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Segment Information
 9 Months Ended
Sep. 29, 2024
Segment Reporting [Abstract]  
Segment Information

Note 11. Segment Information

Operating segments are components of an enterprise about which separate financial information is available and is evaluated quarterly 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. The Company operates and reports in two segments: NETGEAR for Business and Connected Home:

•
NETGEAR for Business: Focuses on businesses and provides solutions for business networking, wireless local area network (“LAN”), audio and video over Ethernet for Pro AV applications, security and remote management providing enterprise-class functionality at an affordable price; and
•
Connected Home: Focuses on consumers and provides high-performance, dependable and easy-to-use premium WiFi internet networking solutions such as WiFi 6, WiFi 6E and WiFi 7 Tri-band and Quad-band mesh systems, and routers, 4G/5G mobile products, and subscription services that provide consumers a range of value-added services focused on performance, security, privacy, and premium support.

The Company believes that this structure reflects its current operational and financial management, and that it 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 and service 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 (loss). Segment contribution income (loss) includes all product line segment revenues less the related cost of sales, research and development and sales and marketing costs. Contribution income (loss) 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 and general and administrative expenses,

amortization of intangibles, stock-based compensation expense, intangibles impairment, restructuring and other charges, litigation reserves, net, and other income (expenses), net.

Effective on January 1, 2024, resulting from certain segment structure changes, the Company revised its allocation method by allocating certain historically unallocated operating expenses to its individual operating segments. The prior-year segment financial information has been recast to conform to the current-year presentation. Financial information for each reportable segment and a reconciliation of segment contribution income to income (loss) before income taxes is as follows:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

(In thousands, except percentage data)

 

September 29, 2024

 

 

October 1, 2023

 

 

September 29, 2024

 

 

October 1, 2023

 

 

Net Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

NETGEAR for Business

 

$

78,530

 

 

$

70,510

 

 

$

207,020

 

 

$

223,679

 

 

Connected Home

 

 

104,324

 

 

 

127,335

 

 

 

284,320

 

 

 

328,487

 

 

Total net revenue

 

$

182,854

 

 

$

197,845

 

 

$

491,340

 

 

$

552,166

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contribution Income (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

NETGEAR for Business

 

$

16,133

 

 

$

14,547

 

 *

$

28,098

 

 

$

42,254

 

 *

Contribution margin

 

 

20.5

 %

 

 

20.6

 %

 *

 

13.6

 %

 

 

18.9

 %

 *

Connected Home

 

$

(4,780

)

 

$

9,465

 

 *

$

(24,714

)

 

$

2,336

 

 *

Contribution margin

 

 

(4.6

)%

 

 

7.4

 %

 *

 

(8.7

)%

 

 

0.7

 %

 *

Total segment contribution income

 

$

11,353

 

 

$

24,012

 

 *

$

3,384

 

 

$

44,590

 

 *

Corporate and unallocated costs

 

 

(9,708

)

 

 

(18,760

)

 *

 

(48,864

)

 

 

(57,145

)

 *

Amortization of intangibles

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(257

)

 

Stock-based compensation expense

 

 

(5,620

)

 

 

(4,285

)

 

 

(16,052

)

 

 

(13,637

)

 

Intangibles impairment

 

 

—

 

 

 

(1,071

)

 

 

—

 

 

 

(1,071

)

 

Restructuring and other charges

 

 

(1,072

)

 

 

(366

)

 

 

(3,792

)

 

 

(2,703

)

 

Litigation reserves, net

 

 

100,855

 

 

 

(178

)

 

 

92,625

 

 

 

(178

)

 

Other income, net (1)

 

 

3,485

 

 

 

2,280

 

 

 

9,048

 

 

 

11,685

 

 

Income (loss) before income taxes

 

$

99,293

 

 

$

1,632

 

 

$

36,349

 

 

$

(18,716

)

 

 

 

(1)
Amounts included gain/(loss), net from derivatives not designated as hedging instruments of $(1.6) million and $0.5 million, for the three and nine months ended September 29, 2024, respectively, and $1.3 million and $2.2 million, for the three and nine months ended October 1, 2023, respectively, and gain/(loss), net from a litigation settlement of $6.0 million for the nine months ended October 1, 2023.

* Financial information for each reportable segment in the prior year periods were recast to conform to the current reportable segment structure.

The CODM does not evaluate operating segments using discrete asset information.

Operations by Geographic Region

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:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

(In thousands)

 

September 29, 2024

 

 

October 1, 2023

 

 

September 29, 2024

 

 

October 1, 2023

 

United States (U.S.)

 

$

124,305

 

 

$

138,013

 

 

$

324,388

 

 

$

368,772

 

Americas (excluding U.S.)

 

 

3,447

 

 

 

3,005

 

 

 

8,795

 

 

 

10,779

 

EMEA (1)

 

 

32,798

 

 

 

35,684

 

 

 

91,340

 

 

 

111,023

 

APAC (1)

 

 

22,304

 

 

 

21,143

 

 

 

66,817

 

 

 

61,592

 

Total net revenue

 

$

182,854

 

 

$

197,845

 

 

$

491,340

 

 

$

552,166

 

 

 

(1)
No individual foreign country represented more than 10% of the Company’s total net revenue in the periods presented.

 

Long-lived assets by Geographic Region

The following table presents the Company’s long-lived assets located in geographic areas, which consist of property and equipment, net, and operating lease right-of-use assets:

 

(In thousands)

 

September 29, 2024

 

 

December 31, 2023

 

United States (U.S.)

 

$

20,082

 

 

$

25,051

 

Canada

 

 

5,583

 

 

 

4,714

 

Americas (excluding U.S. and Canada)

 

 

38

 

 

 

68

 

EMEA

 

 

3,267

 

 

 

3,739

 

Singapore

 

 

5,195

 

 

 

6,218

 

APAC (excluding Singapore) (1)

 

 

7,233

 

 

 

5,768

 

Total

 

$

41,398

 

 

$

45,558

 

 

 

(1)
No individual country represented more than 10% of the Company’s total long-lived assets in the periods presented.