the past 60 days. The long-term earnings growth rate is anticipated to be 13.3%.
Adobe’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average beat being 3.1%. Shares of ADBE have improved 33.7% in the past year.
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