Q4 2023 NETGEAR Inc Earnings Call

Operator: Ladies and gentlemen, thank you for standing by. At this time, all participants are in a listen-only mode.

Ladies and gentlemen, thank you for standing by at this time, all participants are in a listen only mode.

Operator: Later, 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 telephone on your push button phone. I would now like to turn the conference over to Erik Bylin. Please go ahead, sir.

Later, we will conduct a question and answer session.

At that time, if you have a question.

Need to press star one on your telephone.

Button phones.

I would now like to turn the conference over to Eric Byland. Please go ahead Sir.

Erik Bylin: Thank you, Erik. Good afternoon, and welcome to NETGEAR's fourth quarter and full year 2023 financial results conference call. Joining us from the company are Mr. C.J. Prober, CEO, Mr. Bryan Murray, CFO, and Mr. David Henry, President and General Manager of Connected Home Products and Services. Format of the call: we'll start with an overview of the company's recent leadership transition provided by Bryan, followed by an introduction by CJ, and finish with a review of the financials for the fourth quarter and full year, commentary on the business, and first quarter of 2024 guidance provided by Bryan. We'll then have time for any questions.

Erik Bylin: Thank you Eric Good afternoon, and welcome to <unk> fourth quarter and full year 2023 financial results Conference call.

Erik Bylin: Joining us from the company are Mr. Sanjay <unk> CEO, Mr. Bryan Murray CFO and Mr. David Henry President and general manager of connected home products and services.

Bryan Murray: The format of the call will start with an overview of the company's recent leadership transition provided by by Brian.

Bryan Murray: Followed by an introduction by C J and finish with a review of the financials for the fourth quarter and full year commentary on the business.

Bryan Murray: First quarter of 2024 guidance provided by Bryan.

Well then have time for any questions.

Erik Bylin: If you've not received a copy of today's release, please visit NETGEAR's Investor Relations website at www.netgear.com. Before we begin the formal remarks, we advise you that today's conference call contains forward-looking statements. Forward-looking statements include statements regarding expected revenue, operating margins, tax expense, expenses, and future business outlook.

Bryan Murray: If you've not received a copy of todays release, please visit <unk> Investor Relations website at Www Dot net dot com.

Bryan Murray: Before we begin the formal remarks, we advise you that todays conference call contains forward looking statements forward looking statements include statements regarding expected revenue.

Bryan Murray: Operating margins.

Bryan Murray: <unk> expense expenses and future business outlook.

Erik Bylin: 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 NETGEAR's periodic filings with the FCC, including the most recent Form 10-Q. Any forward-looking statements we make on this call are based on assumptions as of today, and NETGEAR 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. 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.

Bryan Murray: Actual results or trends could differ materially from those contemplated by these forward looking statements.

Bryan Murray: More information please refer to the risk factors discussed in next year's periodic filings with the SEC.

Bryan Murray: Including the most recent Form 10-Q.

Bryan Murray: Any forward looking statements that we make on this call are based on assumptions as of today and Netgear undertakes no obligation to update these statements as a result of new information or future events.

Bryan Murray: In addition, several non-GAAP financial measures will be mentioned on this call a reconciliation of the non-GAAP to GAAP measures can be found in today's press release on our Investor Relations website.

Bryan Murray: At this time I would now like to turn the call over to Mr. Bryan Murray.

Bryan Murray: Thank you, Erik, and thank you, everyone, for joining today's call. As we announced last week, after nearly three decades at the helm, Patrick Lo has chosen to retire from his roles as CEO and Chairman at NETGEAR. Patrick will serve as a strategic advisor through July of this year to ensure a smooth transition. While Patrick will certainly be missed, we are very excited to see him embark on his next chapter in life.

Bryan Murray: Thank you Eric and thank you everyone for joining today's call.

Bryan Murray: As we announced last week after nearly three decades at the helm.

Bryan Murray: Patrick Lou has chosen to retire from his role as the CEO and chairman It next year.

Bryan Murray: Patrick will serve as a strategic adviser through July of this year to ensure a smooth transition.

Speaker Change: Well Patrick will certainly be missed we're very excited as he embarks embarks on his next chapter in life.

Bryan Murray: After a thorough search over the past year to identify a successor to Patrick, the board appointed CJ as NETGEAR CEO. GG has a background that is uniquely suited to lead NETGEAR into our next chapter, and the NETGEAR board and management team are excited to work with CJ as we capitalize on the great opportunity in front of us. With that, I would like to personally welcome C.J. and give him the stage to introduce himself prior to getting into the Q4 results.

Speaker Change: After a thorough search over the past year to identify a successor to Patrick.

Speaker Change: The board appointed C J as Nic <unk> CEO.

Speaker Change: Did you hear the background is uniquely suited to lead <unk> into our next chapter.

Speaker Change: And then Nick your board.

Speaker Change: As a team we're excited to work with C. J as we capitalize on the great opportunity in front of us.

Speaker Change: With that I would like to personally welcome C. J, so given the stage and introduce himself prior to getting into the Q4 results.

C.J. Prober: Thank you, Bryan. It's really awesome to be here. We had an all hands meeting with the NETGEAR Global team last week on my first day and another one just an hour ago, and I want to reiterate a few of the points I shared with the team. First, I really appreciate the incredible welcome I've received from the board, our executive leadership team, the broader NETGEAR team, and many of our partners and customers. It's only been a week, but I'm definitely feeling like the shoe fits, and I'm more excited than ever about the road ahead. Second, it's a real honor to be taking over from Patrick. He's been a pioneer in our industry. He's a great person with the highest integrity.

C. J: Thank you, Brian it's really awesome to be here.

C. J: We had an all hands with the Netgear global team last week on my first date and another one just an hour ago and I want to reiterate a few of the points I shared with the team.

C. J: First I really appreciate the incredible welcome I have received from the board or exact leadership team the broader netgear team and many of our partners and customers. It.

C. J: It's only been a week and im definitely feeling but im definitely feeling like the shoe fits and are more excited than ever about the road ahead.

C. J: Second.

C. J: It's a real honor to be taking over from Patrick He has been a pioneer in our industry. He's a great person with the highest integrity and establishing great culture at Nick here I really appreciate him and the rest of the board and trusting me with this opportunity and supporting me and the rest of the executive team in the transition.

C.J. Prober: And he's established a great culture at NETGEAR. I really appreciate him and the rest of the board entrusting me with this opportunity and supporting me and the rest of the executive team in the transition. Third, and most importantly, the opportunity ahead for NETGEAR is incredibly exciting. We have macro tailwinds working in our favor, like the importance of connectivity in a work from anywhere world, connected device proliferation, the increasing need for higher bandwidth to support high-fidelity audio and video experiences, and the growing importance of digital security. We also have an incredible brand, great technology and products, a strong balance sheet, a diversified business with consumer and NETGEAR for business, and a lot of potential adjacencies for growth. It's really pretty rare for a new CEO to be able to step into an opportunity with so much upside.

C. J: Third and most importantly, the opportunity ahead for next year is incredibly exciting.

C. J: We have macro tailwind is working in our favor like the importance of connectivity in a work from anywhere in the world.

Connected device proliferation, increasing need for higher bandwidth to support high fidelity audio and video experiences and the growing importance of digital security. We also have an incredible brand great technology and products a strong balance sheet.

C. J: First site business with consumer and netgear for business and a lot of potential adjacencies for growth.

It's really pretty rare for a new CEO to be able to step into an opportunity was so much upside that the business has obviously been challenged and it's going to take a lot of work to capture that upside.

C.J. Prober: The business has obviously been challenged, and it's going to take a lot of work to capture that upside. The journey ahead starts with strengthening our core business, both on the consumer and NETGEAR for business sides. I see many opportunities to do that.

C. J: The journey starts with strengthening our core business both on the consumer and thank you for business side of things.

C. J: See many opportunities to do that as part of this initial phase and embarking on a 45 day listing tour to validate may plan and seek input from the broader team.

C.J. Prober: As part of this initial phase, I'm embarking on a 45-day listing tour to validate my plan and seek input from the broader team. While it is early, I can say that on the consumer side of things, a couple of important themes will be around the simplification of our product offerings, both devices and subscriptions, and improving the performance of our highest-margin channels. On the NETGEAR for business side of things, we've been able to scale the ProAV business with a solution-focused sales force, and one theme going forward would be to double down on those go-to-market capabilities so that we can grow our share in markets where a product solves a critical need for customers. I believe the plan to strengthen our core, which I look forward to sharing with you during a future earnings call in more detail, will lead to a stronger NETGEAR with improved cash flow, performance, and renewed growth opportunities. With that, back over to you, Bryan.

C. J: While it is early I can say that on the consumer side of things a couple of important themes will be around the simplification of our product offerings, both devices and subscription.

C. J: And improving the performance of our highest margin channel.

C. J: On the negative for business side of things, we've been able to scale. The <unk> business with our solution focused sales motion and one theme going forward would be to double down on those go to market capabilities. So that we can grow our share in markets, where our products solve a critical need for customers.

C. J: I believe the plan to strengthen our core which I look forward to sharing with you during a future earnings call in more detail will lead to a stronger next year with improved cash flow performance and renewed growth opportunities.

C. J: With that back over to you Brad.

Bryan Murray: Thank you, T.J. Once again, on behalf of the entire team, welcome. We are pleased with the continued execution of our team this quarter in delivering revenue and operating margins at the high end of our updated guidance ranges. For the quarter to December 31, 2023, revenue is $188.7 million, down 4.6% on a sequential basis and down 24.3% year-over-year. Importantly, we took great strides in turning inventory into cash and added $55.6 million of cash to our balance sheet. On the CHP side, the U.S. retail market overall underperformed our expectations due to a more promotional holiday season, especially in the lower end of the market. The NETGEAR Out performed the work.

Brad: Thank you T J.

Brad: And once again on behalf of the entire team welcome.

Brad: We are pleased with the continued execution of our team this quarter and delivering revenue and operating margin at the high end of our updated guidance ranges.

Brad: For the quarter ended December 31 2023.

Speaker Change: Revenue was $188 7 million.

Speaker Change: Down four 6% on a sequential basis and down 24, 3% year over year.

Speaker Change: Importantly, we took great strides in turning inventory into cash and added $55 $6 million of cash to our balance sheet.

Speaker Change: On the CHP side, the U S retail market overall underperformed our expectations due to a more promotional holiday season, especially in the lower end of the market.

Speaker Change: The <unk> outperformed the market.

Bryan Murray: Largely driven by strong results in our premium products. In tandem with the ramp of the Wi-Fi 7 upgrade cycle, user demand for our premium solutions, which consist of our Orbi 8 and 9 Tri- and Quad-Band Wi-Fi Mesh products and 5G Nighthawk Mobile Hotspots again performed well and grew double digits sequentially and more than 30% year-over-year. Strongly outpacing the total market. In fact, our premium products reached a new high as a percentage of our CHP retail business, contributing 25% of sales to end users. Meanwhile, sales to service providers came in at just over $27 million for the quarter.

Speaker Change: Largely driven by strong results in our premium products.

Speaker Change: In tandem with the ramp of Wi Fi said, an upgrade cycle.

Speaker Change: And user demand for our premium solutions, which consists of our <unk> 8009 try and quad band Wifi mesh products.

Speaker Change: And <unk> moved Nighthawk mobile hotspots, again performed well and grew double digit sequentially and more than 30% year over year.

Speaker Change: Strongly outpacing the total market.

Speaker Change: In fact, our premium products reached a new high as a percentage of our CHP retail business contributing 25% of sales to end users.

Speaker Change: Meanwhile, sales to service providers came in at just over $27 million for the quarter.

Bryan Murray: Our SMB business outperformed our expectations as we steadily drove up ASPs, even though Channel Inventory for the SMB Business continued to contract, bolstering our total revenue to the upper end of our guidance. Outside of the inventory contraction, our competitive position in S&B remains strong. But softening macro conditions in certain markets are still impacting S&P's growth prospects in the near term.

Speaker Change: Our SMB business outperformed our expectations as we steadily drive up Asp's.

Speaker Change: Even though channel inventory for the SMB business continued to contract.

Speaker Change: Bolstering our total revenue to the upper end of our guidance.

Speaker Change: Yeah.

Speaker Change: Outside of the inventory contraction, our competitive position in SMB remains strong.

Speaker Change: The softening macro conditions in certain markets are still impacting smb's growth prospects in the near term.

Bryan Murray: As customers remain hesitant to make investments, and deals are taking longer to close, for the full year of 2023, NETGEAR's net revenues were $740.8 million, down 20.6% compared to the year ended December 31, 2022. Mid-channel partners constraining inventory levels and tougher market conditions. Despite the challenging macroeconomic environment, elevated interest rates, and inventory rightsizing among our channel partners through the year. We continue to believe that the broader U.S. consumer retail market has stabilized.

Speaker Change: As customers remain hesitant to make investments and deals are taking lower to close.

Speaker Change: For the full year of 2023, Netgear net revenues were $748 million.

Speaker Change: Down 26% compared to the year ended December 31 2022.

Speaker Change: Our mid channel partners constrained inventory levels in tougher market conditions.

Speaker Change: Yeah.

Speaker Change: Despite the challenging macroeconomic environment elevated interest rates and inventory right sizing among our channel partners during the year.

Speaker Change: We continue to believe the broader U S consumer retail market has stabilized.

Bryan Murray: I'm proud of the progress we've made in transitioning our CHP business to the premium, higher-margin segments of the market, where we enjoy considerable competitive differentiation. Industry pundits are also pointing to the next 12 months as when the hangover from the pandemic pre-buying will be flushed out, and the next wave of upgrades will take hold.

Speaker Change: I'm proud of the progress we've made in transitioning our CHP business to the premium higher margin segments of the market.

Speaker Change: Where we enjoy considerable competitive differentiation.

Speaker Change: Industry pundits are also pointing to the next 12 months is when the hangover from the pandemic pre buy will be flushed out.

Speaker Change: And the next wave of upgrades will take hold.

Bryan Murray: As discussed at a recent Analyst Day, we expect that the Wi-Fi 7 upgrade cycle and secular trends in the markets that we've identified across both businesses will continue to expand the available market opportunity for NETGEAR in the coming quarters, especially as the impact from S&B Channel Partners reducing inventory positions begins to wane. With our robust portfolio of hardware and subscription offerings, and a high barrier to entry for the competition, Ford Firm has more than 25 years of innovation.

Speaker Change: So as discussed at our recent analyst day, we expect that the Wi Fi seven upgrade cycle and secular trends in the markets that we've identified across both businesses will continue to expand the available market opportunity for <unk> in the coming quarters.

Speaker Change: Especially as the impact from SMB channel partners, reducing inventory positions begins to wane.

Speaker Change: With a robust portfolio of hardware and subscription offerings.

Speaker Change: In a high barrier to entry for the competition for it.

Speaker Change: More than 25 years of innovation.

Bryan Murray: NETGEAR's higher-margin premium products are the key to delivering long-term profitable growth. The fact that our premium products materially outperformed the market to the tune of double-digit full-year growth and helped generate significant gross margin improvement serves as a clear validation of our core long-term strategy to focus on the premium segment and grow our services business. The investments we've made in pursuing this strategy are essential in returning to long-term profitable growth. Notably, the improved mix towards premium, higher-margin products combined with the progress we continue to make in growing our service revenue business, led us to achieve a full-year non-GAAP gross margin of 33.9%, equaling our highest full-year non-GAAP gross margin in the past 16 years. This marks an impressive improvement in our non-gap gross margin year-over-year by more than 1,000 basis points for the fourth quarter and 680 basis points for the full year. A result that would not have been possible without our team's outstanding efforts to retool our mix towards the higher AS-free premium Wi-Fi mesh and 5G mobile hotspot products. Improved Traction in our Services business and the inroads we've made in establishing and growing our presence in the pro-AZ market. Additionally, this has been enabled by Discipline Expense Management.

Speaker Change: Nick years higher margin premium products are the key to delivering long term profitable growth.

Speaker Change: The fact that our premium products materially outperformed the market to the tune of double digit full year growth.

And helped generate significant gross margin improvement.

Speaker Change: Serves as a clear validation of our core long term strategy to focus on the premium segment and grow our services business.

Speaker Change: The investments we've made in pursuing this strategy essentially returning to long term profitable growth.

Speaker Change: Notably the improved mix towards premium higher margin products combined with the progress we continue to make in growing our service revenue business.

Speaker Change: Led us to achieve full year non-GAAP gross margin of 33, 9%.

Speaker Change: Equally our highest full year non-GAAP gross margin in the past 16 years.

Speaker Change: This marks an impressive improvement in our non-GAAP gross margin year over year by more than 1000 basis points for the fourth quarter.

Speaker Change: And 680 basis points for the full year.

Speaker Change: The result that would not have been possible without our team's outstanding efforts to retool our mix towards the higher <unk> free premium Wi Fi mesh and.

Speaker Change: <unk> mobile hotspot products.

Speaker Change: Improved traction in our services business.

Speaker Change: And the inroads, we've made in establishing and growing our presence in the market.

Speaker Change: Additionally enabled by disciplined expense management we.

Bryan Murray: We continue the momentum behind our improving profitability in the fourth quarter. Delivering non-GAAP operating income of $2.7 million, and a non-GAAP property margin of 1.4%, with the margin coming in at the high end of our updated guidance range. Our non-GAAP operating margin was up 300 basis points compared to the year-ago period and down 130 basis points compared to the prior quarter due to a slight loss of top line leverage. However, looking back at the full year, the ongoing uncertain macroeconomic environment, elevated interest rates, and improved supply position broadly in the market continue to constrain our top-line potential, as our channel partners on both the CHP and SMB sides of the business reduced their inventory carrying levels far below historical norms. As a result,

Speaker Change: We continued the momentum behind our improving profitability in the fourth quarter.

Speaker Change: Delivering non-GAAP operating income was $2 7 million.

Speaker Change: The non-GAAP operating margin of one 4%.

Speaker Change: With the margin coming in at the high end of our updated guidance range.

Speaker Change: Our non-GAAP operating margin was up 300 basis points compared to the year ago period.

Speaker Change: And down 130 basis points compared to the prior quarter due to a slight loss of top line leverage.

Speaker Change: However, looking back at the full year, the ongoing uncertain macroeconomic environment elevated interest rates and improved supply position broadly in the market continued to constrain our topline potential as.

Speaker Change: As our channel partners on both the CHP and F&B sides of the business reduce their inventory carrying levels far below historical norms.

Speaker Change: As a result these.

Bryan Murray: These headwinds reduced our leverage and led to a 4-year non-GAAP operating loss of $9.9 million, a non-GAAP operating margin of negative 1.3%. For the fourth quarter of 2023, net revenue for the Americas was $124.8 million, a decline of 21.6% year-over-year and down 11.5% on a sequential basis. Immunorevenue was $37.9 million.

Speaker Change: These headwinds reduced our leverage and led to full year non-GAAP operating loss of $9 9 million and non-GAAP operating margin of negative one 3%.

Speaker Change: For the fourth quarter of 2023 net revenue for the Americas was $124 8 million.

Speaker Change: A decline of 21, 6% year over year and down 11, 5% on a sequential basis.

Speaker Change: EMEA revenue was $37 9 million, a decrease of 28, 1% year over year and up six 2% quarter over quarter.

Bryan Murray: A decrease of 28.1% year-over-year and up 6.2% quarter-over-quarter. Our APAC net revenue was $26 million, which is down 30.2% from the prior year comparable period and up 22.9% sequentially. For the fourth quarter of 2023, we shipped a total of approximately 1.7 million units, including 938,000 nodes of wireless products. Shipments of all wired and wireless routers and gateways combined were about 480,000 units in the fourth quarter of 2023.

Speaker Change: Our APAC net revenue was $26 million, which is down 32% from the prior year comparable period and up 22, 9% sequentially.

Speaker Change: For the fourth quarter of 2023, we shipped a total of approximately $1 7 million units, including 938000 nodes of wireless products.

Speaker Change: Shipments of all wired and wireless routers and gateways combined were about 480000 units for the fourth quarter of 2023.

Bryan Murray: And that revenue split between home and business products was about 63% and 37%, respectively. The net revenue split between wireless and wired products was about 59% and 41%, respectively. Products introduced in the last 15 months constituted about 14% of our fourth quarter shipments, and products introduced in the last 12 months contributed about 10% of our fourth quarter shipments. From this point on, my discussion points will focus on non-GAAP numbers. The reconciliation from gap to non-gap is detailed in our earnings release distributed earlier today. Non-Gap Gross Margin in the fourth quarter of 2023 was 35%, which is up 1,010 basis points as compared to 24.9% in the prior comparable period and flat compared to the third quarter of 2023. As compared to the prior year period, increased shipments of our premium, higher-margin CHP, growth in services revenue, and considering lower total freight costs largely drove the improvement. Total Q4 non-GAAP operating expenses came in at $63.3 million, which is down 4.2% year-over-year and down 1.1% sequentially. Our head count was 635 at the end of this quarter, down from 644 in Q3.

Speaker Change: The net revenue split between home and business products was about 63% and 37% respectively.

Speaker Change: The net revenue split between wireless and wired products was about 59% to 41% respectively.

Speaker Change: Products introduced in the last 15 months constituted about 14% of our fourth quarter shipments while products introduced in the last 12 months contributed about 10% of our fourth quarter shipments.

Speaker Change: From this point on my discussion points will focus on non-GAAP numbers. The reconciliation from GAAP to non-GAAP is detailed in our earnings release distributed earlier today.

Speaker Change: non-GAAP gross margin in the fourth quarter of 2023 was 35%.

Speaker Change: Which is up 1010 basis points as compared to 24, 9% in the prior year comparable period and flat compared to the third quarter of 2023.

Speaker Change: As compared to the prior year period increased shipments of our premium higher margin CHP products growth in services revenue.

Speaker Change: Considerably lower total freight costs largely drove the improvement.

Speaker Change: Total Q4, non-GAAP operating expenses came in at $63 3 million.

Speaker Change: Which is down four 2% year over year and down one 1% sequentially.

Speaker Change: Our head count was 635 visits this quarter down from 644 in Q3.

Bryan Murray: We will continue to strategically invest in our business and hire in key areas we believe will deliver future growth and profitability, such as ProAV Managed Switches, Premium Orbi Wi-Fi Mesh Systems, 5G Mobile Hotspots, and Subscription Services. However, we continue to evaluate other areas of the business on a regular basis, driving further cost efficiency. Our non-GAAP R&D expense for the fourth quarter was 9.9% of net revenue, as compared to 7.7% of net revenue in the prior comparable period and 10.1% of net revenue in the third quarter of 2023. To continue our technology and subscription service leadership, we are committed to continued investment in R&D. Our non-GAAP tax expense was $2.4 million in the fourth quarter of 2023.

Speaker Change: We will.

Speaker Change: <unk> strategic strategically invest in our business and higher in key areas, we believe will deliver future growth and profitability.

Speaker Change: Such as probably be managed switches premium will be Wifi mesh systems, <unk> mobile hotspots and subscription services.

Speaker Change: However, we continue to evaluate other areas of the business on a regular basis driving further cost efficiencies.

Speaker Change: Our non-GAAP R&D expense for the fourth quarter was nine 9% of net revenue as compared to seven 7% of net revenue in the prior year comparable period and 10, 1% of net revenue in the third quarter of 2023.

Speaker Change: To continue our technology and subscription service leadership, we are committed to continued investment in R&D.

Speaker Change: Our non-GAAP tax expense was $2 4 million in the fourth quarter of 2023.

Bryan Murray: Looking at the bottom line for Q4, we reported non-GAAP net income of $2.7 million and non-GAAP diluted earnings per share of 9 cents. Turning to the balance sheet, we ended the fourth quarter of 2023 with $283.7 million in cash and cash short-term investments, an increase of $55.6 million from the prior quarter. We continue our positive free cash flow generation in the fourth quarter as we make meaningful progress in further reducing our inventory. During the quarter, $56.3 million of cash was provided by operations, which drove our total cash provided by operations over the past 12 months to $56.9 million. We used $2.2 million and purchased property equipment in the quarter, which brings our total cash use for capital expenditures over the churning 12 months to $5.8 million.

Speaker Change: Looking at the bottom line for Q4, we reported non-GAAP net income of $2 7 million and non-GAAP.

Speaker Change: Diluted earnings per share of <unk>.

Speaker Change: Turning to the balance sheet, we ended the fourth quarter of 2023 with $283 7 million in cash and cash short term investments.

Speaker Change: A $55 $6 million from the prior quarter.

Speaker Change: We continued our positive free cash flow generation in the fourth quarter as we made meaningful progress in further reducing our inventory.

Speaker Change: During the quarter $56 3 million of cash was provided by operations, which drove our total cash provided by operations over the trailing 12 months to $56 9 million.

Speaker Change: We used $2 2 million in purchases of property equipment during the quarter, which brings our total cash used for capital expenditures over the trailing 12 months to $5 8 million.

Bryan Murray: We expect to continue generating positive free cash flow as we believe we will further reduce our inventory levels in the early part of 2024 as we drive to pre-pandemic carrying levels of three to four months. Now, turning to the fourth quarter results for our product segment. The Connected Home segment, which includes our industry-leading Orvi, Nighthawk, Nighthawk Pro Gaming, Armor, and Mural Brands, generated net revenue of $118.4 million in the quarter, down 20.6% on a year-over-year basis and down 7% sequentially. In the comparable prior year period, our CHP business benefited from higher sales to service providers as we made great progress in building up and delivering supply of our M And, on the retail side, the total rest of the market was larger a year ago, leading to a year-over-year decline in both the retail and service provider channels.

Speaker Change: We expect to continue generating positive free cash flow as we believe we will further reduce our inventory levels in the early part of 2024 as.

Speaker Change: As we drive to pre pandemic carrying levels of three to four months.

Speaker Change: Now turning to the fourth quarter results for our product segments.

Speaker Change: The connected home segment, which includes our industry, leading orby Nighthawk Nighthawk Pro gaming armor and Bureau brands <unk>.

Speaker Change: Generated net revenue of $118 $4 million during the quarter.

Around 26% on a year over year basis, and down 7% sequentially.

Speaker Change: In the comparable prior year period for CHP business benefited from higher sales to service providers as we made great progress in building up and delivering supply of our <unk> and <unk> Pro mobile hotspot.

Speaker Change: And on the retail side, the total rest of the market with larger a year ago.

Speaker Change: Leading to a year over year decline in both the retail and service provider channels.

Bryan Murray: However, despite the year-over-year overall retail market contraction, demand for premium Orbi 8 and 9 Wi-Fi mesh and 5G mobile hotspots continued to grow year-over-year by over 30%. Bolstered by the addition of a recently released Wi-Fi 7 Orbi 97X mesh system, the contribution of premium products to our CHP retail business grew to over 25% of sales to end users. These higher-margin, high-end products continue to drive up ASPs and help us deliver considerably improved profitability year over year. As we progress through this upcoming Wi-Fi 7 upgrade cycle, we continue to believe the market has stabilized and expect CHP channel inventory to remain generally stable moving forward. Consequently, we anticipate our CHP product mix will continue to shift towards these higher-margin products and add to the momentum of our core long-term growth and profitability strategy. We remain keenly focused on the solutions our customers need and recognize that our premium OrbiWiFi mesh systems may not be the optimal choice for smaller households or those who want the best connectivity at a lower price point. In these cases, our differentiated Wi-Fi 6E and Wi-Fi 7 Nighthawk routers, cable gateways, and mid-range Nighthawk mobile hotspots fit the bill perfectly.

Speaker Change: However, despite the year over year overall retail market traction.

Speaker Change: <unk> for our premium or be 80, 90, Wifi mesh <unk> mobile hotspots continued to grow year over year by over 30%.

Speaker Change: Bolstered by the addition of our recently released Wi Fi 700 will be 97 X mesh system. The contribution of premium products towards CHP retail business grew to over 25% of sales to end users.

Speaker Change: These higher margin.

Speaker Change: Margin high end products continue to drive up Asp's and.

Speaker Change: And helped us deliver considerably improved profitable profitability year over year.

Speaker Change: As we progressed through this upcoming Wi Fi seven upgrade cycle. We continue to believe the market has stabilized and expect CHP channel inventory to remain generally stable moving forward.

Speaker Change: Consequently, we anticipate our CSB product mix will continue to shift towards these higher margin products and add to the momentum of our core long term growth and profitability strategy.

Speaker Change: We remain keenly focused on the solutions our customers need.

Speaker Change: And recognize that our premium or be Wifi mesh systems may not be the optimal choice for smaller households, or those who want the best connectivity at a lower price point.

Speaker Change: In these cases are differentiated Wi Fi <unk>, and Wi Fi seven Nighthawk routers cable gateways and midrange Nighthawk mobile hotspots fit the bill perfectly and we expect these products to contribute to our improving growth and profitability in the CHP business.

Bryan Murray: And we expect these products to contribute toward improving growth and profitability in the CHP business. Meanwhile, while we certainly have demonstrated our hardware expertise, our software solutions are also steadily gaining traction, and our investments in our services strategy continue to pay off. I'm excited to share that we exceeded our target for the full year and exited the fourth quarter with 877,000 paid subscribers, and we generated $11.4 million in service revenue for the fourth quarter, a year-over-year increase of 27.7%. This growth is fueled by the increased emphasis we're seeing CHP consumers place on cybersecurity protection, privacy, and premium support. And we see a path to exit 2024 with a service revenue annualized run rate of $50 million with even greater potential in the long term. On the S&B side, net revenue came in at $70.3 million in the fourth quarter. Slightly above our expectations.

Speaker Change: While we certainly have demonstrated our hardware expertise our software solutions are also steadily gaining traction.

Speaker Change: And our investments in our services strategy continue to pay off.

I'm excited to share that we exceeded our target for the full year and exited the fourth quarter with 877000 paid subscribers.

Speaker Change: We generated $11 4 million and service revenue for the fourth quarter a.

Speaker Change: Our year over year increase of 27, 7%.

Speaker Change: This growth was fueled by the increased emphasis we're seeing CHP consumers place on cyber security protection.

Speaker Change: <unk> and premium support.

Speaker Change: And we see a path to exit 2024, with a service revenue annualized run rate of $50 million.

Speaker Change: With even greater potential in the long term.

Speaker Change: On the SMB side net revenue came in at $70 3 million in the fourth quarter.

Speaker Change: Slightly above our expectations.

Bryan Murray: Similar to the prior quarter, high interest rates and stagnant or even negative GDP growth in major markets such as Germany, Greater China, and Japan weighed on the S&P market and continued to dampen end-user demand for traditional switches. Combined with the reduction in inventory carrying levels at our channel partners throughout the year, these headwinds led us to full-year SMB revenue of $294 million, a decline of 21.3 percent. Although we performed well relative to our expectations for the quarter, our SMB Channel partners again continue to compress inventory levels and are expected to continue doing so in the quarters ahead as macroeconomic headwinds persist. However, we remain confident in the growth potential of this business given our competitive advantage in the ProAV market and the thoughtful investments we've made in both our hardware and software offerings to position ourselves for success, and Entrench, our first mover advantage. To fortify our advantage, we have developed comprehensive and uniquely differentiated solutions. For example, the ability to integrate with over 200 AV equipment manufacturers through our Engage Controller software platform.

Speaker Change: Similar to the prior quarter high interest rates and stagnant or even negative GDP growth in major markets, such as Germany, Greater China, and Japan weighed on the SMB market and.

Speaker Change: We continue to dampen end user demand for our traditional switches.

Speaker Change: Combined with the reduction of inventory carrying levels that our channel partners throughout the year. These headwinds led us to full year SME revenue of $294 million a decline of 21, 3%.

Speaker Change: Okay.

Speaker Change: Although we performed well relative to our expectations for the quarter.

Speaker Change: Our SMB channel partners again continued to compress inventory levels and are expected to continue doing so in the quarters ahead as macroeconomic headwinds persist.

Speaker Change: However, we remain confident in the growth potential of this business given our competitive advantage in the <unk> market and the thoughtful investments we've made in both our hardware and software offerings to position ourselves for success.

Speaker Change: And in terms of our first mover advantage.

Speaker Change: To fortify or advantage, we have developed comprehensive and uniquely differentiated solutions.

Speaker Change: The ability to integrate with over 280 equipment manufacturers through our engaged controller software platform.

Bryan Murray: GoToMarket Partnerships with leading AV integrators around the world in the commercial and residential markets, and an experienced team of AV Network designers. NETGEAR's deep expertise in the rapidly growing ProAV market is unmatched by our competition and gives us confidence in the long-term growth and profitability potential of our ProAV suite of products. I'll now discuss our Q1 2024 Outlook, www.netgear.co.uk. We expect the retail portion of our CHV business to experience a seasonal decline coming off the holiday period. Revenue from the Service Provider Channel is expected to be approximately $25 million in the first quarter. As interest rates remain high, we will continue to work with our SMB Channel partners to optimize their inventory carrying levels over the next few quarters.

Speaker Change: Go to market partnerships with leading Avion integrators around the world in the commercial and residential markets.

Speaker Change: And an experienced team of Avi network designers.

Speaker Change: <unk> deep expertise in the rapidly growing <unk> market is unmatched by our competition and gives us the confidence in the long term growth and profitability potential and our <unk> suite of products.

Speaker Change: I will now discuss our Q1 2024 outlet.

Speaker Change: We expect the retail portion of our CTV business to experience a seasonal decline coming off the holiday period.

Speaker Change: Revenue from the service provider channel is expected to be approximately $25 million in the first quarter.

Speaker Change: As interest rates remain high we will continue to work with our SMB channel partners to optimize the inventory carrying levels. During the next few quarters.

Accordingly, we expect first quarter net revenue to be in the range of $155 million to $170 million.

Speaker Change: As we continue to make meaningful progress in reducing our own inventory levels, we will be consuming higher cost inventory.

Bryan Murray: Accordingly, we expect first quarter net revenue to be in the range of $155 million to $170 million. Additionally, as we continue to make meaningful progress in reducing our own inventory levels, we will be consuming higher-cost inventory. We expect to move back to our historically normal inventory costs in the second half of this year. Accordingly, we expect our first quarter gap operating margin to be in the range of negative 11.4 percent to negative 8.4 percent, and our non-GAAP operating margin to be in the range of negative 8.5% to negative 5.5%. Our GAAP tax expense is expected to be in the range of $6.5 million to $7.5 million.

Speaker Change: We expect to move back toward historically normal inventory costs in the second half of this year.

Speaker Change: Accordingly, we expect our first half first quarter GAAP operating margin to be in the range of negative 11, 4% to negative eight 4%.

Speaker Change: And our non-GAAP operating margin to be in the range of negative <unk>, 5% to negative five 5%.

Speaker Change: Our GAAP tax expense is expected to be in the range of $6 5 million to.

Speaker Change: To $7 5 million.

Speaker Change: And our non-GAAP tax benefit is expected to be in the range of zero to $1 million for the first quarter of 2024.

Speaker Change: We expect to continue to generate meaningful cash in the first quarter of 2024.

Speaker Change: Operator, we would now like to answer any questions from the audience.

Bryan Murray: And our non-GAAP tax benefit is expected to be in the range of zero to one million dollars for the first quarter of 2024. We expect to continue to generate meaningful cash in the first quarter of 2024. Operator, we would now like to answer any questions from the audience. At this time, I would like to remind everyone, in order to ask a question, press star then the number 1 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 Jake Norrison with Raymond James. Your line is open. Okay, thank you. A couple for me.

Speaker Change: 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.

Speaker Change: So just a moment to compile the Q&A roster.

Speaker Change: Okay.

Speaker Change: Your first question comes from the line of Jake Morrison with Raymond James Your.

Jake Morrison: Your line is open.

Jake Morrison: Okay. Thank you a couple from me I just wanted to start off from a high level.

Jake Morrison: Welcoming CJ I'm, just wondering what would this organizational shift.

Jake Morrison: Enable from a strategy and capital allocation perspective long term I know you touched on potential growth Adjacencies anymore color there would be helpful.

Jake Norrison: I just wanted to start off from a high level. Welcoming CJ, I'm just wondering, what would this organizational shift enable from a strategy and capital allocation perspective in the long term? I know you touched on potential growth adjacencies; any more color there would be helpful. Hey Jake, good to meet you.

CJ: Hey, good to meet you.

CJ: It's too early to say I, obviously made the point that.

CJ: I see an opportunity for cash generation, we're doing that now on the back of working capital.

Speaker Change: Improvements, but long term, we want to create value and the way Ics, creating value has been a long term sustainable cash generating business.

C.J. Prober: You know, it's too early to say, but I obviously made the point that... I see an opportunity for cash generation. We're doing that now on the back of working capital improvements. But, you know, long-term, we want to create value. And the way I see us creating value is by being a long-term, sustainable, cash-generating business. In terms of, you know, how much capital that requires and how that feeds into kind of the strategy we implement, we'll have to talk about that on a later call, but I definitely appreciate where you're coming from on that question. Okay, sounds good.

Speaker Change: In terms of how much capital that requires and how that feeds into kind of the strategy. We implemented let's talk about that on on a later call, but I definitely appreciate where you're coming from on that question.

Speaker Change: Okay sounds good thank you and then.

Speaker Change: Im also wondering you guys gave fiscal year guidance at the analyst day can you just give us updated color on the cadence of how the year will play out are you still expecting that sort of hockey stick in the back half low to mid single digit growth for the full year.

Jake Norrison: And then I'm also wondering, you guys gave fiscal year guidance at the end of this day. Can you just give us updated color on the cadence of how the year will play out? Are you still expecting that sort of hockey stick in the back half, low to mid single-digit growth for the full year? Yeah, in keeping with our tradition, we're not going to, you know, revise annual guidance at this point.

Speaker Change: Keeping with our tradition, we're not going to two.

Speaker Change: Readdress annual guidance at this point, we provided guidance for Q1 based on what we see in the near term.

Speaker Change: But as you feel like the guidance, we put out there for Q1 is relatively in line with what we shared at the analyst day.

Speaker Change: There is probably a slight.

Bryan Murray: We've provided the guidance for Q1 based on what we see in the near term, but I do feel like the guidance we put out there for Q1 is relatively in line with what we shared at Analyst Day, www.netgear.com. Lowering the operating margin profile from the range that we provided for the first half. And I would say the differential there is largely due to transitional costs as we kind of, www. NETGEAR.com The new leadership of CJ coming on board and the transition costs coming along with that make sense. And then last one for me, you mentioned a couple of times that you saw the, you know, retail market stabilize. Can you just touch on what gives you confidence that there and that channel, our CHB channel inventory will be stable for the rest of the year? Thanks. Yeah, maybe I'll start and then I'll ask David to weigh in.

Speaker Change: Lowering of the operating margin profile from the range that we provided for the first half and I would say the differential there is largely due to transitional cost as we kind of.

Speaker Change: Ramp up this new.

Speaker Change: The new leadership with Cedric coming onboard and the transition costs coming along with that.

Speaker Change: Makes sense and then last one from me you mentioned a couple of times you saw.

Speaker Change: Retail market stabilize.

Speaker Change: Can you just touch on what's giving you confidence there in that channel or CHP channel inventory will be stable for.

Speaker Change: For the rest of the year. Thank you.

Speaker Change: Yes, maybe I'll start and then I'll ask David to weigh in here I think as we said last quarter, what's giving us the confidence of seeing that is that we're starting to see a return to normal seasonal behavior within that market.

David Henry: Typically you would see a seasonal decline as is implied in our guidance here for Q1. So thats. The main data point, we have we obviously think that continues to strengthen.

Bryan Murray: I think, as we said last quarter, what's giving us the confidence of seeing that is that we're starting to see a return to normal seasonal behavior within that market. You know, typically, you would see a seasonal decline as it's implied in our guidance here for Q1. So that's the main data point we have. We obviously think that continues to strengthen as Wi-Fi 7 becomes more prominent in the market, just given the natural growth in ASPs that that will bring into play. But David can probably provide some additional context.

David Henry: As <unk> becomes more prominent in the market just given the natural growth in asps that that will bring in play, but David can probably provide some additional context.

David Henry: Sure Yeah, as Brian said I think over the last couple of quarters, we started to see the year on year decline of the market stabilize and not continue to get.

David Henry: Lower and lower as we have seen for the last few years.

David Henry: As we go into this year obviously.

David Henry: Cash cycle for years removed from the pandemic, Poland selling would be wind at our backs as well as.

David Henry: Sure, yeah, as Bryan said, I think over the last couple of quarters we started to see the year-on-year decline of the market stabilize and not continue to get lower and lower as we have seen for the last few years. As we go into this year, obviously, the refresh cycle four years removed from the pandemic pull-in would certainly be a win at our backs as well.

David Henry: There's a lot of new Wi Fi seven devices launching in the market Samsung just announced their <unk>.

David Henry: She has 24 Galaxy 24 of the Wi Fi seven we expect others throughout this year.

David Henry: And as people start to adopt.

David Henry: Adopt those new products theyre going to one upgrade their networks and that should help stimulate the market to further stabilization.

David Henry: You know, there are a lot of new Wi-Fi 7 devices launching on the market. Samsung just announced their GS24, the Galaxy S24, with Wi-Fi 7. We expect others throughout this year. And as people start to, you know, adopt those new products, they're going to want to upgrade their networks, and that should help stimulate the market to further stabilization. Very helpful. Thank you. Again, if you would like to ask a question, press star then the number 1 on your telephone keypad. Your next question comes from the line of Hamed Khorsand with BWS Financial. Your line is open.

Speaker Change: Very helpful. Thank you.

Speaker Change: Again, if you would like to ask a question Press Star then the number one on your telephone keypad.

Speaker Change: Your next question comes from the line of Amit.

Amit: Of course.

Amit: With Dws financial.

Amit: Your line is open.

Amit: Hi, So first off can we just talk about your commentary here for Q1.

Amit: Yes.

Speaker Change: Youre, saying retail stabilizing, but youre guiding quite a bit down and then.

Speaker Change: Flicks that stabilization comment because Q1 'twenty three.

Hamed Khorsand: Hi, so first off, can we just talk about your commentary here for Q1? Yeah, I mean, you're saying retail stabilizing, but you're guiding quite a bit down. And then, you know, it conflicts with that stabilization comment because Q123, it was, you know, you're going to be below that. How is it stable?

Speaker Change: It was youre going to be below that.

Speaker Change: How is it stable when Q1 'twenty three you were saying Oh, it's going to be at the bottom and all of that commentary now you are saying well, it's going to be below that number yes.

Speaker Change: Yes.

Speaker Change: You may recall the <unk>.

Speaker Change: Retail portion of the CHP business is very seasonal.

Speaker Change: In normal periods, you'll see something like a mid teen.

Bryan Murray: When Q123 was released, you were saying, oh, it's going to be the bottom and all that commentary, and now you're saying, well, it's going to be below that. Yeah, as you may recall, the retail portion of the CHP business is very seasonal. In normal periods, you'll see something like a mid-teen percentage decline in the market from Q4 into Q1. So that's the main driver why revenues would be coming down. And that was mentioned back in December at Analyst Day as well. So we continue to see that playing out, as we mentioned back in December, and the primary driver for the superintendent applying the revenue. Yeah, no, I understand the commentary you gave in December; I understand the commentary now. What I'm trying to understand is, how are you saying it's stable if your revenue is declining year over year from Q1'23 to Q1'24? That doesn't seem stable.

Speaker Change: Percentage decline in the market from Q4 into Q1.

Speaker Change: So that's the main driver why revenues will be would be coming down and that was that was mentioned back in December at the analyst day as well.

Speaker Change: So we continue to see that playing out.

Speaker Change: As we have mentioned back in December and the primary driver for the sequential decline in revenue.

Speaker Change: Yes, no I understand the commentary you gave in December I understand the commentary now what I'm trying to understand is how are you, saying it's stable if youre actually your revenue is declining year over year from Q1 'twenty three in Q1 24 that doesn't seem stable.

Speaker Change: Yeah, So again the.

Speaker Change: The comment I made earlier with regards to what the signal is it leads us to believe that the market has stabilized is largely because we have returned to normal seasonal patterns at some point it will play out as.

Bryan Murray: Yeah, so again, the comment I made earlier with regard to what the signal is that leads us to believe that the market is stabilized is largely because we have returned to normal seasonal patterns. At some point, it will play out as a year-over-year flattening and hopefully turning to growth, which, again, I think to the point David made and that I said earlier, that that's going to come as Wi-Fi 7 kind of becomes more prominent in the market. Those are the signals that we think are driving us towards believing the market is stabilized. And then, Bryan, what's happened since Analysts' Day?

Speaker Change: Year over year, flattening and hopefully turning to growth, which again to the <unk>.

Speaker Change: David made and that I said earlier that that's going to come as Wi Fi seven kind of becomes more prominent in the market.

Speaker Change: Those are those are the signals that we've seen there.

Speaker Change: Driving us towards to believe in the market is stabilizing.

And then Brian what's happened since the analyst day that it's.

Speaker Change: It feels like the <unk>.

Brian: Q1 is going to be lower than what was perceived I think your quote was in investor day. It was going to be first half was going to be down mid single digits.

Hamed Khorsand: It feels like Q1 is going to be lower than what was perceived. I think your quote on Investor Day was that the first half was going to be down mid-single digits. Right, and now this is quite a bit more than that. Yeah, we said the sequential decline would be down mid-single digits. I think we're in that general direction with the guidance, depending where in the range you are landing.

Brian: Right now this is quite a bit more than that.

Brian: Okay.

Brian: We said the sequential decline would be down mid single digit I think we're in that general direction with the guidance, depending where in the range of <unk> fewer landing.

Brian: There's not much that's changed from the December guidance on the topline.

Speaker Change: Okay, and then why Hasnt there been any progress as far as what you want to do your cash I mean that $284 million.

Bryan Murray: There's not much that's changed from that December guidance on the top line. Okay, and then why hasn't there been any progress as far as what you want to do with your cash? I mean, that 284 million dollars. That's quite a bit of change, and there has been no activity on buying back any stock. Yeah, there's no doubt we've been very successful in quickly turning that ship.

Speaker Change: Quite a bit of change and there has been no activity on buying back any stock.

Speaker Change: Yes, there's no doubt we've been very successful of quickly turning that ship.

Speaker Change: From the end of Q2, we were at $203 million and to exit the year, just shy of $284 million. We've generated a lot of cash a very short period of time, mainly coming from compressing our inventory balances.

Bryan Murray: From the end of Q2, we were at $203 million, and to exit the year, just shy of $284 million. We've generated a lot of cash in a very short period of time, mainly coming from compressing our inventory balances. NETGEAR Inc., I would just say that is a very near-term trend. We obviously are going through a change in leadership, and we're going to continue to have the same kind of conversations we've had historically with regard to how we allocate capital, which we continue to reiterate that we think we need about $125 million to run the business, and then all amounts beyond that, we're continuing to have discussions about strategic uses. Obviously, M&A is something that we continuously talk about.

Speaker Change: I would just say it is a very near term trend.

Speaker Change: We obviously are going through.

Speaker Change: A change in leadership and we're going to continue to have the same kind of conversation we've had historically with regards to how we allocate capital.

Which.

Speaker Change: Again, we continue to reiterate that we think we need about $125 million to run the business and then all amounts beyond that we're continuing to have discussions about strategic uses.

Speaker Change: Obviously M&A is something that we continuously talk about.

Speaker Change: And then stock repurchases, we will again continue to be opportunistic buyers of our stock with 2 million two 5 million shares remaining on that program.

Speaker Change: But I think it's because we've quickly turn turned <unk>, where we were utilized using cash in the first half of the year and we've aggressively turn that around with the Q4 performance of generating free cash flow over $54 million.

Speaker Change: Which was quite an improvement and if you recall my comments.

Bryan Murray: And then stock repurchase, so again, continue the opportunity for buyers for stock with 2.5 million shares remaining on that program. But I think it's because... We quickly turned the tides where we were using cash in the first half of the year, and we've aggressively turned that around with the Q4 performance. Generating, you know, free cash flow of over $54 million was quite an improvement. And if you recall my comments. Back in October, we were expecting to generate probably something more in the $25 to $30 million range, so we overshot that mark, which is great, and we still continue to believe that we're going to generate more cash in Q1.

Speaker Change: Back in October we were expecting to generate probably something more in the $25 million to $30 million range. So.

Speaker Change: We overshot that Mark which is great.

Speaker Change: And we still continue to believe that we're going to generate more cash in Q1.

Speaker Change: Okay. Thank you.

Speaker Change: Sure.

Speaker Change: There are no further questions at this time.

Speaker Change: C J I turn the call back over to you.

C J: Yes. Thank you guys for joining us today like I said couldnt be more excited about the opportunity ahead.

Speaker Change: That's it for us so Nick your team signed enough.

Speaker Change: This concludes today's conference call you may now disconnect.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Bryan Murray: Okay, thank you. Sure. There are no further questions at this time. TJ, I turn the call back over to you. Thank you guys for joining us today, like I said, couldn't be more excited about the opportunity ahead and that's it for us, NETGEAR team signing off. This concludes today's conference call. You may now disconnect, www. NETGEAR.com, ?? ?? ?? ?? ?? ?? ??

Speaker Change: Sure.

Speaker Change: Sure.