NETGEAR, Inc. Q2 FY2025 earnings call

• Q2 was a great quarter with historically high gross margins and non-GAAP profitability. - Transformation to drive long-term shareholder value via profitable growth is progressing. - NFB revenue up 38% YOY, ProAV had strong growth but supply constraints led to increased backlog. - Home networking launched Orbi 370, Jonathan Oakes joined as GM, showing progress. - Mobile had strong retail performance but weaker U.S. service provider sales. - Macro points: most products exempt from tariffs, U.S. independence beneficial geopolitically. - Exium acquisition and $7.5M share buybacks for capital allocation.

In Q2, NFB led with revenue up 38% YOY and >4% sequentially, gross margin at 46.7% (up 1,300 basis points YOY). ProAV within NFB had 14% sequential revenue growth despite supply constraints, with sales backlog increasing. Home networking had net revenue of $67.5M, up 13.1% YOY and 10% sequentially, gross margin at 29.5% (up 1,800 basis points YOY) driven by WiFi 7 mix and lower cost inventory. Mobile segment had revenue of $20.4M, below expectations, but gross margin over 29% and positive contribution margin.

• Third quarter net revenue expected $165M to $180M. - NFB ProAV supply constraints may limit top line, but expect to burn down backlog in Q3 and build safety stock in 1Q26. - Home networking sees benefits from broader portfolio. - Mobile expects revenue in line with Q2. - Non-GAAP operating margin range negative 5.5% to negative 2.5%.

• Memory pricing noise and DDR4 end-of-life concerns. - Trade tensions and supply chain constraints. - Litigation defense costs. - Uncertainty around geopolitical and tariff impacts.

Q: Logan Katzman asked about ProAV supply constraints, backlog carry into Q3.

A: Charles J. Prober said ProAV is ~25% of overall top line, backlog increased but expect to burn down backlog in Q3 and build safety stock in 1Q26.

Q: Jay Goldberg asked about home networking progress.

A: Charles J. Prober said home networking is evolving, gained share in Prime Day despite market dynamics, with plans to leverage software and subscriptions.