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NETGEAR's (NTGR) CEO Patrick Lo on Q1 2016 Results - Earnings Call Transcript

Q1 2016 Earnings Conference Call

April 27, 2016 05:00 PM ET

Executives

Chris Genualdi - IR

Patrick Lo - CEO

Christine Gorjanc - CFO

Analysts

Tavis McCourt - Raymond James

Ryan Hutchinson - Guggenheim

Hamed Khorsand - BWS Financial

Rohit Chopra - Buckingham Research

Kirk Adams - Rosenblatt Securities

Rob Cihra - Sterne Agee CRT

Operator

Greetings, and welcome to NETGEAR Inc. First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Chris Genualdi, Investor Relations Manager. Please go ahead sir.

Chris Genualdi

Thank you, operator. Good afternoon and welcome to NETGEAR’s firth quarter 2016 financial results conference call. Joining us from the company are Mr. Patrick Lo, Chairman and CEO and Ms. Christine Gorjanc, CFO.

The format of the call will be a little different than in the past, we’ll lead off with a review of the financials for the first quarter provided by Christine and followed by details and commentary on the business provided by Patrick and finish with second quarter guidance provided by Christine. We will then have time for any questions. If you have not received the copy of the release please call NETGEAR Investor Relations or go to NETGEAR’s corporate website at www.netgear.com.

Before we begin the formal remarks, we advise you that today’s conference call contains forward-looking statements. Forward-looking statements include among other things statements regarding expected revenue, operating margins, tax rates, expenses and future business outlook Actual results or trends could differ materially from those contemplated by these forward-looking statements. For more information, please refer to the risk factors discussed in NETGEAR’s periodic filings with the SEC, including the most recent Form 10-K.

Any forward-looking statements that we make on this call are based on assumptions as of today and NETGEAR undertakes no obligation to update these statements as a result of new information or future events. In addition, several non-GAAP financial measures will be mentioned on this call. A reconciliation of the non-GAAP to GAAP measures can be found in our press release on the Investor Relations' Web site at www.netgear.com.

At this time, I would like to now turn the call over to Ms. Christine Gorjanc.

Christine Gorjanc

Thank you, Christopher. For the result of the first quarter of 2016 came in slightly above the high end of our guidance, we’re pleased to each of our three business units met or slightly exceeded our expectations for the quarter. For the first quarter ended April 3, 2016 net revenue was $310.3 million which is slightly up on a year-over-year basis and down 14% on a sequential basis. As noted on the prior earnings call expected a step down in our service provider revenue run rate during the Q1 and the sequential decline in revenue both reflect this as well as typical Q1 seasonality for retail and commercial. NETGEAR net revenue by geography reflects our continued strength in North America. Net revenue for the Americas was $193.9 million which is up 11.5% year-over-year. On a sequential basis the Americas revenue was down 16.4% which reflects the aforementioned step down in service provider as well as normal seasonality for retail and commercial business. EMEA net revenue was $64.5 million which is down 27.6% year-over-year and down 25.8% quarter-over-quarter, similar to the Americas the drop quarter-over-quarter in EMEA reflects reduced service provider revenue and normal seasonality for our retail business. Our APAC net revenue was $51.9 million for the first quarter of 2016 which is up 12.2% from the prior year’s comparable quarter and up 23% quarter-over-quarter and we saw growth in all the major countries and the impact region during Q1.