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NETGEAR (NTGR) Q1 Loss Wider Than Expected, Revenues Fall Y/Y
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NETGEAR, Inc (NTGR - Free Report) reported first-quarter 2024 non-GAAP loss of 28 cents per share compared with non-GAAP loss of 19 cents recorded in the year-ago quarter. The reported figure was wider than the Zacks Consensus Estimate of a loss of 27 cents.
NTGR generated net revenues of $164.6 million, down 9% year over year. However, the top line beat the consensus estimate by 0.4%.
Management noted that tough macroeconomic conditions along with inflationary pressure and high interest rates compelled channel partners to drive down inventory levels across both the consumer and B2B businesses, thereby affecting the top-line performance.
Further, higher destocking coupled with an unfavorable product mix (shift from premium-consumer products to service-provider products) and a promotional retail market environment negatively impacted profitability in the quarter.
Region-wise, net revenues from the Americas were $109.9 million (67% of total revenues), down 9.8% year over year. Europe, the Middle East and Africa generated revenues (19%) of $31.2 million, down 20.4% year over year. Revenues from the Asia Pacific region (14%) increased 18.5% year over year to $23.5 million.
NETGEAR ended the quarter with 928,000 paid service subscribers.
Following the announcement, shares tanked 20.2% in the after-market trading on May 1. In the past year, the stock has risen 9.6% compared with sub-industry’s breakeven growth.
Image Source: Zacks Investment Research
Segmental Performance
Connected Home or CHP segment (which includes Orbi, Nighthawk, and Armor brands) delivered revenues of $96 million, down 6.6% year over year. The downtick was due to the underperformance of the overall U.S. retail market amid weak macroeconomic environment. Our estimate was pegged at $97.7 million.
Continued momentum in premium CHP products (including newly released Wi-Fi 7 Orbi 97x mesh system and premium mobile hotspot) acted as a tailwind.
Despite a strong demand for ProAV-managed switched products, revenues from NETGEAR for Business (NFB) revenues declined 12.2% year over year to $68.6 million. The downtick was caused by continued channel inventory reductions by channel partners. Our estimate was $66.1 million.
Other Details
Adjusted gross margin decreased to 29.5% from 33.6% year over year. Non-GAAP operating loss was $16 million compared with operating loss of $7.07 million in the year-ago quarter.
Non-GAAP operating expenses were $64.6 million, down 4.8% year over year.
Cash Flow & Liquidity
For the quarter ended Mar 31, 2024, NETGEAR generated $17.2 million in cash from operations. It also had $172.7 million in cash and cash equivalents and $244.3 million of total current liabilities compared with $176.7 million and $264.4 million, respectively, in the quarter that ended on Dec 31, 2023.
NTGR repurchased 783,000 shares worth $11.4 million in the quarter under review.
Q2 Outlook
Management anticipates net revenues in the range of $125-$140 million. The company expects to accelerate through NFB and CHP destocking activities with its channel partners resulting in a headwind of $25-$30 million to quarterly revenues.
Further NTGR added that higher cost of inventory amid the company’s inventory reduction efforts and phasing out slower moving inventory in an accelerated manner is likely to weigh down on the margin performance in the current quarter.
GAAP operating margin is estimated to be between (30.9)% and (27.9)%. Non-GAAP operating margin is expected in the band of (25)-(22)%.
The Zacks Consensus Estimate for Badger Meter’s 2024 EPS is pegged at $3.89, up 9.9% in the past 60 days. The long-term earnings growth rate is 15.6%.
BMI’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 12.7%. Shares of BMI have soared 32.6% in the past year.
The Zacks Consensus Estimate for CRM’s fiscal 2025 EPS is pegged at $9.71. Salesforce’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 5.1%.
The long-term earnings growth rate for CRM is 17.4%. Shares of CRM have gained 38.7% in the past year.
The Zacks Consensus Estimate for DSGX’s fiscal 2025 EPS has increased 3% in the past 60 days to $1.69. Descartes earnings beat the Zacks Consensus Estimate in two of the last four quarters, while missing in the remaining two quarters, the average surprise being 5.1%. Shares of DSGX have gained 21.3% in the past year
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NETGEAR (NTGR) Q1 Loss Wider Than Expected, Revenues Fall Y/Y
NETGEAR, Inc (NTGR - Free Report) reported first-quarter 2024 non-GAAP loss of 28 cents per share compared with non-GAAP loss of 19 cents recorded in the year-ago quarter. The reported figure was wider than the Zacks Consensus Estimate of a loss of 27 cents.
NTGR generated net revenues of $164.6 million, down 9% year over year. However, the top line beat the consensus estimate by 0.4%.
Management noted that tough macroeconomic conditions along with inflationary pressure and high interest rates compelled channel partners to drive down inventory levels across both the consumer and B2B businesses, thereby affecting the top-line performance.
Further, higher destocking coupled with an unfavorable product mix (shift from premium-consumer products to service-provider products) and a promotional retail market environment negatively impacted profitability in the quarter.
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 $109.9 million (67% of total revenues), down 9.8% year over year. Europe, the Middle East and Africa generated revenues (19%) of $31.2 million, down 20.4% year over year. Revenues from the Asia Pacific region (14%) increased 18.5% year over year to $23.5 million.
NETGEAR ended the quarter with 928,000 paid service subscribers.
Following the announcement, shares tanked 20.2% in the after-market trading on May 1. In the past year, the stock has risen 9.6% compared with sub-industry’s breakeven growth.
Image Source: Zacks Investment Research
Segmental Performance
Connected Home or CHP segment (which includes Orbi, Nighthawk, and Armor brands) delivered revenues of $96 million, down 6.6% year over year. The downtick was due to the underperformance of the overall U.S. retail market amid weak macroeconomic environment. Our estimate was pegged at $97.7 million.
Continued momentum in premium CHP products (including newly released Wi-Fi 7 Orbi 97x mesh system and premium mobile hotspot) acted as a tailwind.
Despite a strong demand for ProAV-managed switched products, revenues from NETGEAR for Business (NFB) revenues declined 12.2% year over year to $68.6 million. The downtick was caused by continued channel inventory reductions by channel partners. Our estimate was $66.1 million.
Other Details
Adjusted gross margin decreased to 29.5% from 33.6% year over year. Non-GAAP operating loss was $16 million compared with operating loss of $7.07 million in the year-ago quarter.
Non-GAAP operating expenses were $64.6 million, down 4.8% year over year.
Cash Flow & Liquidity
For the quarter ended Mar 31, 2024, NETGEAR generated $17.2 million in cash from operations. It also had $172.7 million in cash and cash equivalents and $244.3 million of total current liabilities compared with $176.7 million and $264.4 million, respectively, in the quarter that ended on Dec 31, 2023.
NTGR repurchased 783,000 shares worth $11.4 million in the quarter under review.
Q2 Outlook
Management anticipates net revenues in the range of $125-$140 million. The company expects to accelerate through NFB and CHP destocking activities with its channel partners resulting in a headwind of $25-$30 million to quarterly revenues.
Further NTGR added that higher cost of inventory amid the company’s inventory reduction efforts and phasing out slower moving inventory in an accelerated manner is likely to weigh down on the margin performance in the current quarter.
GAAP operating margin is estimated to be between (30.9)% and (27.9)%. Non-GAAP operating margin is expected in the band of (25)-(22)%.
Zacks Rank
NETGEAR currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks worth consideration in the broader technology space are Badger Meter (BMI - Free Report) , Salesforce (CRM - Free Report) and The Descartes Systems Group Inc (DSGX - Free Report) . While BMI sports a Zacks Rank #1 (Strong Buy), CRM and DSGX carry a Zacks Rank of 2 (Buy) each, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Badger Meter’s 2024 EPS is pegged at $3.89, up 9.9% in the past 60 days. The long-term earnings growth rate is 15.6%.
BMI’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 12.7%. Shares of BMI have soared 32.6% in the past year.
The Zacks Consensus Estimate for CRM’s fiscal 2025 EPS is pegged at $9.71. Salesforce’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 5.1%.
The long-term earnings growth rate for CRM is 17.4%. Shares of CRM have gained 38.7% in the past year.
The Zacks Consensus Estimate for DSGX’s fiscal 2025 EPS has increased 3% in the past 60 days to $1.69. Descartes earnings beat the Zacks Consensus Estimate in two of the last four quarters, while missing in the remaining two quarters, the average surprise being 5.1%. Shares of DSGX have gained 21.3% in the past year