Netgear, Inc. (NTGR) Tops Q2 EPS by 32c, Revenues Beat

Netgear, Inc. (NASDAQ: NTGR) reported Q2 EPS of $0.54, $0.32 better than the analyst estimate of $0.22. Revenue for the quarter came in at $280.1 million versus the consensus estimate of $235.29 million.

• Second quarter 2020 net revenue of $280.1 million, an increase of 21.3% from the comparable prior year quarter.
• Second quarter 2020 GAAP operating income of $8.9 million, or 3.2% of net revenue, as compared to operating income of $0.3 million, or 0.1% of net revenue, in the comparable prior year quarter.
  • Second quarter 2020 non-GAAP operating income of $21.0 million, or 7.5% of net revenue, as compared to $10.0 million, or 4.4% of net revenue in the comparable prior year quarter.
• Second quarter 2020 GAAP net income per diluted share of $0.20, as compared to $0.03 in the comparable prior year quarter.
  • Second quarter 2020 non-GAAP net income per diluted share of $0.54, as compared to $0.28 in the comparable prior year quarter.

Patrick Lo, Chairman and Chief Executive Officer of NETGEAR, commented, “The NETGEAR team navigated challenging conditions to accommodate the robust end demand we saw during the quarter, all while working remotely. Driven by the CHP side of the business, we achieved revenue growth of 21% and more than doubled our operating profit over the prior year. The surge in demand that began in March continued throughout the entire quarter and resulted in strong growth in both the retail and service provider channels for the CHP business. The work-from-home transition taking place worldwide is driving the adoption of high performance WiFi at home as an indispensable necessity and, as the leader in WiFi 6 technology, we stand well positioned to enable this new reality. In conjunction with the increased penetration of high-end WiFi 6 mesh systems and routers into the market, we accelerated the acquisition of new service subscribers, particularly in cybersecurity protection and parental control services, growing our paid subscriber base 28% sequentially and putting us on a trajectory to exceed our goal of doubling our subscriber count in 2020.”

Mr. Lo continued, “As many employees continue to work from home today, companies are growing increasingly confident that their workforce can be productive remotely and are beginning to measure the positive aspects of remote work. This is driving a consensus that remote work will be a larger part of the landscape even as the pandemic eventually eases. As a result, we see strong demand for high performance home WiFi continuing to fuel our revenue growth at least through the rest of this year. While providing an unexpected tailwind for CHP, the pandemic has at the same time created a headwind for SMB. That said, our SMB business benefited from the opportunity to drive sales of more sophisticated home office setups, including low port count switches and commercial grade WiFi. Within SMB, we continue to see success in our ProAV business and expect it to grow during the next two quarters. Nevertheless, uncertainty still exists in our SMB business as reopening plans in some economies have stalled, or even taken steps backwards, as is the case in the United States. Unhindered by remote work, our teams continued to deliver important new products to the market, including another WiFi 6 Orbi mesh product and two new POE+ switches. Our 5G mobile hotspots shipped in material volume in Q2, and we see the expanded use of mobile hotspots continuing in the second half as people increasingly take to the road or seek more flexible WiFi solutions, and as more schools equip underprivileged students with hotspots to provide high speed WiFi access for remote learning.”

Bryan Murray, Chief Financial Officer of NETGEAR, added, “We had another quarter of strong cash flow, generating $63.2 million in cash from operations in the second quarter. Additionally, in Q2, we repurchased approximately 315,000 shares of common stock for $7.5 million. Although the full economic impact and duration of the current pandemic remain unclear, we believe we are well positioned to serve the demand trends we are currently seeing in the marketplace. Preserving strong liquidity and generating cash are paramount during these uncertain times, and we are confident in our ability to do so through the remainder of this year.”

Business Outlook

Mr. Murray continued, “While we are confident in the ongoing strength of end market demand for home networks, there is still considerable uncertainty around the slowing or reversals of re-openings, new waves of COVID-19 and by extension the speed of the economic recovery worldwide in the second half of 2020. This makes our most profitable business, SMB, difficult to forecast, and heightens the risk of supply chain disruption. Given this, we feel it is prudent to continue to suspend our practice of giving guidance for Q3 and full year 2020.”

For earnings history and earnings-related data on Netgear, Inc. (NTGR) click here.

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