Q4 2020 NETGEAR Inc Earnings Call
Ladies and gentlemen, thank you for standing by at this time, all participants are in a listen only mode.
We will conduct a question and answer session at that time. If you have a question you will need to press star one on your push button zone.
I would now like to turn the conference over to Eric violent. Please go ahead Sir.
Thank you David Good afternoon, and welcome to next year's fourth quarter, and full year, 'twenty and 'twenty financial results Conference call.
Joining us from the company are Mr. Patrick Lo Chairman and CEO and Mr. Bryan Murray CFO.
Format of the call will start with a review of the financials for the fourth quarter and full year provided by Bryan.
Followed by details and commentary on the business provided by Patrick.
And finish with our first quarter of 'twenty 'twenty, one guidance provided by Bryan.
Well then have time for any questions.
If you've not received a copy of today's press release.
Is it next year's Investor Relations website.
At Www Dot net dot com.
Before we begin the formal remarks, we advise you.
Today's conference call contains forward looking statements.
Forward looking statements include statements regarding expected revenue.
Operating margins and tax rates expenses and future business outlook.
Actual results or trends could differ materially from those contemplated by these forward looking statements.
For more information please refer to the risk factors discussed in net gears periodic filings with the SEC.
Including the most recent form 10-Q.
Any forward looking statements that we make on this call are based on assumptions as of today.
And Nick here undertakes no obligation to update these statements as a result of new information or future events.
In addition, several non-GAAP financial measures will be mentioned on this call rec.
A reconciliation of the non-GAAP to GAAP measures can be found in today's press release on our Investor Relations website.
At this time I would now like to turn the call over to Mr. Bryan Murray.
Thank you Eric and thank you everyone for joining today's call.
Net revenue for the fourth quarter ended December 31, 'twenty and 'twenty.
With $367 $1 million up 45, 1% year over year.
And down two 9% on a sequential basis.
The strong demand for our leading Wifi six offerings continued in the fourth quarter, which drove exceptional growth and our CHP business.
With service provider delivering on our expectations.
Both the retail and service provider channels of the CHP business grew in excess of 60 per cent and the fourth quarter as compared to the prior year period.
Additionally.
The work we've done to focus on the right products and supported the work from home networking market.
Led to a strong rebound for F&B business.
With 16% sequential gross and.
And also yielding a return to year over year gross.
For the full year 2020.
Nick Your net revenues were $1.26 billion.
Which is up 25, 7% compared to for the full year ended December 31 and 2019.
Our team did an exceptional job navigating the many challenges brought about by Covid induced lockdowns to deliver strong growth and revenue.
And while producing leverage and the business model to drive considerable margin expansion.
We continue to see the same market growth trends, we discussed at our recent analyst day.
And expect 2021 revenue to grow and the mid to high single digits.
Also the strong growth we experienced in 2020.
Our non-GAAP operating margin for the fourth quarter came in at 11%.
And improvement of 660 basis points over the fourth quarter of 2019.
Full year non-GAAP operating income was $110 $8 million.
And our non-GAAP operating margin of eight 8%.
We adjusted quickly to manage through a complicated supply chain environment.
To deliver strong leverage on our revenue growth.
With non-GAAP operating profit up by more than 70% as compared to the prior year.
For the fourth quarter of 'twenty and 'twenty.
Net revenue per the Americas was $259 $6 million.
Which is up $53 five per cent year over year.
And down six 6% on a sequential basis.
Yeah.
Americas again benefited from strong year over year gross proceeds P products from both retail and service provider channels.
As expected the service provider sequential downtick from Q3's lofty levels.
Coupled with continued supply constraints.
And as a moderate sequential decline for the Americas region.
Yeah.
EMEA net revenue was $57 $5 million.
Which is up 33 six per cent year over year.
And up five 9% quarter over quarter.
The strength and F&B, adding to the strong year over year growth for CHP products from both the retail and service provider channels.
Our APAC net revenue was $40 million, which was up 19, 9% from the prior year comparable quarter.
Driven by strong growth of CHP products, and the retail channel and.
Up nine 5% sequentially.
For the fourth quarter of 'twenty and 'twenty, we shipped a total of approximately $4 5 million units.
Including $3 6 million nodes of wireless products.
Shipments of all wired and wireless routers and gateways combined.
We're about $1 8 million units for the fourth quarter of 2020.
The net revenue split between home and business products was about 81% and 19% respectively.
And net revenue split between wireless and wired products was about 74% and 26% respectively.
Products introduced in the last 15 months constitutes about 34% of our fourth quarter shipments well.
And while products introduced in the last 12 months contributed about 29% of our fourth quarter shipments.
From this point on my discussion points will focus on non-GAAP numbers.
The reconciliation from GAAP to non-GAAP and as detailed in our earnings release distributed earlier today.
The non-GAAP gross margin and the fourth quarter of 'twenty and 'twenty was 36%.
Which is up 270 basis points compared to 27, 9% and the prior year comparable quarter.
And up 30 basis points compared to 33% and the third quarter of 'twenty and 'twenty.
While we continue to spend heavily on air freight to deliver incremental profitable revenue.
A combination of lower promotional activities and improved product margins from our premium Wi Fi systems products.
Combine to produce strong year over year gains and gross margin.
Total Q4, non-GAAP operating expenses came in at $72 million.
It was up 21, 1% and year over year and down one 6% sequentially.
Our team again, navigating a challenging operating environment, while adding proportionately less incremental spin to deliver considerable leverage on our 45% revenue growth.
Allowing for a more than 250% increase and our offer and operating profit year over year.
As always we manage our expenses prudently.
While also ensuring we adequately fund the growth portions of our business. So that they have the resources they need to succeed.
Our head count was 818 as it ended the quarter.
We continue to manage our head count.
It will add resources to invest and areas that we believe will deliver future gross.
Our non-GAAP R&D expense for the fourth quarter was 6% of net revenue.
As compared to seven 2% of net revenue and the prior year comparable period and.
And six 2% of net revenue and the third quarter of 'twenty and 'twenty.
To continue our technology and subscription services leadership.
We are committed to continued investment and R&D.
Our non-GAAP tax rate was 24 per cent and the fourth quarter of 'twenty and 'twenty.
Looking at the bottom line for Q4, we reported non-GAAP net income of $31 million.
And non-GAAP diluted EPS of <unk> 99, and 10.
Each coming in at roughly three times, what we delivered and the prior year comparable period.
Non-GAAP diluted earnings per share for the full year of 'twenty and 'twenty was $2 and 88.
Up 54 per cent from 2019.
Turning to the balance sheet, we ended the fourth quarter of 'twenty, and 'twenty with $353 $3 million and cash and short term investments.
Up $46 $5 million from the prior quarter.
And up $157 $6 million from the beginning of the year.
We were also able to strengthen our inventory position incrementally in the quarter, adding $27 $8 million of our stock.
However, we remain supply constrained in the quarter across both businesses.
We also believe that within the first three quarters of 'twenty and 'twenty, one we will be able to return to normalized historical inventory levels.
During the quarter, we generated $46 $1 million and cash flow from operations.
Which brings our total cash provided from operations over the trailing 12 months to $181 $2 million.
We used $4 $2 million and purchases of property and equipment during the quarter.
Which brings our total cash used for capital expenditures over the trailing 12 months to $10.3 million.
These efforts yielded and impressive free cash flow for the year of $179 million.
Equivalent to 193% of our non-GAAP net income.
And we move into 'twenty and 'twenty, one we plan to reestablish normal carrying levels of our own inventory.
We expect to be below our normal conversion ratio of 85 to 100 per cent of non-GAAP net income by a fair amount.
But we remain confident and our ability to continue to generate cash and a full year basis.
Now turning to the fourth quarter results for our product segments.
The connected home segment, which includes the industry leading nighthawk.
B.
Nighthawk Pro gaming and Merrell brands.
Generated net revenue of $296 $1 million in the quarter.
Which is up 61, 1% on a year over year basis, and down six 5% sequentially.
We again saw strong year over year growth driven by heightened demand across both service provider and retail channels.
And the fourth quarter, just slipped despite and supply headwinds for our Wi Fi six products. We again held a strong leadership position and U S market share and consumer Wifi coming in at 41% and we.
We fully expect we can grow our share once again once we overcome the Wi Fi six supply constraints and the coming quarters.
Yeah.
The SMB segment continued its recovery with another strong sequential increase and generated net revenue was $79 million for the fourth quarter of 2020.
Which was up two seven per cent on a year over year basis, and up 15, 6% sequentially.
Our efforts to shift channel and product mix is paying dividends with revenue and profitability improvements.
On the product front, our SMB wireless products and P always switches continue to perform well and the market.
Our market share and switches sold through the U S. Retail channel came in at 55 per cent and Q4.
I'll now turn the call over to Patrick for his commentary.
After which I will provide guidance for the first quarter of 2021.
Yeah.
And Bryan and Hello, everyone.
'twenty and 'twenty was and on price at end of year in many ways that would change the way, we live and work forever.
Born of necessity virtual communication quickly became the norm.
And people suddenly conducted the vast majority of the interactions digitally.
Online has supplanted in person, while many activities such as watching movies and exercising.
Work from home is here to stay for many professionals for at least two three days a week or even more.
Post pandemic.
These trends have driven an unpleasant and a requirement for expansive.
Premium ever higher performance Wi Fi throughout the world.
Our team has done an outstanding job to fulfill the explosive demand that fueled our impressive revenue and profit growth in 'twenty and 'twenty.
In the face of significant supply chain challenges the team at net GAAP maneuver through multiple obstacles to surpass what we thought was achievable while still remaining efficient.
As a result, net here revenue grew 26% to more than $1.26 billion.
And through diligence and discipline and non-GAAP operating profit grew more than 70 per cent to over $110 million.
And there is a portion of the population that clearly demand more from their Wi Fi connection.
And these homes every one and the family is consuming high bandwidth through the life of zoom.
Falkirk and video streaming.
And they are connected at the same time from the farthest reaches of the home.
And pound this.
And the number of connected devices.
Thermal and steps to security to lighting and electrical vehicles is growing exponentially.
This has driven a new segment and Wi Fi systems, the premium segment.
And then just defined by products comprised of Wi Fi six standard a mesh configuration and Tri band architecture.
Only these premium Wi Fi systems can meet the demands of families that are now doing so much more from home.
Okay.
I was pushing the leading edge of Wi Fi for what net pioneered this category.
And coming into 2020, a month, we retain and commanding share of this segment of the market.
This segment represented 25 per cent of the Wi Fi and match North America market <unk> for <unk>.
Rising from 16% and Q3.
And almost nothing in the beginning of 'twenty 'twenty.
Even though we remain supply constrained.
Our sales and the premium category were up 42% sequentially in the fourth quarter.
Not only is this category growing quickly.
<unk> the highest prices used the healthiest margins and has the highest prospects of attaching our value added services.
Which we are already clearly seeing the benefits.
In our Q4 performance.
These are the customers who demand the fastest speeds available.
With the Samsung with Samsung, including Wi Fi six E in their latest Galaxy S. One altra film.
And Apple rumored to follow suit with their annual release later this year.
It's clear the market is ready for the speed of Wifi six the net.
Wifi standard, which can almost double that of Wifi six.
And two cases and this out from premium set of customers. We recently announced the world's first all purpose Wi Fi six E voucher and.
Nighthawk, our H E 505 band router.
Which will debut in the market next month and a price of $599.
And with speeds up to gigabit available from cable operators and the U S. Now.
And these products.
And it's the ability of high quality video downloads and uploads and E. K gaming, but we'll look to expand our product portfolio with Wifi six E technology with releases of additional routers matched systems cable gateways and mobile gateways for the rest of this year.
Yeah.
And importantly, I'm proud to share we won a CES innovation award for our service smart parental control.
This is our first such award for software.
This is hanging incredible validation not only for our offering before the importance of managing how Wi Fi is used in the house.
Our success and the premium market and validation with CES awards, both bode well for our subscription business and we again produced outstanding results and growing recurring revenue stream.
And the fourth quarter, we added 68000 subscribers to end the year with 437000 paid subscribers more than 80000 about our goal for the year.
We have our sights set on getting to 650000 subscribers by the end of this year and keeping pace towards our long term goal of acquiring 2 million subscribers.
One of the many ways, we plan to achieve our target this year.
To introduce new services.
The reason the strong reception of our new ex our 1000 Wi Fi six gaming router introduced and the end of Q3, 'twenty and 'twenty clearly validates that the gaming specific features and offers our value to the many games out there.
Accordingly, we plan to bring these features to the market in the form of a subscription service offering in the second half of this year, but those online game loving customers of our premium Wifi six Tri band all the systems.
On the SMB front and Q4, we continued to see the driving forces of.
Working from home and running a small business from home.
This resulted in strong sequential revenue growth of 16% and business that does not normally well Q3 to Q4.
This is evidence that our strong brand recognition for both consumers and small businesses, coupled with the ideal products needed to segregate networks and homes between business and personal use is gaining traction.
As many of you are probably experiencing a single office with 20 employees has become 20 offices each with a single endpoint.
And the need to secure the home office connection has never been more imperative.
While they are espousing kits have to share the same pipe.
Home professional demands and always on separate and secured connection unlike ever before.
I will all be in parallel with Vela and management.
At this point coupled to plug and play Vlan switches are probably the easiest and most cost effective solutions in the market.
As a result, we saw 15% year on year growth in low and switches and 36% growth in our SMB wireless offerings.
And the quarter.
We had success with several marquee organizations and the health.
Personal fitness and sports industry.
They deployed next generation a vs systems that transport audio and video sit and those over Ethernet.
Despite installation of big projects being hampered by the limitations put on us due to the pandemic, we saw it and year over year growth and our pro avian business.
With an ongoing transition from 10 ADP the fall Kay to 8-K video and broadcast moving towards multi cast streaming we expect <unk> to continue to be a growth driver for our.
SMB business for 2021 and B L.
We plan to seize the opportunity to innovate and lead in the work from home network market.
And without P O E Vita and switches as well as now all be pro and wireless access points.
Coupled with paving the way for the transition from HDMI networks to a day over Ethernet with a pole Avi lines of products. We believe our SMB business is poised for double digit growth this year.
And we'll now turn the call back to Bryan for first quarter guidance.
Thank you Patrick.
And supply is expected to remain constrained.
And with an anticipated sequential step down and sales to service providers.
Our net revenue for the first quarter is expected to be and the range of $300 million to $315 million.
GAAP operating margin is expected to be and the range of $4 five per cent to $5 five per cent.
And non-GAAP operating margin is expected to be and the range of 8% to 9%.
Our GAAP tax rate is expected to be approximately 28 per cent.
And our non-GAAP tax rate is expected to be 24, and 5% for the first quarter 2021.
While we are confident and our ability to provide guidance at this time.
We do so with the caveat that considerable uncertainty remains and the market due to the COVID-19 pandemic.
And should unforeseen events occur and particular really related to transportation delays and southern California, where our main distribution center is located where actual results could differ from the foregoing guidance.
We would now like to answer any questions from the audience.
Okay.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
We'll pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Adam Tindle with Raymond James Your line is open.
Okay. Thanks, good afternoon, and congrats on a strong Q4 I think you also said that you still expect mid to high single digit growth in fiscal 'twenty. One off of this higher number and I wanted to touch on that because Bryan. The Q1 guidance that you just went over starting a little bit below I think what you thought from the Ana.
A list day and supposed to be down 10% sequentially now down a little over 15% sequentially.
U S channel inventories at retail and distribution increase for the first time all year. So you know a couple of data points that suggest that things are cooling a little bit.
The question is why maintain a really raise that 'twenty 'twenty one.
Year guidance, while guiding down Q1, given everything around you.
Yeah Adam.
In terms of the guidance that we gave with regards to Q1 and the sphere for 'twenty and 'twenty one at the analyst day.
I think we.
And we did not quite realize how well we would do and Q4. So that was expected lower revenue in Q4, and we were building off that number, but obviously with the outperformance and <unk>.
Q4, and you know largely different driven by the success that we sold and the SMB business.
I think we had originally thought that we would be flat and in terms of CHP ex service provider and I think we did a little bit better than that would be two 2% growth. There I think we outperformed on the Q4 side. So naturally I think Q1.
And it's gonna be a little bit off because as we've been saying for the last several quarters. We are supply constrained right. So where we'll do everything we can to accelerate that but based on the visibility. We have today, we are supply constrained and continuing going forward.
On the CHP side and to some extent on some of the SMB products.
So that would be with regards to to be a Q1 and steer and.
And as I said earlier.
Do you think that the trends and the markets are still pointing us towards that mid to high single digit growth for the full year of 'twenty 'twenty one.
Okay, and I think you also alluded to some some inventory build that will occur during the year that should likely help you out a little bit can you maybe help us quantify that.
The channel inventory get back to you said normalized levels is that you know 10 plus days at U S retail or maybe some color around how much inventory build benefit there should be during the year.
Yep.
And it's really twofold and starting with the channel as you were just mentioning them. You know we think the channel not only has to get back to where it has historically, but maybe even beyond to be able to support the growth market.
At the pace that we're seeing today. So historically retail had operated and that eight to 10 level. We think it may need to go even higher so we will be working to to.
To build that back up we're not we're not there obviously right now but.
But also our own inventory, we want to get out of the business of having to airfreight, a significant portion of our inbound supply.
And the visibility we have today, we think that's going to take us.
And probably into the third quarter or two to be establish our normal carrying levels of inventories, which is typically about three months.
Okay. That's helpful. Maybe just one for Patrick on the market share dynamic and consumer Wi Fi, obviously still very healthy, but it's been in decline throughout the year you were an early mover on Wi Fi six so would've thought the opposite so maybe just speak to the competitive landscape and why there seems to be a disconnect between your <unk>.
Innovation or tech leadership, and the market share trends are coming down over the year.
Well I mean, it's clearly our technology and pushes faster then and now what the foundries can produce from the chip perspective, I think I mentioned, it last time and I'll call as well as and on the analyst day, Wifi, six and non Wi Fi six E requires a more advanced.
Location technology for the chips.
So while we had the most aggressive and moving towards Wi Fi six we are the biggest sufferer of supply constrained.
So that's why I mean, while a lot of our competitors are still selling the older Wi Fi five technology, and a very low price with heavy promotion.
We decided to push all in for Wi Fi six so.
That's why you see you know Inc.
Losing share and that means the market is growing faster.
And that means and we got more supply and then clearly we will be able to gain more share and that's why we're bullish about the share because the market. Indeed is growing really fast and people want and Wifi six except that we could not surprising them and then if they don't get Wifi six and you'll get whatever is available in the market.
So we believe that early information help size and position ourselves into the future hurts us a little bit for the time being.
Because of supply constrained, but you know is always you look at it.
And the glass half full and when the glass is half full you're going to feel that up as the year goes by.
Okay. Just one last one for me cash continues to build net cash per share is over 10 Bucks I understand that there's going to be some some dip, but it sounds like still positive cash generation on a full year basis in 'twenty and 'twenty, one correct me if I'm wrong.
And if that's the case you know with with the such a clean balance sheet. So much liquidity, maybe Bryan can just update us on thoughts on your uses for cash.
Sure.
Maybe just to kind of frame.
And kind of give a little bit deeper and what I said.
With regards to the generation and in 'twenty and 'twenty one.
And I think I mentioned this last quarter that we're going to have to reestablish your carrying levels of inventory and we think we'll use roughly $100 million and the first half of the year.
Normally we're used to converting cash at a rate of call. It 85 to 100 per cent of non-GAAP net income, obviously, 'twenty and 'twenty was a phenomenal year at 193% I think we'll probably staring to something like 25 per cent for this year. So.
And operationally, we're going to have to use some cash and the first half of the year to.
And wish inventory beyond that we continue to evaluate them.
Other strategic uses we continue to evaluate M&A.
And we will continue to to discuss stock.
Stock repurchase is moving forward.
Thank you.
Your next question comes from the line of harm of course, and with B Ws financial Your line is open.
Hi.
First off could you just talk about are you seeing other component shortages beyond Wi Fi six I mean, you've been pushing out the normalization period and now it's Q3.
Are you are you, suggesting that it's the industry growing faster that you're preparing for or is it or is it just lead times and just expand and greater than you thought.
The two are related is pretty clear that because everybody is moving towards online and so and also people are driving more EV.
And and even for the old cars. They are more electronics and net the overall market demand for chips have gone way up but.
But the supply actually has you know.
Come down because you probably know and some of the lower and foundries and being taken out of commission because of the.
The sanctions and.
So the new fabrication and foundries and not going to be online next one is from TSMC and Arizona and probably in 2024. So the chip supply is going to continue to be constrained while the demand is changing to ramp.
So the lead times lengthened because supply is long.
And the demand is high so you're right chip supply has gone to almost like 50 weeks now or does it spill over to the other things well whenever its chips involved yes. For example, there is tremendous.
And as on memory as well so that again is also in a tight supply.
And the other ones and not so much I mean, it seems and I.
From the big factories of China, a PCB is not a problem capacitors transistors and not a problem, but then for some of the Wi Fi six <unk> special and Tanners and futures, we do see.
Constrained there as well.
Okay, and then you just mentioned and 50 weeks here are you okay for the year as far as meeting the annual guidance.
Have you been able to get allocation.
That's a good good question as a matter of fact, I mean, the reason why with that that we guide for the overall year mid to high single digit growth is because you're right we secured.
The supply alright.
And we still believe that and I mean, given the fact that we had and a lot of market share to gain win win and get more spot. This year. Its all supply back I mean, if we could somehow wild and tricks to get more supply will be better but of course, if there is some more disruptions and supply and.
And then.
We'll be disappointed but from a demand and from a.
Supplied planning standpoint, we're pretty confident and our full year guidance.
Okay and then just last question and just how are you internally managing the allocation of chips.
Between the different price points is there a particular models that you're more focused on what the tight supply constraints.
Clearly I mean, we are favoring chips I mean attributes that Jim has a chip myself. So we would you know.
We definitely would favor chipset and give us a higher price point so.
For example, Wi Fi six.
It's all under constraint of course, we will save that those that would be tri band.
Higher speed versus the dual band lowest speed and low lower price point that's for sure.
And.
So as we discussed already out of our major asphalt and chip suppliers and primarily on the Wi Fi side.
And thus we have less of allocation 11 AC side, but that's by design.
Patrick excuse me I think.
And you misunderstood Murray.
And talk to them.
Mistakenly is that I was referring to your own router models, where those are Wi Fi chips six.
<unk> chips would end up and the Wifi six chips.
Chips would end up and within your own models not.
I understood that the.
The same chips.
No I don't quite exactly understand.
And where you take lessons.
Sure are you just going towards the high end of your ecosystem as far as routers go are you are you putting more emphasis on getting as much Wi Fi six chips to or be tri band or you evenly allocated and your Wi Fi six chips and be between all your router models.
Well, that's what I, just said I mean within the complete supply of Wi Fi six chipsets, alright, we would allocate more to the higher and models and it doesn't matter whether it is.
Or is it and routers all cable gateways and that's what I meant.
Okay, great. Thank you.
Yes.
Okay.
Your next question comes from the line of Jeffrey Rand with Deutsche Bank. Your line is open.
Alright, thanks and.
Thanks, and congrats on a good quarter and you're guiding your operating margins down sequentially and <unk>. Two is that mostly from lower revenue levels or are there other dynamics, we should be aware of.
No that's right. It's it's it's primarily coming from topline and leverage.
And just adding to it and of any church and this.
With regards to Adam's earlier question.
And obviously, we're supply constrained the CHP side, but.
Service revenue is expected to take a step down we knew and it's gonna be elevated and the back half of 2020. We saw phenomenal result in Q3, followed on with strong results and Q4 for service provider, but.
We've been guiding for 'twenty and 'twenty, one we said it would return to on average 35 million and a quarter. We know that business is very lumpy.
And so happens the first quarter is going to be slightly down quarter, we see that steering towards $25 million, but to your question in terms of the operating margin. The step down is all driven by top line leverage.
Great and then obviously you've done very well with adding paid subscribers have you noticed any changing trends with new subscribers as we go through the pandemic.
No actually it isn't a matter of fact, it's pretty consistent and.
General and the most popular.
Services and those that are doing control, such as cyber protection and parental control and they generally skewed towards the high end models.
The more expensive product is the higher propensity of those buyers going to subscribe to services.
So that trend hasn't really changed much and they and.
And recent introduction of our high and Wi Fi six gaming router gives us a hint that gaming service will be really popular with these are high and models of Nash as well as we introduce it and the second half of this year.
Great. Thank you.
Sure.
Again, if you would like to ask a question Press Star then the number one on your telephone keypad your.
Your next question comes from the line of Paul Silverstein with Cowen Your line is open.
Most pressured Bryan appreciate you, taking the questions and I'm going to apologize upfront and just ask you to repeat any things and the.
Paul I haven't been paying attention, but perhaps and some of the numbers and I'm going to apologize modems and the house and speculate on one particular question for the questions. Patrick If I recall I think you started 24 to 30 week lead times 90 days ago up from historical norm to 13 weeks and and I'll start.
And 50 weeks, so that those numbers are accurate.
Has there been a GAAP was about 26 weeks and the last 90 days.
No you haven't fantastic memory.
You had selling a nightmare.
And.
Okay.
And do you feel that you've secured.
Supply over the course of this year to drive the 5% to 10%, you're hoping that the supply constraints. If I understood you used by the fourth quarter.
How much confidence do you have asked and supply constraints using that timeframe.
And what's the opportunity either through the supply constraints and faster and more world for weighted to persist longer and worse.
Well I mean, we don't think that it would actually ease until as I just mentioned, the new factories and Arizona come on line.
I just don't see the demand for Internet connection to go down and I don't see the demand for electric vehicles to go down right.
And right now and just have to have.
A much longer planning horizon so.
And with paying out the whole year 52 weeks and.
And we've got commitment from chip suppliers to provide that kind of planning horizon and place appeals already committed to and level already and if they continue to stick to their delivery schedule alright, Dan our our revenue plan and will materialize and if there is any disruption unforeseen.
And in the chip manufacturing and of course, all bets are off and then at the same time, we're already planning for next year, because we think that next year that the lead time and continue to be the same if not longer. So we're starting to plan for next year and and then as the saying goes right.
Theres no way to predict the future and.
Unless you make the future and that's what we're going to and that's why we're pushing all in for newer technology and make the future. So we got it right I mean people one's Wifi six now we're going to do and again, we believe that people will want Wi Fi six and with planning for it for 2022.
Alright, and women's suits and mortgage insurance man.
You said your share of consumer why for this quarter was 44% did I hear that correctly.
And that concerned I'm sorry.
What was this your consumer Wifi, Patrick Bryan 441 per se.
Yeah.
41, and Thats down from 44 last quarter is that right.
That's correct. So you can see pretty clearly I mean, while we are doing a sequential gross.
And then in the non carrier channel, almost 60% and quarter over quarter.
And we see them below the market growth.
Okay.
Patrick you and Brian emphasized the focus on the premium into the market for obvious reasons.
We do watch price what is your share.
Oh within a y within Wifi, six including oil price points out and trying to estimate over 50 percentage.
Over 50%.
Yeah and.
Do you think that that went up or down over the last few days and I. Appreciate that you were early to market relatively speaking and you have a broader lineup.
Made the point last quarter that Amazon and their era six centuries, only dual band are you seeing them. It's Amazon no soon and as always will be and are you seeing them have any incremental impact I know, there's there's not a ton of time since we launched but how much of an impact do they have and you're printing.
Oh, they certainly have a significant impact for example, the market of this high and Wi Fi six Chai ban has expanded from 16% of the market.
5% of the market, so clearly and all day.
They help to expand the market secondly, whenever you introduce something even if you sell one piece you got to get the market share right. Because you have gone from zero to one.
And so they clearly are taking some market share in that market, but at the same time enlarging the pie for us as well and we just don't have enough supply and joy is tremendous.
Hi.
Alright.
The question you asked and speculate.
Maybe you have insight with respect to speculation but.
Two points here one.
And that you're supply constrained and cannot satisfy volume demand because you don't have the products.
I suspect that many of those customers are going to buy what's available.
Which is why five five or lower and Wi Fi six foot and from you or someone else. What gives you confidence that those customers are going to wait for a little higher and Wi Fi six to be available and the other question is I appreciate it when you're talking about high and we're talking about relative to be more sophisticated customers that want the performance for their throughput reached.
Central and so they very well may appreciate you're aware of and appreciate the differences between Tri band and dual band that said I suspect.
As many or more customers.
That they see Wi Fi six we see the throughput and they really don't appreciate and not.
And we're aware of no appreciate the difference between try being dual band and so Amazon and <unk> six or Google eventually coming into the market for yourself.
Wifi six dual band awesome and buying it.
And they say no.
The weighted for Tri band from Netgear or somebody else.
Any insight you can share and those two issues.
Yeah definitely okay. So first youre, absolutely right people need Wi Fi upgrades.
No matter what.
So if they cannot Fi Wi Fi six well they'll settle for Wi Fi five no doubt of that now, but you haven't understand all of the discussions we have been in the last 20 minutes, we'd say, we and sure there is enough supply on the high and.
I assume those people who are willing to pay.
They will have it and they definitely will have it they were not moving to a point that they will buy it and they take it home, but for those people who would look to buy a 200 dollar Wi Fi six or even 300 dollar Wifi and stage two.
You bet, we just don't have enough supply and then that and say, okay I'll settle for Wi Fi.
And your competitor and that's way we lose share.
So I think generally speaking people understand Wi Fi six is better than Wi Fi, otherwise Apple and Samsung will not all be moving Wi Fi six and which leads to the second one.
And people don't quite exactly understand what is the fall versus do you think vs. The VA book is.
And what do you call high torque electric motor and they all could drive fetus speedometer and faster.
Everybody and if youre in a Tesla and moving Chris mode and you.
Price the panel.
And just the dominant goes pretty fast so anybody could tell that.
The thing is one that is that and everybody would be kind of what I'm asking you know what Chris was really ludicrous and everything.
And now that's the fastest Cal another period and and story they don't have to worry about and always the hydro electric mode versus a V and general.
And they don't cash same thing.
And everybody knows on the phone to use old close speed test to see how fast the download speeds and.
Anybody to do that and China. They do it all day long and it doesn't matter, we do ban on Tri band, there's got to be better than dual but let's do it with the old class and.
Speed test, it's not even comparable if you do if you do it ultra speed test on a 1000 and not a system.
And 200, our system from Europe, My God, I mean, it's not even close and that's everyone.
And I understand that.
Okay.
Two other quick questions from me one.
Apologize George said this but why.
<unk> as a percentage of your total what price sales versus 90 days ago.
The percentage.
Oh, Yeah, I mean for our sales if you look at systems and.
And as mash and boundaries and.
Our Wi Fi six Joseph almost 60%.
Where do you think it'll be 90 days from now or at the end of the year.
It really depends on supply I would love it to be 100%.
Alright, and one last question.
Google with their desk why questions product any insight on when that's going to hit the market.
And just thoughts on the I assume it's the same and Amazon that Youre focused on high end and you're also going to churn, but let me let you respond.
We don't have the gene to us yet, but for one thing for sure.
And Google introduced Neste, Wi Fi and after six months.
Actually E O L D.
Day retired because getting myself and so they went back to their very own regional Google Wi Fi and discounted the hell out of it.
And when they're going to come up with a net Wi Fi all would be where they are.
<unk> come out with net Wi Fi again.
Okay, I appreciate and responses thanks, Chris sure no problem.
Your next question comes from the line of Rouge, and Ho with Bloomberg Intelligence. Your line is open.
Great. Thank you for taking my questions.
Patrick so.
Can you just talk a little bit about Wi Fi six E allocations.
Yeah, you were early on and Wifi, six and getting the Wifi chip supply.
And I'm, just curious how youre thinking about Wi Fi six availability, especially given with the iPhone 13, we were to have Wi Fi <unk> launch earlier this year.
Right I mean the.
Samsung and 'twenty, one out and try is ready and <unk> and we tested it and and this.
Speed is just amazing is incredible.
So I think people when we went out with it especially now you do have two gigabit internet speed from Comcast and both upload and download.
The metric.
Which is great I mean, so you need those fellows and you need a Wi Fi six key products and really enjoy that speed and.
And of course, and chip allocations do very very tight and being the first and the market. Unfortunately at the Muslim tissue of that allocation.
And then we'll continue to push for it.
So I would say, but still the overall allocation into Wi Fi.
She is going to be very limited, we don't expect that it will be.
More than 10 per cent of the total chip supply.
Got it and and and then.
Typically when you launch a new product I mean, you've got the Nighthawk Wifi 60 out.
First of all market.
But it usually takes about two to three quarters to really gain.
Gain steam we're all waiting for the Orb Wi Fi six E product.
I don't know when that's going to be announced let's just say, it's a in the third quarter.
How should we think about how aggressive you are with that particular product and especially given that you are trying to drive asp's upwards.
Well at this time and it's actually different than previously when we first introduced Wi Fi six there was no client on the market [laughter], we're selling on the premise for future proof and.
And the clients and as a matter of fact, the Samsung phone that carries Wi Fi six came almost like six to nine months behind us by physics router. This time, it's different.
Is there actually.
A month ahead of us yet shipping day, the F 'twenty, one alpha a phone with.
He already and we only got to ship our first Wifi six feet voucher for now. So this is very different and I'm not going to speculate but I am just using your words, you said that our already and will be two three quarters behind this well by then the iPhone 13 with Wi Fi six will be there too. So so this time will be done.
And this time again I'm absolutely confident once again is purely supply constrained.
Great. Thanks for taking my questions.
Yeah.
There are no further questions at this time, Mr. Low I turn the call back over to you.
Thank you.
And thanks, everyone for joining us.
And I'm really proud of what the team and that gave was able to accomplish and <unk>.
And in 'twenty of course, this is a new year and this market is very exciting.
The market <unk>.
And very rapidly and the customers are responding very quickly to new technology, which drive considerable growth and the market and help us to increase our revenue as well as margin.
Excited to continue to lead the market and without innovation and multiple sites and deliver another year of gross in 2021 and again. Thank you once again for joining us today, and we look forward to sharing more with you throughout the year.
This concludes today's conference call you may now disconnect.
Okay.
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