Delaware
|
|
77-0419172
|
(State or other jurisdiction of
incorporation or organization)
|
|
(IRS Employer
Identification No.)
|
|
|
|
350 East Plumeria Drive,
San Jose, California
|
|
95134
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Item 1.
|
||
|
||
|
||
|
||
|
||
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 5.
|
||
Item 6.
|
||
|
Item 1.
|
Financial Statements
|
|
As of
|
||||||
|
July 2,
2017 |
|
December 31,
2016 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
190,676
|
|
|
$
|
240,468
|
|
Short-term investments
|
114,847
|
|
|
125,514
|
|
||
Accounts receivable, net
|
304,588
|
|
|
313,839
|
|
||
Inventories
|
263,773
|
|
|
247,862
|
|
||
Prepaid expenses and other current assets
|
27,705
|
|
|
35,102
|
|
||
Total current assets
|
901,589
|
|
|
962,785
|
|
||
Property and equipment, net
|
18,829
|
|
|
19,473
|
|
||
Intangibles, net
|
30,215
|
|
|
37,899
|
|
||
Goodwill
|
85,463
|
|
|
85,463
|
|
||
Other non-current assets
|
79,493
|
|
|
78,836
|
|
||
Total assets
|
$
|
1,115,589
|
|
|
$
|
1,184,456
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
72,886
|
|
|
$
|
112,436
|
|
Accrued employee compensation
|
24,017
|
|
|
33,096
|
|
||
Other accrued liabilities
|
173,714
|
|
|
170,674
|
|
||
Deferred revenue
|
36,533
|
|
|
35,301
|
|
||
Income taxes payable
|
—
|
|
|
5,146
|
|
||
Total current liabilities
|
307,150
|
|
|
356,653
|
|
||
Non-current income taxes payable
|
15,721
|
|
|
15,119
|
|
||
Other non-current liabilities
|
16,796
|
|
|
15,865
|
|
||
Total liabilities
|
339,667
|
|
|
387,637
|
|
||
Commitments and contingencies (Note 8)
|
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Common stock
|
32
|
|
|
33
|
|
||
Additional paid-in capital
|
584,097
|
|
|
566,307
|
|
||
Accumulated other comprehensive income (loss)
|
(4,810
|
)
|
|
1,938
|
|
||
Retained earnings
|
196,603
|
|
|
228,541
|
|
||
Total stockholders’ equity
|
775,922
|
|
|
796,819
|
|
||
Total liabilities and stockholders’ equity
|
$
|
1,115,589
|
|
|
$
|
1,184,456
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 2,
2017 |
|
July 3,
2016 |
|
July 2,
2017 |
|
July 3,
2016 |
||||||||
Net revenue
|
$
|
330,723
|
|
|
$
|
311,655
|
|
|
$
|
654,380
|
|
|
$
|
621,911
|
|
Cost of revenue
|
238,787
|
|
|
213,867
|
|
|
465,512
|
|
|
423,558
|
|
||||
Gross profit
|
91,936
|
|
|
97,788
|
|
|
188,868
|
|
|
198,353
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and development
|
23,357
|
|
|
21,804
|
|
|
46,040
|
|
|
43,941
|
|
||||
Sales and marketing
|
36,461
|
|
|
36,089
|
|
|
74,690
|
|
|
73,366
|
|
||||
General and administrative
|
12,950
|
|
|
13,035
|
|
|
26,144
|
|
|
25,884
|
|
||||
Restructuring and other charges
|
22
|
|
|
1,311
|
|
|
59
|
|
|
3,989
|
|
||||
Litigation reserves, net
|
53
|
|
|
35
|
|
|
53
|
|
|
45
|
|
||||
Total operating expenses
|
72,843
|
|
|
72,274
|
|
|
146,986
|
|
|
147,225
|
|
||||
Income from operations
|
19,093
|
|
|
25,514
|
|
|
41,882
|
|
|
51,128
|
|
||||
Interest income
|
482
|
|
|
279
|
|
|
887
|
|
|
513
|
|
||||
Other income (expense), net
|
383
|
|
|
(332
|
)
|
|
718
|
|
|
(698
|
)
|
||||
Income before income taxes
|
19,958
|
|
|
25,461
|
|
|
43,487
|
|
|
50,943
|
|
||||
Provision for income taxes
|
5,376
|
|
|
9,427
|
|
|
12,911
|
|
|
18,320
|
|
||||
Net income
|
$
|
14,582
|
|
|
$
|
16,034
|
|
|
$
|
30,576
|
|
|
$
|
32,623
|
|
Net income per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.45
|
|
|
$
|
0.49
|
|
|
$
|
0.94
|
|
|
$
|
1.00
|
|
Diluted
|
$
|
0.44
|
|
|
$
|
0.48
|
|
|
$
|
0.91
|
|
|
$
|
0.98
|
|
Weighted average shares used to compute net income per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
32,352
|
|
|
32,639
|
|
|
32,650
|
|
|
32,578
|
|
||||
Diluted
|
33,116
|
|
|
33,493
|
|
|
33,656
|
|
|
33,390
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 2,
2017 |
|
July 3,
2016 |
|
July 2,
2017 |
|
July 3,
2016 |
||||||||
Net income
|
$
|
14,582
|
|
|
$
|
16,034
|
|
|
$
|
30,576
|
|
|
$
|
32,623
|
|
Other comprehensive income (loss), before tax:
|
|
|
|
|
|
|
|
||||||||
Unrealized gains (losses) on derivative instruments
|
(6,003
|
)
|
|
511
|
|
|
(7,700
|
)
|
|
(36
|
)
|
||||
Unrealized gains (losses) on available-for-sale securities
|
(27
|
)
|
|
46
|
|
|
(82
|
)
|
|
147
|
|
||||
Other comprehensive income (loss), before tax
|
(6,030
|
)
|
|
557
|
|
|
(7,782
|
)
|
|
111
|
|
||||
Tax benefit related to derivative instruments
|
809
|
|
|
—
|
|
|
1,005
|
|
|
—
|
|
||||
Tax benefit (provision) related to available-for-sale securities
|
9
|
|
|
(17
|
)
|
|
29
|
|
|
(55
|
)
|
||||
Other comprehensive income (loss), net of tax
|
(5,212
|
)
|
|
540
|
|
|
(6,748
|
)
|
|
56
|
|
||||
Comprehensive income
|
$
|
9,370
|
|
|
$
|
16,574
|
|
|
$
|
23,828
|
|
|
$
|
32,679
|
|
|
Six Months Ended
|
||||||
|
July 2,
2017 |
|
July 3,
2016 |
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
30,576
|
|
|
$
|
32,623
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
14,224
|
|
|
16,887
|
|
||
Purchase premium amortization/discount accretion on investments, net
|
100
|
|
|
56
|
|
||
Non-cash stock-based compensation
|
10,829
|
|
|
9,430
|
|
||
Income tax impact associated with stock option exercises
|
—
|
|
|
768
|
|
||
Deferred income taxes
|
1,788
|
|
|
3,857
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
9,252
|
|
|
60,092
|
|
||
Inventories
|
(15,911
|
)
|
|
5,277
|
|
||
Prepaid expenses and other assets
|
5,519
|
|
|
3,066
|
|
||
Accounts payable
|
(39,283
|
)
|
|
(9,866
|
)
|
||
Accrued employee compensation
|
(9,079
|
)
|
|
3,349
|
|
||
Other accrued liabilities
|
(1,322
|
)
|
|
(34,091
|
)
|
||
Deferred revenue
|
1,232
|
|
|
136
|
|
||
Income taxes payable
|
(4,544
|
)
|
|
(1,482
|
)
|
||
Net cash provided by operating activities
|
3,381
|
|
|
90,102
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of short-term investments
|
(56,876
|
)
|
|
(80,254
|
)
|
||
Proceeds from maturities of short-term investments
|
67,648
|
|
|
50,147
|
|
||
Purchase of property and equipment
|
(6,162
|
)
|
|
(5,060
|
)
|
||
Cost method investment
|
(1,400
|
)
|
|
—
|
|
||
Payments made in connection with business acquisition, net of cash acquired
|
(737
|
)
|
|
—
|
|
||
Net cash provided by (used in) investing activities
|
2,473
|
|
|
(35,167
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Repurchases of common stock
|
(56,631
|
)
|
|
(23,252
|
)
|
||
Restricted stock unit withholdings
|
(5,649
|
)
|
|
(3,915
|
)
|
||
Proceeds from exercise of stock options
|
3,972
|
|
|
14,653
|
|
||
Proceeds from issuance of common stock under employee stock purchase plan
|
2,662
|
|
|
1,645
|
|
||
Net cash used in financing activities
|
(55,646
|
)
|
|
(10,869
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
(49,792
|
)
|
|
44,066
|
|
||
Cash and cash equivalents, at beginning of period
|
240,468
|
|
|
181,945
|
|
||
Cash and cash equivalents, at end of period
|
$
|
190,676
|
|
|
$
|
226,011
|
|
Note 1.
|
The Company and Basis of Presentation
|
Note 2.
|
Summary of Significant Accounting Policies
|
Note 3.
|
Business Acquisition
|
Cash and cash equivalents
|
$
|
8
|
|
Accounts receivable, net
|
11
|
|
|
Prepaid expenses and other current assets
|
130
|
|
|
Property and equipment, net
|
83
|
|
|
Intangibles, net
|
6,000
|
|
|
Goodwill
|
3,742
|
|
|
Accounts payable
|
(40
|
)
|
|
Other accrued liabilities
|
(74
|
)
|
|
Deferred tax liabilities, net
|
(308
|
)
|
|
Total purchase price
|
$
|
9,552
|
|
Note 4.
|
Balance Sheet Components
|
|
As of
|
||||||||||||||||||||||||||||||
|
July 2, 2017
|
|
December 31, 2016
|
||||||||||||||||||||||||||||
|
Cost
|
|
Unrealized Gain
|
|
Unrealized Loss
|
|
Estimated Fair Value
|
|
Cost
|
|
Unrealized Gain
|
|
Unrealized Loss
|
|
Estimated Fair Value
|
||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||
U.S. treasuries
|
$
|
112,987
|
|
|
$
|
—
|
|
|
$
|
(113
|
)
|
|
$
|
112,874
|
|
|
$
|
123,869
|
|
|
$
|
9
|
|
|
$
|
(40
|
)
|
|
$
|
123,838
|
|
Certificates of deposit
|
158
|
|
|
—
|
|
|
—
|
|
|
158
|
|
|
148
|
|
|
—
|
|
|
—
|
|
|
148
|
|
||||||||
Total
|
$
|
113,145
|
|
|
$
|
—
|
|
|
$
|
(113
|
)
|
|
$
|
113,032
|
|
|
$
|
124,017
|
|
|
$
|
9
|
|
|
$
|
(40
|
)
|
|
$
|
123,986
|
|
|
As of
|
||||||
|
July 2,
2017 |
|
December 31,
2016 |
||||
|
(In thousands)
|
||||||
Gross accounts receivable
|
$
|
323,291
|
|
|
$
|
333,080
|
|
Allowance for doubtful accounts
|
(1,256
|
)
|
|
(1,255
|
)
|
||
Allowance for sales returns
|
(15,029
|
)
|
|
(13,506
|
)
|
||
Allowance for price protection
|
(2,418
|
)
|
|
(4,480
|
)
|
||
Total allowances
|
(18,703
|
)
|
|
(19,241
|
)
|
||
Total accounts receivable, net
|
$
|
304,588
|
|
|
$
|
313,839
|
|
|
As of
|
||||||
|
July 2,
2017 |
|
December 31,
2016 |
||||
|
(In thousands)
|
||||||
Raw materials
|
$
|
3,691
|
|
|
$
|
4,596
|
|
Work in process
|
5
|
|
|
—
|
|
||
Finished goods
|
260,077
|
|
|
243,266
|
|
||
Total inventories
|
$
|
263,773
|
|
|
$
|
247,862
|
|
|
As of
|
||||||
|
July 2,
2017 |
|
December 31,
2016 |
||||
|
(In thousands)
|
||||||
Computer equipment
|
$
|
10,174
|
|
|
$
|
10,557
|
|
Furniture, fixtures and leasehold improvements
|
21,324
|
|
|
20,827
|
|
||
Software
|
28,789
|
|
|
28,663
|
|
||
Machinery and equipment
|
57,073
|
|
|
63,446
|
|
||
Total property and equipment, gross
|
117,360
|
|
|
123,493
|
|
||
Accumulated depreciation and amortization
|
(98,531
|
)
|
|
(104,020
|
)
|
||
Total property and equipment, net
|
$
|
18,829
|
|
|
$
|
19,473
|
|
|
As of July 2, 2017
|
||||||||||
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
||||||
|
(In thousands)
|
||||||||||
Technology
|
$
|
66,599
|
|
|
$
|
(60,920
|
)
|
|
$
|
5,679
|
|
Customer contracts and relationships
|
56,500
|
|
|
(33,918
|
)
|
|
22,582
|
|
|||
Other
|
11,045
|
|
|
(9,091
|
)
|
|
1,954
|
|
|||
Total intangibles, net
|
$
|
134,144
|
|
|
$
|
(103,929
|
)
|
|
$
|
30,215
|
|
|
As of December 31, 2016
|
||||||||||
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
||||||
|
(In thousands)
|
||||||||||
Technology
|
$
|
66,599
|
|
|
$
|
(57,381
|
)
|
|
$
|
9,218
|
|
Customer contracts and relationships
|
56,500
|
|
|
(30,375
|
)
|
|
26,125
|
|
|||
Other
|
11,045
|
|
|
(8,489
|
)
|
|
2,556
|
|
|||
Total intangibles, net
|
$
|
134,144
|
|
|
$
|
(96,245
|
)
|
|
$
|
37,899
|
|
|
As of July 2, 2017
|
||
|
(In thousands)
|
||
2017 (remaining six months)
|
$
|
5,227
|
|
2018
|
9,396
|
|
|
2019
|
7,544
|
|
|
2020
|
6,622
|
|
|
2021
|
1,413
|
|
|
Thereafter
|
13
|
|
|
Total estimated amortization expense
|
$
|
30,215
|
|
|
Arlo
|
|
Connected Home
|
|
SMB
|
|
Total
|
||||||||
|
(In thousands)
|
||||||||||||||
Goodwill as of January 1, 2017
|
$
|
21,149
|
|
|
$
|
28,035
|
|
|
$
|
36,279
|
|
|
$
|
85,463
|
|
Goodwill as of July 2, 2017
|
$
|
21,149
|
|
|
$
|
28,035
|
|
|
$
|
36,279
|
|
|
$
|
85,463
|
|
|
As of
|
||||||
|
July 2,
2017 |
|
December 31, 2016
|
||||
|
(In thousands)
|
||||||
Non-current deferred income taxes
|
$
|
70,168
|
|
|
$
|
70,859
|
|
Other
|
9,325
|
|
|
7,977
|
|
||
Total other non-current assets
|
$
|
79,493
|
|
|
$
|
78,836
|
|
|
As of
|
||||||
|
July 2,
2017 |
|
December 31,
2016 |
||||
|
(In thousands)
|
||||||
Sales and marketing
|
$
|
72,026
|
|
|
$
|
74,330
|
|
Warranty obligation
|
60,451
|
|
|
58,520
|
|
||
Freight
|
5,510
|
|
|
8,980
|
|
||
Other
|
35,727
|
|
|
28,844
|
|
||
Total other accrued liabilities
|
$
|
173,714
|
|
|
$
|
170,674
|
|
Note 5.
|
Derivative Financial Instruments
|
Derivative Assets
|
|
Balance Sheet
Location
|
|
Fair Value at
July 2, 2017 |
|
Balance Sheet
Location
|
|
Fair Value at
December 31, 2016
|
||||
|
|
|
|
(In thousands)
|
|
|
|
(In thousands)
|
||||
Derivative assets not designated as hedging instruments
|
|
Prepaid expenses and other current assets
|
|
$
|
438
|
|
|
Prepaid expenses and other current assets
|
|
$
|
5,873
|
|
Derivative assets designated as hedging instruments
|
|
Prepaid expenses and other current assets
|
|
1,237
|
|
|
Prepaid expenses and other current assets
|
|
2,890
|
|
||
Total
|
|
|
|
$
|
1,675
|
|
|
|
|
$
|
8,763
|
|
Derivative Liabilities
|
|
Balance Sheet
Location
|
|
Fair Value at
July 2, 2017 |
|
Balance Sheet
Location
|
|
Fair Value at
December 31, 2016
|
||||
|
|
|
|
(In thousands)
|
|
|
|
(In thousands)
|
||||
Derivative liabilities not designated as hedging instruments
|
|
Other accrued liabilities
|
|
$
|
2,935
|
|
|
Other accrued liabilities
|
|
$
|
1,002
|
|
Derivative liabilities designated as hedging instruments
|
|
Other accrued liabilities
|
|
6,365
|
|
|
Other accrued liabilities
|
|
703
|
|
||
Total
|
|
|
|
$
|
9,300
|
|
|
|
|
$
|
1,705
|
|
As of July 2, 2017
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Assets
|
|
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
|
|
Net Amounts Of Assets Presented in the Condensed Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Pledged
|
|
Net Amount
|
|||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
Bank of America
|
|
$
|
1,180
|
|
|
$
|
—
|
|
|
$
|
1,180
|
|
|
$
|
(1,180
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Wells Fargo
|
|
495
|
|
|
—
|
|
|
495
|
|
|
(495
|
)
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
$
|
1,675
|
|
|
$
|
—
|
|
|
$
|
1,675
|
|
|
$
|
(1,675
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
As of December 31, 2016
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Assets
|
|
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
|
|
Net Amounts Of Assets Presented in the Condensed Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Pledged
|
|
Net Amount
|
|||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
J.P. Morgan Chase
|
|
$
|
1,492
|
|
|
$
|
—
|
|
|
$
|
1,492
|
|
|
$
|
(442
|
)
|
|
$
|
—
|
|
|
$
|
1,050
|
|
Wells Fargo
|
|
7,271
|
|
|
—
|
|
|
7,271
|
|
|
(1,263
|
)
|
|
—
|
|
|
6,008
|
|
||||||
Total
|
|
$
|
8,763
|
|
|
$
|
—
|
|
|
$
|
8,763
|
|
|
$
|
(1,705
|
)
|
|
$
|
—
|
|
|
$
|
7,058
|
|
As of July 2, 2017
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Liabilities
|
|
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
|
|
Net Amounts Of Liabilities Presented in the Condensed Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Pledged
|
|
Net Amount
|
|||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
Bank of America
|
|
$
|
6,587
|
|
|
$
|
—
|
|
|
$
|
6,587
|
|
|
$
|
(1,180
|
)
|
|
$
|
—
|
|
|
$
|
5,407
|
|
Wells Fargo
|
|
2,713
|
|
|
—
|
|
|
2,713
|
|
|
(495
|
)
|
|
—
|
|
|
2,218
|
|
||||||
Total
|
|
$
|
9,300
|
|
|
$
|
—
|
|
|
$
|
9,300
|
|
|
$
|
(1,675
|
)
|
|
$
|
—
|
|
|
$
|
7,625
|
|
As of December 31, 2016
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Liabilities
|
|
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
|
|
Net Amounts Of Liabilities Presented in the Condensed Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Pledged
|
|
Net Amount
|
|||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
J.P. Morgan Chase
|
|
$
|
442
|
|
|
$
|
—
|
|
|
$
|
442
|
|
|
$
|
(442
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Wells Fargo
|
|
1,263
|
|
|
—
|
|
|
1,263
|
|
|
(1,263
|
)
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
$
|
1,705
|
|
|
$
|
—
|
|
|
$
|
1,705
|
|
|
$
|
(1,705
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivatives Designated as Hedging Instruments
|
|
Three Months Ended July 2, 2017
|
||||||||||||||
|
Gains (Losses)
Recognized in
OCI -
Effective
Portion
|
|
Location of
Gain (Loss)
Reclassified from OCI
into Income - Effective
Portion
|
|
Gains (Losses)
Reclassified
from
OCI into
Income -
Effective
Portion
(1)
|
|
Location of
Gains (Losses)
Recognized in
Income and
Excluded from
Effectiveness Testing
|
|
Amount of Gains (Losses) Recognized in
Income and
Excluded from
Effectiveness Testing
|
|||||||
|
|
(In thousands)
|
||||||||||||||
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency forward contracts
|
|
$
|
(6,935
|
)
|
|
Net revenue
|
|
$
|
(1,008
|
)
|
|
Other income (expense), net
|
|
$
|
381
|
|
Foreign currency forward contracts
|
|
—
|
|
|
Cost of revenue
|
|
(1
|
)
|
|
Other income (expense), net
|
|
—
|
|
|||
Foreign currency forward contracts
|
|
—
|
|
|
Operating expenses
|
|
77
|
|
|
Other income (expense), net
|
|
—
|
|
|||
Total
|
|
$
|
(6,935
|
)
|
|
|
|
$
|
(932
|
)
|
|
|
|
$
|
381
|
|
Derivatives Designated as Hedging Instruments
|
|
Six Months Ended July 2, 2017
|
||||||||||||||
|
Gains (Losses)
Recognized in
OCI -
Effective
Portion
|
|
Location of
Gain (Loss)
Reclassified from OCI
into Income - Effective
Portion
|
|
Gains (Losses)
Reclassified
from
OCI into
Income -
Effective
Portion
(1)
|
|
Location of
Gains (Losses)
Recognized in
Income and
Excluded from
Effectiveness Testing
|
|
Amount of Gains (Losses) Recognized in
Income and
Excluded from
Effectiveness Testing
|
|||||||
|
|
(In thousands)
|
||||||||||||||
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency forward contracts
|
|
$
|
(7,052
|
)
|
|
Net revenue
|
|
$
|
1,027
|
|
|
Other income (expense), net
|
|
$
|
668
|
|
Foreign currency forward contracts
|
|
—
|
|
|
Cost of revenue
|
|
(14
|
)
|
|
Other income (expense), net
|
|
—
|
|
|||
Foreign currency forward contracts
|
|
—
|
|
|
Operating expenses
|
|
(365
|
)
|
|
Other income (expense), net
|
|
—
|
|
|||
Total
|
|
$
|
(7,052
|
)
|
|
|
|
$
|
648
|
|
|
|
|
$
|
668
|
|
Derivatives Designated as Hedging Instruments
|
|
Three Months Ended July 3, 2016
|
||||||||||||||
|
Gains (Losses)
Recognized in
OCI -
Effective
Portion
|
|
Location of
Gain (Loss)
Reclassified from OCI
into Income - Effective
Portion
|
|
Gains (Losses)
Reclassified
from
OCI into
Income -
Effective
Portion
(1)
|
|
Location of
Gains (Losses)
Recognized in
Income and
Excluded from
Effectiveness Testing
|
|
Amount of Gains (Losses) Recognized in
Income and
Excluded from
Effectiveness Testing
|
|||||||
|
|
(In thousands)
|
||||||||||||||
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency forward contracts
|
|
$
|
88
|
|
|
Net revenue
|
|
$
|
(407
|
)
|
|
Other income (expense), net
|
|
$
|
18
|
|
Foreign currency forward contracts
|
|
—
|
|
|
Cost of revenue
|
|
(2
|
)
|
|
Other income (expense), net
|
|
—
|
|
|||
Foreign currency forward contracts
|
|
—
|
|
|
Operating expenses
|
|
(14
|
)
|
|
Other income (expense), net
|
|
—
|
|
|||
Total
|
|
$
|
88
|
|
|
|
|
$
|
(423
|
)
|
|
|
|
$
|
18
|
|
Derivatives Designated as Hedging Instruments
|
|
Six Months Ended July 3, 2016
|
||||||||||||||
|
Gains (Losses)
Recognized in
OCI -
Effective
Portion
|
|
Location of
Gain (Loss)
Reclassified from OCI
into Income - Effective
Portion
|
|
Gains (Losses)
Reclassified
from
OCI into
Income -
Effective
Portion
(1)
|
|
Location of
Gains (Losses)
Recognized in
Income and
Excluded from
Effectiveness Testing
|
|
Amount of Gains (Losses) Recognized in
Income and
Excluded from
Effectiveness Testing
|
|||||||
|
|
(In thousands)
|
||||||||||||||
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency forward contracts
|
|
$
|
(699
|
)
|
|
Net revenue
|
|
$
|
(719
|
)
|
|
Other income (expense), net
|
|
$
|
53
|
|
Foreign currency forward contracts
|
|
—
|
|
|
Cost of revenue
|
|
—
|
|
|
Other income (expense), net
|
|
—
|
|
|||
Foreign currency forward contracts
|
|
—
|
|
|
Operating expenses
|
|
56
|
|
|
Other income (expense), net
|
|
—
|
|
|||
Total
|
|
$
|
(699
|
)
|
|
|
|
$
|
(663
|
)
|
|
|
|
$
|
53
|
|
Derivatives Not Designated as Hedging Instruments
|
|
Location of Gains (Losses)
Recognized in Income on Derivative
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 2, 2017
|
|
July 3, 2016
|
|
July 2, 2017
|
|
July 3, 2016
|
|||||||||||
|
|
|
|
(In thousands)
|
||||||||||||||
Foreign currency forward contracts
|
|
Other income (expense), net
|
|
$
|
(2,893
|
)
|
|
$
|
1,185
|
|
|
$
|
(4,246
|
)
|
|
$
|
(759
|
)
|
Note 6.
|
Net Income Per Share
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 2,
2017 |
|
July 3,
2016 |
|
July 2,
2017 |
|
July 3,
2016 |
||||||||
|
(In thousands, except per share data)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
14,582
|
|
|
$
|
16,034
|
|
|
$
|
30,576
|
|
|
$
|
32,623
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares - basic
|
32,352
|
|
|
32,639
|
|
|
32,650
|
|
|
32,578
|
|
||||
Potentially dilutive common share equivalent
|
764
|
|
|
854
|
|
|
1,006
|
|
|
812
|
|
||||
Weighted average common shares - dilutive
|
$
|
33,116
|
|
|
$
|
33,493
|
|
|
$
|
33,656
|
|
|
$
|
33,390
|
|
|
|
|
|
|
|
|
|
||||||||
Basic net income per share
|
$
|
0.45
|
|
|
$
|
0.49
|
|
|
$
|
0.94
|
|
|
$
|
1.00
|
|
Diluted net income per share
|
$
|
0.44
|
|
|
$
|
0.48
|
|
|
$
|
0.91
|
|
|
$
|
0.98
|
|
|
|
|
|
|
|
|
|
||||||||
Anti-dilutive employee stock-based awards, excluded
|
782
|
|
|
431
|
|
|
271
|
|
|
310
|
|
Note 7.
|
Income Taxes
|
Note 8.
|
Commitments and Contingencies
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 2,
2017 |
|
July 3,
2016 |
|
July 2,
2017 |
|
July 3,
2016 |
||||||||
|
(In thousands)
|
||||||||||||||
Balance as of beginning of the period
|
$
|
56,336
|
|
|
$
|
49,908
|
|
|
$
|
58,520
|
|
|
$
|
56,706
|
|
Provision for warranty obligation made during the period
|
34,515
|
|
|
18,593
|
|
|
61,268
|
|
|
34,808
|
|
||||
Settlements made during the period
|
(30,400
|
)
|
|
(18,108
|
)
|
|
(59,337
|
)
|
|
(41,121
|
)
|
||||
Balance at end of period
|
$
|
60,451
|
|
|
$
|
50,393
|
|
|
$
|
60,451
|
|
|
$
|
50,393
|
|
•
|
US 9,054,728, Data compression systems and methods;
|
•
|
US 7,415,530, System and methods for accelerated data storage and retrieval;
|
•
|
US 9,116,908, System and methods for accelerated data storage and retrieval; and
|
•
|
US 8,717,204, Methods for encoding and decoding data
|
Note 9.
|
Stockholders' Equity
|
|
Unrealized gains (losses) on available-for-sale securities
|
|
Unrealized gains (losses) on derivatives
|
|
Estimated tax benefit (provision)
|
|
Total
|
||||||||
|
(In thousands)
|
||||||||||||||
Balance as of December 31, 2016
|
$
|
(31
|
)
|
|
$
|
2,230
|
|
|
$
|
(261
|
)
|
|
$
|
1,938
|
|
Other comprehensive loss before reclassifications
|
(82
|
)
|
|
(7,052
|
)
|
|
807
|
|
|
(6,327
|
)
|
||||
Less: Amount reclassified from accumulated other comprehensive income
|
—
|
|
|
648
|
|
|
(227
|
)
|
|
421
|
|
||||
Net current period other comprehensive income (loss)
|
(82
|
)
|
|
(7,700
|
)
|
|
1,034
|
|
|
(6,748
|
)
|
||||
Balance as of July 2, 2017
|
$
|
(113
|
)
|
|
$
|
(5,470
|
)
|
|
$
|
773
|
|
|
$
|
(4,810
|
)
|
|
Unrealized gains (losses) on available-for-sale securities
|
|
Unrealized gains (losses) on derivatives
|
|
Estimated tax benefit (provision)
|
|
Total
|
||||||||
|
(In thousands)
|
||||||||||||||
Balance as of December 31, 2015
|
$
|
(64
|
)
|
|
$
|
43
|
|
|
$
|
24
|
|
|
$
|
3
|
|
Other comprehensive income (loss) before reclassifications
|
147
|
|
|
(699
|
)
|
|
177
|
|
|
(375
|
)
|
||||
Less: Amount reclassified from accumulated other comprehensive income
|
—
|
|
|
(663
|
)
|
|
232
|
|
|
(431
|
)
|
||||
Net current period other comprehensive income (loss)
|
147
|
|
|
(36
|
)
|
|
(55
|
)
|
|
56
|
|
||||
Balance as of July 3, 2016
|
$
|
83
|
|
|
$
|
7
|
|
|
$
|
(31
|
)
|
|
$
|
59
|
|
Details about Accumulated Other Comprehensive Income Components
|
|
Three Months Ended July 2, 2017
|
|
Six Months Ended July 2, 2017
|
||||||||
|
Amount Reclassified from AOCI
|
|
Affected Line Item in the Statements of Operations
|
|
Amount Reclassified from AOCI
|
|
Affected Line Item in the Statement of Operations
|
|||||
|
|
(In thousands)
|
|
|
|
(In thousands)
|
|
|
||||
Gains (losses) on cash flow hedge:
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts
|
|
$
|
(1,008
|
)
|
|
Net revenue
|
|
$
|
1,027
|
|
|
Net revenue
|
Foreign currency forward contracts
|
|
$
|
(1
|
)
|
|
Cost of revenue
|
|
$
|
(14
|
)
|
|
Cost of revenue
|
Foreign currency forward contracts
|
|
77
|
|
|
Operating expenses
|
|
(365
|
)
|
|
Operating expenses
|
||
|
|
$
|
(932
|
)
|
|
Total before tax
|
|
$
|
648
|
|
|
Total before tax
|
|
|
326
|
|
|
Tax impact
|
|
(227
|
)
|
|
Tax impact
|
||
|
|
$
|
(606
|
)
|
|
Total, net of tax
|
|
$
|
421
|
|
|
Total, net of tax
|
Details about Accumulated Other Comprehensive Income Components
|
|
Three Months Ended July 3, 2016
|
|
Six Months Ended July 3, 2016
|
||||||||
|
Amount Reclassified from AOCI
|
|
Affected Line Item in the Statements of Operations
|
|
Amount Reclassified from AOCI
|
|
Affected Line Item in the Statement of Operations
|
|||||
|
|
(In thousands)
|
|
|
|
(In thousands)
|
|
|
||||
Gains (losses) on cash flow hedge:
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts
|
|
$
|
(407
|
)
|
|
Net revenue
|
|
$
|
(719
|
)
|
|
Net revenue
|
Foreign currency forward contracts
|
|
(2
|
)
|
|
Cost of revenue
|
|
—
|
|
|
Cost of revenue
|
||
Foreign currency forward contracts
|
|
(14
|
)
|
|
Operating expenses
|
|
56
|
|
|
Operating expenses
|
||
|
|
(423
|
)
|
|
Total before tax
|
|
(663
|
)
|
|
Total before tax
|
||
|
|
148
|
|
|
Tax impact
|
|
232
|
|
|
Tax impact
|
||
|
|
$
|
(275
|
)
|
|
Total, net of tax
|
|
$
|
(431
|
)
|
|
Total, net of tax
|
Note 10.
|
Employee Benefit Plans
|
|
Number of shares
|
|
Weighted Average Exercise Price Per Share
|
|||
|
(In thousands)
|
|
(In dollars)
|
|||
Outstanding as of December 31, 2016
|
1,884
|
|
|
$
|
31.14
|
|
Granted
|
328
|
|
|
42.70
|
|
|
Exercised
|
(142
|
)
|
|
27.84
|
|
|
Cancelled
|
—
|
|
|
—
|
|
|
Expired
|
(1
|
)
|
|
30.66
|
|
|
Outstanding as of July 2, 2017
|
2,069
|
|
|
$
|
33.20
|
|
|
Number of shares
|
|
Weighted Average Grant Date Fair Value Per Share
|
|||
|
(In thousands)
|
|
(In dollars)
|
|||
Outstanding as of December 31, 2016
|
996
|
|
|
$
|
36.22
|
|
Granted
|
544
|
|
|
49.59
|
|
|
Vested
|
(361
|
)
|
|
34.99
|
|
|
Cancelled
|
(28
|
)
|
|
44.61
|
|
|
Outstanding as of July 2, 2017
|
1,151
|
|
|
$
|
42.72
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|||||||||||||||||
|
Stock Options
|
|
ESPP
|
|
Stock Options
|
|
ESPP
|
|||||||||||||
|
July 2,
2017 |
|
July 3,
2016 |
|
July 2,
2017 |
|
July 3,
2016 |
|
July 2,
2017 |
|
July 3,
2016 |
|
July 2,
2017 |
|
July 3,
2016 |
|||||
Expected life (in years)
|
4.4
|
|
|
NA
|
|
NA
|
|
NA
|
|
4.4
|
|
|
4.4
|
|
|
0.5
|
|
|
0.5
|
|
Risk-free interest rate
|
1.65
|
%
|
|
NA
|
|
NA
|
|
NA
|
|
1.65
|
%
|
|
1.28
|
%
|
|
0.66
|
%
|
|
0.42
|
%
|
Expected volatility
|
31.6
|
%
|
|
NA
|
|
NA
|
|
NA
|
|
31.6
|
%
|
|
35.4
|
%
|
|
27.6
|
%
|
|
44.7
|
%
|
Dividend yield
|
—
|
|
|
NA
|
|
NA
|
|
NA
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 2,
2017 |
|
July 3,
2016 |
|
July 2,
2017 |
|
July 3,
2016 |
||||||||
|
(In thousands)
|
||||||||||||||
Cost of revenue
|
$
|
542
|
|
|
$
|
451
|
|
|
$
|
978
|
|
|
$
|
890
|
|
Research and development
|
1,373
|
|
|
1,118
|
|
|
2,692
|
|
|
1,984
|
|
||||
Sales and marketing
|
1,438
|
|
|
1,338
|
|
|
2,685
|
|
|
2,535
|
|
||||
General and administrative
|
2,348
|
|
|
2,112
|
|
|
4,474
|
|
|
4,021
|
|
||||
Total stock-based compensation
|
$
|
5,701
|
|
|
$
|
5,019
|
|
|
$
|
10,829
|
|
|
$
|
9,430
|
|
Note 11.
|
Segment Information
|
•
|
Connected Home: Focused on consumers and consists of high-performance, dependable and easy-to-use LTE and WiFi internet networking solutions; and
|
•
|
SMB: Focused on small and medium-sized businesses and consists of business networking, storage and security solutions that bring enterprise-class functionality to small and medium-sized businesses at an affordable price.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 2, 2017
|
|
July 3, 2016*
|
|
July 2, 2017
|
|
July 3, 2016*
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||
Net revenue:
|
|
|
|
|
|
|
|
||||||||
Arlo
|
$
|
78,732
|
|
|
$
|
38,585
|
|
|
$
|
139,444
|
|
|
$
|
62,850
|
|
Connected Home
|
185,905
|
|
|
198,654
|
|
|
380,266
|
|
|
414,764
|
|
||||
SMB
|
66,086
|
|
|
74,416
|
|
|
134,670
|
|
|
144,297
|
|
||||
Total net revenue
|
$
|
330,723
|
|
|
$
|
311,655
|
|
|
$
|
654,380
|
|
|
$
|
621,911
|
|
Contribution income:
|
|
|
|
|
|
|
|
||||||||
Arlo
|
$
|
3,172
|
|
|
$
|
389
|
|
|
$
|
3,493
|
|
|
$
|
(3,441
|
)
|
Arlo contribution margin
|
4.0
|
%
|
|
1.0
|
%
|
|
2.5
|
%
|
|
(5.5
|
)%
|
||||
Connected Home
|
$
|
25,124
|
|
|
$
|
33,228
|
|
|
$
|
56,836
|
|
|
$
|
75,257
|
|
Connected Home contribution margin
|
13.5
|
%
|
|
16.7
|
%
|
|
14.9
|
%
|
|
18.1
|
%
|
||||
SMB
|
$
|
16,752
|
|
|
$
|
18,846
|
|
|
$
|
35,256
|
|
|
$
|
34,241
|
|
SMB contribution margin
|
25.3
|
%
|
|
25.3
|
%
|
|
26.2
|
%
|
|
23.7
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Total segment contribution income
|
$
|
45,048
|
|
|
$
|
52,463
|
|
|
$
|
95,585
|
|
|
$
|
106,057
|
|
Corporate and unallocated costs
|
(17,033
|
)
|
|
(16,418
|
)
|
|
(35,234
|
)
|
|
(33,134
|
)
|
||||
Amortization of intangibles
(1)
|
(3,146
|
)
|
|
(4,166
|
)
|
|
(7,528
|
)
|
|
(8,331
|
)
|
||||
Stock-based compensation expense
|
(5,701
|
)
|
|
(5,019
|
)
|
|
(10,829
|
)
|
|
(9,430
|
)
|
||||
Restructuring and other charges
|
(22
|
)
|
|
(1,311
|
)
|
|
(59
|
)
|
|
(3,989
|
)
|
||||
Litigation reserves, net
|
(53
|
)
|
|
(35
|
)
|
|
(53
|
)
|
|
(45
|
)
|
||||
Interest income
|
482
|
|
|
279
|
|
|
887
|
|
|
513
|
|
||||
Other income (expense), net
|
383
|
|
|
(332
|
)
|
|
718
|
|
|
(698
|
)
|
||||
Income before income taxes
|
$
|
19,958
|
|
|
$
|
25,461
|
|
|
$
|
43,487
|
|
|
$
|
50,943
|
|
(1)
|
Amount excludes amortization expense related to patents within purchased intangibles in cost of revenue.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 2, 2017
|
|
July 3, 2016
|
|
July 2, 2017
|
|
July 3, 2016
|
||||||||
|
(In thousands)
|
||||||||||||||
Arlo
|
$
|
7,972
|
|
|
$
|
5,236
|
|
|
$
|
9,949
|
|
|
$
|
11,217
|
|
Connected Home
|
48,485
|
|
|
61,356
|
|
|
101,678
|
|
|
138,208
|
|
||||
SMB
|
588
|
|
|
746
|
|
|
1,378
|
|
|
2,194
|
|
||||
Total service provider net revenue
|
$
|
57,045
|
|
|
$
|
67,338
|
|
|
$
|
113,005
|
|
|
$
|
151,619
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 2,
2017 |
|
July 3,
2016 |
|
July 2,
2017 |
|
July 3,
2016 |
||||||||
|
(In thousands)
|
||||||||||||||
United States (U.S.)
|
$
|
221,387
|
|
|
$
|
203,508
|
|
|
$
|
427,512
|
|
|
$
|
392,874
|
|
Americas (excluding U.S.)
|
5,562
|
|
|
7,400
|
|
|
11,066
|
|
|
11,884
|
|
||||
EMEA
|
55,204
|
|
|
51,653
|
|
|
113,649
|
|
|
116,158
|
|
||||
APAC
|
48,570
|
|
|
49,094
|
|
|
102,153
|
|
|
100,995
|
|
||||
Total net revenue
|
$
|
330,723
|
|
|
$
|
311,655
|
|
|
$
|
654,380
|
|
|
$
|
621,911
|
|
|
As of
|
||||||
|
July 2,
2017 |
|
December 31,
2016 |
||||
|
(In thousands)
|
||||||
United States
|
$
|
8,806
|
|
|
$
|
9,542
|
|
Canada
|
2,045
|
|
|
2,745
|
|
||
EMEA
|
171
|
|
|
210
|
|
||
China
|
5,906
|
|
|
5,219
|
|
||
APAC (excluding China)
|
1,901
|
|
|
1,757
|
|
||
Total property and equipment, net
|
$
|
18,829
|
|
|
$
|
19,473
|
|
Note 12.
|
Fair Value Measurements
|
|
As of July 2, 2017
|
||||||||||||||
|
Total
|
|
Quoted market
prices in active
markets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
||||||||
|
(In thousands)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents: money-market funds
|
$
|
25,007
|
|
|
$
|
25,007
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Available-for-sale securities: U.S. treasuries
(1)
|
112,874
|
|
|
112,874
|
|
|
—
|
|
|
—
|
|
||||
Available-for-sale securities: certificates of deposit
(1)
|
158
|
|
|
158
|
|
|
—
|
|
|
—
|
|
||||
Trading securities: mutual funds
(1)
|
1,815
|
|
|
1,815
|
|
|
—
|
|
|
—
|
|
||||
Foreign currency forward contracts
(2)
|
1,675
|
|
|
—
|
|
|
1,675
|
|
|
—
|
|
||||
Total assets measured at fair value
|
$
|
141,529
|
|
|
$
|
139,854
|
|
|
$
|
1,675
|
|
|
$
|
—
|
|
(1)
|
Included in short-term investments on the Company’s unaudited condensed consolidated balance sheets.
|
(2)
|
Included in prepaid expenses and other current assets on the Company’s unaudited condensed consolidated balance sheets.
|
|
As of July 2, 2017
|
||||||||||||||
|
Total
|
|
Quoted market
prices in active
markets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
||||||||
|
(In thousands)
|
||||||||||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
(3)
|
$
|
9,300
|
|
|
$
|
—
|
|
|
$
|
9,300
|
|
|
$
|
—
|
|
Total liabilities measured at fair value
|
$
|
9,300
|
|
|
$
|
—
|
|
|
$
|
9,300
|
|
|
$
|
—
|
|
(3)
|
Included in other accrued liabilities on the Company’s unaudited condensed consolidated balance sheets.
|
|
As of December 31, 2016
|
||||||||||||||
|
Total
|
|
Quoted market
prices in active
markets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
||||||||
|
(In thousands)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents: money-market funds
|
$
|
17,027
|
|
|
$
|
17,027
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Available-for-sale securities: U.S. treasuries
(1)
|
123,838
|
|
|
123,838
|
|
|
—
|
|
|
—
|
|
||||
Available-for-sale securities: certificates of deposit
(1)
|
148
|
|
|
148
|
|
|
—
|
|
|
—
|
|
||||
Trading securities: mutual funds
(1)
|
1,528
|
|
|
1,528
|
|
|
—
|
|
|
—
|
|
||||
Foreign currency forward contracts
(2)
|
8,763
|
|
|
—
|
|
|
8,763
|
|
|
—
|
|
||||
Total assets measured at fair value
|
$
|
151,304
|
|
|
$
|
142,541
|
|
|
$
|
8,763
|
|
|
$
|
—
|
|
(1)
|
Included in short-term investments on the Company’s unaudited condensed consolidated balance sheets.
|
(2)
|
Included in prepaid expenses and other current assets on the Company’s unaudited condensed consolidated balance sheets.
|
|
As of December 31, 2016
|
||||||||||||||
|
Total
|
|
Quoted market
prices in active
markets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
||||||||
|
(In thousands)
|
||||||||||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
(3)
|
$
|
1,705
|
|
|
$
|
—
|
|
|
$
|
1,705
|
|
|
$
|
—
|
|
Total liabilities measured at fair value
|
$
|
1,705
|
|
|
$
|
—
|
|
|
$
|
1,705
|
|
|
$
|
—
|
|
(3)
|
Included in other accrued liabilities on the Company’s unaudited condensed consolidated balance sheets.
|
Note 13.
|
Shipping and Handling Fees and Costs
|
Note 14.
|
Restructuring and Other Charges
|
|
Accrued Restructuring and Other Charges at December 31, 2016
|
|
Additions
|
|
Cash Payments
|
|
Adjustments
|
|
Accrued Restructuring and Other Charges at July 2, 2017
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Restructuring
|
|
|
|
|
|
|
|
|
|
||||||||||
Employee termination charges
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6
|
|
Lease contract termination and other charges
|
1,402
|
|
|
59
|
|
|
(202
|
)
|
|
—
|
|
|
1,259
|
|
|||||
Total Restructuring and other charges
|
$
|
1,408
|
|
|
$
|
59
|
|
|
$
|
(202
|
)
|
|
$
|
—
|
|
|
$
|
1,265
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||
|
July 2,
2017 |
|
July 3,
2016 |
|
July 2,
2017 |
|
July 3,
2016 |
||||||||||||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||||||||
Net revenue
|
$
|
330,723
|
|
|
100.0
|
%
|
|
$
|
311,655
|
|
|
100.0
|
%
|
|
$
|
654,380
|
|
|
100.0
|
%
|
|
$
|
621,911
|
|
|
100.0
|
%
|
Cost of revenue
|
238,787
|
|
|
72.2
|
%
|
|
213,867
|
|
|
68.6
|
%
|
|
465,512
|
|
|
71.1
|
%
|
|
423,558
|
|
|
68.1
|
%
|
||||
Gross profit
|
91,936
|
|
|
27.8
|
%
|
|
97,788
|
|
|
31.4
|
%
|
|
188,868
|
|
|
28.9
|
%
|
|
198,353
|
|
|
31.9
|
%
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Research and development
|
23,357
|
|
|
7.1
|
%
|
|
21,804
|
|
|
7.0
|
%
|
|
46,040
|
|
|
7.0
|
%
|
|
43,941
|
|
|
7.1
|
%
|
||||
Sales and marketing
|
36,461
|
|
|
11.0
|
%
|
|
36,089
|
|
|
11.6
|
%
|
|
74,690
|
|
|
11.5
|
%
|
|
73,366
|
|
|
11.8
|
%
|
||||
General and administrative
|
12,950
|
|
|
3.9
|
%
|
|
13,035
|
|
|
4.2
|
%
|
|
26,144
|
|
|
4.0
|
%
|
|
25,884
|
|
|
4.2
|
%
|
||||
Restructuring and other charges
|
22
|
|
|
0.0
|
%
|
|
1,311
|
|
|
0.4
|
%
|
|
59
|
|
|
0.0
|
%
|
|
3,989
|
|
|
0.6
|
%
|
||||
Litigation reserves, net
|
53
|
|
|
0.0
|
%
|
|
35
|
|
|
0.0
|
%
|
|
53
|
|
|
0.0
|
%
|
|
45
|
|
|
0.0
|
%
|
||||
Total operating expenses
|
72,843
|
|
|
22.0
|
%
|
|
72,274
|
|
|
23.2
|
%
|
|
146,986
|
|
|
22.5
|
%
|
|
147,225
|
|
|
23.7
|
%
|
||||
Income from operations
|
19,093
|
|
|
5.8
|
%
|
|
25,514
|
|
|
8.2
|
%
|
|
41,882
|
|
|
6.4
|
%
|
|
51,128
|
|
|
8.2
|
%
|
||||
Interest income
|
482
|
|
|
0.1
|
%
|
|
279
|
|
|
0.1
|
%
|
|
887
|
|
|
0.1
|
%
|
|
513
|
|
|
0.1
|
%
|
||||
Other income (expense), net
|
383
|
|
|
0.1
|
%
|
|
(332
|
)
|
|
(0.1
|
)%
|
|
718
|
|
|
0.1
|
%
|
|
(698
|
)
|
|
(0.1
|
)%
|
||||
Income before income taxes
|
19,958
|
|
|
6.0
|
%
|
|
25,461
|
|
|
8.2
|
%
|
|
43,487
|
|
|
6.6
|
%
|
|
50,943
|
|
|
8.2
|
%
|
||||
Provision for income taxes
|
5,376
|
|
|
1.6
|
%
|
|
9,427
|
|
|
3.1
|
%
|
|
12,911
|
|
|
1.9
|
%
|
|
18,320
|
|
|
3.0
|
%
|
||||
Net income
|
$
|
14,582
|
|
|
4.4
|
%
|
|
$
|
16,034
|
|
|
5.1
|
%
|
|
$
|
30,576
|
|
|
4.7
|
%
|
|
$
|
32,623
|
|
|
5.2
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Americas
|
$
|
226,949
|
|
|
7.6
|
%
|
|
$
|
210,908
|
|
|
$
|
438,578
|
|
|
8.4
|
%
|
|
$
|
404,758
|
|
Percentage of net revenue
|
68.6
|
%
|
|
|
|
67.6
|
%
|
|
67.0
|
%
|
|
|
|
65.1
|
%
|
||||||
EMEA
|
$
|
55,204
|
|
|
6.9
|
%
|
|
$
|
51,653
|
|
|
$
|
113,649
|
|
|
(2.2
|
)%
|
|
$
|
116,158
|
|
Percentage of net revenue
|
16.7
|
%
|
|
|
|
16.6
|
%
|
|
17.4
|
%
|
|
|
|
18.7
|
%
|
||||||
APAC
|
$
|
48,570
|
|
|
(1.1
|
)%
|
|
$
|
49,094
|
|
|
$
|
102,153
|
|
|
1.1
|
%
|
|
$
|
100,995
|
|
Percentage of net revenue
|
14.7
|
%
|
|
|
|
15.8
|
%
|
|
15.6
|
%
|
|
|
|
16.2
|
%
|
||||||
Total net revenue
|
$
|
330,723
|
|
|
6.1
|
%
|
|
$
|
311,655
|
|
|
$
|
654,380
|
|
|
5.2
|
%
|
|
$
|
621,911
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Cost of revenue
|
$
|
238,787
|
|
|
11.7
|
%
|
|
$
|
213,867
|
|
|
$
|
465,512
|
|
|
9.9
|
%
|
|
$
|
423,558
|
|
Gross margin
|
27.8
|
%
|
|
|
|
31.4
|
%
|
|
28.9
|
%
|
|
|
|
31.9
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Research and development expense
|
$
|
23,357
|
|
|
7.1
|
%
|
|
$
|
21,804
|
|
|
$
|
46,040
|
|
|
4.8
|
%
|
|
$
|
43,941
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Sales and marketing expense
|
$
|
36,461
|
|
|
1.0
|
%
|
|
$
|
36,089
|
|
|
$
|
74,690
|
|
|
1.8
|
%
|
|
$
|
73,366
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
General and administrative expense
|
$
|
12,950
|
|
|
(0.7
|
)%
|
|
$
|
13,035
|
|
|
$
|
26,144
|
|
|
1.0
|
%
|
|
$
|
25,884
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Restructuring and other charges
|
$
|
22
|
|
|
(98.3
|
)%
|
|
$
|
1,311
|
|
|
$
|
59
|
|
|
(98.5
|
)%
|
|
$
|
3,989
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Litigation reserves, net
|
$
|
53
|
|
|
51.4
|
%
|
|
$
|
35
|
|
|
$
|
53
|
|
|
17.8
|
%
|
|
$
|
45
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Interest income
|
$
|
482
|
|
|
72.8
|
%
|
|
$
|
279
|
|
|
$
|
887
|
|
|
72.9
|
%
|
|
$
|
513
|
|
Other income (expense), net
|
383
|
|
|
**
|
|
|
(332
|
)
|
|
718
|
|
|
**
|
|
|
(698
|
)
|
||||
Total
|
$
|
865
|
|
|
**
|
|
|
$
|
(53
|
)
|
|
$
|
1,605
|
|
|
**
|
|
|
$
|
(185
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
|
July 2,
2017 |
|
% Change
|
|
July 3,
2016 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Provision for income taxes
|
$
|
5,376
|
|
|
(43.0
|
)%
|
|
$
|
9,427
|
|
|
$
|
12,911
|
|
|
(29.5
|
)%
|
|
$
|
18,320
|
|
Effective tax rate
|
26.9
|
%
|
|
|
|
37.0
|
%
|
|
29.7
|
%
|
|
|
|
36.0
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||
|
July 2,
2017 |
|
% Change
|
|
July 3, 2016*
|
|
July 2,
2017 |
|
% Change
|
|
July 3, 2016*
|
||||||||||
|
(in thousands, except percentage data)
|
||||||||||||||||||||
Net revenue
|
$
|
78,732
|
|
|
104.0
|
%
|
|
$
|
38,585
|
|
|
$
|
139,444
|
|
|
121.9
|
%
|
|
$
|
62,850
|
|
Percentage of total net revenue
|
23.8
|
%
|
|
|
|
12.4
|
%
|
|
21.3
|
%
|
|
|
|
10.1
|
%
|
||||||
Contribution income
|
$
|
3,172
|
|
|
**
|
|
|
$
|
389
|
|
|
$
|
3,493
|
|
|
**
|
|
|
$
|
(3,441
|
)
|
Contribution margin
|
4.0
|
%
|
|
|
|
1.0
|
%
|
|
2.5
|
%
|
|
|
|
(5.5
|
)%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||
|
July 2,
2017 |
|
% Change
|
|
July 3, 2016*
|
|
July 2,
2017 |
|
% Change
|
|
July 3, 2016*
|
||||||||||
|
(in thousands, except percentage data)
|
||||||||||||||||||||
Net revenue
|
$
|
185,905
|
|
|
(6.4
|
)%
|
|
$
|
198,654
|
|
|
$
|
380,266
|
|
|
(8.3
|
)%
|
|
$
|
414,764
|
|
Percentage of total net revenue
|
56.2
|
%
|
|
|
|
63.7
|
%
|
|
58.1
|
%
|
|
|
|
66.7
|
%
|
||||||
Contribution income
|
$
|
25,124
|
|
|
(24.4
|
)%
|
|
$
|
33,228
|
|
|
$
|
56,836
|
|
|
(24.5
|
)%
|
|
$
|
75,257
|
|
Contribution margin
|
13.5
|
%
|
|
|
|
16.7
|
%
|
|
14.9
|
%
|
|
|
|
18.1
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||
|
July 2,
2017 |
|
% Change
|
|
July 3, 2016*
|
|
July 2,
2017 |
|
% Change
|
|
July 3, 2016*
|
||||||||||
|
(in thousands, except percentage data)
|
||||||||||||||||||||
Net revenue
|
$
|
66,086
|
|
|
(11.2
|
)%
|
|
$
|
74,416
|
|
|
$
|
134,670
|
|
|
(6.7
|
)%
|
|
$
|
144,297
|
|
Percentage of total net revenue
|
20.0
|
%
|
|
|
|
23.9
|
%
|
|
20.6
|
%
|
|
|
|
23.2
|
%
|
||||||
Contribution income
|
$
|
16,752
|
|
|
(11.1
|
)%
|
|
$
|
18,846
|
|
|
$
|
35,256
|
|
|
3.0
|
%
|
|
$
|
34,241
|
|
Contribution margin
|
25.3
|
%
|
|
|
|
25.3
|
%
|
|
26.2
|
%
|
|
|
|
23.7
|
%
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
•
|
changes in the pricing policies of or the introduction of new products by us or our competitors;
|
•
|
slow or negative growth in the networking product, personal computer, Internet infrastructure, smart home, home electronics and related technology markets, as well as decreased demand for Internet access;
|
•
|
introductions of new technologies and changes in consumer preferences that result in either unanticipated or unexpectedly rapid product category shifts;
|
•
|
seasonal shifts in end market demand for our products, particularly in our Connected Home and Arlo business segments;
|
•
|
delays in the introduction of new products by us or market acceptance of these products;
|
•
|
unanticipated decreases or delays in purchases of our products by our significant traditional and online retail customers;
|
•
|
component supply constraints from our vendors;
|
•
|
foreign currency exchange rate fluctuations in the jurisdictions where we transact sales and expenditures in local currency;
|
•
|
shift in overall product mix sales from higher to lower margin products, or from one business segment to another, that would adversely impact our margins;
|
•
|
unanticipated increase in costs, including air freight, associated with shipping and delivery of our products;
|
•
|
the inability to maintain stable operations by our suppliers and other parties with which we have commercial relationships;
|
•
|
discovery of security vulnerabilities in our products, services or systems, leading to negative publicity, decreased demand or potential liability;
|
•
|
unfavorable level of inventory and turns;
|
•
|
changes in or consolidation of our sales channels and wholesale distributor relationships or failure to manage our sales channel inventory and warehousing requirements;
|
•
|
delay or failure to fulfill orders for our products on a timely basis;
|
•
|
delay or failure of our service provider customers to purchase at the volumes that they forecast;
|
•
|
changes in tax rates or adverse changes in tax laws that expose us to additional income tax liabilities;
|
•
|
changes in international trade policy and potential U.S. tax overhaul that adversely affect customs, tax or duty rates, including consequences of the "Brexit" process in the United Kingdom;
|
•
|
operational disruptions, such as transportation delays or failure of our order processing system, particularly if they occur at the end of a fiscal quarter;
|
•
|
disruptions or delays related to our financial and enterprise resource planning systems;
|
•
|
our inability to accurately forecast product demand, resulting in increased inventory exposure;
|
•
|
allowance for bad debts exposure with our existing customers and new customers, particularly as we expand into new international markets;
|
•
|
geopolitical disruption, including sudden changes in immigration policies, leading to disruption in our workforce or delay or even stoppage of our operations in manufacturing, transportation, technical support and research and development;
|
•
|
terms of our contracts with customers or suppliers that cause us to incur additional expenses or assume additional liabilities;
|
•
|
an increase in price protection claims, redemptions of marketing rebates, product warranty and stock rotation returns or allowance for doubtful accounts;
|
•
|
litigation involving alleged patent infringement;
|
•
|
epidemic or widespread product failure, or unanticipated safety issues, in one or more of our products;
|
•
|
challenges associated with integrating acquisitions that we make, or with realizing value from our strategic investments in other companies;
|
•
|
failure to effectively manage our third party customer support partners, which may result in customer complaints and/or harm to the NETGEAR brand;
|
•
|
our inability to monitor and ensure compliance with our anti-corruption compliance program and domestic and international anti-corruption laws and regulations, whether in relation to our employees or with our suppliers or customers;
|
•
|
labor unrest at facilities managed by our third-party manufacturers;
|
•
|
unanticipated shift or decline in profit by geographical region that would adversely impact our tax rate;
|
•
|
our failure to implement and maintain the appropriate internal controls over financial reporting which may result in restatements of our financial statements; and
|
•
|
any changes in accounting rules.
|
•
|
actual or anticipated fluctuations in our operating results or our competitors' operating results;
|
•
|
actual or anticipated changes in the growth rate of the general networking sector, our growth rates or our competitors' growth rates;
|
•
|
conditions in the financial markets in general or changes in general economic conditions, including government efforts to stabilize currencies;
|
•
|
actual or anticipated changes in governmental regulation, including taxation and tariff policies;
|
•
|
interest rate or currency exchange rate fluctuations;
|
•
|
our ability to forecast or report accurate financial results; and
|
•
|
changes in stock market analyst recommendations regarding our common stock, other comparable companies or our industry generally.
|
•
|
loss of or delay in revenue and loss of market share;
|
•
|
negative publicity and damage to our reputation and brand;
|
•
|
a decline in the average selling price of our products;
|
•
|
adverse reactions in our sales channels, such as reduced shelf space, reduced online product visibility, or loss of sales channel; and
|
•
|
increased levels of product returns.
|
•
|
our reseller agreements generally do not require substantial minimum purchases;
|
•
|
our customers can stop purchasing and our resellers can stop marketing our products at any time; and
|
•
|
our reseller agreements generally are not exclusive.
|
•
|
unexpected increases in manufacturing and repair costs;
|
•
|
inability to control the quality and reliability of finished products;
|
•
|
inability to control delivery schedules;
|
•
|
potential liability for expenses incurred by third-party manufacturers in reliance on our forecasts that later prove to be inaccurate;
|
•
|
potential lack of adequate capacity to manufacture all or a part of the products we require; and
|
•
|
potential labor unrest affecting the ability of the third-party manufacturers to produce our products.
|
•
|
exchange rate fluctuations;
|
•
|
political and economic instability, international terrorism and anti-American sentiment, particularly in emerging markets;
|
•
|
potential for violations of anti-corruption laws and regulations, such as those related to bribery and fraud;
|
•
|
preference for locally branded products, and laws and business practices favoring local competition;
|
•
|
potential consequences of, and uncertainty related to, the "Brexit" process in the United Kingdom, which could lead to additional expense and complexity in doing business there;
|
•
|
increased difficulty in managing inventory;
|
•
|
delayed revenue recognition;
|
•
|
less effective protection of intellectual property;
|
•
|
stringent consumer protection and product compliance regulations, including but not limited to the Restriction of Hazardous Substances directive, the Waste Electrical and Electronic Equipment directive and the European Ecodesign directive, or EuP, that are costly to comply with and may vary from country to country;
|
•
|
difficulties and costs of staffing and managing foreign operations;
|
•
|
business difficulties, including potential bankruptcy or liquidation, of any of our worldwide third party logistics providers; and
|
•
|
changes in local tax and customs duty laws or changes in the enforcement, application or interpretation of such laws.
|
•
|
changes in the regulatory environment;
|
•
|
changes in accounting and tax standards or practices;
|
•
|
changes in the composition of operating income by tax jurisdiction; and
|
•
|
our operating results before taxes.
|
•
|
integrating the companies, assets, systems, products, sales channels and personnel that we acquire;
|
•
|
higher than anticipated acquisition and integration costs and expenses;
|
•
|
reliance on third parties to provide transition services for a period of time after closing to ensure an orderly transition of the business;
|
•
|
growing or maintaining revenues to justify the purchase price and the increased expenses associated with acquisitions;
|
•
|
entering into territories or markets with which we have limited or no prior experience;
|
•
|
establishing or maintaining business relationships with customers, vendors and suppliers who may be new to us;
|
•
|
overcoming the employee, customer, vendor and supplier turnover that may occur as a result of the acquisition;
|
•
|
disruption of, and demands on, our ongoing business as a result of integration activities including diversion of management's time and attention from running the day to day operations of our business;
|
•
|
inability to implement uniform standards, disclosure controls and procedures, internal controls over financial reporting and other procedures and policies in a timely manner;
|
•
|
inability to realize the anticipated benefits of or successfully integrate with our existing business the businesses, products, technologies or personnel that we acquire; and
|
•
|
potential post-closing disputes.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period
|
|
Total Number of
Shares Purchased
(2)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(1)
|
|
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
|
|||||
April 3, 2017 - April 30, 2017
|
|
715,913
|
|
|
$
|
49.14
|
|
|
662,163
|
|
|
3,461,112
|
|
May 1, 2017 - May 28, 2017
|
|
274,150
|
|
|
$
|
46.24
|
|
|
266,806
|
|
|
3,194,306
|
|
May 29, 2017 - July 2, 2017
|
|
19,788
|
|
|
$
|
43.14
|
|
|
—
|
|
|
3,194,306
|
|
Total
|
|
1,009,851
|
|
|
$
|
48.24
|
|
|
928,969
|
|
|
|
(1)
|
From time to time, our Board of Directors has authorized programs under which we may repurchase shares of our common stock, depending on market conditions, in the open market or through privately negotiated transactions. Under the authorizations, the timing and actual number of shares subject to repurchase are at the discretion of management and are contingent on a number of factors, such as levels of cash generation from operations, cash requirements for acquisitions and the price of our common stock. On April 25, 2017, our Board of Directors authorized the repurchase of up to
3.0 million
shares of our outstanding common stock which, at the time of authorization, were incremental to the remaining shares under our previous share repurchase program. During
the three months ended July 2, 2017
, we repurchased and retired, reported based on trade date, approximately
0.9 million
shares of common stock at a cost of
$45.0 million
under this authorization.
|
(2)
|
During
the three months ended July 2, 2017
, we repurchased, as reported based on trade date, approximately
81,000
shares of common stock at a cost of
3.7 million
to help administratively facilitate the withholding and subsequent remittance of personal income and payroll taxes for individuals receiving RSUs.
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibits
|
NETGEAR, INC.
|
Registrant
|
/s/ CHRISTINE M. GORJANC
|
Christine M. Gorjanc
|
Chief Financial Officer
|
(Principal Financial and Accounting Officer)
|
|
|
|
|
Incorporated by Reference
|
|
|
||||
Exhibit Number
|
|
Exhibit Description
|
|
Form
|
|
Date
|
|
Number
|
|
Filed Herewith
|
3.1
|
|
Amended and Restated Certificate of Incorporation of the registrant
|
|
|
|
|
|
|
|
X
|
3.2
|
|
Amended and Restated Bylaws of the registrant
|
|
|
|
|
|
|
|
X
|
4.1
|
|
Form of registrant's common stock certificate
|
|
S-1/A
|
|
7/14/2003
|
|
4.1
|
|
|
31.1
|
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
|
|
|
|
|
|
|
|
X
|
31.2
|
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
|
|
|
|
|
|
|
|
X
|
32.1#
|
|
Section 1350 Certification of Principal Executive Officer
|
|
|
|
|
|
|
|
X
|
32.2#
|
|
Section 1350 Certification of Principal Financial Officer
|
|
|
|
|
|
|
|
X
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
X
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
X
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
X
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
X
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
X
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
#
|
|
This certification is deemed to accompany this Form 10-Q and will not be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section. This certification will not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
|
|
NETGEAR, INC.
|
|
|
|
|
|
/s/ Patrick Lo
|
|
Patrick Lo
|
|
Chief Executive Officer
|
|
|
Page
|
ARTICLE I
|
CORPORATE OFFICES
|
1
|
1.1
|
REGISTERED OFFICE
|
1
|
1.2
|
OTHER OFFICES
|
1
|
ARTICLE II
|
MEETINGS OF STOCKHOLDERS
|
1
|
2.1
|
PLACE OF MEETINGS
|
1
|
2.2
|
ANNUAL MEETING
|
1
|
2.3
|
SPECIAL MEETING
|
1
|
2.4
|
NOTICE OF STOCKHOLDERS’ MEETINGS; EXCEPTION TO REQUIREMENTS OF NOTICE
|
3
|
2.5
|
MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
|
4
|
2.6
|
QUORUM
|
4
|
2.7
|
ADJOURNED MEETING; NOTICE
|
4
|
2.8
|
VOTING
|
5
|
2.9
|
WAIVER OF NOTICE
|
5
|
2.10
|
NO STOCKHOLDER ACTION BY WRITTEN CONSENT
|
5
|
2.11
|
RECORD DATE FOR STOCKHOLDER NOTICE
|
5
|
2.12
|
PROXIES
|
6
|
2.13
|
LIST OF STOCKHOLDERS ENTITLED TO VOTE; STOCK LEDGER
|
6
|
2.14
|
NOMINATIONS OUTSIDE OF PROXY ACCESS AND OTHER PROPOSALS BY STOCKHOLDERS AT ANNUAL MEETING
|
6
|
2.15
|
PROXY ACCESS FOR DIRECTOR NOMINATIONS
|
7
|
2.16
|
ORGANIZATION
|
14
|
2.17
|
NOTICE BY ELECTRONIC TRANSMISSION
|
14
|
ARTICLE III
|
DIRECTORS
|
15
|
3.1
|
POWERS
|
15
|
3.2
|
NUMBER OF DIRECTORS
|
15
|
3.3
|
ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
|
15
|
3.4
|
RESIGNATION AND VACANCIES
|
16
|
3.5
|
PLACE OF MEETINGS; MEETINGS BY TELEPHONE
|
16
|
3.6
|
FIRST MEETINGS
|
16
|
3.7
|
REGULAR MEETINGS
|
16
|
3.8
|
SPECIAL MEETINGS; NOTICE
|
16
|
3.9
|
QUORUM
|
17
|
3.10
|
WAIVER OF NOTICE
|
17
|
3.11
|
ADJOURNED MEETING; NOTICE
|
17
|
3.12
|
BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
|
17
|
3.13
|
FEES AND COMPENSATION OF DIRECTORS
|
18
|
3.14
|
REMOVAL OF DIRECTORS
|
18
|
ARTICLE IV
|
COMMITTEES
|
18
|
4.1
|
COMMITTEES OF DIRECTORS
|
18
|
4.2
|
COMMITTEE MINUTES
|
18
|
4.3
|
MEETINGS AND ACTION OF COMMITTEES
|
18
|
|
TABEL OF CONTENTS
|
|
|
(continued)
|
|
|
|
Page
|
ARTICLE V
|
OFFICERS
|
19
|
5.1
|
OFFICERS
|
19
|
5.2
|
ELECTION OF OFFICERS
|
19
|
5.3
|
SUBORDINATE OFFICERS
|
19
|
5.4
|
REMOVAL AND RESIGNATION OF OFFICERS
|
19
|
5.5
|
VACANCIES IN OFFICES
|
19
|
5.6
|
CHAIRMAN OF THE BOARD
|
19
|
5.7
|
CHIEF EXECUTIVE OFFICER
|
20
|
5.8
|
PRESIDENT
|
20
|
5.9
|
VICE PRESIDENT
|
20
|
5.10
|
SECRETARY
|
20
|
5.11
|
CHIEF FINANCIAL OFFICER
|
20
|
5.12
|
ASSISTANT SECRETARY
|
21
|
5.13
|
ASSISTANT TREASURER
|
21
|
5.14
|
AUTHORITY AND DUTIES OF OFFICERS
|
21
|
ARTICLE VI
|
INDEMNITY
|
21
|
6.1
|
RIGHT TO INDEMNIFICATION IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE BY OR IN THE RIGHTS OF THE CORPORATION
|
21
|
6.2
|
RIGHT TO INDEMNIFICATION IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION
|
22
|
6.3
|
AUTHORIZATION OF INDEMNIFICATION
|
22
|
6.4
|
GOOD FAITH DEFINED
|
22
|
6.5
|
INDEMNIFICATION BY A COURT
|
23
|
6.6
|
EXPENSES PAYABLE IN ADVANCE
|
23
|
6.7
|
NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
|
23
|
6.8
|
INSURANCE
|
23
|
6.9
|
CERTAIN DEFINITIONS
|
23
|
6.10
|
SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
|
24
|
6.11
|
LIMITATION ON INDEMNIFICATION
|
24
|
6.12
|
INDEMNIFICATION OF EMPLOYEES AND AGENTS
|
24
|
ARTICLE VII
|
RECORDS AND REPORTS
|
24
|
7.1
|
MAINTENANCE AND INSPECTION OF RECORDS
|
24
|
7.2
|
INSPECTION BY DIRECTORS
|
25
|
7.3
|
REPRESENTATION OF SHARES OF OTHER CORPORATIONS
|
25
|
ARTICLE VIII
|
GENERAL MATTERS
|
25
|
8.1
|
CHECKS
|
25
|
8.2
|
EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
|
25
|
8.3
|
STOCK CERTIFICATES; PARTLY PAID SHARES
|
25
|
8.4
|
SPECIAL DESIGNATION ON CERTIFICATES
|
26
|
8.5
|
LOST CERTIFICATES
|
26
|
8.6
|
CONSTRUCTION; DEFINITIONS
|
26
|
|
TABEL OF CONTENTS
|
|
|
(continued)
|
|
|
|
Page
|
8.7
|
DIVIDENDS
|
26
|
8.8
|
FISCAL YEAR
|
26
|
8.9
|
SEAL
|
27
|
8.10
|
TRANSFER OF STOCK
|
27
|
8.11
|
REGISTERED STOCKHOLDERS
|
27
|
ARTICLE IX
|
AMENDMENTS
|
27
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of NETGEAR, Inc. (the “Registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5.
|
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
|
/s/ PATRICK C.S. LO
|
|
Patrick C.S. Lo
|
|
Chairman and
|
|
Chief Executive Officer
|
|
NETGEAR, Inc.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of NETGEAR, Inc. (the “Registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5.
|
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
|
/s/ CHRISTINE M. GORJANC
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Christine M. Gorjanc
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Chief Financial Officer
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NETGEAR, Inc.
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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By:
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/s/ PATRICK C.S. LO
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Patrick C.S. Lo
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Chairman and
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Chief Executive Officer
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NETGEAR, Inc.
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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By:
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/s/ CHRISTINE M. GORJANC
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Christine M. Gorjanc
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Chief Financial Officer
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NETGEAR, Inc.
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