Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 29, 2019 | Oct. 25, 2019 | |
Cover page. | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 29, 2019 | |
Document Transition Report | false | |
Entity File Number | 000-50350 | |
Entity Registrant Name | NETGEAR, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 77-0419172 | |
Entity Address, Address Line One | 350 East Plumeria Drive, | |
Entity Address, City or Town | San Jose, | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 95134 | |
City Area Code | (408) | |
Local Phone Number | 907-8000 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Smaller Reporting Company | false | |
Emerging Growth Company | false | |
Entity Shell Company | false | |
Title of 12(b) Security | Common Stock, $0.001 par value | |
Trading Symbol | NTGR | |
Security Exchange Name | NASDAQ | |
Entity Common Stock, Shares Outstanding (In shares) | 30,147,504 | |
Entity Central Index Key | 0001122904 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
Unaudited Condensed Consolidate
Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 29, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, net of allowance for doubtful accounts of $1,079 and $1,254 as of September 29, 2019 and December 31, 2018, respectively | $ 1,079 | $ 1,254 |
Current assets: | ||
Cash and cash equivalents | 168,002 | 201,047 |
Short-term investments | 3,915 | 73,317 |
Accounts receivable, net of allowance for doubtful accounts of $1,079 and $1,254 as of September 29, 2019 and December 31, 2018, respectively | 248,070 | 303,667 |
Inventories | 275,584 | 243,871 |
Prepaid expenses and other current assets | 31,153 | 35,997 |
Total current assets | 726,724 | 857,899 |
Property and equipment, net | 19,671 | 20,177 |
Operating lease right-of-use assets, net | 31,610 | 0 |
Intangibles, net | 11,699 | 17,146 |
Goodwill | 80,721 | 80,721 |
Other non-current assets | 72,636 | 67,433 |
Total assets | 943,061 | 1,043,376 |
Current liabilities: | ||
Accounts payable | 83,912 | 139,748 |
Accrued employee compensation | 18,103 | 31,666 |
Other accrued liabilities | 163,333 | 199,472 |
Deferred revenue | 5,812 | 11,086 |
Income taxes payable | 1,314 | 2,020 |
Total current liabilities | 272,474 | 383,992 |
Non-current income taxes payable | 13,219 | 19,600 |
Non-current operating lease liabilities | 27,178 | 0 |
Other non-current liabilities | 8,052 | 12,232 |
Total liabilities | 320,923 | 415,824 |
Commitments and contingencies (Note 10) | ||
Stockholders’ equity: | ||
Common stock | 31 | 32 |
Additional paid-in capital | 821,966 | 793,585 |
Accumulated other comprehensive loss | (18) | (15) |
Accumulated deficit | (199,841) | (166,050) |
Total stockholders’ equity | 622,138 | 627,552 |
Total liabilities and stockholders’ equity | $ 943,061 | $ 1,043,376 |
Unaudited Condensed Consolida_2
Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 29, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, net of allowance for doubtful accounts of $1,079 and $1,254 as of September 29, 2019 and December 31, 2018, respectively | $ 1,079 | $ 1,254 |
Unaudited Condensed Consolida_3
Unaudited Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Income Statement [Abstract] | ||||
Net revenue | $ 265,858 | $ 269,411 | $ 745,792 | $ 769,888 |
Cost of revenue | 188,666 | 174,966 | 521,147 | 518,844 |
Gross profit | 77,192 | 94,445 | 224,645 | 251,044 |
Operating expenses: | ||||
Research and development | 19,537 | 20,136 | 57,183 | 63,273 |
Sales and marketing | 33,491 | 37,892 | 103,887 | 114,318 |
General and administrative | 11,887 | 16,184 | 35,467 | 50,403 |
Other operating expenses, net | 212 | 380 | 1,709 | 1,752 |
Total operating expenses | 65,127 | 74,592 | 198,246 | 229,746 |
Income from operations | 12,065 | 19,853 | 26,399 | 21,298 |
Interest income, net | 639 | 985 | 2,122 | 2,806 |
Other income (expense), net | (403) | 955 | 425 | 425 |
Income before income taxes | 12,301 | 21,793 | 28,946 | 24,529 |
Provision (benefit) for income taxes | (228) | 5,483 | 2,735 | 6,668 |
Net income from continuing operations | 12,529 | 16,310 | 26,211 | 17,861 |
Net loss from discontinued operations, net of tax | 0 | (7,160) | 0 | (8,351) |
Net income | 12,529 | 9,150 | 26,211 | 9,510 |
Net Income (Loss) Attributable to Noncontrolling Interest | 0 | (799) | 0 | (799) |
Net income | $ 12,529 | $ 9,949 | $ 26,211 | $ 10,309 |
Net income per share - basic: | ||||
Income per share - basic, continuing operations (in dollars per share) | $ 0.41 | $ 0.51 | $ 0.84 | $ 0.56 |
Income per share - basic, discontinued operations (in dollars per share) | 0 | (0.20) | 0 | (0.23) |
Net income per share - basic (in dollars per share) | 0.41 | 0.31 | 0.84 | 0.33 |
Net income per share - diluted: | ||||
Income per share - diluted, continuing operations (in dollars per share) | 0.39 | 0.49 | 0.81 | 0.54 |
Income per share - diluted, discontinued operations (in dollars per share) | 0 | (0.19) | 0 | (0.23) |
Net income per share - diluted (in dollars per share) | $ 0.39 | $ 0.30 | $ 0.81 | $ 0.31 |
Weighted average shares used to compute net income per share: | ||||
Basic (in shares) | 30,933 | 31,802 | 31,221 | 31,634 |
Diluted (in shares) | 31,819 | 32,974 | 32,327 | 32,826 |
Unaudited Condensed Consolida_4
Unaudited Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 12,529 | $ 9,150 | $ 26,211 | $ 9,510 |
Other comprehensive income (loss), before tax: | ||||
Change in unrealized gains and losses on derivatives | (37) | 48 | (16) | 864 |
Change in unrealized gains and losses on available-for-sale investments | 0 | 41 | 16 | 72 |
Other comprehensive income (loss), before tax | (37) | 89 | 0 | 936 |
Tax benefit (provision) related to derivatives | 7 | (8) | 1 | (84) |
Tax provision related to available-for-sale investments | 0 | (10) | (4) | (37) |
Other comprehensive income (loss), net of tax | (30) | 71 | (3) | 815 |
Comprehensive income | 12,499 | 9,221 | 26,208 | 10,325 |
Comprehensive Income (Loss) attributable to Noncontrolling Interest | 0 | (797) | 0 | (797) |
Comprehensive Income (Loss) attributable to Parent | $ 12,499 | $ 10,018 | $ 26,208 | $ 11,122 |
Unaudited Condensed Consolida_5
Unaudited Condensed Consolidated Statement of Stockholder's Equity - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-In Capital | AOCI | (Accumulated deficit) Retained Earnings | Noncontrolling Interest [Member] |
Stockholders' Equity Attributable to Noncontrolling Interest | $ 0 | |||||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | 730,485 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Adoptions of ASU 2014-09 (ASC 606 Rev Rec), ASU 2016-16, and ASU 2018-02, net of tax | 8,593 | $ 8,593 | ||||
Beginning balance (in shares) at Dec. 31, 2017 | 31,320,000 | |||||
Beginning balance at Dec. 31, 2017 | $ 31 | $ 603,137 | $ (851) | 128,168 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Change in unrealized gains and losses on available-for-sale investments, net of tax | (49) | (49) | ||||
Change in unrealized gains and losses on derivatives, net of tax | 631 | 631 | ||||
Net income | 5,590 | 5,590 | ||||
Stock-based compensation | 8,150 | 8,150 | ||||
Restricted stock unit withholdings (in shares) | (38,000) | |||||
Restricted stock unit withholdings | (2,271) | (2,271) | ||||
Issuance of common stock under stock-based compensation plans (in shares) | 252,000 | |||||
Issuance of common stock under stock-based compensation plans | 4,590 | $ 1 | 4,589 | |||
Ending balance (in shares) at Apr. 01, 2018 | 31,534,000 | |||||
Ending balance at Apr. 01, 2018 | $ 32 | 615,876 | (269) | 140,080 | ||
Beginning balance (in shares) at Dec. 31, 2017 | 31,320,000 | |||||
Beginning balance at Dec. 31, 2017 | $ 31 | 603,137 | (851) | 128,168 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 10,309 | |||||
Net Income (Loss) Attributable to Noncontrolling Interest | $ (799) | |||||
Repurchase of common stock (in shares) | (200,000) | |||||
Repurchase of common stock | $ (15,000) | |||||
Restricted stock unit withholdings (in shares) | (100,000) | |||||
Ending balance (in shares) at Sep. 30, 2018 | 31,746,000 | |||||
Ending balance at Sep. 30, 2018 | $ 32 | 785,694 | (36) | 124,488 | ||
Stockholders' Equity Attributable to Noncontrolling Interest | $ 0 | |||||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | 755,719 | |||||
Beginning balance (in shares) at Apr. 01, 2018 | 31,534,000 | |||||
Beginning balance at Apr. 01, 2018 | $ 32 | 615,876 | (269) | 140,080 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Change in unrealized gains and losses on available-for-sale investments, net of tax | 53 | 53 | ||||
Change in unrealized gains and losses on derivatives, net of tax | 109 | 109 | ||||
Net income | (5,230) | (5,230) | ||||
Stock-based compensation | 8,970 | 8,970 | ||||
Restricted stock unit withholdings (in shares) | (85,000) | |||||
Restricted stock unit withholdings | (4,897) | (4,897) | ||||
Issuance of common stock under stock-based compensation plans (in shares) | 332,000 | |||||
Issuance of common stock under stock-based compensation plans | 1,012 | $ 0 | 1,012 | |||
Ending balance (in shares) at Jul. 01, 2018 | 31,781,000 | |||||
Ending balance at Jul. 01, 2018 | $ 32 | 625,858 | (107) | 129,953 | ||
Stockholders' Equity Attributable to Noncontrolling Interest | 0 | |||||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | 755,736 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Change in unrealized gains and losses on available-for-sale investments, net of tax | 31 | 31 | ||||
Change in unrealized gains and losses on derivatives, net of tax | 40 | 40 | ||||
Net income | 9,949 | 9,949 | ||||
Net Income (Loss) Attributable to Noncontrolling Interest | (799) | $ (799) | ||||
Stock-based compensation | 8,612 | 8,612 | ||||
Noncontrolling Interest, Share-based Compensation | 942 | 942 | ||||
Noncontrolling Interest, Increase from Sale of Parent Equity Interest | 170,246 | 146,088 | $ 24,158 | |||
Repurchase of common stock (in shares) | (205,000) | |||||
Repurchase of common stock | (15,000) | (15,000) | ||||
Restricted stock unit withholdings (in shares) | (6,000) | |||||
Restricted stock unit withholdings | (414) | (414) | ||||
Issuance of common stock under stock-based compensation plans (in shares) | 176,000 | |||||
Issuance of common stock under stock-based compensation plans | 5,136 | 5,136 | ||||
Ending balance (in shares) at Sep. 30, 2018 | 31,746,000 | |||||
Ending balance at Sep. 30, 2018 | $ 32 | 785,694 | (36) | 124,488 | ||
Stockholders' Equity Attributable to Noncontrolling Interest | 24,301 | |||||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | 934,479 | |||||
Beginning balance (in shares) at Dec. 31, 2018 | 31,562,000 | |||||
Beginning balance at Dec. 31, 2018 | 627,552 | $ 32 | 793,585 | (15) | (166,050) | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Change in unrealized gains and losses on available-for-sale investments, net of tax | 12 | 12 | ||||
Change in unrealized gains and losses on derivatives, net of tax | 17 | 17 | ||||
Net income | 12,843 | 12,843 | ||||
Stock-based compensation | 6,457 | 6,457 | ||||
Repurchase of common stock (in shares) | (436,000) | |||||
Repurchase of common stock | (15,000) | $ 0 | (15,000) | |||
Restricted stock unit withholdings (in shares) | (89,000) | |||||
Restricted stock unit withholdings | (3,344) | (3,344) | ||||
Issuance of common stock under stock-based compensation plans (in shares) | 430,000 | |||||
Issuance of common stock under stock-based compensation plans | 4,371 | $ 0 | 4,371 | |||
Ending balance (in shares) at Mar. 31, 2019 | 31,467,000 | |||||
Ending balance at Mar. 31, 2019 | 632,908 | $ 32 | 804,413 | 14 | (171,551) | |
Beginning balance (in shares) at Dec. 31, 2018 | 31,562,000 | |||||
Beginning balance at Dec. 31, 2018 | 627,552 | $ 32 | 793,585 | (15) | (166,050) | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 26,211 | |||||
Net Income (Loss) Attributable to Noncontrolling Interest | $ 0 | |||||
Repurchase of common stock (in shares) | (1,700,000) | |||||
Repurchase of common stock | $ (53,900) | |||||
Restricted stock unit withholdings (in shares) | (200,000) | |||||
Ending balance (in shares) at Sep. 29, 2019 | 30,581,000 | |||||
Ending balance at Sep. 29, 2019 | $ 622,138 | $ 31 | 821,966 | (18) | (199,841) | |
Beginning balance (in shares) at Mar. 31, 2019 | 31,467,000 | |||||
Beginning balance at Mar. 31, 2019 | 632,908 | $ 32 | 804,413 | 14 | (171,551) | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Change in unrealized gains and losses on derivatives, net of tax | (2) | (2) | ||||
Net income | 839 | 839 | ||||
Stock-based compensation | 6,739 | 6,739 | ||||
Repurchase of common stock (in shares) | (570,000) | |||||
Repurchase of common stock | (16,980) | $ (1) | (16,979) | |||
Restricted stock unit withholdings (in shares) | (79,000) | |||||
Restricted stock unit withholdings | (2,314) | (2,314) | ||||
Issuance of common stock under stock-based compensation plans (in shares) | 292,000 | |||||
Issuance of common stock under stock-based compensation plans | 882 | $ 0 | 882 | |||
Ending balance (in shares) at Jun. 30, 2019 | 31,110,000 | |||||
Ending balance at Jun. 30, 2019 | 622,072 | $ 31 | 812,034 | 12 | (190,005) | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Change in unrealized gains and losses on derivatives, net of tax | (30) | (30) | ||||
Net income | 12,529 | 12,529 | ||||
Net Income (Loss) Attributable to Noncontrolling Interest | 0 | |||||
Stock-based compensation | 6,986 | 6,986 | ||||
Repurchase of common stock (in shares) | (679,000) | |||||
Repurchase of common stock | (21,966) | $ (1) | (21,965) | |||
Restricted stock unit withholdings (in shares) | (12,000) | |||||
Restricted stock unit withholdings | (400) | (400) | ||||
Issuance of common stock under stock-based compensation plans (in shares) | 162,000 | |||||
Issuance of common stock under stock-based compensation plans | 2,947 | $ 1 | 2,946 | |||
Ending balance (in shares) at Sep. 29, 2019 | 30,581,000 | |||||
Ending balance at Sep. 29, 2019 | $ 622,138 | $ 31 | $ 821,966 | $ (18) | $ (199,841) |
Unaudited Condensed Consolida_6
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 29, 2019 | Sep. 30, 2018 | |
Cash flows from operating activities: | ||
Net income | $ 26,211 | $ 9,510 |
Net loss from discontinued operations | 0 | 8,351 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 14,577 | 14,260 |
Stock-based compensation | 20,183 | 20,228 |
Deferred income taxes | 503 | 53 |
Other Noncash Income (Expense) | 253 | 519 |
Changes in assets and liabilities | ||
Accounts receivable | 55,597 | 18,760 |
Inventories | (31,713) | (36,326) |
Prepaid expenses and other assets | 2,960 | (5,443) |
Accounts payable | (54,574) | 26,546 |
Accrued employee compensation | (13,562) | (1,521) |
Other accrued liabilities | (45,240) | (5,384) |
Deferred revenue | (4,152) | 3,620 |
Income taxes payable | (7,087) | (10,432) |
Net cash provided by (used in) continuing operating activities | (36,044) | 42,741 |
Net cash provided by discontinued operating activities | 0 | 31,115 |
Net cash provided by (used in) operating activities | (36,044) | 73,856 |
Cash flows from investing activities: | ||
Purchases of short-term investments | (282) | (70,157) |
Proceeds from maturities of short-term investments | 70,786 | 102,054 |
Purchases of property and equipment | (11,797) | (8,950) |
Proceeds from Sale, Maturity and Collection of Investments | 0 | 624 |
Purchases of long-term investments | (5,484) | 0 |
Payments to Acquire Businesses, Net of Cash Acquired | 0 | 14,352 |
Net cash provided by continuing investing activities | 53,223 | 9,219 |
Net cash used in discontinued investing activities | 0 | (50,707) |
Net cash provided by (used in) investing activities | 53,223 | (41,488) |
Cash flows from financing activities: | ||
Repurchases of common stock | (52,365) | (15,000) |
Restricted stock unit withholdings | (6,058) | (7,583) |
Proceeds from exercise of stock options | 4,582 | 5,183 |
Proceeds from issuance of common stock under employee stock purchase plan | 3,617 | 5,554 |
Net cash used in continuing financing activities | (50,224) | (11,846) |
Cash Provided by (Used in) Financing Activities, Discontinued Operations | 0 | 170,248 |
Net cash provided by (used in) financing activities | (50,224) | 158,402 |
Net increase (decrease) in cash and cash equivalents | (33,045) | 190,770 |
Cash and cash equivalents, at beginning of period | 201,047 | 202,870 |
Cash and cash equivalents, at end of period | 168,002 | 393,640 |
Non-cash investing and financing activities: | ||
Additions to property and equipment included in accounts payable and other accrued liabilities | 3,174 | (257) |
Business Combination, Contingent Consideration, Liability, Noncurrent | $ 0 | $ 5,953 |
The Company and Basis of Presen
The Company and Basis of Presentation | 9 Months Ended |
Sep. 29, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
The Company and Basis of Presentation | The Company and Basis of Presentation NETGEAR, Inc. (“NETGEAR” or the “Company”) was incorporated in Delaware in January 1996. The Company is a global company that delivers innovative networking and Internet connected products to consumers and businesses. The Company's products 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, the Company continually invests in research and development to create new technologies and to capitalize on technological inflection points and trends, such as WiFi 6, 5G and Pro-AV. NETGEAR's product lines consist of devices that create and extend wired and wireless networks as well as devices that provide a special function and attach to the network, such as smart digital canvasses and services. These products are available in multiple configurations to address the changing needs of our customers in each geographic region in which they are sold. The accompanying unaudited condensed consolidated financial statements include the accounts of NETGEAR, Inc. and its wholly owned subsidiaries. They have been prepared in accordance with established guidelines for interim financial reporting and the instructions of Form 10-Q and Article 10 of Regulation S-X. All significant intercompany balances and transactions have been eliminated in consolidation. The balance sheet dated December 31, 2018 has been derived from audited financial statements at such date. These unaudited condensed consolidated financial statements do not include all of the information and footnotes typically found in the audited consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K. In the opinion of management, the unaudited condensed consolidated financial statements reflect all normal recurring adjustments considered necessary to fairly state the Company’s financial position, results of operations, comprehensive income, stockholder's equity and cash flows for the periods indicated. These unaudited condensed consolidated financial statements should be read in conjunction with the notes to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 . On December 31, 2018, the Company completed the Spin-Off of Arlo Technologies, Inc. (“Arlo”), a majority owned subsidiary and reporting segment of NETGEAR. Arlo’s historical financial results for periods prior to the Spin-Off are reflected in the unaudited condensed consolidated financial statements as discontinued operations. For further detail, refer to Note 4. Discontinued Operations . The Company’s fiscal year begins on January 1 of the year stated and ends on December 31 of the same year. The Company reports its interim results on a fiscal quarter basis rather than on a calendar quarter basis. Under the fiscal quarter basis, each of the first three fiscal quarters ends on the Sunday closest to the calendar quarter end, with the fourth quarter ending on December 31. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the financial statements, and (iii) the reported amounts of net revenue and expenses during the reported period. Actual results could differ materially from those estimates and operating results for the three and nine months ended September 29, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 or any future period. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 29, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies The Company's significant accounting policies are disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 . Refer to Note 15. Leases , for the updated accounting policy on leases upon adoption of ASU 2016-02, "Leases" as of January 1, 2019. Recent accounting pronouncements Accounting Pronouncements Recently Adopted ASU 2016-02 In February 2016, FASB issued ASU 2016-02, "Leases" (Topic 842), which requires a lessee to recognize on the balance sheets a right-of-use asset, representing its right to use the underlying asset for the lease term, and a corresponding lease liability. The liability is equal to the present value of lease payments while the right-of-use asset is based on the liability, subject to adjustment, such as for initial direct costs. In addition, ASU 2016-02 expands the disclosure requirements for lessees. The Company adopted the new standard effective January 1, 2019 and was required to record a lease asset and lease liability related to its operating leases. The Company elected to utilize the alternative modified transition method, under which the cumulative-effect adjustment to the opening balance is recognized on the date of adoption while comparative prior periods continue to be reported under the guidance in effect prior to January 1, 2019. Accordingly, the Company did not restate or make related disclosures under the new standard for comparative prior periods in the period of adoption, and the Company applied the new lease standard prospectively to leases existing or commencing on or after January 1, 2019. The Company elected the package of practical expedients permitted under the transition guidance within the standard to not (1) reassess whether any expired or existing contracts are considered or contain leases; (2) reassess the lease classification for any expired or existing leases; and (3) reassess the initial direct costs for any existing leases. The Company made an accounting policy election to treat the lease and non-lease components in its office lease contracts as a single performance obligation to the extent that the timing and pattern of transfer are similar for the lease and non-lease components and the lease component qualifies as an operating lease. The Company also made an accounting policy election not to recognize lease liabilities and right-of-use assets for leases with a term of 12 months or less. The Company will recognize these lease payments on a straight-line basis over the lease term. The following table summarizes the impact of adopting ASU 2016-02 on the Company’s unaudited condensed consolidated balance sheet for the fiscal year beginning January 1, 2019 as an adjustment to the opening balances: As of Adjustments As of December 31, January 1, (In thousands) Assets: Prepaid expenses and other current assets $ 35,997 $ (543 ) $ 35,454 Total current assets $ 857,899 $ (543 ) $ 857,356 Operating lease right-of-use assets, net $ — $ 39,110 $ 39,110 Total assets $ 1,043,376 $ 38,567 $ 1,081,943 Liabilities: Other accrued liabilities $ 199,472 $ 10,909 $ 210,381 Total current liabilities $ 383,992 $ 10,909 $ 394,901 Non-current operating lease liabilities $ — $ 33,823 $ 33,823 Other non-current liabilities $ 12,232 $ (6,165 ) $ 6,067 Total liabilities $ 415,824 $ 38,567 $ 454,391 Total liabilities and stockholders’ equity $ 1,043,376 $ 38,567 $ 1,081,943 The standard did not impact our statement of operations and cash flows. Accounting Pronouncements Not Yet Effective In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments" (Topic 326), which replaces the incurred-loss impairment methodology and requires immediate recognition of estimated credit losses expected to occur for most financial assets, including trade receivables. Credit losses on available-for-sale debt securities with unrealized losses will be recognized as allowances for credit losses limited to the amount by which fair value is below amortized cost. The Company will adopt the new standard when it becomes effective in the first fiscal quarter of 2020. The Company is currently in the process of developing new credit loss models and updating its controls in preparation for the adoption. Based on the composition of the Company’s investment portfolio, current market conditions, and historical credit loss activity, the Company does not expect that it will have material impacts on its financial position, results of operations or cash flows. With the exception of the new standard discussed above, there have been no other new accounting pronouncements that have significance, or potential significance, to the Company's financial position, results of operations and cash flows. |
Revenue
Revenue | 9 Months Ended |
Sep. 29, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Revenue | Revenue Revenue from contracts with customers is recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Transaction Price Allocated to the Remaining Performance Obligations Remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and partially unsatisfied performance obligations consist of contract liabilities, in-transit orders with destination terms, and non-cancellable backlog. Non-cancellable backlog includes goods and services for which customer purchase orders have been accepted that are scheduled or in the process of being scheduled for shipment. The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 29, 2019 : 1 year 2 years Greater than 2 years Total (In thousands) Performance obligations $ 58,528 $ 921 $ 1,008 $ 60,457 Contract Balances The Company records accounts receivable when it has an unconditional right to consideration. Contract liabilities are recorded when cash payments are received or due in advance of performance. Contract liabilities consist of advance payments and deferred revenue, where the Company has unsatisfied performance obligations. Payment terms vary by customer. The time between invoicing and when payment is due is not significant. For certain products or services and customer types, payment is required before the products or services are delivered to the customer. The following table reflects the changes in contract balances for the nine months ended September 29, 2019 : Balance Sheet Location September 29, 2019 December 31, 2018 $ change % change (In thousands) Accounts Receivable, net Accounts receivable, net $ 248,070 $ 303,667 $ (55,597 ) (18.3 )% Contract liabilities - current Deferred revenue $ 5,812 $ 11,086 $ (5,274 ) (47.6 )% Contract liabilities - non-current Other non-current liabilities $ 1,900 $ 779 $ 1,121 143.9 % The difference in the balances of the Company’s contract assets and liabilities as of September 29, 2019 and December 31, 2018 primarily results from the timing difference between the Company’s performance and the customer’s payment. During the nine months ended September 29, 2019 , $10.8 million of revenue was deferred due to unsatisfied performance obligations for service contracts and undelivered product commitments, $14.9 million of revenue was recognized for the satisfaction of performance obligations and $9.4 million of this recognized revenue was included in the contract liability balance at the beginning of the period. There were no significant changes in estimates during the period that would affect the contract balances. Disaggregation of Revenue In the following table, net revenue is disaggregated by geographic region and sales channel. The Company conducts business across three geographic regions: Americas; Europe, Middle-East and Africa (“EMEA”); and Asia Pacific ("APAC"). The table also includes a reconciliation of the disaggregated revenue by reportable segment. The Company operates and reports in two segments: Connected Home, and Small and Medium Business ("SMB"). Sales and usage-based taxes are excluded from net revenue. Three Months Ended September 29, September 30, Connected Home SMB Total Connected Home SMB Total (In thousands) Geographic regions: Americas $ 146,806 $ 31,873 $ 178,679 $ 141,883 $ 34,049 $ 175,932 EMEA 22,190 27,364 49,554 27,619 25,539 53,158 APAC 21,676 15,949 37,625 25,181 15,140 40,321 Total net revenue $ 190,672 $ 75,186 $ 265,858 $ 194,683 $ 74,728 $ 269,411 Sales channels: Service provider $ 35,482 $ 972 $ 36,454 $ 30,769 $ 1,191 $ 31,960 Non-service provider 155,190 74,214 229,404 163,914 73,537 237,451 Total net revenue $ 190,672 $ 75,186 $ 265,858 $ 194,683 $ 74,728 $ 269,411 Nine Months Ended September 29, September 30, Connected Home SMB Total Connected Home SMB Total (In thousands) Geographic regions: Americas $ 392,162 $ 91,716 $ 483,878 $ 416,491 $ 93,867 $ 510,358 EMEA 65,406 84,202 149,608 69,134 79,667 148,801 APAC 69,964 42,342 112,306 69,797 40,932 110,729 Total net revenue $ 527,532 $ 218,260 $ 745,792 $ 555,422 $ 214,466 $ 769,888 Sales channels: Service provider $ 99,201 $ 3,370 $ 102,571 $ 118,899 $ 2,954 $ 121,853 Non-service provider 428,331 214,890 643,221 436,523 211,512 648,035 Total net revenue $ 527,532 $ 218,260 $ 745,792 $ 555,422 $ 214,466 $ 769,888 |
Discontinued Operations
Discontinued Operations | 9 Months Ended |
Sep. 29, 2019 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued Operations | Discontinued Operations On February 6, 2018, the Company announced that its Board of Directors had unanimously approved the pursuit of a separation of its smart camera business “Arlo” from NETGEAR (the “Separation”) to be effected by way of initial public offering (“IPO”) and spin-off. In August 2018, Arlo Technologies, Inc. (“Arlo”) was listed on the New York Stock Exchange under the symbol "ARLO" and completed the IPO. Upon completion of the IPO, NETGEAR held approximately 84.2% of the outstanding shares of Arlo common stock, or 62,500,000 shares. On December 31, 2018, NETGEAR completed the distribution of these 62,500,000 shares of common stock of Arlo (the “Distribution”) and no longer owns any shares of Arlo common stock. The Distribution took place by way of a pro rata common stock dividend to each NETGEAR stockholder of record on the record date of the Distribution, December 17, 2018, and NETGEAR stockholders received 1.980295 shares of Arlo common stock for every share of NETGEAR common stock held as of the record date. Upon completion of the Distribution, the Company ceased to own a controlling financial interest in Arlo and Arlo's assets, liabilities, operating results and cash flows for all periods presented have been classified as discontinued operations within the unaudited condensed Consolidated Financial Statements. The financial results of Arlo through the Distribution date are presented as income (loss) from discontinued operations, net of tax, in the unaudited condensed consolidated statement of operations. The following table presents financial results of Arlo for the three and nine months ended September 30, 2018 : Three Months Ended Nine Months Ended September 30, 2018 September 30, 2018 (In thousands) Net revenue $ 131,175 $ 342,491 Cost of revenue 101,427 255,666 Gross profit 29,748 86,825 Operating expenses: Research and development 14,816 32,569 Sales and marketing 11,592 25,148 General and administrative 6,905 9,859 Separation expense 6,675 25,443 Total operating expenses 39,988 93,019 Loss from operations of discontinued operations (10,240 ) (6,194 ) Interest income, net 503 503 Other income (expense), net (126 ) 213 Loss from discontinued operations before income taxes (9,863 ) (5,478 ) Provision (benefit) for income taxes (2,703 ) 2,873 Loss from discontinued operations, net of tax $ (7,160 ) $ (8,351 ) |
Business Acquisitions
Business Acquisitions | 9 Months Ended |
Sep. 29, 2019 | |
Business Combinations [Abstract] | |
Business Acquisitions | Business Acquisition Meural Inc. On August 6, 2018 , the Company acquired Meural Inc. ("Meural"), a New York based startup focused on producing and developing hardware and cloud platform capabilities for the digital distribution of curated artwork. Meural aims to provide a premium product to customers and to complement sales of digital canvasses with subscription services by offering customers the ability to subscribe to a large library of curated artworks. The Company believes that the acquisition enables it to enter a new and growing product category focused on consumer lifestyle and enhance its portfolio of hardware and service offerings. Prior to the business acquisition, the Company had an investment in Meural since 2017. The total purchase consideration was $22.2 million , which consisted of $14.4 million of cash, which was paid in the third quarter of 2018, $1.5 million due to the Company's settlement in its prior equity interest in Meural, and the acquisition date fair value of contingent consideration of $6.3 million . The merger agreement provides for the payment of contingent consideration to each selling shareholder of Meural based on the achievement of certain technical and service revenue milestones through August 6, 2023, with a maximum payout of $3.5 million on each of two milestones. The valuation of the contingent consideration was derived using estimates of the probability of achievement within specified time periods, in a scenario based model for the technical milestone; and using an option pricing model in a risk neutral framework using a Monte Carlo simulation, based on projections of future service revenues for the service revenue milestone. As of acquisition date, the fair value of such contingent consideration payable to Meural’s external shareholders was determined to be $5.9 million and included in Other non-current liabilities on the unaudited condensed consolidated balance sheets. As of September 29, 2019 , there were no material changes in the range of expected outcomes and the fair value of the contingent consideration from the acquisition date. The acquisition qualified as a business combination and was accounted for using the acquisition method of accounting. The results of Meural have been included in the unaudited condensed consolidated financial statements since the date of acquisition. Pro forma results of operations for the acquisition are not presented as the financial impact to the Company's consolidated results of operations is not material. The purchase price allocation was as follows (in thousands): Cash and cash equivalents $ 20 Accounts receivable 209 Inventories 760 Prepaid expenses and other current assets 500 Property and equipment 16 Intangibles 4,800 Non-current deferred income taxes 815 Goodwill 16,407 Accounts payable (1,317 ) Other accrued liabilities (35 ) Total purchase price $ 22,175 The $16.4 million of goodwill recorded on the acquisition of Meural is not deductible for U.S. federal or U.S. state income tax purposes. T he goodwill was generated as a result of the anticipated synergies, expected to be derived through selling Meural’s products and services through NETGEAR’s established worldwide sales channel and customer base. The goodwill was assigned to the Company's Connected Home segment. In connection with the acquisition, the Company recorded $0.8 million of deferred tax assets net of deferred tax liabilities. The deferred tax assets were recorded for the tax benefit of the net operating losses as of the date of the acquisition after consideration of limitations on their use under U.S. Internal Revenue Code section 382. The deferred tax assets were reduced by deferred tax liabilities for the book basis of intangible assets for which the Company has no tax basis. The Company designated $3.0 million of the acquired intangibles as developed technology. T he valuation was derived using an income approach, based on the present value of the estimated future cash flows derived from projections of future operations attributable to the developed technology, discounted at a rate of 16.0% and are being amortized over an estimated useful life of seven years . The Company designated $0.6 million of the acquired intangibles as trade name, $0.6 million as customer relationships and $0.6 million as playlist database. The valuations of these intangibles were derived using variations of the income approach for the trade name and customer relationships, and replacement cost method for the playlist database. The valuations were based on certain key assumptions like the royalty rate, revenue and cash flows derived from projections of future operations and discount rates ranging from 16.0% to 19.0% . The intangible assets are being amortized over estimated useful lives of three years , two years and seven years for trade name, customer relationships and playlist database, respectively. |
Balance Sheet Components
Balance Sheet Components | 9 Months Ended |
Sep. 29, 2019 | |
Balance Sheet Related Disclosures [Abstract] | |
Balance Sheet Components | Balance Sheet Components Available-for-sale short-term investments As of September 29, 2019 December 31, 2018 Cost Unrealized Gains Unrealized Losses Estimated Fair Value Cost Unrealized Gains Unrealized Losses Estimated Fair Value (In thousands) U.S. treasuries $ — $ — $ — $ — $ 70,330 $ 1 $ (17 ) $ 70,314 Certificates of deposits 145 — — 145 149 — — 149 Total $ 145 $ — $ — $ 145 $ 70,479 $ 1 $ (17 ) $ 70,463 The Company’s short-term investments are primarily comprised of marketable securities that are classified as available-for-sale and consist of government securities with an original maturity or remaining maturity at the time of purchase of greater than three months and no more than twelve months. Accordingly, none of the available-for-sale investments have unrealized losses greater than twelve months. Inventories As of September 29, December 31, (In thousands) Raw materials $ 45,235 $ 3,427 Finished goods 230,349 240,444 Total inventories $ 275,584 $ 243,871 The Company records provisions for excess and obsolete inventory based on assumptions about future demand and market conditions. While management believes the estimates and assumptions underlying its current forecasts are reasonable, there is risk that additional charges may be necessary if current forecasts are greater than actual demand. Property and equipment, net As of September 29, December 31, (In thousands) Computer equipment $ 9,885 $ 9,205 Furniture, fixtures and leasehold improvements 18,542 18,286 Software 28,088 28,065 Machinery and equipment 67,818 60,552 Total property and equipment, gross 124,333 116,108 Accumulated depreciation and amortization (104,662 ) (95,931 ) Total property and equipment, net $ 19,671 $ 20,177 Depreciation and amortization expense pertaining to property and equipment was $3.0 million and $9.1 million for the three and nine months ended September 29, 2019 , respectively, and $2.5 million and $8.0 million for the three and nine months ended September 30, 2018 , respectively. Intangibles, net As of September 29, 2019 As of December 31, 2018 Gross Accumulated Amortization Net Gross Accumulated Amortization Net (In thousands) Technology $ 59,799 $ (57,299 ) $ 2,500 $ 59,799 $ (56,978 ) $ 2,821 Customer contracts and relationships 56,800 (48,956 ) 7,844 56,800 (44,280 ) 12,520 Other 10,345 (8,990 ) 1,355 10,345 (8,540 ) 1,805 Total intangibles, net $ 126,944 $ (115,245 ) $ 11,699 $ 126,944 $ (109,798 ) $ 17,146 Amortization of intangibles was $1.6 million and $5.4 million for the three and nine months ended September 29, 2019 , respectively, and $2.0 million and $6.2 million for the three and nine months ended September 30, 2018 , respectively. As of September 29, 2019 , estimated amortization expense related to finite-lived intangibles for the remaining years is as follows (in thousands): 2019 (remaining three months) $ 1,594 2020 6,205 2021 2,044 2022 527 2023 514 Thereafter 815 Total estimated amortization expense $ 11,699 Other non-current assets As of September 29, December 31, 2018 (In thousands) Non-current deferred income taxes $ 57,055 $ 57,557 Long-term investments 8,147 2,886 Other 7,434 6,990 Total other non-current assets $ 72,636 $ 67,433 Other accrued liabilities As of September 29, December 31, (In thousands) Current operating lease liabilities $ 9,765 $ — Sales and marketing 63,027 91,548 Warranty obligations 10,858 14,412 Sales returns 45,547 46,318 Freight and duty 5,519 10,586 Other 28,617 36,608 Total other accrued liabilities $ 163,333 $ 199,472 |
Derivative Financial Instrument
Derivative Financial Instruments | 9 Months Ended |
Sep. 29, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Financial Instruments | Derivative Financial Instruments The Company’s subsidiaries have had, and will continue to have material future cash flows, including revenue and expenses, which are denominated in currencies other than the Company’s functional currency. The Company and all its subsidiaries designate the U.S. dollar as the functional currency. Changes in exchange rates between the Company’s functional currency and other currencies in which the Company transacts business will cause fluctuations in cash flow expectations and cash flow realized or settled. Accordingly, the Company uses derivatives to mitigate its business exposure to foreign exchange risk. The Company enters into foreign currency forward contracts in Australian dollars, British pounds, Euros, Canadian dollar, and Japanese yen to manage the exposures to foreign exchange risk related to expected future cash flows on certain forecasted revenue, costs of revenue, operating expenses and existing assets and liabilities. The Company does not enter into derivatives transactions for trading or speculative purposes. The Company’s foreign currency forward contracts do not contain any credit-risk-related contingent features. The Company is exposed to credit losses in the event of nonperformance by the counter-parties of its forward contracts. The Company enters into derivative contracts with high-quality financial institutions and limits the amount of credit exposure to any one counter-party. In addition, the derivative contracts typically mature in less than six months and the Company continuously evaluates the credit standing of its counter-party financial institutions. The counter-parties to these arrangements are large highly rated financial institutions and the Company does not consider non-performance a material risk. The Company may choose not to hedge certain foreign exchange exposures for a variety of reasons, including, but not limited to, materiality, accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange rates. The Company’s accounting policies for these instruments are based on whether the instruments are designated as hedge or non-hedge instruments in accordance with the authoritative guidance for derivatives and hedging. The Company records all derivatives on the balance sheets at fair value. Cash flow hedge gains and losses are recorded in other comprehensive income ("OCI") until the hedged item is recognized in earnings. Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings in Other income (expense), net in the unaudited condensed consolidated statements of operations. The fair values of the Company’s derivative instruments and the line items on the unaudited condensed consolidated balance sheets to which they were recorded as of September 29, 2019 and December 31, 2018 are summarized as follows: As of As of Balance Sheet Location September 29, December 31, Balance Sheet Location September 29, December 31, (In thousands) (In thousands) Derivatives not designated as hedging instruments Prepaid expenses and other current assets $ 1,050 $ 784 Other accrued liabilities $ 150 $ 331 Derivatives designated as hedging instruments Prepaid expenses and other current assets 47 2 Other accrued liabilities 58 37 Total $ 1,097 $ 786 $ 208 $ 368 Refer to Note 14. Fair Value Measurements , in Notes to Unaudited Condensed Consolidated Financial Statements for detailed disclosures regarding fair value measurements in accordance with the authoritative guidance for fair value measurements and disclosures. Offsetting Derivative Assets and Liabilities The Company has entered into master netting arrangements which allow net settlements under certain conditions. Although netting is permitted, it is currently the Company's policy and practice to record all derivative assets and liabilities on a gross basis on the unaudited condensed consolidated balance sheets. The following tables set forth the offsetting of derivative assets as of September 29, 2019 and December 31, 2018 : As of September 29, 2019 Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets Gross Amounts of Recognized Assets Gross Amounts Offset on the Condensed Consolidated Balance Sheets Net Amounts Of Assets Presented on the Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount (In thousands) J.P. Morgan Chase $ 128 $ — $ 128 $ (31 ) $ — $ 97 Bank of America — — — (2 ) — (2 ) Wells Fargo 969 — 969 (175 ) — 794 Total $ 1,097 $ — $ 1,097 $ (208 ) $ — $ 889 As of December 31, 2018 Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets Gross Amounts of Recognized Assets Gross Amounts Offset on the Condensed Consolidated Balance Sheets Net Amounts Of Assets Presented on the Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount (In thousands) Bank of America $ 323 $ — $ 323 $ (64 ) $ — $ 259 Wells Fargo 463 — 463 (298 ) — 165 Total $ 786 $ — $ 786 $ (362 ) $ — $ 424 The following tables set forth the offsetting of derivative liabilities as of September 29, 2019 and December 31, 2018 : As of September 29, 2019 Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets Gross Amounts of Recognized Liabilities Gross Amounts Offset on the Condensed Consolidated Balance Sheets Net Amounts Of Liabilities Presented on the Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount (In thousands) J.P. Morgan Chase $ 31 $ — $ 31 $ (31 ) $ — $ — Bank of America 2 — 2 (2 ) — — Wells Fargo 175 — 175 (175 ) — — Total $ 208 $ — $ 208 $ (208 ) $ — $ — As of December 31, 2018 Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets Gross Amounts of Recognized Liabilities Gross Amounts Offset on the Condensed Consolidated Balance Sheets Net Amounts Of Liabilities Presented on the Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount (In thousands) J.P. Morgan Chase $ 6 $ — $ 6 $ — $ — $ 6 Bank of America 64 — 64 (64 ) — — Wells Fargo 298 — 298 (298 ) — — Total $ 368 $ — $ 368 $ (362 ) $ — $ 6 Cash flow hedges To help manage the exposure of operating margins to fluctuations in foreign currency exchange rates, the Company hedges a portion of its anticipated foreign currency revenue, costs of revenue and certain operating expenses. These hedges are designated at the inception of the hedge relationship as cash flow hedges under the authoritative guidance for derivatives and hedging. Effectiveness is tested at least quarterly both prospectively and retrospectively using regression analysis to ensure that the hedge relationship has been effective and is likely to remain effective in the future. The Company typically hedges portions of its anticipated foreign currency exposure less than six months . The Company enters into about ten forward contracts per quarter with an average size of approximately $6.0 million USD equivalent related to its cash flow hedging program. The effects of the Company's cash flow hedges in the unaudited condensed statement of operations for the three and nine months ended September 29, 2019 and September 30, 2018 are summarized as follows: Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges Three Months Ended September 29, 2019 Net revenue Cost of revenue Research and development Sales and marketing General and administrative (In thousands) Statement of operations $ 265,858 $ 188,666 $ 19,537 $ 33,491 $ 11,887 Gains (losses) on cash flow hedge $ 548 $ (2 ) $ (2 ) $ (42 ) $ (7 ) Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges Three Months Ended September 30, 2018 Net revenue Cost of revenue Research and development Sales and marketing General and administrative (In thousands) Statement of operations $ 269,411 $ 174,966 $ 20,136 $ 37,892 $ 16,184 Gains (losses) on cash flow hedge $ 750 $ (6 ) $ — $ (115 ) $ (32 ) Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges Nine Months Ended September 29, 2019 Net revenue Cost of revenue Research and development Sales and marketing General and administrative (In thousands) Statement of operations $ 745,792 $ 521,147 $ 57,183 $ 103,887 $ 35,467 Gains (losses) on cash flow hedge $ 1,634 $ (10 ) $ (47 ) $ (209 ) $ (30 ) Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges Nine Months Ended September 30, 2018 Net revenue Cost of revenue Research and development Sales and marketing General and administrative (In thousands) Statement of operations $ 769,888 $ 518,844 $ 63,273 $ 114,318 $ 50,403 Gains (losses) on cash flow hedge $ 235 $ (7 ) $ 86 $ (42 ) $ (41 ) The Company expects to reclassify to earnings all of the amounts recorded in OCI associated with its cash flow hedges over the next twelve months . OCI associated with cash flow hedges of foreign currency revenue is recognized as a component of net revenue in the same period the related revenue is recognized. OCI associated with cash flow hedges of foreign currency costs of revenue and operating expenses are recognized as a component of cost of revenue and operating expenses in the same period and in the same statement of operations line item as the related costs of revenue and operating expenses are recognized. Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur within the designated hedge period or if not recognized within 60 days following the end of the hedge period. Deferred gains and losses in OCI with such derivative instruments are reclassified immediately into earnings through Other income (expense), net. Any subsequent changes in fair value of such derivative instruments also are reflected in current earnings unless they are re-designated as hedges of other transactions. The Company did not recognize any material net gains or losses related to the loss of hedge designation as there were no discontinued cash flow hedges during the nine months ended September 29, 2019 and September 30, 2018 . The pre-tax effects of the Company’s derivative instruments in OCI and the unaudited condensed consolidated statement of operations for the three and nine months ended September 29, 2019 and September 30, 2018 are summarized as follows: Derivatives Designated as Hedging Instruments Gains (Losses) Recognized in OCI - Effective Portion Location of Gains (Losses) Reclassified from OCI into Income - Effective Portion Gains (Losses) Reclassified from OCI into Income - Effective Portion (1) Three Months Ended Three Months Ended September 29, September 30, September 29, September 30, (In thousands) (In thousands) Cash flow hedges: Foreign currency forward contracts $ 458 $ 625 Net revenue $ 548 $ 750 Foreign currency forward contracts — — Cost of revenue (2 ) (6 ) Foreign currency forward contracts — — Research and development (2 ) — Foreign currency forward contracts — — Sales and marketing (42 ) (115 ) Foreign currency forward contracts — — General and administrative (7 ) (32 ) Total $ 458 $ 625 $ 495 $ 597 _________________________ (1) Refer to Note 11. Stockholders' Equity , which summarizes the accumulated other comprehensive income activity related to derivatives. Derivatives Designated as Hedging Instruments Gains (Losses) Recognized in OCI - Effective Portion Location of Gains (Losses) Reclassified from OCI into Income - Effective Portion Gains (Losses) Reclassified from OCI into Income - Effective Portion (1) Nine Months Ended Nine Months Ended September 29, September 30, September 29, September 30, (In thousands) (In thousands) Cash flow hedges: Foreign currency forward contracts $ 1,322 $ 1,075 Net revenue $ 1,634 $ 235 Foreign currency forward contracts — — Cost of revenue (10 ) (7 ) Foreign currency forward contracts — — Research and development (47 ) 86 Foreign currency forward contracts — — Sales and marketing (209 ) (42 ) Foreign currency forward contracts — — General and administrative (30 ) (41 ) Total $ 1,322 $ 1,075 $ 1,338 $ 231 _________________________ (1) Refer to Note 11. Stockholders' Equity , which summarizes the accumulated other comprehensive income activity related to derivatives. Non-designated hedges The Company enters into non-designated hedges under the authoritative guidance for derivatives and hedging to manage the exposure of non-functional currency monetary assets and liabilities held on its financial statements to fluctuations in foreign currency exchange rates, as well as to reduce volatility in other income and expense. The non-designated hedges are generally expected to offset the changes in value of its net non-functional currency asset and liability position resulting from foreign exchange rate fluctuations. Foreign currency denominated accounts receivable and payable are hedged with non-designated hedges when the related anticipated foreign revenue and expenses are recognized in the Company’s financial statements. The Company also hedges certain non-functional currency monetary assets and liabilities that may not be incorporated into the cash flow hedge program. The Company adjusts its non-designated hedges monthly and enters into about ten non-designated derivatives per quarter. The average size of its non-designated hedges is approximately $2.0 million USD equivalent and these hedges range from one to three months in duration. The effects of the Company’s non-designated hedge included in Other income (expense), net in the unaudited condensed consolidated statements of operations for the nine months ended September 29, 2019 and September 30, 2018 are as follows: Derivatives Not Designated as Hedging Instruments Location of Gains (Losses) Recognized in Income on Derivative Three Months Ended Nine Months Ended September 29, 2019 September 30, 2018 September 29, 2019 September 30, 2018 (In thousands) Foreign currency forward contracts Other income (expense), net $ 1,540 $ 991 $ 2,446 $ 2,930 |
Net Income Per Share
Net Income Per Share | 9 Months Ended |
Sep. 29, 2019 | |
Earnings Per Share [Abstract] | |
Net Income Per Share | Net Income Per Share Basic net income per share is computed by dividing the net income for the period by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period. Potentially dilutive common shares include common shares issuable upon exercise of stock options, vesting of restricted stock awards, and issuances of shares under the Employee Stock Purchase Plan (the "ESPP"), which are reflected in diluted net income per share by application of the treasury stock method. Potentially dilutive common shares are excluded from the computation of diluted net income per share when their effect is anti-dilutive. Net income per share for the three and nine months ended September 29, 2019 and September 30, 2018 are as follows: Three Months Ended Nine Months Ended September 29, September 30, September 29, September 30, (In thousands, except per share data) Numerator: Net income from continuing operations $ 12,529 $ 16,310 $ 26,211 $ 17,861 Net loss from discontinued operations — (7,160 ) — (8,351 ) Net income 12,529 9,150 26,211 9,510 Less: Net loss attributable to non-controlling interest in discontinued operations — (799 ) — (799 ) Net income attributable to NETGEAR, Inc. $ 12,529 $ 9,949 $ 26,211 $ 10,309 Denominator: Weighted average common shares - basic 30,933 31,802 31,221 31,634 Potentially dilutive common share equivalent 886 1,172 1,106 1,192 Weighted average common shares - dilutive 31,819 32,974 32,327 32,826 Basic net income per share Net income from continuing operations $ 0.41 $ 0.51 $ 0.84 $ 0.56 Net loss from discontinued operations attributable to NETGEAR, Inc. — (0.20 ) — (0.23 ) Net income attributable to NETGEAR, Inc. $ 0.41 $ 0.31 $ 0.84 $ 0.33 Diluted net income per share Net income from continuing operations $ 0.39 $ 0.49 $ 0.81 $ 0.54 Net loss from discontinued operations attributable to NETGEAR, Inc. — (0.19 ) — (0.23 ) Net income attributable to NETGEAR, Inc. $ 0.39 $ 0.30 $ 0.81 $ 0.31 Anti-dilutive employee stock-based awards, excluded 1,587 450 625 874 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 29, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The income tax provision (benefit) for the three and nine months ended September 29, 2019 , was $(0.2) million , or an effective tax rate of (1.9)% , and $2.7 million , or an effective tax rate of 9.4% , respectively. The income tax provision for the three and nine months ended September 30, 2018 , was $5.5 million , or an effective tax rate of 25.2% , and $6.7 million , or an effective tax rate of 27.2% , respectively. The decrease in the effective tax rate and tax expense for the three and nine months ended September 29, 2019 , compared to the prior year periods, resulted primarily from the resolution of income tax examinations for the United Kingdom and Germany that concluded during the three months ended September 29, 2019. The resolution of these examinations resulted in a favorable adjustment to the Company’s uncertain tax positions. Additionally, during the three-month period, the Company finalized its US federal income tax return resulting in the recognition of favorable benefits from the true up of previous estimates. These favorable adjustments were partially offset by an increase in the overall forecasted effective tax rate caused by an estimate of the US federal Base Erosion Anti-abuse Tax (BEAT). In addition to the items noted for the three months ended September 29, 2019, the effective tax rate for the nine months ended September 29, 2019 also included a benefit related to the closing of the French tax audit. The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. The future foreign tax rate could be affected by changes in the composition in earnings in countries with tax rates differing from the U.S. federal rate. The Company is under examination in various U.S. jurisdictions. The Company files income tax returns in the U.S. federal jurisdiction as well as various state, local, and foreign jurisdictions. Due to the uncertain nature of ongoing tax audits, the Company has recorded its liability for uncertain tax positions as part of its long-term liability as payments cannot be anticipated over the next twelve months. The existing tax positions of the Company continue to generate an increase in the liability for uncertain tax positions. The liability for uncertain tax positions may be reduced for liabilities that are settled with taxing authorities or on which the statute of limitations could expire without assessment from tax authorities. The possible reduction in liabilities for uncertain tax positions in multiple jurisdictions in the next twelve months is approximately $0.7 million , excluding the interest, penalties and the effect of any related deferred tax assets or liabilities. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 29, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Leases The Company leases office space, cars, distribution centers and equipment under operating leases, some of which are non-cancelable, with various expiration dates through December 2026 . The terms of some of the Company’s office leases provide for rental payments on a graduated scale. Lease expense is recognized on a straight-line basis over the lease term. For further details, refer to Note 15. Leases . Purchase Obligations The Company has entered into various inventory-related purchase agreements with suppliers. Generally, under these agreements, 50% of orders are cancelable by giving notice 46 to 60 days prior to the expected shipment date and 25% of orders are cancelable by giving notice 31 to 45 days prior to the expected shipment date. Orders are non-cancelable within 30 days prior to the expected shipment date. For those orders not governed by master purchase agreements, the commitments are governed by the commercial terms on the Company's purchase orders subject to acknowledgment from its suppliers. As of September 29, 2019 , the Company had approximately $95.1 million in non-cancelable purchase commitments with suppliers. The Company establishes a loss liability for all products it does not expect to sell for which it has committed purchases from suppliers. Such losses have not been material to date. From time to time the Company’s suppliers procure unique complex components on the Company's behalf. If these components do not meet specified technical criteria or are defective, the Company should not be obligated to purchase the materials. However, disputes may arise as a result and significant resources may be spent resolving such disputes. Non-Trade Commitments As of September 29, 2019 , the Company had long term, non-cancellable purchase commitments of $17.4 million pertaining to non-trade activities. Warranty Obligations Changes in the Company’s warranty obligations, which is included in Other accrued liabilities on the unaudited condensed consolidated balance sheets, are as follows: Three Months Ended Nine Months Ended September 29, September 30, September 29, September 30, (In thousands) Balance as of beginning of the period $ 11,913 $ 15,271 $ 14,412 $ 44,068 Reclassified to sales returns upon adoption of ASC 606 — — — (29,147 ) * Provision for warranty obligation made during the period 1,558 2,987 4,970 10,009 Settlements made during the period (2,613 ) (3,350 ) (8,524 ) (10,022 ) Balance at end of period $ 10,858 $ 14,908 $ 10,858 $ 14,908 ________________________ * Upon adoption of ASC 606 on January 1, 2018, certain warranty reserve balances totaling $29.1 million were reclassified to sales returns as these liabilities are payable to the Company's customers and settled in cash or by credit on account. Under ASC 606, these amounts are to be accounted for as sales with right of return. Guarantees and Indemnifications The Company, as permitted under Delaware law and in accordance with its Bylaws, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum amount of potential future indemnification is unlimited; however, the Company has a Director and Officer Insurance Policy that enables it to recover a portion of any future amounts paid. As a result of its insurance policy coverage, the Company believes the fair value of each indemnification agreement is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of September 29, 2019 . In its sales agreements, the Company typically agrees to indemnify its direct customers, distributors and resellers (the “Indemnified Parties”) for any expenses or liability resulting from claimed infringements by the Company's products of patents, trademarks or copyrights of third parties that are asserted against the Indemnified Parties, subject to customary carve outs. The terms of these indemnification agreements are generally perpetual after execution of the agreement. The maximum amount of potential future indemnification is generally unlimited. From time to time, the Company receives requests for indemnity and may choose to assume the defense of such litigation asserted against the Indemnified Parties. The Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of September 29, 2019 . Employment Agreements The Company has signed various change in control and severance agreements with key executives. Upon a termination without cause or resignation with good reason, executive officers would be entitled to (1) cash severance equal to the executive officer’s annual base salary, and, for the Chief Executive Officer, an additional amount equal to his target annual bonus, (2) 12 months of health benefits continuation and (3) accelerated vesting of any unvested equity awards that would have vested during the 12 months following the termination date. Upon a termination without cause or resignation with good reason that occurs during the one month prior to or 12 months following a change in control of the Company, executive officers would be entitled to (1) cash severance equal to a multiple ( 2 x for the Chief Executive Officer and 1 x for all other executive officers) of the sum of the executive officer’s annual base salary and target annual bonus, (2) a number of months ( 24 for the Chief Executive Officer and 12 for other executive officers) of health benefits continuation and (3) accelerated vesting of all outstanding, unvested equity awards. Severance will be conditioned upon the execution and non-revocation of a release of claims. The change in control and severance agreements will not provide for any excise tax gross ups. If the merger-related payments or benefits of the executive officer are subject to the 20% excise tax under Section 4999 of the tax code, then the executive officer will either receive all such payments and benefits subject to the excise tax or such payments and benefits will be reduced so that the excise tax does not apply, whichever approach yields the best after-tax outcome for the executive officer. The Company has no liabilities recorded for these agreements as of September 29, 2019 . Litigation and Other Legal Matters The Company is involved in disputes, litigation, and other legal actions, including, but not limited to, the matters described below. In all cases, at each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. In such cases, the Company accrues for the amount, or if a range, the Company accrues the low end of the range, only if there is not a better estimate than any other amount within the range, as a component of legal expense within litigation reserves, net. The Company monitors developments in these legal matters that could affect the estimate the Company had previously accrued. In relation to such matters, the Company currently believes that there are no existing claims or proceedings that are likely to have a material adverse effect on its financial position within the next twelve months , or the outcome of these matters is currently not determinable. There are many uncertainties associated with any litigation, and these actions or other third-party claims against the Company may cause the Company to incur costly litigation and/or substantial settlement charges. In addition, the resolution of any intellectual property litigation may require the Company to make royalty payments, which could have an adverse effect in future periods. If any of those events were to occur, the Company's business, financial condition, results of operations, and cash flows could be adversely affected. The actual liability in any such matters may be materially different from the Company's estimates, which could result in the need to adjust the liability and record additional expenses. Agenzia Entrate Provincial Revenue Office 1 of Milan v. NETGEAR International, Inc. In November 2012, the Italian tax police began a comprehensive tax audit of NETGEAR International, Inc.’s Italian Branch. The scope of the audit initially was from 2004 through 2011 and was subsequently expanded to include 2012 . The tax audit encompassed Corporate Income Tax (IRES), Regional Business Tax (IRAP) and Value-Added Tax (VAT). In December 2013, December 2014, August 2015, and December 2015 an assessment was issued by Inland Revenue Agency, Provincial Head Office No. 1 of Milan-Auditing Department (Milan Tax Office) for the 2004 tax year, the 2005 through 2007 tax years, the 2008 through 2010 tax years, and the 2011 through 2012 tax years, respectively. In May 2014, the Company filed with the Provincial Tax Court of Milan an appeal brief, including a Request for Hearing in Open Court and Request for Suspension of the Tax Assessment for the 2004 year. The hearing was held and decision was issued on December 19, 2014. The Tax Court decided in favor of the Company and nullified the assessment by the Inland Revenue Agency for 2004. The Inland Revenue Agency appealed the decision of the Tax Court on June 12, 2015. The Company filed its counter appeal with respect to the 2004 year during September 2015. On February 26, 2016, the Regional Tax Court conducted the appeals hearing for the 2004 year, ruling in favor of the Company. On June 13, 2016, the Inland Revenue Agency appealed the decision to the Supreme Court. The Company filed a counter appeal on July 23, 2016 and is awaiting scheduling of the hearing. In June 2015, the Company filed with the Provincial Tax Court of Milan an appeal brief including a Request for Hearing in Open Court and Request for Suspension of the Tax Assessment for the 2005 through 2006 tax years. The hearing for suspension was held and the Request for Suspension of payment was granted. The hearing for the validity of the tax assessment for 2005 and 2006 was held in December 2015 with the Provincial Tax Court issuing its decision in favor of the Company. The Inland Revenue Agency filed its appeal with the Regional Tax Court. The Company filed its counter brief on September 30, 2016 and the hearing was held on March 22, 2017. A decision favorable to the Company was issued by the Court on July 5, 2017. The Italian Tax Authority has appealed the decision to the Supreme Court and the Company has responded with a counter appeal brief on December 3, 2017 and awaits scheduling of the hearing. The hearing for the validity of the tax assessment for 2007 was held on March 10, 2016 with the Provincial Tax Court who issued its decision in favor of the Company on April 7, 2016. The Inland Revenue Agency has filed its appeal to the Regional Tax Court and the Company has submitted its counter brief. The hearing was held on November 17, 2017 and the Company received a positive decision on December 11, 2017. On June 11, 2018, the Italian government filed its appeal brief with the Supreme Court, and the Company filed its counter brief on July 12, 2018 and awaits scheduling the hearing. With respect to 2008 through 2010, the Company filed its appeal briefs with the Provincial Tax Court in October 2015 and the hearing for the validity of the tax assessments was held on April 21, 2016. A decision favorable to the Company was issued on May 12, 2016. The Inland Revenue Agency has filed its appeal to the Regional Tax Court. The Company filed its counter brief on February 5, 2017. The hearing was held on May 21, 2018, and the Company received a favorable decision on June 12, 2018. On October 14, 2019, Milan Tax Office filed an appeal with the Supreme Court. The Company will file its counter brief with the Supreme Court on or before November 23, 2019. With respect to 2011 through 2012, the Company has filed its appeal brief on February 26, 2016 with the Provincial Tax Court to contest the relevant tax assessments. The hearing for suspension was held and the Request for Suspension of payment was granted. On October 13, 2016, the Company filed its final brief with the Provincial Tax Court. The hearing was held on October 24, 2016 and a decision favorable to the Company was issued by the Court. The Inland Revenue Agency appealed the decision before the Regional Tax Court. The Regional Tax Court heard the case on February 26, 2019 for both years and issued a decision favorable to the Company on March 11, 2019. On October 14, 2019, Milan Tax Office filed an appeal with the Supreme Court. The Company will file its counter brief with the Supreme Court on or before November 23, 2019. With regard to all tax years, it is too early to reasonably estimate any financial impact to the Company resulting from this litigation matter. Via Vadis v. NETGEAR, Inc. On August 22, 2014, the Company was sued by Via Vadis, LLC and AC Technologies, S.A. (“Via Vadis”), in the Western District of Texas. The complaint alleges that the Company’s ReadyNAS and Stora products “with built-in BitTorrent software" allegedly infringe three related patents of Via Vadis (U.S. Patent Nos. 7,904,680, RE40, 521, and 8,656,125). Via Vadis filed similar complaints against Belkin, Buffalo, Blizzard, D-Link, and Amazon. By referring to “built-in BitTorrent software,” the Company believes that the complaint is referring to the BitTorrent Sync application, which was released by BitTorrent Inc. in spring of 2014. At a high-level, the application allows file synchronization across multiple devices by storing the underlying files on multiple local devices, rather than on a centralized server. The Company’s ReadyNAS products do not include BitTorrent software when sold. The BitTorrent application is provided as one of a multitude of potential download options, but the software itself is not included on the Company’s devices when shipped. Therefore, the only viable allegation at this point is an indirect infringement allegation. On November 10, 2014, the Company answered the complaint denying that it infringes the patents in suit and also asserting the affirmative defenses that the patents in suit are invalid and barred by the equitable doctrines of laches, waiver, and/or estoppel. On February 6, 2015, the Company filed its motion to transfer venue from the Western District of Texas to the Northern District of California with the Court; on February 13, 2015, Via Vadis filed its opposition to the Company’s motion to transfer; and on February 20, 2015, the Company filed its reply brief on its motion to transfer. In early April 2015, the Company received the plaintiff’s infringement contentions, and on June 12, 2015, the defendants served invalidity contentions. On July 30, 2015, the Court granted the Company’s motion to transfer venue to the Northern District of California. In addition, the Company learned that Amazon and Blizzard filed petitions for the inter partes reviews (“IPRs”) for the patents in suit. On October 30, 2015, the Company and Via Vadis filed a joint stipulation requesting that the Court vacate all deadlines and enter a stay of all proceedings in the case pending the Patent Trial and Appeal Board’s final non-appealable decision on the IPRs initiated by Amazon and Blizzard. On November 2, 2015, the Court granted the requested stay. On March 8, 2016, the Patent Trial and Appeal Board issued written decisions instituting the IPRs jointly filed by Amazon and Blizzard. In early March of 2017, The Patent Trial and Appeal Board (PTAB) issued various decisions regarding Amazon’s and Blizzard’s IPRs of the patents in suit. One of the IPRs of the '125 patent resulted in a finding by the PTAB that Amazon and Blizzard had had failed to show invalidity. The second IPR on the '125 patent, however, resulted in cancellation of all claims asserted in Via Vadis’s suit against the Company. Reissue '521 did not have any claims found invalid by the PTAB, and some dependent claims of the '680 patent survived the IPRs, and some claims of the '680 patent were canceled. Via Vadis has completed its appeal of the PTAB decisions on the IPRs, which were affirmed by the Federal Circuit. Meanwhile, the W.D. Texas Court issued a claim construction order finding the '680 patent indefinite. The parties in the W.D. of Texas case lifted their stay and Via Vadis filed a motion for reconsideration of the Court’s finding of indefiniteness, which the Court has denied. On August 8, 2019, Via Vadis filed its notice of appeal to the Federal Circuit in the W.D. Texas cases. The Company’s case in N.D. California will remain stayed during the pendency of the appeal. It is too early to reasonably estimate any financial impact to the Company resulting from this litigation matter. Chrimar Systems, Inc. v NETGEAR, Inc. On July 1, 2015, the Company was sued by a non-practicing entity named Chrimar Systems, Inc., doing business as CMS Technologies and Chrimar Holding Company, LLC (collectively, “CMS”), in the Eastern District of Texas for allegedly infringing four patents-U.S. Patent Nos. 8,155,012 (the “'012 Patent”), entitled “System and method for adapting a piece of terminal equipment”; 8,942,107 (the “'107 Patent”), entitled “Piece of ethernet terminal equipment”; 8,902,760 (the “'760 Patent”), entitled “Network system and optional tethers”; and 9,019,838 (the “'838 Patent”), entitled “Central piece of network equipment” (collectively “patents-in-suit”). The patents-in-suit relate to using or embedding an electrical DC current or signal into an existing Ethernet communication link in order to transmit additional data about the devices on the communication link, and the specifications for the patents are identical. It appears that CMS has approximately 40 active cases in the Eastern District of Texas, as well as some cases in the Northern District of California on the patents-in-suit and the parent patent to the patents-in-suit. The Company answered the complaint on September 15, 2015. On November 24, 2015, CMS served its infringement contentions on the Company, and CMS is generally attempting to assert that the patents in suit cover the Power over Ethernet standard (802.3af and 802.3at) used by certain of the Company's products. On December 3, 2015, the Company filed with the Court a motion to transfer venue to the District Court for the Northern District of California and their memorandum of law in support thereof. On December 23, 2015, CMS filed its response to the Company’s motion to transfer, and, on January 8, 2016, the Company filed its reply brief in support of its motion to transfer venue. On January 15, 2016, the Court granted the Company’s motion to transfer venue to the District Court for the Northern District of California. The initial case management conference in the Northern District of California occurred on May 13, 2016, and on August 19, 2016, the parties exchanged preliminary claim constructions and extrinsic evidence. On August 26, 2016, the Company and three defendants in other Northern District of California CMS cases (Juniper Networks, Inc., Ruckus Wireless, Inc., and Fortinet, Inc.) submitted motions to stay their cases. The defendants in part argued that stays were appropriate pending the resolution of the currently-pending IPRs of the patents-in-suit before the Patent Trial and Appeal Board (PTAB), including four IPR Petitions filed by Juniper. On September 9, 2016, CMS submitted its opposition to the motions to stay the cases. On September 26, 2016, the Court ordered the cases stayed in their entirety, until the PTAB reaches institution decisions with respect to Juniper’s four pending IPR petitions. Juniper’s four IPR petitions were instituted by the PTAB in January 2017, and the Company subsequently moved to join the IPR petitions as an “understudy” to Juniper, only assuming a more active role in the petitions in the event Juniper settles with CMS. For all four patents in suit against the Company, the PTAB ordered that (a) the Petitioners’ (the Company, Ruckus, and Brocade) Motion for Joinder to the Juniper IPRs is granted; (b) the Petitioners IPRs are instituted on the same grounds as in the Juniper ‘IPRs and Petitioners are joined with the Juniper IPRs; and (c) all further filings by Petitioners in the joined proceedings will be in the Juniper IPRs. On December 21, 2017, the PTAB issued the first of the four Final Written Decisions in the IPRs filed by the Company on the patents in suit, ruling that the claims of the ‘107 Patent asserted by Chrimar were invalid. This was quickly followed by two more Final Written Decisions -- on January 3, 2018, the ’838 patent’s asserted claims were ruled invalid, and on January 23, 2018 the ‘012 patent’s asserted claims were ruled invalid. Chrimar has 30 days from each Final Written Decision to seek a rehearing at the PTAB and 63 days from each to file an appeal. On April 26, 2018, the PTAB issued its decision invalidating all of the claims of the ‘760 patent challenged in the IPR. The PTAB’s reasoning was similar to the reasoning set forth in the PTAB’s previous decisions on the 012, 107 and 838 patents. The ‘760 patent claims were, however, amended by Chrimar during the pendency of the ‘760 IPR, and the PTAB did not rule on the validity of the amended claims, as they were not challenged in the original IPR Petitions (they couldn’t have been because the Chrimar amendments had not yet happened). On June 6, 2018, Chrimar's appeals on all 4 written decisions by the USPTO invalidating all challenged claims were consolidated. The parties have completed briefing the matter and are awaiting schedule for oral argument before the Federal Circuit. On September 3, 2019, the Company and other defendants conducted their oral argument before the Federal Circuit Court of Appeals. On September 19, 2019, the Federal Circuit affirmed the USPTO’s decisions on defendants’ IPRs invalidating all of the challenged claims. Barring any attempts by Chrimar to assert new patents that was not subject to the IPRs or appeal to the Supreme Court, the Company plans to dismiss the case before the Court in the Northern District of California. It is too early to reasonably estimate any financial impact to the Company resulting from this litigation matter. Vivato v. NETGEAR, Inc. On April 19, 2017, the Company was sued by XR Communications (d/b/a) Vivato (“Vivato”) in the United States District Court, Central District of California. Based on its complaint, Vivato purports to be a research and development and product company in the WiFi area, but it appears that Vivato is not currently a manufacturer of commercial products. The three (3) patents that Vivato asserts against the Company are U.S. Patent Nos. 7,062,296, 7,729,728, and 6,611,231. The ’296 and ’728 patents are entitled “Forced Beam Switching in Wireless Communication Systems Having Smart Antennas.” The ’231 patent is entitled “Wireless Packet Switched Communication Systems and Networks Using Adaptively Steered Antenna Arrays.” Vivato also has recently asserted the same patents in the Central District of California against D-Link, Ruckus, and Aruba, among others. According to the complaint, the accused products include WiFi access points and routers supporting MU-MIMO, including without limitation access points and routers utilizing the IEEE 802.11ac-2013 standard. The accused technology is standards-based, and more specifically, based on the transmit beamforming technology in the 802.11ac WiFi standard. The Company answered an amended complaint on July 7, 2017. In its answer, the Company objected to venue and recited that objection as a specific affirmative defense, so as to expressly reserve the same. The Company also raised several other affirmative defenses in its answer. On August 28, 2017, the Company submitted its initial disclosures to the plaintiff. The initial scheduling conference was on October 2, 2017, and the Court set five day jury trial for March 19, 2019 for the leading Vivato/D-Link case, meaning the Company’s trial date will be at some point after March 19, 2019. On March 20, 2018, the Company and other defendants in the various Vivato cases moved the Court to stay the case pending various IPRs filed on all of the patents in suit. Every asserted claim of all three patents-in-suit is now subject to challenge in IPRs that are pending before the U.S. Patent and Trial Appeal Board (“PTAB”). In particular, the Company, Belkin, and Ruckus are filing one set of IPRs on the three patents in suit; Cisco is filing another set of independent IPRs on the three patents in suit; and Aruba is filing yet another set of independent IPRs on the three patents in suit. On April 11, 2018, the Court granted the motion to stay pending filing of the IPRs. On May 3, 2018, the Company and other defendants filed their IPRs. The PTAB instituted the IPRs for the ’296 and ’728 patents, but not the ’231 patent from the Ruckus and Belkin set of petitions. However, the Cisco IPR for the ’231 patent was instituted. Vivato has proposed amendments to its claims and the parties have completed briefing the matter before the PTAB. In July and August of 2019, the Company and other defendants had two oral arguments before the PTAB regarding the ’296 and ’728 patents. The PTAB denied institution of petition for the’231 Patent. On October 10, 2019, the PTAB issued a Final Written Decision invalidating all of the original claims at issue in the ’296 Patent and denied Vivato’s motion to amend (the claims). Defendants are awaiting the PTAB decision on the ’728 Patent. Once that decision issues, the Parties will reopen the currently stayed district court case in Central District of California to address the ’231 Patent and any remaining issues. It is too early to reasonably estimate any financial impact to the Company resulting from this litigation matter. Hera Wireless v. NETGEAR, Inc. On July 14, 2017, the Company was sued by Sisvel (via Hera Wireless) in the District of Delaware on three related patents allegedly covering the 802.11n standard. Similar complaints were filed against Amazon, ARRIS, Belkin, Buffalo, and Roku. On December 12, 2017, the Company answered the complaint, denying why each claim limitation of the patents in suit were allegedly met and asserting various affirmative defenses, including invalidity and noninfringement. A proposed joint Scheduling Order was submitted to the Court on January 24, 2018 with trial proposed for March of 2020. On February 27, 2018, Hera Wireless identified the accused products and the asserted claims, alleging that any 802.11n compliant product infringes, and identified only the Company’s Orbi and WND930 products with particularity. Hera Wireless’ infringement contentions were submitted on April 28, 2018. Discovery is ongoing. On June 28, 2018, the Company and other defendants submitted invalidity contentions. The Company along with other defendants jointly filed IPRs challenging three of the patents in suit on July 18, 2018. On September 14, 2018, the Company and other defendants jointly filed a second set of IPRs with the USPTO challenging the remaining six patents asserted in the Amended Complaint. The USPTO has instituted IPRs on five of the patents-in-suit and the Company is awaiting institution decisions on the other four patents. The District Court case has been stayed pending outcome of the IPRs. It is too early to reasonably estimate any financial impact to the Company resulting from this litigation matter. Fischer v. NETGEAR, Inc. On June 4, 2018, Plaintiff Rob Fischer filed a purported class-action complaint in the Circuit Court of Cook County, Ill, alleging the Company’s Range Extender does not extend the range of a consumer’s WiFi network as shown in a diagram in a data sheet. On August 3, 2018, the Company filed a motion to dismiss the case and a hearing was held on November 29, 2018, where the motion was denied. The Company filed its Answer on December 27, 2018. The parties are conducting routine discovery. The parties have settled and the case was dismissed on October 22, 2019 with non-material impact on the Company. Modern Telecom Systems (MTS) v. NETGEAR, Inc. On August 3, 2018, Plaintiff MTS filed a patent infringement lawsuit against NETGEAR in the District of Delaware. MTS accuses all of NETGEAR’s routers that are compliant with those 802.11 standards of infringing U.S. Patent No. 6,504,886 (“the ’886 Patent”), and specifically identifies NETGEAR’s Nighthawk X10 Smart WiFi Router. The Company filed its Answer on January 4, 2019. The Company’s case was consolidated with ARRIS / Ruckus and Brother. In March 2019, the Company joined a motion for judgment on the pleadings that the patent-in-suit is invalid under Section 101 led by Arris. The motion remains pending and the claim construction phase of the case is upcoming. It is too early to reasonably estimate any financial impact to the Company resulting from this litigation matter. Mentone Solutions v. NETGEAR, Inc. On October 31, 2018, Mentone Solutions LLC filed a patent infringement suit against the Company in the District of Delaware, alleging infringement of U.S. Patent No. 6,952,413 (the ’413 patent). Mentone alleges NETGEAR’s LTE Modem LB2120 device, and in particular the device’s dual carrier HSPA+ (“DC-HSPA+”) capability infringes the ’413 patent. The Company filed its Answer on February 21, 2019. The parties have settled and the case was dismissed on August 29, 2019 with non-material impact on the Company. John Pham v. Arlo Technologies, Inc., NETGEAR Inc., et al., and other related actions On January 9, 2019 and January 10, 2019, February 1, 2019 and February 8, 2019, the Company was sued in four separate securities class action suits in Superior Court of California, County of Santa Clara, along with Arlo Technologies, individuals, and underwriters involved in the spin-off of Arlo. Two more similar state actions have been filed against Arlo Technologies Inc. et al.. In total, six putative class action complaints have now been filed in California state court in Santa Clara County. The Company is named as a defendant in five of the six lawsuits. The complaints generally allege that Arlo’s IPO materials contained false and misleading statements, hiding problems with Arlo’s Ultra product. These claims are styled as violations of Sections 11, 12(a), and 15 of the Securities Act of 1933. There is also a putative class action pending in federal court in the Northern District of California, on behalf of the same class of plaintiffs, making very similar claims. The Company is not presently named in the federal action. Defendants filed motions to stay the state court actions in deference to the federal court action. The court held a hearing on April 26, 2019 to consider whether to consolidate the six lawsuits and appoint a “lead plaintiff” and another hearing on May 31, 2019 to consider defendants’ motions to stay the state court cases. On June 21, 2019, the California state court judge granted the Company’s motion to stay the state court case pending the outcome of the federal case. The case will now proceed only in federal court. On August 6, 2019, all the defendants, including NETGEAR, filed a motion to dismiss the federal court action. Plaintiffs filed their opposition brief on September 6, 2019 and defendants filed a reply on October 4, 2019. The motion is set for hearing on December 5, 2019. The state court action remains stayed pending the outcome of the federal action. It is too early to reasonably estimate any financial impact to the Company resulting from these matters. China Patent Matters - Beijing and Heifei Municipalities On or around May 14, 2019, NETGEAR Beijing Network Technology Co. Ltd (“Beijing WOFE”) received notice from the Beijing Municipal IP Office (BMIPO) that petitioner Global Innovation Aggregators, a Delaware registered company (“Patentee”), filed two patent infringement complaints against Beijing WOFE, alleging infringement of two patents: China Patent Nos. CN100502338C and CN103138979B. The accused products were certain Company routers sold in China. Patentee alleges that the Dynamic Quality of Service (“QoS”) or dynamic bandwidth adjustment and allocation functionality in the routers infringes CN100502338C, and the parental control functionality infringes CN103138979B. The Company hired local counsel who has responded to the Beijing matters and separately filed invalidation actions against both patents. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 29, 2019 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity | Stockholders' Equity Stock Repurchases From time to time, the Company’s Board of Directors has authorized programs under which the Company may repurchase shares of its common stock, depending on market conditions, in the open market or through privately negotiated transactions. 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 the Company’s common stock. On July 19, 2019, the Company's Board of Directors approved an increase in the number of shares of common stock authorized for repurchase under the Company's stock repurchase program of up to an incremental 4.5 million shares. As of September 29, 2019 , 4.3 million shares remained authorized for repurchase under the repurchase program. During the nine months ended September 29, 2019 , the Company repurchased, reported based on trade date, approximately 1.7 million shares of common stock at a cost of approximately $53.9 million under the repurchase authorization. Similarly, during the nine months ended September 30, 2018 , the Company repurchased, reported based on trade date, approximately 0.2 million shares of common stock at a cost of approximately $15.0 million under the repurchase authorization. The Company repurchased, as reported based on trade date, approximately 0.2 million shares of common stock at a cost of approximately $6.1 million to administratively facilitate the withholding and subsequent remittance of personal income and payroll taxes for individuals receiving RSUs during the nine months ended September 29, 2019 . Similarly, during the nine months ended September 30, 2018 , the Company repurchased, as reported based on trade date, approximately 0.1 million shares of common stock at a cost of approximately $7.6 million to facilitate tax withholding for RSUs. These shares were retired upon repurchase. The Company’s policy related to repurchases of its common stock is to charge the excess of cost over par value to retained earnings. All repurchases were made in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. Accumulated Other Comprehensive Income (Loss) The following table sets forth the changes in accumulated other comprehensive income ("AOCI") by component for the nine months ended September 29, 2019 and September 30, 2018 : Unrealized gains (losses) on available-for-sale investments Unrealized gains (losses) on derivatives Estimated tax benefit (provision) Total (In thousands) Balance as of December 31, 2018 $ (18 ) $ (8 ) $ 11 $ (15 ) Other comprehensive income (loss) before reclassifications 16 1,322 (284 ) 1,054 Less: Amount reclassified from accumulated other comprehensive income — 1,338 (281 ) 1,057 Net current period other comprehensive income (loss) 16 (16 ) (3 ) (3 ) Balance as of September 29, 2019 $ (2 ) $ (24 ) $ 8 $ (18 ) Unrealized gains (losses) on available-for-sale investments Unrealized gains (losses) on derivatives Estimated tax benefit (provision) Total (In thousands) Balance as of December 31, 2017 $ (146 ) $ (838 ) $ 133 $ (851 ) Other comprehensive income (loss) before reclassifications 72 1,075 (165 ) 982 Less: Amount reclassified from accumulated other comprehensive income — 211 (44 ) 167 Net current period other comprehensive income (loss) 72 864 (121 ) 815 Balance as of September 30, 2018 $ (74 ) $ 26 $ 12 $ (36 ) The following tables provide details about significant amounts reclassified out of each component of AOCI for the three and nine months ended September 29, 2019 and September 30, 2018 : Details about Accumulated Other Comprehensive Income Components Three Months Ended September 29, 2019 Nine Months Ended September 29, 2019 Amount Reclassified from AOCI Affected Line Item in the Statements of Operations Amount Reclassified from AOCI Affected Line Item in the Statement of Operations (In thousands) (In thousands) Gains (losses) on cash flow hedge: Foreign currency forward contracts $ 548 Net revenue $ 1,634 Net revenue Foreign currency forward contracts (2 ) Cost of revenue (10 ) Cost of revenue Foreign currency forward contracts (2 ) Research and development (47 ) Research and development Foreign currency forward contracts (42 ) Sales and marketing (209 ) Sales and marketing Foreign currency forward contracts (7 ) General and administrative (30 ) General and administrative 495 Total from continuing operations before tax 1,338 Total from continuing operations before tax (104 ) Tax impact from continuing operations (281 ) Tax impact from continuing operations 391 Total, from continuing operations net of tax 1,057 Total, from continuing operations net of tax — Total, from discontinued operations net of tax — Total, from discontinued operations net of tax $ 391 Total, net of tax $ 1,057 Total, net of tax Details about Accumulated Other Comprehensive Income Components Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 Amount Reclassified from AOCI Affected Line Item in the Statements of Operations Amount Reclassified from AOCI Affected Line Item in the Statement of Operations (In thousands) (In thousands) Gains (losses) on cash flow hedge: Foreign currency forward contracts $ 750 Net revenue $ 235 Net revenue Foreign currency forward contracts (6 ) Cost of revenue (7 ) Cost of revenue Foreign currency forward contracts — Research and development 86 Research and development Foreign currency forward contracts (115 ) Sales and marketing (42 ) Sales and marketing Foreign currency forward contracts (32 ) General and administrative (41 ) General and administrative 597 Total from continuing operations before tax 231 Total from continuing operations before tax (125 ) Tax impact from continuing operations (49 ) Tax impact from continuing operations 472 Total, from continuing operations net of tax 182 Total, from continuing operations net of tax 197 Total, from discontinued operations net of tax (15 ) Total, from discontinued operations net of tax $ 669 Total, net of tax $ 167 Total, net of tax |
Employee Benefit Plans
Employee Benefit Plans | 9 Months Ended |
Sep. 29, 2019 | |
Employee Benefit and Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Employee Benefit Plans | Employee Benefit Plans The Company grants options and RSUs under the 2016 Incentive Plan (the "2016 Plan"), under which awards may be granted to all employees. Award vesting periods for this plan are generally four years . In January 2019, the Company received the approval from its Compensation Committee to increase the number of shares that the Company may issue under the 2016 plan to a new total of 3.1 million shares, pursuant to the adjustment provisions of the 2016 Plan as a result of the Distribution. As of September 29, 2019 , approximately 1.6 million shares were reserved for future grants under the 2016 Plan. Additionally, the Company sponsors an Employee Stock Purchase Plan (the “ESPP”), pursuant to which eligible employees may contribute up to 10% of compensation, subject to certain income limits, to purchase shares of the Company’s common stock. The terms of the plan include a look-back feature that enables employees to purchase stock at a price equal to 85% of the lesser of the fair market value at the beginning of the offering period or the purchase date. The duration of each offering period is generally six -months. As of September 29, 2019 , approximately 0.6 million shares were available for issuance under the ESPP. Option Activity Stock option activity during the nine months ended September 29, 2019 was as follows: Number of shares Weighted Average Exercise Price Per Share (In thousands) (In dollars) Outstanding as of December 31, 2018 1,969 $ 25.30 Granted 502 $ 26.61 Exercised (226 ) $ 20.31 Cancelled (16 ) $ 36.27 Expired (15 ) $ 40.00 Outstanding as of September 29, 2019 2,214 $ 25.93 RSU Activity RSU activity during the nine months ended September 29, 2019 was as follows: Number of shares Weighted Average Grant Date Fair Value Per Share (In thousands) (In dollars) Outstanding as of December 31, 2018 1,627 $ 34.31 Granted 693 $ 31.37 Vested (535 ) $ 31.62 Cancelled (105 ) $ 35.12 Outstanding as of September 29, 2019 1,680 $ 33.90 Valuation and Expense Information The Company measures stock-based compensation at the grant date based on the estimated fair value of the award. Estimated compensation cost relating to RSUs is based on the closing fair market value of the Company’s common stock on the date of grant. The fair value of options granted under the 2016 Plan and the purchase rights granted under the ESPP is estimated on the date of grant using a Black-Scholes-Merton option valuation model that uses the assumptions noted in the following table. The estimated expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. The risk free interest rate of options granted and the purchase rights granted under the ESPP is based on the implied yield currently available on U.S. Treasury securities with a remaining term commensurate with the estimated expected term. Expected volatility of options granted under the 2016 Plan and the purchase rights granted under the ESPP is based on historical volatility over the most recent period commensurate with the estimated expected term. The table below sets forth the weighted average assumptions used to estimate the fair value of option grants and purchase rights granted during the three and nine months ended September 29, 2019 and September 30, 2018 . Three Months Ended Nine Months Ended Stock Options ESPP Stock Options ESPP September 29, September 30, September 29, September 30, September 29, September 30, September 29, September 30, Expected life (in years) 6.2 4.4 0.5 0.5 6.2 4.4 0.5 0.5 Risk-free interest rate 1.85 % 2.79 % 1.83 % 2.22 % 1.85 % 2.36 % 2.06 % 2.00 % Expected volatility 33.9 % 33.5 % 44.5 % 38.8 % 33.9 % 31.1 % 43.9 % 37.9 % Dividend yield — — — — — — — — The following table sets forth the stock-based compensation expense resulting from stock options, RSUs and the ESPP included in the Company’s unaudited condensed consolidated statements of operations: Three Months Ended Nine Months Ended September 29, September 30, September 29, September 30, (In thousands) Cost of revenue $ 706 $ 619 $ 2,129 $ 1,754 Research and development 1,496 1,037 3,976 3,171 Sales and marketing 2,097 1,970 6,223 6,363 General and administrative 2,687 2,492 7,855 8,940 Total stock-based compensation $ 6,986 $ 6,118 $ 20,183 $ 20,228 As of September 29, 2019 , $10.3 million of unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 2.1 years. $48.3 million of unrecognized compensation cost related to unvested RSUs is expected to be recognized over a weighted-average period of 2.4 years. |
Segment Information
Segment Information | 9 Months Ended |
Sep. 29, 2019 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information Operating segments are components of an enterprise about which separate financial information is available and is regularly evaluated 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 and operates and reports in two segments: Connected Home, and SMB: • Connected Home: Focused on consumers and consists of high-performance, dependable and easy-to-use WiFi internet networking solutions, 4G/5G mobile products, and smart devices such as Orbi Voice smart speakers and Meural digital canvasses; and • SMB: Focused on small and medium-sized businesses and consists of business networking, storage, wireless LAN and security solutions that bring enterprise-class functionality to small and medium-sized businesses at an affordable price. The Company believes that this structure reflects its current operational and financial management, and 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 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. Segment contribution income includes all product line segment revenues less the related cost of sales, research and development and sales and marketing costs. Contribution income 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 expense and general and administrative costs, amortization of intangibles, stock-based compensation expense, separation expense, change in fair value of contingent consideration, restructuring and other charges, litigation reserves, net, interest income, net and other income (expense), net. The CODM does not evaluate operating segments using discrete asset information. Financial information for each reportable segment and a reconciliation of segment contribution income to income before income taxes is as follows : Three Months Ended Nine Months Ended September 29, 2019 September 30, 2018 September 29, 2019 September 30, 2018 (In thousands, except percentage data) Net revenue: Connected Home $ 190,672 $ 194,683 $ 527,532 $ 555,422 SMB 75,186 74,728 218,260 214,466 Total net revenue $ 265,858 $ 269,411 $ 745,792 $ 769,888 Contribution income: Connected Home $ 18,934 $ 30,071 $ 52,257 $ 67,222 Contribution margin 9.9 % 15.4 % 9.9 % 12.1 % SMB $ 18,750 $ 20,593 $ 52,855 $ 51,750 Contribution margin 24.9 % 27.6 % 24.2 % 24.1 % Total segment contribution income $ 37,684 $ 50,664 $ 105,112 $ 118,972 Corporate and unallocated costs (16,901 ) (22,391 ) (51,609 ) (69,727 ) Amortization of intangibles (1) (1,520 ) (1,922 ) (5,212 ) (5,967 ) Stock-based compensation expense (6,986 ) (6,118 ) (20,183 ) (20,228 ) Separation expense — (379 ) (264 ) (379 ) Change in fair value of contingent consideration (199 ) — (199 ) — Restructuring and other charges 77 (1 ) (1,146 ) (1,368 ) Litigation reserves, net (90 ) — (100 ) (5 ) Interest income, net 639 985 2,122 2,806 Other income (expense), net (403 ) 955 425 425 Income before income taxes $ 12,301 $ 21,793 $ 28,946 $ 24,529 _________________________ (1) Amount excludes amortization expense related to patents within purchased intangibles in cost of revenue. Operations by Geographic Region The Company conducts business across three geographic regions: Americas, EMEA, and APAC. Net revenue consists of gross product shipments and service revenue, less allowances for estimated sales returns, price protection, end-user customer rebates and other channel sales incentives deemed to be a reduction of net revenue per the authoritative guidance for revenue recognition, and net changes in deferred revenue. 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 for the periods indicated: Three Months Ended Nine Months Ended September 29, September 30, September 29, September 30, (In thousands) United States (U.S.) $ 174,805 $ 173,580 $ 473,381 $ 501,153 Americas (excluding U.S.) 3,874 2,352 10,497 9,205 EMEA 49,554 53,158 149,608 148,801 APAC 37,625 40,321 112,306 110,729 Total net revenue $ 265,858 $ 269,411 $ 745,792 $ 769,888 Long-lived assets by Geographic Region Long-lived assets include purchased intangibles, goodwill and property and equipment. The Company's property and equipment are located in the following geographic locations: As of September 29, December 31, (In thousands) United States $ 4,698 $ 4,993 Canada 3,641 4,359 EMEA 344 95 China 4,389 7,652 APAC (excluding China) 6,599 3,078 Total property and equipment, net $ 19,671 $ 20,177 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 29, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements The following tables summarize assets and liabilities measured at fair value on a recurring basis as of September 29, 2019 and December 31, 2018 : As of September 29, 2019 Total Quoted market prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) (In thousands) Assets: Cash equivalents: money-market funds $ 31,572 $ 31,572 $ — $ — Available-for-sale investments: certificates of deposit (1) 145 — 145 — Trading securities: mutual funds (1) 3,770 3,770 — — Foreign currency forward contracts (2) 1,097 — 1,097 — Total assets measured at fair value $ 36,584 $ 35,342 $ 1,242 $ — Liabilities: Foreign currency forward contracts (3) $ 208 $ — $ 208 $ — Contingent considerations (4) 6,152 — — 6,152 Total liabilities measured at fair value $ 6,360 $ — $ 208 $ 6,152 As of December 31, 2018 Total Quoted market prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) (In thousands) Assets: Cash equivalents: money-market funds $ 22,573 $ 22,573 $ — $ — Available-for-sale debt investments: U.S. treasuries (1) 70,314 — 70,314 — Available-for-sale investments: certificates of deposit (1) 149 — 149 — Trading securities: mutual funds (1) 2,854 2,854 — — Foreign currency forward contracts (2) 786 — 786 — Total assets measured at fair value $ 96,676 $ 25,427 $ 71,249 $ — Liabilities: Foreign currency forward contracts (3) $ 368 $ — $ 368 $ — Contingent considerations (4) 5,953 — — 5,953 Total liabilities measured at fair value $ 6,321 $ — $ 368 $ 5,953 _________________________ (1) Included in Short-term investments on the Company’s unaudited condensed consolidated balance sheets. (2) Included in Prepaid expenses and other current assets on the Company’s unaudited condensed consolidated balance sheets. (3) Included in Other accrued liabilities on the Company’s unaudited condensed consolidated balance sheets. (4) Included in Other non-current accrued liabilities on the Company’s unaudited condensed consolidated balance sheets. The contingent consideration represents the estimated fair value of the additional variable cash consideration payable in connection with the acquisition of Meural that is contingent upon the achievement of certain technical and service revenue milestones. Refer to Note 5. Business Acquisition , regarding detailed disclosures on the determination of fair value of the contingent consideration. The Company’s investments in cash equivalents and trading securities are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. The Company’s available-for-sale investments are classified within Level 2 of the fair value hierarchy because they are valued based on readily available pricing sources for comparable instruments, identical instruments in less active markets, or models using market observable inputs. The Company’s foreign currency forward contracts are classified within Level 2 of the fair value hierarchy as they are valued using pricing models that take into account the contract terms as well as currency rates and counterparty credit rates. The Company verifies the reasonableness of these pricing models using observable market data for related inputs into such models. Additionally, the Company includes an adjustment for non-performance risk in the recognized measure of fair value of derivative instruments. As of September 29, 2019 and December 31, 2018 , the adjustment for non-performance risk did not have a material impact on the fair value of the Company’s foreign currency forward contracts. The Company enters into foreign currency forward contracts with only those counterparties that have long-term credit ratings of A-/A3 or higher. The Company's contingent considerations resulting from acquisitions are classified within Level 3 of the fair value hierarchy as the valuations typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. The carrying value of non-financial assets and liabilities measured at fair value in the financial statements on a recurring basis, including accounts receivable and accounts payable, approximate fair value due to their short maturities. |
Leases
Leases | 9 Months Ended |
Sep. 29, 2019 | |
Leases [Abstract] | |
Leases | Leases The Company determines if an arrangement is a lease or contains a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other accrued liabilities, and operating lease liabilities on the unaudited condensed consolidated balance sheets. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For certain office leases, the Company accounts for the lease and non-lease components as a single lease component. Lease expense is recognized on a straight-line basis over the lease term. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Generally the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company's incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives. The Company's lease arrangements comprise of operating leases for office space, cars, distribution centers and equipment. The leases have remaining lease terms of 1 year to 10 years , some of which include options to extend for up to a further 5 years , and some of which include options to terminate prior to completion of the contractual lease term with or without penalties. The Company determines the duration of the lease arrangement giving thought to whether or not it is reasonably certain that the Company will exercise options to extend or terminate the lease arrangement ahead of its contractual term. The leases do not contain any material residual value guarantees. The components of lease cost were as follows: Three Months Ended Nine Months Ended September 29, September 29, (in thousands) Operating lease cost $ 2,977 $ 8,928 Short-term lease cost (1) 121 1,004 Total lease cost (2) $ 3,098 $ 9,932 (1) Included variable lease cost, which was immaterial. (2) Included in cost of revenue, sales and marketing, research and development and general and administration in the Company’s unaudited condensed statement of operations. Supplemental cash flow information related to leases was as follows: Nine Months Ended September 29, (in thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows relating to operating leases $ 8,982 Lease liabilities arising from obtaining right-of-use assets: Operating leases $ 834 Supplemental balance sheet information related to leases was as follows: As of September 29, 2019 Weighted Average Remaining Lease Term (in years) Operating leases 4.6 Weighted Average Discount Rate Operating leases 3.8 % As of September 29, 2019 , maturity analysis of operating lease liabilities were as follows (in thousands): Operating Lease 2019 (remaining three months) $ 2,936 2020 10,165 2021 8,015 2022 6,980 2023 4,502 Thereafter 7,691 Total lease payments 40,289 Less imputed interest (3,346 ) Total $ 36,943 As of December 31, 2018 , future minimum lease payments under non-cancelable operating leases were as follows (in thousands): Leases (1) 2019 $ 11,900 2020 9,986 2021 7,785 2022 6,856 2023 4,478 Thereafter 7,725 Total future minimum lease payments $ 48,730 (1) Amounts are based on ASC 840 Leases that was superseded upon the adoption of ASC 842 Leases on January 1, 2019. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 29, 2019 | |
Accounting Policies [Abstract] | |
Recent accounting pronouncements | Recent accounting pronouncements Accounting Pronouncements Recently Adopted ASU 2016-02 In February 2016, FASB issued ASU 2016-02, "Leases" (Topic 842), which requires a lessee to recognize on the balance sheets a right-of-use asset, representing its right to use the underlying asset for the lease term, and a corresponding lease liability. The liability is equal to the present value of lease payments while the right-of-use asset is based on the liability, subject to adjustment, such as for initial direct costs. In addition, ASU 2016-02 expands the disclosure requirements for lessees. The Company adopted the new standard effective January 1, 2019 and was required to record a lease asset and lease liability related to its operating leases. The Company elected to utilize the alternative modified transition method, under which the cumulative-effect adjustment to the opening balance is recognized on the date of adoption while comparative prior periods continue to be reported under the guidance in effect prior to January 1, 2019. Accordingly, the Company did not restate or make related disclosures under the new standard for comparative prior periods in the period of adoption, and the Company applied the new lease standard prospectively to leases existing or commencing on or after January 1, 2019. The Company elected the package of practical expedients permitted under the transition guidance within the standard to not (1) reassess whether any expired or existing contracts are considered or contain leases; (2) reassess the lease classification for any expired or existing leases; and (3) reassess the initial direct costs for any existing leases. The Company made an accounting policy election to treat the lease and non-lease components in its office lease contracts as a single performance obligation to the extent that the timing and pattern of transfer are similar for the lease and non-lease components and the lease component qualifies as an operating lease. The Company also made an accounting policy election not to recognize lease liabilities and right-of-use assets for leases with a term of 12 months or less. The Company will recognize these lease payments on a straight-line basis over the lease term. The following table summarizes the impact of adopting ASU 2016-02 on the Company’s unaudited condensed consolidated balance sheet for the fiscal year beginning January 1, 2019 as an adjustment to the opening balances: As of Adjustments As of December 31, January 1, (In thousands) Assets: Prepaid expenses and other current assets $ 35,997 $ (543 ) $ 35,454 Total current assets $ 857,899 $ (543 ) $ 857,356 Operating lease right-of-use assets, net $ — $ 39,110 $ 39,110 Total assets $ 1,043,376 $ 38,567 $ 1,081,943 Liabilities: Other accrued liabilities $ 199,472 $ 10,909 $ 210,381 Total current liabilities $ 383,992 $ 10,909 $ 394,901 Non-current operating lease liabilities $ — $ 33,823 $ 33,823 Other non-current liabilities $ 12,232 $ (6,165 ) $ 6,067 Total liabilities $ 415,824 $ 38,567 $ 454,391 Total liabilities and stockholders’ equity $ 1,043,376 $ 38,567 $ 1,081,943 The standard did not impact our statement of operations and cash flows. Accounting Pronouncements Not Yet Effective In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments" (Topic 326), which replaces the incurred-loss impairment methodology and requires immediate recognition of estimated credit losses expected to occur for most financial assets, including trade receivables. Credit losses on available-for-sale debt securities with unrealized losses will be recognized as allowances for credit losses limited to the amount by which fair value is below amortized cost. The Company will adopt the new standard when it becomes effective in the first fiscal quarter of 2020. The Company is currently in the process of developing new credit loss models and updating its controls in preparation for the adoption. Based on the composition of the Company’s investment portfolio, current market conditions, and historical credit loss activity, the Company does not expect that it will have material impacts on its financial position, results of operations or cash flows. With the exception of the new standard discussed above, there have been no other new accounting pronouncements that have significance, or potential significance, to the Company's financial position, results of operations and cash flows. |
Revenue Recognition | Contract Balances The Company records accounts receivable when it has an unconditional right to consideration. Contract liabilities are recorded when cash payments are received or due in advance of performance. Contract liabilities consist of advance payments and deferred revenue, where the Company has unsatisfied performance obligations. Payment terms vary by customer. The time between invoicing and when payment is due is not significant. For certain products or services and customer types, payment is required before the products or services are delivered to the customer. Revenue from contracts with customers is recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Transaction Price Allocated to the Remaining Performance Obligations Remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and partially unsatisfied performance obligations consist of contract liabilities, in-transit orders with destination terms, and non-cancellable backlog. Non-cancellable backlog includes goods and services for which customer purchase orders have been accepted that are scheduled or in the process of being scheduled for shipment. |
Leases | The Company determines if an arrangement is a lease or contains a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other accrued liabilities, and operating lease liabilities on the unaudited condensed consolidated balance sheets. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For certain office leases, the Company accounts for the lease and non-lease components as a single lease component. Lease expense is recognized on a straight-line basis over the lease term. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Generally the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company's incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives. The Company's lease arrangements comprise of operating leases for office space, cars, distribution centers and equipment. The leases have remaining lease terms of 1 year to 10 years , some of which include options to extend for up to a further 5 years , and some of which include options to terminate prior to completion of the contractual lease term with or without penalties. The Company determines the duration of the lease arrangement giving thought to whether or not it is reasonably certain that the Company will exercise options to extend or terminate the lease arrangement ahead of its contractual term. The leases do not contain any material residual value guarantees. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Accounting Policies [Abstract] | |
Schedule of Balance Sheet Impacts from ASU 2016-02 Adoption | The following table summarizes the impact of adopting ASU 2016-02 on the Company’s unaudited condensed consolidated balance sheet for the fiscal year beginning January 1, 2019 as an adjustment to the opening balances: As of Adjustments As of December 31, January 1, (In thousands) Assets: Prepaid expenses and other current assets $ 35,997 $ (543 ) $ 35,454 Total current assets $ 857,899 $ (543 ) $ 857,356 Operating lease right-of-use assets, net $ — $ 39,110 $ 39,110 Total assets $ 1,043,376 $ 38,567 $ 1,081,943 Liabilities: Other accrued liabilities $ 199,472 $ 10,909 $ 210,381 Total current liabilities $ 383,992 $ 10,909 $ 394,901 Non-current operating lease liabilities $ — $ 33,823 $ 33,823 Other non-current liabilities $ 12,232 $ (6,165 ) $ 6,067 Total liabilities $ 415,824 $ 38,567 $ 454,391 Total liabilities and stockholders’ equity $ 1,043,376 $ 38,567 $ 1,081,943 |
Revenue (Tables)
Revenue (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Remaining Performance Obligations | The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 29, 2019 : 1 year 2 years Greater than 2 years Total (In thousands) Performance obligations $ 58,528 $ 921 $ 1,008 $ 60,457 |
Schedule of Changes in Contract Balances | The following table reflects the changes in contract balances for the nine months ended September 29, 2019 : Balance Sheet Location September 29, 2019 December 31, 2018 $ change % change (In thousands) Accounts Receivable, net Accounts receivable, net $ 248,070 $ 303,667 $ (55,597 ) (18.3 )% Contract liabilities - current Deferred revenue $ 5,812 $ 11,086 $ (5,274 ) (47.6 )% Contract liabilities - non-current Other non-current liabilities $ 1,900 $ 779 $ 1,121 143.9 % |
Schedule of Net Revenue Disaggregated by Geographical Region and Sales Channel | In the following table, net revenue is disaggregated by geographic region and sales channel. The Company conducts business across three geographic regions: Americas; Europe, Middle-East and Africa (“EMEA”); and Asia Pacific ("APAC"). The table also includes a reconciliation of the disaggregated revenue by reportable segment. The Company operates and reports in two segments: Connected Home, and Small and Medium Business ("SMB"). Sales and usage-based taxes are excluded from net revenue. Three Months Ended September 29, September 30, Connected Home SMB Total Connected Home SMB Total (In thousands) Geographic regions: Americas $ 146,806 $ 31,873 $ 178,679 $ 141,883 $ 34,049 $ 175,932 EMEA 22,190 27,364 49,554 27,619 25,539 53,158 APAC 21,676 15,949 37,625 25,181 15,140 40,321 Total net revenue $ 190,672 $ 75,186 $ 265,858 $ 194,683 $ 74,728 $ 269,411 Sales channels: Service provider $ 35,482 $ 972 $ 36,454 $ 30,769 $ 1,191 $ 31,960 Non-service provider 155,190 74,214 229,404 163,914 73,537 237,451 Total net revenue $ 190,672 $ 75,186 $ 265,858 $ 194,683 $ 74,728 $ 269,411 Nine Months Ended September 29, September 30, Connected Home SMB Total Connected Home SMB Total (In thousands) Geographic regions: Americas $ 392,162 $ 91,716 $ 483,878 $ 416,491 $ 93,867 $ 510,358 EMEA 65,406 84,202 149,608 69,134 79,667 148,801 APAC 69,964 42,342 112,306 69,797 40,932 110,729 Total net revenue $ 527,532 $ 218,260 $ 745,792 $ 555,422 $ 214,466 $ 769,888 Sales channels: Service provider $ 99,201 $ 3,370 $ 102,571 $ 118,899 $ 2,954 $ 121,853 Non-service provider 428,331 214,890 643,221 436,523 211,512 648,035 Total net revenue $ 527,532 $ 218,260 $ 745,792 $ 555,422 $ 214,466 $ 769,888 |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Disposal Groups, Including Discontinued Operations | The financial results of Arlo through the Distribution date are presented as income (loss) from discontinued operations, net of tax, in the unaudited condensed consolidated statement of operations. The following table presents financial results of Arlo for the three and nine months ended September 30, 2018 : Three Months Ended Nine Months Ended September 30, 2018 September 30, 2018 (In thousands) Net revenue $ 131,175 $ 342,491 Cost of revenue 101,427 255,666 Gross profit 29,748 86,825 Operating expenses: Research and development 14,816 32,569 Sales and marketing 11,592 25,148 General and administrative 6,905 9,859 Separation expense 6,675 25,443 Total operating expenses 39,988 93,019 Loss from operations of discontinued operations (10,240 ) (6,194 ) Interest income, net 503 503 Other income (expense), net (126 ) 213 Loss from discontinued operations before income taxes (9,863 ) (5,478 ) Provision (benefit) for income taxes (2,703 ) 2,873 Loss from discontinued operations, net of tax $ (7,160 ) $ (8,351 ) |
Business Acquisitions (Tables)
Business Acquisitions (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Business Combinations [Abstract] | |
Schedule of Business Acquisitions, by Acquisition | The purchase price allocation was as follows (in thousands): Cash and cash equivalents $ 20 Accounts receivable 209 Inventories 760 Prepaid expenses and other current assets 500 Property and equipment 16 Intangibles 4,800 Non-current deferred income taxes 815 Goodwill 16,407 Accounts payable (1,317 ) Other accrued liabilities (35 ) Total purchase price $ 22,175 |
Balance Sheet Components (Table
Balance Sheet Components (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Balance Sheet Related Disclosures [Abstract] | |
Schedule of Available-for-Sale Short-Term Investments | Available-for-sale short-term investments As of September 29, 2019 December 31, 2018 Cost Unrealized Gains Unrealized Losses Estimated Fair Value Cost Unrealized Gains Unrealized Losses Estimated Fair Value (In thousands) U.S. treasuries $ — $ — $ — $ — $ 70,330 $ 1 $ (17 ) $ 70,314 Certificates of deposits 145 — — 145 149 — — 149 Total $ 145 $ — $ — $ 145 $ 70,479 $ 1 $ (17 ) $ 70,463 |
Schedule of Inventories | Inventories As of September 29, December 31, (In thousands) Raw materials $ 45,235 $ 3,427 Finished goods 230,349 240,444 Total inventories $ 275,584 $ 243,871 |
Schedule of Property and Equipment, Net | Property and equipment, net As of September 29, December 31, (In thousands) Computer equipment $ 9,885 $ 9,205 Furniture, fixtures and leasehold improvements 18,542 18,286 Software 28,088 28,065 Machinery and equipment 67,818 60,552 Total property and equipment, gross 124,333 116,108 Accumulated depreciation and amortization (104,662 ) (95,931 ) Total property and equipment, net $ 19,671 $ 20,177 |
Schedule of Intangibles, Net | Intangibles, net As of September 29, 2019 As of December 31, 2018 Gross Accumulated Amortization Net Gross Accumulated Amortization Net (In thousands) Technology $ 59,799 $ (57,299 ) $ 2,500 $ 59,799 $ (56,978 ) $ 2,821 Customer contracts and relationships 56,800 (48,956 ) 7,844 56,800 (44,280 ) 12,520 Other 10,345 (8,990 ) 1,355 10,345 (8,540 ) 1,805 Total intangibles, net $ 126,944 $ (115,245 ) $ 11,699 $ 126,944 $ (109,798 ) $ 17,146 |
Schedule of Estimated Amortization Expense Related to Intangibles | As of September 29, 2019 , estimated amortization expense related to finite-lived intangibles for the remaining years is as follows (in thousands): 2019 (remaining three months) $ 1,594 2020 6,205 2021 2,044 2022 527 2023 514 Thereafter 815 Total estimated amortization expense $ 11,699 |
Schedule of Other Non-Current Assets | Other non-current assets As of September 29, December 31, 2018 (In thousands) Non-current deferred income taxes $ 57,055 $ 57,557 Long-term investments 8,147 2,886 Other 7,434 6,990 Total other non-current assets $ 72,636 $ 67,433 |
Schedule of Other Accrued Liabilities | Other accrued liabilities As of September 29, December 31, (In thousands) Current operating lease liabilities $ 9,765 $ — Sales and marketing 63,027 91,548 Warranty obligations 10,858 14,412 Sales returns 45,547 46,318 Freight and duty 5,519 10,586 Other 28,617 36,608 Total other accrued liabilities $ 163,333 $ 199,472 |
Derivative Financial Instrume_2
Derivative Financial Instruments (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Fair Values of the Company's Derivative Instruments and the Line Items on the Consolidated Balance Sheets | The fair values of the Company’s derivative instruments and the line items on the unaudited condensed consolidated balance sheets to which they were recorded as of September 29, 2019 and December 31, 2018 are summarized as follows: As of As of Balance Sheet Location September 29, December 31, Balance Sheet Location September 29, December 31, (In thousands) (In thousands) Derivatives not designated as hedging instruments Prepaid expenses and other current assets $ 1,050 $ 784 Other accrued liabilities $ 150 $ 331 Derivatives designated as hedging instruments Prepaid expenses and other current assets 47 2 Other accrued liabilities 58 37 Total $ 1,097 $ 786 $ 208 $ 368 |
Schedule of Offsetting of Derivative Assets | The following tables set forth the offsetting of derivative assets as of September 29, 2019 and December 31, 2018 : As of September 29, 2019 Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets Gross Amounts of Recognized Assets Gross Amounts Offset on the Condensed Consolidated Balance Sheets Net Amounts Of Assets Presented on the Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount (In thousands) J.P. Morgan Chase $ 128 $ — $ 128 $ (31 ) $ — $ 97 Bank of America — — — (2 ) — (2 ) Wells Fargo 969 — 969 (175 ) — 794 Total $ 1,097 $ — $ 1,097 $ (208 ) $ — $ 889 As of December 31, 2018 Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets Gross Amounts of Recognized Assets Gross Amounts Offset on the Condensed Consolidated Balance Sheets Net Amounts Of Assets Presented on the Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount (In thousands) Bank of America $ 323 $ — $ 323 $ (64 ) $ — $ 259 Wells Fargo 463 — 463 (298 ) — 165 Total $ 786 $ — $ 786 $ (362 ) $ — $ 424 |
Schedule of Offsetting of Derivative Liabilities | The following tables set forth the offsetting of derivative liabilities as of September 29, 2019 and December 31, 2018 : As of September 29, 2019 Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets Gross Amounts of Recognized Liabilities Gross Amounts Offset on the Condensed Consolidated Balance Sheets Net Amounts Of Liabilities Presented on the Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount (In thousands) J.P. Morgan Chase $ 31 $ — $ 31 $ (31 ) $ — $ — Bank of America 2 — 2 (2 ) — — Wells Fargo 175 — 175 (175 ) — — Total $ 208 $ — $ 208 $ (208 ) $ — $ — As of December 31, 2018 Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets Gross Amounts of Recognized Liabilities Gross Amounts Offset on the Condensed Consolidated Balance Sheets Net Amounts Of Liabilities Presented on the Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount (In thousands) J.P. Morgan Chase $ 6 $ — $ 6 $ — $ — $ 6 Bank of America 64 — 64 (64 ) — — Wells Fargo 298 — 298 (298 ) — — Total $ 368 $ — $ 368 $ (362 ) $ — $ 6 |
Schedule of Effects and Locations of Gains or Losses Recognized in Income | The effects of the Company's cash flow hedges in the unaudited condensed statement of operations for the three and nine months ended September 29, 2019 and September 30, 2018 are summarized as follows: Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges Three Months Ended September 29, 2019 Net revenue Cost of revenue Research and development Sales and marketing General and administrative (In thousands) Statement of operations $ 265,858 $ 188,666 $ 19,537 $ 33,491 $ 11,887 Gains (losses) on cash flow hedge $ 548 $ (2 ) $ (2 ) $ (42 ) $ (7 ) Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges Three Months Ended September 30, 2018 Net revenue Cost of revenue Research and development Sales and marketing General and administrative (In thousands) Statement of operations $ 269,411 $ 174,966 $ 20,136 $ 37,892 $ 16,184 Gains (losses) on cash flow hedge $ 750 $ (6 ) $ — $ (115 ) $ (32 ) Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges Nine Months Ended September 29, 2019 Net revenue Cost of revenue Research and development Sales and marketing General and administrative (In thousands) Statement of operations $ 745,792 $ 521,147 $ 57,183 $ 103,887 $ 35,467 Gains (losses) on cash flow hedge $ 1,634 $ (10 ) $ (47 ) $ (209 ) $ (30 ) Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges Nine Months Ended September 30, 2018 Net revenue Cost of revenue Research and development Sales and marketing General and administrative (In thousands) Statement of operations $ 769,888 $ 518,844 $ 63,273 $ 114,318 $ 50,403 Gains (losses) on cash flow hedge $ 235 $ (7 ) $ 86 $ (42 ) $ (41 ) |
Schedule of Company's Derivative Instruments on Other Comprehensive Income and the Consolidated Statement of Operations | The pre-tax effects of the Company’s derivative instruments in OCI and the unaudited condensed consolidated statement of operations for the three and nine months ended September 29, 2019 and September 30, 2018 are summarized as follows: Derivatives Designated as Hedging Instruments Gains (Losses) Recognized in OCI - Effective Portion Location of Gains (Losses) Reclassified from OCI into Income - Effective Portion Gains (Losses) Reclassified from OCI into Income - Effective Portion (1) Three Months Ended Three Months Ended September 29, September 30, September 29, September 30, (In thousands) (In thousands) Cash flow hedges: Foreign currency forward contracts $ 458 $ 625 Net revenue $ 548 $ 750 Foreign currency forward contracts — — Cost of revenue (2 ) (6 ) Foreign currency forward contracts — — Research and development (2 ) — Foreign currency forward contracts — — Sales and marketing (42 ) (115 ) Foreign currency forward contracts — — General and administrative (7 ) (32 ) Total $ 458 $ 625 $ 495 $ 597 _________________________ (1) Refer to Note 11. Stockholders' Equity , which summarizes the accumulated other comprehensive income activity related to derivatives. Derivatives Designated as Hedging Instruments Gains (Losses) Recognized in OCI - Effective Portion Location of Gains (Losses) Reclassified from OCI into Income - Effective Portion Gains (Losses) Reclassified from OCI into Income - Effective Portion (1) Nine Months Ended Nine Months Ended September 29, September 30, September 29, September 30, (In thousands) (In thousands) Cash flow hedges: Foreign currency forward contracts $ 1,322 $ 1,075 Net revenue $ 1,634 $ 235 Foreign currency forward contracts — — Cost of revenue (10 ) (7 ) Foreign currency forward contracts — — Research and development (47 ) 86 Foreign currency forward contracts — — Sales and marketing (209 ) (42 ) Foreign currency forward contracts — — General and administrative (30 ) (41 ) Total $ 1,322 $ 1,075 $ 1,338 $ 231 _________________________ (1) Refer to Note 11. Stockholders' Equity , which summarizes the accumulated other comprehensive income activity related to derivatives. |
Schedule of Derivatives not Designated as Hedging Instruments | The effects of the Company’s non-designated hedge included in Other income (expense), net in the unaudited condensed consolidated statements of operations for the nine months ended September 29, 2019 and September 30, 2018 are as follows: Derivatives Not Designated as Hedging Instruments Location of Gains (Losses) Recognized in Income on Derivative Three Months Ended Nine Months Ended September 29, 2019 September 30, 2018 September 29, 2019 September 30, 2018 (In thousands) Foreign currency forward contracts Other income (expense), net $ 1,540 $ 991 $ 2,446 $ 2,930 |
Net Income Per Share (Tables)
Net Income Per Share (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of Net Income Per Share | Net income per share for the three and nine months ended September 29, 2019 and September 30, 2018 are as follows: Three Months Ended Nine Months Ended September 29, September 30, September 29, September 30, (In thousands, except per share data) Numerator: Net income from continuing operations $ 12,529 $ 16,310 $ 26,211 $ 17,861 Net loss from discontinued operations — (7,160 ) — (8,351 ) Net income 12,529 9,150 26,211 9,510 Less: Net loss attributable to non-controlling interest in discontinued operations — (799 ) — (799 ) Net income attributable to NETGEAR, Inc. $ 12,529 $ 9,949 $ 26,211 $ 10,309 Denominator: Weighted average common shares - basic 30,933 31,802 31,221 31,634 Potentially dilutive common share equivalent 886 1,172 1,106 1,192 Weighted average common shares - dilutive 31,819 32,974 32,327 32,826 Basic net income per share Net income from continuing operations $ 0.41 $ 0.51 $ 0.84 $ 0.56 Net loss from discontinued operations attributable to NETGEAR, Inc. — (0.20 ) — (0.23 ) Net income attributable to NETGEAR, Inc. $ 0.41 $ 0.31 $ 0.84 $ 0.33 Diluted net income per share Net income from continuing operations $ 0.39 $ 0.49 $ 0.81 $ 0.54 Net loss from discontinued operations attributable to NETGEAR, Inc. — (0.19 ) — (0.23 ) Net income attributable to NETGEAR, Inc. $ 0.39 $ 0.30 $ 0.81 $ 0.31 Anti-dilutive employee stock-based awards, excluded 1,587 450 625 874 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Changes in Warranty Obligation | Changes in the Company’s warranty obligations, which is included in Other accrued liabilities on the unaudited condensed consolidated balance sheets, are as follows: Three Months Ended Nine Months Ended September 29, September 30, September 29, September 30, (In thousands) Balance as of beginning of the period $ 11,913 $ 15,271 $ 14,412 $ 44,068 Reclassified to sales returns upon adoption of ASC 606 — — — (29,147 ) * Provision for warranty obligation made during the period 1,558 2,987 4,970 10,009 Settlements made during the period (2,613 ) (3,350 ) (8,524 ) (10,022 ) Balance at end of period $ 10,858 $ 14,908 $ 10,858 $ 14,908 ________________________ * Upon adoption of ASC 606 on January 1, 2018, certain warranty reserve balances totaling $29.1 million were reclassified to sales returns as these liabilities are payable to the Company's customers and settled in cash or by credit on account. Under ASC 606, these amounts are to be accounted for as sales with right of return. |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Stockholders' Equity Note [Abstract] | |
Schedule of Accumulated Other Comprehensive Income | The following table sets forth the changes in accumulated other comprehensive income ("AOCI") by component for the nine months ended September 29, 2019 and September 30, 2018 : Unrealized gains (losses) on available-for-sale investments Unrealized gains (losses) on derivatives Estimated tax benefit (provision) Total (In thousands) Balance as of December 31, 2018 $ (18 ) $ (8 ) $ 11 $ (15 ) Other comprehensive income (loss) before reclassifications 16 1,322 (284 ) 1,054 Less: Amount reclassified from accumulated other comprehensive income — 1,338 (281 ) 1,057 Net current period other comprehensive income (loss) 16 (16 ) (3 ) (3 ) Balance as of September 29, 2019 $ (2 ) $ (24 ) $ 8 $ (18 ) Unrealized gains (losses) on available-for-sale investments Unrealized gains (losses) on derivatives Estimated tax benefit (provision) Total (In thousands) Balance as of December 31, 2017 $ (146 ) $ (838 ) $ 133 $ (851 ) Other comprehensive income (loss) before reclassifications 72 1,075 (165 ) 982 Less: Amount reclassified from accumulated other comprehensive income — 211 (44 ) 167 Net current period other comprehensive income (loss) 72 864 (121 ) 815 Balance as of September 30, 2018 $ (74 ) $ 26 $ 12 $ (36 ) |
Schedule of Reclassification out of Accumulated Other Comprehensive Income (Loss) | The following tables provide details about significant amounts reclassified out of each component of AOCI for the three and nine months ended September 29, 2019 and September 30, 2018 : Details about Accumulated Other Comprehensive Income Components Three Months Ended September 29, 2019 Nine Months Ended September 29, 2019 Amount Reclassified from AOCI Affected Line Item in the Statements of Operations Amount Reclassified from AOCI Affected Line Item in the Statement of Operations (In thousands) (In thousands) Gains (losses) on cash flow hedge: Foreign currency forward contracts $ 548 Net revenue $ 1,634 Net revenue Foreign currency forward contracts (2 ) Cost of revenue (10 ) Cost of revenue Foreign currency forward contracts (2 ) Research and development (47 ) Research and development Foreign currency forward contracts (42 ) Sales and marketing (209 ) Sales and marketing Foreign currency forward contracts (7 ) General and administrative (30 ) General and administrative 495 Total from continuing operations before tax 1,338 Total from continuing operations before tax (104 ) Tax impact from continuing operations (281 ) Tax impact from continuing operations 391 Total, from continuing operations net of tax 1,057 Total, from continuing operations net of tax — Total, from discontinued operations net of tax — Total, from discontinued operations net of tax $ 391 Total, net of tax $ 1,057 Total, net of tax Details about Accumulated Other Comprehensive Income Components Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 Amount Reclassified from AOCI Affected Line Item in the Statements of Operations Amount Reclassified from AOCI Affected Line Item in the Statement of Operations (In thousands) (In thousands) Gains (losses) on cash flow hedge: Foreign currency forward contracts $ 750 Net revenue $ 235 Net revenue Foreign currency forward contracts (6 ) Cost of revenue (7 ) Cost of revenue Foreign currency forward contracts — Research and development 86 Research and development Foreign currency forward contracts (115 ) Sales and marketing (42 ) Sales and marketing Foreign currency forward contracts (32 ) General and administrative (41 ) General and administrative 597 Total from continuing operations before tax 231 Total from continuing operations before tax (125 ) Tax impact from continuing operations (49 ) Tax impact from continuing operations 472 Total, from continuing operations net of tax 182 Total, from continuing operations net of tax 197 Total, from discontinued operations net of tax (15 ) Total, from discontinued operations net of tax $ 669 Total, net of tax $ 167 Total, net of tax |
Employee Benefit Plans (Tables)
Employee Benefit Plans (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Employee Benefit and Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Schedule of Stock Option Activity | Stock option activity during the nine months ended September 29, 2019 was as follows: Number of shares Weighted Average Exercise Price Per Share (In thousands) (In dollars) Outstanding as of December 31, 2018 1,969 $ 25.30 Granted 502 $ 26.61 Exercised (226 ) $ 20.31 Cancelled (16 ) $ 36.27 Expired (15 ) $ 40.00 Outstanding as of September 29, 2019 2,214 $ 25.93 |
Schedule of RSU Activity | RSU activity during the nine months ended September 29, 2019 was as follows: Number of shares Weighted Average Grant Date Fair Value Per Share (In thousands) (In dollars) Outstanding as of December 31, 2018 1,627 $ 34.31 Granted 693 $ 31.37 Vested (535 ) $ 31.62 Cancelled (105 ) $ 35.12 Outstanding as of September 29, 2019 1,680 $ 33.90 |
Schedule of Weighted Average Assumptions | The table below sets forth the weighted average assumptions used to estimate the fair value of option grants and purchase rights granted during the three and nine months ended September 29, 2019 and September 30, 2018 . Three Months Ended Nine Months Ended Stock Options ESPP Stock Options ESPP September 29, September 30, September 29, September 30, September 29, September 30, September 29, September 30, Expected life (in years) 6.2 4.4 0.5 0.5 6.2 4.4 0.5 0.5 Risk-free interest rate 1.85 % 2.79 % 1.83 % 2.22 % 1.85 % 2.36 % 2.06 % 2.00 % Expected volatility 33.9 % 33.5 % 44.5 % 38.8 % 33.9 % 31.1 % 43.9 % 37.9 % Dividend yield — — — — — — — — |
Schedule of Total Stock-Based Compensation Expense Resulting from Stock Options, Restricted Stock Awards, and the Employee Stock Purchase Plan | The following table sets forth the stock-based compensation expense resulting from stock options, RSUs and the ESPP included in the Company’s unaudited condensed consolidated statements of operations: Three Months Ended Nine Months Ended September 29, September 30, September 29, September 30, (In thousands) Cost of revenue $ 706 $ 619 $ 2,129 $ 1,754 Research and development 1,496 1,037 3,976 3,171 Sales and marketing 2,097 1,970 6,223 6,363 General and administrative 2,687 2,492 7,855 8,940 Total stock-based compensation $ 6,986 $ 6,118 $ 20,183 $ 20,228 |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Segment Reporting [Abstract] | |
Schedule of Reportable Segments and Reconciliation of Segment Contribution Income to Income Before Income Taxes | Financial information for each reportable segment and a reconciliation of segment contribution income to income before income taxes is as follows : Three Months Ended Nine Months Ended September 29, 2019 September 30, 2018 September 29, 2019 September 30, 2018 (In thousands, except percentage data) Net revenue: Connected Home $ 190,672 $ 194,683 $ 527,532 $ 555,422 SMB 75,186 74,728 218,260 214,466 Total net revenue $ 265,858 $ 269,411 $ 745,792 $ 769,888 Contribution income: Connected Home $ 18,934 $ 30,071 $ 52,257 $ 67,222 Contribution margin 9.9 % 15.4 % 9.9 % 12.1 % SMB $ 18,750 $ 20,593 $ 52,855 $ 51,750 Contribution margin 24.9 % 27.6 % 24.2 % 24.1 % Total segment contribution income $ 37,684 $ 50,664 $ 105,112 $ 118,972 Corporate and unallocated costs (16,901 ) (22,391 ) (51,609 ) (69,727 ) Amortization of intangibles (1) (1,520 ) (1,922 ) (5,212 ) (5,967 ) Stock-based compensation expense (6,986 ) (6,118 ) (20,183 ) (20,228 ) Separation expense — (379 ) (264 ) (379 ) Change in fair value of contingent consideration (199 ) — (199 ) — Restructuring and other charges 77 (1 ) (1,146 ) (1,368 ) Litigation reserves, net (90 ) — (100 ) (5 ) Interest income, net 639 985 2,122 2,806 Other income (expense), net (403 ) 955 425 425 Income before income taxes $ 12,301 $ 21,793 $ 28,946 $ 24,529 _________________________ (1) Amount excludes amortization expense related to patents within purchased intangibles in cost of revenue. |
Schedule of Net Revenue by Geography | The following table shows net revenue by geography for the periods indicated: Three Months Ended Nine Months Ended September 29, September 30, September 29, September 30, (In thousands) United States (U.S.) $ 174,805 $ 173,580 $ 473,381 $ 501,153 Americas (excluding U.S.) 3,874 2,352 10,497 9,205 EMEA 49,554 53,158 149,608 148,801 APAC 37,625 40,321 112,306 110,729 Total net revenue $ 265,858 $ 269,411 $ 745,792 $ 769,888 |
Schedule of Long-Lived Asset By Geographic Areas | Long-lived assets include purchased intangibles, goodwill and property and equipment. The Company's property and equipment are located in the following geographic locations: As of September 29, December 31, (In thousands) United States $ 4,698 $ 4,993 Canada 3,641 4,359 EMEA 344 95 China 4,389 7,652 APAC (excluding China) 6,599 3,078 Total property and equipment, net $ 19,671 $ 20,177 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair Value, Assets and Liabilities Measured on Recurring Basis | The following tables summarize assets and liabilities measured at fair value on a recurring basis as of September 29, 2019 and December 31, 2018 : As of September 29, 2019 Total Quoted market prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) (In thousands) Assets: Cash equivalents: money-market funds $ 31,572 $ 31,572 $ — $ — Available-for-sale investments: certificates of deposit (1) 145 — 145 — Trading securities: mutual funds (1) 3,770 3,770 — — Foreign currency forward contracts (2) 1,097 — 1,097 — Total assets measured at fair value $ 36,584 $ 35,342 $ 1,242 $ — Liabilities: Foreign currency forward contracts (3) $ 208 $ — $ 208 $ — Contingent considerations (4) 6,152 — — 6,152 Total liabilities measured at fair value $ 6,360 $ — $ 208 $ 6,152 As of December 31, 2018 Total Quoted market prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) (In thousands) Assets: Cash equivalents: money-market funds $ 22,573 $ 22,573 $ — $ — Available-for-sale debt investments: U.S. treasuries (1) 70,314 — 70,314 — Available-for-sale investments: certificates of deposit (1) 149 — 149 — Trading securities: mutual funds (1) 2,854 2,854 — — Foreign currency forward contracts (2) 786 — 786 — Total assets measured at fair value $ 96,676 $ 25,427 $ 71,249 $ — Liabilities: Foreign currency forward contracts (3) $ 368 $ — $ 368 $ — Contingent considerations (4) 5,953 — — 5,953 Total liabilities measured at fair value $ 6,321 $ — $ 368 $ 5,953 _________________________ (1) Included in Short-term investments on the Company’s unaudited condensed consolidated balance sheets. (2) Included in Prepaid expenses and other current assets on the Company’s unaudited condensed consolidated balance sheets. (3) Included in Other accrued liabilities on the Company’s unaudited condensed consolidated balance sheets. (4) Included in Other non-current accrued liabilities on the Company’s unaudited condensed consolidated balance sheets. The contingent consideration represents the estimated fair value of the additional variable cash consideration payable in connection with the acquisition of Meural that is contingent upon the achievement of certain technical and service revenue milestones. Refer to Note 5. Business Acquisition , regarding detailed disclosures on the determination of fair value of the contingent consideration. |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Leases [Abstract] | |
Summary of Lease Cost and Supplemental Cash Flow Information | The components of lease cost were as follows: Three Months Ended Nine Months Ended September 29, September 29, (in thousands) Operating lease cost $ 2,977 $ 8,928 Short-term lease cost (1) 121 1,004 Total lease cost (2) $ 3,098 $ 9,932 (1) Included variable lease cost, which was immaterial. (2) Included in cost of revenue, sales and marketing, research and development and general and administration in the Company’s unaudited condensed statement of operations. Supplemental cash flow information related to leases was as follows: Nine Months Ended September 29, (in thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows relating to operating leases $ 8,982 Lease liabilities arising from obtaining right-of-use assets: Operating leases $ 834 |
Summary of Supplemental Balance Sheet Information | Supplemental balance sheet information related to leases was as follows: As of September 29, 2019 Weighted Average Remaining Lease Term (in years) Operating leases 4.6 Weighted Average Discount Rate Operating leases 3.8 % |
Schedule of Operating Lease Liability Maturities | As of September 29, 2019 , maturity analysis of operating lease liabilities were as follows (in thousands): Operating Lease 2019 (remaining three months) $ 2,936 2020 10,165 2021 8,015 2022 6,980 2023 4,502 Thereafter 7,691 Total lease payments 40,289 Less imputed interest (3,346 ) Total $ 36,943 |
Schedule of Future Minimum Rental Payments for Operating Leases | As of December 31, 2018 , future minimum lease payments under non-cancelable operating leases were as follows (in thousands): Leases (1) 2019 $ 11,900 2020 9,986 2021 7,785 2022 6,856 2023 4,478 Thereafter 7,725 Total future minimum lease payments $ 48,730 (1) Amounts are based on ASC 840 Leases that was superseded upon the adoption of ASC 842 Leases on January 1, 2019. |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Balance Sheet Impact of ASU 2016-02 Adoption (Details) - USD ($) $ in Thousands | Sep. 29, 2019 | Jan. 01, 2019 | Dec. 31, 2018 |
ASSETS | |||
Prepaid expenses and other current assets | $ 31,153 | $ 35,454 | $ 35,997 |
Total current assets | 726,724 | 857,356 | 857,899 |
Operating lease right-of-use assets, net | 31,610 | 39,110 | 0 |
Total assets | 943,061 | 1,081,943 | 1,043,376 |
Liabilities [Abstract] | |||
Other accrued liabilities | 163,333 | 210,381 | 199,472 |
Total current liabilities | 272,474 | 394,901 | 383,992 |
Non-current operating lease liabilities | 27,178 | 33,823 | 0 |
Other non-current liabilities | 8,052 | 6,067 | 12,232 |
Total liabilities | 320,923 | 454,391 | 415,824 |
Total liabilities and stockholders’ equity | $ 943,061 | 1,081,943 | $ 1,043,376 |
ASU 2016-02 | |||
ASSETS | |||
Prepaid expenses and other current assets | (543) | ||
Total current assets | (543) | ||
Operating lease right-of-use assets, net | 39,110 | ||
Total assets | 38,567 | ||
Liabilities [Abstract] | |||
Other accrued liabilities | 10,909 | ||
Total current liabilities | 10,909 | ||
Non-current operating lease liabilities | 33,823 | ||
Other non-current liabilities | (6,165) | ||
Total liabilities | 38,567 | ||
Total liabilities and stockholders’ equity | $ 38,567 |
Revenue (Narrative) (Details)
Revenue (Narrative) (Details) $ in Millions | 9 Months Ended |
Sep. 29, 2019USD ($)regionsegment | |
Revenue from Contract with Customer [Abstract] | |
Revenue deferred due to unsatisfied performance obligations | $ 10.8 |
Revenue recognized for satisfaction of performance obligations over time | $ 14.9 |
Number of geographic regions in which the Company conducts business | region | 3 |
Number of operating segments | segment | 2 |
Number of reportable segments | segment | 2 |
Contract with Customer, Liability Included In Beginning Balance, Revenue Recognized | $ 9.4 |
Revenue (Schedule of Remaining
Revenue (Schedule of Remaining Performance Obligations) (Details) $ in Thousands | Sep. 29, 2019USD ($) |
Revenue from Contract with Customer [Abstract] | |
Performance obligations, amount | $ 60,457 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-09-29 | |
Revenue from Contract with Customer [Abstract] | |
Performance obligations, amount | $ 58,528 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligations, period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-09-29 | |
Revenue from Contract with Customer [Abstract] | |
Performance obligations, amount | $ 921 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligations, period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-09-29 | |
Revenue from Contract with Customer [Abstract] | |
Performance obligations, amount | $ 1,008 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligations, period |
Revenue (Schedule of Changes in
Revenue (Schedule of Changes in Contract Balances) (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 29, 2019 | Dec. 31, 2018 | |
Accounts Receivable, net | ||
Accounts receivable, net | $ 248,070 | $ 303,667 |
$ change | $ (55,597) | |
% change | (18.30%) | |
Contract liabilities - current | ||
Contract liabilities - current | $ 5,812 | 11,086 |
$ change | $ (5,274) | |
% change | (47.60%) | |
Contract liabilities - non-current | ||
Contract liabilities - non-current | $ 1,900 | $ 779 |
$ change | $ 1,121 | |
% change | 143.90% |
Revenue (Schedule of Net Revenu
Revenue (Schedule of Net Revenue Disaggregated by Geographical Region and Sales Channel) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | $ 265,858 | $ 269,411 | $ 745,792 | $ 769,888 |
Service provider | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | 36,454 | 31,960 | 102,571 | 121,853 |
Non-service provider | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | 229,404 | 237,451 | 643,221 | 648,035 |
Americas | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | 178,679 | 175,932 | 483,878 | 510,358 |
EMEA | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | 49,554 | 53,158 | 149,608 | 148,801 |
APAC | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | 37,625 | 40,321 | 112,306 | 110,729 |
Connected Home | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | 190,672 | 194,683 | 527,532 | 555,422 |
Connected Home | Service provider | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | 35,482 | 30,769 | 99,201 | 118,899 |
Connected Home | Non-service provider | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | 155,190 | 163,914 | 428,331 | 436,523 |
Connected Home | Americas | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | 146,806 | 141,883 | 392,162 | 416,491 |
Connected Home | EMEA | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | 22,190 | 27,619 | 65,406 | 69,134 |
Connected Home | APAC | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | 21,676 | 25,181 | 69,964 | 69,797 |
SMB | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | 75,186 | 74,728 | 218,260 | 214,466 |
SMB | Service provider | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | 972 | 1,191 | 3,370 | 2,954 |
SMB | Non-service provider | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | 74,214 | 73,537 | 214,890 | 211,512 |
SMB | Americas | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | 31,873 | 34,049 | 91,716 | 93,867 |
SMB | EMEA | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | 27,364 | 25,539 | 84,202 | 79,667 |
SMB | APAC | ||||
Disaggregation of Revenue [Line Items] | ||||
Total net revenue | $ 15,949 | $ 15,140 | $ 42,342 | $ 40,932 |
Discontinued Operations (Narrat
Discontinued Operations (Narrative) (Details) | Dec. 31, 2018shares | Aug. 07, 2018shares |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Distribution of shares outstanding to shareholders, conversion ratio | 1.980295 | |
Arlo | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Ownership percentage | 84.20% | |
Shares, outstanding (in shares) | 62,500,000 | |
Number of shares distributed (in shares) | 62,500,000 |
Discontinued Operations (Income
Discontinued Operations (Income (Loss) From Discontinued Operations, Net Of Tax) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Operating expenses: | ||||
Loss from discontinued operations, net of tax | $ 0 | $ (7,160) | $ 0 | $ (8,351) |
Arlo | Discontinued Operations, Disposed of by Spin-off | ||||
Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Abstract] | ||||
Net revenue | 131,175 | 342,491 | ||
Cost of revenue | 101,427 | 255,666 | ||
Gross profit | 29,748 | 86,825 | ||
Operating expenses: | ||||
General and administrative | 6,905 | 9,859 | ||
Total operating expenses | 39,988 | 93,019 | ||
Loss from operations of discontinued operations | (10,240) | (6,194) | ||
Interest Income | 503 | 503 | ||
Other Expense | (126) | |||
Other income (expense), net | 213 | |||
Loss from discontinued operations before income taxes | (9,863) | (5,478) | ||
Provision (benefit) for income taxes | (2,703) | 2,873 | ||
Loss from discontinued operations, net of tax | (7,160) | (8,351) | ||
Sales and marketing | Arlo | Discontinued Operations, Disposed of by Spin-off | ||||
Operating expenses: | ||||
Total operating expenses | 11,592 | 25,148 | ||
Separation expense | Arlo | Discontinued Operations, Disposed of by Spin-off | ||||
Operating expenses: | ||||
Total operating expenses | 6,675 | 25,443 | ||
Research and development | Arlo | Discontinued Operations, Disposed of by Spin-off | ||||
Operating expenses: | ||||
Total operating expenses | $ 14,816 | $ 32,569 |
Business Acquisitions (Narrativ
Business Acquisitions (Narrative) (Details) | Aug. 06, 2018USD ($) | Sep. 30, 2018USD ($) | Sep. 29, 2019USD ($) | Dec. 31, 2018USD ($) |
Business Acquisition [Line Items] | ||||
Goodwill | $ 80,721,000 | $ 80,721,000 | ||
Meural | ||||
Business Acquisition [Line Items] | ||||
Total purchase price | $ 22,200,000 | |||
Purchase price, cash paid | $ 14,400,000 | |||
Prior equity interest settlement | 1,500,000 | |||
Fair value of contingent considerations | 6,300,000 | |||
Contingent consideration liability | 5,900,000 | |||
Goodwill | 16,407,000 | |||
Goodwill deductible for income tax purposes | 0 | |||
Intangibles | $ 4,800,000 | |||
Meural | Technology | ||||
Business Acquisition [Line Items] | ||||
Acquired intangible assets, estimated useful life ( in years) | 7 years | |||
Intangibles | $ 3,000,000 | |||
Meural | Trade Names | ||||
Business Acquisition [Line Items] | ||||
Acquired intangible assets, estimated useful life ( in years) | 3 years | |||
Intangibles | $ 600,000 | |||
Meural | Customer Relationships | ||||
Business Acquisition [Line Items] | ||||
Acquired intangible assets, estimated useful life ( in years) | 2 years | |||
Intangibles | $ 600,000 | |||
Meural | Database | ||||
Business Acquisition [Line Items] | ||||
Acquired intangible assets, estimated useful life ( in years) | 7 years | |||
Intangibles | $ 600,000 | |||
Technical Milestone | Meural | ||||
Business Acquisition [Line Items] | ||||
Contingent consideration liability, maximum amount of each milestone | 3,500,000 | |||
Service Revenue Milestone | Meural | ||||
Business Acquisition [Line Items] | ||||
Contingent consideration liability, maximum amount of each milestone | $ 3,500,000 | |||
Measurement Input, Discount Rate | Meural | Technology | ||||
Business Acquisition [Line Items] | ||||
Intangible Asset, Measurement Input | 0.160 | |||
Measurement Input, Discount Rate | Minimum | Meural | ||||
Business Acquisition [Line Items] | ||||
Intangible Asset, Measurement Input | 0.160 | |||
Measurement Input, Discount Rate | Maximum | Meural | ||||
Business Acquisition [Line Items] | ||||
Intangible Asset, Measurement Input | 0.190 |
Business Acquisitions (Schedule
Business Acquisitions (Schedule Of Allocation Of Purchase Price) (Details) - USD ($) $ in Thousands | Sep. 29, 2019 | Dec. 31, 2018 | Aug. 06, 2018 |
Business Acquisition [Line Items] | |||
Goodwill | $ 80,721 | $ 80,721 | |
Meural | |||
Business Acquisition [Line Items] | |||
Cash and cash equivalents | $ 20 | ||
Accounts receivable | 209 | ||
Inventories | 760 | ||
Prepaid expenses and other current assets | 500 | ||
Property and equipment | 16 | ||
Intangibles | 4,800 | ||
Non-current deferred income taxes | 815 | ||
Goodwill | 16,407 | ||
Accounts payable | (1,317) | ||
Other accrued liabilities | (35) | ||
Total purchase price | $ 22,175 |
Balance Sheet Components (Sched
Balance Sheet Components (Schedule of Available-for-Sale Short-Term Investments) (Details) - USD ($) $ in Thousands | Sep. 29, 2019 | Dec. 31, 2018 |
Debt Securities, Available-for-sale [Line Items] | ||
Cost | $ 145 | $ 70,479 |
Unrealized Gains | 0 | 1 |
Unrealized Losses | 0 | (17) |
Estimated Fair Value | 145 | 70,463 |
U.S. treasuries | ||
Debt Securities, Available-for-sale [Line Items] | ||
Cost | 0 | 70,330 |
Unrealized Gains | 0 | 1 |
Unrealized Losses | 0 | (17) |
Estimated Fair Value | 0 | 70,314 |
Certificates of deposits | ||
Debt Securities, Available-for-sale [Line Items] | ||
Cost | 145 | 149 |
Unrealized Gains | 0 | 0 |
Unrealized Losses | 0 | 0 |
Estimated Fair Value | $ 145 | $ 149 |
Balance Sheet Components (Sch_2
Balance Sheet Components (Schedule of Inventories) (Details) - USD ($) $ in Thousands | Sep. 29, 2019 | Dec. 31, 2018 |
Balance Sheet Related Disclosures [Abstract] | ||
Raw materials | $ 45,235 | $ 3,427 |
Finished goods | 230,349 | 240,444 |
Total inventories | $ 275,584 | $ 243,871 |
Balance Sheet Components (Sch_3
Balance Sheet Components (Schedule of Property and Equipment, Net) (Details) - USD ($) $ in Thousands | Sep. 29, 2019 | Dec. 31, 2018 |
Total property and equipment, gross | $ 124,333 | $ 116,108 |
Accumulated depreciation and amortization | (104,662) | (95,931) |
Total property and equipment, net | 19,671 | 20,177 |
Computer equipment | ||
Total property and equipment, gross | 9,885 | 9,205 |
Furniture, fixtures and leasehold improvements | ||
Total property and equipment, gross | 18,542 | 18,286 |
Software | ||
Total property and equipment, gross | 28,088 | 28,065 |
Machinery and equipment | ||
Total property and equipment, gross | $ 67,818 | $ 60,552 |
Balance Sheet Components (Prope
Balance Sheet Components (Property and Equipment, Other Information) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Balance Sheet Related Disclosures [Abstract] | ||||
Depreciation and amortization | $ 3 | $ 2.5 | $ 9.1 | $ 8 |
Balance Sheet Components (Sch_4
Balance Sheet Components (Schedule of Intangibles, Net) (Details) - USD ($) $ in Thousands | Sep. 29, 2019 | Dec. 31, 2018 |
Intangible Assets [Line Items] | ||
Gross | $ 126,944 | $ 126,944 |
Accumulated Amortization | (115,245) | (109,798) |
Net | 11,699 | 17,146 |
Technology | ||
Intangible Assets [Line Items] | ||
Gross | 59,799 | 59,799 |
Accumulated Amortization | (57,299) | (56,978) |
Net | 2,500 | 2,821 |
Customer contracts and relationships | ||
Intangible Assets [Line Items] | ||
Gross | 56,800 | 56,800 |
Accumulated Amortization | (48,956) | (44,280) |
Net | 7,844 | 12,520 |
Other | ||
Intangible Assets [Line Items] | ||
Gross | 10,345 | 10,345 |
Accumulated Amortization | (8,990) | (8,540) |
Net | $ 1,355 | $ 1,805 |
Balance Sheet Components (Intan
Balance Sheet Components (Intangibles, Other Information) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization of intangibles | $ 1.6 | $ 2 | $ 5.4 | $ 6.2 |
Balance Sheet Components (Sch_5
Balance Sheet Components (Schedule of Estimated Amortization Expense Related to Intangibles) (Details) - USD ($) $ in Thousands | Sep. 29, 2019 | Dec. 31, 2018 |
Balance Sheet Related Disclosures [Abstract] | ||
2019 (remaining three months) | $ 1,594 | |
2020 | 6,205 | |
2021 | 2,044 | |
2022 | 527 | |
2023 | 514 | |
Thereafter | 815 | |
Net | $ 11,699 | $ 17,146 |
Balance Sheet Components (Sch_6
Balance Sheet Components (Schedule of Other Non-Current Assets) (Details) - USD ($) $ in Thousands | Sep. 29, 2019 | Dec. 31, 2018 |
Balance Sheet Related Disclosures [Abstract] | ||
Non-current deferred income taxes | $ 57,055 | $ 57,557 |
Long-term investments | 8,147 | 2,886 |
Other | 7,434 | 6,990 |
Total other non-current assets | $ 72,636 | $ 67,433 |
Balance Sheet Components (Sch_7
Balance Sheet Components (Schedule of Other Accrued Liabilities) (Details) - USD ($) $ in Thousands | Sep. 29, 2019 | Jan. 01, 2019 | Dec. 31, 2018 |
Balance Sheet Related Disclosures [Abstract] | |||
Current operating lease liabilities | $ 9,765 | $ 0 | |
Sales and marketing | 63,027 | 91,548 | |
Warranty obligations | 10,858 | 14,412 | |
Sales returns | 45,547 | 46,318 | |
Freight and duty | 5,519 | 10,586 | |
Other | 28,617 | 36,608 | |
Total other accrued liabilities | $ 163,333 | $ 210,381 | $ 199,472 |
Derivative Financial Instrume_3
Derivative Financial Instruments (Narrative) (Details) - Foreign currency forward contracts $ in Millions | 9 Months Ended |
Sep. 29, 2019USD ($)derivative_instrument | |
Derivatives Not Designated as Hedging Instruments | |
Derivative [Line Items] | |
Approximate number of derivatives per quarter | derivative_instrument | 10 |
Average size of derivative contracts | $ | $ 2 |
Cash Flow Hedges | |
Derivative [Line Items] | |
Approximate number of derivatives per quarter | derivative_instrument | 10 |
Average size of derivative contracts | $ | $ 6 |
Estimated term of reclassification from OCI to Income | 12 months |
Maximum number of days after hedge period allowed before de-designation | 60 days |
Minimum | Derivatives Not Designated as Hedging Instruments | |
Derivative [Line Items] | |
Term of derivative contracts | 1 month |
Maximum | |
Derivative [Line Items] | |
Term of derivative contracts | 6 months |
Maximum | Derivatives Not Designated as Hedging Instruments | |
Derivative [Line Items] | |
Term of derivative contracts | 3 months |
Maximum | Cash Flow Hedges | |
Derivative [Line Items] | |
Term of derivative contracts | 6 months |
Derivative Financial Instrume_4
Derivative Financial Instruments (Schedule of Fair Values of the Company's Derivative Instruments and the Line Items on the Consolidated Balance Sheets) (Details) - USD ($) $ in Thousands | Sep. 29, 2019 | Dec. 31, 2018 |
Derivatives, Fair Value [Line Items] | ||
Gross Amounts of recognized assets | $ 1,097 | $ 786 |
Gross Amounts of recognized liabilities | 208 | 368 |
Prepaid expenses and other current assets | Derivative assets not designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Gross Amounts of recognized assets | 1,050 | 784 |
Prepaid expenses and other current assets | Derivative assets designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Gross Amounts of recognized assets | 47 | 2 |
Other accrued liabilities | Derivative assets not designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Gross Amounts of recognized liabilities | 150 | 331 |
Other accrued liabilities | Derivative assets designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Gross Amounts of recognized liabilities | $ 58 | $ 37 |
Derivative Financial Instrume_5
Derivative Financial Instruments (Schedule of Offsetting of Derivative Assets) (Details) - USD ($) $ in Thousands | Sep. 29, 2019 | Dec. 31, 2018 |
Offsetting of Derivative Assets [Line Items] | ||
Gross Amounts of Recognized Assets | $ 1,097 | $ 786 |
Gross Amounts Offset on the Condensed Consolidated Balance Sheets | 0 | 0 |
Net Amounts Of Assets Presented on the Condensed Consolidated Balance Sheets | 1,097 | 786 |
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets: Financial Instruments | (208) | (362) |
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets: Cash Collateral Pledged | 0 | 0 |
Net Amount | 889 | 424 |
J.P. Morgan Chase | ||
Offsetting of Derivative Assets [Line Items] | ||
Gross Amounts of Recognized Assets | 128 | |
Gross Amounts Offset on the Condensed Consolidated Balance Sheets | 0 | |
Net Amounts Of Assets Presented on the Condensed Consolidated Balance Sheets | 128 | |
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets: Financial Instruments | (31) | |
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets: Cash Collateral Pledged | 0 | |
Net Amount | 97 | |
Bank of America | ||
Offsetting of Derivative Assets [Line Items] | ||
Gross Amounts of Recognized Assets | 0 | 323 |
Gross Amounts Offset on the Condensed Consolidated Balance Sheets | 0 | 0 |
Net Amounts Of Assets Presented on the Condensed Consolidated Balance Sheets | 0 | 323 |
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets: Financial Instruments | (2) | (64) |
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets: Cash Collateral Pledged | 0 | 0 |
Net Amount | (2) | 259 |
Wells Fargo | ||
Offsetting of Derivative Assets [Line Items] | ||
Gross Amounts of Recognized Assets | 969 | 463 |
Gross Amounts Offset on the Condensed Consolidated Balance Sheets | 0 | 0 |
Net Amounts Of Assets Presented on the Condensed Consolidated Balance Sheets | 969 | 463 |
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets: Financial Instruments | (175) | (298) |
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets: Cash Collateral Pledged | 0 | 0 |
Net Amount | $ 794 | $ 165 |
Derivative Financial Instrume_6
Derivative Financial Instruments (Schedule of Offsetting of Derivative Liabilities) (Details) - USD ($) $ in Thousands | Sep. 29, 2019 | Dec. 31, 2018 |
Offsetting of Derivative Liabilities [Line Items] | ||
Gross Amounts of Recognized Liabilities | $ 208 | $ 368 |
Gross Amounts Offset on the Condensed Consolidated Balance Sheets | 0 | 0 |
Net Amounts Of Liabilities Presented on the Condensed Consolidated Balance Sheets | 208 | 368 |
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets: Financial Instruments | (208) | (362) |
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets: Cash Collateral Pledged | 0 | 0 |
Net Amount | 0 | 6 |
J.P. Morgan Chase | ||
Offsetting of Derivative Liabilities [Line Items] | ||
Gross Amounts of Recognized Liabilities | 31 | 6 |
Gross Amounts Offset on the Condensed Consolidated Balance Sheets | 0 | 0 |
Net Amounts Of Liabilities Presented on the Condensed Consolidated Balance Sheets | 31 | 6 |
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets: Financial Instruments | (31) | 0 |
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets: Cash Collateral Pledged | 0 | 0 |
Net Amount | 0 | 6 |
Bank of America | ||
Offsetting of Derivative Liabilities [Line Items] | ||
Gross Amounts of Recognized Liabilities | 2 | 64 |
Gross Amounts Offset on the Condensed Consolidated Balance Sheets | 0 | 0 |
Net Amounts Of Liabilities Presented on the Condensed Consolidated Balance Sheets | 2 | 64 |
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets: Financial Instruments | (2) | (64) |
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets: Cash Collateral Pledged | 0 | 0 |
Net Amount | 0 | 0 |
Wells Fargo | ||
Offsetting of Derivative Liabilities [Line Items] | ||
Gross Amounts of Recognized Liabilities | 175 | 298 |
Gross Amounts Offset on the Condensed Consolidated Balance Sheets | 0 | 0 |
Net Amounts Of Liabilities Presented on the Condensed Consolidated Balance Sheets | 175 | 298 |
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets: Financial Instruments | (175) | (298) |
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets: Cash Collateral Pledged | 0 | 0 |
Net Amount | $ 0 | $ 0 |
Derivative Financial Instrume_7
Derivative Financial Instruments (Schedule of Effects and Locations of Gains or Losses Recognized in Income) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Net revenue | $ 265,858 | $ 269,411 | $ 745,792 | $ 769,888 |
Cost of revenue | 188,666 | 174,966 | 521,147 | 518,844 |
Research and development | 19,537 | 20,136 | 57,183 | 63,273 |
Sales and marketing | 33,491 | 37,892 | 103,887 | 114,318 |
General and administrative | 11,887 | 16,184 | 35,467 | 50,403 |
Net revenue | Cash Flow Hedges | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gains (losses) on cash flow hedge | 548 | 750 | 1,634 | 235 |
Cost of revenue | Cash Flow Hedges | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gains (losses) on cash flow hedge | (2) | (6) | (10) | (7) |
Research and development | Cash Flow Hedges | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gains (losses) on cash flow hedge | (2) | 0 | (47) | 86 |
Sales and marketing | Cash Flow Hedges | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gains (losses) on cash flow hedge | (42) | (115) | (209) | (42) |
General and administrative | Cash Flow Hedges | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gains (losses) on cash flow hedge | $ (7) | $ (32) | $ (30) | $ (41) |
Derivative Financial Instrume_8
Derivative Financial Instruments (Schedule of Company's Derivative Instruments on Other Comprehensive Income and the Consolidated Statement of Operations) (Details) - Foreign currency forward contracts - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gains (losses) recognized in OCI - Effective Portion | $ 458 | $ 625 | $ 1,322 | $ 1,075 |
Gains (Losses) Reclassified from OCI into Income - Effective Portion | 495 | 597 | 1,338 | 231 |
Net revenue | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gains (Losses) Reclassified from OCI into Income - Effective Portion | 548 | 750 | 1,634 | 235 |
Cost of revenue | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gains (Losses) Reclassified from OCI into Income - Effective Portion | (2) | (6) | (10) | (7) |
Research and development | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gains (Losses) Reclassified from OCI into Income - Effective Portion | (2) | 0 | (47) | 86 |
Sales and marketing | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gains (Losses) Reclassified from OCI into Income - Effective Portion | (42) | (115) | (209) | (42) |
General and administrative | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gains (Losses) Reclassified from OCI into Income - Effective Portion | $ (7) | $ (32) | $ (30) | $ (41) |
Derivative Financial Instrume_9
Derivative Financial Instruments (Schedule of Derivatives not Designated as Hedging Instruments) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Other income (expense), net | Foreign currency forward contracts | Derivatives Not Designated as Hedging Instruments | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gains (losses) on cash flow hedge | $ 1,540 | $ 991 | $ 2,446 | $ 2,930 |
Net Income Per Share (Schedule
Net Income Per Share (Schedule of Net Income Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 29, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | Jul. 01, 2018 | Apr. 01, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Numerator: | ||||||||
Net income from continuing operations | $ 12,529 | $ 16,310 | $ 26,211 | $ 17,861 | ||||
Net (income) from discontinued operations | 0 | (7,160) | 0 | (8,351) | ||||
Net income | 12,529 | 9,150 | 26,211 | 9,510 | ||||
Net Income (Loss) Attributable to Noncontrolling Interest | 0 | (799) | 0 | (799) | ||||
Net income | $ 12,529 | $ 839 | $ 12,843 | $ 9,949 | $ (5,230) | $ 5,590 | $ 26,211 | $ 10,309 |
Denominator: | ||||||||
Weighted average common shares - basic (in shares) | 30,933 | 31,802 | 31,221 | 31,634 | ||||
Potentially dilutive common share equivalent (in shares) | 886 | 1,172 | 1,106 | 1,192 | ||||
Weighted average common shares - dilutive (in shares) | 31,819 | 32,974 | 32,327 | 32,826 | ||||
Earnings Per Share, Basic [Abstract] | ||||||||
Income per share - basic, continuing operations (in dollars per share) | $ 0.41 | $ 0.51 | $ 0.84 | $ 0.56 | ||||
Income per share - basic, discontinued operations (in dollars per share) | 0 | (0.20) | 0 | (0.23) | ||||
Net income per share - basic (in dollars per share) | 0.41 | 0.31 | 0.84 | 0.33 | ||||
Earnings Per Share, Diluted [Abstract] | ||||||||
Income per share - diluted, continuing operations (in dollars per share) | 0.39 | 0.49 | 0.81 | 0.54 | ||||
Income per share - diluted, discontinued operations (in dollars per share) | 0 | (0.19) | 0 | (0.23) | ||||
Net income per share - diluted (in dollars per share) | $ 0.39 | $ 0.30 | $ 0.81 | $ 0.31 | ||||
Anti-dilutive employee stock-based awards, excluded (in shares) | 1,587 | 450 | 625 | 874 |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Tax impact | $ (228) | $ 5,483 | $ 2,735 | $ 6,668 |
Effective tax rate | (1.90%) | 25.20% | 9.40% | 27.20% |
Possible reduction in liabilities for uncertain tax positions | $ 700 | $ 700 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) | Jun. 21, 2019patent | May 14, 2019patent | Sep. 15, 2018patent | Sep. 14, 2018patent | Jul. 18, 2018patent | Jan. 03, 2018decision | Dec. 21, 2017decision | Oct. 02, 2017 | Jul. 14, 2017patent | Apr. 19, 2017patent | Sep. 26, 2016petition | Aug. 26, 2016petitiondefendant | Jul. 01, 2015patent | Aug. 22, 2014patent | Feb. 08, 2019case | Jan. 31, 2017petition | Sep. 29, 2019USD ($)caseclaim |
Loss Contingencies [Line Items] | |||||||||||||||||
Lease expiration date | December 2026 | ||||||||||||||||
Number of days for non-cancellation of purchase obligations prior to expected shipment date | 30 days | ||||||||||||||||
Non-cancelable purchase commitments with suppliers | $ | $ 95,100,000 | ||||||||||||||||
Liabilities recorded for director and officer indemnification agreements | $ | 0 | ||||||||||||||||
Liabilities recorded for customers, distributors, and resellers indemnification agreements | $ | $ 0 | ||||||||||||||||
Period following change of company control executive officer termination entitlements (in months) | 12 months | ||||||||||||||||
Liabilities for executive's employment agreements | $ | $ 0 | ||||||||||||||||
Number of existing cases and proceedings that the Company currently believes are liking to have a material adverse effect on its financial position | claim | 0 | ||||||||||||||||
The future length the Company currently considered regarding existing cases and proceedings that are likely to have a material adverse effect on it (in months) | 12 months | ||||||||||||||||
Number of class action lawsuits | case | 6 | ||||||||||||||||
Netgear and Arlo | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Number of class action lawsuits | case | 4 | ||||||||||||||||
NETGEAR | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Number of class action lawsuits | case | 5 | ||||||||||||||||
Arlo | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Number of class action lawsuits | case | 2 | ||||||||||||||||
Via Vadis v. NETGEAR | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Number of patents accused of infringing upon | 3 | ||||||||||||||||
Chrismar Systems vs. NETGEAR | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Number of patents accused of infringing upon | 4 | ||||||||||||||||
Number of active cases the suing company has | case | 40 | ||||||||||||||||
Number of defendants | defendant | 3 | ||||||||||||||||
Number of Final Written Decisions | decision | 2 | 4 | |||||||||||||||
Period post Final Written Decision to seek rehearing | 30 days | ||||||||||||||||
Period post Final Written Decision to file appeal | 63 days | ||||||||||||||||
Chrismar Systems vs. NETGEAR | Juniper | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Number of IPR petitions | petition | 4 | 4 | 4 | ||||||||||||||
Vivato vs. NETGEAR | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Number of patents accused of infringing upon | 3 | ||||||||||||||||
Duration of jury trial set by court | 5 days | ||||||||||||||||
Hera Wireless vs. NETGEAR | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Number of patents accused of infringing upon | 5 | 6 | 3 | 3 | |||||||||||||
Number of patents accused of infringing upon and awaiting institution decisions | 4 | ||||||||||||||||
China Patent Matters- Bejing and Heifei Municipalities [Member] | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Number of patents accused of infringing upon | 2 | ||||||||||||||||
Aegis 11 S.A. v. NETGEAR [Member] | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Number of patents accused of infringing upon | 3 | ||||||||||||||||
Chief Executive Officer | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Period of health benefits continuation (in months) | 12 months | ||||||||||||||||
Accelerated vesting period, unvested equity awards (in months) | 12 months | ||||||||||||||||
Annual base salary and target annual bonus multiple for cash severance | 200.00% | ||||||||||||||||
Period of health benefits continuation subsequent to change of company control (in months) | 24 months | ||||||||||||||||
Other Key Executives | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Annual base salary and target annual bonus multiple for cash severance | 100.00% | ||||||||||||||||
Period of health benefits continuation subsequent to change of company control (in months) | 12 months | ||||||||||||||||
46 to 60 Days | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Percentage of cancelable orders | 50.00% | ||||||||||||||||
31 to 45 Days | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Percentage of cancelable orders | 25.00% | ||||||||||||||||
Non-Trade Activities | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Long-term, non-cancellable purchase commitments | $ | $ 17,400,000 | ||||||||||||||||
Minimum | 46 to 60 Days | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Required notice period prior to expected shipment date | 46 days | ||||||||||||||||
Minimum | 31 to 45 Days | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Required notice period prior to expected shipment date | 31 days | ||||||||||||||||
Maximum | 46 to 60 Days | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Required notice period prior to expected shipment date | 60 days | ||||||||||||||||
Maximum | 31 to 45 Days | |||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||
Required notice period prior to expected shipment date | 45 days |
Commitments and Contingencies_3
Commitments and Contingencies (Schedule of Changes in Warranty Obligation) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Jan. 01, 2018 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Sales returns | $ 45,547 | $ 45,547 | $ 46,318 | |||
Movement in Standard Product Warranty Accrual [Roll Forward] | ||||||
Balance as of beginning of the period | 11,913 | $ 15,271 | 14,412 | $ 44,068 | ||
Reclassified to sales returns upon adoption of ASC 606 | 0 | 0 | 0 | (29,147) | ||
Provision for warranty obligation made during the period | 1,558 | 2,987 | 4,970 | 10,009 | ||
Settlements made during the period | (2,613) | (3,350) | (8,524) | (10,022) | ||
Balance at end of period | $ 10,858 | $ 14,908 | $ 10,858 | $ 14,908 | ||
Difference between Revenue Guidance in Effect before and after Topic 606 | Accounting Standards Update 2014-09 | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Sales returns | $ 29,100 |
Stockholders' Equity (Narrative
Stockholders' Equity (Narrative) (Details) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | |||||
Sep. 29, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | Jul. 19, 2019 | |
Stockholders' Equity Note [Abstract] | |||||||
Shares remaining authorized for repurchase (in shares) | 4,300 | 4,300 | |||||
Stock repurchased (in shares) | 1,700 | 200 | |||||
Cost of stock repurchased | $ 21,966 | $ 16,980 | $ 15,000 | $ 15,000 | $ 53,900 | $ 15,000 | |
RSU withholdings (in shares) | 200 | 100 | |||||
RSU withholdings | $ 6,058 | $ 7,583 | |||||
Number of Shares Authorized to be Repurchased | 4,500 |
Stockholders' Equity (Schedule
Stockholders' Equity (Schedule of Changes in Accumulated Other Comprehensive Income by Component) (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 29, 2019 | Sep. 30, 2018 | |
Estimated tax benefit (provision) | ||
Beginning balance | $ 11 | $ 133 |
Other comprehensive income (loss) before reclassifications | (284) | (165) |
Less: Amount reclassified from accumulated other comprehensive income | (281) | (44) |
Net current period other comprehensive income (loss) | (3) | (121) |
Ending balance | 8 | 12 |
AOCI, after tax | ||
Beginning balance | 627,552 | |
Other comprehensive income (loss) before reclassifications | 1,054 | 982 |
Amount reclassified from accumulated other comprehensive income, Net of tax | 1,057 | 167 |
Less: Amount reclassified from accumulated other comprehensive income | (3) | 815 |
Ending balance | 622,138 | |
Unrealized gains (losses) on available-for-sale investments | ||
AOCI, before tax | ||
Beginning balance | (18) | (146) |
Other comprehensive income (loss) before reclassifications | 16 | 72 |
Less: Amount reclassified from accumulated other comprehensive income | 0 | 0 |
Net current period other comprehensive income (loss) | 16 | 72 |
Ending balance | (2) | (74) |
Unrealized gains (losses) on derivatives | ||
AOCI, before tax | ||
Beginning balance | (8) | (838) |
Other comprehensive income (loss) before reclassifications | 1,322 | 1,075 |
Less: Amount reclassified from accumulated other comprehensive income | 1,338 | 211 |
Net current period other comprehensive income (loss) | (16) | 864 |
Ending balance | (24) | 26 |
AOCI | ||
AOCI, after tax | ||
Beginning balance | (15) | (851) |
Ending balance | $ (18) | $ (36) |
Stockholders' Equity (Schedul_2
Stockholders' Equity (Schedule of Reclassifications out of Accumulated Other Comprehensive Income) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Reclassification Out of Accumulated Other Comprehensive Income [Line Items] | ||||
Net revenue | $ 265,858 | $ 269,411 | $ 745,792 | $ 769,888 |
Cost of revenue | 188,666 | 174,966 | 521,147 | 518,844 |
Research and development | 19,537 | 20,136 | 57,183 | 63,273 |
Sales and marketing | 33,491 | 37,892 | 103,887 | 114,318 |
General and administrative | 11,887 | 16,184 | 35,467 | 50,403 |
Income before income taxes | 12,301 | 21,793 | 28,946 | 24,529 |
Tax impact from continuing operations | 228 | (5,483) | (2,735) | (6,668) |
Net income from continuing operations | 12,529 | 16,310 | 26,211 | 17,861 |
Net loss from discontinued operations, net of tax | 0 | (7,160) | 0 | (8,351) |
Net income | 12,529 | 9,150 | 26,211 | 9,510 |
Amount Reclassified from AOCI | Accumulated Net Gain (Loss) from Cash Flow Hedges Including Portion Attributable to Noncontrolling Interest [Member] | ||||
Reclassification Out of Accumulated Other Comprehensive Income [Line Items] | ||||
Net revenue | 548 | 750 | 1,634 | 235 |
Cost of revenue | (2) | (6) | (10) | (7) |
Research and development | (2) | 0 | (47) | 86 |
Sales and marketing | (42) | (115) | (209) | (42) |
General and administrative | (7) | (32) | (30) | (41) |
Income before income taxes | 495 | 597 | 1,338 | 231 |
Tax impact from continuing operations | (104) | (125) | (281) | (49) |
Net income from continuing operations | 391 | 472 | 1,057 | 182 |
Net loss from discontinued operations, net of tax | 0 | 197 | 0 | (15) |
Net income | $ 391 | $ 669 | $ 1,057 | $ 167 |
Employee Benefit Plans (Narrati
Employee Benefit Plans (Narrative) (Details) - USD ($) shares in Millions, $ in Millions | 9 Months Ended | |
Sep. 29, 2019 | Jan. 01, 2019 | |
Stock Options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total unrecognized compensation | $ 10.3 | |
Weighted-average period of recognition of stock based compensation | 2 years 1 month 6 days | |
RSUs | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total unrecognized compensation | $ 48.3 | |
Weighted-average period of recognition of stock based compensation | 2 years 4 months 24 days | |
2016 Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options granted, vesting term (in years) | 4 years | |
Additional shares authorized (in shares) | 3.1 | |
Number of shares reserved for future grant (in shares) | 1.6 | |
ESPP | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Price at which employees could purchase stock semi-annually, percent of fair market value on purchase date | 85.00% | |
General duration of each offering period | 6 months | |
ESPP | ESPP | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares reserved for future grant (in shares) | 0.6 | |
Maximum percentage of compensation contributed by employees | 10.00% |
Employee Benefit Plans (Schedul
Employee Benefit Plans (Schedule of Stock Option Activity) (Details) - Stock Options shares in Thousands | 9 Months Ended |
Sep. 29, 2019$ / sharesshares | |
Number of shares | |
Beginning balance (in shares) | shares | 1,969 |
Granted (in shares) | shares | 502 |
Exercised (in shares) | shares | (226) |
Cancelled ( in shares) | shares | (16) |
Expired (in shares) | shares | (15) |
Ending balance (in shares) | shares | 2,214 |
Weighted Average Exercise Price Per Share | |
Beginning balance (in dollars per share) | $ / shares | $ 25.30 |
Granted ( in dollar per share) | $ / shares | 26.61 |
Exercised (in dollars per share) | $ / shares | 20.31 |
Cancelled (in dollars per share) | $ / shares | 36.27 |
Expired (in dollars per share) | $ / shares | 40 |
Ending balance (in dollars per share) | $ / shares | $ 25.93 |
Employee Benefit Plans (Sched_2
Employee Benefit Plans (Schedule of RSU Activity) (Details) - RSUs shares in Thousands | 9 Months Ended |
Sep. 29, 2019$ / sharesshares | |
Number of shares | |
Beginning balance (in shares) | shares | 1,627 |
Granted (in shares) | shares | 693 |
Vested (in shares) | shares | (535) |
Cancelled (in shares) | shares | (105) |
Ending balance (in shares) | shares | 1,680 |
Weighted Average Grant Date Fair Value Per Share | |
Beginning Balance (in dollars per share) | $ / shares | $ 34.31 |
Granted (in dollars per share) | $ / shares | 31.37 |
Vested (in dollars per share) | $ / shares | 31.62 |
Cancelled (in dollars per share) | $ / shares | 35.12 |
Ending Balance (in dollars per share) | $ / shares | $ 33.90 |
Employee Benefit Plans (Sched_3
Employee Benefit Plans (Schedule of Valuation and Expense Information) (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Stock Options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Expected life (in years) | 6 years 2 months 12 days | 4 years 4 months 24 days | 6 years 2 months 12 days | 4 years 4 months 24 days |
Risk-free interest rate | 1.85% | 2.79% | 1.85% | 2.36% |
Expected volatility | 33.90% | 33.50% | 33.90% | 31.10% |
Dividend yield | 0.00% | 0.00% | 0.00% | |
ESPP | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Expected life (in years) | 6 months | 6 months | 6 months | 6 months |
Risk-free interest rate | 1.83% | 2.22% | 2.06% | 2.00% |
Expected volatility | 44.50% | 38.80% | 43.90% | 37.90% |
Dividend yield | 0.00% | 0.00% | 0.00% | 0.00% |
Employee Benefit Plans (Sched_4
Employee Benefit Plans (Schedule of Total Stock-Based Compensation Expense Resulting from Stock Options, Restricted Stock Awards, and the Employee Stock Purchase Plan) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation | $ 6,986 | $ 6,118 | $ 20,183 | $ 20,228 |
Cost of revenue | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation | 706 | 619 | 2,129 | 1,754 |
Research and development | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation | 1,496 | 1,037 | 3,976 | 3,171 |
Sales and marketing | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation | 2,097 | 1,970 | 6,223 | 6,363 |
General and administrative | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation | $ 2,687 | $ 2,492 | $ 7,855 | $ 8,940 |
Segment Information (Narrative)
Segment Information (Narrative) (Details) | 9 Months Ended |
Sep. 29, 2019regionsegment | |
Segment Reporting [Abstract] | |
Number of operating segments | 2 |
Number of reportable segments | 2 |
Number of geographic regions in which the Company conducts business | region | 3 |
Segment Information (Schedule o
Segment Information (Schedule of Reportable Segments and Reconciliation of Segment Contribution Income to Income Before Income Taxes) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Segment Reporting Information [Line Items] | ||||
Total net revenue | $ 265,858 | $ 269,411 | $ 745,792 | $ 769,888 |
Total segment contribution income | 37,684 | 50,664 | 105,112 | 118,972 |
Corporate and unallocated costs | (16,901) | (22,391) | (51,609) | (69,727) |
Amortization of intangibles | (1,520) | (1,922) | (5,212) | (5,967) |
Stock-based compensation expense | (6,986) | (6,118) | (20,183) | (20,228) |
Separation expense | 0 | (379) | (264) | (379) |
Change in fair value of contingent consideration | (199) | 0 | (199) | 0 |
Restructuring and other charges | 77 | (1) | (1,146) | (1,368) |
Litigation reserves, net | (90) | 0 | (100) | (5) |
Interest income, net | 639 | 985 | 2,122 | 2,806 |
Other income (expense), net | (403) | 955 | 425 | 425 |
Income before income taxes | 12,301 | 21,793 | 28,946 | 24,529 |
Connected Home | ||||
Segment Reporting Information [Line Items] | ||||
Total net revenue | 190,672 | 194,683 | 527,532 | 555,422 |
Total segment contribution income | $ 18,934 | $ 30,071 | $ 52,257 | $ 67,222 |
Segment contribution margin | 9.90% | 15.40% | 9.90% | 12.10% |
SMB | ||||
Segment Reporting Information [Line Items] | ||||
Total net revenue | $ 75,186 | $ 74,728 | $ 218,260 | $ 214,466 |
Total segment contribution income | $ 18,750 | $ 20,593 | $ 52,855 | $ 51,750 |
Segment contribution margin | 24.90% | 27.60% | 24.20% | 24.10% |
Segment Information (Schedule_2
Segment Information (Schedule of Net Revenue by Geographic Areas) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Segment Reporting Information [Line Items] | ||||
Total net revenue | $ 265,858 | $ 269,411 | $ 745,792 | $ 769,888 |
United States (U.S.) | ||||
Segment Reporting Information [Line Items] | ||||
Total net revenue | 174,805 | 173,580 | 473,381 | 501,153 |
Americas (excluding U.S.) | ||||
Segment Reporting Information [Line Items] | ||||
Total net revenue | 3,874 | 2,352 | 10,497 | 9,205 |
EMEA | ||||
Segment Reporting Information [Line Items] | ||||
Total net revenue | 49,554 | 53,158 | 149,608 | 148,801 |
APAC | ||||
Segment Reporting Information [Line Items] | ||||
Total net revenue | $ 37,625 | $ 40,321 | $ 112,306 | $ 110,729 |
Segment Information (Schedule_3
Segment Information (Schedule of Long-Lived Asset by Geographic Areas) (Details) - USD ($) $ in Thousands | Sep. 29, 2019 | Dec. 31, 2018 |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total property and equipment, net | $ 19,671 | $ 20,177 |
United States (U.S.) | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total property and equipment, net | 4,698 | 4,993 |
Canada | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total property and equipment, net | 3,641 | 4,359 |
EMEA | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total property and equipment, net | 344 | 95 |
China | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total property and equipment, net | 4,389 | 7,652 |
APAC (excluding China) | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total property and equipment, net | $ 6,599 | $ 3,078 |
Fair Value Measurements (Summar
Fair Value Measurements (Summary of Valuation of Company's Financial Instruments by Various Levels) (Details) - USD ($) $ in Thousands | Sep. 29, 2019 | Dec. 31, 2018 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | $ 36,584 | $ 96,676 |
Liabilities measured at fair value | 6,360 | 6,321 |
Quoted market prices in active markets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 35,342 | 25,427 |
Liabilities measured at fair value | 0 | 0 |
Significant other observable inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 1,242 | 71,249 |
Liabilities measured at fair value | 208 | 368 |
Significant unobservable inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 0 | 0 |
Liabilities measured at fair value | 6,152 | 5,953 |
Cash equivalents | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 31,572 | 22,573 |
Cash equivalents | Quoted market prices in active markets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 31,572 | 22,573 |
Cash equivalents | Significant other observable inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 0 | 0 |
Cash equivalents | Significant unobservable inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 0 | 0 |
U.S. treasuries | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 70,314 | |
U.S. treasuries | Quoted market prices in active markets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 0 | |
U.S. treasuries | Significant other observable inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 70,314 | |
U.S. treasuries | Significant unobservable inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 0 | |
Certificates of deposits | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 145 | 149 |
Certificates of deposits | Quoted market prices in active markets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 0 | 0 |
Certificates of deposits | Significant other observable inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 145 | 149 |
Certificates of deposits | Significant unobservable inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 0 | 0 |
Trading securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 3,770 | 2,854 |
Trading securities | Quoted market prices in active markets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 3,770 | 2,854 |
Trading securities | Significant other observable inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 0 | 0 |
Trading securities | Significant unobservable inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 0 | 0 |
Foreign currency forward contracts | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 1,097 | 786 |
Liabilities measured at fair value | 208 | 368 |
Foreign currency forward contracts | Quoted market prices in active markets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 0 | 0 |
Liabilities measured at fair value | 0 | 0 |
Foreign currency forward contracts | Significant other observable inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 1,097 | 786 |
Liabilities measured at fair value | 208 | 368 |
Foreign currency forward contracts | Significant unobservable inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 0 | 0 |
Liabilities measured at fair value | 0 | 0 |
Contingent Consideration | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Liabilities measured at fair value | 6,152 | 5,953 |
Contingent Consideration | Quoted market prices in active markets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Liabilities measured at fair value | 0 | 0 |
Contingent Consideration | Significant other observable inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Liabilities measured at fair value | 0 | 0 |
Contingent Consideration | Significant unobservable inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Liabilities measured at fair value | $ 6,152 | $ 5,953 |
Leases (Narrative) (Details)
Leases (Narrative) (Details) | 9 Months Ended |
Sep. 29, 2019 | |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Operating lease, remaining lease term | 10 years |
Operating lease, renewal term option | 5 years |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Operating lease, remaining lease term | 1 year |
Leases (Lease Cost) (Details)
Leases (Lease Cost) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 29, 2019 | Sep. 29, 2019 | |
Leases [Abstract] | ||
Operating lease cost | $ 2,977 | $ 8,928 |
Short-term Lease, Cost | 121 | 1,004 |
Lease, Cost | $ 3,098 | $ 9,932 |
Leases (Supplemental Cash Flow
Leases (Supplemental Cash Flow Information) (Details) $ in Thousands | 9 Months Ended |
Sep. 29, 2019USD ($) | |
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows relating to operating leases | $ 8,982 |
Lease liabilities arising from obtaining right-of-use assets: | |
Operating leases | $ 834 |
Leases (Supplemental Balance Sh
Leases (Supplemental Balance Sheet Information) (Details) | Sep. 29, 2019 |
Weighted Average Remaining Lease Term In Years [Abstract] | |
Operating leases | 4 years 7 months 6 days |
Weighted Average Discount Rate [Abstract] | |
Operating leases | 3.80% |
Leases (Maturities of Operating
Leases (Maturities of Operating Lease Liabilities - Topic 842) (Details) $ in Thousands | Sep. 29, 2019USD ($) |
Leases [Abstract] | |
2019 (remaining three months) | $ 2,936 |
2020 | 10,165 |
2021 | 8,015 |
2022 | 6,980 |
2023 | 4,502 |
Thereafter | 7,691 |
Total lease payments | 40,289 |
Less imputed interest | (3,346) |
Total | $ 36,943 |
Leases (Future Minimum Lease Pa
Leases (Future Minimum Lease Payments Under Non-cancelable Operating Leases - Topic 840) (Details) $ in Thousands | Dec. 31, 2018USD ($) |
Leases [Abstract] | |
2019 | $ 11,900 |
2020 | 9,986 |
2021 | 7,785 |
2022 | 6,856 |
2023 | 4,478 |
Thereafter | 7,725 |
Total future minimum lease payments | $ 48,730 |