4Q18 Investor Presentation February 06, 2019
Safe Harbor Disclosure This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. The words “anticipate,” “expect,” “believe,” “will,” “may,” “should,” “estimate,” “project,” “outlook,” “forecast” or other similar words are used to identify such forward -looking statements. However, the absence of these words does not mean that the statements are not forward-looking. The forward- looking statements represent NETGEAR, Inc.’s expectations or beliefs co ncerning future events based on information available at the time such statements were made and include statements regarding: NETGEAR’s ability to pursue its long -term strategies; NETG EAR’s future operating performance and financial condition, expected net revenue, GAAP and non-GAAP operating margins, and GAAP and non-GAAP tax rates; expectations regarding the timing, distribution, sales momentum and market acceptance of recent and anticipated new product introductions that position the Company for growth; and expectations reg arding seasonal changes in the Company’s business performance. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: future demand for the Company's products and services may be lower than anticipated; consumers may choose not to adopt the Company's new product or service offerings or adopt competing products or services; product performance may be adversely affected by real world operating conditions; the Company may be unsuccessful or experience delays in manufacturing and distributing its new and existing products; telecommunications service providers may choose to slow their deployment of the Company's products or utilize competing products; the Company may be unable to collect receivables as they become due; the Company may fail to manage costs, including the cost of developing new products and manufacturing and distribution of its existing offerings; the Company may fail to successfully continue to effect operating expense savings; changes in the level of NETGEAR's cash resources and the Company's planned usage of such resources, including potential repurchases of the Company’s common stock; changes in the Company's stock price and developmen ts in the business that could increase the Company's cash needs; fluctuations in foreign exchange rates; and the actions and financial health of the Company's customers. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Further information on potential risk factors that could affect NETGEAR and its business are detailed in the Company's periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled “Part II - Item 1A. Risk Factors,” i n the Company's quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2018, filed with the Securities and Exchange Commission on November 2, 2018. Given these circumstances, you should not place undue reliance on these forward- looking statements. NETGEAR undertakes no obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law. All product and company names herein are or may be trademarks of their respective owners. 2
Mission Be the innovative leader in connecting the world to the Internet. 3
4Q18 Highlights Quarterly Revenue of $288.9 8.9 million llion 52% % Market et Share re in Wi WiFi Net etworking working De Devi vices es in the US 1 58% % Market et Share re in Retail ail Switc itche hes s in the US 2 9.7 million llion Regi gistere stered d Users rs Worldwide 1.4 million llion Regi gistere stered d App Users rs Worldwide Launched Indust ustry ry-leading leading Wi-Fi Fi 6 Route ter Launched World’s First Millimeter Wave 5G Device with AT&T Comple plete ted Spin n of Arlo o Technol chnologies ogies 1 The NPD Group, Inc., U.S. Retail Tracking Service, Networking Devices: Gateways, Range Extenders, and Routers; Cellular ready technology: exclude 3G, 4G, Dual Band 3G/4G, LTE; Network Connectivity: exclude powerline; 4 based on dollar sales, Oct.- Dec. 2018. 2 The NPD Group, Inc., U.S. Retail Tracking Service, Networking Devices, Switches, based on dollar sales, Oct.- Dec. 2018.
Strategy for Growth TECHNOL NOLOGY GY INFLE LECT CTION CREATE TE NEW CATEGO GORIE RIES RECURR RRING NG SERVI VICE CE REVENU NUE
Key Technology Mesh Inflections PoE+ Conte tent nt Streamin ing Pro AV 5G 5G New Categories 11ax Gaming ng 10 G Gig Mesh
The NETGEAR Evolution F R O M A L A R G E I N S T A L L E D B A S E W I T H L I M I T E D E N G A G E M E N T … … T O A L A R GE A N D E N GAG E D C U STOME R C O MMU NITY P A T H T O 15 15 % O P M A R G I N S * Registration + Recurring Ongoing Engagement Revenue *Non-GAAP
Connected Home Services
SMB Services
Connected Home Products Segment P R O D U C T S A N D T E C H N O L O G Y
11ax CAPACI CITY TY SPEE EED Handles up to 4X Up to 40% Higher the devices throughput Next Gen Wi-Fi 6 RANGE GE PERF RFORM ORMAN ANCE CE Up to 50% longer Improves battery range life for clients
Designing for the Needs of Gamers
Nighthawk Pro Gaming Driven by the Growth of eSports & Online Gaming 2.35B 68% Gamers worldwide Of gamers purchase growing to 2.75B by 2021 hardware to improve or feel it’s essential for gaming Source: Source: Newzoo 2018 Global Games Market Report NewZoo 2018 Global Games Market Report
Orbi Voice B E T T E R W I W I - F I A N D S O U N D . E V E R Y W H E R E . https://www.youtube.com/watch?v=3n51QtdNZIo
“ Orbi mesh “The union we’ve “ It's got serious networking system, all been waiting for sound…spreading this is a perfect is here.” internet while it's add- on.” pumping tunes.” “ Why has no one “ In all, the thing is “ something no other “ Netgear is getting thought of it before? really cool!” smart speaker more hip.” ...packs a pretty good does…” audio punch”
Now featuring content from… "A magical painting whose contents can change, Harry Potter-style, in an "...so realistic, you want to instant" reach out and touch the brush strokes."
Meural Membership • Subscription $49.95/year • Unlimited access to 30,000+ digital content • Exclusive artwork & photography • Strong membership attach
CHP Strategy Sell services Drive new lifestyle category Up ASP with new technology
SMB Segment P R O D U C T S A N D T E C H N O L O G Y
History of Innovation in SMB First st DIY Wi Wi-Fi Fi Mesh sh Solu lution tion for Busi sine ness ss First App Managed Access Point First 10G Smart Switch First Smart 2018 2018 Switch 2017 2017 2017 2017 2017 2017 2014 2014 2011 2011 Pro AV 48/96 /96 2010 2010 2003 2003 10G Switch itch First Fully Autonomous Cloud Flexible Mounting Management Switch Click Switch First Lightly Managed Plus Switch
Upgraded Technology > 2x ASP… Smart Switch Port Speed ASPs Smart Switch PoE ASPs NETGEAR SMB Access Point ASPs $400 400 $420 420 $1,376 76 $250 250 $140 140 $68 $68 $210 $210 Q3'18 Q3'18 Q3'18 11n 11n 11ac 11ac 11ax 11ax PoE PoE PoE+ PoE+ 1G 1G 10G 10G PoE PoE+ 11ac 11ax ax 1Gbps 10Gb Gbps
AV Transitioning HDMI to Ethernet Interconnect market is $250M 0M Converting to AV-over-IP
Do-It-Yourself SMB Networks Secure guest network DIY wire-free installation High-performance Wi-Fi
DIY DIY Manage naged d Service vice Provi vider ders $5 per year per device $15 per year per device SCREENSHOT
SMB Summary SCREENSHOT Insight services Pro AV, Orbi, App Switches Up ASP with new technology
Financials 26
Quarterly Net Revenue (Net Revenue, $ Millions) $300 $289 $274 $269 $250 $261 $255 $252 $252 $245 $200 $150 $100 $50 $0 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 27
Segment Performance (Net Revenue, $ Millions) S M B C O N N E C T E D H O M E 100 250 90 80 200 70 60 150 50 100 40 30 50 20 10 0 0 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 Retail Service Provider 28
Regional Performance (Net Revenue, $ Millions) A M E R I C A S E M E A A P A C 195 70 80 190 70 60 185 60 180 50 175 50 40 170 40 165 30 30 160 20 155 20 150 10 10 145 140 0 0 29
Operating Margin (Non-GAAP, % of Revenue) 12% 10% 10.5% 9.4% 8.9% 8% 7.8% 6.6% 6% 4.6% 4% 4.3% 4.1% 2% 0% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 30
Earnings Per Share (Non-GAAP, $ per Share) $0.90 $0.80 $0.70 $0.73 $0.68 $0.60 $0.50 $0.46 $0.45 $0.40 $0.43 $0.30 $0.34 $0.29 $0.26 $0.20 $0.10 $0.00 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 31
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