Netgear, Inc. (NASDAQ: NTGR) reported Q1 EPS of $0.21, $0.05 better than the analyst estimate of $0.16. Revenue for the quarter came in at $230 million versus the consensus estimate of $214.4 million.

• First quarter 2020 net revenue of $230.0 million, a decrease of 7.7% from the comparable prior year quarter.
• First quarter 2020 GAAP operating income of $0.7 million, or 0.3% of net revenue, as compared to operating income of $14.0 million, or 5.6% of net revenue, in the comparable prior year quarter.• First quarter 2020 non-GAAP operating income of $8.2 million, or 3.6% of net revenue, as compared to $22.7 million, or 9.1% of net revenue in the comparable prior year quarter.
• First quarter 2020 GAAP net loss per diluted share of $0.14, as compared to net income of $0.39 in the comparable prior year quarter.• First quarter 2020 non-GAAP net income per diluted share of $0.21, as compared to $0.60 in the comparable prior year quarter.

Patrick Lo, Chairman and Chief Executive Officer of NETGEAR, commented, “Q1 was a challenging quarter due to the spread of the Covid-19 pandemic, from China to the rest of Asia, to Europe and then to North America. Our team has endured supply and demand disruptions around the world on a rolling basis. Despite all these hurdles, our team has executed and exceeded all our Q1 objectives, including revenue and operating margin, rebalancing our worldwide channel inventory to be more WiFi 6 centric, introducing the third wave of WiFi 6 mesh products and the second generation 5G mobile hotspot plus a duo of new PoE plus switches for small businesses, and most important of all, adding 28% more paid service subscribers.”

Mr. Lo continued, “We saw two distinct phenomena during the Covid-19 pandemic. Whenever a shelter in place lockdown was declared, business activities fell and demand for our SMB products dropped significantly. At the same time, consumers are quickly finding out that high performance WiFi at home is a necessity and are rushing to upgrade their home WiFi, driving upticks in our consumer WiFi and mobile hotspot sales. We also saw significant channel shift from physical retail channel purchases to online purchases which put strain on the logistics of some of our online sales partners. Despite the rapidly changing environment, we were able to navigate the impact the pandemic had on the global economy in Q1 and delivered financial results better than our forecast. I would like to extend our appreciation to the team and to our channel partners.”

“We are continuing on our drive to increase our paid subscriber base worldwide. The number of our registered users went up from 12.8 million to 13.7 million, and our registered app users went up from 4.4 million to 5.1 million total. The number of net new paid service subscribers increased by 50,000 to 228,000 at the end of the first quarter. With this performance, we are well on our way to reaching our goal of doubling our subscriber count in 2020.”

Bryan Murray, Chief Financial Officer of NETGEAR, added, “We had another strong cash flow quarter, generating $29.0 million in cash from operations in the first quarter. Additionally, in Q1, we repurchased approximately 584,000 shares of common stock for $15.0 million. We remain confident in our ability to generate cash and maintain strong liquidity in this uncertain macro environment, as demonstrated by our track record during the previous two recessions in 2001 and 2009.”

Business Outlook

Mr. Murray continued, “Given the current worldwide business shutdown and shelter in place orders throughout most of the globe, and the uncertainty of how and when the lockdowns will be eased, we are unable to give a definitive financial outlook for Q2 and are consequently withdrawing prior targets of net revenue growth and operating margin for 2020 set at our Analyst Day in November 2019. However, we are committed to operating profitably, generating cash, and gaining share. We are committed to our R&D resources to ensure our market leading new product introductions for the rest of the year and beyond.”

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