What changed in this filing

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Item 1. Financial Statements

2024-08-02 compared with 2024-05-03 · 201 added, 134 removed, 570 unchanged (37% of the section changed)

3 unchanged sentences

(In thousands)

March 31, 2024

June 30, 2024

December 31, 2023

2 unchanged sentences

Short-term investments

Accounts receivable, net of allowance for doubtful accounts of $ 338 as of March 31, 2024 and December 31, 2023, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 417 and $ 338 as of June 30, 2024 and December 31, 2023, respectively

Prepaid expenses and other current assets

18 unchanged sentences

Additional paid-in capital

Accumulated other comprehensive income

Accumulated other comprehensive income (loss)

Accumulated deficit

6 unchanged sentences

Three Months Ended

March 31, 2024

April 2, 2023

Six Months Ended

June 30, 2024

Cost of revenue

3 unchanged sentences

General and administrative

Other operating expenses, net

Litigation reserves, net

Restructuring and other charges

Total operating expenses

2 unchanged sentences

Loss before income taxes

Benefit from income taxes

Provision for (benefit from) income taxes

Net loss per share

5 unchanged sentences

Three Months Ended

March 31, 2024

April 2, 2023

Six Months Ended

June 30, 2024

Other comprehensive income (loss), before tax:

2 unchanged sentences

Other comprehensive income (loss), before tax

Tax provision related to derivatives

Tax benefit (provision) related to derivatives

Tax provision related to available-for-sale investments

16 unchanged sentences

Balance as of March 31, 2024

Change in unrealized gains and losses on available-for-sale investments, net of tax

Change in unrealized gains and losses on derivatives, net of tax

Stock-based compensation

Repurchase of common stock

Restricted stock unit withholdings

Issuance of common stock under stock-based compensation plans

Balance as of June 30, 2024

Comprehensive

8 unchanged sentences

Balance as of April 2, 2023

Change in unrealized gains and losses on available-for-sale investments, net of tax

Change in unrealized gains and losses on derivatives, net of tax

Stock-based compensation

Restricted stock unit withholdings

Issuance of common stock under stock-based compensation plans

Balance as of July 2, 2023

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

Stock-based compensation

(Gain) Loss on investments, net

Gain on investments, net

Deferred income taxes

8 unchanged sentences

Income taxes payable

Net cash provided by operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

2 unchanged sentences

Purchases of property and equipment

Purchases of long-term investments

Net cash used in investing activities

4 unchanged sentences

Net cash provided by (used in) financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, at beginning of period

Cash and cash equivalents, at end of period

Non-cash investing and financing activities:

Unpaid property and equipment

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

26 unchanged sentences

These estimates may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known.

Actual results could differ materially from those estimates and operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024, or any future period.

Actual results could differ materially from those estimates and operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024, or any future period.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Segment Recast

1 unchanged sentence

This change impacted Note 11, Segment Information .

The prior-year segment financial information has been recast to conform to the

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

current-year presentation.

The prior-year segment financial information has been recast to conform to the current-year presentation.

None of the changes impact previously reported consolidated net revenue, income (loss) from operations, net income (loss) per share, total assets, or stockholders’ equity.

9 unchanged sentences

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”, which improves the transparency of income tax disclosures.

Improvements to Income Tax Disclosures”, which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions.

ASU 2023-09 is effective for the Company for the year ended December 31, 2025 and early adoption is permitted.

Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements.

The guidance allows for adoption using either a prospective or retrospective transition method.

The Company is evaluating the impact that the updated standard will have on its financial statement disclosures.

5 unchanged sentences

Non-cancellable backlog includes goods for which customer purchase orders have been accepted, that are scheduled or in the process of being scheduled for shipment, and that are not yet invoiced.

The following table summarizes estimated revenue expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as of March 31, 2024 :

The following table summarizes estimated revenue expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as of June 30, 2024 :

(In thousands)

2 unchanged sentences

Performance obligations

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Contract Balances

3 unchanged sentences

Contract liabilities are mainly classified as Deferred revenue on the unaudited condensed consolidated balance sheets.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Payment terms vary by customer.

4 unchanged sentences

Balance Sheet Location

March 31, 2024

June 30, 2024

December 31, 2023

5 unchanged sentences

Other non-current liabilities

The difference in the balances of the Company’s contract assets and liabilities as of March 31, 2024 and December 31, 2023, primarily results from the timing difference between the Company’s performance and the customer’s payment.

During the three months ended March 31, 2024 , $ 12.9 million of revenue was deferred primarily due to unsatisfied performance obligations for service contracts, $ 11.2 million of revenue was recognized for the satisfaction of performance

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

obligations and $ 9.9 million of this recognized revenue was included in the contract liability balance at the beginning of the period.

The difference in the balances of the Company’s contract assets and liabilities as of June 30, 2024 and December 31, 2023, primarily results from the timing difference between the Company’s performance and the customer’s payment.

During the six months ended June 30, 2024 , $ 24.9 million of revenue was deferred primarily due to unsatisfied performance obligations for service contracts, $ 22.7 million of revenue was recognized for the satisfaction of performance obligations and $ 18.1 million of this recognized revenue was included in the contract liability balance at the beginning of the period.

There were no significant changes in estimates during the period that would affect the contract balances.

9 unchanged sentences

Three Months Ended

March 31, 2024

April 2, 2023

June 30, 2024

(In thousands)

5 unchanged sentences

Non-service provider

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Six Months Ended

June 30, 2024

(In thousands)

NETGEAR for Business

Geographic regions (1) :

Sales channels:

Service provider

Non-service provider

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

1 unchanged sentence

Available-for-sale investments

Amortized cost and estimated fair market value of investments classified as available-for-sale, excluding cash equivalents, as of March 31, 2024 and December 31, 2023, were as follows:

March 31, 2024

Amortized cost and estimated fair market value of investments classified as available-for-sale, excluding cash equivalents, as of June 30, 2024 and December 31, 2023, were as follows:

June 30, 2024

(In thousands)

1 unchanged sentence

treasury securities

Convertible debt

Corporate equity securities

December 31, 2023

5 unchanged sentences

The contractual maturities on the U.S.

treasury securities as of March 31, 2024 are all due within one year.

Accrued interest receivable as of March 31, 2024 was $ 0.5 million and was recorded within Prepaid expenses and other current assets on the unaudited condensed consolidated balance sheet.

The following table summarizes investments classified as available-for-sale in a continuous unrealized loss position for which an allowance for credit losses was not recorded as of March 31, 2024 and December 31, 2023:

March 31, 2024

treasury securities as of June 30, 2024 are all due within one year.

Accrued interest receivable as of June 30, 2024 was $ 0.5 million and was recorded within Prepaid expenses and other current assets on the unaudited condensed consolidated balance sheet.

June 30, 2024

Less Than 12 Months

19 unchanged sentences

treasury securities

In the three months ended March 31, 2024 and April 2, 2023 , no unrealized losses on available-for-sale securities were recognized in income.

In the three and six months ended June 30, 2024 and July 2, 2023 , no unrealized losses on available-for-sale securities were recognized in income.

The Company does not intend to sell, and it is unlikely that it will be required to sell the investments in an unrealized loss position prior to their anticipated recovery.

1 unchanged sentence

treasury securities and the decline in fair value is largely due to changes in interest rates and other market conditions with the fair value expected to recover as they reach maturity.

There were no other-than-temporary impairments for these securities during the three months ended March 31, 2024 and April 2, 2023.

There were no other-than-temporary impairments for these securities during the three and six months ended June 30, 2024 and July 2, 2023.

Refer to Note 12, Fair Value Measurements, for detailed disclosures regarding fair value measurements.

(In thousands)

March 31, 2024

June 30, 2024

December 31, 2023

1 unchanged sentence

Finished goods

The Company records provisions for excess and obsolete inventory based on assumptions about future demand and market conditions and the amounts incurred were $ 1.1 million and $ 1.2 million for the three months ended March 31, 2024 and April 2, 2023, respectively.

The Company records provisions for excess and obsolete inventory based on assumptions about future demand and market conditions and the amounts incurred were $ 1.9 million and $ 3.0 million for the three and six months ended June 30, 2024, respectively, and $ 0.4 million and $ 1.5 million for the three and six months ended July 2, 2023, respectively.

While management believes the estimates and assumptions underlying its current forecasts are reasonable, there is risk that additional charges may be necessary if current forecasts are greater than actual demand.

2 unchanged sentences

(In thousands)

March 31, 2024

June 30, 2024

December 31, 2023

Computer equipment

Furniture, fixtures, and leasehold improvements

Machinery and equipment

Furniture, fixtures, and leasehold improvements

Computer equipment

Total property and equipment, gross

2 unchanged sentences

(In thousands)

March 31, 2024

June 30, 2024

December 31, 2023

2 unchanged sentences

Long-term equity investments

The Company’s long-term investments are comprised of equity investments without readily determinable fair values, investments in convertible debt securities and investments in limited partnership funds.

The Company’s long-term investments are comprised of equity investments without readily determinable fair values, investments in convertible debt securities or corporate equity securities and investments in limited partnership funds.

The changes in the carrying value of equity investments without readily determinable fair values were as follows:

Three months ended

Six months ended

(In thousands)

March 31, 2024

April 2, 2023

June 30, 2024

Carrying value as of the beginning of the period (1)

Carrying value as of the end of the period (1)

(1) The balances excluded an investment in limited partnership funds of $ 2.2 million as of March 31, 2024 , $ 1.6 million as of April 2, 2023 , $ 2.3 million as of December 31, 2023, and $ 1.7 million as of December 31, 2022.

Additionally, the balance excluded an investment in convertible debt securities of $ 0.2 million as of March 31, 2024, December 31, 2023, April 2, 2023 , and December 31, 2022, respectively.

For such equity investments without readily determinable fair values still held at March 31, 2024 , there were no cumulative downward adjustments for price changes and impairment and the cumulative upward adjustments for price changes was $ 0.3 million.

(1) The balances excluded an investment in limited partnership funds of $ 2.3 million as of June 30, 2024 , $ 1.8 million as of July 2, 2023 , $ 2.3 million as of December 31, 2023, and $ 1.7 million as of December 31, 2022.

Additionally, the balance excluded an investment in corporate equity securities of $ 0.3 million as of June 30, 2024 , an investment in convertible debt securities of $ 0.2 million as of December 31, 2023, July 2, 2023 , and December 31, 2022, respectively.

For such equity investments without readily determinable fair values still held on June 30, 2024 , there were no cumulative downward adjustments for price changes and impairment and the cumulative upward adjustments for price changes was $ 0.3 million.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1 unchanged sentence

(In thousands)

March 31, 2024

June 30, 2024

December 31, 2023

4 unchanged sentences

Freight and duty

(1) Inventory expected to be received from future sales returns amounted to $ 17.4 million and $ 16.9 million as of March 31, 2024 and December 31, 2023, respectively.

Provisions to write down expected returned inventory to net realizable value amounted to $ 8.6 million and $ 9.7 million as of March 31, 2024 and December 31, 2023 , respectively.

(1) Inventory expected to be received from future sales returns amounted to $ 15.5 million and $ 16.9 million as of June 30, 2024 and December 31, 2023, respectively.

Provisions to write down expected returned inventory to net realizable value amounted to $ 8.9 million and $ 9.7 million as of June 30, 2024 and December 31, 2023 , respectively.

Derivative F inancial Instruments

1 unchanged sentence

dollar, the Company’s functional currency worldwide.

The Company executes currency forward contracts that typically mature in less than 6 months to mitigate its currency risk, in currencies including Australian dollars, British pounds, euros, Canadian dollars, and Japanese yen.

The Company executes currency forward contracts that typically mature in less than six months to mitigate its currency risk, in currencies including Australian dollars, British pounds, euros, Canadian dollars, and Japanese yen.

The Company does not enter into derivatives transactions for trading or speculative purposes.

25 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands, except per share data)

March 31, 2024

April 2, 2023

June 30, 2024

Weighted average common shares – basic

4 unchanged sentences

In come Taxes

The income tax benefit for the three months ended March 31, 2024 was $ 0.1 million, or an effective tax rate of 0.8 %.

The income tax benefit for the three months ended April 2, 2023 was $ 0.9 million, or an effective tax rate of 8.1 %.

The change in taxes for the three months ended March 31, 2024, compared to the prior year period, was primarily due to the continued full valuation allowance on deferred tax assets for U.S.

federal and state purposes that was established during the period ended October 1, 2023.

The Company evaluated the current results as of the period ended March 31, 2024, coupled with the expectations for the remainder of the year, and determined that it continued to not be more likely than not that the deferred tax assets would be realized, and accordingly, recorded no benefit for the forecasted tax loss for the three months ended March 31, 2024.

By comparison, for the three months ended April 2, 2023, a tax benefit was recorded on the pre-tax loss since the valuation allowance on deferred tax assets had not yet been established.

The income tax provision for the three and six months ended June 30, 2024 was $ 1.0 million, or an effective tax rate of ( 2.3 )%, and $ 0.9 million, or an effective tax rate of ( 1.4 )%, respectively.

The income tax benefit for the three and six months ended July 2, 2023 was $ 1.2 million, or an effective tax rate of 12.2 %, and $ 2.0 million, or an effective tax rate of 10.1 %, respectively.

The changes in taxes for the three and six months ended June 30, 2024, compared to the prior year period, were primarily due to the continued full valuation allowance on deferred tax assets for U.S.

federal and state purposes that was established during the three months ended October 1, 2023.

The Company evaluated the current results as of the period ended June 30, 2024, coupled with the expectations for the remainder of the year, and determined that it continues to not be more likely than not that the deferred tax assets would be realized, and accordingly, has recorded no benefit for the forecasted tax loss for the three and six months ended June 30, 2024.

By comparison, for the three and six months ended July 2, 2023, tax benefits were recorded on the pre-tax loss since the valuation allowance on deferred tax assets had not yet been established .

The Company is subject to income taxes in the U.S.

14 unchanged sentences

Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year.

In addition, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences resulting from different treatment for tax versus accounting for certain items, such as accruals and allowances not currently deductible for tax purposes.

In addition, deferred tax assets and liabilities

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

tax assets and liabilities represent the future tax return consequences of these differences, which will either be taxable or deductible when assets and liabilities are recovered or settled, as well as operating loss carryforwards.

are recognized for the expected future tax consequences of temporary differences resulting from different treatment for tax versus accounting for certain items, such as accruals and allowances not currently deductible for tax purposes.

The deferred tax assets and liabilities represent the future tax return consequences of these differences, which will either be taxable or deductible when assets and liabilities are recovered or settled, as well as operating loss carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

12 unchanged sentences

Generally, under these agreements, 50 % of orders are cancelable by giving notice 46 to 60 days prior to the expected shipment date and 25 % of orders are cancelable by giving notice 31 to 45 days prior to the expected shipment date.

As of March 31, 2024, the Company had approximately $ 77.0 million , as compared to $ 42.6 million as of December 31, 2023, in short-term non-cancelable purchase commitments with suppliers or where the suppliers had procured unique materials and components upon receipts of the Company’s purchase orders.

As of June 30, 2024, the Company had approximately $ 71.7 million , as compared to $ 42.6 million as of December 31, 2023, in short-term non-cancelable purchase commitments with suppliers or where the suppliers had procured unique materials and components upon receipts of the Company’s purchase orders.

Due to an elongation of the time from order placement to production that occurred several years ago, the Company issued purchase orders to supply chain partners beyond contractual termination periods.

As of March 31, 2024 , $ 274.2 million of purchase orders beyond contractual termination periods remained outstanding.

As of June 30, 2024, $ 257.7 million of purchase orders beyond contractual termination periods remained outstanding.

Consequently, the Company may incur expenses for materials and components, such as chipsets purchased by the supplier to fulfill the purchase order if the purchase order is cancelled.

1 unchanged sentence

For those orders not governed by master purchase agreements, the commitments are governed by the commercial terms on the Company’s purchase orders subject to acknowledgment from its suppliers.

The Company establishes a loss liability for all products it does not expect to sell or orders it anticipates cancelling for which it has committed purchases from suppliers.

The Company establishes a loss liability for all products it does not expect to sell or orders it anticipates canceling for which it has committed purchases from suppliers.

Such loss liability is included in Other accrued liabilities on the Company’s unaudited condensed consolidated balance sheets.

Losses incurred in relation to purchase commitments, including unique materials and components, amounted to $ 1.1 million and $ 0.5 million for the three months ended March 31, 2024 and April 2, 2023, respectively.

Losses incurred in relation to purchase commitments, including unique materials and components, amounted to $ 5.1 million and $ 6.2 million for the three and six months ended June 30, 2024 , respectively and $ 0.9 million and $ 1.4 million for the three and six months ended July 2, 2023, respectively.

Non-Trade Commitments

As of March 31, 2024, the Company had non-cancellable purchase commitments of $ 13.1 million pertaining to non-trade activities.

As of June 30, 2024 , the Company had non-cancellable purchase commitments of $ 11.3 million pertaining to non-trade activities.

Warranty Obligations

1 unchanged sentence

Three Months Ended

Six Months Ended

(In thousands)

March 31, 2024

April 2, 2023

June 30, 2024

Balance as of beginning of the period

13 unchanged sentences

The actual liability in any such matters may be materially different from the Company’s estimates, which could result in the need to adjust the liability and record additional expenses.

NETGEAR Inc., NETGEAR Deutschland GmbH, and Exertis-Connect GmbH

NETGEAR Inc., NETGEAR Deutschland GmbH, and Exertis-Connect GmbH (at the Dusseldorf District Court, Germany)

On or around March of 2022, Huawei filed two patent infringement lawsuits at the District Court of Dusseldorf, Germany, against NETGEAR Inc., NETGEAR Deutschland GmbH, and Exertis-Connect GmbH, a third-party webstore selling NETGEAR products in Germany.

Huawei asserted one EU patent in each suit, EP 3 337 077 B1 (the ’077 Patent) in case no.

08/22 and EP 3 143 741 B1 (the ’741 Patent) in case no.

Huawei asserted one EU patent in each suit, EP 3 337 077 B1 (“EP 077”) in case no.

08/22 and EP 3 143 741 B1 (EP 741) in case no.

In its complaints, Huawei alleged that the Company’s WiFi 6 products infringed the two patents, which Huawei further claimed are standard-essential patents.

1 unchanged sentence

The Company attended an oral hearing for both infringement cases on March 21, 2023 before the Dusseldorf District Court and the Court dismissed case no.

09/22 for the ‘741 Patent and stayed case no.

08/22 for the ‘077 Patent.

09/22 for the EP 741 and stayed case no.

08/22 for EP 077.

Huawei is appealing the dismissal of case no.

09/22, and the hearing for the appeal is set for May 23, 2024.

On March 20, 2024, the Patent Court maintained the validity of ‘741 Patent, but with an amended claim.

08/22 remains stayed while the nullity action is ongoing.

09/22, and the deadline for the parties’ briefing is scheduled for November 22, 2024 with an oral hearing on March 6, 2025.

On March 20, 2024, the Patent Court maintained the validity of EP 741, but with an amended claim.

08/22 (EP 077) remains stayed while the nullity action is ongoing.

An oral hearing for the EP 077 nullity action is scheduled for December 12, 2024.

On or around May 10, 2022, the Company was served with two suits that Huawei filed before the Jinan Intermediate People’s Court of China asserting Patent Nos.

ZL 201811536087.9 (case no 407) and ZL 201810757332.2 (case no.

ZL 201811536087.9 (case no.

407) and ZL 201810757332.2 (case no.

408) against the Company’s WiFi 6 products.

2 unchanged sentences

Licensing and technical hearings followed on July 24, 2023 and July 25, 2023.

After the July 25th hearing, the Court indicated it will advise the parties of further action.

NETGEAR Inc., NETGEAR Deutschland GmbH, and NETGEAR International Limited

On or around July 3, 2023, Huawei filed a new infringement suit, asserting patent EP 3 611 989 (the ’989 Patent), against NETGEAR Inc., NETGEAR Deutschland GmbH, and NETGEAR International Limited at the Unified Patent Court (UPC) in Munich, Germany.

The Company filed its Statement of Defense on November 7, 2023 and the Court held an interim conference on February 19, 2024.

The deadline for the parties to complete briefing is June 3, 2024 and the oral hearing is scheduled for June 18, 2024.

On around December 11, 2023, Huawei filed a second UPC suit, asserting EP 3 678 321 (“EP 321”), against the Company and requested that the Court allow it to amend the pending EP 989 case to add EP 321.

The Company disagreed and filed an objection.

The Appeal Court found in favor of the Company and designated the EP 321 matter as a separate case.

The Company filed its Statement of Defense on April 18, 2024, to include a counterclaim for revocation of the patent at the UPC.

The Company, at this time, is not able to reasonably estimate any financial impact to the Company resulting from these litigation matters.

On or around June 12, 2024, the Jinan Court found that the Company Wi-Fi 6 products infringe Huawei’s two asserted Chinese patents.

The Company appealed both cases to the Chinese Supreme Court on June 21, 2024.

NETGEAR Inc., NETGEAR Deutschland GmbH, and NETGEAR International Limited (at the Unified Patent Court - UPC)

On or around July 3, 2023, Huawei filed an infringement suit, asserting patent EP 3 611 989 (the ’989 Patent), against NETGEAR Inc., NETGEAR Deutschland GmbH, and NETGEAR International Limited at the Unified Patent Court (UPC) in Munich, Germany.

The deadline for the parties to complete briefing was extended to July 3, 2024.

An interim conference is scheduled for August 29, 2024, and oral hearing for October 30 and 31, 2024.

On or around December 11, 2023, Huawei filed a second UPC suit, asserting EP 3 678 321 (EP 321), against the Company.

The Company submitted its Statement of Defense on April 18, 2024.

The parties are awaiting a date from the Court for oral argument.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NETGEAR Inc., NETGEAR Deutschland GmbH, and NETGEAR International Limited (at the Munich District Court, Germany)

On May 17, 2024, Huawei filed a Complaint asserting EP 3 334 112 (EP 112) against the Company’s WiFi-6 products at the Munich District Court.

The entities named in the suit are NETGEAR Inc, NETGEAR International, and NETGEAR Germany.

The deadline for the parties to complete briefing is November 15, 2024 and the oral hearing is scheduled for December 19, 2024.

On July 10, 2024, Huawei filed a Complaint asserting EP 3 937 445 (EP 445) against the Company’s WiFi-6 products at the Munich District Court.

The entities named in the suit are NETGEAR Inc, NETGEAR International, and NETGEAR Germany.

The Company filed a Statement of Defense for NETGEAR Germany on July 10, 2024.

The deadline for other entities’ Statement of Defense is due on October 11, 2024.

NETGEAR (at the ITC and Northern District of California District Court)

On May 6, 2024, TP-Link sued the Company at the International Trade Commission (ITC), alleging that the Company’s Orbi and Nighthawk products (collectively, the “Accused Products”) infringe five of TP-Link’s patents:

7,636,550 entitled “System and Method for Determining Channel Quality in a Wireless Network,” U.S.

8,176,148 entitled “Method and System for Wireless Network Configuration,” U.S.

8,229,357 entitled “Method and System For a Portable Wireless Range,” U.S.

7,672,268 entitled “Systems and Methods for Implementing Double Wide Channels in a Communication System,” and U.S.

8,774,008 entitled “Real-Time Network Measurement” (collectively, the “Asserted Patents”).

The ITC instituted the case on June 14, 2024 and the Company filed its Response on July 18, 2024.

On June 8, 2024, TP-Link filed a parallel lawsuit before the Northern District of California District Court alleging that the Company infringes the same Asserted Patents by the same Accused Products.

This case is stayed pending outcome of the ITC case.

NETGEAR (at the Northern District of California District Court)

On June 10, 2024, TP-Link filed a lawsuit against NETGEAR in the United States District Court Northern District of California alleging breach of contract.

The Company recently obtained an Initial Determination at the ITC that TP Link’s products infringe on the Company’s U.S.

Patent 7,936,714 (the ’714 Patent).

TP-Link alleged, in its Complaint, that the ’714 Patent is a Standard Essential Patent (SEP) and by suing TP-Link for patent infringement, the Company breached its contractual obligation, as a member of Wi-Fi Alliance or WFA, to offer TP- Link (also a WFA member) a license to the ’714 Patent on reasonable and non-discriminatory (RAND) terms.

The suit seeks a declaratory judgment from the Court that the Company is subject to RAND licensing obligations and damages.

On June 18, 2024, TP-Link filed a motion for preliminary injunction seeking to enjoin the Company from enforcing an exclusion order from the ITC based on the ’714 patent.

The Company’s opposition to the preliminary injunction is due August 1, 2024 and an oral hearing is scheduled for August 22, 2024.

The Company’s response to the Complaint is due August 8, 2024.

The Company, at this time, is not able to reasonably estimate any financial impact to the Company resulting from these litigation matters.

The Company does not believe that it is reasonably possible that a material loss has been incurred for any of the matters disclosed above, and consequently has not established any loss provisions.

For the three and six months ended June 30, 2024, the Company recorded an $ 8.2 million litigation reserve relating to a contingent liability tied to a successful outcome of the ITC suit against TP-Link.

The Company included the amount in Litigations reserves, net in the condensed consolidated statements of operations.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stock holders’ Equity

2 unchanged sentences

Under the authorizations, the timing and actual number of shares subject to repurchase are at the discretion of management and are contingent on a number of factors, such as levels of cash generation from operations, cash requirements for acquisitions and the price of the Company’s common stock.

During the three months ended March 31, 2024 , the Company repurchased and retired, reported based on trade date, approximately 0.8 million shares of common stock, at a cost of approximately $ 11.4 million under the repurchase authorization.

The Company did not repurchase any shares of common stock during the three months ended April 2, 2023.

As of March 31, 2024 , 1.7 million shares remained authorized for repurchase under the repurchase program.

The Company repurchased, reported based on trade date, approxima tely 32,000 and 6,000 shares of common stock, at a cost of approximately $ 0.5 million and $ 0.1 million, during the three months ended March 31, 2024 and April 2, 2023, respectively, to administratively facilitate the withholding and subsequent remittance of personal income and payroll taxes for individuals receiving RSUs.

During the six months ended June 30, 2024 , the Company repurchased and retired, reported based on trade date, approximately 1.6 million shares of common stock, at a cost of approximately $ 21.4 million under the repurchase authorization.

The Company did not repurchase any shares of common stock during the six months ended July 2, 2023.

As of June 30, 2024 , approximately 0.9 million shares remained authorized for repurchase under the repurchase program.

On July 16, 2024, the Board of Directors authorized management to repurchase up to 3.0 million shares of the Company’s outstanding common stock, incremental to the remaining shares under the Company’s previous repurchase program.

The Company repurchased, reported based on trade date, approxima tely 197,000 and 147,000 shares of common stock, at a cost of approximately $ 2.9 million and $ 2.1 million, during the six months ended June 30, 2024 and July 2, 2023, respectively, to administratively facilitate the withholding and subsequent remittance of personal income and payroll taxes for individuals receiving RSUs.

These shares were retired upon repurchase.

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Net current period other comprehensive income (loss)

Balance as of March 31, 2024

Balance as of June 30, 2024

(In thousands)

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Net current period other comprehensive income (loss)

Balance as of April 2, 2023

Balance as of July 2, 2023

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1 unchanged sentence

Three Months Ended

Six Months Ended

(In thousands)

March 31, 2024

April 2, 2023

June 30, 2024

Amount Reclassified from AOCI

9 unchanged sentences

Employe e Benefit Plans

The Company grants options, RSUs, and performance shares under the 2016 Incentive Plan (the “2016 Plan”), under which awards may be granted to all employees.

The Company grants options, RSUs and performance units under the 2016 Incentive Plan (the “2016 Plan”), under which awards may be granted to all employees.

Vesting periods under this plan are generally four years for options and RSUs and three years for performance shares.

As of March 31, 2024, approximately 2.8 million shares were reserved for future grants under the 2016 Plan.

In February 2024, the Company’s Board of Directors approved 2024 Inducement Equity Incentive Plan (the “2024 Inducement Plan”), under which Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units, Performance Shares, and other stock or cash awards can be granted to personnel for positions of substantial responsibility.

As of March 31, 2024 , approximately 0.9 million shares were reserved for future grants under the 2024 Inducement Plan.

As of June 30, 2024, approximately 2.0 million shares were reserved for future grants under the 2016 Plan.

In February 2024, the Company’s Board of Directors approved 2024 Inducement Equity Incentive Plan (the “2024 Inducement Plan”), under which options, restricted stock awards, RSUs, stock appreciation rights, performance units, performance shares, and other stock or cash awards can be granted to personnel for positions of substantial responsibility.

As of June 30, 2024 , approximately 0.7 million shares were reserved for future grants under the 2024 Inducement Plan.

Additionally, the Company sponsors an Employee Stock Purchase Plan (the “ESPP”).

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The duration of each offering period is generally six months.

As of March 31, 2024, approximately 0.6 million shares were available for issuance under the ESPP.

As of June 30, 2024, approximately 0.6 million shares were available for issuance under the ESPP.

Option Activity

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Outstanding as of December 31, 2023

Outstanding as of March 31, 2024

Outstanding as of June 30, 2024

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4 unchanged sentences

Outstanding as of December 31, 2023

Outstanding as of March 31, 2024

Outstanding as of June 30, 2024

Performance-Based RSU Activity

Since 2020, the Company’s executive officers were granted performance-based restricted stock units (“PSUs”) under the 2016 Plan with vesting occurring at the end of a three-year period if performance conditions are met.

The number of PSUs earned and eligible to vest are determined based on achievement of the pre-determined performance conditions and the recipients’ continued service with the Company.

The number of stock units to vest could range from 0 % to 150 % of the target shares granted.

At the end of each reporting period, the Company evaluates the probability of achieving the performance conditions and records the related stock-based compensation expense based on performance to date over the service period.

In February 2024, the Company granted PSUs under the 2024 Inducement Plan to its newly-hired Chief Executive Officer with 1/3 of the target PSUs being allocated to each tranche and vesting occurring at the end of each anniversary of the vesting commencement date over a three-year period.

The number of PSUs to vest could range from 0 % to 150 % of the target shares granted and are determined based on achievement of the pre-determined market condition and the recipients’ continued service with the Company.

Since 2020, the Company’s executive officers have been granted performance-based restricted stock units (“PSUs”) under the 2016 Plan and 2024 Inducement Plan with vesting occurring at the end of an approximately three-year period if performance conditions or market conditions are met.

The number of PSUs earned and eligible to vest are determined based on achievement of the pre-determined performance conditions or market conditions and the recipients’ continued service with the Company.

The number of PSUs to vest could range from 0 % to 150 % of the target shares granted.

For the PSUs with performance conditions, at the end of each reporting period, the Company evaluates the probability of achieving the performance conditions and records the related stock-based compensation expense based on performance to date over the service period.

For the PSUs with market conditions, t he grant date fair value is determined using the Monte Carlo valuation method and the stock-based compensation expense is recognized straight line from the grant date to the vesting date.

In February 2024, the Company granted PSUs under the 2024 Inducement Plan to its newly-hired Chief Executive Officer with 1/3 of the target PSUs allocated to each tranche and vesting occurring at the end of each anniversary of the vesting commencement date over a three-year period.

The number of PSUs to vest could range from 0 % to 150 % of the target shares granted and are determined based on achievement of the pre-determined market conditions and the recipients’ continued service with the Company.

T he grant date fair value was determined using the Monte Carlo valuation method.

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Outstanding as of December 31, 2023

Outstanding as of March 31, 2024

Outstanding as of June 30, 2024

Valuation and Expense Information

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Three Months Ended

Six Months Ended

(In thousands)

March 31, 2024

April 2, 2023

June 30, 2024

Cost of revenue

3 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As of March 31, 2024, $ 36.8 million of unrecognized compensation cost related to unvested RSUs ( time-based and performance-based) expected to be recognized over a weighted-average period of 2.4 years.

As of June 30, 2024 , $ 45.3 million of unrecognized compensation cost related to unvested RSUs and performance shares expected to be recognized over a weighted-average period of 2.5 years.

Segme nt Information

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• NETGEAR for Business:

Focuses on small and medium sized 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.

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.

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.

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

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, restructuring and other charges, litigation reserves, net, and other income (expenses), net.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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Three Months Ended

(In thousands)

March 31, 2024

April 2, 2023*

Six Months Ended

(In thousands, except percentage data)

June 30, 2024

Connected Home

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Loss before income taxes

(1) Amounts included gain/(loss), net from derivatives not designated as hedging instruments of $ 1.5 million and $( 0.2 ) million, for the three months ended March 31, 2024 and April 2, 2023 , respectively.

* F inancial information for each reportable segment were recast to conform to the current reportable segment structure.

(1) Amounts included gain/(loss), net from derivatives not designated as hedging instruments of $ 0.6 million and $ 2.1 million, for the three and six months ended June 30, 2024, respectively, and $ 1.0 million and $ 0.9 million, for the three and six months ended July 2, 2023, respectively, and gain/(loss), net from litigation settlements of $ 6.0 million for the three and six months ended July 2, 2023, respectively .

* F inancial 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.

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Three Months Ended

Six Months Ended

(In thousands)

March 31, 2024

April 2, 2023

June 30, 2024

United States (U.S.)

6 unchanged sentences

(In thousands)

March 31, 2024

June 30, 2024

December 31, 2023

5 unchanged sentences

The following tables summarize assets and liabilities measured at fair value on a recurring basis:

March 31, 2024

June 30, 2024

(In thousands)

8 unchanged sentences

Available-for-sale investments:

convertible debt securities (1)

corporate equity securities (1)

Foreign currency forward contracts (2)

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(3) Included in Other accrued liabilities on the Company's unaudited condensed consolidated balance sheets.

The Company’s investments in money-market funds and mutual funds are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets.

The Company’s investments in money-market funds, mutual funds and corporate equity securities are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets.

The Company’s investments in U.S.

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Accrued restructuring and other charges are classified within Accrued employee compensation and Other accrued liabilities on the condensed consolidated balance sheets.

Restructuring and other charges recognized in the three months ended March 31, 2024 and April 2, 2023, respectively, were primarily for severance, and other costs in relation to the reorganization of our business to better align the cost structure of the business with projected revenue levels.

The liabilities as of March 31, 2024 are expected to be settled in 2024.

Restructuring and other charges recognized in the three and six months ended June 30, 2024 and July 2, 2023, respectively, were primarily for severance, and other costs in relation to the reorganization of our business to better align the cost structure of the business with the areas to deliver long-term growth and expanding profitability or projected revenue levels.

The liabilities as of June 30, 2024 are expected to be settled in 2024.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3 unchanged sentences

Cash Payments

Accrued Restructuring and Other Charges at March 31, 2024

Accrued Restructuring and Other Charges at June 30, 2024

Restructuring

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Cash Payments

Accrued Restructuring and Other Charges at April 2, 2023

Accrued Restructuring and Other Charges at July 2, 2023

Restructuring

Employee termination charges

Lease contract termination and other charges

Total Restructuring and other charges

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements