Netgear Inc. (NASDAQ:NTGR) Q2 2019 Earnings Conference Call - Final Transcript

Jul 24, 2019 • 05:00 pm ET

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Netgear Inc. (NASDAQ:NTGR) Q2 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good afternoon, my name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the NETGEAR Second Quarter 2019 Earnings Conference Call. [Operator Instructions]

Thank you, Mr. Chris Genualdi, Director of IR, you may begin your conference.

Executive
Christopher Genualdi

Thank you, operator. Good afternoon, and welcome to NETGEAR's second quarter of 2019 financial results conference call. Joining us from the company are Mr. Patrick Lo, Chairman and CEO; and Mr. Bryan Murray, CFO.

The format of the call will start with a review of the financials for the second quarter provided by Bryan, followed by details and commentary on the business, provided by Patrick, and finish with third quarter of 2019 guidance provided by Bryan. We'll then have time for any questions. If you have not received a copy of today's release, please visit NETGEAR's Investor Relations website at www.netgear.com.

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

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

At this time, I would now like to turn the call over to Mr. Bryan Murray.

Executive
Bryan Murray

Thank you, Christopher, and thank you everyone for joining today's call. Results for the second quarter 2019, came in slightly above the high end of our guidance range for revenue and inline with the range for non-GAAP operating margin. We saw improvement in the U.S. retail WiFi market during the quarter, which was driven by the continued rollout of WiFi 6 Nighthawk routers and our various channel marketing activities.

Overall, NETGEAR net revenue for the second quarter ended June 30th, 2019 was $230.9 million, which was down 9.6% on a year-over-year basis and down 7.3% on a sequential basis. As discussed on our prior earnings calls, the decline during Q2 was driven by several factors; reduce service provider spending ahead of 5G rollout; increase channel marketing to counter a slowdown in the U.S. market for legacy 11ac routers; normalization of the EMEA channel following the Brexit driven U.K. sales pull in during Q1 and second quarter seasonality.

Looking ahead, we expect service provider revenue to rebound in Q3 to more normal levels, and expect to benefit from Q3, back-to-school seasonality. I'll provide more detail on Q3 when I discuss our third quarter guidance. NETGEAR net revenue by geography reflects the Q2 headwinds,