NETGEAR, Inc. EBITDA dropped on 11.6% while Revenue increased slightly on 1.9%
02/06/2019 • About NETGEAR, Inc. (
$NTGR) • By InTwits
NETGEAR, Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is quite volatile: 5.4% in 2018, 6.3% in 2017, 11.0% in 2016, 9.3% in 2015, 4.6% in 2014
- NETGEAR, Inc. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 is 1.6%. Average EBITDA Margin for the same period was 7.4%. In 2018 SBC/Revenue was even higher: 2.5%
- NETGEAR, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.9%.
- In the last 5 years the company invested considerably less than D&A: $57m vs. $145m. In 2018 this situation was still the same: CAPEX was 12 while D&A was 19
- The company has potentially unprofitable business model: ROIC is 5.6%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
NETGEAR, Inc.'s Revenue increased slightly on 1.9%. Revenue growth showed acceleration in 18Q4 - it increased 5.4% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 3.9 pp from 18.2% to 22.1% in 2018. During the last 5 years EBITDA Margin topped in 2016 at 11.0% and was declining since that time.
Gross Margin increased on 2.7 pp from 29.6% to 32.3% in 2018. SG&A as a % of Revenue increased slightly on 2.0 pp from 18.6% to 20.5% in 2018. SG&A as a % of Revenue grew at 1.6 pp per annum in the last 5 years. Stock Based Compensation (SBC) as a % of Revenue increased slightly on 0.67 pp from 1.8% to 2.5% in 2018. During the last 5 years SBC as a % of Revenue bottomed in 2015 at 1.1% and was growing since that time.
Net Income margin decreased on 2.7 pp from 1.9% to -0.87% in 2018. During the last 5 years Net Income margin topped in 2016 at 5.7% and was declining since that time.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 1.2% in 2018. NETGEAR, Inc.'s CAPEX/Revenue showed almost no change from 2015 to 2018.
Accounts receivable as a % of Revenue increased on 4.1 pp from 24.6% to 28.7% in 2018. Inventories as a % of Revenue increased on 7.4 pp from 15.7% to 23.0% in 2018. Accounts payable as a % of Revenue increased on 7.0 pp from 12.5% to 19.5% in 2018.
NETGEAR, Inc. has spent
$14m on M&A in 2018 which accounts for 1.4% of revenue.
Return on investment
The company operates at low but positive ROIC (5.6%) and negative ROE (-1.3%). ROIC showed almost no change in 2018. ROE decreased on 3.9 pp from 2.5% to -1.3% in 2018. During the last 5 years ROE topped in 2016 at 10.1% and was declining since that time.
Leverage (Debt)
The company has no debt. Cash decreased slightly on 0.83%.
Management team
NETGEAR, Inc.'s CEO is Patrick C S Lo. Patrick C S Lo is a founder and has 17 years tenure with the company. CEO total compensation was
$7,095,858 in 2018 which included
$895,000 salary. Bryan Murray is a NETGEAR, Inc.'s CFO. Bryan Murray has spent 1 year at the company.
Insider ownership is 3.0%. Insider ownership didn't change in 2018.
At the end of financial year the company had 837 employees. The number of employees dropped on 17.0%. Average revenue per employee in 2018 was
$1,265,013 and it surged on 22.7%.
Financial and operational results
FY ended 12/31/2018
NETGEAR, Inc. ($NTGR) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 1,394 | 1,301 | 1,328 | 1,039 | 1,059 | 1.9% |
| Gross Profit | 398 | 368 | 412 | 308 | 342 | 11.0% |
| SG&A | 204 | 192 | 205 | 193 | 217 | 12.6% |
| EBITDA | 64 | 121 | 146 | 65 | 58 | -11.6% |
| EBIT | 28 | 85 | 114 | 43 | 39 | -9.0% |
| Tax | 22 | 37 | 39 | 57 | 26 | -54.9% |
| Net Income | 9 | 49 | 76 | 19 | -9 | -147.1% |
| Stock Based Compensation | 19 | 14 | 18 | 19 | 26 | 39.5% |
Balance Sheet
|
|---|
| Cash | 141 | 182 | 240 | 203 | 201 | -0.8% |
| Accounts Receivable | 276 | 291 | 314 | 255 | 304 | 19.0% |
| Inventory | 223 | 213 | 248 | 163 | 244 | 49.7% |
| Accounts Payable | 106 | 91 | 112 | 91 | 140 | 53.2% |
| Short Term Debt | 0 | 0 | 0 | 0 | 0 | |
| Long Term Debt | 0 | 0 | 0 | 0 | 0 | |
Cash flow
|
|---|
| Capex | 19 | 14 | 11 | 0 | 12 | |
| Acquisitions | 1 | | 9 | | 14 | |
Ratios
|
|---|
| Revenue growth | 1.7% | -6.7% | 2.1% | -21.8% | 1.9% | |
| EBITDA growth | -49.4% | 90.4% | 20.5% | -55.4% | -11.6% | |
|
|---|
| Gross Margin | 28.6% | 28.3% | 31.0% | 29.6% | 32.3% | 2.7% |
| EBITDA Margin | 4.6% | 9.3% | 11.0% | 6.3% | 5.4% | -0.8% |
| EBIT Margin | 2.0% | 6.6% | 8.6% | 4.1% | 3.7% | -0.4% |
| SG&A, % of revenue | 14.6% | 14.8% | 15.4% | 18.6% | 20.5% | 2.0% |
| SBC, % of revenue | 1.4% | 1.1% | 1.4% | 1.8% | 2.5% | 0.7% |
| Net Income Margin | 0.6% | 3.7% | 5.7% | 1.9% | -0.9% | -2.7% |
| CAPEX, % of revenue | 1.4% | 1.1% | 0.8% | 0.0% | 1.2% | |
|
|---|
| ROIC | 3.7% | 11.6% | 14.7% | 5.4% | 5.6% | 0.2% |
| ROE | 1.2% | 6.8% | 10.1% | 2.5% | -1.3% | -3.9% |
| Net Debt/EBITDA | -2.2x | -1.5x | -1.6x | -3.1x | -3.5x | -0.4x |
People
|
|---|
| Insider ownership | 3.0% | 3.0% | 3.0% | 3.0% | 3.0% | 0.0% |
| Employees | 1,038 | 963 | 945 | 1,008 | 837 | -17.0% |
| Revenue/Employee, th. $ | 1,343 | 1,351 | 1,406 | 1,031 | 1,265 | 22.7% |
NETGEAR, Inc. ($NTGR) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 245 | 367 | 401 | 289 | | -24.2% | 10.9% | 12.7% | 5.4% |
| EBITDA | 7 | 3 | 16 | 19 | | -78.7% | -89.1% | -50.5% | 137.6% |
| Net Income | 6 | -5 | 10 | -19 | | -65.0% | -135.9% | -52.2% | |
Balance Sheet
|
|---|
| Cash | 259 | 227 | 394 | 201 | | 9.8% | 19.3% | 59.6% | -0.8% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 31.1% | 29.8% | 31.0% | 31.4% | | 1.2% | 2.0% | 2.0% | 3.6% |
| EBITDA Margin | 2.7% | 0.8% | 3.9% | 6.5% | | -6.8% | -6.9% | -4.9% | 3.6% |
| Net Income Margin | 2.3% | -1.4% | 2.5% | -6.7% | | -2.7% | -5.8% | -3.4% | 4.9% |
Peers in Communications Equipment
Below you can find NETGEAR, Inc. benchmarking vs. other companies in Communications Equipment industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Ribbon Communications Inc. ($RBBN) | | | | 30.6% | 75.2% |
| Extreme Networks, Inc. ($EXTR) | | 6.4% | -4.4% | 13.2% | 64.4% |
| Optical Cable Corporation ($OCC) | | -11.3% | -12.2% | -0.8% | 37.0% |
| ParkerVision Inc ($PRKR) | | | 37,601.2% | -97.5% | 35.0% |
| Network-1 Technologies, Inc. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | 0.7% | 7.6% | 5.6% | 3.5% |
|---|
| NETGEAR, Inc. ($NTGR) | | -6.7% | 2.1% | -21.8% | 1.9% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 82.1% | 82.7% | 83.1% | 83.1% | 83.3% |
| Radware Ltd. ($RDWR) | 82.1% | 82.4% | 81.8% | 81.3% | 82.2% |
| Radcom Ltd. ($RDCM) | 63.2% | 76.8% | 69.6% | 71.8% | 74.0% |
| Casa Systems, Inc. ($CASA) | | 70.8% | 69.1% | 73.4% | 73.4% |
| NetScout Systems, Inc. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 42.4% | 44.0% | 43.9% | 41.7% | 41.2% |
|---|
| NETGEAR, Inc. ($NTGR) | 28.6% | 28.3% | 31.0% | 29.6% | 32.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Network-1 Technologies, Inc. ($NTIP) | 35.5% | 33.7% | 50.6% | 37.8% | 42.8% |
| InterDigital, Inc. ($IDCC) | 50.8% | 58.1% | 73.6% | 67.3% | 41.9% |
| EchoStar Corporation ($SATS) | 25.7% | 39.7% | 40.3% | 38.1% | 37.4% |
| Ubiquiti Networks, Inc. ($UBNT) | 34.7% | 25.5% | 37.3% | 34.3% | 32.8% |
| Ituran Location and Control Ltd. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.6% | 4.7% | 5.5% | 6.2% | 4.6% |
|---|
| NETGEAR, Inc. ($NTGR) | 4.6% | 9.3% | 11.0% | 6.3% | 5.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Resonant Inc. ($RESN) | | | 132.5% | 124.8% | 245.2% |
| ViaSat, Inc. ($VSAT) | 22.8% | 26.5% | 26.7% | 33.0% | 32.1% |
| Applied Optoelectronics, Inc. ($AAOI) | 31.5% | 30.1% | 19.0% | 17.5% | 26.9% |
| EchoStar Corporation ($SATS) | 19.7% | 43.8% | 39.9% | 30.9% | 26.5% |
| Finisar Corporation ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.3% | 2.3% | 2.0% | 1.9% | 1.7% |
|---|
| NETGEAR, Inc. ($NTGR) | 1.4% | 1.1% | 0.8% | 0.0% | 1.2% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 33.9% | 40.8% | 43.1% | 46.9% | 47.9% |
| Ubiquiti Networks, Inc. ($UBNT) | 61.4% | 31.5% | 41.5% | 38.5% | 39.1% |
| Motorola Solutions, Inc. ($MSI) | -16.1% | 18.9% | 26.4% | 39.5% | 35.3% |
| Ituran Location and Control Ltd. ($ITRN) | 50.9% | 46.8% | 50.1% | 48.5% | 35.1% |
| Casa Systems, Inc. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| |
|---|
| Median (70 companies) | 1.2% | 2.0% | 2.2% | 2.1% | 0.3% |
|---|
| NETGEAR, Inc. ($NTGR) | 3.7% | 11.6% | 14.7% | 5.4% | 5.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Extreme Networks, Inc. ($EXTR) | | | -2.2x | -1.5x | 7.1x |
| ViaSat, Inc. ($VSAT) | 3.4x | 2.5x | 3.2x | 2.5x | 5.8x |
| CommScope Holding Company, Inc. ($COMM) | 2.3x | 9.6x | 4.3x | 4.6x | 4.4x |
| Inseego Corp. ($INSG) | | | | | 3.9x |
| Finisar Corporation ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
| |
|---|
| Median (45 companies) | -0.7x | -0.6x | -0.8x | -0.6x | 0.2x |
|---|
| NETGEAR, Inc. ($NTGR) | -2.2x | -1.5x | -1.6x | -3.1x | -3.5x |
