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What changed in NETGEAR, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of NETGEAR, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+391 added−418 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-17)

Top changes in NETGEAR, INC.'s 2023 10-K

391 paragraphs added · 418 removed · 326 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

75 edited+12 added−16 removed75 unchanged
Biggest changeThese products and services are sold into the small and medium business marketplace through an extensive network of DMRs and VARs, NETGEAR.com, and through brick-and-mortar retail and e-commerce channels and include: • Pro AV Solutions, which include high-performance flexible switches that are engineered for AV over IP for both enterprise and home installation; • Enterprise grade Cloud managed or standalone access points, which are devices used to manage and control WiFi on a campus, a facility, or an office providing WiFi connections to smart phones, tablets, laptops and other computing devices; • Ethernet switches, which are multiple port network devices used to connect devices using IP protocols; and • NETGEAR Insight services, which help small businesses to remotely deploy, monitor, manage and secure their networks easily and seamlessly.
Biggest changeThese products and services are sold into the business marketplace through an extensive network of DMRs and VARs, NETGEAR.com, and through brick-and-mortar retail and e-commerce channels and include: • Pro AV Solutions, which include high-performance, flexible Ethernet switches that are engineered for easy configuration of AV over IP for both commercial and high-end residential installations; • Pro Routers, which provide the internet gateway for businesses and combine with access points, Ethernet switches, and our Insight cloud management software to create a Total Network Solution for businesses; • Enterprise-grade, Cloud managed or standalone Pro WiFi access points, which are used to provide wide coverage areas and fast WiFi on a campus, boutique hotel, or an office, providing secure WiFi connections to smart phones, tablets, laptops and other computing devices; • General purpose Ethernet switches, in a wide range of sizes which are used to connect devices that are networked together for exchanging information including IoT devices; • NETGEAR Insight remote management software, which help VARs and small businesses remotely deploy, monitor, manage and secure their networks easily and seamlessly; and • NETGEAR Engage Controller which provides quick, profile-based configuration for audio and video signals over a network to integrate our products with those from a myriad of AV end point manufacturers for fast, easy deployments that help eliminate cost and complexity.
Our newest Power over Ethernet (“PoE”)++ switches, including cloud managed and unmanaged PoE switches, provide elevated power budgets and uninterrupted PoE++ power for businesses of all sizes to address the growing need for deployment of multiple PoE devices with more power, due to the widespread adoption of IP communication, security cameras, WiFi access points, proximity sensors, and various other new applications.
Our newest Power over Ethernet (“PoE”) switches, including cloud managed and unmanaged switches, provide elevated power budgets and uninterrupted PoE power for businesses of all sizes to address the growing need for deployment of multiple PoE devices with more power, due to the widespread adoption of IP communication, security cameras, WiFi access points, proximity sensors, and various other new applications.
Over the last decade, technology transformation has driven a need for constant connectivity. Consumers, small businesses and service providers demand networking products, incorporating the latest technology, that fit their specific needs and budgets.
Over the last decade, technology transformation has driven a need for constant connectivity. Consumers, businesses and service providers demand networking products, incorporating the latest technology, that fit their specific needs and budgets.
They are sold primarily via our direct online store as well as traditional retailers, increasingly leveraging their online presence, in addition to their brick-and-mortar stores, and service provider channels and include: • WiFi routers and home WiFi Mesh Systems, which create a local area network (“LAN”) for home or office computer, mobile and smart devices to connect and share a broadband internet connection; • WiFi Hotspots, which create mobile WiFi Internet access that utilizes 4G/5G mobile and 5G data networks for use on the go, and at home in place of traditional wired broadband Internet access; 5 Table of Contents • Value-added service offerings such as security and privacy, technical support, and parental controls for consumers; • Digital Canvasses, which enable users to display digital art and photos, including non-fungible token (“NFT”) artwork by supporting the most popular crypto wallets. • Broadband modems, which are devices that convert the broadband signals into Ethernet data that feeds Internet into homes and offices.
They are sold primarily via our direct online store as well as traditional retailers, increasingly 5 Table of Contents leveraging their online presence, in addition to their brick-and-mortar stores, and service provider channels and include: • WiFi routers and home WiFi Mesh Systems, which create a local area network (“LAN”) for home or office computer, mobile and smart devices to connect and share a broadband internet connection; • WiFi Hotspots, which create mobile WiFi Internet access that utilizes 4G/5G mobile and 5G data networks for secure use on the go, and at home in place of traditional wired broadband internet access; • Value-added service offerings such as security and privacy, technical support, and parental controls for consumers; • Digital Displays, which enable users to showcase digital art and photos, including non-fungible token (“NFT”) artwork by supporting the most popular crypto wallets. • Broadband modems, which are devices that convert the broadband signals into Ethernet data that feeds internet into homes and offices.
Our product line consists of devices that create and extend wired and wireless networks, devices that attach to the network, such as smart digital canvasses as well as services that complement and enhance our product line offerings. These products are available in multiple configurations to address the changing needs of our customers in each geographic region. Connected Home.
Our product line consists of devices that create and extend wired and wireless networks, devices that attach to the network, such as smart digital displays as well as services that complement and enhance our product line offerings. These products are available in multiple configurations to address the changing needs of our customers in each geographic region. Connected Home.
Our website address is www.netgear.com . Our website provides a link to our SEC filings, which are available free of charge on the same day such filings are made. The specific location on the website where these reports can be found is http://investor.netgear.com/sec.cfm.
Our website provides a link to our SEC filings, which are available free of charge on the same day such filings are made. The specific location on the website where these reports can be found is http://investor.netgear.com/sec.cfm.
These products typically include higher port counts, higher data transfer rates and other performance characteristics designed to meet the needs of a modern business. For example, our business products provide data transfer rates up to ten gigabits per second to meet the higher capacity requirements.
These products typically include higher port counts, higher data transfer rates and other performance characteristics designed to meet the needs of a modern business. For example, our business products provide data transfer rates up to 100 gigabits per second to meet the higher capacity requirements.
Several of our competitors, such as 7 Table of Contents TP-Link, offer a range of products that directly compete with most of our product offerings. Several of our other competitors compete in a more limited manner. For example, Dell sells networking products primarily targeted at larger businesses or enterprises while Google and Amazon primarily only sell WiFi mesh systems.
Several of our competitors, such as TP-Link, offer a range of products that directly compete with most of our product offerings. Several of our other competitors compete in a more limited manner. For example, Dell sells networking products primarily targeted at larger businesses or enterprises while Google and Amazon primarily only sell WiFi mesh systems.
We primarily rely on a combination of copyright, trademark, trade secret, and patent laws, nondisclosure agreements with employees, consultants and suppliers and other contractual provisions to establish, maintain and protect our proprietary rights. We hold approximately 222 issued United States patents that expire between years 2023 and 2040 and 36 foreign patents that expire between 2024 and 2035.
We primarily rely on a combination of copyright, trademark, trade secret, and patent laws, nondisclosure agreements with employees, consultants and suppliers and other contractual provisions to establish, maintain and protect our proprietary rights. We hold approximately 225 issued United States patents that expire between years 2024 and 2040 and 36 foreign patents that expire between 2024 and 2035.
Any disruptions from natural disasters, health epidemics and political, social and economic instability would affect the ability of our manufacturers to manufacture our products. If our manufacturing or warehousing facilities are disrupted or destroyed, we would not have readily available alternatives 8 Table of Contents for manufacturing our products and our business would be significantly impacted.
Any disruptions from natural disasters, health epidemics and political, social and economic instability would affect the ability of our manufacturers to manufacture our products. If our manufacturing or warehousing facilities are disrupted or destroyed, we would not have readily available alternatives for manufacturing our products and our business would be significantly impacted.
Our research and development employees work closely with our technology and manufacturing partners to bring high quality new products and services to market in a timely and cost-efficient manner. We identify, qualify and create new technologies to develop products using one or both of the methodologies described below.
Our research and development employees work closely with our technology and manufacturing partners to bring high quality new products and services to market in a timely and cost-efficient manner. 8 Table of Contents We identify, qualify and create new technologies to develop products using one or both of the methodologies described below.
Falcon was at Quantum Corporation, where he served as Vice President of Operations and Supply Chain Management from September 1999 to November 2002, Meridian Data (acquired by Quantum Corporation), where he served as Vice President of Operations from April 1999 to September 1999, and Silicon Valley Group, where he served as Director of Operations, Strategic Planning and Supply Chain 13 Table of Contents Management from February 1989 to April 1999.
Falcon was at Quantum Corporation, where he served as Vice President of Operations and Supply Chain Management from September 1999 to November 2002, Meridian Data (acquired by Quantum Corporation), where he served as Vice President of Operations from April 1999 to September 1999, and Silicon Valley Group, where he served as Director of Operations, Strategic Planning and Supply Chain Management from February 1989 to April 1999.
Rogers received a B.A. in Communication Studies from the University of California, Santa Barbara and an M.S. in Counseling from California State University, Hayward. 14 Table of Contents Michael A. Werdann has served as our Chief Revenue Officer since July 2021. Previously, Mr.
Rogers received a B.A. in Communication Studies from the University of California, Santa Barbara and an M.S. in Counseling from California State University, Hayward. Michael A. Werdann has served as our Chief Revenue Officer since July 2021. Previously, Mr.
Kim holds a J.D. from Cornell Law School, and received a B.A. degree in history from Yale University. Vikram Mehta has served as our Senior Vice President of SMB Products and Services since January 2020 and previously served as our consultant from July 2019 to December 2019. From May 2015 to January 2020, Mr.
Kim holds a J.D. from Cornell Law School, and received a B.A. degree in history from Yale University. Vikram Mehta has served as our Senior Vice President of NETGEAR for Business Products and Services since January 2020 and previously served as our consultant from July 2019 to December 2019. From May 2015 to January 2020, Mr.
Our success will depend in part on our continued ability to have access to these technologies. We have trade secret rights for our products, consisting mainly of product design, technical product documentation and software.
Our success will depend in part on our continued ability to have access to these technologies. 10 Table of Contents We have trade secret rights for our products, consisting mainly of product design, technical product documentation and software.
Since we operate 10 Table of Contents on a global basis, this is a complex process that requires continual monitoring of regulations and compliance efforts to ensure that we, and our suppliers, are in compliance with all existing regulations.
Since we operate on a global basis, this is a complex process that requires continual monitoring of regulations and compliance efforts to ensure that we, and our suppliers, are in compliance with all existing regulations.
While there is always a need for point solutions that enhance or extend the functionality provided by internet service providers (“ISPs”), there is also a growing demand for premium WiFi devices and networks that combine the newest WiFi standards with elegant design and a seamless app experience to accommodate the end-to-end networking needs of homes that are becoming increasingly smarter.
While there is always a need for point solutions that enhance or extend the functionality provided by internet service providers (“ISPs”), there is also a growing demand for premium WiFi networking products that combine the newest WiFi standards with elegant design, comprehensive security and a seamless app experience to accommodate the end-to-end networking needs of homes that are becoming increasingly smarter.
Manufacturing Our primary manufacturers are Cloud Network Technology (more commonly known as Hon Hai Precision or Foxconn Corporation), Delta Electronics Incorporated, Wistron NeWeb Corporation, and Pegatron Corporation, all of which are headquartered in Taiwan. We also manufacture in Haiphong, Vietnam at a facility owned by Shenzhen Gongjin Electronics Co., Ltd. (more commonly known as T&W), which is headquartered in China.
Manufacturing Our primary manufacturers are Cloud Network Technology (more commonly known as Hon Hai Precision or Foxconn Corporation), Delta Electronics Incorporated, Senao Networks, Inc., and Pegatron Corporation, all of which are headquartered in Taiwan. We also manufacture in Haiphong, Vietnam at a facility owned by Shenzhen Gongjin Electronics Co., Ltd. (more commonly known as T&W), which is headquartered in China.
In particular, high-income consumers with large numbers of connected devices and fast broadband subscriptions are investing in premium home WiFi solutions, such as our Orbi WiFi 6 and WiFi 6E Tri-band and Quad-band Mesh products.
In particular, consumers with large numbers of connected devices and fast broadband subscriptions are investing in premium home WiFi solutions, such as our Orbi WiFi 6E and WiFi 7 Tri-band and Quad-band Mesh products.
The Connected Home segment focuses on consumers and provides high-performance, dependable and easy-to-use premium WiFi internet networking solutions such as WiFi 6 and WiFi 6E Tri-band and Quad-band mesh systems, routers, 4G/5G mobile products, smart devices such as Meural digital canvasses, and subscription services that provide consumers a range of value-added services focused on performance, security, privacy and premium support.
The Connected Home segment focuses on consumers and provides high-performance, dependable and easy-to-use premium WiFi networking solutions such as WiFi 6, WiFi 6E and WiFi 7 Tri-band and Quad-band mesh systems and routers, 4G/5G mobile products, smart devices such as Meural digital displays, and subscription services that provide 3 Table of Contents consumers a range of value-added services focused on performance, security, privacy and premium support.
Additionally, we continually invest in research and development to create new technologies and services and to capitalize on technological inflection points and trends, such as WiFi 7, audio and video over Ethernet, non-fungible token (“NFT”) artwork, and future technologies.
Additionally, we continually invest in research and development to create new technologies and services and to capitalize on technological inflection points and trends, such as multi-Gigabit internet service to homes, WiFi 7, audio and video over Ethernet, non-fungible token (“NFT”) artwork, and future technologies.
This group is also responsible for targeted full-funnel marketing, including paid, earned and owned channels; delivering a seamless purchase journey and leveraging our loyal customers to advocate for the NETGEAR brand.
This group is also responsible for targeted full-funnel marketing, including paid, earned and owned channels; delivering a seamless purchase journey reaching and acquiring new customers as well as leveraging our loyal customers to advocate for the NETGEAR brand.
Equity serves as a key component in attracting, retaining, and motivating our employees. We also provide the opportunity for equity ownership through our employee stock purchase plan. We provide competitive benefits that include retirement planning, health care, parental leave, flexible time away, and appreciation events for employees. In addition, we offer benefits to support our employees’ physical and mental health.
Equity serves as a key component in attracting, retaining, and motivating our employees. We also provide the opportunity for equity ownership through our employee stock purchase plan. We provide competitive benefits that include retirement planning, health care, parental leave, flexible time away, and appreciation events for employees.
Our potential competitors include other consumer electronics vendors, including Apple, Lifelock, LG Electronics, McAfee, Microsoft, Panasonic, Sony, Toshiba and Vizio, who could integrate networking and streaming capabilities into their line of products, such as televisions, set top boxes and gaming consoles, and our channel customers who may decide to offer self-branded networking products.
Other competitors include numerous local vendors such as Xiaomi in China, AVM in Germany and Buffalo in Japan. 7 Table of Contents Our potential competitors include other consumer electronics vendors, including Apple, Lifelock, LG Electronics, McAfee, Microsoft, Panasonic, Sony, Toshiba and Vizio, who could integrate networking and streaming capabilities into their line of products, such as televisions, set top boxes and gaming consoles, and our channel customers who may decide to offer self-branded networking products.
However, increasingly we are seeing products designed for small and medium-sized businesses move through these channels. We sell directly to, or enter into consignment arrangements with, a number of our traditional retailers, increasingly leveraging their online presence in addition to their in-store space and online retailers.
However, increasingly we are seeing products designed for businesses move through these channels. We sell directly to, or enter into consignment arrangements with, a number of our traditional retailers, increasingly leveraging their online presence in addition to their in-store space and online retailers. The remaining traditional retailers, as well as our online retailers, are fulfilled through wholesale distributors.
Mehta worked at a number of technology companies, including Hewlett-Packard Company, where he served in various management positions in sales, marketing, and General Management in the U.S., Asia, and Australia, Nortel Networks, Alteon WebSystems (acquired by Nortel Networks) and Ensim Corporation (acquired by Ingram Micro). Mr. Mehta received a B.S. degree in Electrical Engineering from Birla Institute of Technology.
Mehta worked at a number of technology companies, including Hewlett-Packard Company, where he served in various management positions in sales, marketing, and General Management in the U.S., Asia, and 14 Table of Contents Australia, Nortel Networks, Alteon WebSystems (acquired by Nortel Networks) and Ensim Corporation (acquired by Ingram Micro). Mr.
They also handle escalations from the outsourced resources. We utilize the information gained from customers by our customer support organization to enhance our product offerings, including further simplifying the installation process.
We utilize the information gained from customers by our customer support organization to enhance our product offerings, including further simplifying the installation process.
Our corporate marketing group is responsible for defining and building our corporate brand, supporting the business units with creative marketing strategies and driving traffic to our online and in-app platforms. The group focuses on defining our brand promise and marketing messages on a worldwide basis.
Our corporate marketing group is responsible for defining and building our corporate brand, supporting the business units with creative marketing strategies and driving awareness, education and demand for our products by way of our online and in-app platforms. The group focuses on defining our brand promise and marketing messages on a worldwide basis.
We periodically examine various Health and Safety aspects such as safe and clean workplaces, emergency preparedness, injury and illness, industrial hygiene, ergonomics, machine safeguarding, and more. We are also dedicated to maintaining updated safety guidelines for all of our products.
We periodically examine various Health and Safety aspects such as safe and clean workplaces, emergency preparedness, injury and illness, industrial hygiene, ergonomics, machine safeguarding, and more. We are also dedicated to maintaining updated safety guidelines for all of our products. Health and safety are covered under our Responsible Business Alliance (RBA) guided audit program and corporate facilities.
As of December 31, 2022, 57% of our independent directors were female, and approximately 55% of our executive management team 11 Table of Contents self-identify as an underrepresented minority, in terms of race, ethnicity, or gender. In addition, women represented approximately 22% of technical positions worldwide and approximately 36% of leadership roles worldwide.
As of December 31, 2023, 57% of our independent directors were female, and approximately 60% of our executive management team self-identify as an underrepresented minority, in terms of race, ethnicity, or gender. In addition, women represented approximately 21% of technical positions worldwide and approximately 38% of leadership roles worldwide.
To the best of our knowledge, we maintain compliance with all current government regulations concerning our production processes for all locations in which we operate.
To the best of our knowledge, we maintain compliance with all current government regulations concerning our production processes and product disposal in the locations where we operate and sell.
Item 1. B usiness General We are a global company that turns ideas into innovative, high-performance, and premium networking products that connect people, power businesses and service providers. We operate and report in two segments: Connected Home, and Small and Medium Business (“SMB”).
Item 1. B usiness General We are a global company that turns ideas into innovative, high-performance, and premium networking products that connect people, power businesses and advance the way we live. We operate and report in two segments: Connected Home, and NETGEAR for Business (formerly known as Small and Medium Business, or SMB).
The ever-growing number of internet-connected devices, such as security cameras, heating and air conditioning systems, increasing internet speeds available to homes, new WiFi standards (the transition from WiFi 5 and 6 to WiFi 6E and the anticipated WiFi 7) and the growth of bandwidth-hungry applications such as 8K video streaming and gaming, as well as anticipated augmented reality (“AR”) or virtual reality (“VR”) and Metaverse have all increased the need for more robust networking solutions.
As homes get smarter with the ever-growing number of internet-connected devices, such as security cameras, smart TVs, appliances, doorbells, lighting and more, increasing internet speeds available to homes, new WiFi standards (the transition from WiFi 5 and 6 to WiFi 6E and WiFi 7) and the growth of bandwidth-hungry applications such as 8K video streaming and gaming, real time streaming of entertainment and cultural events as well as augmented reality (“AR”) and virtual reality (“VR”) and applications have all increased the need for more robust networking solutions.
Cormack has served as our Chief Marketing Officer since July 2021. She has been with NETGEAR since July 2009, serving in various management roles within the marketing organization. Prior to assuming the role of Chief Marketing Officer, Ms.
She has been with NETGEAR since July 2009, serving in various management roles within the marketing organization. Prior to assuming the role of Chief Marketing Officer, Ms. Cormack served as NETGEAR’s Senior Vice President of Global Marketing, Vice President of Corporate Marketing, and as our Director of Regional Marketing prior to that. Before joining NETGEAR, Ms.
Information About Our Executive Officers The following table sets forth the names, ages and positions of our executive officers as of February 10, 2023. Name Age Position Patrick C.S. Lo 66 Chairman and Chief Executive Officer Bryan D. Murray 48 Chief Financial Officer Heidi B. Cormack 48 Chief Marketing Officer Michael F. Falcon 66 Chief Operations Officer David J.
Information About Our Executive Officers The following table sets forth the names, ages and positions of our executive officers as of February 9, 2024. Name Age Position Charles (CJ) Prober 52 Chief Executive Officer Bryan D. Murray 49 Chief Financial Officer Heidi B. Cormack 49 Chief Marketing Officer Michael F. Falcon 67 Chief Operations Officer David J.
We also supply directly to broadband service providers in the United States and internationally providing DSL, WiFi and 4G/5G mobile broadband products. Service providers supply our products to their business and home subscribers. Our largest broadband service providers include AT&T and Telstra. Direct Online Store.
Service providers supply our products to their business and home subscribers. Our largest broadband service providers include AT&T and Telstra. Direct Online Store. We sell directly online at www.netgear.com in the United States and internationally to consumers and businesses.
Customers can also get self-help service through the comprehensive knowledgebase and the user forums on our website. Customer support is provided through a combination of a limited number of permanent employees and use of subcontracted, out-sourced resources. Our permanent employees design our technical support model and process and are responsible for training and managing our outsourced sub-contractors.
Customer support is provided through a combination of a limited number of permanent employees and use of subcontracted, out-sourced resources. Our permanent employees design our technical support model and process and are responsible for training and managing our outsourced sub-contractors. They also handle escalations from the outsourced resources.
Marketing tactics include driving the social media and online marketing strategy, public relations, installed base marketing programs, community engagement programs, sponsorships and events, and corporate websites worldwide, as well as creative production for all product categories.
Marketing tactics include driving the social media and online marketing strategy, public relations, installed base marketing programs, community engagement programs, sponsorships and events, and corporate websites worldwide, as well as creative production for all product categories. We conduct most of our international sales and marketing operations through wholly-owned subsidiaries, which operate via sales and marketing subsidiaries and branch offices worldwide.
In addition, we believe these enterprises will move into utility-like on-demand computing power supplied by third-party data centers. With the increased adoption of hybrid and fully remote work environments, along with increases in new businesses being established at home, we see a need for greater networking capabilities as workforces become more dispersed.
With the increased adoption of hybrid and fully remote work environments, along with increases in new businesses being established at home, we see a need for greater networking capabilities as workforces become more dispersed.
The SMB segment focuses on small and medium sized businesses and provides solutions for business networking, wireless local area network (“LAN”), audio and video over Ethernet for Pro AV applications, security and remote management providing enterprise-class functionality at an affordable price .
The NETGEAR for Business segment focuses on businesses and provides solutions for business networking, wireless local area network (“LAN”), audio and video over Ethernet for Pro AV applications, security and remote management providing enterprise-class functionality at an affordable price . We conduct business across three geographic territories: Americas; Europe, Middle East and Africa (“EMEA”); and Asia Pacific (“APAC”).
In addition, we currently have approximately 24 pending United States and foreign patent applications related to technology and products offered by us. We also rely on third-party licensors for patented hardware and software license rights in technology that are incorporated into and are necessary for the operation and functionality of our products.
We also rely on third-party licensors for patented hardware and software license rights in technology that are incorporated into and are necessary for the operation and functionality of our products.
In addition, these parties are also responsible for some configuration and re-packaging of our products including bundling components to form kits, inserting appropriate documentation, disk drive configuration, and adding power adapters.
In addition, these parties are also responsible for some configuration and re-packaging of our products including bundling components to form kits, inserting appropriate documentation, disk drive configuration, and adding power adapters. APL Logistics Americas, Ltd. in City of Industry, California serves the Americas region, Kerry Logistics Ltd. in Singapore serves the Asia Pacific region, DSV Solutions B.V.
These training courses help equip our employees with the skillset they need to be an ally, taking us one step closer to more inclusive operations. We demonstrate diversity, equity, and inclusion at the highest levels of our company.
Equipping our employees with the tools they need to be an ally brings us closer to our goal of a more inclusive operation. We demonstrate diversity, equity, and inclusion at the highest levels of our company.
Our products that target the business market are generally designed with an industrial appearance, including metal cases and, for some product categories, the ability to mount the product within standard data networking racks as well as unique mounting solutions for other uses.
In our Connected Home business, our core long-term strategy focuses on the premium and higher-margin segments of the market, where we demonstrate our highly differentiated technology leadership. 6 Table of Contents Our products that target the business market are generally designed with an industrial appearance, including metal cases and, for some product categories, the ability to mount the product within standard data networking racks as well as unique mounting solutions for other uses.
The group works closely with our sales and research and development groups to align our product development roadmap to meet customer technology demands from a strategic perspective.
Our product marketing group focuses on product and service strategy, product and service development roadmaps, the new product introduction process, product lifecycle management, demand assessment and competitive analysis. The group works closely with our sales and research and development groups to align our product development roadmap to meet customer technology demands from a strategic perspective.
The surveys help us to identify areas where we can improve our policies, maximizing the engagement and performance of our employees. Since initiating the surveys in 2014, we have never fallen below a 95% participation rate. Our most recent employee experience survey was conducted in 2021 and had a 99% participation rate.
In addition, we are a member of CEO Action for Diversity and Inclusion. We conduct employee engagement surveys every two years. The surveys help us to identify areas where we can improve our policies, maximizing the engagement and performance of our employees. Since initiating the surveys in 2014, we have never fallen below a 95% participation rate.
Henry 50 President and General Manager of Connected Home Products and Services Andrew W. Kim 52 Chief Legal Officer Vikram Mehta 57 Senior Vice President, SMB Products and Services Mark G. Merrill 68 Chief Technology Officer Tamesa T. Rogers 49 Chief People Officer Michael A. Werdann 54 Chief Revenue Officer Martin D. Westhead 52 Chief Technology Officer, Software Patrick C.S.
Henry 51 President and General Manager of Connected Home Products and Services Andrew W. Kim 53 Chief Legal Officer Vikram Mehta 58 Senior Vice President, NETGEAR for Business Products and Services Tamesa T. Rogers 50 Chief People Officer Michael A. Werdann 55 Chief Revenue Officer Martin D.
The flexible work experiences have enabled our teams to remain connected with each other and with our customers while maintaining and enhancing productivity, operational excellence and innovation. 12 Table of Contents Available Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the Securities Exchange Commission (the “SEC”).
Available Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the Securities Exchange Commission (the “SEC”). Our website address is www.netgear.com .
Prior to assuming the role of CFO, he served as NETGEAR’s Vice President of Finance and Corporate Controller since June 2011. Before joining NETGEAR in 2001, he worked in public accounting at Deloitte and Touche LLP. He holds a B.A. from the University of California, Santa Barbara, and is licensed as a Certified Public Accountant (inactive). Heidi B.
Before 13 Table of Contents joining NETGEAR in 2001, he worked in public accounting at Deloitte and Touche LLP. He holds a B.A. from the University of California, Santa Barbara, and is licensed as a Certified Public Accountant (inactive). Heidi B. Cormack has served as our Chief Marketing Officer since July 2021.
We sell directly online at www.netgear.com in the United States and internationally to consumers and businesses. Through our direct online store, we provide high-performance and premium networking and internet connected products and subscription services, some of which are only available at www.netgear.com .
Through our direct online store, we provide high-performance and premium networking and internet connected products and subscription services, some of which are only available at www.netgear.com . The direct online store also allows us to deliver curated rich content to supplement the purchase journey of customers, in addition to establishing a direct relationship with our customers.
The competitive environment in which we operate changes rapidly due to technological reasons and other factors outside of our control, such as new entrants to the market and the ability of market participants to adapt to changing environments, such as the lingering impact from the COVID-19 pandemic.
The competitive environment in which we operate changes rapidly due to technological reasons and other factors outside of our control, such as new entrants to the market and the ability of market participants to adapt to changing environments. Other companies with significant resources could also become direct competitors, either through acquiring a competitor or through internal efforts.
This shift has contributed to growing the market for lower port count switches and our SMB wireless offerings. In addition, we continue to see a shift from traditional AV applications utilizing HDMI technology to Ethernet switching driven by a transition from the 1080p to 4K to 8K video, and broadcast moving towards multicast streaming.
In addition, we continue to see a shift from traditional AV applications utilizing HDMI technology to Ethernet switching driven by a transition from the 1080p to 4K to 8K resolution video, and broadcast moving towards multicast streaming. IP provides an economical path to building high performance, scalable AV networks.
From September 1999 to January 2003, he served as our Vice President of Engineering and as our Director of Engineering from September 1995 to September 1999. Mr. Merrill received both a B.S. degree and an M.S. degree in Electrical Engineering from Stanford University. Tamesa T. Rogers has served as our Chief People Officer since July 2021. Previously, Ms.
Mehta received a B.S. degree in Electrical Engineering from Birla Institute of Technology. Tamesa T. Rogers has served as our Chief People Officer since July 2021. Previously, Ms.
Some of these products are also designed to support transmission modes such as fiber optic cabling, which is common in more sophisticated business environments. As a result of the COVID-19 pandemic, there continues to be a shift in the demand and use cases for SMB products as more small businesses are now running out of homes.
Some of these products are also designed to support transmission modes such as fiber optic cabling, which is common in more sophisticated business environments.
Our Connected Home business continues to make progress on our core long-term strategy of focusing on the premium and higher-margin segments of the market, where we demonstrate highly differentiated technology. Our focus is to continue to introduce new products and services into growth areas that form the basis of smart homes.
Our vision for the home network is about intelligently controlling and monitoring all devices connected to the home network at all times, thus creating a Smart Environment. Our Connected Home business continues to make progress on our core long-term strategy of focusing on the premium and higher-margin segments of the market, where we demonstrate highly differentiated technology.
We also leverage many of our technological developments, high volume manufacturing, technical support and engineering infrastructure across our markets to maximize business efficiencies. In our Connected Home business, our core long-term strategy focuses on the premium and higher-margin segments of the market, where we demonstrate our highly differentiated technology leadership.
We also leverage many of our technological developments, high volume manufacturing, technical support and engineering infrastructure across our markets to maximize business efficiencies.
The remaining traditional retailers, as well as our online retailers, are fulfilled through wholesale distributors. We work directly with our retail channels on market development activities, such as co-advertising, online promotions and video demonstrations, instant rebate programs, event sponsorship and sales associate training.
We work directly with our retail channels on market 4 Table of Contents development activities, such as co-advertising, online promotions and video demonstrations, instant rebate programs, event sponsorship and sales associate training. Our largest retailers include Amazon.com, Inc, Best Buy Co., Inc., Wal-Mart Stores, Inc. and their respective affiliates. DMRs and VARs.
Governmental Regulations Environmental Laws Our products and manufacturing process are subject to numerous governmental regulations, which cover both the use of various materials as well as environmental concerns.
In 2023, we had a flatter trend than we historically observe mainly driven by channel inventory compression driven by the uncertain macroeconomic environment and a contraction of the U.S. retail market. Governmental Regulations Environmental Laws Our products and manufacturing process are subject to numerous governmental regulations, which cover both the use of various materials as well as environmental concerns.
Markets Our mission is to be the innovative leader in connecting the world to the internet by providing advanced, high-performance and premium networking technologies and internet-connected products for consumers, businesses and service providers. There are a number of factors that are driving today’s demand for products within these markets.
In the years ended December 31, 2023, 2022, and 2021, we generated net revenue of $740.8 million, $932.5 million, and $1.17 billion, respectively. Markets Our mission is to be the innovative leader in connecting the world to the internet by providing advanced, high-performance and premium networking technologies and internet-connected products for consumers, businesses and service providers.
Sales and Marketing We work directly with our retail partners on market development activities, such as co-advertising, online promotions and video demonstrations, live and virtual event sponsorships and sales associate training. We also participate in major industry trade shows and marketing events. Our marketing department is comprised of our channel marketing, product marketing and corporate marketing groups.
Netherlands serves the EMEA region, and Likewize Logistics Pty Ltd. in Melbourne, VIC, Australia serves Australia and New Zealand. 9 Table of Contents Sales and Marketing We work directly with our retail partners on market development activities, such as co-advertising, online promotions and video demonstrations, live and virtual event sponsorships and sales associate training.
IP provides an economical path to building high performance, scalable AV networks. 6 Table of Contents Security requirements within our products for business broadband access include firewall and VPN capabilities that allow for secure interactions between remote offices and business headquarter locations over the internet.
Security requirements within our products for business broadband access include firewall and VPN capabilities that allow for secure interactions between remote offices and business headquarter locations over the internet. Our connectivity product offerings for the business market include enhanced security and remote configurability often required in a business setting.
DMRs and VARs may receive sales incentives, marketing support and other program benefits from us. Our DMRs and VARs generally purchase our products through our wholesale distributors and audio-visual manufacturers that purchase our switches to include in their complete solutions. Broadband Service Providers.
Our DMRs and VARs generally purchase our products through our wholesale distributors and audio-visual manufacturers that purchase our switches to include in their complete solutions. Broadband Service Providers. We also supply directly to broadband service providers in the United States and internationally providing DSL, WiFi and 4G/5G mobile broadband products.
Employee Health and Safety The health and safety of our employees are critical to our success and thus one of our top priorities. We frequently monitor workplace cleanliness and safety in an effort to promote hygiene and minimize injuries. Our Corporate Emergency Response Team and Business Continuity Program equip employees with essential knowledge and supplies in case of emergencies.
We consistently monitor our workplace with the lens of Health and Safety to maintain a clean environment, practice emergency preparedness, minimize injury and illness, promote industrial hygiene, provide ergonomic training and equipment, machine safeguarding, and more. Our Corporate Emergency Response Team and Business Continuity Program equip employees with essential knowledge and supplies in case of emergencies.
Our largest retailers include Amazon.com, Inc., Best Buy Co., Inc., Wal-Mart Stores, Inc. and their respective affiliates. 4 Table of Contents DMRs and VARs. We sell into the business marketplace through an extensive network of DMRs and VARs. Our DMRs include companies such as CDW Corporation and Insight Corporation. VARs include our network of registered NETGEAR Solution Partners.
We sell into the business marketplace through an extensive network of DMRs and VARs. Our DMRs include companies such as CDW Corporation and Insight Corporation. VARs include our network of registered NETGEAR Solution Partners. DMRs and VARs may receive sales incentives, marketing support and other program benefits from us.
We have never had a work stoppage among our employees, no personnel are represented under collective bargaining agreements, and we consider our relations with our employees to be good. Culture and Engagement Our mission to connect the world using innovative networking products cannot be achieved without employing imaginative, talented and committed individuals from around the world.
We have never had a work stoppage among our employees, no personnel are represented under collective bargaining agreements, and we consider our relations with our employees to be good. 11 Table of Contents Culture and Engagement We seek to foster a diverse working environment, representing a broad spectrum of backgrounds and cultures that promotes innovative ideas and products.
For further discussion of how government regulations may affect our business, see the related discussion in “Risk Factors – Financial, Legal, Regulatory and Tax Compliance Risks, Including Recent Impairment Charges”.
For further discussion of how government regulations may affect our business, see the related discussion in “Risk Factors – Financial, Legal, Regulatory and Tax Compliance Risks, Including Recent Impairment Charges.” Human Capital As of December 31, 2023, we had 635 full-time employees, with 210 in sales, marketing and technical support, 228 in research and development, 77 in operations, and 120 in finance, information systems and administration.
Our channel marketing team focuses on working with the sales teams to maximize our participation in channel partner marketing activities and merchandise our products both online and in store. Our product marketing group focuses on product and service strategy, product and service development roadmaps, the new product introduction process, product lifecycle management, demand assessment and competitive analysis.
We also participate in major industry trade shows and marketing events. Our marketing department is comprised of our channel marketing, product marketing and corporate marketing groups. Our channel marketing team focuses on working with the sales teams to maximize our participation in channel partner marketing activities and merchandise our products both online and in store.
As consumer behavior shifts to doing even more online, including shopping, work-, fitness- and schooling-from-home, the demand for high-performance, dependable and secure WiFi continues to increase. The growing need for always on, secure high speed internet connectivity anywhere and everywhere has become a greater priority for households and businesses.
The growing need for always on, secure high speed internet connectivity anywhere and everywhere has become a greater priority for consumers and businesses.
We conduct most of our international sales and marketing operations through wholly-owned subsidiaries, which operate via sales and marketing subsidiaries and branch offices worldwide. 9 Table of Contents Customer Support We design our products with ease-of-use top of mind. We respond globally to customer inquiries through a variety of channels including phone, chat, community, social media, and email.
Customer Support We design our products with ease-of-use top of mind. We respond globally to customer inquiries through a variety of channels including phone, chat, community, social media, and email. Customers can also get self-help service through the comprehensive knowledge base, chatbot and user forums on our website.
Our vision for the business network is to increase the effectiveness, efficiency and supportability of the hybrid cloud access network. We believe small and medium-sized enterprises will continue to move into cloud-based applications, such as: Salesforce.com, Ring Central, Zoom video conferencing, SAP SuccessFactors, Workday, and others.
We believe enterprises will continue to move into cloud-based applications, such as: Salesforce.com, Ring Central, Zoom video conferencing, SAP SuccessFactors, Workday, and others. In addition, we believe these enterprises will move into utility-like on-demand computing power supplied by third-party data centers.
The direct online store also allows us to deliver curated rich content to supplement the purchase journey of customers, in addition to establishing a direct relationship with our customers. The largest portion of our net revenues was derived from the Americas, representing approximately 66% and 67% of net revenue in the years ended December 31, 2022 and 2021, respectively.
NETGEAR.com is a destination where we deliver to early tech adopters and inexperienced audiences alike a premium and comprehensive product and brand experience. The largest portion of our net revenues was derived from the Americas, representing approximately 68%, 66% and 67% of net revenue in the years ended December 31, 2023, 2022 and 2021, respectively.
We educate employees on belongingness, empathy, and on our internal efforts toward a more diverse workforce. Our Reflection on Bias course helps employees to recognize, deal with, and prevent bias through understanding the needs of diverse groups at NETGEAR.
For example, our Diversity and Inclusion course, required by all employees, helps to ensure that all personnel understand NETGEAR’s diversity and inclusion philosophy, from recruitment to team development. In addition, our Reflection on Bias course helps employees recognize, deal with, and prevent bias through understanding the needs of diverse groups at NETGEAR.
Mr. Lo was named the Ernst & Young National Technology Entrepreneur of the Year in 2006. Mr. Lo received a B.S. degree in electrical engineering from Brown University. Bryan D. Murray has served as our Chief Financial Officer since August 2018. He has been with NETGEAR since November 2001, serving in various management roles within the finance organization.
Murray has served as our Chief Financial Officer since August 2018. He has been with NETGEAR since November 2001, serving in various management roles within the finance organization. Prior to assuming the role of CFO, he served as NETGEAR’s Vice President of Finance and Corporate Controller since June 2011.
We offer ongoing development programs, including CEO Action for Diversity & Inclusion and Employee Resource Groups (ERG): the Black Employee Resource Group, and Women in the Workplace Resource Group. We conduct regular engagement surveys every two years to increase and monitor employee engagement.
As part of our commitment to building a more inclusive environment, we work to enrich our global community through charitable contributions and community engagement initiatives. We work every day to support and cultivate diversity. We offer ongoing development programs, such as Employee Resource Groups (ERG): the Black Employee Resource Group, and Women in the Workplace Resource Group.
Diversity and Inclusion We believe that our employee population should reflect the communities where we live and serve. We are committed to promoting and cultivating an inclusive and diverse culture that welcomes and celebrates everyone without bias. We seek to foster a diverse working environment, representing a broad spectrum of backgrounds and cultures that promotes innovative ideas and products.
We believe that it takes true diversity and inclusion to unleash the power of each of our employees’ fullest potential. We are committed to promoting a culture that welcomes and celebrates everyone without bias, reflecting the importance of diversity in our communities.
Removed
We 3 Table of Contents conduct business across three geographic territories: Americas; Europe, Middle East and Africa (“EMEA”); and Asia Pacific (“APAC”). In the years ended December 31, 2022, 2021, and 2020, we generated net revenue of $932.5 million, $1.17 billion, and $1.26 billion, respectively.
Added
There are a number of factors that are driving today’s demand for products within these markets. As consumer behavior has shifted to do more online, including shopping, hybrid work, fitness, and college curriculum, as well as a shift from cable TV to streaming - including live sports, we see high demand for high-performance, dependable and secure WiFi continuing to increase.
Removed
Our connectivity product offerings for the business market include enhanced security and remote configurability often required in a business setting. Our vision for the home network is about intelligently controlling and monitoring all devices connected to the home network at all times, thus creating a Smart Environment.
Added
As a result of the hybrid work model, there continues to be a shift in the demand and use cases for NETGEAR for Business products as more small businesses now run out of homes or remote offices. This shift has contributed to growing the market for lower port count switches and our NETGEAR for Business wireless offerings.
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Other competitors include numerous local vendors such as Xiaomi in China, AVM in Germany and Buffalo in Japan.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOther factors that could affect our quarterly and annual operating results include those listed in the risk factors section of this report and others such as: • operational disruptions, such as transportation delays or failure of our order processing system, particularly if they occur at the end of a fiscal quarter; • component supply constraints, including specialized WiFi 6 chipsets, or sudden, unforeseen price increases from our manufacturers, suppliers and vendors; • unanticipated increases in costs, including air and ocean freight, associated with shipping and delivery of our products; • the inability to maintain stable operations by our suppliers, distribution centers and other parties with which we have commercial relationships; • the duration and impact of the COVID-19 pandemic and macroeconomic conditions, particularly on our supply chain, our channel partners and our end market sales; • seasonal shifts in end market demand for our products, particularly in our Connected Home business segment; • our inability to accurately forecast product demand or optimal product mix such as the proportion of lower-priced products versus premium products resulting in increased inventory exposure and/or lost sales; • 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; 27 Table of Contents • unanticipated decreases, reduced inventory targets or delays in purchases of our products by our significant traditional and online retail customers; • shift in overall product mix sales from higher to lower gross margin products, from lower-priced products to premium products, or from one business segment to another, that would adversely impact our revenue and gross margins; • an increase in price protection claims, redemptions of marketing rebates, product warranty and stock rotation returns or allowance for doubtful accounts; • delay or failure to fulfill orders for our products on a timely basis; • changes in the pricing policies of or the introduction of new products by us or our competitors; • unexpected challenges or delays in our ability to further develop services and applications that complement our products and result in meaningful subscriber growth and future recurring revenue; • discovery or exploitation of security vulnerabilities in our products, services or systems, leading to negative publicity, decreased demand or potential liability, including potential breach of our customers’ data privacy or disruption of the continuous operation of our cloud infrastructure and our products; • introductions of new technologies and changes in consumer preferences that result in either unanticipated or unexpectedly rapid product category shifts; • slow or negative growth in the networking product, personal computer, Internet infrastructure, smart home, home electronics and related technology markets; • delays in the introduction of new products by us or market acceptance of these products; • delays in regulatory approvals or consumer adoption of WiFi 6E technology in various regions; • increases in expenses related to the development, introduction and marketing of new products that adversely impact our margins; • increases in expenses related to the development and marketing related to the Company’s direct online sales channels that adversely impact our margins; • changes in tax rates or adverse changes in tax laws that expose us to additional income tax liabilities; • changes in U.S. and international trade policy that adversely affect customs, tax or duty rates; • foreign currency exchange rate fluctuations in the jurisdictions where we transact sales and expenditures in local currency; • unanticipated increases in expenses related to periodic restructuring measures undertaken to achieve profitability and other business goals, including the reallocation or relocation of resources; • delay or failure of our service provider customers to purchase at their historic volumes or at the volumes that they or we forecast; • litigation involving alleged patent infringement, consumer class actions, securities class actions or other claims that could negatively impact our reputation, brand, business and financial condition; • disruptions or delays related to our financial and enterprise resource planning systems; • allowance for doubtful accounts exposure with our existing retailers, distributors and other channel partners and new retailers, distributors and other channel partners, particularly as we expand into new international markets; • geopolitical disruption, including sudden changes in immigration policies and economic sanctions, 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; 28 Table of Contents • epidemic or widespread product failure, performance problems or unanticipated safety issues in one or more of our products that could negatively impact our reputation, brand and business; • any changes in accounting rules; • 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 our brand; • our inability to monitor and ensure compliance with our code of ethics, 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; • workplace or human rights violations in certain countries in which our third-party manufacturers or suppliers operate, which may affect our brand and negatively affect our products’ acceptance by consumers; • overall performance of the equity markets and the economy as a whole; • unanticipated shifts or declines in profit by geographical region that would adversely impact our tax rate; and • our failure to implement and maintain the appropriate internal controls over financial reporting which may result in restatements of our financial statements.
Biggest changeOther factors that could affect our quarterly and annual operating results include those listed in the risk factors section of this report and others such as: • operational disruptions, such as transportation delays or failure of our order processing system, particularly if they occur at the end of a fiscal quarter; • component supply constraints, including specialized WiFi 6 or WiFi 7 chipsets, or sudden, unforeseen price increases from our manufacturers, suppliers and vendors; • unanticipated increases in costs, including air and ocean freight, associated with shipping and delivery of our products; • the inability to maintain stable operations by our suppliers, distribution centers and other parties with which we have commercial relationships; • seasonal shifts in end market demand for our products, particularly in our Connected Home business segment; • our inability to accurately forecast product demand or optimal product mix such as the proportion of lower-priced products versus premium products resulting in increased inventory exposure and/or lost sales; • unfavorable or compressed 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; • unanticipated decreases, reduced inventory targets or delays in purchases of our products by our significant traditional and online retail customers; • shift in overall product mix sales from higher to lower gross margin products, from lower-priced products to premium products, or from one business segment to another, that would adversely impact our revenue and gross margins; • an increase in price protection claims, redemptions of marketing rebates, product warranty and stock rotation returns or allowance for doubtful accounts; • delay or failure to fulfill orders for our products on a timely basis; • changes in the pricing policies of or the introduction of new products by us or our competitors; • unexpected challenges or delays in our ability to further develop services and applications that complement our products and result in meaningful subscriber growth and future recurring revenue; • discovery or exploitation of security vulnerabilities in our products, services or systems, leading to negative publicity, decreased demand or potential liability, including potential breach of our customers’ data privacy or disruption of the continuous operation of our cloud infrastructure and our products; • introductions of new technologies and changes in consumer preferences that result in either unanticipated or unexpectedly rapid product category shifts; • slow or negative growth in the networking product, personal computer, Internet infrastructure, smart home, home electronics and related technology markets; • delays in the introduction of new products by us or market acceptance of these products; • delays in regulatory approvals or consumer adoption of WiFi 6E or WiFi 7 technology in various regions; 26 Table of Contents • increases in expenses related to the development, introduction and marketing of new products that adversely impact our margins; • increases in expenses related to the development and marketing related to the Company’s direct online sales channels that adversely impact our margins; • changes in tax rates or adverse changes in tax laws that expose us to additional income tax liabilities; • changes in U.S. and international trade policy that adversely affect customs, tax or duty rates; • foreign currency exchange rate fluctuations in the jurisdictions where we transact sales and expenditures in local currency; • unanticipated increases in expenses related to periodic restructuring measures undertaken to achieve profitability and other business goals, including the reallocation or relocation of resources; • delay or failure of our service provider customers to purchase at their historic volumes or at the volumes that they or we forecast; • litigation involving alleged patent infringement, consumer class actions, securities class actions or other claims that could negatively impact our reputation, brand, business and financial condition; • disruptions or delays related to our financial and enterprise resource planning systems; • allowance for doubtful accounts exposure with our existing retailers, distributors and other channel partners and new retailers, distributors and other channel partners, particularly as we expand into new international markets; • geopolitical disruption, including sudden changes in immigration policies and economic sanctions, 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; • epidemic or widespread product failure, performance problems or unanticipated safety issues in one or more of our products that could negatively impact our reputation, brand and business; • any changes in accounting rules; • 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 our brand; • our inability to monitor and ensure compliance with our code of ethics, 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; • workplace or human rights violations in certain countries in which our third-party manufacturers or suppliers operate, which may require quarantine of affected products, affect our brand and negatively affect our products’ acceptance by consumers; • overall performance of the equity markets and the economy as a whole; • unanticipated shifts or declines in profit by geographical region that would adversely impact our tax rate; and • our failure to implement and maintain the appropriate internal controls over financial reporting which may result in restatements of our financial statements. 27 Table of Contents As a result, period-to-period comparisons of our operating results may not be meaningful, and you should not rely on them as an indication of our future performance.
We are dependent on the interoperability of Armor and our parental controls services and our other products with popular mobile operating systems, networks, technologies, products, and standards that we do not control, such as the Android and iOS operating systems and mobile browsers.
We are dependent on the interoperability of Armor and our parental controls services and our other products and services with popular mobile operating systems, networks, technologies, products, and standards that we do not control, such as the Android and iOS operating systems and mobile browsers.
In addition, if our software solutions, services, applications, pricing and other factors are not sufficiently competitive, or if there is an adverse reaction to our product decisions, we may lose market share in certain areas, which could adversely affect our revenue, profitability and prospects. Software research and development is complex.
In addition, if our software solutions, services, applications, pricing and other factors are not sufficiently competitive, or if there is an adverse reaction to our product and services decisions, we may lose market share in certain areas, which could adversely affect our revenue, profitability and prospects. Software research and development is complex.
Acquisitions involve numerous risks and challenges, including but not limited to the following: • 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 30 Table of Contents • potential post-closing disputes.
Acquisitions involve numerous risks and challenges, including but not limited to the following: • 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; 29 Table of Contents • 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.
Any changes, bugs, or technical issues in such systems, or changes in our relationships with mobile operating system partners, handset manufacturers, browser developers, or mobile carriers, or in their terms of service or policies that degrade our products’ functionality, reduce or eliminate our ability to update or distribute our products, give preferential treatment to competitive products, or charge fees related to the distribution of our products could adversely affect the usage of our subscription services products or our other products on mobile devices.
Any changes, bugs, or technical issues in such systems, or changes in our relationships with mobile operating system partners, handset manufacturers, browser developers, or mobile carriers, or in their terms of service or policies that degrade our products’ functionality, reduce or eliminate our ability to update or distribute our products or services, give preferential treatment to competitive products, or charge fees related to the distribution of our products could adversely affect the usage of our subscription services products or our other products and services on mobile devices.
If the cost of production charged by our third-party manufacturers increases, it may affect our margins and ability to lower prices for our products to stay competitive. Labor unrest in Southeast Asia, China or other locations where components and our products are manufactured may also affect our third-party manufacturers as workers may strike and cause production delays.
Furthermore, if the cost of production charged by our third-party manufacturers increases, it may affect our margins and ability to lower prices for our products to stay competitive. Labor unrest in Southeast Asia, China or other locations where components and our products are manufactured may also affect our third-party manufacturers as workers may strike and cause production delays.
If malicious actors compromise this cloud service, or if customer confidential information is accessed without authorization, our business would be harmed. Operating an online cloud service is a relatively new business for us and we may not have the expertise to properly manage risks related to data security and systems security.
If malicious actors compromise this cloud service, or if customer confidential information is accessed without authorization, our business and reputation would be harmed. Operating an online cloud service is a relatively new business for us and we may not have the expertise to properly manage risks related to data security and systems security.
For instance, if a third party were able to successfully overcome the security measures in our products, such a person or entity could misappropriate customer data, third party data stored by our customers and other information, including intellectual property. In addition, the operations of our end-user customers may be interrupted.
For instance, if a third party were able to successfully overcome the security measures in our products, such a person or entity could misappropriate customer data, third party data stored by our customers and other information, including intellectual property and personal information. In addition, the operations of our end-user customers may be interrupted.
To the degree that turmoil in the credit markets makes it more difficult for some customers to obtain financing, our customers’ ability to pay could be adversely impacted, which in turn could have a material adverse impact on our business, operating results, and financial condition.
Furthermore, to the degree that turmoil in the credit markets makes it more difficult for some customers to obtain financing, our customers’ ability to pay could be adversely impacted, which in turn could have a material adverse impact on our business, operating results, and financial condition.
We operate in a highly competitive, quickly changing environment, and our future success depends on our ability to develop or acquire and introduce new products and services, enhance existing products and services, effectively stimulate customer demand for new and upgraded products and services, and successfully manage the transition to these new and upgraded products and services.
We operate in a highly competitive, quickly changing environment, and our future success depends on our ability to develop or acquire and introduce new products and services, enhance existing products and services, effectively stimulate customer and business demand for new and upgraded products and services, and successfully manage the transition to these new and upgraded products and services.
As such, we have evolved the focus of our organization towards the delivery of more integrated hardware and software solutions for our customers, as well as related services, and we have and continue to expend additional resources in this area in the future, including key new hires.
As such, we have evolved the focus of our organization towards the delivery of more integrated hardware and software solutions for our customers, as well as related services, and we have and will continue to expend additional resources in this area in the future, including key new hires.
A port worker strike, work slow-down or other transportation disruption in the ports of Rotterdam, Singapore, Los Angeles or Long Beach, California, where we have significant distribution centers, could significantly disrupt our business.
A port worker strike, work slow-down or other transportation disruption in the ports of Singapore, Rotterdam, and Los Angeles or Long Beach, California, where we have significant distribution centers, could significantly disrupt our business.
We must make long-term investments, develop or obtain appropriate intellectual property and commit significant resources before knowing whether our output from these investments will successfully result in meaningful customer demand for our products and services.
We must make long-term investments, develop or obtain appropriate intellectual property and commit significant resources before knowing whether our output from these investments will successfully result in meaningful customer demand and retention for our products and services.
In particular, managing inventory and production of our products for our service provider customers is a challenge and may be further exacerbated by current macroeconomic uncertainties and geopolitical instability. Many of our service provider customers have irregular purchasing requirements.
In particular, managing inventory, inventory levels and production of our products for our service provider customers is a challenge and may be further exacerbated by current macroeconomic uncertainties and geopolitical instability. Many of our service provider customers have irregular purchasing requirements.
We are increasingly exposed to these risks as we continue to develop and market more products containing third-party software, such as our subscription service offerings related to network security and smart parental controls.
We are increasingly exposed to these risks as we continue to develop and market more products and services containing third-party software, such as our subscription service offerings related to network security and smart parental controls.
As also noted in the risk factor “ We make substantial 33 Table of Contents investments in software research and development and unsuccessful investments could materially adversely affect our business, financial condition and results of operations ” below, we devote considerable time and resources on testing and quality control efforts to detect quality issues and defects, and any reallocation of resources to fix such quality issues and defects could lead to delays in product introductions, which could further harm our competitive position.
As also noted in the risk factor “ We make substantial investments in software research and development and unsuccessful investments could materially adversely affect our 33 Table of Contents business, financial condition and results of operations ” above, we devote considerable time and resources on testing and quality control efforts to detect quality issues and defects, and any reallocation of resources to fix such quality issues and defects could lead to delays in product introductions, which could further harm our competitive position.
International operations are subject to a number of other risks, including: • exchange rate fluctuations and inflation; • geopolitical and economic tensions, such as between China/Taiwan, 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; • changes in local tax and customs duty laws or changes in the enforcement, application or interpretation of such laws (including potential responses to the higher U.S. tariffs on certain imported products implemented by the U.S.); • increased difficulty in managing inventory and reduced inventory level targets; • delayed revenue recognition; 23 Table of Contents • unpredictable judicial systems, which may unfairly favor domestic plaintiffs over foreign corporations, or which may more easily impose harsher penalties such as import injunctions; • 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; and • business difficulties, including potential bankruptcy or liquidation, of any of our worldwide third-party logistics providers.
International operations are subject to a number of other risks, including: • exchange rate fluctuations and inflation; • geopolitical and economic tensions, such as in the Middle East, between China/Taiwan, 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; • changes in local tax and customs duty laws or changes in the enforcement, application or interpretation of such laws (including potential responses to the higher U.S. tariffs on certain imported products implemented by the U.S.); • increased difficulty in managing inventory and reduced inventory level targets; • delayed revenue recognition; • unpredictable judicial systems, which may unfairly favor domestic plaintiffs over foreign corporations, or which may more easily impose harsher penalties such as import injunctions; • 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; and • business difficulties, including potential bankruptcy or liquidation, of any of our worldwide third-party logistics providers.
Some specific factors that may have a significant effect on our common stock market price include: • 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, political and market conditions, including government efforts to mitigate economic downturns or control inflation; • novel and unforeseen market forces and trading strategies, such as the massive short squeeze rally caused by retail investors on companies such as Gamestop; • 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 42 Table of Contents • changes in stock market analyst recommendations regarding our common stock, other comparable companies or our industry generally.
Some specific factors that may have a significant effect on our common stock market price include: • 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, political and market conditions, including government efforts to mitigate economic downturns or control inflation; • novel and unforeseen market forces and trading strategies, such as the massive short squeeze rally caused by retail investors on companies such as GameStop; • 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.
For example, at times, during the course of the COVID-19 pandemic, we have experienced disruptions at the ports, due to multiple factors, such as supply and demand imbalance, a shortage of warehouse workers, truck drivers, and transport equipment (tractors and trailers), and other causes, and have suffered from heightened congestion, bottleneck and gridlock, leading to abnormally high transportation delays.
For example, at times, during the course of the COVID-19 pandemic, we had experienced disruptions at the ports, due to multiple factors, such as supply and demand imbalance, a shortage of warehouse workers, truck drivers, and transport equipment (tractors and trailers), and other causes, and had suffered from heightened congestion, bottleneck and gridlock, leading to abnormally high transportation delays.
The success of new product and services depend on a number of factors, including timely and successful development either through rapid innovation or acquisition, market acceptance, our ability to manage the risks and costs, such as investment costs and marketing costs, associated with development and introduction of new products and services, the effective management of purchase commitments and inventory levels in line with anticipated product demand, availability of products in appropriate quantities and at expected costs to meet anticipated demand, the risk that new products and services may have delays, quality or other defects or deficiencies and our ability to effectively manage marketing and reviews of our products and services.
The success of new products and services depends on a number of factors, including timely and successful development either through rapid innovation or acquisition, market acceptance, our ability to manage the risks and costs, such as investment costs and marketing costs, associated with development and introduction of new products and services, the effective management of purchase commitments and channel inventory levels in line with anticipated product demand, availability of products in appropriate quantities and at expected costs to meet anticipated demand, the risk that new products and services may have delays, quality or other defects or deficiencies and our ability to effectively manage marketing and reviews of our products and services.
We generally allow wholesale distributors and traditional retailers to return a limited amount of our products in exchange for other products.
In addition, we generally allow wholesale distributors and traditional retailers to return a limited amount of our products in exchange for other products.
Adverse changes in economic conditions, including inflation, slower growth or recession, new or increased tariffs and other barriers to trade, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations could adversely impact the demand and sale of our products to end users and the quantity of 40 Table of Contents products our customers decide to purchase from us (or change the mix of products demanded) and make it more challenging to forecast our operating results and make business decisions.
Adverse changes in economic conditions, including inflation, slower growth or recession, new or increased tariffs and other barriers to trade, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations could adversely impact the demand and sale of our products to end users and the quantity of products our customers decide to purchase from us (or change the mix of products demanded) and make it more challenging to forecast our operating results and make business decisions.
There are areas where new regulations have been enacted which could increase our cost of the components that we utilize or require us to expend additional resources to ensure compliance. For example, the SEC’s “conflict minerals” rules apply to our business, and we are expending significant resources to ensure compliance.
There are areas where new regulations have been enacted which could increase our cost of the components that we utilize or require us to expend additional resources to ensure compliance. For example, the SEC’s “conflict minerals” rules apply to our business, and we expended significant resources to ensure compliance.
For example, thus far we have experienced that patent litigation in China proceeds along a faster timeline, is more costly than we anticipated, carries a greater risk of injunction, and suffers from a relative lack of judicial development relative to patent litigation in the United States.
For example, we have experienced that patent litigation in China proceeds along a faster timeline, is more costly than we anticipated, carries a greater risk of injunction, and suffers from a relative lack of judicial development relative to patent litigation in the United States.
If we improperly forecast demand for our products, we could end up with too many products and be unable to sell the excess inventory in a timely manner, if at all, or, alternatively we could end up with too few products and not be able to satisfy demand.
If we improperly forecast demand for our products and channel inventory levels, we could end up with too many products and be unable to sell the excess inventory in a timely manner, if at all, or, alternatively we could end up with too few products and not be able to satisfy demand.
In the service provider space, we also face significant and increased competition from original design manufacturers, or ODMs, and contract manufacturers who sell and attempt to sell their products directly to service providers around the world. 22 Table of Contents Many of our existing and potential competitors have longer operating histories, greater name recognition and substantially greater financial, technical, sales, marketing and other resources.
In the service provider space, we also face significant and increased competition from original design manufacturers, or ODMs, and contract manufacturers who sell and attempt to sell their products directly to service providers around the world. Many of our existing and potential competitors have longer operating histories, greater name recognition and substantially greater financial, technical, sales, marketing and other resources.
Compliance with laws and regulations concerning privacy, cybersecurity, data governance and data protection is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms ensuring compliance with the laws and regulations and incur substantial expenditures.
Compliance with laws and regulations concerning artificial intelligence, privacy, cybersecurity, data governance and data protection is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms ensuring compliance with the laws and regulations and incur substantial expenditures.
In 2022, a third party initiated litigation against us in Germany, which carries with it the threat of an injunction on the importation of our products into Germany, as well as a significant increase in time and resources to defend against.
In 2022, a third-party initiated litigation against us in Germany and China, which carries with it the threat of injunction on the importation of our products into Germany and China, as well as a significant increase in time and resources to defend against.
Certain substantial competitors have business models that are more focused on customer acquisition and access to customer data rather than on financial return from product sales, and these competitors have the ability to provide sustained price competition to many of our products in the market. Average sales prices have declined in the past and may again decline in the future.
Certain substantial competitors have business models that are more focused on customer acquisition and access to customer data rather than on financial return from product sales, and these competitors have the ability to provide sustained price competition to many of our products in the market. 22 Table of Contents Average sales prices have declined in the past and may again decline in the future.
In addition, we manufacture and sell our products in many international jurisdictions that offer reduced levels of protection and recourse from intellectual property misuse or theft, as compared to the United States. Our inability to secure and protect our intellectual property rights could significantly harm our brand and business, operating results and financial condition.
In addition, we manufacture and sell our products in many international jurisdictions that offer reduced levels of protection and recourse from intellectual property misuse or theft, as compared to the United States. 34 Table of Contents Our inability to secure and protect our intellectual property rights could significantly harm our brand and business, operating results and financial condition.
Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit. For example, during the first quarter of 2022, the market price of our common stock and market capitalization declined and the U.S. WiFi market contracted, which had a significant negative impact on our Connected Home business.
Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit. For example, in 2022, the market price of our common stock and market capitalization declined and the U.S. WiFi market contracted, which had a significant negative impact on our Connected Home business.
The uncertainty in global and regional economic conditions have also affected the financial markets and financial institutions on which we rely and have resulted in a number of adverse effects including a low level of liquidity in many financial markets, extreme volatility in credit, equity, currency and fixed income markets, instability in the stock market, high inflation and high unemployment.
The uncertainty in global and regional economic conditions have also affected the financial markets and financial institutions on which we rely and have resulted in a number of adverse effects including a low level of liquidity in many financial markets, banking sector disruptions, extreme volatility in credit, equity, currency and fixed income markets, instability in the stock market, high inflation and high unemployment.
This shift may have a longer-term impact on the inventory levels our customers choose to carry. Additionally, concentration and consolidation among our customer base may allow certain customers to command increased leverage in negotiating prices and other terms of sale, which could adversely affect our profitability.
This shift may have a longer-term impact on the inventory levels our customers choose to carry. 18 Table of Contents Additionally, concentration and consolidation among our customer base may allow certain customers to command increased leverage in negotiating prices and other terms of sale, which could adversely affect our profitability.
It is also possible that an attacker could compromise our internal code repository or those of our partners and insert a ‘backdoor’ that would give them easy access to any of our devices using this code. This particular kind of attack is very sophisticated, relatively new, and hard to defend against.
It is also possible that an attacker could compromise our internal code repository or those of our 31 Table of Contents partners and insert a ‘backdoor’ that would give them easy access to any of our devices using this code. This particular kind of attack is very sophisticated, relatively new, and hard to defend against.
The transportation network is subject to disruption or congestion from a variety of causes, including labor disputes or port strikes, acts of war, terrorism or other geopolitical conflicts, natural disasters, effects of climate change, pandemics like COVID-19 and congestion resulting from higher shipping volumes.
The transportation network is subject to disruption or congestion from a variety of causes, including labor disputes or port strikes, acts of war, terrorism or other geopolitical conflicts like the Middle East conflict, natural disasters, effects of climate change, pandemics like COVID-19 and congestion resulting from higher shipping volumes.
If we are unable to successfully anticipate changing economic, geopolitical and financial conditions, we may be unable to effectively plan for and respond to those changes which could further disrupt our business or limit our ability to access certain assets and materially adversely affect our business and results of operations.
If we are 40 Table of Contents unable to successfully anticipate changing economic, geopolitical and financial conditions, we may be unable to effectively plan for and respond to those changes which could further disrupt our business or limit our ability to access certain assets and materially adversely affect our business and results of operations.
International trade disputes, geopolitical tensions, and military conflicts have led, and continue to lead, to new and increasing export restrictions, trade barriers, tariffs, and other trade measures that can increase our manufacturing costs, limit our ability to sell to certain customers or markets, limit our ability to procure, or increase our costs for, components or raw materials, impede or slow the movement of our goods across borders, or otherwise restrict our ability to conduct operations.
International trade disputes, geopolitical tensions, and military conflicts have led, and continue to lead, to new and increasing export restrictions, trade barriers, tariffs, and other trade measures that can increase our manufacturing and transportation costs, limit our ability to sell to certain customers or markets, limit our ability to procure, or increase our costs for, components or raw materials, impede or slow the movement of our goods across borders, or otherwise 28 Table of Contents restrict our ability to conduct operations.
These patent aggregation services may obtain, or have previously obtained, licenses for the alleged patent infringement claims against us and other patent assets that could be used offensively against us. The costs of such defensive patent aggregation services, while potentially lower than the costs of litigation, may be 35 Table of Contents significant as well.
These patent aggregation services may obtain, or have previously obtained, licenses for the alleged patent infringement claims against us and other patent assets that could be used offensively against us. The costs of such defensive patent aggregation services, while potentially lower than the costs of litigation, may be significant as well.
We may not be successful in maintaining or developing relationships with key participants in the mobile ecosystem or in developing products that operate effectively with these technologies, products, systems, networks, or standards.
We may not be successful in maintaining or developing relationships with key participants in the mobile ecosystem or in developing products and services that operate effectively with these technologies, products, systems, networks, or standards.
Despite our efforts and processes to prevent breaches, our devices are potentially vulnerable to cybersecurity risks, including cyber-attacks such as viruses and worms, vulnerabilities such as command injection, cross site scripting, authentication and session management, and stack-based buffer overflow, and other sophisticated attacks or exploits.
Despite our efforts and processes to prevent breaches, our systems and products are potentially vulnerable to cybersecurity risks, including cyber-attacks such as viruses and worms, vulnerabilities such as command injection, cross site scripting, authentication and session management, and stack-based buffer overflow, and other sophisticated attacks or exploits.
The Tax Cuts and Jobs Act of 2017 included provisions effective for the 2022 tax year that eliminate the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years for domestic payments and 15 years for payments to foreign parties.
The Tax Cuts and Jobs Act of 2017 included provisions effective for the 2022 tax year that eliminate the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize 36 Table of Contents such expenditures over five years for domestic payments and 15 years for payments to foreign parties.
Specifically, substantially all of our manufacturing and assembly occurs in the Asia Pacific region, and any disruptions due to natural disasters, climate change, health epidemics and political, social and economic instability in the region would affect the ability of our third-party manufacturers to manufacture our products.
Specifically, substantially all of our manufacturing and assembly occurs in the Asia Pacific region, and any disruptions due to natural disasters, climate change, health epidemics and political, social and economic instability in 21 Table of Contents the region would affect the ability of our third-party manufacturers to manufacture our products.
We are also required to comply with local environmental legislation and our customers rely on this compliance in order to sell our products. If our customers do not agree with our interpretations and requirements of new legislation, they may cease to order our products and our revenue would be harmed.
We are also required to comply with local environmental legislation and our customers rely on this compliance in order to sell our products. If our customers do not agree with 23 Table of Contents our interpretations and requirements of new legislation, they may cease to order our products and our revenue would be harmed.
If the U.S. government does not agree with our determinations, we could be required to pay additional amounts, including potential penalties, and our profitability would be adversely impacted. 29 Table of Contents Expansion of our operations and infrastructure may strain our operations and increase our operating expenses.
If the U.S. government does not agree with our determinations, we could be required to pay additional amounts, including potential penalties, and our profitability would be adversely impacted. Expansion of our operations and infrastructure may strain our operations and increase our operating expenses.
If we improperly forecast demand for our products, we could incur increased expenses associated with writing off excessive or obsolete inventory, lose sales, incur penalties for late delivery or have to ship products by air freight to meet immediate demand incurring incremental freight costs above the sea freight costs, a preferred method, and suffering a corresponding decline in gross margins.
If we improperly forecast demand for our products and channel inventory levels, we could incur increased expenses associated with writing off excessive or obsolete inventory, lose sales, incur penalties for late delivery or have to ship products by air freight to meet immediate demand incurring incremental freight costs above the sea freight costs and suffering a corresponding decline in gross margins.
In addition, we may not have the resources 38 Table of Contents to maintain compliance with these customer requirements and failure to comply may result in decreased sales to these customers, which may have a material adverse effect on our business, financial condition and results of operations.
In addition, we may not have the resources to maintain compliance with these customer requirements and failure to comply may result in decreased sales to these customers, which may have a material adverse effect on our business, financial condition and results of operations.
In addition, some components that are used in all our products are obtained from limited sources. We also obtain switching fabric semiconductors, which are used in our Ethernet switches and Internet gateway products, and WiFi chipsets, which are 17 Table of Contents used in all of our wireless products, from a limited number of suppliers.
In addition, some components that are used in all our products are obtained from limited sources. We also obtain switching fabric semiconductors, which are used in our Ethernet switches and Internet gateway products, and WiFi chipsets, which are used in all of our wireless products, from a limited number of suppliers.
These provisions have not been deferred, modified, or repealed by Congress as was previously anticipated might occur. These provisions have a material impact on our cash taxes which will continue in the future if these provisions are not modified, or repealed by Congress. We have been audited by the ITA for the 2004 through 2012 tax years.
These provisions have not been deferred, modified, or repealed by Congress as was previously anticipated might occur. These provisions have a material impact on our cash taxes which will continue in the future if these provisions are not modified, or repealed by Congress. We have been audited by the Italy Tax Authority (“ITA”) for the 2004 through 2012 tax years.
For example, as mentioned below in the risk factors “ If disruptions in our transportation network continue to occur or our shipping costs substantially increase again in the future, we may be unable to sell or timely deliver our products, and net revenue and our gross margin could decrease ” and “ We obtain several key components from limited or sole sources, and if these sources fail to satisfy our supply requirements or we are unable to properly manage our supply requirements with our third-party manufacturers, we may lose sales and experience increased component costs ” , we have experienced high freight costs and component costs.
For example, as mentioned below in the risk factors “ If disruptions in our transportation network continue to occur or our shipping costs substantially increase again in the future, we may be unable to sell or timely deliver our products, and net revenue and our gross margin could decrease ” and “ We obtain several key components from limited or sole sources, and if these sources fail to satisfy our supply requirements or we are unable to properly manage our supply requirements with our third-party manufacturers, we may lose sales and experience increased component costs ”, we had previously experienced high freight costs and component costs and had issued price increases to our customers.
If we do not successfully overcome these challenges, we will not be able to profitably manage our service provider sales channel and our financial results will be harmed. We expect our operating results to fluctuate on a quarterly and annual basis, which could cause our stock price to fluctuate or decline.
If we do not successfully overcome these challenges, we will not be able to profitably manage our service provider sales channel and our financial results will be harmed. 25 Table of Contents We expect our operating results to fluctuate on a quarterly and annual basis, which could cause our stock price to fluctuate or decline.
If we are shipping products that contain third-party technology that we subsequently lose the right to license, then we will not be able to continue to offer or support those products. In addition, these licenses often require royalty payments or other consideration to 31 Table of Contents the third-party licensor.
If we are shipping products that contain third-party technology that we subsequently lose the right to license, then we will not be able to continue to offer or support those products. In addition, these licenses often require royalty payments or other consideration to the third-party licensor.
The market for talent in the technology industry, especially in the areas of software and subscription services, has become increasingly competitive, and we may not have the resources to compete at the same level as larger companies who are able to offer more compelling compensation packages.
The market for talent in the technology industry, especially in the areas of software and subscription services is competitive, and we may not have the resources to compete at the same level as larger companies who are able to offer more compelling compensation packages.
Our business operations are subject to interruption by natural disasters, fire, power shortages, terrorist attacks and other hostile acts, labor disputes, public health issues, and other events beyond our control.
Our business operations are subject to interruption by natural disasters, fire, power shortages, geopolitical disputes or conflicts, terrorist attacks and other hostile acts, labor disputes, public health issues, and other events beyond our control.
If, in any period our stock price decreases to the point where our market capitalization is less than our book value, this too could indicate a potential impairment and we may be required to record an impairment charge in that period.
If, in any period our stock price decreases to the point where our market capitalization is less than our book 39 Table of Contents value, this too could indicate a potential impairment and we may be required to record an impairment charge in that period.
Potential breaches of our security measures and the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about us, our employees or our customers, including the potential loss or disclosure of such information or data as a result of employee error or other employee actions, hacking, fraud, social engineering or other forms of deception, could expose us, our customers or the individuals affected to a risk of loss or misuse of this information, result in litigation and potential liability for us, subject us to significant governmental fines, damage our brand and reputation, or otherwise harm our business.
Potential breaches of our security measures and the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about us, our employees or our customers, including the potential loss or disclosure of such information or data as a result of improper use of AI tools, employee error or other employee actions, hacking, fraud, social engineering or other forms of deception, could expose us, our 32 Table of Contents customers or the individuals affected to a risk of loss or misuse of this information, result in litigation and potential liability for us, subject us to significant governmental fines, damage our brand and reputation, or otherwise harm our business.
When this occurs, our exposure to the foregoing risks is 18 Table of Contents greater and our potential liability for losses is greater relative to our more typical ordering horizon of up to 6 to 9 months.
When this occurs, our exposure to the foregoing risks is greater and our potential liability for losses is greater relative to our more typical ordering horizon of up to 6 to 9 months.
Accordingly, if we cannot properly manage future introductions and transitions of products and services, this could result in: • 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 channels; and • increased levels of product returns.
Accordingly, if we cannot properly drive customer and business demand, manage future introductions and transitions of products and services, this could result in: • 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 channel inventory levels, reduced online product visibility, or loss of sales channels; and • increased levels of product returns.
Our sales and operations in international markets have exposed us to and may in the future expose us to operational, financial and regulatory risks. International sales comprise a significant amount of our overall net revenue. International sales were approximately 36% of overall net revenue in fiscal 2022 and approximately 35% of overall net revenue in fiscal 2021.
Our sales and operations in international markets have exposed us to and may in the future expose us to operational, financial and regulatory risks. International sales comprise a significant amount of our overall net revenue. International sales were approximately 34% of overall net revenue in fiscal 2023 and approximately 36% of overall net revenue in fiscal 2022.
Major public health issues, including pandemics such as COVID-19, could negatively affect us through more stringent employee travel restrictions, additional limitations in freight services, governmental actions limiting the movement of products between regions, delays in production ramps of new products, and disruptions in the operations of our manufacturing vendors and component suppliers.
Wars or geopolitical conflicts, major public health issues, including pandemics such as COVID-19, could negatively affect us through more stringent employee travel restrictions, additional limitations in freight services or increase in freight costs, governmental actions limiting the movement of products between regions, delays in production ramps of new products, and disruptions in the operations of our manufacturing vendors and component suppliers.
For example, in 2022, demand for our Connected Home products turned out to be lower than we previously forecasted, and resulted in our revenue for our Connected Home products to come in lower than expected, as our channel partners in the U.S. are expected to replenish inventory slower than they sell it through to end users to right size their inventory carrying position based on the lower demand levels than were previously expected.
For example, in 2022, demand for our Connected Home products turned out to be lower than we previously forecasted and resulted in our revenue for our Connected Home products to come in lower than expected, as our channel partners in the U.S. replenished inventory slower than they sold through to end users to right size their inventory carrying position based on the lower demand levels than were previously expected.
In addition, the supply-chain due diligence investigation required by the conflict minerals rules will require expenditures of resources and management attention regardless of the results of the investigation.
In addition, the supply-chain due diligence investigation required by the conflict minerals rules requires expenditures of resources and management attention regardless of the results of the investigation.
In addition, health epidemics, war, terrorism, geopolitical uncertainties, social and economic instability, public health issues, sudden changes in trade and immigration policies (such as the higher tariffs on certain products imported from China enacted by the previous U.S. administration or U.S. sanctions against Russia as a result of the Russia-Ukraine dispute), and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a strong negative effect on us, our suppliers, logistics providers, manufacturing vendors and customers.
In addition, health epidemics, war, terrorism, geopolitical uncertainties, social and economic instability, public health issues, sudden changes in trade and immigration policies (such as the higher tariffs on certain products imported from China, U.S. sanctions against Russia as a result of the Russia-Ukraine dispute, and the Israel-Hamas conflicts and Red Sea crisis), and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a strong negative effect on us, our suppliers, logistics providers, manufacturing vendors and customers.
If we are unable to properly monitor and manage our sales channel inventory and maintain an appropriate level and mix of products with our retail partners and wholesale distributors and within our sales channels, we may incur increased and unexpected costs associated with this inventory.
If we are unable to properly monitor and help our channel partners to optimize their inventory levels and maintain an appropriate level and mix of products with our retail partners and wholesale distributors and within our sales channels, we may incur increased and unexpected costs associated with this inventory.
In order to differentiate our products from our competitors’ products, we must continue to increase our focus and capital investment in research 21 Table of Contents and development and marketing and sales, including software development for our products and complementary services and applications.
In order to differentiate our products from our competitors’ products, we must continue to increase our focus and capital investment in research and development and marketing and sales, including software development for our products and complementary services and applications.
Even if we are 26 Table of Contents selected as a supplier, typically a service provider will also designate a second source supplier, which over time will reduce the aggregate orders that we receive from that service provider.
Even if we are selected as a supplier, typically a service provider will also designate a second source supplier, which over time will reduce the aggregate orders that we receive from that service provider.
While we regularly test the plan and the program, there can be no assurance that the plan and program can withstand an actual or serious disruption in our business, including a data protection breach or cyber-attack.
While we regularly test and update these plans, policy and program, there can be no assurance that the plans, policy and program can withstand an actual or serious disruption in our business, including a data protection breach or cyber-attack.
Additionally, outside parties may attempt to fraudulently induce our employees to disclose sensitive information in order to gain access to our information technology systems, our data or our customers’ data. We have established a crisis management plan and business continuity program.
Additionally, outside parties may attempt to fraudulently induce our employees to disclose sensitive information in order to gain access to our information technology systems, our data or our customers’ data. We have established a crisis management plan, business continuity program, information security incident response plan and Generative AI policy.
This has required a material investment in capital, time and resources and carries the risk that it may not achieve the expected return on investment that we are expecting, and that it may adversely affect our relationships with our existing channel partners, which ultimately may materially and adversely affect our results of operations.
This requires material investment in capital, time and resources and carries the risk that it may not achieve 20 Table of Contents the expected return on investment that we are expecting, and that it may adversely affect our relationships with our existing channel partners, which ultimately may materially and adversely affect our results of operations.
Our products and services may contain unknown security vulnerabilities. For example, the firmware, software and open source software that we or our manufacturing partners have installed on our products may be susceptible to hacking or misuse.
For example, the firmware, software and open source software that we or our manufacturing partners have installed on our products may be susceptible to hacking or misuse.
As a result, we recognized an impairment charge to our Connected Home reporting unit in the first quarter of 2022. We have not recognized any goodwill impairment charge on our SMB reporting unit. However, we operate in highly competitive environments and projections of future operating results and cash flows may vary significantly from actual results.
As a result, we recognized a goodwill impairment charge in the first quarter of 2022. We have not recognized any impairment charge on our NETGEAR for Business reporting unit. However, we operate in highly competitive environments and projections of future operating results and cash flows may vary significantly from actual results.
If this occurs, the timing of revenue recognition is uncertain and our business would be harmed. In addition, we often commence building custom-made products prior to execution of a contract in order to meet the customer’s contemplated launch dates and requirements.
There is risk that we do not ultimately close and sign a definitive contract. If this occurs, the timing of revenue recognition is uncertain and our business would be harmed. In addition, we often commence building custom-made products prior to execution of a contract in order to meet the customer’s contemplated launch dates and requirements.
Our business has been and may continue to be affected by a number of factors that are beyond our control, such as general geopolitical, economic and business conditions, conditions in the financial markets, and changes in the overall demand for networking and smart home products.
Global economic conditions could materially adversely affect our revenue and results of operations. Our business has been and may continue to be affected by a number of factors that are beyond our control, such as general geopolitical, economic and business conditions, conditions in the financial markets, and changes in the overall demand for ProAV, networking and smart home products.
In addition, significant negative industry or economic trends, such as those that have occurred as a result of the recent economic downturn, including reduced estimates of future cash flows or disruptions to our business could indicate that goodwill and intangible assets might be impaired.
As a result of our acquisitions, we have significant goodwill recorded on our balance sheets. In addition, significant negative industry or economic trends, such as those that have occurred as a result of the recent economic downturn, including reduced estimates of future cash flows or disruptions to our business could indicate that goodwill might be impaired.
In addition, if we are unable to successfully introduce or acquire new products with higher gross margins, or if we are unable to improve the margins on our previously introduced and rapidly growing product lines, our net revenue and overall gross margin would likely decline.
In addition, if we are unable to successfully introduce or acquire new products with higher gross margins, or enhance and improve our services and subscription offerings for customer retention or service revenue growth, or if we are unable to improve the margins on our previously introduced and rapidly growing product and services lines, our net revenue and overall gross margin would likely decline.
The occurrence of any of these events could harm our results. Gains or losses from equity securities could vary from expectations depending on gains or losses realized on the sale or exchange of securities and impairment charges related to debt instruments as well as equity and other investments.
Gains or losses from equity securities could vary from expectations depending on gains or losses realized on the sale or exchange of securities and impairment charges related to debt instruments as well as equity and other investments.
Recently, we have begun to sell products and services directly to consumers from our own e-commerce platforms.
We also sell products and services directly to consumers from our own e-commerce platforms.
We rely upon third parties for a substantial portion of the intellectual property that we use in our products. At the same time, we rely on a combination of copyright, trademark, patent and trade secret laws, nondisclosure agreements with employees, consultants and suppliers and other contractual provisions to establish, maintain and protect our intellectual property rights and technology.
At the same time, we rely on a combination of copyright, trademark, patent and trade secret laws, nondisclosure agreements with employees, consultants and suppliers and other contractual provisions to establish, maintain and protect our intellectual property rights and technology.
If these financial institutions default on their obligations or their credit ratings are negatively impacted by liquidity issues, credit deterioration or losses, financial results, or other factors, the value of our cash equivalents and short-term investments could decline and result in a material impairment, which could have a material adverse effect on our financial condition and operating results. 39 Table of Contents Governmental regulations of imports or exports affecting Internet security could affect our net revenue.
If these financial institutions default on their obligations or their credit ratings are negatively impacted by liquidity issues, credit deterioration or losses, financial results, or other factors, the value of our cash equivalents and short-term investments could decline and result in a material impairment, which could have a material adverse effect on our financial condition and operating results.
In addition, there is no assurance that a manufacturer can scale its production of our products at the volumes and in the quality that we require.
Ensuring that a manufacturer is qualified to manufacture our products to our standards is time consuming. In addition, there is no assurance that a manufacturer can scale its production of our products at the volumes and in the quality that we require.
In most cases, we rely on these manufacturers to procure components and, in some cases, subcontract engineering work. 19 Table of Contents Some of our products are manufactured by a single manufacturer. We do not have any long-term contracts with any of our third-party manufacturers.
In most cases, we rely on these manufacturers to procure components and, in some cases, subcontract engineering work. Some of our products are manufactured by a single manufacturer. We do not have any long-term contracts with any of our third-party manufacturers. Some of these third-party manufacturers produce products for our competitors or are themselves competitors in certain product categories.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Pr operties Our principal administrative, sales, marketing and research and development facilities currently occupy approximately 142,700 square feet in an office complex in San Jose, California, under a lease that expires in September 2025.
Biggest changeItem 2. Properties Our principal administrative, sales, marketing and research and development facilities currently occupy approximately 142,700 square feet in an office complex in San Jose, California, under a lease that expires in September 2025. Our international headquarters occupy approximately 7,000 square feet in an office complex in Cork, Ireland, under a lease that expires in December 2037.
We have invested in internal capacity and strategic relationships with outside manufacturing vendors as needed to meet anticipated demand for our products. We use third parties to provide warehousing services to us in facilities located in both Northern and Southern California, Netherlands, Singapore and Australia.
We have invested in internal capacity and strategic relationships with outside manufacturing vendors as needed to meet anticipated demand for our products. We use third parties to provide warehousing services to us in facilities located in both Northern and Southern California, Netherlands, Singapore and Australia. 44 Table of Contents
Removed
Starting in January 2023, our international headquarters occupy approximately 7,000 square feet in an office complex in Cork, Ireland, under a lease that expires in December 2037.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings The information set forth under the heading “Litigation and Other Legal Matters” in Note 8, Commitments and Contingencies , in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 43 Table of Contents 10-K, is incorporated herein by reference.
Biggest changeItem 3. Legal Proceedings The information set forth under the heading “Litigation and Other Legal Matters” in Note 8, Commitments and Contingencies , in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K, is incorporated herein by reference.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRepurchase of Equity Securities by the Company 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 (In millions) October 3, 2022 - October 30, 2022 — $ — — 2.5 October 31, 2022 - November 27, 2022 1,626 $ 19.65 — 2.5 November 28, 2022 - December 31, 2022 2,302 $ 18.58 — 2.5 Total 3,928 $ 19.02 — (1) From time to time, our Board of Directors has authorized programs under which we may repurchase shares of our common stock.
Biggest changeRepurchase of Equity Securities by the Company 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 (In millions) October 2, 2023 - October 29, 2023 — $ — — 2.5 October 30, 2023 - November 26, 2023 1,577 $ 12.64 — 2.5 November 27, 2023 - December 31, 2023 2,160 $ 14.26 — 2.5 Total 3,737 $ 13.58 — (1) From time to time, our Board of Directors has authorized programs under which we may repurchase shares of our common stock.
Recent Sales of Unregistered Securities None. 45 Table of Contents Stock Performance Graph Notwithstanding any statement to the contrary in any of our previous or future filings with the SEC, the following information relating to the price performance of our common stock shall not be deemed “filed” with the SEC or “soliciting material” under the Exchange Act and shall not be incorporated by reference into any such filings.
Recent Sales of Unregistered Securities None. 46 Table of Contents Stock Performance Graph Notwithstanding any statement to the contrary in any of our previous or future filings with the SEC, the following information relating to the price performance of our common stock shall not be deemed “filed” with the SEC or “soliciting material” under the Exchange Act and shall not be incorporated by reference into any such filings.
For the purpose of this graph, the effect of the final separation of Arlo is reflected in the cumulative total return of NETGEAR common stock as a reinvested dividend. 46 Table of Contents
For the purpose of this graph, the effect of the final separation of Arlo is reflected in the cumulative total return of NETGEAR common stock as a reinvested dividend. 47 Table of Contents
The following graph shows a comparison from December 31, 2017 through December 31, 2022 of cumulative total return for our common stock, the Nasdaq Composite Index and the Nasdaq Computer Index. Such returns are based on historical results and are not intended to suggest future performance.
The following graph shows a comparison from December 31, 2018 through December 31, 2023 of cumulative total return for our common stock, the Nasdaq Composite Index and the Nasdaq Computer Index. Such returns are based on historical results and are not intended to suggest future performance.
(2) During the three months ended December 31, 2022, we repurchased and retired, as reported on trade date, approximately 4,000 shares of common stock at a cost of approximately $75,000 to facilitate tax withholding for Restricted Stock Units.
(2) During the three months ended December 31, 2023, we repurchased and retired, as reported on trade date, 3,737 shares of common stock at a cost of approximately $51,000 to facilitate tax withholding for Restricted Stock Units.
Holders of Common Stock On February 10, 2023, there were 68 stockholders of record, one of which was Cede & Co., a nominee for Depository Trust Company (“DTC”).
Holders of Common Stock On February 9, 2024, there were 77 stockholders of record, one of which was Cede & Co., a nominee for Depository Trust Company (“DTC”).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations The following table sets forth, for the periods presented, the consolidated statements of operations data, which is derived from the accompanying consolidated financial statements: Year Ended December 31, (In thousands, except percentage data) 2022 2021 2020 Net revenue $ 932,472 100.0 % $ 1,168,073 100.0 % $ 1,255,202 100.0 % Cost of revenue 681,923 73.1 % 802,236 68.7 % 883,050 70.4 % Gross profit 250,549 26.9 % 365,837 31.3 % 372,152 29.6 % Operating expenses: Research and development 88,443 9.5 % 92,967 8.0 % 88,788 7.1 % Sales and marketing 139,675 15.0 % 145,961 12.4 % 147,854 11.7 % General and administrative 56,316 6.0 % 59,659 5.1 % 61,148 4.9 % Goodwill impairment charge 44,442 4.8 % — — % — — % Other operating expenses, net 4,597 0.5 % 653 0.1 % (1,182 ) (0.1 )% Total operating expenses 333,473 35.8 % 299,240 25.6 % 296,608 23.6 % Income (loss) from operations (82,924 ) (8.9 )% 66,597 5.7 % 75,544 6.0 % Other income (expenses), net 902 0.1 % (1,093 ) (0.1 )% (4,741 ) (0.4 )% Income (loss) before income taxes (82,022 ) (8.8 )% 65,504 5.6 % 70,803 5.6 % Provision for (benefit from) income taxes (13,035 ) (1.4 )% 16,117 1.4 % 12,510 1.0 % Net income (loss) $ (68,987 ) (7.4 )% $ 49,387 4.2 % $ 58,293 4.6 % 52 Table of Contents Net Revenue by Geographic Region Our net revenue consists of gross product shipments and service revenue, less allowances for estimated sales returns, price protection, end-user customer rebates and other channel sales incentives deemed to be a reduction of revenue per the authoritative guidance for revenue recognition, and net changes in deferred revenue.
Biggest changeRecent Accounting Pronouncements For a complete description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on financial condition and results of operations, refer to Note 1, The Company and Summary of Significant Accounting Policies , in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K. 53 Table of Contents Results of Operations The following table sets forth, for the periods presented, the consolidated statements of operations data, which is derived from the accompanying consolidated financial statements: Year Ended December 31, (In thousands, except percentage data) 2023 2022 2021 Net revenue $ 740,840 100.0 % $ 932,472 100.0 % $ 1,168,073 100.0 % Cost of revenue 491,588 66.4 % 681,923 73.1 % 802,236 68.7 % Gross profit 249,252 33.6 % 250,549 26.9 % 365,837 31.3 % Operating expenses: Research and development 83,295 11.2 % 88,443 9.5 % 92,967 8.0 % Sales and marketing 127,778 17.4 % 139,675 15.0 % 145,961 12.4 % General and administrative 66,243 8.9 % 56,316 6.0 % 59,659 5.1 % Goodwill impairment — — % 44,442 4.8 % — — % Intangibles impairment 1,071 0.1 % — — % — — % Other operating expenses, net 4,140 0.5 % 4,597 0.5 % 653 0.1 % Total operating expenses 282,527 38.1 % 333,473 35.8 % 299,240 25.6 % Income (loss) from operations (33,275 ) (4.5 )% (82,924 ) (8.9 )% 66,597 5.7 % Other income (expenses), net 14,139 1.9 % 902 0.1 % (1,093 ) (0.1 )% Income (loss) before income taxes (19,136 ) (2.6 )% (82,022 ) (8.8 )% 65,504 5.6 % Provision for (benefit from) income taxes 85,631 11.5 % (13,035 ) (1.4 )% 16,117 1.4 % Net income (loss) $ (104,767 ) (14.1 )% $ (68,987 ) (7.4 )% $ 49,387 4.2 % Net Revenue by Geographic Region Our net revenue consists of gross product shipments and service revenue, less allowances for estimated sales returns, price protection, end-user customer rebates and other channel sales incentives deemed to be a reduction of revenue per the authoritative guidance for revenue recognition, and net changes in deferred revenue.
Business and Executive Overview We are a global company that turns ideas into innovative, high-performance, and premium networking products. Our products connect people, and power businesses and service providers. Our products are designed to simplify and improve people’s lives.
Business and Executive Overview We are a global company that turns ideas into innovative, high-performance, and premium networking products. Our products connect people, power businesses and service providers. Our products are designed to simplify and improve people’s lives.
Segment Information A description of our products and services, as well as segment financial data, for each segment and a reconciliation of segment contribution income to income before income taxes can be found in Note 11, Segment Information , in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
Segment Information A description of our products and services, as well as segment financial data, for each segment and a reconciliation of segment contribution income (loss) to income (loss) before income taxes can be found in Note 11, Segment Information , in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
We aim to execute on our strategy of capitalizing on the technological inflection points of WiFi 6E, WiFi 6, 5G, audio and video over Ethernet and the anticipated release of WiFi 7, to develop and expand the premium WiFi market through new product introductions and to develop and roll out service offerings that build recurring service revenue streams.
We aim to execute on our strategy of capitalizing on the technological inflection points of the recent release of WiFi 7, WiFi 6E, WiFi 6, 5G, audio and video over Ethernet, to develop and expand the premium WiFi market through new product introductions and to develop and roll out service offerings that build recurring service revenue streams.
Our product line consists of devices that create and extend wired and wireless networks, devices that attach to the network, such as smart digital canvasses as well as services that complement and enhance our product line offerings. These products are available in multiple configurations to address the changing needs of our customers in each geographic region.
Our product line consists of devices that create and extend wired and wireless networks, devices that attach to the network, such as smart digital displays as well as services that complement and enhance our product line offerings. These products are available in multiple configurations to address the changing needs of our customers in each geographic region.
Provisions for Excess and Obsolete Inventory On a quarterly basis we assess the value of our inventory and write down its value for estimated excess and obsolete inventory based upon assumptions about the future demand by reviewing inventory quantities on hand and on order under non-cancelable purchase commitments in comparison to our estimated forecast of product demand to determine what inventory, if any, is not saleable at or above cost.
Provisions for Excess and Obsolete Inventory On a quarterly basis we assess the value of our inventory and write down its value for estimated excess and obsolete inventory based upon assumptions about the future demand by reviewing inventory quantities on hand and 51 Table of Contents on order under non-cancelable purchase commitments in comparison to our estimated forecast of product demand to determine what inventory, if any, is not saleable at or above cost.
For a discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021.
For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.
The Connected Home segment focuses on consumers and provides high-performance, dependable and easy-to-use premium WiFi internet networking solutions such as WiFi 6 and WiFi 6E Tri-band and Quad-band mesh systems, routers, 4G/5G mobile products, smart devices such as Meural digital canvasses, and subscription services that provide consumers a range of value-added services focused on security, performance, privacy, and premium support.
The Connected Home segment focuses on consumers and provides high-performance, dependable, and easy-to-use premium WiFi internet networking solutions such as WiFi 6, WiFi 6E, and WiFi 7 tri-band and Quad-band mesh systems, 4G/5G mobile products, smart devices such as Meural digital displays, and subscription services that provide consumers a range of value-added services focused on security, performance, privacy, and premium support.
Our commitments for property and equipment purchases as of December 31, 2022 was not material. (2) Represent undiscounted non-cancellable remaining lease payments. For a detailed discussion on our operating leases, refer to Note 14, Leases, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
Our commitments for property and equipment purchases as of December 31, 2023 were not material. (2) Represent undiscounted non-cancellable remaining lease payments. For a detailed discussion on our operating leases, refer to Note 14, Leases, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
Our cost of revenue as a percentage of net revenue can vary significantly based upon factors such as: uncertainties surrounding revenue levels, including future pricing and/or potential discounts as a result of the economy or in response to the strengthening of the U.S. dollar in our international markets, competition, the timing of sales, and related production level variances; import customs duties and imposed tariffs; changes in technology; changes in product mix; expenses associated with writing off excessive or obsolete inventory; variability of stock-based compensation costs; royalties to third parties; fluctuations in freight costs; manufacturing and purchase price variances; changes in prices on commodity components; and warranty costs.
Our cost of revenue as a percentage of net revenue can vary significantly based upon factors such as: uncertainties surrounding revenue levels, broad-based inflationary pressures and the uncertain macroeconomic environment, future pricing and/or potential discounts as a result of the economy or in response to the strengthening of the U.S. dollar in our international markets, competition, the timing of sales, and related production level variances; import customs duties and imposed tariffs; changes in technology; changes in product mix; expenses associated with writing off excessive or obsolete inventory; variability of stock-based compensation costs; royalties to third parties; fluctuations in freight costs; manufacturing and purchase price variances; changes in prices on commodity components; and warranty costs.
The SMB segment focuses on small and medium sized businesses and provides solutions for business networking, wireless local area network (“LAN”), audio and video over Ethernet for Pro AV applications, security and remote management providing enterprise-class functionality at an affordable price . We conduct business across three geographic regions: Americas; Europe, Middle East, and Africa (“EMEA”); and Asia Pacific (“APAC”).
The NETGEAR for Business segment focuses on businesses and provides solutions for business networking, wireless local area network (“LAN”), audio and video over Ethernet for Pro AV applications, security and remote management providing enterprise-class functionality at an affordable price. We conduct business across three geographic regions: Americas; Europe, Middle East, and Africa (“EMEA”); and Asia Pacific (“APAC”).
Cost of Revenue and Gross Margin Cost of revenue consists primarily of the following: the cost of finished products from our third-party manufacturers; overhead costs, including purchasing, product planning, inventory control, warehousing and distribution logistics; third-party software licensing fees; inbound freight; import duties/tariffs; warranty costs associated with returned goods; write-downs for excess and obsolete inventory; amortization of certain acquired intangibles and software development costs; and costs attributable to the provision of service offerings. 53 Table of Contents We outsource our manufacturing, warehousing and distribution logistics.
Cost of Revenue and Gross Margin Cost of revenue consists primarily of the following: the cost of finished products from our third-party manufacturers; overhead costs, including purchasing, product planning, inventory control, warehousing and distribution logistics; third-party software licensing fees; inbound freight; import duties/tariffs; warranty costs associated with returned goods; write-downs for excess and obsolete inventory; amortization of certain acquired intangibles and software development costs; and costs attributable to the provision of service offerings.
Our investments reflect our steadfast focus on 48 Table of Contents cybersecurity of our products and systems, as the rising threat of cyber-attacks and exploitation of security vulnerabilities in our industry is a significant consumer concern.
Our investments reflect our steadfast focus on cybersecurity of our products and systems, as the rising threat of cyber-attacks and exploitation of security vulnerabilities in our industry is a significant consumer concern.
The increase in goodwill impairment charge for fiscal 2022, compared to the prior year, was due to an impairment charge recognized for the Connected Home segment resulting from an interim goodwill impairment assessment performed in the first fiscal quarter of 2022.
The decrease in goodwill impairment charge for fiscal 2023, compared to the prior year, was due to an impairment charge recognized for the Connected Home segment resulting from an interim goodwill impairment assessment performed in the first fiscal quarter of 2022.
In addition, as of December 31, 2022, we had $8.2 million of total gross unrecognized tax benefits and related interest and penalties. The timing of any payments that could result from these unrecognized tax benefits will depend upon a number of factors.
In addition, as of December 31, 2023, we had $8.9 million of total gross unrecognized tax benefits and related interest and penalties. The timing of any payments that could result from these unrecognized tax benefits will depend upon a number of factors.
To remain competitive, we believe we must continue to aggressively invest resources to develop new products and subscription services, enhance our current products, and expand our channels and direct-to-consumer capabilities, while increasing engagement and maintaining satisfaction with our customers.
To remain competitive, we believe we must continue to aggressively invest resources to develop new products and subscription services, enhance our 49 Table of Contents current products, and expand our channels and direct-to-consumer capabilities, while increasing engagement and maintaining satisfaction with our customers.
We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Our future foreign tax rate could be affected by changes in the composition in earnings in countries with tax rates differing from the U.S. federal rate.
We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Our future foreign tax rate could be affected by changes in the composition in earnings in countries with tax rates differing from the U.S. federal rate. We are currently under examination in various U.S. and foreign jurisdictions.
However, we may require or desire additional funds 59 Table of Contents to support our operating expenses and capital requirements or for other purposes, such as acquisitions, and may seek to raise such additional funds through public or private equity financing or from other sources.
However, we may require or desire additional funds to support our operating expenses and capital requirements or for other purposes, such as acquisitions, and may seek to raise such additional funds through public or private equity financing or from other sources.
Our retail channel includes traditional retail locations domestically and internationally, such as Best Buy, Wal-Mart, Costco, Staples, Office Depot, Target, Electra (Sweden), Fnac Darty (Europe), JB HiFi (Australia), Elkjop (Norway), and Boulanger (France). Online retailers include Amazon.com (worldwide), and Digitec Galaxus AG (Switzerland). Our DMRs include CDW Corporation, Insight Corporation, and PC Connection in domestic markets.
Our retail channel includes traditional and online retailers both domestically and internationally, such as Amazon.com (worldwide), Best Buy, Wal-Mart, Costco, Staples, Office Depot, Target, Electra (Sweden), Fnac Darty (Europe), JB HiFi (Australia), Elkjop (Norway), and Boulanger (France). Our DMRs include CDW Corporation, Insight Corporation, and PC Connection in domestic markets.
Other Income (Expenses), Net Other income (expenses), net consists of interest income, which represents amounts earned and incurred on our cash, cash equivalents and short-term investments, and other income and expenses, which primarily represents gains and losses on transactions denominated in foreign currencies, gains and losses on investments, and other non-operating income and expenses.
Other Income (Expenses), Net Other income (expenses), net consists of interest income, which represents amounts earned and incurred on our cash, cash equivalents and short-term investments, and other income and expenses, which primarily represents gains and losses on transactions denominated in foreign currencies, gains and losses on investments, and other non-operating income and expenses, including gain on litigation settlements.
We believe that the principal competitive factors in the consumer and small and medium-sized business markets for networking products include product breadth, price points, size and scope of the sales channel, brand recognition, timeliness of new product introductions, product availability, performance, features, functionality, reliability, ease-of-installation, maintenance and use, security, as well as customer service and support.
We believe that the principal competitive factors in the consumer, business, and service provider markets for networking products include product breadth, price points, size and scope of the sales channel, brand name, timeliness of new product introductions, product availability, performance, features, functionality, reliability, ease-of-installation, maintenance and use, security, as well as customer service and support.
Additionally, we continually invest in research and development to create new technologies and services and to capitalize on technological inflection points and trends, such as WiFi 7, audio and video over Ethernet, non-fungible token (“NFT”) artwork, and future technologies.
Additionally, we continually invest in research and development to create new technologies and services and to capitalize on technological inflection points and trends, such as multi-Gigabit internet service to homes, WiFi 7, audio and video over Ethernet, non-fungible token (“NFT”) artwork, and future technologies.
As of December 31, 2022, approximately 40% of our cash and cash equivalents and short-term investments were outside of the U.S. The cash and cash equivalents and short-term investments balances outside of the U.S. are subject to fluctuation based on the settlement of intercompany balances.
As of December 31, 2023, approximately 33% of our cash and cash equivalents and short-term investments were outside of the U.S. The cash and cash equivalents and short-term investments balances outside of the U.S. are subject to fluctuation based on the settlement of intercompany balances.
Actual results could differ significantly from these estimates. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. On a regular basis, we evaluate our assumptions, judgments and estimates and make changes accordingly. We also discuss our critical accounting estimates with the Audit Committee of the Board of Directors.
These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. On a regular basis, we evaluate our assumptions, judgments and estimates and make changes accordingly. We also discuss our critical accounting estimates with the Audit Committee of the Board of Directors.
We operate and report in two segments: Connected Home, and Small and Medium Business (“SMB”). We believe that this structure reflects our current operational and financial management, and that it provides the best structure for us to focus on growth opportunities while maintaining financial discipline.
We operate and report in two segments: Connected Home, and NETGEAR for Business (formerly known as Small and Medium Business, or SMB). We believe that this structure reflects our current operational and financial management, and that it provides the best structure for us to focus on growth opportunities while maintaining financial discipline.
This section generally discusses the results of our operations for the year ended December 31, 2022 (“fiscal 2022”) compared to the year ended December 31, 2021 (“fiscal 2021”).
This section generally discusses the results of our operations for the year ended December 31, 2023 (“fiscal 2023”) compared to the year ended December 31, 2022 (“fiscal 2022”).
Accordingly, in assessing our future taxable income on a jurisdictional basis, we consider the effect of its transfer pricing policies on that income. We have recorded a valuation allowance against certain federal and state deferred tax assets since the recovery of the 51 Table of Contents assets is uncertain.
Accordingly, in assessing our future taxable income on a jurisdictional basis, we consider the effect of its transfer pricing policies on that income. We have recorded a full valuation allowance against U.S. federal and state deferred tax assets since the recovery of the assets is considered uncertain.
We include interest expense and penalties related to uncertain tax positions as additional tax expense. The Company made an accounting policy election related to accounting for the tax effects of Global Intangible Low-Taxed Income (“GILTI”) that was implemented as part of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), enacted on December 22, 2017.
The Company made an accounting policy election related to accounting for the tax effects of Global Intangible Low-Taxed Income (“GILTI”) that was implemented as part of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), enacted on December 22, 2017.
No goodwill impairment was recognized for our SMB reporting unit in the year ended December 31, 2022. No goodwill impairment was recognized for our Connected Home and SMB reporting units in the year ended December 31, 2021 or 2020.
No goodwill impairment was recognized for our NETGEAR for Business reporting unit in the year ended December 31, 2022 and no goodwill impairment was recognized for our Connected Home and NETGEAR for Business reporting units in the year ended December 31, 2021.
We continue to invest in research and development to grow our cloud platform capabilities, our services and mobile applications and to create and expand our hardware product offerings focused on WiFi 7, premium WiFi 6E, WiFi 6, Advanced 4G/5G mobile and 5G coverage solutions, audio and video over Ethernet, web-managed, 10Gig and PoE switch and SMB wireless products.
We continue to invest in research and development to grow our cloud platform capabilities, our services and mobile applications and to create and expand our hardware product offerings focused on premium WiFi 7, and WiFi 6/6E, Advanced 4G/5G mobile and 5G coverage solutions, audio and video over Ethernet, web-managed, AV over IP managed switches and NETGEAR for Business wireless products.
Securities and Exchange Commission (“SEC”). The preparation of these financial statements requires management to make assumptions, judgments and estimates that can have a significant impact on the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances.
The preparation of these financial statements requires management to make assumptions, judgments and estimates that can have a significant impact on the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. Actual results could differ significantly from these estimates.
We expect that revenue derived from paid subscription service plans will continue to increase in the future, which may have a positive impact on our gross margin.
We expect that revenue derived from paid subscription service plans will continue to increase in the future, which may have a positive impact on our gross margin. However, we will continue to experience fluctuations in our gross margin due to the factors discussed above.
For a detailed discussion of goodwill impairment charge, refer to Note 3, Balance Sheet Components , in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K. 56 Table of Contents Other Operating Expenses (Income), Net Other operating expenses (income), net consists of restructuring and other charges, litigation reserves, net, and change in the fair value of contingent consideration.
For a detailed discussion of goodwill and intangibles impairment, refer to Note 3, Balance Sheet Components , in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K. 57 Table of Contents Other Operating Expenses, Net Other operating expenses, net consists of restructuring and other charges, and litigation reserves, net.
The following table presents Other operating expenses (income), net for the periods indicated: Year Ended December 31, (In thousands, except percentage data) 2022 % Change 2021 % Change 2020 Other operating expenses, net $ 4,597 ** $ 653 ** $ (1,182 ) ___________________ ** Percentage change not meaningful. 2022 vs 2021 We incurred restructuring and other charges of $4.6 million associated with the reorganization of our Connected Home segment in fiscal 2022 to better align the cost structure of the business with projected revenue levels.
The following table presents other operating expenses, net for the periods indicated: Year Ended December 31, (In thousands, except percentage data) 2023 % Change 2022 % Change 2021 Other operating expenses, net $ 4,140 (9.9 )% $ 4,597 ** $ 653 ___________________ ** Percentage change not meaningful. 2023 vs 2022 We incurred restructuring and other charges of $4.0 million and $4.6 million in fiscal 2023 and 2022, respectively, primarily associated with the reorganization of our business in each year to better align the cost structure of the business with projected revenue levels.
We also repurchased and retired, reported based on trade date, approximately 202,000 and 204,000 shares of common stock at a cost of $4.8 million and $7.7 million, respectively, to administratively facilitate the withholding and subsequent remittance of personal income and payroll taxes for individuals receiving Restricted Stock Units.
During the years ended December 31, 2023 and 2022, we repurchased and retired, reported based on trade date, approximately 198,000 and 202,000 shares of common stock at a cost of $2.8 million and $4.8 million, respectively, to administratively facilitate the withholding and subsequent remittance of personal income and payroll taxes for individuals receiving Restricted Stock Units.
We believe this outsourcing strategy allows us to better manage our product costs and gross margin.
We outsource our manufacturing, warehousing and distribution logistics. We believe this outsourcing strategy allows us to better manage our product costs and gross margin.
Goodwill Impairment Charge The following table presents goodwill impairment charge for the periods indicated: Year Ended December 31, (In thousands, except percentage data) 2022 % Change 2021 % Change 2020 Goodwill impairment charge $ 44,442 ** $ — ** $ — ___________________ ** Percentage change not meaningful.
Goodwill and Intangibles Impairment The following table presents goodwill and intangibles impairment charges for the periods indicated: Year Ended December 31, (In thousands, except percentage data) 2023 % Change 2022 % Change 2021 Goodwill impairment $ — ** $ 44,442 ** $ — Intangibles impairment $ 1,071 ** $ — ** $ — ___________________ ** Percentage change not meaningful.
The interim goodwill impairment test performed resulted in an impairment charge of $44.4 million in respect to our Connected Home reporting unit, which reduced the goodwill of this reporting unit to zero. Further, we completed our annual impairment test of goodwill as of the first day of the fourth fiscal quarter of 2022, or October 3, 2022.
An interim goodwill impairment test performed in the first fiscal quarter of 2022 resulted in an impairment charge of $44.4 million in respect to our Connected Home reporting unit, which reduced the goodwill of this reporting unit to zero.
The extent of impacts from the COVID-19 pandemic and/or macroeconomic trends on our ongoing operational and financial performance, including our ability to execute our business strategies in the expected time frame, will depend on future developments. The duration of the pandemic and the broader implications of the macro-economic recovery and any related disruptions to channel partners are uncertain and unpredictable.
The extent of impacts from these macroeconomic and geopolitical trends on our ongoing operational and financial performance, including our ability to execute our business strategies in the expected time frame, will depend on future developments. The broader implications of the macroeconomic uncertainty, and any related disruptions to channel partners and freight are unpredictable.
As a result, significant interpretation and judgment is sometimes required to determine the appropriate accounting for these transactions including: (1) whether performance obligations are considered distinct and required to be accounted for separately or combined, including allocation of transaction price; (2) combining contracts that may impact the allocation of the transaction price between product and services; and (3) estimating and accounting for variable consideration, including rights of return, sales incentives, and price protection as a reduction of the transaction price. 50 Table of Contents Our standard obligation to our direct customers generally provides for a full refund if such product is not merchantable or is found to be damaged or defective.
As a result, significant interpretation and judgment is sometimes required to determine the appropriate accounting for these transactions including: (1) whether performance obligations are considered distinct and required to be accounted for separately or combined, including allocation of transaction price; (2) combining contracts that may impact the allocation of the transaction price between product and services; and (3) estimating and accounting for variable consideration, including rights of return, sales incentives, and price protection as a reduction of the transaction price.
Research and development expenses are recognized as they are incurred. Our research and development organization is focused on enhancing our ability to introduce innovative and easy-to-use products and services.
Our research and development organization is focused on enhancing our ability to introduce innovative and easy-to-use products and services.
We expect research and development expenses as a percentage of net revenue in fiscal 2023 to be relatively similar to fiscal 2022 levels. Research and development expenses may fluctuate depending on the timing and number of development activities and could vary significantly as a percentage of net revenue, depending on actual revenues achieved in any given quarter.
Research and development expenses may fluctuate depending on the timing and number of development activities and could vary significantly as a percentage of net revenue, depending on actual revenues achieved in any given quarter.
Our accounts payable (excluding payables related to property and equipment) increased from $73.2 million as of December 31, 2021 to $85.3 million as of December 31, 2022 primarily due to timing of inventory receipts and supplier payments.
Our accounts payable (excluding payables related to property and equipment) decreased from $85.3 million as of December 31, 2022, to $46.4 million as of December 31, 2023, primarily due to the reduction and timing of inventory receipts and supplier payments.
As of December 31, 2022, approximately 2.5 million shares remained authorized for repurchase under the repurchase program. During the years ended December 31, 2022 and 2021, we repurchased and retired, and reported based on trade date, approximately 1.0 million and 2.1 million shares of common stock at a cost of $24.4 million and $75.0 million, respectively, under the repurchase authorizations.
During the year ended December 31, 2022, we repurchased and retired, and reported based on trade date, approximately 1.0 million shares of common stock at a cost of $24.4 million under the repurchase program.
Marketing expenditure committed with a customer is generally recorded as a reduction of revenue per authoritative guidance. 55 Table of Contents General and Administrative General and administrative expenses consist of salaries and related expenses for executives, finance and accounting, human resources, information technology, professional fees, including legal costs associated with defending claims against us, allowance for doubtful accounts, IT and facility allocations, and other general corporate expenses.
General and Administrative General and administrative expenses consist of salaries and related expenses for executives, finance and accounting, human resources, information technology, professional fees, including legal costs associated with defending claims against us, allowance for doubtful accounts, IT and facility allocations, and other general corporate expenses.
For our SMB reporting unit, we do not believe it is likely that there will be a material change in the estimates or assumptions we use to test for impairment losses on goodwill. However, if the actual results are not consistent with our estimates or assumptions, we may be exposed to a future impairment charge that could be material.
For our NETGEAR for Business reporting unit, we do not believe it is likely that there will be a material change in the estimates or assumptions we use to test for impairment losses on goodwill.
Goodwill Goodwill is not amortized, but instead tested for impairment on an annual basis, or more frequently if certain events or indicators of potential impairment exists, and goodwill is written down when it is determined to be impaired. During the first fiscal quarter ended April 3, 2022, the market price of our common stock and our market capitalization declined significantly.
Goodwill Goodwill is not amortized, but instead tested for impairment on an annual basis, or more frequently if certain events or indicators of potential impairment exists, and goodwill is written down when it is determined to be impaired.
(5) Included on our consolidated balance sheets. 60 Table of Contents (6) For a detailed discussion, refer to Note 8, Commitments and Contingencies , in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
(4) Represent estimated liability related to a one-time transaction tax that resulted from the passage of the Tax Act. (5) Included on our consolidated balance sheets. (6) For a detailed discussion, refer to Note 8, Commitments and Contingencies , in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
Liquidity and Capital Resources Our principal sources of liquidity are cash, cash equivalents, short-term investments and cash generated from operations. As of December 31, 2022, we had cash, cash equivalents and short-term investment of $227.4 million, a decrease of $44.1 million from December 31, 2021.
Liquidity and Capital Resources Our principal sources of liquidity are cash, cash equivalents, short-term investments and cash generated from operations. As of December 31, 2023, we had cash, cash equivalents and short-term investment of $283.6 million, an increase of $56.2 million from December 31, 2022.
Looking forward to 2023, we expect to continue to experience strong underlying demand in our SMB segment driven by Pro AV products, and the premium portion of our Connected Home product portfolio powered by our super-premium mesh systems and 5G mobile hotspots.
Despite these challenges, we expect to continue to experience strong underlying demand in the premium portion of our Connected Home product portfolio powered by our premium WiFi mesh systems and 5G mobile hotspots, along with growth in the Pro AV market.
The following table presents research and development expenses, for the periods indicated: Year Ended December 31, (In thousands, except percentage data) 2022 % Change 2021 % Change 2020 Research and development $ 88,443 (4.9 )% $ 92,967 4.7 % $ 88,788 2022 vs 2021 The decline in research and development expenses in fiscal 2022, compared to the prior year, was mainly due to the decrease in personnel-related expenditures of $5.4 million, partially offset by increased costs for engineering projects and outside professional services of $1.2 million in support of our product development efforts.
The following table presents research and development expenses, for the periods indicated: Year Ended December 31, (In thousands, except percentage data) 2023 % Change 2022 % Change 2021 Research and development $ 83,295 (5.8 )% $ 88,443 (4.9 )% $ 92,967 2023 vs 2022 The decline in research and development expenses in fiscal 2023, compared to the prior year, was primarily driven by a decrease in personnel-related expenditures of $4.7 million mainly due to decreased headcount primarily in our Connected Home segment and shared services functions.
However, we may experience fluctuations in our gross margin due to the factors discussed above. 54 Table of Contents Operating Expenses Research and Development Research and development expenses consist primarily of personnel expenses, payments to suppliers for design services, safety and regulatory testing, product certification expenditures to qualify our products for sale into specific markets, prototypes, IT and facility allocations, and other consulting fees.
Operating Expenses Research and Development Research and development expenses consist primarily of personnel expenses, payments to suppliers for design services, safety and regulatory testing, product certification expenditures to qualify our products for sale into specific markets, prototypes, IT and facility allocations, and other consulting fees. Research and development expenses are recognized as they are incurred.
Cash Flows The following table presents our cash flows for the periods presented: Year Ended December 31, (In thousands) 2022 2021 2020 Cash provided by (used in) operating activities $ (13,732 ) $ (4,579 ) $ 181,150 Cash used in investing activities (79,517 ) (9,985 ) (16,836 ) Cash used in financing activities (24,023 ) (68,124 ) (8,062 ) Net cash decrease $ (117,272 ) $ (82,688 ) $ 156,252 2022 vs 2021 Operating activities Net cash used in operating activities increased by $9.2 million for fiscal 2022, compared to the prior year, primarily due to lower net revenue.
Cash Flows The following table presents our cash flows for the periods presented: Year Ended December 31, (In thousands) 2023 2022 2021 Cash provided by (used in) operating activities $ 56,853 $ (13,732 ) $ (4,579 ) Cash used in investing activities (27,433 ) (79,517 ) (9,985 ) Cash provided by (used in) financing activities 797 (24,023 ) (68,124 ) Net cash increase (decrease) $ 30,217 $ (117,272 ) $ (82,688 ) 2023 vs 2022 Operating activities Net cash provided by operating activities was $56.9 million, compared to net cash used of $13.7 million in the prior year, primarily due to favorable working capital movements.
Connected Home Segment Year Ended December 31, (In thousands, except percentage data) 2022 % Change 2021 % Change 2020 Net revenue $ 558,823 (34.5 )% $ 853,472 (15.3 )% $ 1,007,545 Percentage of net revenue 59.9 % 73.1 % 80.3 % Contribution income (loss) $ (8,539 ) ** $ 116,889 (23.4 )% $ 152,512 Contribution margin (1.5 )% 13.7 % 15.1 % ___________________ ** Percentage change not meaningful. 2022 vs 2021 Connected Home net revenue decreased in fiscal 2022, compared to the prior year, mainly due to a contraction of the U.S. consumer WiFi market, and to a lesser extent, the impact of retailers reducing their inventory levels.
Connected Home Segment Year Ended December 31, (In thousands, except percentage data) 2023 % Change 2022 % Change 2021 Net revenue $ 446,865 (20.0 )% $ 558,823 (34.5 )% $ 853,472 Percentage of net revenue 60.3 % 59.9 % 73.1 % Contribution income (loss) $ 19,052 ** $ (8,539 ) ** $ 116,889 Contribution margin 4.3 % (1.5 %) 13.7 % ___________________ ** Percentage change not meaningful. 2023 vs 2022 Connected Home net revenue decreased in fiscal 2023, compared to the prior year, primarily due to a contraction of the U.S. retail market and lower net revenue from the service provider channel.
Investing activities Net cash used in investing activities increased by $69.5 million for fiscal 2022, compared to the prior year, mainly driven by net purchases of short-term investments, partially offset by lower payments for purchases of property and equipment.
Investing activities Net cash used in investing activities decreased by $52.1 million for fiscal 2023, compared to the prior year, mainly driven by lower net purchases of short-term investments.
Year Ended December 31, (In thousands, except percentage data) 2022 % Change 2021 % Change 2020 Americas $ 617,211 (21.5 )% $ 786,326 (12.4 )% $ 897,971 Percentage of net revenue 66.2 % 67.3 % 71.5 % EMEA $ 179,358 (22.0 )% $ 229,829 3.7 % $ 221,665 Percentage of net revenue 19.2 % 19.7 % 17.7 % APAC $ 135,903 (10.5 )% $ 151,918 12.1 % $ 135,566 Percentage of net revenue 14.6 % 13.0 % 10.8 % Total net revenue $ 932,472 (20.2 )% $ 1,168,073 (6.9 )% $ 1,255,202 2022 vs 2021 Americas Net revenue in Americas decreased in fiscal 2022, primarily due to the performance of our Connected Home segment, which experienced decline in net revenue of 32.0%, compared to the prior year.
Year Ended December 31, (In thousands, except percentage data) 2023 % Change 2022 % Change 2021 Americas $ 504,349 (18.3 )% $ 617,211 (21.5 )% $ 786,326 Percentage of net revenue 68.1 % 66.2 % 67.3 % EMEA $ 148,922 (17.0 )% $ 179,358 (22.0 )% $ 229,829 Percentage of net revenue 20.1 % 19.2 % 19.7 % APAC $ 87,569 (35.6 )% $ 135,903 (10.5 )% $ 151,918 Percentage of net revenue 11.8 % 14.6 % 13.0 % Total net revenue $ 740,840 (20.6 )% $ 932,472 (20.2 )% $ 1,168,073 2023 vs 2022 Americas Net revenue in Americas decreased in fiscal 2023, driven by declines of 19.2% in Connected Home net revenue and 15.9% in NETGEAR for Business net revenue, compared to the prior year.
The following table presents sales and marketing expenses, for the periods indicated: Year Ended December 31, (In thousands, except percentage data) 2022 % Change 2021 % Change 2020 Sales and marketing $ 139,675 (4.3 )% $ 145,961 (1.3 )% $ 147,854 2022 vs 2021 The decline in sales and marketing expenses for fiscal 2022, compared to the prior year, was mainly attributable to decreases in personnel-related expenditures of $4.7 million, outside service expenditures of $2.0 million, and amortization of intangibles of $1.3 million, partially offset by increased marketing expenses of $1.5 million.
The following table presents sales and marketing expenses, for the periods indicated: Year Ended December 31, (In thousands, except percentage data) 2023 % Change 2022 % Change 2021 Sales and marketing $ 127,778 (8.5 )% $ 139,675 (4.3 )% $ 145,961 2023 vs 2022 The decline in sales and marketing expenses for fiscal 2023, compared to the prior year, was primarily attributable to decreases in outbound freight costs for product deliveries to our customers of $7.0 million, in personnel-related expenditures and variable compensation of $4.2 million, mainly due to lower headcount and 56 Table of Contents performance-based compensation expenses, and outside service expenditures of $2.8 million, mainly attributable to lower call center support costs.
Provision for Income Taxes Year Ended December 31, (In thousands, except percentage data) 2022 % Change 2021 % Change 2020 Provision for (benefit from) income taxes $ (13,035 ) ** $ 16,117 28.8 % $ 12,510 Effective tax rate 15.9 % 24.6 % 17.7 % ___________________ ** Percentage change not meaningful. 2022 vs 2021 The benefit from income taxes in fiscal 2022 resulted primarily from the current year loss from operations as well as benefit from certain changes in estimate upon filing the 2021 U.S. federal tax return and the recognition of uncertain tax benefits related to the closing Internal Revenue Service (“IRS") tax audits for the 2018 and 2019 tax years.
The benefit from income taxes in fiscal 2022 resulted primarily from the year loss from operations as well as benefit from certain changes in estimate upon filing the 2021 U.S. federal tax return and the recognition of uncertain tax benefits related to the closing Internal Revenue Service (“IRS") tax audits for the 2018 and 2019 tax years.
The decrease in Connected Home net revenue was partially offset by a 12.2% increase in SMB net revenue. For further discussions specific to our Connected Home and SMB business, refer to the "Segment Information" section below.
The decline in Connected Home net revenue was primarily driven by the macroeconomic environment headwinds. For further discussions specific to our Connected Home and NETGEAR for Business, refer to the "Segment Information" section below.
Due to these factors, we determined that a triggering event had occurred. In the first fiscal quarter of 2022, before an interim goodwill impairment test, we assessed our long-lived assets and concluded that they were not impaired. The interim goodwill impairment test performed resulted in an impairment charge of $44.4 million in respect to our Connected Home reporting unit.
Due to these factors, we determined that a triggering event had occurred, and an interim goodwill impairment assessment was performed. Prior to performing a goodwill impairment test, we assessed our long-lived assets and concluded the carrying amount of the intangible assets for our Connected Home reporting unit was not recoverable and recognized an intangible asset impairment charge of $1.1 million.
The following table presents other income (expenses), net for the periods indicated: Year Ended December 31, (In thousands, except percentage data) 2022 % Change 2021 % Change 2020 Other income (expenses), net $ 902 ** $ (1,093 ) (76.9 )% $ (4,741 ) ___________________ ** Percentage change not meaningful. 2022 vs 2021 The change in other income (expenses), net for fiscal 2022 was primarily due to higher interest earned on our short-term investment pertaining to U.S. treasuries.
The following table presents other income (expenses), net for the periods indicated: Year Ended December 31, (In thousands, except percentage data) 2023 % Change 2022 % Change 2021 Other income (expenses), net $ 14,139 ** $ 902 ** $ (1,093 ) ___________________ ** Percentage change not meaningful. 2023 vs 2022 The change in other income (expenses), net for fiscal 2023 was primarily due to an increase of $7.1 million in higher interest earned on our investment in U.S. treasuries and money market funds and $6.0 million cash received relating to a favorable litigation settlement during the second fiscal quarter of 2023.
Base Erosion and Anti-abuse Tax (BEAT) estimated for 2021, and the income from operations in 2021. 57 Table of Contents During fiscal 2022, we evaluated the impact of the Global Intangible Low-Tax Income (“GILTI”), Foreign Derived Intangible Income (“FDII”) and BEAT provisions. These provisions resulted in a net reduction of tax of $0.6 million.
These benefits were partially offset by the impact of the write-off of non-deductible goodwill during the year. 58 Table of Contents During fiscal 2023, we evaluated the impact of the Global Intangible Low-Tax Income “GILTI”, Foreign Derived Intangible Income (“FDII”) and Base Erosion and Anti-abuse Tax “BEAT” provisions. These provisions resulted in a net reduction of tax of $0.3 million.
These purchases orders may be cancelled by either party, however we may incur expenses for materials and components, such as chipsets purchased by the supplier to fulfill the purchase order, in the event of cancellation. Expenses incurred in respect of cancelled purchase orders has historically not been significant relative to the original order value.
A further $323.7 million of purchase orders beyond contractual termination periods remained outstanding. Consequently, we may incur expenses for materials and components, such as chipsets purchased by the supplier to fulfill the purchase order if the purchase order is cancelled. Expenses incurred in respect of cancelled purchase orders have historically not been significant relative to the original order value.
We cannot assure you that additional financing will be available at all or that, if available, such financing would be obtainable on terms favorable to us and would not be dilutive. Our future liquidity and cash requirements will depend on numerous factors, including the introduction of new products and potential acquisitions of related businesses or technology.
We cannot assure you that additional financing will be available at all or that, if available, such financing would be obtainable on terms favorable to us and would not be dilutive.
The possible reduction in liabilities for uncertain tax positions in multiple jurisdictions that may impact the statements of operations in the next 12 months is approximately $0.4 million, excluding the interest, penalties and the effect of any related deferred tax assets or liabilities.
The possible reduction in liabilities for uncertain tax positions in multiple jurisdictions that may impact the statements of operations in the next 12 months is approximately $0.7 million, excluding the interest, penalties and the effect of any related deferred tax assets or liabilities. 61 Table of Contents Our contractual and other obligations are expected to be funded by our existing cash, cash equivalents and short-term investments, together with cash generated from operations. 62 Table of Contents
Refer to Note 3, Balance Sheet Components , in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for details. Global Events Affecting our Business and Operations COVID-19 pandemic continued to impact businesses since the onset almost three years ago.
Refer to Note 3, Balance Sheet Components , in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for details.
We believe that all of our other deferred tax assets are recoverable; however, if there were a change in our ability to recover our deferred tax assets, we would be required to take a charge in the period in which we determined that recovery was not more likely than not.
We believe that deferred tax assets recorded for foreign jurisdictions are recoverable; however, if there were a change in our ability to recover these assets, we would be required to take a charge in the period in which we determined that recovery was not more likely than not. 52 Table of Contents Uncertain tax provisions are recognized under guidance that provides that a company should use a more-likely-than-not recognition threshold based on the technical merits of the income tax position taken.
Contractual and Other Obligations The following table summarizes our non-cancelable short-term and long-term contractual and other obligations as of December 31, 2022: (In thousands) Short-term Long-term Total Purchase obligations (1) (6) $ 105,148 $ — $ 105,148 Operating leases (2) (5) 12,842 38,121 50,963 Other non-trade purchase commitments (3) (6) 1,737 13,104 14,841 Tax Act payables (4) (5) 2,254 6,761 9,015 $ 121,981 $ 57,986 $ 179,967 (1) Represent non-cancellable inventory-related purchase agreements with suppliers.
Contractual and Other Obligations The following table summarizes our non-cancelable short-term and long-term contractual and other obligations as of December 31, 2023: (In thousands) Short-term Long-term Total Purchase obligations (1) (6) $ 42,616 $ — $ 42,616 Operating leases (2) (5) 13,814 34,741 48,555 Other non-trade purchase commitments (3) (6) 1,823 11,282 13,105 Tax Act payables (4) (5) 3,005 3,756 6,761 $ 61,258 $ 49,779 $ 111,037 (1) Represent non-cancellable inventory-related purchase agreements with suppliers.
Income Taxes We account for income taxes under an asset and liability approach. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year.
However, if the actual results are not consistent with our estimates or assumptions, we may be exposed to a future impairment charge that could be material. Income Taxes We account for income taxes under an asset and liability approach. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year.
Recent macroeconomic trends have led to uncertainty in the global economic environment. These include conditions such as the potential for a recession, foreign exchange rate fluctuations, particularly the strengthening of the U.S. dollar, high inflation and the related negative impact on the global economy, as well as the continued conflict between Russia and Ukraine.
These include conditions such as the potential for a recession, fluctuations in inflation, elevated interest rates, and the related negative impact on the global economy, foreign exchange rate fluctuations, particularly changes of the U.S. dollar, and ongoing worldwide tensions, including the Russia-Ukraine conflict, Israel-Hamas conflicts, and Red Sea crisis.
In determining estimates for future returns, we estimate variable consideration at the expected value based on management’s analysis of historical data, channel inventory levels, current economic trends and changes in customer demand. Sales incentives and price protection are determined based on a combination of the actual amounts committed and through estimating future expenditure based upon historical customary business practice.
Sales incentives and price protection are determined based on a combination of the actual amounts committed and through estimating future expenditure based upon historical customary business practice, historical pricing information, current pricing trends, and channel inventory levels. We continue to assess variable consideration estimates such that it is probable that a significant reversal of revenue will not occur.
The following table presents general and administrative expenses, for the periods indicated: Year Ended December 31, (In thousands, except percentage data) 2022 % Change 2021 % Change 2020 General and administrative $ 56,316 (5.6 )% $ 59,659 (2.4 )% $ 61,148 2022 vs 2021 The decline in general and administrative expenses for fiscal 2022, compared to the prior year, was primarily driven by lower personnel-related expenditure of $6.6 million, partially offset by higher expenditure in legal and professional services fees of $2.9 million, mainly associated with patent litigation claims.
The following table presents general and administrative expenses, for the periods indicated: Year Ended December 31, (In thousands, except percentage data) 2023 % Change 2022 % Change 2021 General and administrative $ 66,243 17.6 % $ 56,316 (5.6 )% $ 59,659 2023 vs 2022 The increase in general and administrative expenses for fiscal 2023, compared to the prior year, was primarily driven by an increase in legal and professional services fees of $7.5 million, mainly associated with litigation matters, which included fees incurred while reaching the favorable litigation settlement mentioned below in “Other income (expenses), net”, as well as an increase in personnel-related expenditures of $1.8 million, primarily due to increased deferred compensation benefits and stock-based compensation.
Refer to Item 1A, Risk Factors, of Part I of this Annual Report on Form 10-K for various risks and uncertainties associated with the COVID-19 pandemic. Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the U.S.
Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).
We believe that a combination of improved product mix with increased sales of premium and super-premium Connected Home products and SMB products, higher subscription services and reduced transportation costs, including less reliance on higher-cost air freight, will help to deliver improvement to margin performance as 2023 progresses.
We believe that a combination of improved product mix with increased sales of premium Connected Home products, higher subscription services and improved transportation costs, including less reliance on higher-cost air freight, will continue to help with margin performance in fiscal 2024. 55 Table of Contents Forecasting gross margin percentages is difficult, and there are a number of risks related to our ability to maintain or improve our current gross margin levels.
The following table presents costs of revenue and gross margin, for the periods indicated: Year Ended December 31, (In thousands, except percentage data) 2022 % Change 2021 % Change 2020 Cost of revenue $ 681,923 (15.0 )% $ 802,236 (9.2 )% $ 883,050 Gross margin percentage 26.9 % 31.3 % 29.6 % 2022 vs 2021 Gross margin decreased for fiscal 2022, compared to the prior year, primarily due to higher transportation costs and component costs, higher provision for sales returns and the strengthened U.S. dollar, partially offset by improved product mix, with SMB net revenue representing a higher proportion of net revenue.
The following table presents costs of revenue and gross margin, for the periods indicated: Year Ended December 31, (In thousands, except percentage data) 2023 % Change 2022 % Change 2021 Cost of revenue $ 491,588 (27.9 )% $ 681,923 (15.0 )% $ 802,236 Gross margin percentage 33.6 % 26.9 % 31.3 % 2023 vs 2022 Gross margin percentage increased for fiscal 2023, compared to the prior year, primarily due to a more favorable mix of premium Connected Home products which carry higher gross margins, combined with continued growth of our services business.
Uncertain tax provisions are recognized under guidance that provides that a company should use a more-likely-than-not recognition threshold based on the technical merits of the income tax position taken. Income tax positions that meet the more-likely-than-not recognition threshold should be measured in order to determine the tax benefit to be recognized in the financial statements.
Income tax positions that meet the more-likely-than-not recognition threshold should be measured in order to determine the tax benefit to be recognized in the financial statements. We include interest expense and penalties related to uncertain tax positions as additional tax expense.
Marketing expenses may also fluctuate depending upon the timing, extent and nature of marketing programs.
Marketing expenses may also fluctuate depending upon the timing, extent and nature of marketing programs. Marketing expenditure committed with a customer is generally recorded as a reduction of revenue per authoritative guidance.
SMB Segment Year Ended December 31, (In thousands, except percentage data) 2022 % Change 2021 % Change 2020 Net revenue $ 373,649 18.8 % $ 314,601 27.0 % $ 247,657 Percentage of net revenue 40.1 % 26.9 % 19.7 % Contribution income $ 75,790 22.0 % $ 62,136 47.3 % $ 42,174 Contribution margin 20.3 % 19.8 % 17.0 % 2022 vs 2021 SMB net revenue increased in fiscal 2022, compared to the prior year, primarily due to record demand for the Pro AV product line of managed switches, despite supply chain challenges throughout the year.
NETGEAR for Business Segment Year Ended December 31, (In thousands, except percentage data) 2023 % Change 2022 % Change 2021 Net revenue $ 293,975 (21.3 )% $ 373,649 18.8 % $ 314,601 Percentage of net revenue 39.7 % 40.1 % 26.9 % Contribution income $ 58,532 (22.8 )% $ 75,790 22.0 % $ 62,136 Contribution margin 19.9 % 20.3 % 19.8 % 2023 vs 2022 NETGEAR for Business net revenue decreased in fiscal 2023, compared to the prior year, primarily due to a reduction in inventory carrying levels across our channel partners driven by the continued pressure of the uncertain macroeconomic environment, particularly in Asia and Europe.
The decrease in the personnel-related expenditures was mainly due to lower performance-based compensation expense, lower stock-based compensation and lower headcount. We believe that innovation and technological leadership is critical to our future success, and we are committed to continuing a significant level of research and development to develop new technologies, products and services.
We believe that innovation and technological leadership is critical to our future success, and we are committed to continuing a significant level of research and development to develop new technologies, products and services. We expect research and development expenses as a percentage of net revenue in fiscal 2024 to be in line with or slightly below fiscal 2023 levels.
Financing activities Net cash used in financing activities decreased by $44.1 million in fiscal 2022 as compared to the prior year, primarily due to lower purchases of our common stock and lower payments relating to restricted stock unit tax withholdings, partially offset by lower proceeds from exercise of stock options.
Financing activities Net cash provided by financing activities was $0.8 million, compared to net cash used of $24.0 million in the prior year, primarily due to lower purchases of our common stock.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA hypothetical 10% movement in foreign exchange rates would result in a before-tax positive or negative impact of approximately $1.0 million, $0.7 million and $0.6 million net income, net of our hedged position at December 31, 2022, 2021 and 2020, respectively.
Biggest changeA hypothetical 10% movement in foreign exchange rates would result in a before-tax positive or negative impact of approximately $0.7 million, $1.0 million and $0.7 million net income, net of our hedged position as of December 31, 2023, 2022 and 2021, respectively.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk Interest Rate Risk We do not use derivative financial instruments in our investment portfolio. We have an investment portfolio of fixed income securities that are classified as available-for-sale securities, which was immaterial as of December 31, 2022 and 2021.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk Interest Rate Risk We do not use derivative financial instruments in our investment portfolio. We have an investment portfolio of fixed income securities that are classified as available-for-sale securities, which was immaterial as of December 31, 2023 and 2022.
For additional disclosure on our foreign currency contracts, refer to Note 4, Derivative Financial Instruments, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K. As of December 31, 2022 and 2021, we had net assets in various local currencies.
For additional disclosure on our foreign currency contracts, refer to Note 4, Derivative Financial Instruments, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K. As of December 31, 2023 and 2022, we had net assets in various local currencies.
Actual future gains and losses associated with our foreign currency exposures and positions may differ materially from the sensitivity analyses performed as of December 31, 2022 and 2021 due to the inherent limitations associated with predicting the foreign currency exchange rates, and our actual exposures and positions.
Actual future gains and losses associated with our foreign currency exposures and positions may differ materially from the sensitivity analyses performed as of December 31, 2023, and 2022 due to the inherent limitations associated with predicting the foreign currency exchange rates, and our actual exposures and positions.
We monitor our interest rate and credit risks, including our credit exposure to specific rating categories and to individual issuers. There were no impairment charges on such investments during fiscal years 2022, 2021 and 2020.
We monitor our interest rate and credit risks, including our credit exposure to specific rating categories and to individual issuers. There were no impairment charges on such investments during fiscal years 2023, 2022 and 2021.
For the years ended December 31, 2022, 2021 and 2020, 24%, 24% and 20% of total net revenue was denominated in a currency other than the U.S. dollar, respectively. 62 Table of Contents
For the years ended December 31, 2023, 2022, and 2021, 24% of total net revenue was denominated in a currency other than the U.S. dollar, respectively. 63 Table of Contents

Other NTGR 10-K year-over-year comparisons