NETGEAR, Inc. NTGR reported third-quarter 2024 non-GAAP earnings of 17 cents per share, which beat the Zacks Consensus Estimate of a loss of 4 cents. The company had reported non-GAAP earnings of 23 cents in the year-ago quarter. 

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NETGEAR generated net revenues of $182.9 million, beating the consensus estimate by 4.5%. The figure also beat the guidance of $170- $180 million. Revenues improved 27.1% sequentially. But the metric was down 7.6% on a year-over-year basis. The company completed a successful destocking plan, leading to a $27 million reduction in inventory in the third quarter. This is expected to help NTGR to align sell-in with sell-through with channel partners, thereby increasing revenue predictability. NETGEAR also witnessed a 22% spike in recurring revenues in the quarter under review. It now has 555,000 recurring subscribers. 

Region-wise, net revenues from the Americas were $127.8 million (70% of total revenues), down 9.4% year over year. Europe, the Middle East and Africa generated revenues (18%) of $32.8 million, down 8.1%. Revenues from the Asia Pacific region (12%) increased 5.5% year over year to $22.3 million.

NETGEAR, Inc. Price, Consensus and EPS Surprise

NETGEAR, Inc. price-consensus-eps-surprise-chart | NETGEAR, Inc. Quote

NETGEAR’s Segmental Details

Connected Home or CHP segment (which includes Orbi, Nighthawk and Armor brands) generated revenues of $104.3 million, down 18.1% year over year but up 24.1% sequentially. The segment continues to witness strength in the premium products portfolio and saw positive demand trends for new M7 Pro mobile hotspots and Nighthawk products. Revenues from the Service provider channel were $22.9 million, gaining from the earlier launch of M7 Pro mobile hotspots. 

Driven by ongoing momentum for ProAV managed switch products (which grew in double digits year over year), revenues from NETGEAR for Business (NFB) jumped 11.4% year over year and 31.2% sequentially to $78.5 million.

Adjusted gross margin decreased to 31.1% from 35% year over year. Non-GAAP operating income was $1.6 million compared with operating income of $5.3 million in the year-ago quarter.

Non-GAAP operating expenses were $55.3 million, down 13.7%.

NTGR’s Cash Flow & Liquidity

For the quarter ended Sept. 29, 2024, NETGEAR generated $107.7 million in cash from operations. 

It also had $395.7 million in cash and cash equivalents and short-term investments and $271.4 million of total current liabilities. The strong cash balance was driven by a litigation settlement with TP-Link. 

NTGR repurchased 99,000 shares worth $1.5 million in the quarter under review due to trading restrictions. The company has 3.8 million shares left under existing authorization and it expects to resume buyback in the fourth quarter.

NTGR’s Q4 Guidance

Management projects net revenues in the band of $160-$175 million. The company expects to see more predictable performance following the completion of destocking for NFB and CHP businesses. NETGEAR added that while the market is showing signs of recovery, the company expects higher promotional activity due to the holiday season within the retail business for its CHP segment. 

It anticipates revenues from the service provider channel to be nearly $20 million in the fourth quarter, slightly down sequentially, owing to the earlier launch of the M7 Pro mobile hotspot. 

Gross margins and operating margins are likely to remain affected by ongoing inventory reduction efforts and elevated transportation costs, including those related to the Red Sea shipping crisis.

GAAP operating margin is forecasted to be between (12.4)% and (9.4)%. Non-GAAP operating margin is estimated in the band of (8)-(5)%.

GAAP tax benefit is expected to be between $2 million and $3 million, with a non-GAAP tax benefit projected to be between breakeven and $1 million for the fourth quarter of 2024.

Zacks Rank of NTGR

NETGEAR currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank  stocks here.

The stock has surged 63.6% compared with sub-industry’s gain of 6.2% in the past year.

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Recent Performance of Other Companies in Tech Space

Seagate Technology Holdings plc STX reported first-quarter fiscal 2025 non-GAAP earnings of $1.58 per share, beating the Zacks Consensus Estimate by 6.8%. The company reported a non-GAAP loss of 22 cents per share in the year-ago quarter. This improvement in the bottom line was driven by a favorable mix shift to mass-capacity products and a better pricing environment. Non-GAAP revenues of $2.168 billion beat the Zacks Consensus Estimate by 2.4%. The figure increased 49% on a year-over-year basis and 15% sequentially. Shares of STX have gained 46.1% in the past year.

Badger Meter, Inc BMI reported EPS of $1.08 for the third quarter of 2024, beating the Zacks Consensus Estimate by 5.9%. Quarterly net sales were $208.4 million, up 12% from $186.2 million in the year-ago quarter. This uptick resulted from continued strong yet normalizing demand for its tailorable water management solutions. Shares of BMI have gained 47.9% in the past year. 

Iridium Communications IRDM reported EPS of 21 cents for the third quarter of 2024, beating the Zacks Consensus Estimate by 5%. The company incurred a loss of a cent per share in the prior-year quarter. Quarterly revenues were $212.8 million, up 8% from the year-ago level, driven by strength across all three segments. The Zacks Consensus Estimate was pegged at $205.7 million. Shares of IRDM have lost 20.4% in the past year.

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