NETGEAR, Inc. EBITDA surged on 82.4% and Revenue surged on 25.7%
02/03/2021 • About NETGEAR, Inc. (
$NTGR) • By InTwits
NETGEAR, Inc. reported 2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- NETGEAR, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.8%.
- In the last 5 years the company invested considerably less than D&A: $48m vs. $73m
- The company has business model with average profitability: ROIC is 11.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue surged on 25.7%. Revenue growth showed acceleration in 20Q4 - it increased 45.1% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 4.0 pp from 11.0% to 15.0% in 2020. During the last 5 years EBITDA Margin bottomed in 2018 at 5.4% and was growing since that time.
Gross Margin showed almost no change in 2020. SG&A as a % of Revenue decreased on 2.1 pp from 18.8% to 16.7% in 2020. During the last 5 years SG&A as a % of Revenue topped in 2018 at 20.5% and was declining since that time.
Net Income margin increased on 2.1 pp from 2.6% to 4.6% in 2020. During the last 5 years Net Income margin bottomed in 2018 at -0.87% and was growing since that time.
Investments (CAPEX, working capital and M&A)
In 2020 the company had CAPEX/Revenue of 0.82%. NETGEAR, Inc.'s CAPEX/Revenue increased slightly on 0.82 pp from 0% in 2017 to 0.82% in 2020. Average CAPEX/Revenue for the last three years was 1.1%.
Return on investment
The company operates at low ROIC (11.2%) and ROE (9.0%). ROIC increased on 6.9 pp from 4.3% to 11.2% in 2020. ROE increased on 4.8 pp from 4.2% to 9.0% in 2020. During the last 5 years ROE bottomed in 2018 at -1.3% and was growing since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is -3.0x and Debt / EBITDA is 0.3x. Debt decreased on 3.4% while cash jumped on 82.1%.
NETGEAR, Inc. has no short term refinancing risk: cash is higher than short term debt (3,786.9%).
Valuation and dividends
NETGEAR, Inc.'s trades at EV/EBITDA 9.0x and P/E 21.6x.
Management team
Patrick C S Lo is a the company's CEO. Patrick C S Lo has spent 19 years with the company. NETGEAR, Inc.'s CFO is Bryan Murray. Bryan Murray has 2 years tenure at the company.
Financial and operational results
FY ended 12/31/2020
NETGEAR, Inc. ($NTGR) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 1,328 | 1,039 | 1,059 | 999 | 1,255 | 25.7% |
| Gross Profit | 412 | 308 | 342 | 294 | 372 | 26.5% |
| SG&A | 205 | 193 | 217 | 188 | 209 | 11.4% |
| EBITDA | 146 | 65 | 58 | 58 | 105 | 82.4% |
| EBIT | 114 | 43 | 39 | | | |
| Tax | 39 | 57 | 26 | | | |
| Net Income | 76 | 19 | -9 | 26 | 58 | 126.0% |
| Stock Based Compensation | 18 | 19 | 26 | | | |
Balance Sheet
|
|---|
| Cash | 240 | 203 | 201 | 190 | 346 | 82.1% |
| Accounts Receivable | 314 | 255 | 304 | | | |
| Inventory | 248 | 163 | 244 | | | |
| Accounts Payable | 112 | 91 | 140 | | | |
| Short Term Debt | 0 | 0 | 0 | 10 | 9 | -12.5% |
| Long Term Debt | 0 | 0 | 0 | 25 | 26 | 0.3% |
Cash flow
|
|---|
| Capex | 11 | 0 | 12 | 14 | 10 | -27.6% |
| Acquisitions | 9 | | 14 | | | |
Ratios
|
|---|
| Revenue growth | 2.1% | -21.8% | 1.9% | -5.7% | 25.7% | |
| EBITDA growth | 20.5% | -55.4% | -11.6% | -0.0% | 82.4% | |
|
|---|
| Gross Margin | 31.0% | 29.6% | 32.3% | 29.5% | 29.6% | 0.2% |
| EBITDA Margin | 11.0% | 6.3% | 5.4% | 5.8% | 8.4% | 2.6% |
| EBIT Margin | 8.6% | 4.1% | 3.7% | | |
| SG&A, % of revenue | 15.4% | 18.6% | 20.5% | 18.8% | 16.7% | -2.1% |
| SBC, % of revenue | 1.4% | 1.8% | 2.5% | | |
| Net Income Margin | 5.7% | 1.9% | -0.9% | 2.6% | 4.6% | 2.1% |
| CAPEX, % of revenue | 0.8% | 0.0% | 1.2% | 1.4% | 0.8% | -0.6% |
|
|---|
| ROIC | 14.7% | 5.4% | 5.6% | 4.3% | 11.2% | 6.9% |
| ROE | 10.1% | 2.5% | -1.3% | 4.2% | 9.0% | 4.8% |
| Net Debt/EBITDA | -1.6x | -3.1x | -3.5x | -2.7x | -3.0x | -0.3x |
People
|
|---|
| Insider ownership | 3.0% | 3.0% | 3.0% | | | |
| Employees | 945 | 1,008 | 837 | | | |
| Revenue/Employee, th. $ | 1,406 | 1,031 | 1,265 | | | |
NETGEAR, Inc. ($NTGR) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 230 | 280 | 378 | 367 | | -7.7% | 21.3% | 42.2% | 45.1% |
| EBITDA | 8 | 16 | 40 | 41 | | -62.8% | 95.2% | 101.9% | 465.1% |
| Net Income | -4 | 6 | 26 | 31 | | -132.5% | 613.1% | 103.8% | - |
Balance Sheet
|
|---|
| Cash | 204 | 253 | 300 | 346 | | 10.0% | 17.7% | 78.9% | 82.1% |
| Short Term Debt | 9 | 9 | 9 | 9 | | -2.1% | 54.1% | 201.4% | -12.5% |
| Long Term Debt | 24 | 28 | 27 | 26 | | -23.0% | -5.2% | 0.8% | 0.3% |
Ratios
|
|---|
| Gross Margin | 28.8% | 29.0% | 30.0% | 30.3% | | -4.1% | 0.7% | 1.0% | 2.8% |
| EBITDA Margin | 3.6% | 5.7% | 10.5% | 11.2% | | -5.3% | 2.2% | 3.1% | 8.3% |
| Net Income Margin | -1.8% | 2.1% | 6.8% | 8.4% | | -7.0% | 1.8% | 2.0% | 8.6% |
Peers in Communications Equipment
Below we provide NETGEAR, Inc. benchmarking against other companies in Communications Equipment industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Resonant Inc. ($RESN) | - | 116.2% | -19.8% | 40.3% | 329.9% |
| Franklin Wireless Corp ($FKWL) | - | -18.8% | -38.1% | 21.3% | 105.9% |
| Ribbon Communications Inc. ($RBBN) | - | 30.6% | 75.2% | -2.6% | 49.8% |
| Inseego Corp. ($INSG) | - | -10.0% | -7.7% | 8.4% | 43.0% |
| Casa Systems, Inc. ($CASA) | - | 11.2% | -15.5% | -5.0% | 39.3% |
| |
|---|
| Median (35 companies) | 7.5% | 5.6% | 3.5% | 3.7% | 2.1% |
|---|
| NETGEAR, Inc. ($NTGR) | - | -21.8% | 1.9% | -5.7% | 25.7% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| F5 Networks, Inc. ($FFIV) | 83.1% | 83.1% | 83.3% | 84.1% | 82.6% |
| Radware Ltd. ($RDWR) | 81.8% | 81.3% | 82.2% | 82.1% | 82.0% |
| Radcom Ltd. ($RDCM) | 69.6% | 71.8% | 74.0% | 70.0% | 71.4% |
| AudioCodes Ltd. ($AUDC) | 60.7% | 62.4% | 62.8% | 47.4% | 67.9% |
| Arista Networks, Inc. ($ANET) | 64.0% | 64.5% | 63.8% | 64.1% | 63.9% |
| |
|---|
| Median (33 companies) | 43.9% | 41.7% | 41.2% | 44.3% | 46.8% |
|---|
| NETGEAR, Inc. ($NTGR) | 31.0% | 29.6% | 32.3% | 29.5% | 29.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| InterDigital, Inc. ($IDCC) | 73.6% | 67.3% | 41.9% | 37.5% | 39.5% |
| EchoStar Corporation ($SATS) | 40.3% | 38.1% | 37.4% | 36.4% | 35.0% |
| Arista Networks, Inc. ($ANET) | 23.3% | 29.8% | 14.0% | 35.7% | 33.1% |
| Motorola Solutions, Inc. ($MSI) | 22.2% | 25.5% | 22.0% | 26.7% | 25.9% |
| F5 Networks, Inc. ($FFIV) | 30.3% | 29.9% | 30.1% | 26.2% | 22.9% |
| |
|---|
| Median (32 companies) | 5.5% | 6.2% | 4.6% | 3.1% | 9.3% |
|---|
| NETGEAR, Inc. ($NTGR) | 11.0% | 6.3% | 5.4% | 5.8% | 8.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Resonant Inc. ($RESN) | 132.5% | 124.8% | 245.2% | 109.7% | 22.3% |
| EchoStar Corporation ($SATS) | 39.9% | 30.9% | 26.5% | 22.2% | 21.7% |
| KVH Industries, Inc. ($KVHI) | 3.2% | 8.0% | 9.3% | 7.9% | 8.9% |
| Harmonic Inc. ($HLIT) | 3.7% | 3.2% | 1.7% | 2.6% | 8.5% |
| Applied Optoelectronics, Inc. ($AAOI) | 19.0% | 17.5% | 26.9% | 15.1% | 6.7% |
| |
|---|
| Median (32 companies) | 2.0% | 1.9% | 1.7% | 2.5% | 2.2% |
|---|
| NETGEAR, Inc. ($NTGR) | 0.8% | 0.0% | 1.2% | 1.4% | 0.8% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Franklin Wireless Corp ($FKWL) | 12.2% | 4.7% | -14.9% | -13.0% | 37.5% |
| Motorola Solutions, Inc. ($MSI) | 26.4% | 39.5% | 35.3% | 34.0% | 26.4% |
| Arista Networks, Inc. ($ANET) | 25.7% | 33.9% | 14.5% | 33.3% | 23.5% |
| AudioCodes Ltd. ($AUDC) | 6.1% | 8.6% | 16.1% | -7.7% | 20.8% |
| F5 Networks, Inc. ($FFIV) | 43.1% | 46.9% | 47.9% | 34.1% | 16.5% |
| |
|---|
| Median (35 companies) | 2.2% | 2.1% | 0.3% | -1.6% | 1.9% |
|---|
| NETGEAR, Inc. ($NTGR) | 14.7% | 5.4% | 5.6% | 4.3% | 11.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Inseego Corp. ($INSG) | - | - | 3.9x | 82.5x | 26.9x |
| CommScope Holding Company, Inc. ($COMM) | 4.3x | 4.6x | 4.4x | 27.0x | 10.5x |
| Harmonic Inc. ($HLIT) | - | - | 3.4x | 1.9x | 6.5x |
| Ribbon Communications Inc. ($RBBN) | -17.2x | - | - | - | 3.5x |
| Casa Systems, Inc. ($CASA) | -0.2x | 0.3x | 0.2x | 32.1x | 3.2x |
| |
|---|
| Median (24 companies) | -0.8x | -0.6x | 0.2x | -0.1x | -0.3x |
|---|
| NETGEAR, Inc. ($NTGR) | -1.6x | -3.1x | -3.5x | -2.7x | -3.0x |
