Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Netgear Inc (NASDAQ:NTGR) surpassed the high end of its guidance range for revenue and operating margin in Q4 2024.
• The company successfully reduced its finished goods inventory by approximately 86 million or 35% from the prior year.
• Netgear Inc (NASDAQ:NTGR) achieved a significant settlement in a patent dispute, adding more than $100 million in cash to its balance sheet.
• Recurring revenue grew 25% year over year, with almost 35 million in annual recurring revenue by the end of 2024.
• The company has a strong cash position, enabling it to buy back over $33 million in stock at a significant discount.

Negative Points

• Netgear Inc (NASDAQ:NTGR) faced supply constraints for certain Pro A/V managed switch products, impacting Q1 2025 guidance.
• The company reported a non-GAAP operating loss of $49.6 million for the full year 2024.
• Revenue for the full year 2024 was down 9.1% compared to the prior year, impacted by macroeconomic factors and channel destocking.
• The CHP business saw a 14.2% year-over-year decline in net revenue in Q4 2024.
• Netgear Inc (NASDAQ:NTGR) anticipates a decline in service provider revenue in Q1 2025, contributing to a muted top-line guidance.

Q & A Highlights

• Warning! GuruFocus has detected 7 Warning Sign with NTGR.

Q: Can you touch a little bit more on the supply constraints you are seeing in the B2B side of the business? A: (CJ Prober, CEO) The supply constraints are primarily in our managed switches that fuel our Pro AV business. There was lower optimism for that category exiting 2023, leading to lower forecasts. However, demand accelerated beyond expectations, causing us to chase supply. We're working with our ODM partners to address this, and we expect to be back on track by Q2.

Q: How do you see revenue seasonality playing out throughout 2025? A: (Brian Murray, CFO) In Q1, we expect some headwinds due to supply constraints in managed switches and normal seasonality in the CHP retail market. Service provider revenue is expected to be around $15 million. As we progress, we anticipate relief from supply constraints and normal retail seasonality, with service provider revenue for the year around $75 million.

Q: How are you preparing operationally for a potential ban on TP-Link, given recent headlines? A: (CJ Prober, CEO) We are monitoring the situation closely and considering a small investment in supply to be better prepared for any exclusion. If a ban occurs, it would require significant working capital investment, but we are not making that investment in advance of any decision. We are preparing to respond quickly if needed.

Q: Can you elaborate on your investment priorities for 2025? A: (CJ Prober, CEO) Our investments are focused on building a world-class B2B go-to-market capability, insourcing software capabilities, and filling product gaps. These efforts are primarily concentrated on our B2B business, aiming to enhance marketing, sales coverage, and software development.

Q: With a strong cash balance, are there any updates to your capital allocation priorities? A: (CJ Prober, CEO) Our priorities remain the same: organic investments, share repurchases, and exploring acquisition opportunities. We are committed to being disciplined in evaluating acquisitions that can accelerate our transformation, particularly in software, product adjacencies, and scale.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.