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Segment Information
6 Months Ended
Jun. 30, 2024
Segment Reporting [Abstract]  
Segment Information

Note 11. Segment Information

Operating segments are components of an enterprise about which separate financial information is available and is evaluated quarterly by management, namely the Chief Operating Decision Maker (“CODM”) of an organization, in order to determine operating and resource allocation decisions. By this definition, the Company has identified its CEO as the CODM. The Company operates and reports in two segments: Connected Home and NETGEAR for Business:

Connected Home: 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, and routers, 4G/5G mobile products, and subscription services that provide consumers a range of value-added services focused on performance, security, privacy, and premium support; and
NETGEAR for Business: 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 Company believes that this structure reflects its current operational and financial management, and that it provides the best structure for the Company to focus on growth opportunities while maintaining financial discipline. The leadership team of each segment is focused on product and service development efforts, both from a product marketing and engineering standpoint, to service the unique needs of their customers.

 

The results of the reportable segments are derived directly from the Company’s management reporting system. The results are based on the Company’s method of internal reporting and are not necessarily in conformity with accounting principles generally accepted in the United States. Management measures the performance of each segment based on several metrics, including contribution income (loss). Segment contribution income (loss) includes all product line segment revenues less the related cost of sales, research and development and sales and marketing costs. Contribution income (loss) is used, in part, to evaluate the performance of, and allocate resources to, each of the segments. Certain operating expenses are not allocated to segments because they are separately managed at the corporate level. These unallocated indirect costs include corporate costs, such as corporate research and development, corporate marketing and general and administrative expenses, amortization of intangibles, stock-based compensation expense, restructuring and other charges, litigation reserves, net, and other income (expenses), net.

Effective on January 1, 2024, resulting from certain segment structure changes, the Company revised its allocation method by allocating certain historically unallocated operating expenses to its individual operating segments. The prior-year segment financial information has been recast to conform to the current-year presentation. Financial information for each reportable segment and a reconciliation of segment contribution income (loss) to loss before income taxes is as follows:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

(In thousands, except percentage data)

 

June 30, 2024

 

 

July 2, 2023

 

 

June 30, 2024

 

 

July 2, 2023

 

 

Net Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Connected Home

 

$

84,033

 

 

$

98,406

 

 

$

179,996

 

 

$

201,152

 

 

NETGEAR for Business

 

 

59,867

 

 

 

75,007

 

 

 

128,490

 

 

 

153,169

 

 

Total net revenue

 

$

143,900

 

 

$

173,413

 

 

$

308,486

 

 

$

354,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contribution Income (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

Connected Home

 

$

(13,794

)

 

$

(5,373

)

 *

$

(19,934

)

 

$

(7,129

)

 *

Contribution margin

 

 

(16.4

)%

 

 

(5.5

)%

 *

 

(11.1

)%

 

 

(3.5

)%

 *

NETGEAR for Business

 

$

2,061

 

 

$

13,650

 

 *

$

11,965

 

 

$

27,707

 

 *

Contribution margin

 

 

3.4

 %

 

 

18.2

 %

 *

 

9.3

 %

 

 

18.1

 %

 *

Total segment contribution income

 

$

(11,733

)

 

$

8,277

 

 *

$

(7,969

)

 

$

20,578

 

 *

Corporate and unallocated costs

 

 

(19,350

)

 

 

(19,011

)

 *

 

(39,156

)

 

 

(38,385

)

 *

Amortization of intangibles

 

 

 

 

 

(128

)

 

 

 

 

 

(257

)

 

Stock-based compensation expense

 

 

(5,888

)

 

 

(4,687

)

 

 

(10,432

)

 

 

(9,352

)

 

Restructuring and other charges

 

 

(1,688

)

 

 

(2,229

)

 

 

(2,720

)

 

 

(2,337

)

 

Litigation reserves, net

 

 

(8,200

)

 

 

 

 

 

(8,230

)

 

 

 

 

Other income, net (1)

 

 

2,713

 

 

 

7,999

 

 

 

5,563

 

 

 

9,405

 

 

Loss before income taxes

 

$

(44,146

)

 

$

(9,779

)

 

$

(62,944

)

 

$

(20,348

)

 

 

 

(1)
Amounts included gain/(loss), net from derivatives not designated as hedging instruments of $0.6 million and $2.1 million, for the three and six months ended June 30, 2024, respectively, and $1.0 million and $0.9 million, for the three and six months ended July 2, 2023, respectively, and gain/(loss), net from litigation settlements of $6.0 million for the three and six months ended July 2, 2023, respectively.

* Financial information for each reportable segment in the prior year periods were recast to conform to the current reportable segment structure.

The CODM does not evaluate operating segments using discrete asset information.

Operations by Geographic Region

For reporting purposes, revenue is generally attributed to each geographic region based on the location of the customer.

The following table shows net revenue by geography:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

(In thousands)

 

June 30, 2024

 

 

July 2, 2023

 

 

June 30, 2024

 

 

July 2, 2023

 

United States (U.S.)

 

$

92,794

 

 

$

112,961

 

 

$

200,083

 

 

$

230,759

 

Americas (excluding U.S.)

 

 

2,709

 

 

 

3,650

 

 

 

5,348

 

 

 

7,774

 

EMEA (1)

 

 

27,355

 

 

 

36,161

 

 

 

58,542

 

 

 

75,339

 

APAC (1)

 

 

21,042

 

 

 

20,641

 

 

 

44,513

 

 

 

40,449

 

Total net revenue

 

$

143,900

 

 

$

173,413

 

 

$

308,486

 

 

$

354,321

 

 

 

(1)
No individual foreign country represented more than 10% of the Company’s total net revenue in the periods presented.

 

Long-lived assets by Geographic Region

The following table presents the Company’s long-lived assets located in geographic areas, which consist of property and equipment, net, and operating lease right-of-use assets:

 

(In thousands)

 

June 30, 2024

 

 

December 31, 2023

 

United States (U.S.)

 

$

22,079

 

 

$

25,051

 

Canada

 

 

5,496

 

 

 

4,714

 

Americas (excluding U.S. and Canada)

 

 

52

 

 

 

68

 

EMEA

 

 

3,425

 

 

 

3,739

 

Singapore

 

 

5,648

 

 

 

6,218

 

APAC (excluding Singapore) (1)

 

 

7,735

 

 

 

5,768

 

Total

 

$

44,435

 

 

$

45,558

 

 

 

(1)
No individual country represented more than 10% of the Company’s total long-lived assets in the periods presented.