EXHIBIT 99.1
NETGEAR REPORTS SECOND QUARTER 2003 RESULTS
- 24% Revenue growth year over year
- Net income increases to $11.5 million, including $9.8
million one time deferred tax reversal
- EPS of $0.48 including one time deferred tax reversal
of $0.41 per share
SANTA CLARA, Calif. - September 12, 2003 - NETGEAR, Inc. (Nasdaq: NTGR), a
worldwide provider of technologically advanced, branded networking products,
today reported financial results for the second quarter ended June 29, 2003.
Net revenue for the second quarter ended June 29, 2003 increased 24% or $13.5
million to $69.0 million, compared to $55.5 million for the quarter ended June
30, 2002. This was due to an increase in demand primarily for broadband and
wireless products. Revenue in all global markets increased on a year over year
basis. Net income for the second quarter ended June 29, 2003 increased 528% or
$9.7 million to $11.5 million, compared to $1.8 million for the quarter ended
June 30, 2002. Included in the net income for the second quarter was a reversal
of a deferred tax valuation allowance of $9.8 million. On a per share basis, net
income was $0.57 per basic share and $0.48 per diluted share in the second
quarter of 2003, including $0.48 and $0.41 respectively relating to the one time
reversal. This compares to $0.09 per basic and diluted share in the second
quarter of 2002.
Net revenue for the six-month period ended June 29, 2003 increased 35% or $35.6
million to $136.7 million, compared to $101.1 million for the six months ended
June 30, 2002. Net income for the six-month period ended June 29, 2003 increased
453% or $10.7 million to $13.1 million, from $2.4 million for the six months
ended June 30, 2002. On a per share basis, net income was $0.65 per basic share
and $0.55 per diluted share for the six-month period ended June 29, 2003,
including $0.48 and $0.41 respectively relating to the one time reversal,
compared to a net loss attributable to common shareholders of $(0.70) per basic
and diluted share for the six months ended June 30, 2002. The 2002 period
includes a deemed non-cash preferred dividend of $17.9 million.
Patrick Lo, Chairman and Chief Executive Officer of NETGEAR, commented, "We are
pleased with the second quarter. This was another strong quarter for us as our
customer focused strategy of serving the networking needs of the small business
and home-networking markets is driving record growth in revenue and operating
profit. Importantly, the needs and demand levels of the small business and home
networking markets remain robust and give us confidence in our prospects."
"We completed our Initial Public Offering on July 31. The IPO represents a major
milestone in the history of NETGEAR and further strengthens the company's
financial position, which will allow us to address new business and technology
opportunities as we continue to expand the breadth of our product offerings and
geographic reach," continued Lo. "I would like to thank our employees and early
investors for their dedication and support through our IPO process. We also
would like to thank our public investors for their show of confidence in our
business and our management."
Through its initial public offering, NETGEAR raised approximately $102 million
net of expenses. The Company used $20.0 million of the proceeds to repay an
outstanding note to Nortel Networks and $17.0 million to repay amounts drawn on
its bank line of credit. The repayment of debt is expected to result in a
pre-tax charge of approximately $6.0 million in the third quarter 2003 due to
the acceleration of interest expense equal to the unamortized discount balance
at the date of payment.
Jonathan Mather, Chief Financial Officer of NETGEAR, said, "During the second
quarter, we saw strength across all product categories and geographies. The
higher revenues, combined with a more
favorable product mix and ongoing operating efficiency improvement, led to an
expansion in our gross margin to 27.6% compared to 27.3% in the first quarter
and 25.6% in the year ago second quarter."
During the quarter, NETGEAR announced further enhancements to its already
comprehensive set of small business and home networking solutions by expanding
its line of 802.11g wireless networking products for homes and launching the
industry's first dual band 802.11a+g VPN firewall for small business. In
addition, NETGEAR introduced a new category of business-class wireless
solutions, including an access point and antennae line that deliver higher
security and expanded wireless range to small business.
Looking forward, Mr. Lo added, "We are entering the seasonally strong second
half with confidence in our outlook. Our retail channel is experiencing good
back-to-school demand. We are also benefiting from strength in our small
businesses channels such as Value Added Re-sellers (VARs), and Direct Marketing
Re-sellers (DMRs), as more and more business customers seek the improved
performance and mobility offered by our high speed wired and wireless
solutions."
ABOUT NETGEAR INC.
NETGEAR (Nasdaq: NTGR) designs technologically advanced, branded networking
products that address the specific needs of small business and home users. The
Company's suite of approximately 100 products enables users to share Internet
access, peripherals, files, digital multimedia content and applications among
multiple personal computers and other Internet-enabled devices. NETGEAR is
headquartered in Santa Clara, Calif. For more information, visit the company's
Web site at www.netgear.com or call (408) 907-8000.
NETGEAR is a registered trademark of NETGEAR, Inc. in the United States and
other countries.
CONTACTS:
Doug Hagan David Pasquale
Senior Manager, Public Relations Senior Vice President, Investor Relations
NETGEAR, Inc. The Ruth Group
(408) 907-8053 (646) 536-7006
doug.hagan@netgear.com dpasquale@theruthgroup.com
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
FOR NETGEAR, INC.:
This release contains forward-looking statements. The forward-looking statements
represent NETGEAR, Inc.'s expectations or beliefs concerning future events and
include statements, among other, regarding the expected performance, market
acceptance, market growth, market position of NETGEAR, and its products and
technology. NETGEAR undertakes no duty to update these forward-looking
statements. These statements are subject to risks and uncertainties, including
without limitation, the price/performance requirements of customers, the ability
of NETGEAR to sell products incorporating the technology, the impact and pricing
of competing technologies, the introduction of alternative technological
solutions, the inability of NETGEAR's new products to gain wide market
acceptance and other risks detailed from time-to-time in NETGEAR's SEC filings
and reports.
- Tables Attached -
NETGEAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------- -------------------------
JUNE 29, JUNE 30, JUNE 29, JUNE 30,
2003 2002 2003 2002
--------- --------- --------- ---------
Net revenue ................................................... $ 69,003 $ 55,538 $ 136,709 $ 101,066
--------- --------- --------- ---------
Cost of revenue:
Cost of revenue ............................................. 49,889 41,326 99,135 76,011
Amortization of deferred stock-based compensation ........... 42 20 31 86
--------- --------- --------- ---------
Total Cost of revenue ............................... 49,931 41,346 99,166 76,097
--------- --------- --------- ---------
Gross profit .................................................. 19,072 14,192 37,543 24,969
--------- --------- --------- ---------
Operating expenses:
Research and development .................................... 1,882 1,606 3,898 2,500
Sales and marketing ......................................... 11,706 7,809 22,667 14,989
General and administrative .................................. 1,779 2,024 3,681 3,552
Amortization of deferred stock-based compensation:
Research and development ................................. 103 37 199 180
Sales and marketing ...................................... 179 45 288 188
General and administrative ............................... 98 167 249 367
--------- --------- --------- ---------
Total operating expenses ........................... 15,747 11,688 30,982 21,776
--------- --------- --------- ---------
Income from operations ........................................ 3,325 2,504 6,561 3,193
Interest income ............................................... 25 45 53 66
Interest expense .............................................. (370) (526) (731) (544)
Other income, net ............................................. 128 108 50 40
--------- --------- --------- ---------
Income before income taxes .................................... 3,108 2,131 5,933 2,755
Provision (benefit) for income taxes .......................... (8,395) 299 (7,182) 386
--------- --------- --------- ---------
Net income .................................................... 11,503 1,832 13,115 2,369
Deemed dividend on Preferred Stock ............................ -- -- -- (17,881)
--------- --------- --------- ---------
Net income (loss) attributable to common stockholders ......... $ 11,503 $ 1,832 $ 13,115 $ (15,512)
========= ========= ========= =========
Net income (loss) per share attributable to common stockholders
Basic ...................................................... $ 0.57 $ 0.09 $ 0.65 $ (0.70)
========= ========= ========= =========
Diluted .................................................... $ 0.48 $ 0.09 $ 0.55 $ (0.70)
========= ========= ========= =========
Pro forma net income per share
Basic ...................................................... $ 0.57 $ 0.09 $ 0.65 $ 0.11
========= ========= ========= =========
Diluted .................................................... $ 0.48 $ 0.09 $ 0.55 $ 0.11
========= ========= ========= =========
NETGEAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
Pro
forma
Stockholders'
Equity
at
June 29, June 29, December 31,
2003 2003 2002(1)
--------- --------- ------------
ASSETS
Current assets:
Cash and cash equivalents ............................................ $ 21,376 $ 19,880
Accounts receivable, net of allowance for doubtful accounts of $869 at
June 29, 2003 and $873 at December 31, 2002 .......................... 52,328 42,492
Inventories .......................................................... 40,236 24,774
Deferred income taxes ................................................ 9,772 --
Prepaid expenses and other current assets ............................ 4,128 3,003
--------- ---------
Total current assets ................................................. 127,840 90,149
Property and equipment, net .......................................... 3,617 3,144
Goodwill, net ........................................................ 558 558
--------- ---------
Total assets ......................................................... $ 132,015 $ 93,851
========= =========
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable ..................................................... $ 30,228 $ 10,628
Payable to related parties ........................................... 16,667 13,687
Accrued employee compensation ........................................ 2,473 3,375
Other accrued liabilities ............................................ 26,949 29,419
Deferred revenue ..................................................... 1,168 5,059
Income taxes payable ................................................. 1,171 934
Borrowings under line of credit ...................................... 8,000 --
Note payable to Nortel Networks ...................................... 14,023 13,294
--------- ---------
Total current liabilities ............................................ 100,679 76,396
--------- --------- ---------
Redeemable convertible preferred stock ............................... $- $ 48,039 $ 48,052
--------- --------- ---------
Stockholders' equity (deficit)
Common stock ......................................................... 20
Additional paid-in capital ........................................... 61,184 13,165 12,810
Deferred stock-based compensation .................................... (4,573) (4,573) (4,997)
Accumulated deficit .................................................. (25,295) (25,295) (38,410)
--------- --------- ---------
Total stockholders' equity (deficit) ................................. $ 31,336 (16,703) (30,597)
--------- --------- ---------
Total liabilities, redeemable convertible preferred stock and
stockholders' equity (deficit) ....................................... $ 132,015 $ 93,851
========= =========
(1) Amounts as of December 31, 2002 are derived from audited financial
statements as of that date