Netgear Inc. (NASDAQ:NTGR) Q1 2015 Earnings Conference Call Transcript

Apr 23, 2015 • 05:00 pm ET

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Netgear Inc. (NASDAQ:NTGR) Q1 2015 Earnings Conference Call Transcript

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Presentation
Operator
operator

Greetings, and welcome to the NETGEAR Inc First Quarter 2015 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Mr. Christopher Genualdi, Investor Relations Manager for NETGEAR. Thank you. You may begin.

Executive
Christopher Genualdi

Thank you, operator. Good afternoon and welcome to NETGEAR's first quarter 2015 financial results conference call. Joining us from the company are Mr. Patrick Lo, Chairman and CEO, and Ms. Christine Gorjanc, CFO. The format of the call will be a brief business review by Patrick, followed by Christine, providing detail on the financials and other information. We will then have time for any questions. If you have not received a copy of today's release, please call NETGEAR Investor Relations or go to NETGEAR's corporate website at www.netgear.com.

(Forward-looking Cautionary Statements)

In addition, several non-GAAP financial measures will be mentioned on this call. Information relating to the corresponding GAAP measures as well as a reconciliation of the non-GAAP measures and GAAP measures can be found in our press release or on the Investor Relations website at www.netgear.com.

At this time, I would now like to turn the call over to Mr. Patrick Lo. Please go ahead, sir.

Executive
Patrick Lo

Thank you, Christopher and thank you everyone for joining today's call. For the first quarter of 2015, NETGEAR net revenue was $309.2 million, which is down 11.5% on a year-over-year basis and down 12.5% on a sequential basis. The decline in revenue is due to the exiting of certain service provided business that does not meet our financial metrics as discussed in our previous earnings call, as well as the negative impact of the strengthening dollar on our international business. I will expand upon this further in a moment.

Non-GAAP diluted EPS for the first quarter of 2015 was $0.46 which is down 22% year-over-year. Our EPS was negatively impacted by the decrease of international revenue and profits, which Christine will discuss during her section of the call. For a full reconciliation of GAAP to non-GAAP financial results, please refer to the first quarter 2015 earnings press release.

During the first quarter, net revenue for the Americas was $173.8 million down 10.8% year-over-year and down 10.7% quarter-over-quarter. Revenue in the Americas was primarily impacted by our exiting of certain service provider business that did not meet our expected level of profitability. Both the retail business unit and commercial business unit performance in the Americas during the quarter met expectations.

Europe, the Middle East and Africa or EMEA, net revenue was $89.1 million, which is down 16.6% year-over-year and down 16.1% quarter-over-quarter. We had expected the strengthening US dollar to negatively impact the EMEA results when translating revenues from local currencies into US dollars. In addition to that, Europe underperformed more than expected due to increased volatility in the regions pricing environment. We believe this pricing volatility is a reaction