NETGEAR (NASDAQ:NTGR) Announces Earnings Results

Key Points

• NETGEAR exceeded quarterly expectations: Earnings came in at $0.16 per share versus the $0.01 consensus estimate, while revenue reached $168.6 million against expectations of $157.8 million. Gross margin expanded to 41.4%, supported by stronger enterprise sales.
• Enterprise and recurring-revenue businesses strengthened: Enterprise revenue rose 7.7% year over year to $89 million, representing about 53% of total sales, while annual recurring revenue increased 15% to $41.6 million.
• Consumer weakness and cost pressures cloud the outlook: Consumer revenue declined 9.4%, and management expects memory-cost inflation, promotions and supply constraints to pressure third-quarter results, guiding to revenue of $165 million–$175 million and a non-GAAP operating margin between -3% and 0%.

NETGEAR (NASDAQ:NTGR - Get Free Report) posted its earnings results on Thursday. The communications equipment provider reported $0.16 earnings per share for the quarter, beating analysts' consensus estimates of $0.01 by $0.15, FiscalAI reports. The company had revenue of $168.56 million for the quarter, compared to the consensus estimate of $157.80 million. NETGEAR had a negative return on equity of 2.71% and a negative net margin of 3.58%.NETGEAR's revenue was down 1.2% on a year-over-year basis. During the same quarter in the prior year, the company earned $0.06 earnings per share.

Here are the key takeaways from NETGEAR's conference call:

• Enterprise revenue grew 7.7% year over year to $89 million, led by Pro AV managed switches and strength in the Americas and EMEA. Enterprise now represents about 53% of total revenue and delivered a record 54.1% gross margin.
• Consolidated Q2 results exceeded the high end of guidance, with revenue of $168.6 million, non-GAAP operating margin of 2.4%, and non-GAAP EPS of $0.16. Gross margin expanded 360 basis points year over year to 41.4%, supported by the higher-margin enterprise mix and acquired switch operating-system technology.
• NETGEAR reported continued progress in its software and services transformation, including the Align platform and an enhanced Insight offering. Annual recurring revenue increased 15% year over year to $41.6 million, with 558,000 recurring subscribers exiting the quarter.
• Consumer revenue fell 9.4% year over year to $79.6 million, while gross margin declined to 27.3% amid memory-cost inflation, aggressive promotions, and supply constraints. Management expects these pressures to weigh more heavily in Q3 and projects total revenue of $165 million-$175 million and non-GAAP operating margin between -3% and 0%.
• APAC enterprise revenue declined 16% year over year as NETGEAR restructures its go-to-market model and reduces distribution layers. The company expects sequential growth to resume in Q4 under new regional leadership, but near-term execution remains a headwind.

NETGEAR Stock Down 0.3%

NTGR stock traded down $0.08 during trading on Thursday, hitting $24.30. The company had a trading volume of 280,633 shares, compared to its average volume of 472,499. NETGEAR has a 52-week low of $19.00 and a 52-week high of $36.86. The company has a 50 day simple moving average of $23.76 and a 200-day simple moving average of $23.23. The firm has a market capitalization of $652.21 million, a P/E ratio of -27.61 and a beta of 1.20.

Insider Activity at NETGEAR

In other NETGEAR news, insider Pramod Badjate sold 3,000 shares of the company's stock in a transaction dated Friday, July 31st. The shares were sold at an average price of $23.88, for a total value of $71,640.00. Following the transaction, the insider directly owned 154,073 shares in the company, valued at $3,679,263.24. This represents a 1.91% decrease in their position. The sale was disclosed in a legal filing with the Securities & Exchange Commission, which is available at this hyperlink. The sale was made to cover tax withholding obligations related to the vesting of equity awards. Also, Director Laura Durr sold 2,000 shares of NETGEAR stock in a transaction on Monday, June 1st. The shares were sold at an average price of $25.94, for a total value of $51,880.00. Following the sale, the director directly owned 43,059 shares of the company's stock, valued at approximately $1,116,950.46. This trade represents a 4.44% decrease in their ownership of the stock. The disclosure for this sale is available in the SEC filing. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Insiders have sold 12,085 shares of company stock valued at $313,933 over the last 90 days. 3.10% of the stock is currently owned by insiders.

Institutional Trading of NETGEAR

Several institutional investors and hedge funds have recently made changes to their positions in NTGR. Windward Management LP purchased a new position in NETGEAR in the fourth quarter valued at about $35,468,000. Lazard Asset Management LLC raised its stake in shares of NETGEAR by 87.6% during the 3rd quarter. Lazard Asset Management LLC now owns 548,911 shares of the communications equipment provider's stock worth $17,779,000 after acquiring an additional 256,266 shares in the last quarter. Jacobs Levy Equity Management Inc. lifted its position in NETGEAR by 43.7% during the third quarter. Jacobs Levy Equity Management Inc. now owns 717,973 shares of the communications equipment provider's stock valued at $23,255,000 after acquiring an additional 218,347 shares during the last quarter. Millennium Management LLC lifted its position in NETGEAR by 386.1% during the fourth quarter. Millennium Management LLC now owns 236,078 shares of the communications equipment provider's stock valued at $5,791,000 after acquiring an additional 187,515 shares during the last quarter. Finally, Qube Research & Technologies Ltd boosted its stake in NETGEAR by 447.9% in the second quarter. Qube Research & Technologies Ltd now owns 153,524 shares of the communications equipment provider's stock valued at $4,463,000 after acquiring an additional 125,504 shares in the last quarter. 82.97% of the stock is currently owned by institutional investors.

Analyst Upgrades and Downgrades

Separately, Weiss Ratings reiterated a "sell (d)" rating on shares of NETGEAR in a research report on Wednesday, June 24th. Two equities research analysts have rated the stock with a Buy rating, one has issued a Hold rating and one has issued a Sell rating to the company. According to data from MarketBeat.com, the company has an average rating of "Hold" and an average target price of $36.00.

NETGEAR Company Profile

NETGEAR, Inc NASDAQ: NTGR is a global provider of networking solutions for consumer, business and service provider markets. The company designs, develops and markets a comprehensive portfolio of products that enable high-speed connectivity, data storage and network security for homes, small to medium-sized businesses and large enterprises.

Its product lineup includes Wi-Fi routers, mesh networking systems, cable modems, mobile broadband gateways and Ethernet switches—offered in both managed and unmanaged configurations.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.

Continue following MarketBeat

Add MarketBeat as your preferred source on Google to see our latest stories in your feed.

Add As Preferred Source