NETGEAR INC

Previous wording

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of 1995. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words “believes,” “anticipates,” “plans,” “expects,” “intends,” “could,” “may,” “will,” and similar expressions are intended to identify forward-looking statements. The forward-looking statements represent NETGEAR, Inc.’s expectations or beliefs concerning future events based on information available at the time such statements were made and include statements regarding: NETGEAR’s future operating performance and financial condition, including expectations regarding growth, revenue, expenses, operating margin, gross margin, continued profitability and cash generation; NETGEAR's reporting structure; NETGEAR's belief of the principal competitive factors in the consumer, business, and service provider markets for networking products; expectations regarding more predictable performance that is aligned to the market, including as a result of our efforts to work with our channel partners to optimize their inventory carrying levels; inventory levels and expectation to return to historically normal inventory costs after reaching target inventory levels; expectations regarding transportation costs; expectations regarding demand in the premium portion of NETGEAR's Connected Home product portfolio; NETGEAR’s strategy of capitalizing on technological inflection points, developing products that serve a broader segment and simplifying and developing service offerings that build recurring service revenue streams; expectations regarding paid revenue from paid subscription service plans; expectations regarding product mix and market demand for NETGEAR’s products and services, including NETGEAR for Business and Connected Home products and subscription services and NETGEAR’s ability to respond to this demand; expectations regarding the timing, distribution, sales momentum and market acceptance of recent and anticipated new product and services introductions that position NETGEAR for growth and market share gain; expectations regarding competition, competitive factors, consumer price sensitivity and demand for NETGEAR’s products and services; expectations regarding sales channels, direct online store and in-app offerings; expectations regarding macroeconomic conditions and impacts to NETGEAR’s operational and financial performance and business strategies; expectations regarding the consumer retail networking market; expectations regarding existing cash, cash equivalents and short-term investments and anticipated cash requirements; expectations regarding inventory management and inventory costs; expe…

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Current wording

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words “believes,” “anticipates,” “plans,” “expects,” “intends,” “could,” “may,” “will,” and similar expressions are intended to identify forward-looking statements. The forward-looking statements represent NETGEAR’s expectations or beliefs concerning future events based on information available at the time such statements were made and include statements regarding: NETGEAR’s future operating performance and financial condition, including expectations regarding growth, revenue, expenses, operating margin, gross margin, continued profitability and cash generation; NETGEAR's reporting structure; NETGEAR's belief of the principal competitive factors in the business, consumer, and service provider markets for networking products; expectations regarding more predictable performance that is aligned to the market, including as a result of our efforts to work with our channel partners to optimize their inventory carrying levels; expectations regarding transportation costs; NETGEAR’s strategy of capitalizing on technological inflection points, developing products that serve a broader segment and simplifying and developing service offerings that build recurring service revenue streams; expectations regarding paid revenue from paid subscription service plans; expectations regarding product mix and market demand for NETGEAR’s products and services, including NETGEAR for Business, Home Networking and Mobile products and subscription services and NETGEAR’s ability to respond to this demand; expectations regarding competition, competitive factors, consumer price sensitivity and demand for NETGEAR’s products and services; expectations regarding sales channels, direct online store and in-app offerings; expectations regarding macroeconomic conditions and impacts to NETGEAR’s operational and financial performance and business strategies; expectations regarding the consumer retail networking market; expectations regarding existing cash, cash equivalents and short-term investments and anticipated cash requirements; expectations regarding inventory levels, inventory management and inventory costs; expectations regarding research and development expenses, sales and marketing expenses and general and administration expenses; expectations regarding expected tax rates or tax expenses; and expectations regarding NETGEAR’s subscription services and service revenue. These statements are based on management’s current expectations and are subject to a number of risks and uncertainties, including but not limite…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We are a global company that turns ideas into innovative, high-performance, and premium networking products. Our products power businesses and service providers and connect people. Our products are designed to simplify and improve people’s lives. Our strategy for NETGEAR for Business segment is to innovate manufacturing partner integrations, to deploy our products in businesses of all sizes, as well as to capitalize on our product leadership position to pursue new and adjacent verticals, such as to expand our reach into the broadcast industry. Our strategy for Connected Home segment is to develop products to serve a broader segment of the consumer networking market, to evolve our marketing messaging to highlight our points of differentiation, as well as to leverage our position and independence to forge value-added partnerships that drive innovation and improve the experience for our customers. Our goal is to enable businesses and people to collaborate and connect to a world of information and entertainment in or outside of the home. We are dedicated to delivering innovative and highly differentiated, connected solutions ranging from switching and wireless solutions to augment business networks and audio and video over Ethernet for Pro AV applications, to easy-to-use premium WiFi solutions, security and support services to protect and enhance home networks. Our products and services are built on a variety of technologies such as wireless (WiFi and 4G/5G mobile), Ethernet and powerline, with a focus on reliability and ease-of-use. Additionally, we continually invest in research and development to create new technologies and services and to capitalize on technological inflection points and trends, such as audio and video over Ethernet, multi-Gigabit internet service to homes, WiFi 7, and future technologies. Our product line consists of devices that create and extend wired and wireless networks, as well as services that complement and enhance our product line offerings. These products are available in multiple configurations to address the changing needs of our customers in each geographic region.

Current wording

We are a global leader in innovative and advanced networking technologies for businesses, homes, and service providers. We deliver a wide range of intelligent solutions designed to unleash the full potential of connectivity. Our goal is to power extraordinary experiences where people collaborate and connect to a world of information and innovation. Our highly differentiated connected solutions range from switching and wireless products to augment business networks and audio and video (“AV”) over Ethernet for Pro AV applications to our good, better, and best WiFi solutions, security and support services to protect and enhance business and home networks. Additionally, we continually invest in research and development to create new technologies and services and to capitalize on technological inflection points and trends, such as audio and video over Ethernet, multi-Gigabit internet service to homes, WiFi 7, eSIM and future technologies. Our product line helps to create and extend wired and wireless networks as well as devices that attach to the network, such as services that complement and enhance our product line offerings. These products are available in multiple configurations to address the changing needs of our customers in each geographic region.

Previous wording

We operate and report in two segments: NETGEAR for Business (formerly known as Small and Medium Business, or SMB) and Connected Home. We believe that this structure reflects our current operational and financial management, and that it provides the best structure for us to focus on growth opportunities while maintaining financial discipline. The leadership team of each segment is focused on serving customer needs through product and service development efforts, both from a product marketing and engineering standpoint. The NETGEAR for Business segment focuses on businesses and provides solutions for business networking, wireless local area network (“LAN”), audio and video over Ethernet for Pro AV applications, security and remote management providing enterprise-class functionality at an affordable price. The Connected Home segment focuses on consumers and provides high-performance, dependable, and easy-to-use premium WiFi internet networking solutions such as WiFi 6, WiFi 6E, and WiFi 7 Tri-band and Quad-band mesh systems, 4G/5G mobile products, and subscription services that provide consumers a range of value-added services focused on security, performance, privacy, and premium support. We conduct business across three geographic regions: Americas; Europe, Middle East, and Africa (“EMEA”); and Asia Pacific (“APAC”).

Current wording

As we announced in February 2025, beginning with the first quarter of 2025, we realigned our business structure by separating the previously disclosed Connected Home segment into two distinct reportable segments: Home Networking and Mobile. This realignment further strengthens our operational and financial management and enables us to further focus on growth opportunities while maintaining financial discipline. Effective January 1, 2025, we operate and report in three segments: NETGEAR for Business, Home Networking, and Mobile. The leadership team of each segment focuses on serving the unique needs of their customers through product and service development from both a product marketing and engineering standpoint, while also managing the sales and marketing functions that support their businesses. The NETGEAR for Business segment focuses on businesses and provides solutions for business networking, wireless local area network (“LAN”), audio and video over Ethernet for Pro AV applications, security and remote management providing enterprise-class functionality at an affordable price. The Home Networking segment focuses on consumers and provides high-performance, dependable and easy-to-use WiFi internet networking solutions such as WiFi 6, WiFi 6E and WiFi 7 Tri-band and Quad-band mesh systems, routers, and subscription services that provide consumers a range of value-added services focused on performance, security, privacy, and premium support. The Mobile segment focuses on both consumers and businesses and provides high-performance Mobile (4G/5G) products, including WiFi 7, WiFi 6/6E-enabled portable mobile hotspots and mobile routers, designed to meet the growing demand for on-the-go, high-speed and reliable internet connectivity with advanced security features. The prior-year segment financial information has been recast to conform to the current-year presentation. We conduct business across three geographic regions: Americas, EMEA, and APAC.

Previous wording

The markets in which our segments operate are intensely competitive and subject to rapid technological evolution. We believe that the principal competitive factors in the business, consumer, and service provider markets for networking products include product breadth, price points, size and scope of the sales channel, brand name, timeliness of new product introductions, product availability, performance, features, functionality, reliability, ease-of-installation, maintenance and use, security, as well as customer service and support. To remain competitive, we believe we must continue to aggressively invest resources to develop new products and subscription services, enhance our current products, and expand our channels and direct-to-consumer capabilities, while increasing engagement and maintaining satisfaction with our customers. Our investments reflect our steadfast focus on cybersecurity of our products and systems, as the rising threat of cyber-attacks and exploitation of security vulnerabilities in our industry is a significant consumer concern.

Current wording

The markets in which our segments operate are intensely competitive and subject to rapid technological evolution. We believe that the principal competitive factors in the business, consumer, and service provider markets for networking products include product breadth, price points, brand name, security and privacy, performance, features, functionality and reliability, product availability, timeliness of new product introductions, size and scope of the sales channel, ease-of-installation, maintenance and use, and customer service and support. To remain competitive, we believe we must continue to aggressively invest resources in highly differentiated, “good, better, best”, high performance reliable and trusted connectivity solutions, complemented by valuable subscription services, expanding our sales channels including our direct-to-consumer capabilities and custom installers, increasing engagement with our customers and manufacturing partners, and maintaining customer satisfaction worldwide. Our investments reflect our enhanced focus on the security of our products and systems, as the threat of cyber-attacks and exploitation of potential security vulnerabilities in our industry is on the rise and is increasingly a significant consumer concern.

Previous wording

We sell our products through multiple sales channels worldwide, including traditional and online retailers, wholesale distributors, direct market resellers (“DMRs”), value-added resellers (“VARs”), broadband service providers, and through our direct online store atwww.netgear.com. Our retail channel includes traditional and online retail locations both domestically and internationally, such as Amazon.com (worldwide), Best Buy, Wal-Mart, Costco, Staples, Office Depot, Target, Electra (Sweden), Fnac Darty (Europe), JB HiFi (Australia), Elkjop (Norway), and Boulanger (France). Our DMRs include CDW Corporation, Insight Corporation, and PC Connection in domestic markets. Our main wholesale distributors include Ingram Micro, TD Synnex, and D&H Distribution Company. In addition, we also sell our products through broadband service providers, such as multiple system operators, xDSL, mobile, and other broadband technology operators domestically and internationally. Some of these retailers and broadband service providers purchase directly from us, while others are fulfilled through wholesale distributors around the world. A substantial portion of our net revenue is derived from a limited number of wholesale distributors, service providers and retailers. While we expect these channels to continue to be a significant part of our sales strategy, increasingly, customers are choosing to purchase products and services directly from us. We expect revenue through our direct online store or in-app offerings to continue to increase as a percentage of overall revenue for the foreseeable future.

Current wording

We sell our products through multiple sales channels worldwide, including traditional and online retailers, wholesale distributors, DMRs, VARs, broadband service providers, and through our direct online store at www.netgear.com. Our retail channel includes traditional and online retail locations both domestically and internationally, such as Amazon.com (worldwide), Best Buy, Wal-Mart, Staples, Office Depot, Target, Electra (Sweden), Fnac Darty (Europe), JB HiFi (Australia), Elkjop (Norway), and Boulanger (France). Our DMRs include CDW Corporation, Insight Corporation, and PC Connection in domestic markets. Our main wholesale distributors include Ingram Micro, TD Synnex, and D&H Distribution Company. In addition, we also sell our products through broadband service providers, such as multiple system operators, xDSL, mobile, and other broadband technology operators domestically and internationally. Some of these retailers and broadband service providers purchase directly from us, while others are fulfilled through wholesale distributors around the world. A substantial portion of our net revenue is derived from a limited number of wholesale distributors, service providers and retailers. While we expect these channels to continue to be a significant part of our sales strategy, additionally customers are purchasing products and services directly from us. We expect revenue through our direct online store or in-app offerings to continue to increase for the foreseeable future.

Previous wording

During the three months ended September 29, 2024, our net revenue decreased by $15.0 million, compared to the prior year period, mainly driven by a decrease of $23.0 million in our Connected Home segment, partially offset by an increase of $8.0 million in our NETGEAR for Business segment. The decrease in Connected Home net revenue was in part due to market contraction, leading to a year-over-year decline in the retail channel, and a decline in net revenue in service provider channel. The increase in NETGEAR for Business net revenue was primarily due to the completion of our work with our channel partners to optimize their inventory levels and starting to see more predictable performance aligned to the market, led by the higher net revenue from the Pro AV product line of managed switches. Despite the decline in net revenue during the three months ended September 29, 2024, our premium portfolio of products continued to outperform the market. We also experienced continued strong demand for the Pro AV product line of managed switches, and growth in our services revenue. Our gross margin percentage decreased 390 basis points during the three months ended September 29, 2024, compared to the prior year period, primarily attributable to higher freight costs, and cost of inventory, partially offset by higher mix of NETGEAR for Business products, which generally carry higher gross margin. Income from operations increased by $96.5 million during the three months ended September 29, 2024, compared to the prior year period, primarily attributable to the payment received from the litigation settlement with TP-Link, leading to a contra-expense of $92.7 million in the litigation reserves, the reversal of an

Current wording

During the three months ended March 30, 2025, our net revenue decreased by $2.5 million, compared to the prior year period, primarily due to a decline of $7.3 million in our Mobile segment and a decline of $5.8 million in our Home Networking segment. The decreases were partially offset by an increase of $10.6 million in our NETGEAR for Business segment. The declines in Mobile and Home Networking net revenue were mainly driven by lower net revenue in the service provider channel. Conversely, the increase in NETGEAR for Business net revenue was primarily due to continued strong demand for the Pro AV product line of managed switches, which experienced double digit growth in end market sales, as well as growth in service revenue. Gross margin increased by 550 basis points compared to the prior year period, largely due to a higher mix of NETGEAR for Business products, which generally carry higher gross margin, as well as due to lower cost of inventory. Loss from operations decreased by $8.8 million, primarily due to the improved gross margin, partially offset by the lower net revenue.

Previous wording

Geographically, net revenue increased from NETGEAR for Business in Americas and APAC but decreased in EMEA, whereas net revenue decreased from Connected Home in all three regions, during the three months ended September 29, 2024, compared to the prior year period, respectively.

Current wording

Geographically, net revenue from NETGEAR for Business increased in all three regions, while net revenue from Home Networking decreased in Americas and APAC but increased in EMEA, and net revenue from Mobile decreased in Americas and EMEA but increased in APAC, during the three months ended March 30, 2025, compared to the prior year period, respectively.

Previous wording

Macroeconomic and geopolitical trends created uncertainty in the global economic environment since 2022. These include conditions such as the potential for a recession, fluctuations in inflation, interest rate changes, and the related negative impact on the global economy, foreign exchange rate fluctuations, particularly changes of the U.S. dollar, and ongoing worldwide tensions, including the Russia-Ukraine conflict, Israel-Hamas conflict, and Red Sea crisis. The extent of impacts from these macroeconomic and geopolitical trends on our ongoing operational and financial performance, including our ability to execute our business strategies in the expected time frame, will depend on future developments. The broader implications of the macroeconomic uncertainty, and any related disruptions to channel partners and freight are unpredictable. Refer to Item 1A, Risk Factors of Part II of this Quarterly Report on Form 10-Q for various risks and uncertainties associated with the macroeconomic trends and uncertainty.

Current wording

Macroeconomic and geopolitical trends have continued to create uncertainty in the global economic environment. Contributing factors include persistent inflation, elevated interest rates, foreign exchange rate fluctuation, particularly involving the U.S. dollar, and ongoing trade policy shifts, including tariffs related to the U.S. and key international countries. Geopolitical tensions, such as the Russia-Ukraine conflict, the Israel-Hamas war, and the Red Sea crisis, along with lingering supply chain disruptions, have further added to the complexity of the global landscape. The extent of impacts from these macroeconomic and geopolitical trends on our ongoing operational and financial performance, including our ability to execute our business strategies in the expected time frame, will depend on future developments. The broader implications of the macroeconomic uncertainty, and any related disruptions to channel partners and freight are unpredictable. Refer to Item 1A, Risk Factors of Part II of this Quarterly Report on Form 10-Q for various risks and uncertainties associated with the macroeconomic trends and uncertainty.

Previous wording

During the first half of 2024, we completed efforts to work with our channel partners to optimize their inventory carrying levels for both the NETGEAR for Business and Connected Home businesses and started to see more predictable performance aligned to the market in the three months ended September 29, 2024, which we expect to continue to see in the periods ahead. Looking forward, we will continue to reduce our slower moving inventory levels and expect to return to our historically normal inventory costs after we reach our target inventory levels of three months, and when transportation costs return to normal from their heightened levels partially as a result of the Red Sea crisis. We expect to experience continued net revenue growth in our NETGEAR For Business segment, led by our ProAV line of managed switches, and while we are seeing the signs of market recovery, we expect increased promotional activity in the Connected Home retail business due in part to the holiday promotional period. Accordingly, we expect the net revenue in the fourth fiscal quarter of 2024 to be in the range of $160 million to $175 million, including $20 million from the service provider channels. We aim to execute on our strategy of capitalizing on the technological inflection points of audio and video over Ethernet, WiFi 7, WiFi 6E, WiFi 6, and 5G, to develop products that serve a broader segment of the market with a good, better, best product strategy, and to simplify, develop and roll out service offerings that build recurring service revenue streams.

Current wording

Looking forward, we expect to continue to see more predictable performance that is aligned with the market for all of our businesses as our destocking and inventory reduction actions were completed. We expect to experience continued net revenue growth in our NETGEAR for Business segment, led by strong end-user demand for the Pro AV line of managed switches. However, although we expect to make continued improvements in our supply position, we anticipate that supply constraints will persist, which may limit our ability to fully capture the revenue potential of this growing business. For our Home Networking segment, we are seeing early signs of the benefit of our expanded product portfolio, including our more recently introduced WiFi 7 mesh and router products, addressing the market more effectively, and we expect to experience normal seasonality in this business. For our Mobile segment, we expect revenue to be in line with the first fiscal quarter of 2025 level as we await new product introductions later this year that will strengthen the portfolio. We aim to execute on our strategy of capitalizing on the technological inflection points of audio and video over Ethernet, WiFi 7, WiFi 6E, WiFi 6, and 5G, to develop products that serve a broader segment of the market with a good, better, best product strategy, and to simplify, develop and roll out service offerings that build recurring service revenue streams.

Previous wording

Net revenue in Americas decreased in the three and nine months ended September 29, 2024, driven by declines in Connected Home segment’s net revenue of 18.1% and 13.7%, respectively, and in NETGEAR for Business segment’s net revenue of 8.8% in the nine months ended September 29, 2024, compared to the prior year periods. The declines in Connected Home net revenue were primarily due to market contraction, leading to year-over-year declines in the retail channel in both the three and nine months ended September 29, 2024, and a decline in the service provider channel in the nine months ended September 29, 2024, compared to the prior year periods, respectively. The decline in NETGEAR for Business net revenue in the nine months ended September 29, 2024 was mainly due to our work with our channel partners in the first half of 2024 to optimize their inventory carrying levels. The decline in net revenue in Americas in the three months ended September 29, 2024 was partially offset by an increase in NETGEAR for Business segment’s net revenue of 15.7%, mainly driven by higher demand for the Pro AV product line of managed switches, compared to the prior year period.

Current wording

Net revenue in Americas decreased in the three months ended March 30, 2025, compared to the prior year period, primarily driven by declines in Mobile segment's net revenue of 33.8%, and in Home Networking segment’s net revenue of 5.7%, partially offset by an increase in NETGEAR for Business segment’s net revenue of 26.8%. The declines in Mobile and Home Networking segments' net revenue were primarily due to lower net revenue in the service provider channel. The increase in NETGEAR for Business segment's net revenue was primarily due to a higher demand for the Pro AV product line of managed switches, compared to the prior year period.

Previous wording

For further discussions specific to our NETGEAR for Business and Connected Home segments, refer to the "Segment Information" section below.

Current wording

For further discussions specific to our NETGEAR for Business, Home Networking and Mobile segments, refer to the "Segment Information" section below.

Previous wording

We expect our gross margin in the fourth fiscal quarter to be in line with or decrease slightly from the third fiscal quarter of 2024 level. Forecasting gross margin percentages is difficult, and there are a number of risks related to our ability to maintain or improve our current gross margin levels. Our cost of revenue as a percentage of net revenue can vary significantly based upon factors such as: uncertainties surrounding revenue levels, broad-based inflationary pressures and the uncertain macroeconomic environment, future pricing and/or potential discounts as a result of the economy or in response to the strengthening of the U.S. dollar in our international markets, competition, the timing of sales, and related production level variances; import customs duties and imposed tariffs; changes in technology; changes in product mix; expenses associated with writing off excessive or obsolete inventory; variability of stock-based compensation costs; royalties to third parties; fluctuations in freight costs; manufacturing and purchase price variances; changes in prices on commodity components; and warranty costs. We expect that revenue derived from paid subscription service plans will continue to increase in the future, which may have a positive impact on our gross margin. However, we will continue to experience fluctuations in our gross margin due to the factors discussed above.

Current wording

We expect our gross margin in the second fiscal quarter of 2025 to be in line with or decrease slightly from the first fiscal quarter of 2025 level. Forecasting gross margin percentages is difficult, and there are a number of risks related to our ability to maintain or improve our current gross margin levels. Our cost of revenue as a percentage of net revenue can vary significantly based upon factors such as: uncertainties surrounding revenue levels, broad-based inflationary pressures and the uncertain macroeconomic environment, future pricing and/or potential discounts as a result of the economy or in response to the strengthening of the U.S. dollar in our international markets, competition, the timing of sales, and related production level variances; import customs duties and imposed tariffs; changes in technology; changes in product mix; expenses associated with writing off excessive or obsolete inventory; variability of stock-based compensation costs; royalties to third parties; fluctuations in freight costs; manufacturing and purchase price variances; changes in prices on commodity components; and warranty costs. We expect that revenue derived from paid subscription service plans will continue to increase in the future, which may have a positive impact on our gross margin. However, we will continue to experience fluctuations in our gross margin due to the factors discussed above.

Previous wording

We believe that innovation and technological leadership is critical to our future success, and we are committed to continuing a significant level of research and development to develop new technologies, products and services. We expect research and development expenses in absolute dollar amount in the fourth fiscal quarter of 2024 to be in line with the third fiscal quarter of 2024 level. We continue to invest in research and development to grow audio and video over Ethernet, web-managed, AV over IP managed switches, NETGEAR for Business wireless products, our cloud platform capabilities, our recurring services and mobile applications and to create and expand our hardware product offerings focused on premium WiFi 7, and WiFi 6/6E, Advanced 4G/5G mobile and 5G coverage solutions. Research and development expenses may fluctuate depending on the timing and number of development activities and could vary significantly as a percentage of net revenue, depending on actual revenues achieved in any given quarter.

Current wording

We believe that innovation and technological leadership is critical to our future success, and we are committed to continuing a significant level of research and development to develop new technologies, products and services. We expect research and development expenses in absolute dollar amount in the second fiscal quarter of 2025 to increase from the first fiscal quarter of 2025 level. We continue to invest in research and development to grow audio and video over Ethernet, web-managed, AV over IP managed switches, NETGEAR for Business wireless products, our cloud platform capabilities, our recurring services and mobile applications, and to broaden our WiFi 7 offerings for consumers to align to our good-better-best strategy and broaden our 5G mobile products. Our NETGEAR for Business segment will continue to receive most of our incremental investments in the remainder of 2025 and we will be focused on in-sourcing our software capabilities, expanding our product portfolio that will allow us to grow our share in the sizable AV and enterprise WiFi markets. We recently established an in-house research and development center in Chennai, India through the hiring of a team of experienced engineers. This strategic initiative is expected to accelerate the Company’s transition to internally managed software development, resulting in increased innovation velocity, reduced development costs, and decreased reliance on third-party vendors. The newly onboarded team will focus on leveraging artificial intelligence to significantly simplify networking solutions for small and medium-sized businesses. Research and development expenses may fluctuate depending on the timing and number of development activities and could vary significantly as a percentage of net revenue, depending on actual revenues achieved in any given quarter.

Previous wording

We expect sales and marketing expenses in absolute dollar amount in the fourth fiscal quarter of 2024 to be slightly up from the third fiscal quarter of 2024 level as we look to make some investments in sales resources in support of our NETGEAR for Business segment. Expenses may fluctuate depending on revenue levels achieved as certain expenses, such as commissions, are determined based upon the revenues achieved. Forecasting sales and marketing expenses is highly dependent on expected revenue levels and could vary significantly depending on actual revenue achieved in any given quarter. Marketing expenses may also fluctuate depending upon the timing, extent and nature of marketing programs. Marketing expenditure committed with a customer is generally recorded as a reduction of revenue per authoritative guidance.

Current wording

We expect sales and marketing expenses in absolute dollar amount in the second fiscal quarter of 2025 to increase from the first fiscal quarter of 2025 level. Most of our incremental investments in sales and marketing in 2025 will be related to go-to-market capabilities of our product offerings in the NETGEAR for Business segment, partially offset by efficiencies in marketing on the consumer side. Expenses may fluctuate depending on revenue levels achieved as certain expenses, such as commissions, are determined based upon the revenues achieved. Forecasting sales and marketing expenses is highly dependent on expected revenue levels and could vary significantly depending on actual revenue achieved in any given quarter. Marketing expenses may also fluctuate depending upon the timing, extent and nature of marketing programs. Marketing expenditure committed with a customer is generally recorded as a reduction of revenue per authoritative guidance.

Previous wording

The decreases in general and administrative expenses for the three and nine months ended September 29, 2024, compared to the prior year periods, were primarily attributable to a $10.9 million reduction in expenses to offset the legal fees incurred to date associated with the litigation settlement payment from TP-Link. The decreases in the three and nine months ended September 29, 2024 were partially offset by increases in personnel-related expenditures of $3.3 million and $7.7 million, respectively, mainly due to higher variable compensation, and stock-based compensation associated with executives’ transition.

Current wording

General and administrative expenses remained flat for the three months ended March 30, 2025, compared to the prior year period. The decrease in legal and professional services of $2.2 million for the three months ended March 30, 2025 was offset by increases in personnel-related expenditures of $1.1 million, mainly due to stock-based compensation associated with executives’ transition and higher variable compensation, and in IT and facility allocations of $0.8 million.

Previous wording

We expect general and administration expenses in absolute dollar amount in the fourth fiscal quarter of 2024 to be in line with or slightly lower than the second fiscal quarter of 2024, primarily due to lower litigation defense costs. General and administrative expenses could fluctuate depending on a number of factors, including the level and timing of expenditures associated with litigation defense costs in connection with the litigation matters described in Note 8, Commitments and Contingencies, in Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q. Future general and administrative expense increases or decreases in absolute dollars are difficult to predict due to the lack of visibility of certain costs, including legal costs associated with defending claims against us, as well as legal costs associated with asserting and enforcing our intellectual property portfolio and other factors.

Current wording

We expect general and administration expenses in absolute dollar amount in the second fiscal quarter of 2025 to be in line with the first fiscal quarter of 2025 level. General and administrative expenses could fluctuate depending on a number of factors, including the level and timing of expenditures associated with litigation defense costs in connection with the litigation matters described in Note 8, Commitments and Contingencies, in Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q. Future general and administrative expense increases or decreases in absolute dollars are difficult to predict due to the lack of visibility of certain costs, including legal costs associated with defending claims against us, as well as legal costs associated with asserting and enforcing our intellectual property portfolio and other factors.

Previous wording

Restructuring and other charges for the three and nine months ended September 29, 2024 increased, compared to the prior year periods, primarily due to our reorganization to better align the cost structure of the business with the areas to deliver long-term growth and expanding profitability. For a detailed discussion of restructuring and other charges, refer to Note 13, Restructuring and Other Charges, in Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Current wording

Restructuring and other charges for the three months ended March 30, 2025 increased, compared to the prior year period, primarily due to our previously announced reorganization undertaken in January 2025. This restructuring was aimed at reducing costs, which we are reinvesting into the business to capitalize on our highest priority opportunities to expand revenue and profitability. For a detailed discussion of restructuring and other charges, refer to Note 13, Restructuring and Other Charges, in Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Previous wording

Other income, net consists of interest income, which represents amounts earned and incurred on our cash, cash equivalents and short-term investments, and other income and expenses, which primarily represents gains and losses on transactions denominated in foreign currencies, gains and losses on investments, and other non-operating income and expenses, including gain on litigation settlements. The following table presents other income (expenses), net for the periods indicated:

Current wording

Other income, net consists of interest income, which represents amounts earned and incurred on our cash, cash equivalents and short-term investments, and other income and expenses, which primarily represents gains and losses on transactions denominated in foreign currencies, gains and losses on investments, and other non-operating income and expenses, including gain on litigation settlements. The following table presents other income, net for the periods indicated:

Previous wording

In the first fiscal quarter of 2024, resulting from certain segment structure changes, we revised our allocation method by allocating certain historically unallocated operating expenses to our individual operating segments. The prior-year segment financial information has been recast to conform to the current-year presentation. Additional information on the change, a description of our products and services, as well as segment financial data, for each segment and a reconciliation of segment contribution income (loss) to income (loss) before income taxes can be found in Note 11, Segment Information, and information on net revenue by sales channels can be found in Disaggregation of Revenuein Note 3, Revenue, in the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Current wording

As disclosed above, in the first fiscal quarter of 2025, we realigned our business structure by separating the Connected Home segment into two distinct reportable segments: Home Networking and Mobile. Effective January 1, 2025, we operate and report in three segments: NETGEAR for Business, Home Networking and Mobile. The prior-year segment financial information has been recast to conform to the current-year presentation. Additional information on the realignment, a description of our products and services, as well as segment financial data, for each segment and a reconciliation of segment contribution income (loss) to income (loss) before income taxes can be found in Note 11, Segment Information, and information on net revenue by sales channels can be found in Disaggregation of Revenuein Note 3, Revenue, in the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Previous wording

NETGEAR for Business contribution income increased in the three months ended September 29, 2024, compared to the prior year period, primarily due to higher net revenue. NETGEAR for Business contribution income decreased in the nine months ended September 29, 2024, compared to the prior year period, primarily due to lower net revenue, and lower gross margin achievement mainly attributable to higher excess and obsolete inventory expense as we accelerated the depletion of our slower moving inventory, and higher cost of inventory and freight costs.

Current wording

NETGEAR for Business segment's contribution income increased in the three months ended March 30, 2025, compared to the prior year period, primarily due to higher net revenue and higher gross margin achievement, mainly driven by lower sales returns, lower charges for excess or obsolete inventory, and lower cost of inventory.

Previous wording

Connected Home net revenue decreased in the three and nine months ended September 29, 2024, compared to the prior year periods, in part due to market contraction, leading to year-over-year declines in the retail channel, and a decline in net revenue in service provider channel. Despite the declines in the overall consumer networking market during the three and nine months ended September 29, 2024, our premium portfolio of products continued to outperform the market, and we saw growth in our service revenue, as compared to the prior year periods. Geographically, Connected Home net revenue decreased in all three regions in the three and nine months ended September 29, 2024, compared to the prior year periods.

Current wording

Home Networking net revenue decreased in the three months ended March 30, 2025, compared to the prior year period, primarily due to a decline in net revenue in service provider channel, and, to a lesser extent, due to market contraction. Despite the decline in the overall consumer networking market during the three months ended March 30, 2025, our premium portfolio of products continued to outperform the market, and we saw growth in our service revenue, as compared to the prior year period. Geographically, Home Networking net revenue in the three months ended March 30, 2025 decreased in Americas and APAC, but increased in EMEA, compared to the prior year period.

Previous wording

Our principal sources of liquidity are cash, cash equivalents, short-term investments and cash generated from operations. As of September 29, 2024, we had cash, cash equivalents and short-term investment of $395.7 million, an increase of $112.1 million from December 31, 2023.

Current wording

Our principal sources of liquidity are cash, cash equivalents, short-term investments and cash generated from operations. As of March 30, 2025, we had cash, cash equivalents and short-term investment of $391.9 million, a decrease of $16.8 million from December 31, 2024.

Previous wording

As of September 29, 2024, approximately 22% of our cash and cash equivalents and short-term investments were outside of the U.S., which are subject to fluctuation based on the settlement of intercompany balances. As we repatriate these funds in accordance with our designation of funds not permanently reinvested outside of the U.S., we will be required to pay income taxes in certain U.S. states and applicable foreign withholding taxes during the period when such repatriation occurs. We have recorded deferred taxes for the tax effect of repatriating the funds to the U.S.

Current wording

As of March 30, 2025, approximately 25% of our cash and cash equivalents and short-term investments were outside of the U.S., which are subject to fluctuation based on the settlement of intercompany balances. As we repatriate these funds in accordance with our designation of funds not permanently reinvested outside of the U.S., we will be required to pay income taxes in certain U.S. states and applicable foreign withholding taxes during the period when such repatriation occurs. We have recorded deferred taxes for the tax effect of repatriating the funds to the U.S.

Previous wording

Net cash provided by operating activities increased by $142.7 million in the nine months ended September 29, 2024, compared to the prior year period, primarily due to a net proceed before tax of $103.6 million resulting from the litigation settlement payment from TP-Link and other favorable working capital movements. Our accounts payable (excluding payables related to property and equipment) increased from $46.4 million as of December 31, 2023 to $50.9 million as of September 29, 2024, primarily due to the timing of inventory receipts and supplier payments. Accounts receivable decreased from $185.1 million as of December 31, 2023 to $177.3 million as of September 29, 2024, primarily due to the timing of cash collections and lower revenue. Inventory decreased from $248.9 million as of December 31, 2023 to $162.0 million as of September 29, 2024. We expect to continue generating cash from operating activities in the fourth quarter of fiscal 2024 as we continue to reduce our slower moving inventory levels.

Current wording

Net cash used in operating activities was $8.7 million in three months ended March 30, 2025, compared to $17.2 million provided in the prior year period, primarily due to unfavorable working capital movements. Accounts receivable decreased from $156.2 million as of December 31, 2024 to $142.7 million as of March 30, 2025, primarily due to the timing of cash collections and lower revenue. Our inventory decreased from $162.5 million as of December 31, 2024 to $157.9 million as of March 30, 2025, as we continued in optimizing our inventory levels. Accounts payable (excluding payables related to property and equipment) decreased from $57.4 million as of December 31, 2024 to $53.3 million as of March 30, 2025, primarily due to the timing of inventory receipts and supplier payments.

Previous wording

Net cash used in investing activities increased by $7.4 million in the nine months ended September 29, 2024, compared to the prior year period, mainly driven by higher net purchases of short-term investments and higher purchases of property and equipment.

Current wording

Net cash used in investing activities decreased by $10.1 million in the three months ended March 30, 2025, compared to the prior year period, mainly driven by lower net purchases of short-term investments and lower purchases of property and equipment.

Previous wording

Net cash used in financing activities was $22.4 million in the nine months ended September 29, 2024, compared to net cash provided by financing activities of $0.8 million in the prior year period, primarily due to repurchases of our common stock in the current year period.

Current wording

Net cash used in financing activities decreased by $3.3 million in the three months ended March 30, 2025, compared to the prior year period, primarily due to higher proceeds from the exercise of stock options and lower repurchases of our common stock, partially offset by higher payments for restricted stock unit tax withholdings.

Previous wording

From time to time, our Board of Directors has authorized programs under which we may repurchase shares of our common stock. Under the authorizations, the timing and actual number of shares subject to repurchase are at the discretion of management and are contingent on a number of factors, such as levels of cash generation from operations, cash requirements for acquisitions and the price of our common stock. During the nine months ended September 29, 2024, we repurchased and retired, reported based on trade date, approximately 1.7 million shares of common stock, at a cost of approximately $22.9 million under the repurchase authorization. We did not repurchase any shares of common stock during the nine months ended October 1, 2023. On July 16, 2024, the Board of Directors authorized management to repurchase up to 3.0 million shares of our outstanding common stock, incremental to the remaining shares under our previous repurchase program. As of September 29, 2024, approximately 3.8 million shares remained authorized for repurchase under the repurchase program. We also repurchased and retired, reported based on trade date, approximately 222,000 shares and 194,000 shares of common stock, at a cost of approximately $3.3 million and $2.7 million during the nine months ended September 29, 2024 and October 1, 2023, respectively, to administratively facilitate the withholding and subsequent remittance of personal income and payroll taxes for individuals receiving Restricted Stock Units. For a detailed discussion of our common stock repurchases, refer to Note 9,

Current wording

From time to time, our Board of Directors has authorized programs under which we may repurchase shares of our common stock. Under the authorizations, the timing and actual number of shares subject to repurchase are at the discretion of management and are contingent on a number of factors, such as levels of cash generation from operations, cash requirements for acquisitions and the price of our common stock. As of March 30, 2025, approximately 3.1 million shares remained authorized for repurchase under the repurchase program. We repurchased, retired and reported, based on trade date, approximately 0.3 million and 0.8 million shares of common stock, at a cost of approximately $7.5 million and $11.4 million under the repurchase authorization during the three months ended March 30, 2025 and March 31, 2024, respectively. We also repurchased and retired, reported based on trade date, approximately 186,000 shares and 32,000 shares of common stock, at a cost of approximately $5.1 million and $0.5 million during the three months ended March 30, 2025 and March 31, 2024, respectively, to administratively facilitate the withholding and subsequent remittance of personal income and payroll taxes for individuals receiving Restricted Stock Units. For a detailed discussion of our common stock repurchases, refer to Note 9, Stockholders’ Equity, in Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Previous wording

As of September 29, 2024, we had $84.9 million of purchase obligations which represented short-term non-cancellable inventory-related purchase agreements with suppliers, as compared to $42.6 million as of December 31, 2023. Due to an elongation of the time from order placement to production that occurred several years ago, we issued purchase orders to supply chain partners beyond contractual termination periods. As of September 29, 2024, $204.1 million of purchase orders beyond contractual termination periods remained outstanding. These purchase orders may be cancelled by either party, however we may incur expenses for materials and components, such as chipsets purchased by the supplier to fulfill the purchase order, in the event of cancellation. Expenses incurred in respect of cancelled purchase orders have historically not been significant relative to the original order value.

Current wording

As of March 30, 2025, we had $51.3 million of purchase obligations which represented short-term non-cancellable inventory-related purchase agreements with suppliers, as compared to $57.4 million as of December 31, 2024. Due to an elongation of the time from order placement to production that occurred several years ago, we issued purchase orders to supply chain partners beyond contractual termination periods. As of March 30, 2025, $239.8 million of purchase orders beyond contractual termination periods remained outstanding. These purchase orders may be cancelled by either party, however we may incur expenses for materials and components, such as chipsets purchased by the supplier to fulfill the purchase order, in the event of cancellation. Expenses incurred in respect of cancelled purchase orders have historically not been significant relative to the original order value.

Previous wording

As of September 29, 2024, we entered into an office lease that has not yet commenced with short-term and long-term future lease payments of $0.3 million and $43.0 million, respectively, that are not yet recorded on our unaudited Consolidated Balance Sheets. This lease will commence in 2025 with a non-cancelable lease term of 11 years.

Current wording

As of March 30, 2025, we entered into an office lease that has not yet commenced with short-term and long-term future lease payments of $1.7 million and $41.2 million, respectively, that are not yet recorded on our unaudited consolidated balance sheets. This lease will commence in late 2025 with a non-cancelable lease term of 11 years.