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November 15, 2016
Analyst Day 2016
This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Specifically, forward-looking statements within the meaning of the Safe Harbor include statements concerning: future financial performance; projections on market share and market growth; future market opportunities; NETGEAR's products and technology and their expected performance characteristics, specifications and specific uses; and anticipated new product offerings and features. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including, without limitation, the following: future demand for NETGEAR's products may be lower than anticipated; consumers may choose not to adopt NETGEAR's new product offerings or adopt competing products; the actual price, performance and ease of use of NETGEAR products may not meet the price, performance and ease of use requirements of customers; product performance may be adversely affected by real world operating conditions; new cyber threats may challenge the effectiveness of features in NETGEAR's products; the ability of NETGEAR to market and sell its products and technology, the impact and pricing of competing products, and the introduction of alternative technological solutions; NETGEAR may be unsuccessful or experience delays in manufacturing and distributing its new and existing products; telecommunications service providers may choose to slow their deployment of NETGEAR's products or utilize competing products; NETGEAR may be unable to collect receivables as they become due; and NETGEAR may fail to manage costs. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Further information on potential risk factors that could affect NETGEAR and its business are detailed in the Company's periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled “Part II - Item 1A. Risk Factors,” pages 44 through 64, in the Company's quarterly report on Form 10-Q for the fiscal quarter ended October 2, 2016, filed with the Securities and Exchange Commission on November 4, 2016. NETGEAR undertakes no obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
All product and company names herein are or may be trademarks of their respective owners.
2
Safe Harbor Disclosure
Introduction by Patrick
Marketing Update
Arlo Smart Products
Whole Home WiFi
SMB Networking
Financial Update
Agenda
Patrick Lo
Introduction
Mission
Be the innovative leader in connecting the world to the Internet.
Strategy for Growth
Distribution
Innovation
Brand
7
Strategy for Growth
Innovation
8
The New Arlo Category
Arlo Pro
+
Mobile
Introducing Arlo Go
WiFi Coverage Mobile Coverage
Two Arlo Categories
12
Innovative Technologies in New Categories
Arlo IoT Whole Home WiFi 10Gig Switching
Strategy for Growth
Distribution
13
Biggest Competitive Advantage
66% 18% 16%
WORLDWIDE: 28,000 retail outlets 27,000 VARs
Geographic net revenue breakdown for 3Q16
14
Global Brand and Distribution
Strategy for Growth
Brand
15
Heidi Cormack
Marketing Update
Targeting
Online
Engaging Content
17
Today’s Marketing
Global Online Tools Big Data Metrics
18
Marketing Innovation
Personalization
Expand reach
Build Communities
Encourage Brand Ambassadors
19
Building Brands Globally
Social Followers +210%
Page Total Reach +1192%
Engaged Users +765%
20
Social October 2016 YoY%
21
Community
23
New Arlo Pro
24
Intelligent Detection of People, Animals, Vehicles
Automatically eliminates noise (e.g. swaying trees)
Machine Learning Algorithms in the Arlo cloud
Receive Rich Notifications to your phone
Multiple Service Plan Options
Arlo Connects
26
$78 $83
$94
$111
$93
$103
$119
$152
$122
$139
$152
32% CAGR
Less than 10% of US Homes have a security camera
27 Source: NPD US Monthly Data, @ cash register
28 Source: The NPD Group / U.S. Weekly Retail Tracking Service, July 3, 2016- Oct. 1, 2016, based on dollar share
27%
13%
10% 9%
41%
All others with <6% share
Arlo Pro
+
Mobile Connectivity
David Henry
Whole Home WiFi
Orbi Original Nighthawk
Nighthawk and Orbi From 2013
Q3 2016 Q4 2013
Premium WiFi Routers Growing in the Market
33
2014 2015 2016 E
+24.4%
2016 YTD
Source: NPD US Monthly Data, September 2016, @ cash ring
Note: Does not include Wifi Systems or Gateways
Premium Routers: ASP >$201
$62M
$120M
$150M
Growing WiFi Router ASPs
34
$92
$103 $111
$91
$110
$120
2014 2015 2016 YTD
Total Mkt AVG Price NETGEAR AVG Price
Source: NPD US Monthly Data, September 2016, @ cash ring
Note: Does not include Wifi Systems or Gateways
NETGEAR ASP Grew 23% From Sept ‘14 to Sept ‘16
35
26%
50% 56%
2014 2015 2016
Source: NPD US Monthly Data, September 2016
Premium Routers: ASP >$200
NETGEAR Gaining Router Share
2013 2014 2015 2015
The Original Nighthawk Nighthawk X6 Nighthawk X4S Nighthawk X8
36
Nighthawk - Innovation in Premium WiFi
AD7200 Smart WiFi Router
®
Introducing the Nighthawk X10
New Ultra High Speed 802.11ad
1.7GHz Quad Core Processor
Plex Media Server Support
Ultimate 4K Streaming & VR Gaming
MSRP $499.99
37
38
*OECD 2013
Drivers for Premium WiFi
# of IOT Devices Faster Broadband New Applications
by 2022
~50 1Gigabit
by 2022 VR Gaming
4K Streaming
Best User Experience
Carrier Aggregation 4x4 MIMO Antennas 256 QAM
Immersive VR Intense Gaming Media Streaming Video Broadcast
LTE CAT 16
Introducing Nighthawk Mobile Router
1 Gbps
WiFi Router DSL & Cable Range Extender
40
Extend Nighthawk Across Product Lines
Meet
42
Internet Box From ISP
Orbi Satellite
Orbi Router
Orbi Delivers High Performance WiFi Everywhere in Your Home
43
Orbi is the Winner in Mesh
“…Netgear Orbi delivers in spades,
quite literally solves the problem of
dead spots and it does so with
uncompromising performance.”
“Orbi simply blows away
its ‘mesh’ competition…”
“…the Orbi is the best Wi-Fi
system on the market.”
“…We were thoroughly impressed
with Netgear’s Orbi….”
“…Netgear Orbi is our top pick for
home Wi-Fi systems….”
Customer Reviews
44
A Voice From the Orbi Community
“I really wanted Eero to work and I had sunk a fair amount of money into
it with 6 eeros spread across my house but it just didn't fully satisfy me.”
“My house is roughly 4,500 square feet and I have Time Warner 300/20
service.”
“Orbi has blown me away. I'm now literally getting 250+ in every corner
of the house and in the main areas I'm easily getting ~300Mbps. Setup
was easy.”
“In my opinion – Orbi is a “fire and forget” system. Plug it in, set it up,
problem solved. Permanently.”
Post from user turnerm05 on 11/12/16
45
Easy Installation Apps
SMB Networking
John McHugh
47
48
Big Online Presence 1G, 10G; PoE; Form Factor User Experience
A Leader in SMB Networking
49
$1831M
$490M $470M
2016 SMB Networking • Web-managed Growing Fastest
• NETGEAR Leads With 31% Share WW (Infonetics 2015 full year web-managed share)
$ CAGR
‘12-’15
Port
CAGR
‘12-’15
Per port ASP
and price
erosion
$
CAGR
‘16-’19
Port
CAGR
‘16-’19
Managed* 4.5% 6.4% $57
(-1.8% pa) 1.1% 4.1%
Web
Managed 13.7% 14.5%
$7.7
(-0.8% pa) 7.1% 10.5%
Unmanaged 0% 5.7% $2.8
(-5.5% pa) 2.2% 5.2%
Overall 4.5% 6.9% $31
(-2.3% pa) 1.3% 5.3%
Infonetics July 2016
* Managed switching market is adjusted to represent only the SMB portion of the
market. Eliminating 25, 40 and 100Gbps, and eliminating Enterprise revenue.
Web-managed Unmanaged
Managed
Infonetics July 2016
Switching Market Opportunity
50
User Community
Community
Feedback
Loyalty
Awareness
Consideration
Preference
Purchase
22% 25%
50%
56%
Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16
NPD & Context Sept’16 10G switching < $10K
Overall Market
NETGEAR
Leading the Move to Transactional Channels
% of Online/Store Sales Switches
Sales of New Products by Year Introduced
$2.1M 2015
$1.0M 2014
$7.0M 2016
51
New Switches Introduced in 2014 3 in 2015 5 in 2016 14 More in 2017
Impactful Product Launches
52
$580 $643 $757 $574 $376
$1,677 $2,050
$2,230 $2,240
$2,324
$1,617
$1,481 $942
$1,941 $2,108
Q3'15 Q4'15 Q1'16 Q2'16 Q3'16
NPD & Context Sept’16 10G switching < $10K
Managed
Plus
Smart
NETGEAR 10GbE Growing 24% T
ho
usand
s
53
Cisco
NPD & Context Sept’16 10G switching < $10K
Dlink Dell
Others
NETGEAR
NETGEAR Continues to Lead 10GbE
54
Non-stop Switching,
Non-stop Routing Half Width, 100% Uptime
ProSAFE® M4300 Intelligent Edge Series
55
XS716E - 10-Gigabit Web Managed
Most Cost-effective 10-Gigabit Switch
Dell’Oro Jan’15
Multi-Gig is the Next Generation
56
Wave 1 Wave 2
Gigs Simultaneous Users
4
1
1 Gig
2.5 Gig
2010 2015
1 User
4 Users
57
WAC740
4x4 dual band Wave 2
Native 2.5Gbps
M4200
Up to 8 Wave 2 APs
PoE+, non-blocking
ProSAFE® Multi-Gig Offerings
58
LED In The RJ45 Jack Web Management Lightweight Web Cloud User Experience
1996 2003 2010 2017
Creating a New User Experience
59
Best User Experience Leadership in Technology Versatile Form Factor
SMB Critical Success Factors
100Mbps, 1Gbps,
2.5Gbps, 5Gbps,
10Gbps
Multi-speed
Christine Gorjanc
Financial Update
61
10% CAGR for Combined RBU & CBU Revenue
Manage SPBU Revenue, Focus on Profitability
Gross Margin Expansion
Double Digit Operating Margin
Meaningful YoY EPS Growth
2016 Financial Targets - Achieved As Presented at Last Year’s Analyst Day
62
$821M $814M $879M
$1,031M
FY'13 FY'14 FY'15 FY'16E*
17% YoY Growth
Non-Carrier Net Revenue On Track to Beat FY16 Target
*FY’16 Non-Carrier net revenue estimate calculated using mid-point of implied 4Q16 Non-Carrier revenue guidance, which is arrived at by excluding $55 million of Carrier net revenue as guided on NETGEAR’s 3Q16 earnings
call.
Q3 YTD Actual
Mid point Q4 Guidance
63
$548M $580M
$421M
$277M $52M
$48M
$39M $44M
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
$0
$100
$200
$300
$400
$500
$600
FY'13 FY'14 FY'15 FY'16E*
Service Provider Net Revenue Service Provider Contribution Profit $'s
Transformation of Service Provider Business Profitability
*FY’16 Carrier net revenue estimate calculated using YTD actuals and $55 million for 4Q16 as guided on NETGEAR’s 3Q16 earnings call. Contribution margin calculated using actual experience through 9 months ended 3Q16.
10.2% 10.1% 9.5%
11.6%
FY'13 FY'14 FY'15 FY'16YTD
2.29 2.54
2.23
3.00
FY'13 FY'14 FY'15 FY'16
64
Non-GAAP Margin Expansion and EPS Growth
Gross Margin % Expansion
Double Digit Operating Margin
Meaningful YoY EPS Growth
29.5% 29.5% 29.2%
32.3%
FY'13 FY'14 FY'15 FY'16YTD
Co
nsen
su
s
65
Strategic Capital Allocation
R&D Investment M&A Share Buyback
$
Opportunistic Return of Capital
$63M
$91M
$118M
$23M
$40M
$69M
$90M $96M
$124M
FY'12 FY'13 FY'14 FY'15 YTD Q3'16
Share Repurchases Free Cashflow
66
Used >90% FCF for buyback over last three years
67
Invest in R&D for Growth Categories
Continue to Enter New Product Categories
Marketing Investment in Brands
Premium Customer Experience
Driving the Business in 2017
68
$821M $814M $879M $1,031M
$548M $580M $421M $277M
10.2% 10.1%
9.5%
11.5%
8.0%
9.0%
10.0%
11.0%
12.0%
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
FY'13 FY'14 FY'15 FY'16E*
Non-Carrier Net Revenue Service Provider Net Revenue Non-GAAP Operating Margin
Increasingly Stable, Profitable Business Mix
*FY’16 net revenue estimate calculated using mid-point of 4Q16 revenue guidance as provided on NETGEAR’s 3Q16 earnings call.
69
Drive Overall NETGEAR Topline Growth
10% CAGR for Combined RBU & CBU Revenue
SPBU Revenue $55 Million Per Quarter
Full Year 2017 11%-12% Non-GAAP OM%
Deliver YoY EPS Growth
2017 Financial Targets
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