Netgear Turnaround Starts To Show Despite Declining Revenues

Struggling US networking Company Netgear has seen revenues slump another 7.6% in the last quarter with the Company, who are facing tough competition in Australia after Telstra chose to range a new high performance low cost ruggedised portable 5G router up against the popular Netgear product also struggling to make a profit.

The business who are selling expensive routers and modems in Australia has come under pressure from Chinese brands recently with the business struggling to hold onto their performance edge.

The good news is that the Australian operation which is a key market in Asia Pacific saw revenues climb from US21.M in June 2024 to $22.3M as of September 2024. Also up globally was Connected home revenues climbing from $84M to $104.3M as of September 2024.

Third quarter 2024 net revenue was US$182.9 million, a decrease of 7.6% from the comparable prior-year quarter.

CJ Prober, Chief Executive Officer of Netgear claimed “I am thrilled with our progress and the speed at which we are executing on our transformation. Q3 was an excellent quarter where we exceeded revenue and operating income guidance, achieved profitability, and increased our cash balance by over $100 million.”

He added “Our ProAV business had another record quarter in end user sales, and we added over 30 new manufacturing partners to strengthen our differentiation and software leadership in this category. We also launched several innovative products, including the M7 Pro, the industry’s first mobile hotspot that combines 5G and WIFI 7. With great executives joining the team and already driving positive early results, we are confident that we are positioning NETGEAR to fully capitalize on numerous market opportunities to generate long-term growth and profitability and we remain focused on creating long-term value for shareholders.”

In the portable mobile hotspot market Netgear is facing competition from Sonim Technologies who have partnered with Telstra to market a portable router whose military grade, advanced 5G, W7 Su6mm portable hotspot router is half the price of the Netgear Pro version of the same product and has significantly better specs claim observers.

Currently Netgear are selling the Nighthawk M6 Pro 5G mmWave WiFi 6E Mobile Hotspot Router for a staggering $1,299 on their own web site, Telstra is selling the same product for $840.

It’s not known when the new M7Pro model is set to be launched in Australia.Bryan Murray, Chief Financial Officer said, “We continued to execute on our plan to reduce our inventory, which declined by $27.0 million sequentially and represents less than 4 months of inventory, including finished goods and components, for the first time in over 3 years”.

He added “Gross margin for the quarter exceeded 30% and NFB topline grew over 10% year over year and returned to historical levels on contribution margin. In Q3 we also delivered a fifth consecutive quarter of free cash flow generation, even after removing the effect of the TP-Link settlement, and we exited the quarter with $395.7 million in cash and cash equivalents, a $101.4 million sequential increase”.

Murray claimed “As we experienced in the third quarter, we expect to continue to see more predictable performance that is aligned with the market for both of our businesses. Within NFB, we expect to experience continued growth led by our ProAV line of managed switches. While we are seeing the signs of market recovery in CHP, we expect increased promotional activity within our retail business due in part to the holiday period”.

“As we were able to pull forward the launch of our M7 Pro mobile hotspot into the third quarter, we expect revenue from the service provider channel to be approximately $20 million in Q4, down slightly on a sequential basis. Accordingly, we expect fourth quarter net revenue to be in the range of $160 million to $175 million”.