Document And Entity Information
Document And Entity Information - shares | 3 Months Ended | |
Mar. 28, 2021 | Apr. 23, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 28, 2021 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | NTGR | |
Entity Registrant Name | NETGEAR, Inc. | |
Entity Current Reporting Status | Yes | |
Entity Central Index Key | 0001122904 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Smaller Reporting Company | false | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Tax Identification Number | 77-0419172 | |
Entity File Number | 000-50350 | |
Entity Incorporation, State or Country Code | DE | |
Entity Address, Address Line One | 350 East Plumeria Drive | |
Entity Address, City or Town | San Jose | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 95134 | |
City Area Code | (408) | |
Local Phone Number | 907-8000 | |
Security Exchange Name | NASDAQ | |
Title of 12(b) Security | Common Stock, $0.001 par value | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity Interactive Data Current | Yes | |
Entity Common Stock, Shares Outstanding (In shares) | 30,466,470 |
Unaudited Condensed Consolidate
Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 363,514 | $ 346,460 |
Short-term investments | 7,142 | 6,858 |
Accounts receivable, net of allowance for doubtful accounts of $1,081 as of March 28, 2021 and December 31, 2020 | 312,922 | 337,052 |
Inventories | 215,705 | 172,112 |
Prepaid expenses and other current assets | 31,592 | 30,696 |
Total current assets | 930,875 | 893,178 |
Property and equipment, net | 14,897 | 16,080 |
Operating lease right-of-use assets, net | 27,743 | 29,411 |
Intangibles, net | 2,409 | 3,899 |
Goodwill | 80,721 | 80,721 |
Other non-current assets | 80,770 | 82,750 |
Total assets | 1,137,415 | 1,106,039 |
Current liabilities: | ||
Accounts payable | 87,348 | 90,902 |
Accrued employee compensation | 26,648 | 35,020 |
Other accrued liabilities | 220,322 | 218,375 |
Deferred revenue | 15,134 | 13,458 |
Income taxes payable | 11,876 | 7,318 |
Total current liabilities | 361,328 | 365,073 |
Non-current income taxes payable | 20,906 | 19,174 |
Non-current operating lease liabilities | 24,050 | 25,512 |
Other non-current liabilities | 6,708 | 6,896 |
Total liabilities | 412,992 | 416,655 |
Commitments and contingencies (Note 8) | ||
Stockholders’ equity: | ||
Common stock | 31 | 30 |
Additional paid-in capital | 896,710 | 882,709 |
Accumulated other comprehensive income (loss) | 6 | (35) |
Accumulated deficit | (172,324) | (193,320) |
Total stockholders’ equity | 724,423 | 689,384 |
Total liabilities and stockholders’ equity | $ 1,137,415 | $ 1,106,039 |
Unaudited Condensed Consolida_2
Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 31, 2020 |
Statement Of Financial Position [Abstract] | ||
Accounts receivable, net of allowance for doubtful accounts of $1,081 as of March 28, 2021 and December 31, 2020 | $ 1,081 | $ 1,081 |
Unaudited Condensed Consolida_3
Unaudited Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | ||
Mar. 28, 2021 | Mar. 29, 2020 | ||
Income Statement [Abstract] | |||
Net revenue | $ 317,925 | $ 229,963 | |
Cost of revenue | 206,984 | 163,722 | |
Gross profit | 110,941 | 66,241 | |
Operating expenses: | |||
Research and development | 23,829 | 19,739 | |
Sales and marketing | 37,815 | 33,031 | |
General and administrative | 15,405 | 13,134 | |
Other operating expenses (income), net | 2,565 | (332) | |
Total operating expenses | 79,614 | 65,572 | |
Income from operations | 31,327 | 669 | |
Interest income | 10 | 262 | |
Other income (expense), net | [1] | (562) | (4,586) |
Income (loss) before income taxes | 30,775 | (3,655) | |
Provision for income taxes | 7,815 | 518 | |
Net income (loss) | $ 22,960 | $ (4,173) | |
Net income (loss) per share | |||
Basic | $ 0.75 | $ (0.14) | |
Diluted | $ 0.72 | $ (0.14) | |
Weighted average shares used to compute net income (loss) per share: | |||
Basic | 30,665 | 29,583 | |
Diluted | 31,814 | 29,583 | |
[1] | Amounts include gain/loss on investments, net, of $49,000 and $4.5 million for the three months ended March 28, 2021 and March 29, 2020, respectively |
Unaudited Condensed Consolida_4
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Statement Of Income And Comprehensive Income [Abstract] | ||
Net income (loss) | $ 22,960 | $ (4,173) |
Other comprehensive income, before tax: | ||
Change in unrealized gains and losses on derivatives | 47 | 403 |
Other comprehensive income, before tax | 47 | 403 |
Tax provision related to derivatives | (6) | (53) |
Other comprehensive income, net of tax | 41 | 350 |
Comprehensive income (loss) | $ 23,001 | $ (3,823) |
Unaudited Condensed Consolida_5
Unaudited Condensed Consolidated Statements of Stockholder's Equity - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit |
Beginning balance at Dec. 31, 2019 | $ 608,693 | $ 30 | $ 831,365 | $ 21 | $ (222,723) |
Beginning balance (in shares) at Dec. 31, 2019 | 29,925,000 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Change in unrealized gains and losses on derivatives, net of tax | 350 | 350 | |||
Net income (loss) | (4,173) | (4,173) | |||
Stock-based compensation | 6,336 | 6,336 | |||
Repurchase of common stock | $ (15,008) | (15,008) | |||
Repurchase of common stock (in shares) | (600,000) | (584,000) | |||
Restricted stock unit withholdings | $ (1,347) | (1,347) | |||
Restricted stock unit withholdings (in shares) | (54,000) | (54,000) | |||
Issuance of common stock under stock-based compensation plans | $ 2,940 | 2,940 | |||
Issuance of common stock under stock-based compensation plans (in shares) | 305,000 | ||||
Ending balance at Mar. 29, 2020 | 597,791 | $ 30 | 840,641 | 371 | (243,251) |
Ending balance (in shares) at Mar. 29, 2020 | 29,592,000 | ||||
Beginning balance at Dec. 31, 2020 | 689,384 | $ 30 | 882,709 | (35) | (193,320) |
Beginning balance (in shares) at Dec. 31, 2020 | 30,399,000 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Change in unrealized gains and losses on derivatives, net of tax | 41 | 41 | |||
Net income (loss) | 22,960 | 22,960 | |||
Stock-based compensation | $ 6,960 | 6,960 | |||
Repurchase of common stock (in shares) | 0 | ||||
Restricted stock unit withholdings | $ (1,964) | (1,964) | |||
Restricted stock unit withholdings (in shares) | (48,000) | (48,000) | |||
Issuance of common stock under stock-based compensation plans | $ 7,042 | $ 1 | 7,041 | ||
Issuance of common stock under stock-based compensation plans (in shares) | 407,000 | ||||
Ending balance at Mar. 28, 2021 | $ 724,423 | $ 31 | $ 896,710 | $ 6 | $ (172,324) |
Ending balance (in shares) at Mar. 28, 2021 | 30,758,000 |
Unaudited Condensed Consolida_6
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Cash flows from operating activities: | ||
Net income (loss) | $ 22,960 | $ (4,173) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation and amortization | 4,661 | 4,630 |
Stock-based compensation | 6,960 | 6,336 |
Gain/loss on investments, net | 49 | 4,530 |
Deferred income taxes | 2,803 | 1,042 |
Provision for excess and obsolete inventory | 1,201 | 2,403 |
Other | 0 | (222) |
Changes in assets and liabilities: | ||
Accounts receivable | 24,130 | 19,586 |
Inventories | (44,794) | 52,484 |
Prepaid expenses and other assets | (1,877) | 6,802 |
Accounts payable | (3,197) | (41,488) |
Accrued employee compensation | (8,371) | (5,816) |
Other accrued liabilities | 1,428 | (16,745) |
Deferred revenue | 1,494 | 452 |
Income taxes payable | 6,290 | (816) |
Net cash provided by operating activities | 13,737 | 29,005 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (1,588) | (1,275) |
Purchases of long-term investments | (340) | (250) |
Other | 158 | 19 |
Net cash used in investing activities | (1,770) | (1,506) |
Cash flows from financing activities: | ||
Repurchases of common stock | 0 | (15,008) |
Restricted stock unit withholdings | (1,964) | (1,347) |
Proceeds from exercise of stock options | 4,146 | 462 |
Proceeds from issuance of common stock under employee stock purchase plan | 2,905 | 2,478 |
Net cash provided by (used in) financing activities | 5,087 | (13,415) |
Net increase in cash and cash equivalents | 17,054 | 14,084 |
Cash and cash equivalents, at beginning of period | 346,460 | 190,208 |
Cash and cash equivalents, at end of period | $ 363,514 | $ 204,292 |
The Company and Basis of Presen
The Company and Basis of Presentation | 3 Months Ended |
Mar. 28, 2021 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
The Company and Basis of Presentation | Note 1. The Company and Basis of Presentation NETGEAR, Inc. (“NETGEAR” or the “Company”) was incorporated in Delaware in January 1996. The Company is a global company that delivers innovative, advanced high-performance networking technologies and Internet connected products to consumers, businesses, and service providers. The Company's products are designed to simplify and improve people’s lives. The Company's goal is to enable people to collaborate and connect to a world of information and entertainment. The Company is dedicated to delivering innovative and advanced connected solutions ranging from mobile and cloud-based services for enhanced control and security, to smart networking products, video over Ethernet for Pro AV applications, easy-to-use WiFi solutions and performance gaming routers to enhance console, online and cloud game play. The Company's products are built on a variety of technologies such as wireless (WiFi and 4G/5G mobile), Ethernet and powerline, with a focus on reliability and ease-of-use. Additionally, the Company continually invests in research and development to create new technologies and to capitalize on technological inflection points and trends, such as WiFi 6E, WiFi 6, 5G and Pro AV switching. NETGEAR's product line consists of devices that create and extend wired and wireless networks, devices that attach to the network, such as smart digital canvasses as well as services that complement and enhance its product line offerings. These products are available in multiple configurations to address the changing needs of the Company's customers in each geographic region. The accompanying unaudited condensed consolidated financial statements include the accounts of NETGEAR, Inc. and its wholly owned subsidiaries. They have been prepared in accordance with established guidelines for interim financial reporting and the instructions of Form 10-Q and Article 10 of Regulation S-X. All significant intercompany balances and transactions have been eliminated in consolidation. The balance sheet dated December 31, 2020 has been derived from audited financial statements at such date. These unaudited condensed consolidated financial statements do not include all of the information and footnotes typically found in the audited consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K. In the opinion of management, the unaudited condensed consolidated financial statements reflect all normal recurring adjustments considered necessary to fairly state the Company's financial position, results of operations, comprehensive income, stockholder's equity and cash flows for the periods indicated. These unaudited condensed consolidated financial statements should be read in conjunction with the notes to the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “Annual Report”). The Company's fiscal year begins on January 1 of the year stated and ends on December 31 of the same year. The Company reports its results on a fiscal quarter basis rather than on a calendar quarter basis. Under the fiscal quarter basis, each of the first three fiscal quarters ends on the Sunday closest to the calendar quarter end, with the fourth quarter ending on December 31. COVID-19 Pandemic The COVID-19 outbreak, declared as a pandemic by the World Health Organization in March 2020, has had widespread, rapidly-evolving and unpredictable impacts on the global economy, supply chain and work force participation, and created significant volatility and disruption in financial markets. The pandemic has impacted and may continue to impact the supply chain in its ability to timely procure finished goods due to material shortages and freight capacity, its workforce and the operations of its customers, and has led to increased freight rates. Continued and extended periods of global supply chain, workforce availability and economic disruption could significantly affect the business and statement of financial condition. The duration of the disruption from the pandemic remains uncertain due to the dynamic nature of the virus, and makes it difficult to reasonably estimate the impact of COVID-19 on the business operations The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the financial statements, and (iii) the reported amounts of net revenue and expenses during the reported period. The Company bases these estimates on historical and anticipated results, trends and various other assumptions that it believes are reasonable under the circumstances. As of the date of issuance of these condensed consolidated financial statements, the Company is not aware of any specific event or circumstance that would require it to update its estimates, judgments or revise the carrying value of its assets or liabilities. 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 28, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 20 2 1 or any future period. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 28, 2021 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2. Summary of Significant Accounting Policies The Company’s significant accounting policies are disclosed in the Company’s Annual Report . Accounting Pronouncements Recently Adopted ASU 2019-12 In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”, which removes certain exceptions related to intra-period tax allocations and deferred tax accounting on outside basis differences in foreign subsidiaries. Additionally, it provides other simplifying measures for the accounting for income taxes. The Company adopted the new standard effective January 1, 2021. The adoption had no impact on the Company's financial position, results of operations or cash flows. Accounting Pronouncements Not Yet Effective In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which provides optional expedients and exceptions for a limited period of time to ease the potential burden in accounting treatments related to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met T he Company does not expect that the new guidance will have material impact on its financial position, results of operations and cash flows as this new guidance will potentially only impact the Company’s currency forward rates under its hedging program and its incremental borrowing rate in determining the present value of lease payments With the exception of the new standards discussed above, there have been no other new accounting pronouncements that have significance, or potential significance, to the Company's financial position, results of operations and cash flows. |
Revenue
Revenue | 3 Months Ended |
Mar. 28, 2021 | |
Revenue From Contract With Customer [Abstract] | |
Revenue | Note 3. Revenue Revenue from contracts with customers is recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Transaction Price Allocated to the Remaining Performance Obligations Remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and partially unsatisfied performance obligations consist of contract liabilities, in-transit orders with destination terms, and non-cancellable backlog. Non-cancellable backlog includes goods and services for which customer purchase orders have been accepted and that are scheduled or in the process of being scheduled for shipment. The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of March 28, 2021: 1 year 2 years Greater than 2 years Total (In thousands) Performance obligations $ 96,828 $ 2,001 $ 1,109 $ 99,938 Contract Balances The Company records accounts receivable when it has an unconditional right to consideration. Contract liabilities are recorded when cash payments are received or due in advance of performance. Contract liabilities consist of advance payments and deferred revenue, where the Company has unsatisfied performance obligations. Contract liabilities are mainly classified as Deferred revenue on the unaudited condensed consolidated balance sheets. Payment terms vary by customer. The time between invoicing and when payment is due is not significant. For certain products or services and customer types, payment is required before the products or services are delivered to the customer. The following table reflects the contract balances as of March 28, 2021 and December 31, 2020, respectively: Balance Sheet Location March 28, 2021 December 31, 2020 (In thousands) Accounts receivable, net Accounts receivable, net $ 312,922 $ 337,052 Contract liabilities - current Deferred revenue $ 15,134 $ 13,458 Contract liabilities - non-current Other non-current liabilities $ 2,982 $ 3,165 The difference in the balances of the Company's contract assets and liabilities as of March 28, 2021 and December 31, 2020 primarily results from the timing difference between the Company's performance and the customer’s payment. During the three months ended March 28, 2021, $7.4 million of revenue was deferred due to unsatisfied performance obligations for service contracts and undelivered product commitments, $5.9 million of revenue was recognized for the satisfaction of performance obligations and $5.3 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. Disaggregation of Revenue In the following table, net revenue is disaggregated by geographic region and sales channel. The Company conducts business across three geographic regions: Americas; Europe, Middle-East and Africa (“EMEA”); and Asia Pacific ("APAC"). The table also includes reconciliations of the disaggregated revenue by reportable segment. The Company operates and reports in two segments: Connected Home, and Small and Medium Business (“SMB”). Sales and usage-based taxes are excluded from net revenue. Three Months Ended March 28, 2021 March 29, 2020 Connected Home SMB Total Connected Home SMB Total Geographic regions: Americas $ 186,417 $ 32,733 $ 219,150 $ 129,164 $ 29,026 $ 158,190 EMEA 31,173 29,917 61,090 17,971 24,177 42,148 APAC 23,328 14,357 37,685 17,528 12,097 29,625 Total $ 240,918 $ 77,007 $ 317,925 $ 164,663 $ 65,300 $ 229,963 Sales channels: Service provider $ 22,238 $ 799 $ 23,037 $ 26,687 $ 797 $ 27,484 Non-service provider 218,680 76,208 294,888 137,976 64,503 202,479 Total $ 240,918 $ 77,007 $ 317,925 $ 164,663 $ 65,300 $ 229,963 |
Balance Sheet Components
Balance Sheet Components | 3 Months Ended |
Mar. 28, 2021 | |
Balance Sheet Related Disclosures [Abstract] | |
Balance Sheet Components | Note 4. Balance Sheet Components Inventories As of March 28, 2021 December 31, 2020 (In thousands) Raw materials $ 6,854 $ 7,756 Finished goods 208,851 164,356 Total $ 215,705 $ 172,112 The Company records provisions for excess and obsolete inventory based on assumptions about future demand and market conditions and the amounts incurred were $1.2 million and $2.4 million for the three months ended March 28, 2021 and March 29, 2020, 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. Property and equipment, net As of March 28, 2021 December 31, 2020 (In thousands) Computer equipment $ 9,399 $ 10,550 Furniture, fixtures and leasehold improvements 18,234 18,674 Software 29,560 29,499 Machinery and equipment 71,100 72,156 Total property and equipment, gross 128,293 130,879 Accumulated depreciation and amortization (113,396 ) (114,799 ) Total $ 14,897 $ 16,080 Depreciation expense pertaining to property and equipment was $3.1 million and $3.0 million for the three months ended March 28, 2021 and March 29, 2020, respectively. Intangibles, net As of March 28, 2021 As of December 31, 2020 Gross Accumulated Amortization Net Gross Accumulated Amortization Net (In thousands) Technology $ 59,799 $ (57,942 ) $ 1,857 $ 59,799 $ (57,835 ) $ 1,964 Customer contracts and relationships 56,800 (56,800 ) — 56,800 (55,534 ) 1,266 Other 10,345 (9,793 ) 552 10,345 (9,676 ) 669 Total $ 126,944 $ (124,535 ) $ 2,409 $ 126,944 $ (123,045 ) $ 3,899 Amortization of purchased intangibles was and $1.6 million Other non-current assets As of March 28, 2021 December 31, 2020 (In thousands) Non-current deferred income taxes $ 65,514 $ 68,323 Long-term investments 8,686 8,395 Other 6,570 6,032 Total $ 80,770 $ 82,750 Long-term investments The Company's long-term investments are primarily comprised of equity investments without readily determinable fair values. The changes in the carrying value of these investments during the periods represented are as follows: Three Months Ended March 28, 2021 March 29, 2020 (In thousands) Carrying value as of the beginning of the period $ 7,758 (1) $ 8,147 Additions from purchase of investments 340 250 Impairment — (4,530 ) Carrying value as of the end of the period $ 8,098 (1) $ 3,867 (1) For the equity investments without readily determinable fair values as of March 28, 2021, cumulative downward adjustments for price changes and impairment was $7.9 million and cumulative upward adjustments for price changes was $0.2 million. Other accrued liabilities As of March 28, 2021 December 31, 2020 (In thousands) Current operating lease liabilities $ 8,985 $ 9,149 Sales and marketing 89,056 83,561 Warranty obligations 8,176 9,240 Sales returns (1) 59,624 66,972 Freight and duty 15,872 14,885 Other 38,609 34,568 Total $ 220,322 $ 218,375 (1 ) |
Derivative Financial Instrument
Derivative Financial Instruments | 3 Months Ended |
Mar. 28, 2021 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Derivative Financial Instruments | Note 5. Derivative Financial Instruments The Company's subsidiaries have material future cash flows related to revenue and expenses denominated in currencies other than the U.S. 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 dollar, and Japanese yen. The Company does not enter into derivatives transactions for trading or speculative purposes. The Company's foreign currency forward contracts do not contain any credit-risk-related contingent features. The Company enters into derivative contracts with high-quality financial institutions and limits the amount of credit exposure to any individual counter-party. The Company continuously evaluates the credit quality of its counter-party financial institutions and does not consider non-performance a material risk. The Company may choose not to hedge certain foreign exchange exposures for a variety of reasons, including, but not limited to, materiality, accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange rates. Cash flow hedges To help manage the exposure of operating margins to fluctuations in foreign currency exchange rates, the Company hedges a portion of its anticipated foreign currency revenue, costs of revenue and certain operating expenses. These hedges are designated at the inception of the hedge relationship as cash flow hedges under the authoritative guidance for derivatives and hedging. Effectiveness of the hedge relationships are tested at least quarterly both prospectively and retrospectively using regression analysis to ensure that the hedge relationship has been effective and is likely to remain effective in the future. The Company typically executes ten forward contracts per quarter with maturities under six months and with an average USD notional amount of approximately $6.0 million that are designated as cash flow hedges. The Company expects to reclassify to earnings all of the amounts recorded in OCI associated with its cash flow hedges over the next twelve months. The Company did not recognize any material net gains or losses related to anticipated transactions that failed to occur during the three months ended March 28, 2021 and March 29, 2020. Non-designated hedges The Company enters into non-designated hedges under the authoritative guidance for derivatives and hedging to manage the exposure of non-functional currency monetary assets and liabilities not already hedged by de-designated cash flow hedges. The non-designated hedges are generally expected to offset the changes in value of its net non-functional currency asset and liability position resulting from foreign exchange rate fluctuations. The Company adjusts its non-designated hedges monthly and typically executes about ten non-designated forwards per quarter with maturities less than three months and an average USD notional amount of approximately $2.0 million. Fair Value of Derivative Instruments The fair values of the Company's derivative instruments and the line items on the unaudited condensed consolidated balance sheets to which they were recorded as of March 28, 2021, and December 31, 2020, are summarized as follows: Balance Sheet Balance Sheet Location March 28, 2021 December 31, 2020 Location March 28, 2021 December 31, 2020 (In thousands) (In thousands) Derivatives not designated as hedging instruments Prepaid expenses and other current assets $ 973 $ 324 Other accrued liabilities $ 199 $ 2,344 Derivatives designated as hedging instruments Prepaid expenses and other current assets 7 — Other accrued liabilities 1 38 Total $ 980 $ 324 $ 200 $ 2,382 Refer to Note 12, Fair Value Measurements, Effect of Derivative Contracts on Consolidated Statement of Operations and Accumulated Other Comprehensive Income (Loss) The effect of the Company's derivative instruments on AOCI and the unaudited condensed consolidated statements of operations for the three months ended March 28, 2021 and March 29, 2020 are summarized as follows: Three Months Ended March 28, 2021 March 29, 2020 Derivatives designated as hedging instruments: Cash flow hedges Foreign currency forward contracts: Gains (losses) recognized in accumulated other comprehensive income (loss) - Effective Portion $ (371 ) $ 985 Gains (losses) reclassified from accumulated other comprehensive income (loss) into income (loss) - Effective Portion (1) Net revenue $ (463 ) $ 676 Cost of revenue $ — $ (2 ) Research and development $ 12 $ (2 ) Sales and marketing $ 26 $ (77 ) General and administrative $ 7 $ (13 ) Derivatives not designated as hedging instruments: Gains recognized in Other income (expense), net $ 1,416 $ 1,778 (1) Stockholders' Equity |
Net Income (Loss) Per Share
Net Income (Loss) Per Share | 3 Months Ended |
Mar. 28, 2021 | |
Earnings Per Share [Abstract] | |
Net Income (Loss) Per Share | Note 6. Net Income (Loss) Per Share Basic net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period. Potentially dilutive common shares include common shares issuable upon exercise of stock options, vesting of restricted stock unit s and performance shares , and issuances of shares under the Employee Stock Purchase Plan (the "ESPP"), which are reflected in diluted net income (loss) per share by application of the treasury stock method. Potentially dilutive common shares are excluded from the computation of diluted net income (loss) per share when their effect is anti-dilutive. Net income (loss) per share for the three months ended March 28, 2021 and March 29, 2020 are as follows: Three Months Ended March 28, 2021 March 29, 2020 (In thousands, except per share data) Numerator: Net income (loss) $ 22,960 $ (4,173 ) Denominator: Weighted average common shares - basic 30,665 29,583 Potentially dilutive common share equivalent 1,149 — Weighted average common shares - dilutive 31,814 29,583 Basic net income (loss)per share $ 0.75 $ (0.14 ) Diluted net income (loss) per share $ 0.72 $ (0.14 ) Anti-dilutive employee stock-based awards, excluded 287 2,485 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 28, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 7. Income Taxes The income tax provision for the three months ended March 28, 2021 and March 29, 2020 were $7.8 million, or an effective tax rate of 25.4% and $0.5 million, or an effective tax rate of (14.2)%, respectively. The increase in tax expense for the three months ended March 28, 2021, compared to the prior year period, was due primarily to higher pre-tax earnings. For the three months ended March 29, 2020, the benefit on a year-to-date loss was offset by valuation allowances recorded on investment impairments during the period as well as the impact of limitations of current and future stock-based compensation deductions for certain executive officers under IRC section 162(m). The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. The future foreign tax rate could be affected by changes in the composition in earnings in countries with tax rates differing from the U.S. federal rate. The Company is under examination in various U.S. and foreign jurisdictions. The Company files income tax returns in the U.S. federal jurisdiction as well as various state, local, and foreign jurisdictions. Due to the uncertain nature of ongoing tax audits, the Company has recorded its liability for uncertain tax positions as part of its long-term liability as payments cannot be anticipated over the next twelve months. The existing tax positions of the Company continue to generate an increase in the liability for uncertain tax positions. The liability for uncertain tax positions may be reduced for liabilities that are settled with taxing authorities or on which the statute of limitations could expire without assessment from tax authorities. The possible reduction in liabilities for uncertain tax positions in multiple jurisdictions in the next twelve months is approximately $0.5 million, excluding the interest, penalties and the effect of any related deferred tax assets or liabilities. The Company is currently under examination by the U.S. Internal Revenue Service for its fiscal year ended December 31, 2018 as well as other state, local and foreign jurisdictions for different years. On March 11, 2021, the American Rescue Plan Act of 2021, also known as the COVID-19 Stimulus Package, was signed into law. The provisions of the American Rescue Plan do not have a material impact on income taxes or liquidity in the current year. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 28, 2021 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 8. Commitments and Contingencies Purchase Obligations The Company has entered into various inventory-related purchase agreements with suppliers. 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. Commencing at the onset of the COVID-19 pandemic in March 2020, the Company experienced an elongation of the time from order placement to production primarily due to component shortages and supply chain disruptions. The Company has responded by extending its ordering horizon to as long as 15 months. The Company may become liable for non-cancellable material components, such as chipsets purchased by the supplier to meet our purchase order, even if it is subsequently cancelled. Orders are non-cancelable within 30 days prior to the expected shipment date. 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. As of March 28, 2021, the Company had approximately $166.2 million in non-cancelable purchase commitments with suppliers. The Company establishes a loss liability for all products it does not expect to sell for which it has committed purchases from suppliers. Such loss liability was included in Other accrued liabilities on the Company's unaudited condensed consolidated balance sheets. The Company's suppliers procure unique complex components on the Company's behalf. If these components do not meet specified technical criteria or are defective, the Company should not be obligated to purchase the materials. However, disputes may arise as a result and significant resources may be spent resolving such disputes. Non-Trade Commitments As of March 28, 2021, the Company had long term, non-cancellable purchase commitments of $15.8 million pertaining to non-trade activities. Warranty Obligations Changes in the Company's warranty obligations, which is included in Other accrued liabilities on the unaudited condensed consolidated balance sheets, were as follows: Three Months Ended March 28, 2021 March 29, 2020 Balance as of beginning of the period $ 9,240 $ 10,556 Provision for warranty liability made 963 1,683 Settlements made (2,027 ) (2,316 ) Balance as of the end of the period $ 8,176 $ 9,923 Guarantees and Indemnifications The Company, as permitted under Delaware law and in accordance with its Bylaws, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company's request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum amount of potential future indemnification is unlimited; however, the Company has a Director and Officer Insurance Policy that enables it to recover a portion of any future amounts paid. As a result of its insurance policy coverage, the Company believes the fair value of each indemnification agreement is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of March 28, 2021. In its sales agreements, the Company typically agrees to indemnify its direct customers, distributors and resellers (the “Indemnified Parties”) for any expenses or liability resulting from claimed infringements by the Company's products of patents, trademarks or copyrights of third parties that are asserted against the Indemnified Parties, subject to customary carve outs. The terms of these indemnification agreements are generally perpetual after execution of the agreement. The maximum amount of potential future indemnification is generally unlimited. From time to time, the Company receives requests for indemnity and may choose to assume the defense of such litigation asserted against the Indemnified Parties. The Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of March 28, 2021. Litigation and Other Legal Matters The Company is involved in disputes, litigation, and other legal actions, including, but not limited to, the matters described below. In all cases, at each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. In such cases, the Company accrues for the amount, or if a range, the Company accrues the low end of the range, only if there is not a better estimate than any other amount within the range, as a component of legal expense within litigation reserves, net. The Company monitors developments in these legal matters that could affect the estimate the Company had previously accrued. In relation to such matters, the Company currently believes that there are no existing claims or proceedings that are likely to have a material adverse effect on its financial position within the next twelve months, or the outcome of these matters is currently not determinable. There are many uncertainties associated with any litigation, and these actions or other third-party claims against the Company may cause the Company to incur costly litigation and/or substantial settlement charges. In addition, the resolution of any intellectual property litigation may require the Company to make royalty payments, which could have an adverse effect in future periods. If any of those events were to occur, the Company's business, financial condition, results of operations, and cash flows could be adversely affected. 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. Agenzia Entrate Provincial Revenue Office 1 of Milan v. NETGEAR International, Inc. In November 2012, the Italian tax police began a comprehensive tax audit of NETGEAR International, Inc.’s Italian Branch. The scope of the audit initially was from 2004 through 2011 and was subsequently expanded to include 2012. The tax audit encompassed Corporate Income Tax (IRES), Regional Business Tax (IRAP) and Value-Added Tax (VAT). In December 2013, December 2014, August 2015, and December 2015 an assessment was issued by Inland Revenue Agency, Provincial Head Office No. 1 of Milan-Auditing Department (Milan Tax Office) for the 2004 tax year, the 2005 through 2007 tax years, the 2008 through 2010 tax years, and the 2011 through 2012 tax years, respectively. In May 2014, the Company filed with the Provincial Tax Court of Milan an appeal brief, including a Request for Hearing in Open Court and Request for Suspension of the Tax Assessment for the 2004 year. The hearing was held and decision was issued on December 19, 2014. The Tax Court decided in favor of the Company and nullified the assessment by the Inland Revenue Agency for 2004. The Inland Revenue Agency appealed the decision of the Tax Court on June 12, 2015. The Company filed its counter appeal with respect to the 2004 year during September 2015. On February 26, 2016, the Regional Tax Court conducted the appeals hearing for the 2004 year, ruling in favor of the Company. On June 13, 2016, the Inland Revenue Agency appealed the decision to the Supreme Court. The Company filed a counter appeal on July 23, 2016 and is awaiting scheduling of the hearing. In June 2015, the Company filed with the Provincial Tax Court of Milan an appeal brief including a Request for Hearing in Open Court and Request for Suspension of the Tax Assessment for the 2005 through 2006 tax years. The hearing for suspension was held and the Request for Suspension of payment was granted. The hearing for the validity of the tax assessment for 2005 and 2006 was held in December 2015 with the Provincial Tax Court issuing its decision in favor of the Company. The Inland Revenue Agency filed its appeal with the Regional Tax Court. The Company filed its counter brief on September 30, 2016 and the hearing was held on March 22, 2017. A decision favorable to the Company was issued by the Court on July 5, 2017. The Italian Tax Authority has appealed the decision to the Supreme Court and the Company has responded with a counter appeal brief on December 3, 2017 and awaits scheduling of the hearing. The hearing for the validity of the tax assessment for 2007 was held on March 10, 2016 with the Provincial Tax Court who issued its decision in favor of the Company on April 7, 2016. The Inland Revenue Agency has filed its appeal to the Regional Tax Court and the Company has submitted its counter brief. The hearing was held on November 17, 2017 and the Company received a positive decision on December 11, 2017. On June 11, 2018, the Italian government filed its appeal brief with the Supreme Court, and the Company filed its counter brief on July 12, 2018 and awaits scheduling of the hearing. With respect to 2008 through 2010, the Company filed its appeal briefs with the Provincial Tax Court in October 2015 and the hearing for the validity of the tax assessments was held on April 21, 2016. A decision favorable to the Company was issued on May 12, 2016. The Inland Revenue Agency has filed its appeal to the Regional Tax Court. The Company filed its counter brief on February 5, 2017. The hearing was held on May 21, 2018, and the Company received a favorable decision on June 12, 2018. On October 14, 2019, Milan Tax Office filed an appeal with the Supreme Court. The Company filed its counter brief with the Supreme Court on November 22, 2019 and awaits scheduling of the hearing. With respect to 2011 through 2012, the Company has filed its appeal brief on February 26, 2016 with the Provincial Tax Court to contest the relevant tax assessments. The hearing for suspension was held and the Request for Suspension of payment was granted. On October 13, 2016, the Company filed its final brief with the Provincial Tax Court. The hearing was held on October 24, 2016 and a decision favorable to the Company was issued by the Court. The Inland Revenue Agency appealed the decision before the Regional Tax Court. The Regional Tax Court heard the case on February 26, 2019 for both years and issued a decision favorable to the Company on March 11, 2019. On October 14, 2019, Milan Tax Office filed an appeal with the Supreme Court. The Company filed its counter brief with the Supreme Court on November 22, 2019 and awaits scheduling of the hearing. With regard to all tax years, it is too early to reasonably estimate any financial impact to the Company resulting from this litigation matter. Via Vadis v. NETGEAR, Inc. On August 22, 2014, the Company was sued by Via Vadis, LLC and AC Technologies, S.A. (“Via Vadis”), in the Western District of Texas. The complaint alleges that the Company's ReadyNAS and Stora products “with built-in BitTorrent software" allegedly infringe three related patents of Via Vadis (U.S. Patent Nos. 7,904,680, RE40, 521, and 8,656,125). Via Vadis filed similar complaints against Belkin, Buffalo, Blizzard, D-Link, and Amazon. By referring to “built-in BitTorrent software,” the Company believes that the complaint is referring to the BitTorrent Sync application, which was released by BitTorrent Inc. in spring of 2014. At a high-level, the application allows file synchronization across multiple devices by storing the underlying files on multiple local devices, rather than on a centralized server. The Company's ReadyNAS products do not include BitTorrent software when sold. The BitTorrent application is provided as one of a multitude of potential download options, but the software itself is not included on the Company’s devices when shipped. Therefore, the only viable allegation at this point is an indirect infringement allegation. On November 10, 2014, the Company answered the complaint denying that it infringes the patents in suit and also asserting the affirmative defenses that the patents in suit are invalid and barred by the equitable doctrines of laches, waiver, and/or estoppel. On February 6, 2015, the Company filed its motion to transfer venue from the Western District of Texas to the Northern District of California with the Court; on February 13, 2015, Via Vadis filed its opposition to the Company's motion to transfer; and on February 20, 2015, the Company filed its reply brief on its motion to transfer. In early April 2015, the Company received the plaintiff’s infringement contentions, and on June 12, 2015, the defendants served invalidity contentions. On July 30, 2015, the Court granted the Company's motion to transfer venue to the Northern District of California. In addition, the Company learned that Amazon and Blizzard filed petitions for the inter partes reviews (“IPRs”) for the patents in suit. On October 30, 2015, the Company and Via Vadis filed a joint stipulation requesting that the Court vacate all deadlines and enter a stay of all proceedings in the case pending the Patent Trial and Appeal Board’s final non-appealable decision on the IPRs initiated by Amazon and Blizzard. On November 2, 2015, the Court granted the requested stay. On March 8, 2016, the Patent Trial and Appeal Board issued written decisions instituting the IPRs jointly filed by Amazon and Blizzard. In early March of 2017, The Patent Trial and Appeal Board (PTAB) issued various decisions regarding Amazon’s and Blizzard’s IPRs of the patents in suit. One of the IPRs of the '125 patent resulted in a finding by the PTAB that Amazon and Blizzard had had failed to show invalidity. The second IPR on the '125 patent, however, resulted in cancellation of all claims asserted in Via Vadis’s suit against the Company. Reissue '521 did not have any claims found invalid by the PTAB, and some dependent claims of the '680 patent survived the IPRs, and some claims of the '680 patent were canceled. Via Vadis has completed its appeal of the PTAB decisions on the IPRs, which were affirmed by the Federal Circuit. Meanwhile, the W.D. Texas Court issued a claim construction order finding the '680 patent indefinite. The parties in the W.D. of Texas case lifted their stay and Via Vadis filed a motion for reconsideration of the Court’s finding of indefiniteness, which the Court has denied. On August 8, 2019, Via Vadis filed its notice of appeal to the Federal Circuit in the W.D. Texas cases. The Company's case in N.D. California will remain stayed during the pendency of the appeal. On July 8, 2020, the Federal Circuit issued its opinion in the appeal of the Via Vadis cases pending in the W.D. of Texas against Amazon and Blizzard. The appellate court affirmed-in-part and reversed-in-part. The Company expects that the stay in the Company's case in N.D. California will be lifted and the Court will likely set a case management conference in the coming months. On February 16, 2021, Via Vadis dismissed the case with prejudice, thereby concluding this matter without any material impact to the Company. Vivato v. NETGEAR, Inc. On April 19, 2017, the Company was sued by XR Communications (d/b/a) Vivato (“Vivato”) in the United States District Court, Central District of California. Based on its complaint, Vivato purports to be a research and development and product company in the WiFi area, but it appears that Vivato is not currently a manufacturer of commercial products. The three (3) patents that Vivato asserts against the Company are U.S. Patent Nos. 7,062,296, 7,729,728, and 6,611,231. The ’296 and ’728 patents are entitled “Forced Beam Switching in Wireless Communication Systems Having Smart Antennas.” The ’231 patent is entitled “Wireless Packet Switched Communication Systems and Networks Using Adaptively Steered Antenna Arrays.” Vivato also has recently asserted the same patents in the Central District of California against D-Link, Ruckus, and Aruba, among others. According to the complaint, the accused products include WiFi access points and routers supporting MU-MIMO, including without limitation access points and routers utilizing the IEEE 802.11ac-2013 standard. The accused technology is standards-based, and more specifically, based on the transmit beamforming technology in the 802.11ac WiFi standard. The Company answered an amended complaint on July 7, 2017. In its answer, the Company objected to venue and recited that objection as a specific affirmative defense, so as to expressly reserve the same. The Company also raised several other affirmative defenses in its answer. On August 28, 2017, the Company submitted its initial disclosures to the plaintiff. The initial scheduling conference was on October 2, 2017, and the Court set five day jury trial for March 19, 2019 for the leading Vivato/D-Link case, meaning the Company's trial date will be at some point after March 19, 2019. On March 20, 2018, the Company and other defendants in the various Vivato cases moved the Court to stay the case pending various IPRs filed on all of the patents in suit. Every asserted claim of all three patents-in-suit is now subject to challenge in IPRs that are pending before the U.S. Patent and Trial Appeal Board (“PTAB”). In particular, the Company, Belkin, and Ruckus are filing one set of IPRs on the three patents in suit; Cisco is filing another set of independent IPRs on the three patents in suit; and Aruba is filing yet another set of independent IPRs on the three patents in suit. On April 11, 2018, the Court granted the motion to stay pending filing of the IPRs. On May 3, 2018, the Company and other defendants filed their IPRs. The PTAB instituted the IPRs for the ’296 and ’728 patents, but not the ’231 patent from the Ruckus and Belkin set of petitions. However, the Cisco IPR for the ’231 patent was instituted. Vivato has proposed amendments to its claims and the parties have completed briefing the matter before the PTAB. In July and August of 2019, the Company and other defendants had two oral arguments before the PTAB regarding the ’296 and ’728 patents. The PTAB denied institution of petition for the’231 Patent. On October 10, 2019, the PTAB issued a Final Written Decision invalidating all of the original claims at issue in the ’296 Patent and denied Vivato’s motion to amend (the claims). In November 2019, the PTAB issued a Final Written Decision invalidating all of the challenged claims in the ’728 Patent. In the meantime, the PTAB’s Final Written Decision in the Cisco IPR of the’231 Patent found the claims to be valid and Cisco is appealing the finding. On November 25, 2020, the Federal Circuit affirmed the denial of Cisco’s IPR regarding the ’231 Patent. The Company is awaiting the stay on the District Court case to be lifted. It is too early to reasonably estimate any financial impact to the Company resulting from this litigation matter. Hera Wireless v. NETGEAR, Inc. On July 14, 2017, the Company was sued by Sisvel (via Hera Wireless) in the District of Delaware on three related patents allegedly covering the 802.11n standard. Similar complaints were filed against Amazon, ARRIS, Belkin, Buffalo, and Roku. On December 12, 2017, the Company answered the complaint and asserted various affirmative defenses, including invalidity and noninfringement. A proposed joint Scheduling Order was submitted to the Court on January 24, 2018 with trial proposed for March of 2020. On February 27, 2018, Hera Wireless identified the accused products and the asserted claims, alleging that any 802.11n compliant product infringes, and identified only the Company's Orbi and WND930 products with particularity. Hera Wireless’ infringement contentions were submitted on April 28, 2018. Discovery is ongoing. On June 28, 2018, the Company and other defendants submitted invalidity contentions. The Company along with other defendants jointly filed IPRs challenging three of the patents in suit on July 18, 2018. On September 14, 2018, the Company and other defendants jointly filed a second set of IPRs with the USPTO challenging the remaining six patents asserted in the Amended Complaint. All of the instituted IPRs have been decided in defendants’ favor, thereby canceling all claims for 8 of the 9 asserted patents. Hera initially appealed all of the adverse decisions to the Federal Circuit and has since withdrawn 7 of the appeals and filed reissue applications. While the Company awaits the decision on the remaining IPR filed in parallel by Intel, the district court case remains stayed. It is too early to reasonably estimate any financial impact to the Company resulting from this litigation matter. John Pham v. Arlo Technologies, Inc., NETGEAR Inc., et al., and other related actions On January 9, 2019 and January 10, 2019, February 1, 2019 and February 8, 2019, the Company was sued in four separate securities class action suits in Superior Court of California, County of Santa Clara, along with Arlo Technologies, individuals, and underwriters involved in the spin-off of Arlo. Two more similar state actions have been filed against Arlo Technologies Inc. et al. In total, six putative class action complaints have now been filed in California state court in Santa Clara County. The Company is named as a defendant in five of the six lawsuits. The complaints generally allege that Arlo’s IPO materials contained false and misleading statements, hiding problems with Arlo’s Ultra product. These claims are styled as violations of Sections 11, 12(a), and 15 of the Securities Act of 1933. There is also a putative class action pending in federal court in the Northern District of California, on behalf of the same class of plaintiffs, making very similar claims. The Company is not presently named in the federal action. Defendants filed motions to stay the state court actions in deference to the federal court action. The court held a hearing on April 26, 2019 to consider whether to consolidate the six lawsuits and appoint a “lead plaintiff” and another hearing on May 31, 2019 to consider defendants’ motions to stay the state court cases. On June 21, 2019, the California state court judge granted the Company's motion to stay the state court case pending the outcome of the federal case. The case will now proceed only in federal court. On August 6, 2019, all the defendants, including NETGEAR, filed a motion to dismiss the federal court action. Plaintiffs filed their opposition brief on September 6, 2019 and defendants filed a reply on October 4, 2019. The state court action remains stayed pending the outcome of the federal action. On November 18, 2019, the parties participated in mediation, but did not settle the case. On December 5, 2019, the court held a hearing on the defendants’ motion to dismiss, and on December 19, 2019, granted that motion as to all counts, with leave to amend. On February 14, 2020, the Court granted the Parties’ stipulation to stay proceedings to permit filing of a motion for preliminary approval for classwide settlement. On June 11, 2020, the Parties signed the Stipulation and Settlement Agreement. On June 12, 2020, lead attorney for plaintiffs filed a motion with the Court for Preliminary Approval of the Class Action Settlement. In September 2020, the Court preliminarily approved the Parties’ settlement. The Court issued the final written approval for the settlement after the March 11, 2021 hearing in the federal matter. Three individuals who filed suit in state court have requested exclusion from the settlement. Subject to resolution with the three individuals who filed suit in state court, there will be no material financial impact on the Company. Aegis 11 S.A. v. NETGEAR Inc. On June 21, 2019, Aegis 11 S.A. (“Aegis”) sued the Company and several other defendants for patent infringement in the District of Delaware. Aegis asserted that NETGEAR’s WiFi routers infringe three patents related to the 802.11 standard: U.S. Patent No. 6,839,553, U.S. Patent No. 9,584,200, and U.S. Patent No. 9,848,443. In lieu of filing its Answer on October 15, 2019, the Company filed a partial motion to dismiss against one of the asserted claims based on unpatentable subject matter. On September 9, 2020, the Court granted the Defendants’ partial motion to dismiss one of the three patents filed in the case, U.S. Pat. 6,839,553 (the ’553 Patent). The dismissal was granted without prejudice. The Company filed its Answer on September 23, 2020. On October 20, 2020, Aegis filed an Amended Complaint with additional facts related to the ’553 Patent, and added a fourth patent, Pat. 9,350,434 (the ’434 patent). In response, the Company renewed its partial motion to dismiss the Amended Complaint. It is too early to reasonably estimate any financial impact to the Company resulting from this litigation matter. D u njun Technology v. NETGEAR (China Patent Matters) On or around July 2, 2020, Company received notice from its local litigation counsel in China that a Chinese Non-Practicing Entity (NPE) brought an infringement action against its Beijing office before the Beijing Municipal Intellectual Property Office (BMIPO). The action alleges that NETGEAR WAC510 and other devices infringe Chinese patent ZL02123502.3 (the ’502 Patent). On or around October 20, 2020, Dunjun added one of the Company's resellers to this Complaint. On October 13, 2020, the Parties attended a hearing of the infringement case before the BMIPO. The Company also filed a companion invalidity case on the patent. While the invalidity case is pending, the BMIPO has stayed the infringement case along with its ruling from the hearing. The parties attended the invalidity hearing before the CNIPA on January 28, 2021 and on March 30, 2021, the CNIPA affirmed the patent’s validity. On March 5, 2021, the Company’s U.S. entity (NETGEAR, Inc.) was served with the infringement case filed before the Shanghai IP Court seeking damages. The parties are currently negotiating a resolution in these cases. Subject to successful resolution of these cases, there will be no material financial impact on the Company. Altair Logix LLC v NETGEAR Inc. On July 28, 2020, Altair Logix LLC (“Altair”) sued the Company in the District of Delaware. Altair’s Complaint asserts that the Company's Meural frame infringes U.S. Pat. 6,289,434 (the “434” Patent) titled “Apparatus and Method of Implementing Systems on Silicon Using Dynamic-Adaptive Run-Time Reconfigurable Circuits for Processing Multiple, Independent Data and Control Streams of Varying Rates.” The Company filed its Answer on January 12, 2021. The parties are currently conducting discovery. It is too early to reasonably estimate any financial impact to the Company resulting from this matter. Q3 Networking LLC v. NETGEAR Inc. On September 21 and September 22, 2020, Q3 Networking LLC (“Q3”) filed Complaints against the Company, Commscope (with Ruckus and Arris) and Hewlett Packard Enterprises (with Aruba Networks) (together “Defendants” or “Respondents”) at the District Court of Delaware and the International Trade Commission (“ITC”), respectively. Both actions allege that the Company's routers and access points infringe four patents: U.S. Pats. 7,457,627 (the ’627 Patent), 7,609,677 (the ’677 Patent), 7,895,305 (the ’305 Patent), and 8,797,853 (the ’853 Patent) relating to different aspects of networking technology (e.g., 802.11and QoS). The ITC case was instituted on October 23, 2020. On November 10, 2020, NETGEAR filed, and the Court granted, a Motion to Stay the Delaware action while the ITC case is pending. The Parties are conducting fact and expert discovery in the ITC case. Some key dates include fact discovery cutoff on April 21, 2021 and expert discovery cutoff on June 3, 2021. On April 5 and April 6, 2021, the Company and co-respondents filed IPRs against the ’627 Patent and ’853 Patent, respectively. It is too early to reasonably estimate any financial impact to the Company resulting from this matter. Beijing Tianxing Ebel Information Consulting Co., Ltd v. NETGEAR Inc. On or around October 19, 2020, Beijing Tianxing Ebel Information Consulting Co., Ltd (“Tianxing”) filed two Complaints against the Company in the Beijing Intellectual Property Court (“Beijing IP Court”). Tianxing’s Complaints assert that the Company's ReadyNAS RR2304 infringes each of Chinese Patent Nos. ZL200410096563.1 and ZL201010144680.6. The patents are titled “Method for Treating Medium Access Control Address in Main and Spare Conversion” and “Network Access Method, System, Network Authentication Method, Equipment and Terminal,” respectively. In December 2020, NETGEAR Beijing was served with the third suit by Beijing Tianxing. This Complaint asserts that the Company's ReadyNAS RR2304 infringes Chinese Patent No. ZL200510103486.2, titled “System and Method for Processing Link Fault of Wideband Access Apparatus.” The Company filed jurisdictional challenges in all three cases. It is too early to reasonably estimate any financial impact to the Company resulting from these matters. Network-1 Technologies v. NETGEAR Inc On December 15, 2020, Network-1 filed a breach of contract suit against the Company in New York State Court for failure to pay royalties for its Power over Ethernet (“PoE”) products under the parties’ Settlement and Licensing Agreement (“Agreement”). The Company disagrees with Network-1’s position on the Agreement. The parties did not reach an agreement in mediation. The Company has filed a motion to compel arbitration pursuant to the Agreement and the parties are awaiting the Court’s decision. It is too early to reasonably estimate any financial impact to the Company resulting from this matter. 2BCom v. NETGEAR Inc. On January 13, 2021, 2BCom sued the Company in the Northern District of California. 2BCom’s Complaint asserts that the Company's routers infringe U.S. Pats. 6,885,643 (the “’434 Patent”), 6,928,166 (the “’166 Patent”), 7,039,445 (the “’445 Patent”), 7,460,477 (the “’477 Patent”) based on 802.11 and other standards. On April 15, 2021, the Company filed its Answer to the case. It is too early to reasonably estimate any financial impact to the Company resulting from this matter. WSOU v. NETGEAR Inc. On January 13, 2021, WSOU Investments, LLC (WSOU) filed three complaints against the Company in the US District Court for the Western District of Texas (WDTX). WSOU alleges that the Company’s routers and switches infringe three patents related to wireless communication technologies. The patents asserted are US Patent Nos.: 7,512,096 (the “ʼ096 Patent”), 9,338,171 (the “ʼ171 Patent”) and 7,551,630 (the “ʼ630 Patent”). On April 15, 2021, the Company filed motions to dismiss for improper venue or to transfer in lieu of answering in all three cases. It is too early to reasonably estimate any financial impact to the Company resulting from these matters. Shenzhen Yuanyu and Gaoping Yaoyi v. NETGEAR Beijing On or around March 19, 2021, the Company’s Beijing entity was served in seven patent infringement suits filed by Shenzhen Yuanyu Investment Co., Ltd. and Gaoping Yaoyi Trading Co., Ltd., at the Jinan Intermediate People’s Court. Shenzhen Yuanyu asserted Chinese patents ZL201010616817.3, ZL200610168028.1, ZL200410057124.X, ZL200710074176.1 in four separate suits. Gaoping Yaoyi asserted Chinese patents ZL200410080537.X, ZL200810126154.X, and 200710086745.4 in three separate suits. All cases allege the Company’s Nighthawk XR300 and XR500 infringe the patent. The Company filed jurisdictional challenges in all cases. It is too early to reasonably estimate any financial impact to the Company resulting from these matters. Beijing Yiwen v. NETGER Beijing On or around April 1, 2021, the Company’s Beijing entity was served in two patent infringement cases filed by Beijing Yiwen Impression Advertisement Co., Ltd., Beijing Yiwen sued NETGEAR Beijing at the Beijing IP Court alleging the Company’s GS748T infringes Chinese patents ZL200510103486.2 and ZL200510120823.9. The Company filed jurisdictional challenges in all cases It is too early to reasonably estimate any financial impact to the Company resulting from these matters. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 28, 2021 | |
Stockholders Equity Note [Abstract] | |
Stockholders' Equity | Note 9. Stockholders' Equity Stock Repurchases From time to time, the Company's Board of Directors has authorized programs under which the Company may repurchase shares of its common stock, depending on market conditions, in the open market or through privately negotiated transactions. 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. As of March 28, 2021, 2.6 million shares remained authorized for repurchase under the repurchase program. The Company did not repurchase any shares of common stock under the authorizations during the three months ended March 28, 2021. The Company repurchased, reported based on trade date, approximately 0.6 million shares of common stock, at a cost of approximately $15.0 The Company repurchased, as reported based on trade date, approximately 48,000 and 54,000 shares of common stock, at a cost of approximately $2.0 million and $1.3 million, during the three months ended March 28, 2021 and March 29, 2020, 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. The Company's policy related to repurchases of its common stock is to charge the excess of cost over par value to retained earnings. All repurchases were made in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. Accumulated Other Comprehensive Income The following table sets forth the changes in accumulated other comprehensive income ("AOCI") by component during the three months ended March 28, 2021 and March 29, 2020: Unrealized gains (losses) on available -for-sale investments Unrealized gains (losses) on derivatives Estimated tax benefit (provision) Total (In thousands) Balance as of December 31, 2020 $ (2 ) $ (42 ) $ 9 $ (35 ) Other comprehensive income (loss) before reclassifications — (371 ) 82 (289 ) Less: Amount reclassified from accumulated other comprehensive income — (418 ) 88 (330 ) Net current period other comprehensive income (loss) — 47 (6 ) 41 Balance as of March 28, 2021 $ (2 ) $ 5 $ 3 $ 6 Unrealized gains (losses) on available -for-sale investments Unrealized gains (losses) on derivatives Estimated tax benefit (provision) Total (In thousands) Balance as of December 31, 2019 $ (2 ) $ 22 $ 1 21 Other comprehensive income (loss) before reclassifications — 985 (175 ) 810 Less: Amount reclassified from accumulated other comprehensive income (loss) — 582 (122 ) 460 Net current period other comprehensive income (loss) — 403 (53 ) 350 Balance as of March 29, 2020 $ (2 ) $ 425 $ (52 ) $ 371 The following tables provide details about significant amounts reclassified out of each component of AOCI for the three months ended March 28, 2021 and March 29, 2020: Three Months Ended March 28, 2021 March 29, 2020 (In thousands) Amount Reclassified from AOCI Gains (losses) on cash flow hedge: Foreign currency forward contracts Affected line item in the statement of operations Net revenue $ (463 ) $ 676 Cost of revenue — (2 ) Research and development 12 (2 ) Sales and marketing 26 (77 ) General and administrative 7 (13 ) Total before tax (418 ) 582 Tax impact 88 (122 ) Total, net of tax $ (330 ) $ 460 |
Employee Benefit Plans
Employee Benefit Plans | 3 Months Ended |
Mar. 28, 2021 | |
Employee Benefits And Share Based Compensation [Abstract] | |
Employee Benefit Plans | Note 10. Employee 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. Vesting periods under this plan are generally four years for options and RSUs and three years for performance shares. As of March 28, 2021, approximately 2.6 million shares were reserved for future grants under the 2016 Plan. Additionally, the Company sponsors an Employee Stock Purchase Plan (the “ESPP”), pursuant to which eligible employees may contribute up to 10% of compensation, subject to certain income limits, to purchase shares of the Company's common stock. The terms of the plan include a look-back feature that enables employees to purchase stock semi-annually at a price equal to 85% of the lesser of the fair market value at the beginning of the offering period or the purchase date. The duration of each offering period is generally six-months. As of March 28, 2021, approximately 0.3 million shares were available for issuance under the ESPP. Option Activity Stock option activity during the three months ended March 28, 2021 was as follows: Number of Shares Weighted Average Exercise Price Per Share (In thousands) (In dollars) Outstanding as of December 31, 2020 1,333 $ 27.86 Exercised (170 ) $ 24.37 Outstanding as of March 28, 2021 1,163 $ 28.37 RSU Activity RSU activity during the three months ended March 28, 2021 was as follows: Number of Shares Weighted Average Grant Date Fair Value Per Share (In thousands) (In dollars) Outstanding as of December 31, 2020 1,584 $ 30.66 Granted 22 $ 42.50 Vested (134 ) $ 40.39 Cancelled (24 ) $ 30.40 Outstanding as of March 28, 2021 1,448 $ 29.94 Performance Shares Activity In July 2020, the Company's executive officers were granted performance shares with vesting occurring at the end of a three-year 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 . Performance shares activity during the three months ended March 28, 2021 was as follows: Number of Shares Weighted Average Grant Date Fair Value Per Share (In thousands) (In dollars) Outstanding as of December 31, 2020 141 $ 28.22 Granted — $ — Vested — $ — Cancelled — $ — Outstanding as of March 28, 2021 141 $ 28.22 Valuation and Expense Information The Company measures stock-based compensation at the grant date based on the estimated fair value of the award. Estimated compensation cost relating to RSUs and performance shares is based on the closing fair market value of the Company's common stock on the date of grant. The fair value of options granted and the purchase rights granted under the ESPP is estimated on the date of grant using a Black-Scholes-Merton option valuation model that uses the assumptions noted in the following table. The estimated expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. The risk-free interest rate of options granted and the purchase rights granted under the ESPP is based on the implied yield currently available on U.S. Treasury securities with a remaining term commensurate with the estimated expected term. Expected volatility of options granted under the 2016 Plan and the purchase rights granted under the ESPP is based on historical volatility over the most recent period commensurate with the estimated expected term. No options were granted during the three months ended March 28, 2021 and March 29, 2020. The following table sets forth the weighted average assumptions used to estimate the fair value of purchase rights granted under the ESPP during the three months ended March 28, 2021 and March 29, 2020: Three Months Ended March 28, 2021 March 29, 2020 ESPP Expected life (in years) 0.5 0.5 Risk-free interest rate 0.06 % 1.55 % Expected volatility 50.0 % 38.8 % Dividend yield — — The following table sets forth the stock-based compensation expense resulting from stock options, RSUs, performance shares and the ESPP included in the Company's unaudited condensed consolidated statements of operations: Three Months Ended March 28, 2021 March 29, 2020 (In thousands) Cost of revenue $ 834 $ 705 Research and development 1,146 1,034 Sales and marketing 1,780 1,779 General and administrative 3,200 2,818 Total $ 6,960 $ 6,336 As of March 28, 2021, $2.4 million of unrecognized compensation cost related to stock options was expected to be recognized over a weighted-average period of 1.1 years and $30.8 million of unrecognized compensation cost related to unvested RSUs and performance shares was expected to be recognized over a weighted-average period of 2.0 years. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 28, 2021 | |
Segment Reporting [Abstract] | |
Segment Information | Note 11. Segment Information Operating segments are components of an enterprise about which separate financial information is available and is evaluated quarterly by management, namely the Chief Operating Decision Maker (“CODM”) of an organization, in order to determine operating and resource allocation decisions. By this definition, the Company has identified its CEO as the CODM. The Company operates and reports in two segments: Connected Home and SMB: • Connected Home: Focused on consumers and consists of high-performance, dependable and easy-to-use WiFi internet networking solutions such as WiFi mesh systems, routers, 4G/5G mobile products, smart devices such as Meural digital canvasses, and subscription services, offering consumers a range of value added services, including parental controls and cyber security for their home networks ; and • SMB: Focused on small and medium-sized businesses and consists of business networking, wireless LAN, video over Ethernet for Pro AV applications, security and remote management solutions that bring enterprise-class functionality to small and medium-sized businesses 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. The leadership team of each segment is focused on product and service development efforts, both from a product marketing and engineering standpoint, to service the unique needs of their customers. The results of the reportable segments are derived directly from the Company's management reporting system. The results are based on the Company's method of internal reporting and are not necessarily in conformity with accounting principles generally accepted in the United States. Management measures the performance of each segment based on several metrics, including contribution income. Segment contribution income includes all product line segment revenues less the related cost of sales, research and development and sales and marketing costs. Contribution income is used, in part, to evaluate the performance of, and allocate resources to, each of the segments. 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, change in fair value of contingent consideration, restructuring and other charges, litigation rese rves, net, interest income and other income (expense), net. Financial information for each reportable segment and a reconciliation of segment contribution income to income (loss) before income taxes is as follows: Three Months Ended March 28, 2021 March 29, 2020 Net Revenue: Connected Home $ 240,918 $ 164,663 SMB 77,007 65,300 Total net revenue $ 317,925 $ 229,963 Contribution Income: Connected Home $ 47,303 $ 13,587 Contribution margin 19.6 % 8.3 % SMB $ 16,284 $ 13,567 Contribution margin 21.1 % 20.8 % Total segment contribution income $ 63,587 $ 27,154 Corporate and unallocated costs (21,290 ) (18,962 ) Amortization of intangibles (1) (1,445 ) (1,519 ) Stock-based compensation expense (6,960 ) (6,336 ) Change in fair value of contingent consideration — 222 Restructuring and other charges (2,270 ) 135 Litigation reserves, net (295 ) (25 ) Interest income 10 262 Other income (expense), net (2) (562 ) (4,586 ) Income (loss) before income taxes $ 30,775 $ (3,655 ) (1) Amounts exclude amortization expense related to patents within purchased intangibles in cost of revenue. (2) Amounts include gain/loss on investments, net, of $49,000 and $4.5 million for the three months ended March 28, 2021 and March 29, 2020, respectively The CODM does not evaluate operating segments using discrete asset information. Operations by Geographic Region For reporting purposes, revenue is generally attributed to each geographic region based on the location of the customer. The following table shows net revenue by geography for the periods indicated: Three Months Ended March 28, 2021 March 29, 2020 (In thousands) United States (U.S.) $ 213,618 $ 154,805 Americas (excluding U.S.) 5,532 3,385 EMEA 61,090 42,148 APAC 37,685 29,625 Total net revenue $ 317,925 $ 229,963 Long-lived assets by Geographic Region The Company's long-lived assets, which consist of property and equipment, net and operating lease right-of-use assets, net are located in the following geographic locations: As of March 28, 2021 December 31, 2020 (In thousands) United States (U.S.) $ 17,641 $ 19,173 Americas (excluding U.S.) 2,481 2,845 EMEA 3,095 3,215 Singapore 5,601 5,964 APAC (excluding Singapore) (1) 13,822 14,294 Total $ 42,640 $ 45,491 (1) No individual |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 28, 2021 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Note 12. Fair Value Measurements The following tables summarize assets and liabilities measured at fair value on a recurring basis as of March 28, 2021 and December 31, 2020: As of March 28, 2021 Total Quoted market prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) (In thousands) Assets: Cash equivalents: money-market funds $ 160,512 $ 160,512 $ — $ — Available-for-sale debt investments: convertible debt (1) 1,326 — — 1,326 Available-for-sale investments: certificates of deposit (1) 6 — 6 — Trading securities: mutual funds (1) 5,809 5,809 — — Foreign currency forward contracts (2) 980 — 980 — Total assets measured at fair value $ 168,633 $ 166,321 $ 986 $ 1,326 Liabilities: Foreign currency forward contracts (3) $ 200 $ — $ 200 $ — Contingent consideration (4) 3,000 — — 3,000 Total liabilities measured at fair value $ 3,200 $ — $ 200 $ 3,000 As of December 31, 2020 Total Quoted market prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) (In thousands) Assets: Cash equivalents: money-market funds $ 158,054 $ 158,054 $ — $ — Available-for-sale debt investments: convertible debt (1) 1,326 — — 1,326 Available-for-sale investments: certificates of deposit (1) 165 — 165 — Trading securities: mutual funds (1) 5,368 5,368 — — Foreign currency forward contracts (2) 324 — 324 — Total assets measured at fair value $ 165,237 $ 163,422 $ 489 $ 1,326 Liabilities: Foreign currency forward contracts (3) $ 2,382 $ — $ 2,382 $ — Contingent consideration (4) 3,000 — — 3,000 Total liabilities measured at fair value $ 5,382 $ — $ 2,382 $ 3,000 (1) Included in Short-term investments on the Company's unaudited condensed consolidated balance sheets. (2) Included in Prepaid expenses and other current assets on the Company's unaudited condensed consolidated balance sheets. (3) Included in Other accrued liabilities on the Company's unaudited condensed consolidated balance sheets. (4) Included in Other non-current accrued liabilities on the Company's unaudited condensed consolidated balance sheets. The contingent consideration represents the estimated fair value of the additional variable cash consideration payable in connection with the acquisition of Meural in August 2018 that is contingent upon the achievement of certain technical and service revenue milestones. The Company's investments in cash equivalents and trading 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 available-for-sale marketable investments are classified within Level 2 of the fair value hierarchy because they are valued based on readily available pricing sources for comparable instruments, identical instruments in less active markets, or models using market observable inputs. The Company's foreign currency forward contracts are classified within Level 2 of the fair value hierarchy as they are valued using pricing models that take into account the contract terms as well as currency rates and counterparty credit rates. The Company verifies the reasonableness of these pricing models using observable market data for related inputs into such models. The Company enters into foreign currency forward contracts with only those counterparties that have long-term credit ratings of A-/A3 or higher. The Company's contingent consideration resulting from acquisitions and available-for-sale convertible debt securities, which were issued by a privately held company, are classified within Level 3 of the fair value hierarchy as the valuations typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. The carrying value of non-financial assets and liabilities measured at fair value in the financial statements on a recurring basis, including accounts receivable and accounts payable, approximate fair value due to their short maturities. |
Restructuring and Other Charges
Restructuring and Other Charges | 3 Months Ended |
Mar. 28, 2021 | |
Restructuring Charges [Abstract] | |
Restructuring and Other Charges | Note 13. Restructuring and Other Charges The Company accounts for its restructuring plans under the authoritative guidance for exit or disposal activities. The Company includes expenses related to restructuring and other charges in Other operating expenses (income), net in the unaudited condensed consolidated statements of operations. Accrued restructuring and other charges are classified within Accrued employee compensation and Restructuring and other charges recognized in the three months ended March 28, 2021 were primarily for severance, and other costs in relation to the consolidation of the offices in the APAC region to gain some cost efficiencies The following table provides a summary of the activity related to accrued restructuring and other charges for the three months ended March 28, 2021: Accrued Restructuring and Other Charges at December 31, 2020 Additions (1) Cash Payments Adjustments Accrued Restructuring and Other Charges at March 28, 2021 (In thousands) Restructuring Employee termination charges $ 87 $ 1,885 $ (114 ) $ (25 ) $ 1,833 Lease contract termination and other charges 227 375 (181 ) (64 ) 357 Total Restructuring and other charges $ 314 $ 2,260 $ (295 ) $ (89 ) $ 2,190 (1) |
Leases
Leases | 3 Months Ended |
Mar. 28, 2021 | |
Leases [Abstract] | |
Leases | Note 14. Leases The Company leases office space, cars, distribution centers and equipment under non-cancellable operating lease arrangements with various expiration dates through December 2026. The leases have remaining lease terms of approximately 1 year to 6 years, some of which include options to extend for up to a further 5 years, and some of which include options to terminate prior to completion of the contractual lease term with or without penalties. The Company determines the duration of the lease arrangement giving thought to whether or not it is reasonably certain that the Company will exercise options to extend or terminate the lease arrangement ahead of its contractual term. The leases do not contain any material residual value guarantees. The components of lease cost were as follows: Three Months Ended March 28, 2021 March 29, 2020 (In Thousands) Operating lease cost $ 2,394 $ 2,880 Short-term lease cost 330 114 Total lease cost (1) $ 2,724 $ 2,994 ( 1 ) Included in cost of revenue, sales and marketing, research and development and general and administration in the Company's unaudited condensed statement of operations. Supplemental cash flow information related to leases was as follows: Three Months Ended March 28, 2021 March 29, 2020 (In Thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows relating to operating leases $ 2,109 $ 3,074 Lease liabilities arising from obtaining right-of-use assets: Operating leases $ 394 $ 1,295 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 28, 2021 | |
Accounting Policies [Abstract] | |
Accounting pronouncements | Accounting Pronouncements Recently Adopted ASU 2019-12 In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”, which removes certain exceptions related to intra-period tax allocations and deferred tax accounting on outside basis differences in foreign subsidiaries. Additionally, it provides other simplifying measures for the accounting for income taxes. The Company adopted the new standard effective January 1, 2021. The adoption had no impact on the Company's financial position, results of operations or cash flows. Accounting Pronouncements Not Yet Effective In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which provides optional expedients and exceptions for a limited period of time to ease the potential burden in accounting treatments related to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met T he Company does not expect that the new guidance will have material impact on its financial position, results of operations and cash flows as this new guidance will potentially only impact the Company’s currency forward rates under its hedging program and its incremental borrowing rate in determining the present value of lease payments With the exception of the new standards discussed above, there have been no other new accounting pronouncements that have significance, or potential significance, to the Company's financial position, results of operations and cash flows. |
Revenue Recognition | Revenue from contracts with customers is recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Transaction Price Allocated to the Remaining Performance Obligations Remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and partially unsatisfied performance obligations consist of contract liabilities, in-transit orders with destination terms, and non-cancellable backlog. Non-cancellable backlog includes goods and services for which customer purchase orders have been accepted and that are scheduled or in the process of being scheduled for shipment. Contract Balances The Company records accounts receivable when it has an unconditional right to consideration. Contract liabilities are recorded when cash payments are received or due in advance of performance. Contract liabilities consist of advance payments and deferred revenue, where the Company has unsatisfied performance obligations. Contract liabilities are mainly classified as Deferred revenue on the unaudited condensed consolidated balance sheets. |
Net Income (Loss) Per Share | Basic net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period. Potentially dilutive common shares include common shares issuable upon exercise of stock options, vesting of restricted stock unit s and performance shares , and issuances of shares under the Employee Stock Purchase Plan (the "ESPP"), which are reflected in diluted net income (loss) per share by application of the treasury stock method. Potentially dilutive common shares are excluded from the computation of diluted net income (loss) per share when their effect is anti-dilutive. |
Valuation and Expense Information | Valuation and Expense Information The Company measures stock-based compensation at the grant date based on the estimated fair value of the award. Estimated compensation cost relating to RSUs and performance shares is based on the closing fair market value of the Company's common stock on the date of grant. The fair value of options granted and the purchase rights granted under the ESPP is estimated on the date of grant using a Black-Scholes-Merton option valuation model that uses the assumptions noted in the following table. The estimated expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. The risk-free interest rate of options granted and the purchase rights granted under the ESPP is based on the implied yield currently available on U.S. Treasury securities with a remaining term commensurate with the estimated expected term. Expected volatility of options granted under the 2016 Plan and the purchase rights granted under the ESPP is based on historical volatility over the most recent period commensurate with the estimated expected term. |
Revenue (Tables)
Revenue (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Revenue From Contract With Customer [Abstract] | |
Schedule of Remaining Performance Obligations | The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of March 28, 2021: 1 year 2 years Greater than 2 years Total (In thousands) Performance obligations $ 96,828 $ 2,001 $ 1,109 $ 99,938 |
Schedule of Contract Balances | The following table reflects the contract balances as of March 28, 2021 and December 31, 2020, respectively: Balance Sheet Location March 28, 2021 December 31, 2020 (In thousands) Accounts receivable, net Accounts receivable, net $ 312,922 $ 337,052 Contract liabilities - current Deferred revenue $ 15,134 $ 13,458 Contract liabilities - non-current Other non-current liabilities $ 2,982 $ 3,165 |
Schedule of Net Revenue Disaggregated by Geographical Region and Sales Channel | In the following table, net revenue is disaggregated by geographic region and sales channel. The Company conducts business across three geographic regions: Americas; Europe, Middle-East and Africa (“EMEA”); and Asia Pacific ("APAC"). The table also includes reconciliations of the disaggregated revenue by reportable segment. The Company operates and reports in two segments: Connected Home, and Small and Medium Business (“SMB”). Sales and usage-based taxes are excluded from net revenue. Three Months Ended March 28, 2021 March 29, 2020 Connected Home SMB Total Connected Home SMB Total Geographic regions: Americas $ 186,417 $ 32,733 $ 219,150 $ 129,164 $ 29,026 $ 158,190 EMEA 31,173 29,917 61,090 17,971 24,177 42,148 APAC 23,328 14,357 37,685 17,528 12,097 29,625 Total $ 240,918 $ 77,007 $ 317,925 $ 164,663 $ 65,300 $ 229,963 Sales channels: Service provider $ 22,238 $ 799 $ 23,037 $ 26,687 $ 797 $ 27,484 Non-service provider 218,680 76,208 294,888 137,976 64,503 202,479 Total $ 240,918 $ 77,007 $ 317,925 $ 164,663 $ 65,300 $ 229,963 |
Balance Sheet Components (Table
Balance Sheet Components (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Balance Sheet Related Disclosures [Abstract] | |
Schedule of Inventories | Inventories As of March 28, 2021 December 31, 2020 (In thousands) Raw materials $ 6,854 $ 7,756 Finished goods 208,851 164,356 Total $ 215,705 $ 172,112 |
Schedule of Property and Equipment, Net | Property and equipment, net As of March 28, 2021 December 31, 2020 (In thousands) Computer equipment $ 9,399 $ 10,550 Furniture, fixtures and leasehold improvements 18,234 18,674 Software 29,560 29,499 Machinery and equipment 71,100 72,156 Total property and equipment, gross 128,293 130,879 Accumulated depreciation and amortization (113,396 ) (114,799 ) Total $ 14,897 $ 16,080 |
Schedule of Intangibles, Net | Intangibles, net As of March 28, 2021 As of December 31, 2020 Gross Accumulated Amortization Net Gross Accumulated Amortization Net (In thousands) Technology $ 59,799 $ (57,942 ) $ 1,857 $ 59,799 $ (57,835 ) $ 1,964 Customer contracts and relationships 56,800 (56,800 ) — 56,800 (55,534 ) 1,266 Other 10,345 (9,793 ) 552 10,345 (9,676 ) 669 Total $ 126,944 $ (124,535 ) $ 2,409 $ 126,944 $ (123,045 ) $ 3,899 |
Schedule of Other Non-Current Assets | Other non-current assets As of March 28, 2021 December 31, 2020 (In thousands) Non-current deferred income taxes $ 65,514 $ 68,323 Long-term investments 8,686 8,395 Other 6,570 6,032 Total $ 80,770 $ 82,750 |
Schedule of Changes in Carrying Value of Long-term Investments | Long-term investments The Company's long-term investments are primarily comprised of equity investments without readily determinable fair values. The changes in the carrying value of these investments during the periods represented are as follows: Three Months Ended March 28, 2021 March 29, 2020 (In thousands) Carrying value as of the beginning of the period $ 7,758 (1) $ 8,147 Additions from purchase of investments 340 250 Impairment — (4,530 ) Carrying value as of the end of the period $ 8,098 (1) $ 3,867 (1) |
Schedule of Other Accrued Liabilities | Other accrued liabilities As of March 28, 2021 December 31, 2020 (In thousands) Current operating lease liabilities $ 8,985 $ 9,149 Sales and marketing 89,056 83,561 Warranty obligations 8,176 9,240 Sales returns (1) 59,624 66,972 Freight and duty 15,872 14,885 Other 38,609 34,568 Total $ 220,322 $ 218,375 (1 ) |
Derivative Financial Instrume_2
Derivative Financial Instruments (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Schedule of Fair Values of the Company's Derivative Instruments and the Line Items on the Unaudited Condensed Consolidated Balance Sheets | The fair values of the Company's derivative instruments and the line items on the unaudited condensed consolidated balance sheets to which they were recorded as of March 28, 2021, and December 31, 2020, are summarized as follows: Balance Sheet Balance Sheet Location March 28, 2021 December 31, 2020 Location March 28, 2021 December 31, 2020 (In thousands) (In thousands) Derivatives not designated as hedging instruments Prepaid expenses and other current assets $ 973 $ 324 Other accrued liabilities $ 199 $ 2,344 Derivatives designated as hedging instruments Prepaid expenses and other current assets 7 — Other accrued liabilities 1 38 Total $ 980 $ 324 $ 200 $ 2,382 |
Schedule of Company's Derivative Instruments on Accumulated Other Comprehensive Income and the Unaudited Condensed Consolidated Statement of Operations | The effect of the Company's derivative instruments on AOCI and the unaudited condensed consolidated statements of operations for the three months ended March 28, 2021 and March 29, 2020 are summarized as follows: Three Months Ended March 28, 2021 March 29, 2020 Derivatives designated as hedging instruments: Cash flow hedges Foreign currency forward contracts: Gains (losses) recognized in accumulated other comprehensive income (loss) - Effective Portion $ (371 ) $ 985 Gains (losses) reclassified from accumulated other comprehensive income (loss) into income (loss) - Effective Portion (1) Net revenue $ (463 ) $ 676 Cost of revenue $ — $ (2 ) Research and development $ 12 $ (2 ) Sales and marketing $ 26 $ (77 ) General and administrative $ 7 $ (13 ) Derivatives not designated as hedging instruments: Gains recognized in Other income (expense), net $ 1,416 $ 1,778 (1) Stockholders' Equity |
Net Income (Loss) Per Share (Ta
Net Income (Loss) Per Share (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Earnings Per Share [Abstract] | |
Schedule of Net Income (Loss) Per Share | Net income (loss) per share for the three months ended March 28, 2021 and March 29, 2020 are as follows: Three Months Ended March 28, 2021 March 29, 2020 (In thousands, except per share data) Numerator: Net income (loss) $ 22,960 $ (4,173 ) Denominator: Weighted average common shares - basic 30,665 29,583 Potentially dilutive common share equivalent 1,149 — Weighted average common shares - dilutive 31,814 29,583 Basic net income (loss)per share $ 0.75 $ (0.14 ) Diluted net income (loss) per share $ 0.72 $ (0.14 ) Anti-dilutive employee stock-based awards, excluded 287 2,485 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Commitments And Contingencies Disclosure [Abstract] | |
Schedule of Changes in Warranty Obligations | Changes in the Company's warranty obligations, which is included in Other accrued liabilities on the unaudited condensed consolidated balance sheets, were as follows: Three Months Ended March 28, 2021 March 29, 2020 Balance as of beginning of the period $ 9,240 $ 10,556 Provision for warranty liability made 963 1,683 Settlements made (2,027 ) (2,316 ) Balance as of the end of the period $ 8,176 $ 9,923 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Stockholders Equity Note [Abstract] | |
Schedule of Accumulated Other Comprehensive Income | The following table sets forth the changes in accumulated other comprehensive income ("AOCI") by component during the three months ended March 28, 2021 and March 29, 2020: Unrealized gains (losses) on available -for-sale investments Unrealized gains (losses) on derivatives Estimated tax benefit (provision) Total (In thousands) Balance as of December 31, 2020 $ (2 ) $ (42 ) $ 9 $ (35 ) Other comprehensive income (loss) before reclassifications — (371 ) 82 (289 ) Less: Amount reclassified from accumulated other comprehensive income — (418 ) 88 (330 ) Net current period other comprehensive income (loss) — 47 (6 ) 41 Balance as of March 28, 2021 $ (2 ) $ 5 $ 3 $ 6 Unrealized gains (losses) on available -for-sale investments Unrealized gains (losses) on derivatives Estimated tax benefit (provision) Total (In thousands) Balance as of December 31, 2019 $ (2 ) $ 22 $ 1 21 Other comprehensive income (loss) before reclassifications — 985 (175 ) 810 Less: Amount reclassified from accumulated other comprehensive income (loss) — 582 (122 ) 460 Net current period other comprehensive income (loss) — 403 (53 ) 350 Balance as of March 29, 2020 $ (2 ) $ 425 $ (52 ) $ 371 |
Schedule of Reclassification out of AOCI | The following tables provide details about significant amounts reclassified out of each component of AOCI for the three months ended March 28, 2021 and March 29, 2020: Three Months Ended March 28, 2021 March 29, 2020 (In thousands) Amount Reclassified from AOCI Gains (losses) on cash flow hedge: Foreign currency forward contracts Affected line item in the statement of operations Net revenue $ (463 ) $ 676 Cost of revenue — (2 ) Research and development 12 (2 ) Sales and marketing 26 (77 ) General and administrative 7 (13 ) Total before tax (418 ) 582 Tax impact 88 (122 ) Total, net of tax $ (330 ) $ 460 |
Employee Benefit Plans (Tables)
Employee Benefit Plans (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Employee Benefits And Share Based Compensation [Abstract] | |
Schedule of Stock Option Activity | Stock option activity during the three months ended March 28, 2021 was as follows: Number of Shares Weighted Average Exercise Price Per Share (In thousands) (In dollars) Outstanding as of December 31, 2020 1,333 $ 27.86 Exercised (170 ) $ 24.37 Outstanding as of March 28, 2021 1,163 $ 28.37 |
Schedule of RSU Activity | RSU activity during the three months ended March 28, 2021 was as follows: Number of Shares Weighted Average Grant Date Fair Value Per Share (In thousands) (In dollars) Outstanding as of December 31, 2020 1,584 $ 30.66 Granted 22 $ 42.50 Vested (134 ) $ 40.39 Cancelled (24 ) $ 30.40 Outstanding as of March 28, 2021 1,448 $ 29.94 |
Schedule of Performance Shares Activity | Performance shares activity during the three months ended March 28, 2021 was as follows: Number of Shares Weighted Average Grant Date Fair Value Per Share (In thousands) (In dollars) Outstanding as of December 31, 2020 141 $ 28.22 Granted — $ — Vested — $ — Cancelled — $ — Outstanding as of March 28, 2021 141 $ 28.22 |
Schedule of Weighted Average Assumptions | The following table sets forth the weighted average assumptions used to estimate the fair value of purchase rights granted under the ESPP during the three months ended March 28, 2021 and March 29, 2020: Three Months Ended March 28, 2021 March 29, 2020 ESPP Expected life (in years) 0.5 0.5 Risk-free interest rate 0.06 % 1.55 % Expected volatility 50.0 % 38.8 % Dividend yield — — |
Schedule of Total Stock-Based Compensation Expense Resulting from Stock Options, RSUs, Performance Shares and the ESPP | The following table sets forth the stock-based compensation expense resulting from stock options, RSUs, performance shares and the ESPP included in the Company's unaudited condensed consolidated statements of operations: Three Months Ended March 28, 2021 March 29, 2020 (In thousands) Cost of revenue $ 834 $ 705 Research and development 1,146 1,034 Sales and marketing 1,780 1,779 General and administrative 3,200 2,818 Total $ 6,960 $ 6,336 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Segment Reporting [Abstract] | |
Schedule of Reportable Segments and Reconciliation of Segment Contribution Income to Income (Loss) Before Income Taxes | Financial information for each reportable segment and a reconciliation of segment contribution income to income (loss) before income taxes is as follows: Three Months Ended March 28, 2021 March 29, 2020 Net Revenue: Connected Home $ 240,918 $ 164,663 SMB 77,007 65,300 Total net revenue $ 317,925 $ 229,963 Contribution Income: Connected Home $ 47,303 $ 13,587 Contribution margin 19.6 % 8.3 % SMB $ 16,284 $ 13,567 Contribution margin 21.1 % 20.8 % Total segment contribution income $ 63,587 $ 27,154 Corporate and unallocated costs (21,290 ) (18,962 ) Amortization of intangibles (1) (1,445 ) (1,519 ) Stock-based compensation expense (6,960 ) (6,336 ) Change in fair value of contingent consideration — 222 Restructuring and other charges (2,270 ) 135 Litigation reserves, net (295 ) (25 ) Interest income 10 262 Other income (expense), net (2) (562 ) (4,586 ) Income (loss) before income taxes $ 30,775 $ (3,655 ) (1) Amounts exclude amortization expense related to patents within purchased intangibles in cost of revenue. (2) Amounts include gain/loss on investments, net, of $49,000 and $4.5 million for the three months ended March 28, 2021 and March 29, 2020, respectively |
Schedule of Net Revenue by Geography | The following table shows net revenue by geography for the periods indicated: Three Months Ended March 28, 2021 March 29, 2020 (In thousands) United States (U.S.) $ 213,618 $ 154,805 Americas (excluding U.S.) 5,532 3,385 EMEA 61,090 42,148 APAC 37,685 29,625 Total net revenue $ 317,925 $ 229,963 |
Schedule of Long-Lived Asset By Geographic Region | The Company's long-lived assets, which consist of property and equipment, net and operating lease right-of-use assets, net are located in the following geographic locations: As of March 28, 2021 December 31, 2020 (In thousands) United States (U.S.) $ 17,641 $ 19,173 Americas (excluding U.S.) 2,481 2,845 EMEA 3,095 3,215 Singapore 5,601 5,964 APAC (excluding Singapore) (1) 13,822 14,294 Total $ 42,640 $ 45,491 (1) No individual |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Fair Value Disclosures [Abstract] | |
Fair Value, Assets and Liabilities Measured on Recurring Basis | The following tables summarize assets and liabilities measured at fair value on a recurring basis as of March 28, 2021 and December 31, 2020: As of March 28, 2021 Total Quoted market prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) (In thousands) Assets: Cash equivalents: money-market funds $ 160,512 $ 160,512 $ — $ — Available-for-sale debt investments: convertible debt (1) 1,326 — — 1,326 Available-for-sale investments: certificates of deposit (1) 6 — 6 — Trading securities: mutual funds (1) 5,809 5,809 — — Foreign currency forward contracts (2) 980 — 980 — Total assets measured at fair value $ 168,633 $ 166,321 $ 986 $ 1,326 Liabilities: Foreign currency forward contracts (3) $ 200 $ — $ 200 $ — Contingent consideration (4) 3,000 — — 3,000 Total liabilities measured at fair value $ 3,200 $ — $ 200 $ 3,000 As of December 31, 2020 Total Quoted market prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) (In thousands) Assets: Cash equivalents: money-market funds $ 158,054 $ 158,054 $ — $ — Available-for-sale debt investments: convertible debt (1) 1,326 — — 1,326 Available-for-sale investments: certificates of deposit (1) 165 — 165 — Trading securities: mutual funds (1) 5,368 5,368 — — Foreign currency forward contracts (2) 324 — 324 — Total assets measured at fair value $ 165,237 $ 163,422 $ 489 $ 1,326 Liabilities: Foreign currency forward contracts (3) $ 2,382 $ — $ 2,382 $ — Contingent consideration (4) 3,000 — — 3,000 Total liabilities measured at fair value $ 5,382 $ — $ 2,382 $ 3,000 (1) Included in Short-term investments on the Company's unaudited condensed consolidated balance sheets. (2) Included in Prepaid expenses and other current assets on the Company's unaudited condensed consolidated balance sheets. (3) Included in Other accrued liabilities on the Company's unaudited condensed consolidated balance sheets. (4) Included in Other non-current accrued liabilities on the Company's unaudited condensed consolidated balance sheets. The contingent consideration represents the estimated fair value of the additional variable cash consideration payable in connection with the acquisition of Meural in August 2018 that is contingent upon the achievement of certain technical and service revenue milestones. |
Restructuring and Other Charg_2
Restructuring and Other Charges (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Restructuring Charges [Abstract] | |
Summary of Activity Related to Accrued Restructuring and Other Charges | The following table provides a summary of the activity related to accrued restructuring and other charges for the three months ended March 28, 2021: Accrued Restructuring and Other Charges at December 31, 2020 Additions (1) Cash Payments Adjustments Accrued Restructuring and Other Charges at March 28, 2021 (In thousands) Restructuring Employee termination charges $ 87 $ 1,885 $ (114 ) $ (25 ) $ 1,833 Lease contract termination and other charges 227 375 (181 ) (64 ) 357 Total Restructuring and other charges $ 314 $ 2,260 $ (295 ) $ (89 ) $ 2,190 (1) |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 28, 2021 | |
Leases [Abstract] | |
Summary of Lease Cost and Supplemental Cash Flow Information | The components of lease cost were as follows: Three Months Ended March 28, 2021 March 29, 2020 (In Thousands) Operating lease cost $ 2,394 $ 2,880 Short-term lease cost 330 114 Total lease cost (1) $ 2,724 $ 2,994 ( 1 ) Included in cost of revenue, sales and marketing, research and development and general and administration in the Company's unaudited condensed statement of operations. Supplemental cash flow information related to leases was as follows: Three Months Ended March 28, 2021 March 29, 2020 (In Thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows relating to operating leases $ 2,109 $ 3,074 Lease liabilities arising from obtaining right-of-use assets: Operating leases $ 394 $ 1,295 |
Revenue (Schedule of Remaining
Revenue (Schedule of Remaining Performance Obligations) (Details) - USD ($) $ in Thousands | Mar. 28, 2021 | Mar. 29, 2020 |
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items] | ||
Performance obligations, amount | $ 99,938 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2021-03-29 | ||
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items] | ||
Performance obligations, amount | $ 96,828 | |
Performance obligations, period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2022-03-29 | ||
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items] | ||
Performance obligations, amount | $ 2,001 | |
Performance obligations, period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2023-03-29 | ||
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items] | ||
Performance obligations, amount | $ 1,109 | |
Performance obligations, period |
Revenue (Schedule of Remainin_2
Revenue (Schedule of Remaining Performance Obligations) (Details 1) $ in Thousands | Mar. 28, 2021USD ($) |
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items] | |
Performance obligations, amount | $ 99,938 |
Revenue (Schedule of Contract B
Revenue (Schedule of Contract Balances) (Details) - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 31, 2020 |
Revenue From Contract With Customer [Abstract] | ||
Accounts receivable, net | $ 312,922 | $ 337,052 |
Contract liabilities - current | 15,134 | 13,458 |
Contract liabilities - non-current | $ 2,982 | $ 3,165 |
Revenue (Narrative) (Details)
Revenue (Narrative) (Details) $ in Millions | 3 Months Ended |
Mar. 28, 2021USD ($)regionsegment | |
Revenue From Contract With Customer [Abstract] | |
Revenue deferred due to unsatisfied performance obligations | $ 7.4 |
Revenue recognized for satisfaction of performance obligations | 5.9 |
Contract with Customer, Liability Included In Beginning Balance, Revenue Recognized | $ 5.3 |
Number of geographic regions in which the Company conducts business | region | 3 |
Number of operating segments | segment | 2 |
Number of reportable segments | segment | 2 |
Revenue (Schedule of Net Revenu
Revenue (Schedule of Net Revenue Disaggregated by Geographical Region and Sales Channel) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Disaggregation of Revenue [Line Items] | ||
Total net revenue | $ 317,925 | $ 229,963 |
Service provider | ||
Disaggregation of Revenue [Line Items] | ||
Total net revenue | 23,037 | 27,484 |
Non-service provider | ||
Disaggregation of Revenue [Line Items] | ||
Total net revenue | 294,888 | 202,479 |
Connected Home | ||
Disaggregation of Revenue [Line Items] | ||
Total net revenue | 240,918 | 164,663 |
Connected Home | Service provider | ||
Disaggregation of Revenue [Line Items] | ||
Total net revenue | 22,238 | 26,687 |
Connected Home | Non-service provider | ||
Disaggregation of Revenue [Line Items] | ||
Total net revenue | 218,680 | 137,976 |
SMB | ||
Disaggregation of Revenue [Line Items] | ||
Total net revenue | 77,007 | 65,300 |
SMB | Service provider | ||
Disaggregation of Revenue [Line Items] | ||
Total net revenue | 799 | 797 |
SMB | Non-service provider | ||
Disaggregation of Revenue [Line Items] | ||
Total net revenue | 76,208 | 64,503 |
Americas | ||
Disaggregation of Revenue [Line Items] | ||
Total net revenue | 219,150 | 158,190 |
Americas | Connected Home | ||
Disaggregation of Revenue [Line Items] | ||
Total net revenue | 186,417 | 129,164 |
Americas | SMB | ||
Disaggregation of Revenue [Line Items] | ||
Total net revenue | 32,733 | 29,026 |
EMEA | ||
Disaggregation of Revenue [Line Items] | ||
Total net revenue | 61,090 | 42,148 |
EMEA | Connected Home | ||
Disaggregation of Revenue [Line Items] | ||
Total net revenue | 31,173 | 17,971 |
EMEA | SMB | ||
Disaggregation of Revenue [Line Items] | ||
Total net revenue | 29,917 | 24,177 |
APAC | ||
Disaggregation of Revenue [Line Items] | ||
Total net revenue | 37,685 | 29,625 |
APAC | Connected Home | ||
Disaggregation of Revenue [Line Items] | ||
Total net revenue | 23,328 | 17,528 |
APAC | SMB | ||
Disaggregation of Revenue [Line Items] | ||
Total net revenue | $ 14,357 | $ 12,097 |
Balance Sheet Components (Sched
Balance Sheet Components (Schedule of Inventories) (Details) - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 31, 2020 |
Balance Sheet Related Disclosures [Abstract] | ||
Raw materials | $ 6,854 | $ 7,756 |
Finished goods | 208,851 | 164,356 |
Total | $ 215,705 | $ 172,112 |
Balance Sheet Components (Narra
Balance Sheet Components (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Balance Sheet Related Disclosures [Abstract] | ||
Provisions for excess and obsolete inventory | $ 1,201 | $ 2,403 |
Amortization expense | 1,500 | $ 1,600 |
Equity securities without readily determinable fair value, cumulative downward adjustments for price change and impairment loss | 7,900 | |
Cumulative upward adjustments for price changes | $ 200 |
Balance Sheet Components (Sch_2
Balance Sheet Components (Schedule of Property and Equipment, Net) (Details) - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 31, 2020 |
Total property and equipment, gross | $ 128,293 | $ 130,879 |
Accumulated depreciation and amortization | (113,396) | (114,799) |
Total | 14,897 | 16,080 |
Computer equipment | ||
Total property and equipment, gross | 9,399 | 10,550 |
Furniture, fixtures and leasehold improvements | ||
Total property and equipment, gross | 18,234 | 18,674 |
Software | ||
Total property and equipment, gross | 29,560 | 29,499 |
Machinery and equipment | ||
Total property and equipment, gross | $ 71,100 | $ 72,156 |
Balance Sheet Components (Prope
Balance Sheet Components (Property and Equipment, Other Information) (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Balance Sheet Related Disclosures [Abstract] | ||
Depreciation expense | $ 3.1 | $ 3 |
Balance Sheet Components (Sch_3
Balance Sheet Components (Schedule of Intangibles, Net) (Details) - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 31, 2020 |
Intangible Assets [Line Items] | ||
Gross | $ 126,944 | $ 126,944 |
Accumulated Amortization | (124,535) | (123,045) |
Net | 2,409 | 3,899 |
Technology | ||
Intangible Assets [Line Items] | ||
Gross | 59,799 | 59,799 |
Accumulated Amortization | (57,942) | (57,835) |
Net | 1,857 | 1,964 |
Customer contracts and relationships | ||
Intangible Assets [Line Items] | ||
Gross | 56,800 | 56,800 |
Accumulated Amortization | (56,800) | (55,534) |
Net | 0 | 1,266 |
Other | ||
Intangible Assets [Line Items] | ||
Gross | 10,345 | 10,345 |
Accumulated Amortization | (9,793) | (9,676) |
Net | $ 552 | $ 669 |
Balance Sheet Components (Sch_4
Balance Sheet Components (Schedule of Other Non-Current Assets) (Details) - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 31, 2020 |
Balance Sheet Related Disclosures [Abstract] | ||
Non-current deferred income taxes | $ 65,514 | $ 68,323 |
Long-term investments | 8,686 | 8,395 |
Other | 6,570 | 6,032 |
Total | $ 80,770 | $ 82,750 |
Balance Sheet Components (Sch_5
Balance Sheet Components (Schedule of Changes in Carrying Value of Long-term Investments) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Balance Sheet Related Disclosures [Abstract] | ||
Beginning Balance | $ 7,758 | $ 8,147 |
Additions from purchase of investments | 340 | 250 |
Impairment | 0 | (4,530) |
Ending Balance | $ 8,098 | $ 3,867 |
Balance Sheet Components (Sch_6
Balance Sheet Components (Schedule of Changes in Carrying Value of Long-term Investments) (Parentheticals) (Details) - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 31, 2020 |
Balance Sheet Related Disclosures [Line Items] | ||
Equity investments | $ 8,686 | $ 8,395 |
Limited partnership fund | ||
Balance Sheet Related Disclosures [Line Items] | ||
Equity investments | $ 600 |
Balance Sheet Components (Sch_7
Balance Sheet Components (Schedule of Other Accrued Liabilities) (Details) - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 31, 2020 | |
Balance Sheet Related Disclosures [Abstract] | |||
Current operating lease liabilities | $ 8,985 | $ 9,149 | |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | ntgr:OperatingLeaseLiabilityCurrentMember | ntgr:OperatingLeaseLiabilityCurrentMember | |
Sales and marketing | $ 89,056 | $ 83,561 | |
Warranty obligations | 8,176 | 9,240 | |
Sales returns | [1] | 59,624 | 66,972 |
Freight and duty | 15,872 | 14,885 | |
Other | 38,609 | 34,568 | |
Total | $ 220,322 | $ 218,375 | |
[1] | Inventory expected to be received from future sales returns amounted to $28.9 million and $32.6 million as of March 28, 2021 and December 31, 2020, respectively. Provisions to write down expected returned inventory to net realizable value amounted to $16.1 million and $18.0 million as of March 28, 2021 and December 31, 2020, respectively. |
Balance Sheet Components (Sch_8
Balance Sheet Components (Schedule of Other Accrued Liabilities) (Parentheticals) (Details) - USD ($) $ in Millions | Mar. 28, 2021 | Dec. 31, 2020 |
Balance Sheet Related Disclosures [Abstract] | ||
Inventory expected to be received from future sales returns | $ 28.9 | $ 32.6 |
Provisions to write down expected returned inventory to net realizable value | $ 16.1 | $ 18 |
Derivative Financial Instrume_3
Derivative Financial Instruments (Narrative) (Details) - Foreign currency forward contracts $ in Millions | 3 Months Ended | |
Mar. 28, 2021USD ($)derivative_instrument | Mar. 29, 2020 | |
Derivatives not designated as hedging instruments | ||
Derivative [Line Items] | ||
Approximate number of derivatives per quarter | derivative_instrument | 10 | |
Notional amount | $ | $ 2 | |
Cash Flow Hedges | ||
Derivative [Line Items] | ||
Approximate number of derivatives per quarter | derivative_instrument | 10 | |
Notional amount | $ | $ 6 | |
Estimated term of reclassification from OCI to Income | 12 months | 12 months |
Maximum | ||
Derivative [Line Items] | ||
Term of derivative contracts | 6 months | |
Maximum | Derivatives not designated as hedging instruments | ||
Derivative [Line Items] | ||
Term of derivative contracts | 3 months | |
Maximum | Cash Flow Hedges | ||
Derivative [Line Items] | ||
Term of derivative contracts | 6 months |
Derivative Financial Instrume_4
Derivative Financial Instruments (Schedule of Fair Values of the Company's Derivative Instruments and the Line Items on the Unaudited Condensed Consolidated Balance Sheets) (Details) - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 31, 2020 |
Derivatives, Fair Value [Line Items] | ||
Gross Amounts of recognized assets | $ 980 | $ 324 |
Gross Amounts of recognized liabilities | 200 | 2,382 |
Prepaid expenses and other current assets | Derivatives not designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Gross Amounts of recognized assets | 973 | 324 |
Prepaid expenses and other current assets | Derivatives designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Gross Amounts of recognized assets | 7 | 0 |
Other accrued liabilities | Derivatives not designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Gross Amounts of recognized liabilities | 199 | 2,344 |
Other accrued liabilities | Derivatives designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Gross Amounts of recognized liabilities | $ 1 | $ 38 |
Derivative Financial Instrume_5
Derivative Financial Instruments (Schedule of Company's Derivative Instruments on Accumulated Other Comprehensive Income and the Unaudited Condensed Consolidated Statement of Operations) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Derivatives designated as hedging instruments | Cash Flow Hedges | Foreign Exchange Forward | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gains (losses) recognized in accumulated other comprehensive income (loss) - Effective Portion | $ (371) | $ 985 |
Derivatives designated as hedging instruments | Cash Flow Hedges | Foreign Exchange Forward | Net revenue | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gains (losses) reclassified from accumulated other comprehensive income into Income (loss) -Effective Portion | (463) | 676 |
Derivatives designated as hedging instruments | Cash Flow Hedges | Foreign Exchange Forward | Cost of revenue | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gains (losses) reclassified from accumulated other comprehensive income into Income (loss) -Effective Portion | 0 | (2) |
Derivatives designated as hedging instruments | Cash Flow Hedges | Foreign Exchange Forward | Research and development | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gains (losses) reclassified from accumulated other comprehensive income into Income (loss) -Effective Portion | 12 | (2) |
Derivatives designated as hedging instruments | Cash Flow Hedges | Foreign Exchange Forward | Sales and marketing | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gains (losses) reclassified from accumulated other comprehensive income into Income (loss) -Effective Portion | 26 | (77) |
Derivatives designated as hedging instruments | Cash Flow Hedges | Foreign Exchange Forward | General and administrative | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gains (losses) reclassified from accumulated other comprehensive income into Income (loss) -Effective Portion | 7 | (13) |
Derivatives not designated as hedging instruments | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gains recognized in Other income (expense), net | $ 1,416 | $ 1,778 |
Net Income (Loss) Per Share (Sc
Net Income (Loss) Per Share (Schedule of Net Income (Loss) Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Numerator: | ||
Net income (loss) | $ 22,960 | $ (4,173) |
Denominator: | ||
Weighted average common shares - basic | 30,665 | 29,583 |
Potentially dilutive common share equivalent | 1,149 | 0 |
Weighted average common shares - dilutive | 31,814 | 29,583 |
Basic net income (loss)per share | $ 0.75 | $ (0.14) |
Diluted net income (loss) per share | $ 0.72 | $ (0.14) |
Anti-dilutive employee stock-based awards, excluded | 287 | 2,485 |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Income Tax Disclosure [Abstract] | ||
Tax impact | $ 7,815 | $ 518 |
Effective tax rate | 25.40% | (14.20%) |
Possible reduction in liabilities for uncertain tax positions | $ 500 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) | Apr. 01, 2021patent | Mar. 19, 2021patent | Jan. 13, 2021patent | Oct. 19, 2020case | Sep. 09, 2020patent | Jun. 21, 2019patent | Sep. 14, 2018patent | Jul. 18, 2018patent | Jul. 14, 2017patent | Apr. 19, 2017patent | Aug. 22, 2014patent | Dec. 31, 2020case | Feb. 08, 2019case | Mar. 28, 2021USD ($)claimpatent |
Loss Contingencies [Line Items] | ||||||||||||||
Number of days for non-cancellation of purchase obligations prior to expected shipment date | 30 days | |||||||||||||
Non-cancelable purchase commitments with suppliers | $ | $ 166,200,000 | |||||||||||||
Liabilities recorded for director and officer indemnification agreements | $ | 0 | |||||||||||||
Liabilities recorded for customers, distributors, and resellers indemnification agreements | $ | $ 0 | |||||||||||||
Number of existing cases and proceedings that the Company currently believes are liking to have a material adverse effect on its financial position | claim | claim | 0 | |||||||||||||
The future length the Company currently considered regarding existing cases and proceedings that are likely to have a material adverse effect on it (in months) | 12 months | |||||||||||||
Number of class action lawsuits | case | 6 | |||||||||||||
Netgear and Arlo | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Number of class action lawsuits | case | 4 | |||||||||||||
NETGEAR | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Number of class action lawsuits | case | 5 | |||||||||||||
Arlo | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Number of class action lawsuits | case | 2 | |||||||||||||
Via Vadis v. NETGEAR | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Number of patents accused of infringing upon | 3 | |||||||||||||
Vivato v. NETGEAR | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Number of patents under litigation | 3 | |||||||||||||
Hera Wireless v. NETGEAR | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Number of patents accused of infringing upon | 6 | 3 | 3 | 9 | ||||||||||
Number of patents claims canceled | 8 | |||||||||||||
Aegis 11 S.A. v. NETGEAR [Member] | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Number of patents accused of infringing upon | 3 | |||||||||||||
Number of patents | 3 | |||||||||||||
Number of patents dismissed | 1 | |||||||||||||
Beijing Tianxing Ebel Information Consulting Co., Ltd v. NETGEAR Inc. | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Number of complaints filed against company | case | 2 | |||||||||||||
Number of cases filed by company | case | 3 | |||||||||||||
WSOU v. NETGEAR Inc | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Number of patents | 3 | |||||||||||||
Shenzhen Yuanyu and Gaoping Yaoyi v. NETGEAR Beijing | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Number of patents | 7 | |||||||||||||
Beijing Yiwen v. NETGER Beijing | Subsequent Event | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Number of patents | 2 | |||||||||||||
46 to 60 Days | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Percentage of cancelable orders | 50.00% | |||||||||||||
31 to 45 Days | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Percentage of cancelable orders | 25.00% | |||||||||||||
Non-Trade Activities | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Long-term, non-cancellable purchase commitments | $ | $ 15,800,000 | |||||||||||||
Minimum | 46 to 60 Days | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Required notice period prior to expected shipment date | 46 days | |||||||||||||
Minimum | 31 to 45 Days | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Required notice period prior to expected shipment date | 31 days | |||||||||||||
Maximum | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Ordering horizon extended period | 15 months | |||||||||||||
Maximum | 46 to 60 Days | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Required notice period prior to expected shipment date | 60 days | |||||||||||||
Maximum | 31 to 45 Days | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Required notice period prior to expected shipment date | 45 days |
Commitments and Contingencies_3
Commitments and Contingencies (Schedule of Changes in Warranty Obligations) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Movement in Standard Product Warranty Accrual [Roll Forward] | ||
Balance as of beginning of the period | $ 9,240 | $ 10,556 |
Provision for warranty liability made | 963 | 1,683 |
Settlements made | (2,027) | (2,316) |
Balance as of the end of the period | $ 8,176 | $ 9,923 |
Stockholders' Equity (Narrative
Stockholders' Equity (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Stockholders Equity Note [Abstract] | ||
Shares remaining authorized for repurchase (in shares) | 2,600,000 | |
Stock repurchased (in shares) | 0 | 600,000 |
Cost of stock repurchased | $ 15,008 | |
RSU withholdings (in shares) | 48,000 | 54,000 |
RSU withholdings | $ 1,964 | $ 1,347 |
Stockholders' Equity (Schedule
Stockholders' Equity (Schedule of Changes in Accumulated Other Comprehensive Income by Component) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Estimated tax benefit (provision) | ||
Beginning balance | $ 9 | $ 1 |
Other comprehensive income (loss) before reclassifications | 82 | (175) |
Less: Amount reclassified from accumulated other comprehensive income (loss) | 88 | (122) |
Net current period other comprehensive income (loss) | (6) | (53) |
Ending balance | 3 | (52) |
AOCI, after tax | ||
Beginning balance | 689,384 | 608,693 |
Other comprehensive income (loss) before reclassifications | (289) | 810 |
Less: Amount reclassified from accumulated other comprehensive income (loss) | (330) | 460 |
Net current period other comprehensive income (loss) | 41 | 350 |
Ending balance | 724,423 | 597,791 |
Unrealized gains (losses) on available-for-sale investments | ||
AOCI, before tax | ||
Beginning balance | (2) | (2) |
Other comprehensive income (loss) before reclassifications | 0 | 0 |
Less: Amount reclassified from accumulated other comprehensive income (loss) | 0 | 0 |
Net current period other comprehensive income (loss) | 0 | 0 |
Ending balance | (2) | (2) |
Unrealized gains (losses) on derivatives | ||
AOCI, before tax | ||
Beginning balance | (42) | 22 |
Other comprehensive income (loss) before reclassifications | (371) | 985 |
Less: Amount reclassified from accumulated other comprehensive income (loss) | (418) | 582 |
Net current period other comprehensive income (loss) | 47 | 403 |
Ending balance | 5 | 425 |
AOCI | ||
AOCI, after tax | ||
Beginning balance | (35) | 21 |
Ending balance | $ 6 | $ 371 |
Stockholders' Equity (Schedul_2
Stockholders' Equity (Schedule of Reclassifications out of AOCI) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Reclassification Out of Accumulated Other Comprehensive Income [Line Items] | ||
Net revenue | $ 317,925 | $ 229,963 |
Cost of revenue | 206,984 | 163,722 |
Research and development | 23,829 | 19,739 |
Sales and marketing | 37,815 | 33,031 |
General and administrative | 15,405 | 13,134 |
Total before tax | 30,775 | (3,655) |
Tax impact | (7,815) | (518) |
Net income (loss) | 22,960 | (4,173) |
Amount Reclassified from AOCI | ||
Reclassification Out of Accumulated Other Comprehensive Income [Line Items] | ||
Net revenue | (463) | 676 |
Cost of revenue | 0 | (2) |
Research and development | 12 | (2) |
Sales and marketing | 26 | (77) |
General and administrative | 7 | (13) |
Total before tax | (418) | 582 |
Tax impact | 88 | (122) |
Net income (loss) | $ (330) | $ 460 |
Employee Benefit Plans (Narrati
Employee Benefit Plans (Narrative) (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | |
Jul. 31, 2020 | Mar. 28, 2021 | Mar. 29, 2020 | |
A2016 Incentive Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares reserved for future grant (in shares) | 2,600,000 | ||
Employee Stock Purchase Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares reserved for future grant (in shares) | 300,000 | ||
Maximum percentage of compensation contributed by employees (in percentage) | 10.00% | ||
Purchase percentage of stock at fair market value (in percentage) | 85.00% | ||
Options and RSUs | A2016 Incentive Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting term | 4 years | ||
Performance Shares | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting term | 3 years | ||
Performance Shares | Minimum | Target Shares Granted | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Percentage vest of performance shares | 0.00% | ||
Performance Shares | Maximum | Target Shares Granted | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Percentage vest of performance shares | 150.00% | ||
Performance Shares | A2016 Incentive Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting term | 3 years | ||
Share-based Payment Arrangement, Option | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock option granted | 0 | 0 | |
Total unrecognized compensation | $ 2.4 | ||
Weighted-average period of recognition of stock based compensation | 1 year 1 month 6 days | ||
Restricted Stock Units (RSUs) | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total unrecognized compensation | $ 30.8 | ||
Weighted-average period of recognition of stock based compensation | 2 years |
Employee Benefit Plans (Schedul
Employee Benefit Plans (Schedule of Stock Option Activity) (Details) - Share-based Payment Arrangement, Option shares in Thousands | 3 Months Ended |
Mar. 28, 2021$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |
Number of shares, beginning balance (in shares) | shares | 1,333 |
Number of shares, exercised (in shares) | shares | (170) |
Number of shares, ending balance (in shares) | shares | 1,163 |
Beginning balance (in dollars per share) | $ / shares | $ 27.86 |
Exercised (in dollars per share) | $ / shares | 24.37 |
Ending balance (in dollars per share) | $ / shares | $ 28.37 |
Employee Benefit Plans (Sched_2
Employee Benefit Plans (Schedule of RSU Activity) (Details) - Restricted Stock Units (RSUs) shares in Thousands | 3 Months Ended |
Mar. 28, 2021$ / sharesshares | |
Number of Shares | |
Beginning balance (in shares) | shares | 1,584 |
Granted (in shares) | shares | 22 |
Vested (in shares) | shares | (134) |
Cancelled (in shares) | shares | (24) |
Ending balance (in shares) | shares | 1,448 |
Weighted Average Grant Date Fair Value Per Share | |
Beginning Balance (in dollars per share) | $ / shares | $ 30.66 |
Granted (in dollars per share) | $ / shares | 42.50 |
Vested (in dollars per share) | $ / shares | 40.39 |
Cancelled (in dollars per share) | $ / shares | 30.40 |
Ending Balance (in dollars per share) | $ / shares | $ 29.94 |
Employee Benefit Plans (Sched_3
Employee Benefit Plans (Schedule of Performance Shares Activity) (Details) - Performance Shares shares in Thousands | 3 Months Ended |
Mar. 28, 2021$ / sharesshares | |
Number of Shares | |
Beginning balance (in shares) | shares | 141 |
Granted (in shares) | shares | 0 |
Vested (in shares) | shares | 0 |
Cancelled (in shares) | shares | 0 |
Ending balance (in shares) | shares | 141 |
Weighted Average Grant Date Fair Value Per Share | |
Beginning Balance (in dollars per share) | $ / shares | $ 28.22 |
Granted (in dollars per share) | $ / shares | 0 |
Vested (in dollars per share) | $ / shares | 0 |
Cancelled (in dollars per share) | $ / shares | 0 |
Ending Balance (in dollars per share) | $ / shares | $ 28.22 |
Employee Benefit Plans (Sched_4
Employee Benefit Plans (Schedule of Valuation and Expense Information) (Details) - ESPP | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected life (in years) | 6 months | 6 months |
Risk-free interest rate | 0.06% | 1.55% |
Expected volatility | 50.00% | 38.80% |
Dividend yield | 0.00% | 0.00% |
Employee Benefit Plans (Sched_5
Employee Benefit Plans (Schedule of Total Stock-Based Compensation Expense Resulting from Stock Options, RSUs, Performance Shares and the ESPP) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock-based compensation | $ 6,960 | $ 6,336 |
Cost of revenue | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock-based compensation | 834 | 705 |
Research and development | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock-based compensation | 1,146 | 1,034 |
Sales and marketing | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock-based compensation | 1,780 | 1,779 |
General and administrative | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock-based compensation | $ 3,200 | $ 2,818 |
Segment Information (Narrative)
Segment Information (Narrative) (Details) | 3 Months Ended |
Mar. 28, 2021segment | |
Segment Reporting [Abstract] | |
Number of operating segments | 2 |
Number of reportable segments | 2 |
Segment Information (Schedule o
Segment Information (Schedule of Reportable Segments and Reconciliation of Segment Contribution Income to Income (Loss) Before Income Taxes) (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 28, 2021 | Mar. 29, 2020 | ||
Segment Reporting Information [Line Items] | |||
Total net revenue | $ 317,925 | $ 229,963 | |
Total segment contribution income | 63,587 | 27,154 | |
Corporate and unallocated costs | (21,290) | (18,962) | |
Amortization of intangibles | [1] | (1,445) | (1,519) |
Stock-based compensation expense | (6,960) | (6,336) | |
Change in fair value of contingent consideration | 0 | 222 | |
Restructuring and other charges | (2,270) | 135 | |
Litigation reserves, net | (295) | (25) | |
Interest income | 10 | 262 | |
Other income (expense), net | [2] | (562) | (4,586) |
Total before tax | 30,775 | (3,655) | |
Connected Home | |||
Segment Reporting Information [Line Items] | |||
Total net revenue | 240,918 | 164,663 | |
Total segment contribution income | $ 47,303 | $ 13,587 | |
Segment contribution margin | 19.60% | 8.30% | |
SMB | |||
Segment Reporting Information [Line Items] | |||
Total net revenue | $ 77,007 | $ 65,300 | |
Total segment contribution income | $ 16,284 | $ 13,567 | |
Segment contribution margin | 21.10% | 20.80% | |
[1] | Amounts exclude amortization expense related to patents within purchased intangibles in cost of revenue. | ||
[2] | Amounts include gain/loss on investments, net, of $49,000 and $4.5 million for the three months ended March 28, 2021 and March 29, 2020, respectively |
Segment Information (Schedule_2
Segment Information (Schedule of Reportable Segments and Reconciliation of Segment Contribution Income to Income (Loss) Before Income Taxes) (Parenthetical) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Segment Reporting [Abstract] | ||
Gain/loss on investments, net | $ 49 | $ 4,530 |
Segment Information (Schedule_3
Segment Information (Schedule of Net Revenue by Geographic Areas) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Segment Reporting Information [Line Items] | ||
Total net revenue | $ 317,925 | $ 229,963 |
United States (U.S.) | ||
Segment Reporting Information [Line Items] | ||
Total net revenue | 213,618 | 154,805 |
Americas (excluding U.S.) | ||
Segment Reporting Information [Line Items] | ||
Total net revenue | 5,532 | 3,385 |
EMEA | ||
Segment Reporting Information [Line Items] | ||
Total net revenue | 61,090 | 42,148 |
APAC | ||
Segment Reporting Information [Line Items] | ||
Total net revenue | $ 37,685 | $ 29,625 |
Segment Information (Schedule_4
Segment Information (Schedule of Long-Lived Asset by Geographic Region) (Details) - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 31, 2020 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Total | $ 42,640 | $ 45,491 | |
United States (U.S.) | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Total | 17,641 | 19,173 | |
Americas (excluding U.S.) | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Total | 2,481 | 2,845 | |
EMEA | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Total | 3,095 | 3,215 | |
Singapore | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Total | 5,601 | 5,964 | |
APAC (excluding Singapore) | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Total | [1] | $ 13,822 | $ 14,294 |
[1] | No individual |
Segment Information (Schedule_5
Segment Information (Schedule of Long-Lived Asset by Geographic Region) (Parenthetical) (Details) | 3 Months Ended |
Mar. 28, 2021 | |
Maximum | APAC (excluding Singapore) | |
Revenues From External Customers And Long Lived Assets [Line Items] | |
Percentage of total long-lived assets owned | 10.00% |
Fair Value Measurements (Summar
Fair Value Measurements (Summary of Valuation of Company's Financial Instruments by Various Levels) (Details) - USD ($) $ in Thousands | Mar. 28, 2021 | Dec. 31, 2020 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | $ 168,633 | $ 165,237 | |
Liabilities measured at fair value | 3,200 | 5,382 | |
Quoted market prices in active markets (Level 1) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | 166,321 | 163,422 | |
Liabilities measured at fair value | 0 | 0 | |
Significant other observable inputs (Level 2) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | 986 | 489 | |
Liabilities measured at fair value | 200 | 2,382 | |
Significant unobservable inputs (Level 3) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | 1,326 | 1,326 | |
Liabilities measured at fair value | 3,000 | 3,000 | |
Cash equivalents | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | 160,512 | 158,054 | |
Cash equivalents | Quoted market prices in active markets (Level 1) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | 160,512 | 158,054 | |
Cash equivalents | Significant other observable inputs (Level 2) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | 0 | 0 | |
Cash equivalents | Significant unobservable inputs (Level 3) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | 0 | 0 | |
Certificates of deposit | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | [1] | 6 | 165 |
Certificates of deposit | Quoted market prices in active markets (Level 1) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | [1] | 0 | 0 |
Certificates of deposit | Significant other observable inputs (Level 2) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | [1] | 6 | 165 |
Certificates of deposit | Significant unobservable inputs (Level 3) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | [1] | 0 | 0 |
Trading securities | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | [1] | 5,809 | 5,368 |
Trading securities | Quoted market prices in active markets (Level 1) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | [1] | 5,809 | 5,368 |
Trading securities | Significant other observable inputs (Level 2) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | [1] | 0 | 0 |
Trading securities | Significant unobservable inputs (Level 3) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | [1] | 0 | 0 |
Convertible debt | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | [1] | 1,326 | 1,326 |
Convertible debt | Quoted market prices in active markets (Level 1) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | [1] | 0 | 0 |
Convertible debt | Significant other observable inputs (Level 2) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | [1] | 0 | 0 |
Convertible debt | Significant unobservable inputs (Level 3) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | [1] | 1,326 | 1,326 |
Foreign currency forward contracts | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | [2] | 980 | 324 |
Liabilities measured at fair value | [3] | 200 | 2,382 |
Foreign currency forward contracts | Quoted market prices in active markets (Level 1) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | [2] | 0 | 0 |
Liabilities measured at fair value | [3] | 0 | 0 |
Foreign currency forward contracts | Significant other observable inputs (Level 2) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | [2] | 980 | 324 |
Liabilities measured at fair value | [3] | 200 | 2,382 |
Foreign currency forward contracts | Significant unobservable inputs (Level 3) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | [2] | 0 | 0 |
Liabilities measured at fair value | [3] | 0 | 0 |
Contingent Consideration | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Liabilities measured at fair value | [4] | 3,000 | 3,000 |
Contingent Consideration | Quoted market prices in active markets (Level 1) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Liabilities measured at fair value | [4] | 0 | 0 |
Contingent Consideration | Significant other observable inputs (Level 2) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Liabilities measured at fair value | [4] | 0 | 0 |
Contingent Consideration | Significant unobservable inputs (Level 3) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Liabilities measured at fair value | [4] | $ 3,000 | $ 3,000 |
[1] | Included in Short-term investments on the Company's unaudited condensed consolidated balance sheets. | ||
[2] | Included in Prepaid expenses and other current assets on the Company's unaudited condensed consolidated balance sheets. | ||
[3] | Included in Other accrued liabilities on the Company's unaudited condensed consolidated balance sheets. | ||
[4] | Included in Other non-current accrued liabilities on the Company's unaudited condensed consolidated balance sheets. The contingent consideration represents the estimated fair value of the additional variable cash consideration payable in connection with the acquisition of Meural in August 2018 that is contingent upon the achievement of certain technical and service revenue milestones. |
Restructuring and Other Charg_3
Restructuring and Other Charges - (Narrative) (Details) | 3 Months Ended |
Mar. 28, 2021 | |
Restructuring Charges [Abstract] | |
Remaining liabilities of restructuring and related activities, paid off date | 2021-07 |
Restructuring and Other Charg_4
Restructuring and Other Charges (Summary of Activity Related to Accrued Restructuring and Other Charges ) (Details) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021USD ($) | ||
Restructuring | ||
Accrued Restructuring and Other Charges at December 31, 2020 | $ 314 | |
Additions | 2,260 | [1] |
Cash Payments | (295) | |
Adjustments | (89) | |
Accrued Restructuring and Other Charges at March 28, 2021 | 2,190 | |
Employee Termination Charges | ||
Restructuring | ||
Accrued Restructuring and Other Charges at December 31, 2020 | 87 | |
Additions | 1,885 | [1] |
Cash Payments | (114) | |
Adjustments | (25) | |
Accrued Restructuring and Other Charges at March 28, 2021 | 1,833 | |
Lease Contract Termination and Other Charges | ||
Restructuring | ||
Accrued Restructuring and Other Charges at December 31, 2020 | 227 | |
Additions | 375 | [1] |
Cash Payments | (181) | |
Adjustments | (64) | |
Accrued Restructuring and Other Charges at March 28, 2021 | $ 357 | |
[1] | Total restructuring and other charges recognized in the Company's unaudited condensed consolidated statements of operations for the period presented included non-cash charges and adjustments, net of $75,000, which were excluded from the table above. |
Restructuring and Other Charg_5
Restructuring and Other Charges (Summary of Activity Related to Accrued Restructuring and Other Charges ) (Parenthetical) (Details) | 3 Months Ended |
Mar. 28, 2021USD ($) | |
Restructuring Charges [Abstract] | |
Restructuring non-cash charges and adjustments, net | $ 75,000 |
Leases (Narrative) (Details)
Leases (Narrative) (Details) | 3 Months Ended |
Mar. 28, 2021 | |
Lessee, Lease, Description [Line Items] | |
Lease expiration date | December 2026 |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Operating lease, remaining lease term | 6 years |
Operating lease, renewal term option | 5 years |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Operating lease, remaining lease term | 1 year |
Leases (Lease Cost) (Details)
Leases (Lease Cost) (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 28, 2021 | Mar. 29, 2020 | ||
Leases [Abstract] | |||
Operating lease cost | $ 2,394 | $ 2,880 | |
Short-term Lease, Cost | 330 | 114 | |
Total lease cost | [1] | $ 2,724 | $ 2,994 |
[1] | Included in cost of revenue, sales and marketing, research and development and general and administration in the Company's unaudited condensed statement of operations. |
Leases (Supplemental Cash Flow
Leases (Supplemental Cash Flow Information) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2021 | Mar. 29, 2020 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows relating to operating leases | $ 2,109 | $ 3,074 |
Lease liabilities arising from obtaining right-of-use assets: | ||
Operating leases | $ 394 | $ 1,295 |