Ladies and gentlemen, thank you for your patience. I would now like to turn the conference over to Erik Bylin. Please proceed.

Thank you, Erik. Good afternoon and welcome to NETGEAR's Fourth Quarter and Full Year 2023 Financial Results Conference Call. Joining us from the company are Mr. C.J. Prober, CEO; Mr. Bryan Murray, CFO; and Mr. David Henry, President and General Manager of Connected Home Products and Services. The format of the call; we'll start with an overview of the company's recent leadership condition provided by Bryan, followed by an introduction by C.J. and finish a review of the financials for the fourth quarter and full year commentary on the business and first quarter of 2024 guidance provided by Bryan. We'll then have time for any questions. If you've not received a copy of today's release, please visit NETGEAR's Investor Relations website at www.netgear.com. Before we begin the formal remarks, we advise you that today's conference call contains forward-looking statements. Forward-looking statements include statements regarding expected revenue, operating margins, tax expense, expenses and future business outlook. Actual results or trends could differ materially from those contemplated by these forward-looking statements. For more information, please refer to the risk factors discussed in NETGEAR's periodic filings with the SEC, including the most recent Form 10-Q. Any forward-looking statements that we make on this call are based on assumptions as of today and NETGEAR undertakes no obligation to update these statements as a result of new information or future events. In addition, several non-GAAP financial measures will be mentioned on this call. A reconciliation of the non-GAAP to GAAP measures can be found in today's press release on our Investor Relations website. At this time, I would now turn the call over to Mr. Bryan Murray.

Thank you, Erik and thank you, everyone, for joining today's call. As we announced last week, after nearly three decades at the helm, Patrick Lo has chosen to retire from his role as CEO and Chairman at NETGEAR. Patrick will serve as a strategic adviser through July of this year to ensure a smooth transition. While Patrick will certainly be missed, we're very excited to see him embark on his next chapter in life. After a thorough search over the past year to identify a successor for Patrick, the Board appointed C.J. as NETGEAR CEO. C.J. has a background that is uniquely suited to lead NETGEAR into our next chapter, and the NETGEAR Board and management team are excited to work with C.J. as we capitalize on the great opportunity in front of us. With that, I would like to personally welcome C.J. and give him the stage to introduce himself prior to getting into the Q4 results.

Thank you, Bryan. It's really great to be here. We had an all-hands meeting with the NETGEAR global team last week, on my first day, and another one just an hour ago. I want to reiterate a few points that I shared with the team. First, I really appreciate the incredible welcome I have received from the Board, our executive leadership team, the broader NETGEAR team, and many of our partners and customers. It’s only been a week, but I’m definitely feeling like the shoe fits, and I’m more excited than ever about the road ahead. Second, it is a real honor to be taking over from Patrick; he has been a pioneer in our industry. He is a great person with the highest integrity, and he has established a fantastic culture at NETGEAR. I’m grateful to him and the rest of the Board for entrusting me with this opportunity and supporting me and the rest of the executive team during this transition. Third, and most importantly, the opportunity ahead for NETGEAR is incredibly exciting. We have macro tailwinds working in our favor, such as the importance of connectivity in a work-from-anywhere world, connected device proliferation, the increasing need for higher bandwidth to support high-fidelity audio and video experiences, and the growing importance of digital security. We also possess an incredible brand, great technology and products, a strong balance sheet, a diversified business with a focus on both consumer and NETGEAR for business, and many potential adjacencies for growth. It's quite rare for a new CEO to step into an opportunity with so much upside. The business has faced challenges, and capturing that upside will require considerable effort. The journey ahead starts with strengthening our core business, both on the consumer side and the NETGEAR-for-business side. I see many opportunities to do that. As part of this initial phase, I'm embarking on a 45-day listening tour to validate my plan and seek input from the broader team. While it is early, I can say that on the consumer side, key themes will be simplifying our product offerings, both devices and subscriptions, and improving the performance of our highest margin channel. On the NETGEAR for business side, we've been able to scale the Pro AV business with a solution-focused sales approach, and a major theme moving forward will be to intensify our go-to-market capabilities, allowing us to grow our share in markets where our products address critical customer needs. I believe the plan to strengthen our core, which I look forward to sharing with you in more detail during a future earnings call, will lead to a stronger NETGEAR with enhanced cash flow performance and renewed growth opportunities. With that, back to you, Bryan.

Thank you, C.J. And once again, on behalf of the entire team, welcome. We are pleased with the continued execution of our team this quarter in delivering revenue and operating margins at the high end of our updated guidance ranges. For the quarter ended December 31, 2023, revenue was $188.7 million, down 4.6% on a sequential basis and down 24.3% year-over-year. Importantly, we took great strides in converting inventory into cash, adding $55.6 million of cash to our balance sheet. In the Connected Home Products segment, the U.S. retail market overall underperformed our expectations due to a more promotional holiday season, especially in the lower end of the market, but NETGEAR outperformed the market largely driven by strong results in our premium products. In tandem with the ramp of the WiFi 7 upgrade cycle, end-user demand for our premium solutions, including our Orbi 8 and 9, tri-band and quad-band WiFi mesh products, and 5G Nighthawk Mobile Hotspots, performed well, growing double digits sequentially and more than 30% year-over-year, significantly outpacing the total market. In fact, our premium products reached a new high as a percentage of our Connected Home Products retail business, contributing 25% of sales to end users. Meanwhile, sales to service providers came in at just over $27 million for the quarter. Our SMB business outperformed our expectations as we steadily drove up average selling prices, even though channel inventory continued to contract, bolstering our total revenue at the upper end of our guidance. Outside of the inventory contraction, our competitive position in SMB remains strong. The softening macro conditions in certain markets are still impacting SMB's growth prospects in the near term as customers remain hesitant to make investments and deals are taking longer to close. For the full year of 2023, NETGEAR net revenues were $740.8 million, down 20.6% compared to the year ended December 31, 2022, amid channel partners constraining inventory levels and tougher market conditions. Despite the challenging macroeconomic environment, elevated interest rates, and inventory rightsizing among our channel partners through the year, we continue to believe the broader U.S. consumer retail market stabilizes. I'm proud of the progress we've made in transitioning our Connected Home Products business to the premium, higher-margin segments of the market where we enjoy considerable competitive differentiation. Industry analysts are also pointing to the next 12 months as the timeframe when the hangover from the pandemic pre-buying will be flushed out and the next wave of upgrades will take hold. As discussed in our recent Analyst Day, we expect that the WiFi 7 upgrade cycle and secular trends in the markets identified across both businesses will continue to expand the available market opportunity for NETGEAR in the coming quarters, especially as the impact from SMB channel partners reducing inventory positions begins to wane. With our robust portfolio of hardware and subscription offerings, and with the high barriers to entry for competitors from over 25 years of innovation, NETGEAR's higher-margin premium products are key to delivering long-term profitable growth. The fact that our premium products materially outperformed the market, achieving double-digit full-year growth and generating significant gross margin improvement, serves as clear validation of our core long-term strategy to focus on the premium segment and grow our services business. The investments we've made in pursuing this strategy are essential for returning to long-term profitable growth. Notably, the improved mix towards premium higher-margin products combined with our ongoing progress in growing our service revenue business led us to achieve a full-year non-GAAP gross margin of 33.9%, equaling our highest full-year non-GAAP gross margin in the past 16 years. This marks an impressive improvement in our non-GAAP gross margin year-over-year by more than 1,000 basis points for the fourth quarter and 680 basis points for the full year. The results would not have been possible without our team's outstanding efforts in transitioning towards the higher ASP premium WiFi mesh and 5G mobile hotspot products, our improved traction in our services business, and the growth we've established in the Pro AV market. Additionally, enabled by disciplined expense management, we continued momentum behind our improving profitability in the fourth quarter, delivering non-GAAP operating income of $2.7 million and a non-GAAP operating margin of 1.4%. Our margin came in at the high end of our updated guidance range. Our non-GAAP operating margin was up 300 basis points compared to the year-ago period and down 130 basis points compared to the prior quarter due to slight loss of top-line leverage. Looking back at the full year, the ongoing uncertain macroeconomic environment, elevated interest rates, and improved supply positions broadly in the market continued to constrain our top-line potential as our channel partners on both the Connected Home Products and SMB side of the business reduced their inventory carrying levels far below historical norms. As a result, these headwinds reduced our leverage and led to a full-year non-GAAP operating loss of $9.9 million and non-GAAP operating margins of negative 1.3%. For the fourth quarter of 2023, net revenue for the Americas was $124.8 million, a decline of 21.6% year-over-year and down 11.5% sequentially. EMEA net revenue was $37.9 million, a decrease of 28.1% year-over-year and up 6.2% quarter-over-quarter. Our APAC net revenue was $26 million, which is down 30.2% from the prior year comparable period and up 22.9% sequentially. For the fourth quarter of 2023, we shipped a total of approximately 1.7 million units, including 938,000 nodes of wireless products. Shipments of all wired and wireless routers and gateways combined were about 480,000 units for the fourth quarter of 2023. The net revenue split between home and business products was about 63% and 37%, respectively. The net revenue split between wireless and wired products was about 59% and 41%, respectively. Products introduced in the last 15 months constituted about 14% of our fourth quarter shipments, and products introduced in the last 12 months contributed about 10% of our fourth quarter shipments. From this point on, my discussion points will focus on non-GAAP numbers. The reconciliation from GAAP to non-GAAP is detailed in our earnings release distributed earlier today. Non-GAAP gross margin in the fourth quarter of 2023 was 35%, which is up 1,010 basis points compared to 24.9% in the prior year and flat compared to the third quarter of 2023. Increased shipments of our premium base Connected Home Products, growth of service revenue, and considerably lower total freight costs largely drove the improvement. Total Q4 non-GAAP operating expenses came in at $63.3 million, which is down 4.2% year-over-year and down 1.1% sequentially. Our headcount was 635 in the quarter, down from 644 in Q3. We will continue to strategically invest in our business, hiring in key areas we believe will deliver future growth and profitability such as Pro AV managed switches, premium Orbi WiFi mesh systems, 5G mobile hotspots, and subscription services. However, we continue to evaluate other areas of the business regularly to drive further cost efficiencies. Our non-GAAP R&D expense for the fourth quarter was 9.9% of net revenue compared to 7.7% of net revenue in the prior year and 10.1% of net revenue in the third quarter of 2023. To continue our technology and subscription service leadership, we are committed to continued investment in R&D. Our non-GAAP tax expense was $2.4 million in the fourth quarter of 2023. Looking at the bottom line for Q4, we reported non-GAAP net income of $2.7 million and non-GAAP diluted earnings per share of $0.09. Turning to the balance sheet, we ended the fourth quarter of 2023 with $283.7 million in cash and short-term investments, up $55.6 million from the prior year quarter. We continued our positive free cash flow generation in the fourth quarter as we made meaningful progress in reducing our inventory. During the quarter, $56.3 million of cash was provided by operations, which drove our total cash provided by operations over the trailing 12 months to $56.9 million. We used $2.2 million for the purchase of property and equipment during the quarter, bringing our total cash used for capital expenditures over the trailing 12 months to $5.8 million. We expect to continue generating positive free cash flow as we believe we will further reduce our inventory levels in early 2024 as we drive back to prepandemic carrying levels of 3 to 4 months. Now turning to the fourth quarter results for our product segments. The Connected Homes segment, which includes our leading Orbi Nighthawk, Nighthawk Pro Gaming, Armor, and Meural brands, generated net revenue of $118.4 million for the quarter, down 20.6% year-over-year and down 7% sequentially. In the comparable prior year period, our Connected Home Products business benefited from higher sales to service providers as we made great progress in filling and delivering supply of M6 and M6 Pro mobile hotspots. On the retail side, the total addressable market was larger than a year ago, leading to a year-over-year decline in both the retail and service provider channels. However, despite the year-over-year overall retail market contraction, demand for our premium Orbi 8 and 9 WiFi mesh and 5G mobile hotspots continues to grow year-over-year by over 30%, bolstered by the addition of our recently released WiFi 7 Orbi 97x mesh system. The contribution of premium products to our Connected Home Products retail business grew to over 25% of sales to end users. These higher-margin, high-end products continue to drive up average selling prices and help us deliver considerably improved profitability year-over-year. As we progress through this upcoming WiFi 7 upgrade cycle, we continue to believe that the market has stabilized and expect Connected Home Products channel inventory to remain generally stable as we move forward. Consequently, we anticipate our Connected Home Products product mix will continue to shift towards these higher-margin products, adding to the momentum of our core long-term growth and profitability strategy. We remain keenly focused on the solutions our customers need and recognize that our premium Orbi high mesh systems may not be the optimal choice for smaller households or those who want the best connectivity at a lower price point. In these cases, our differentiated WiFi 6e and WiFi 7 Nighthawk routers, Cable Gateway, and midrange Nighthawk mobile hotspots fit the bill perfectly, and we expect these products to contribute to our improving growth and profitability in the Connected Home Products business. While we have certainly demonstrated our hardware expertise, our software solutions are also steadily gaining traction. Our investments in our services strategy continue to pay off. I'm excited to share that we exceeded our target for the full year and exited the fourth quarter with 877,000 paid subscribers. We generated $11.4 million in service revenue for the fourth quarter, a year-over-year increase of 27.7%. This growth is fueled by the increased emphasis we're seeing from Connected Home Products consumers on cybersecurity protection, privacy, and premium support. We see a path to exit 2024 with service revenue and an annualized run rate of $50 million, with even greater potential in the long term. On the SMB side, net revenue came in at $70.3 million in the fourth quarter, slightly above our expectations. Similar to the prior quarter, high interest rates and stagnant or even negative GTV growth in major markets such as Germany, Greater China, and Japan weighed on the SMB market, dampening end-user demand for our traditional switches combined with the reduction in inventory carrying levels that our channel partners experienced throughout the year. These headwinds led us to full-year SMB revenue of $284 million, a decline of 21.3%. Although we performed well relative to our expectations for this quarter, our SMB channel partners continued to compress inventory levels and are expected to do so in the forthcoming quarters as macroeconomic headwinds persist. However, we remain confident in the growth potential of this business, given our competitive advantage in the Pro AV market and the thoughtful investments we've made in both our hardware and software offerings to position ourselves for success and entrench our first-mover advantage. To fortify our advantage, we have developed comprehensive and uniquely differentiated solutions, allowing us to integrate with over 200 AV equipment manufacturers through our Engage Controller software platform and establish go-to-market partnerships with leading AV integrators worldwide in the commercial and residential markets. An experienced team of AV network designers gives us deep expertise in the rapidly growing Pro AV market, unmatched by our competition, giving us the confidence in the long-term growth and profitability potential of our Pro AV suite of products. I'll now discuss our Q1 2024 outlook. We expect the retail portion of our Connected Home Products business to experience seasonal decline coming off the holiday period. Revenue from the service provider channel is expected to be around $25 million in the first quarter. As interest rates remain high, we will continue to work with our SMB channel partners to optimize their inventory carrying levels in the next few quarters. Accordingly, we expect first-quarter net revenue to be in the range of $155 million to $170 million. As we make meaningful progress in reducing our own inventory levels, we will be consuming higher-cost inventory. We expect to return to historically normal inventory costs in the second half of this year. Accordingly, we expect our first-quarter GAAP operating margin to be in the range of negative 11.4% to negative 8.4%, and our non-GAAP operating margin to be in the range of negative 8.5% to negative 5.5%. Our GAAP tax expenses is expected to be in the range of $6.5 million to $7.5 million. Our non-GAAP tax benefit is expected to be in the range of $0 to $1 million in the first quarter of 2024. We expect to continue to generate meaningful cash in the first quarter of 2024.

Your first question comes from Jake Norrison with Raymond James.

Okay. A couple from me. I just wanted to start off from a high level. Welcoming C.J., I'm just wondering what this organizational shift enabled from a strategy and capital allocation perspective long term? I know you touched on potential growth adjacencies. Any more details there would be helpful.

It's too early to say. I obviously made the point that I see an opportunity for cash generation. We're doing that now on the back of working capital improvements. But long term, we want to create value, and I see us creating value by being a long-term sustainable cash-generating business. In terms of how much capital that requires and how that feeds into the strategy we implement, let's discuss that on a later call, but I appreciate where you're coming from on that question.

Okay. Sounds good. And then I'm also wondering, you provided fiscal year guidance at the Analyst Day. Can you just give us updated color on the cadence of how the year will play out? Are you still expecting that sort of hockey stick in the back half, low to mid-single-digit growth for the full year?

Yes. Staying true to our tradition, we won't readdress annual guidance at this point. We provided guidance for Q1 based on what we see in the near term. But the guidance we put out for Q1 is relatively in line with what we shared at the Analyst Day. There is probably a slight lowering of the operating margin profile from the range that we provided for the first half, and I would say the differential there is largely due to transitional costs as we ramp up with the new leadership of C.J. coming onboard.

Makes sense. And then the last one for me. You mentioned a couple of times that you saw the retail market stabilize. Can you just touch on what gives you confidence there that the Connected Home Products channel inventory will be stable for the rest of the year?

Yes. Perhaps I'll start, and then I'll ask David to weigh in here. As we said last quarter, what's giving us confidence is that we're starting to see a return to normal seasonal behavior within that market. Typically, you would see a seasonally lower supply following our guidance here for Q1. So that's the main data point we have. We think that continues to strengthen as WiFi 7 becomes more prominent in the market, just given the natural growth in average selling prices that it will bring into play. But David can probably provide some additional context.

Sure. Yes. As Bryan said, I think over the last couple of quarters, we started to see the year-on-year decline of the market stabilize and not continue to decline as we have seen in previous years. As we go into this year, we have the refresh cycle, four years removed from the pandemic pull-in, which will be in our favor, along with a lot of new WiFi 7 devices launching on the market. Samsung just announced their Galaxy F24 with WiFi 7, and we expect others to launch throughout this year. As consumers start to adopt those new products, they will want to upgrade their networks, and that should help stimulate the market towards further stabilization.

Your next question comes from Hamed Khorsand with BWS Financial.

So first off, can we just talk about your commentary here for Q1? I mean you're saying retail is stabilizing, but you're guiding quite a bit down, which seems contrary to that stabilization comment, because in Q1 '23, you indicated you would be below that. How is it stable when the revenue is declining year-over-year from Q1 '23 to Q1 '24? That doesn't seem stable.

Yes, Hamed, you may recall the retail portion of the Connected Home Products business is very seasonal. In normal periods, you'll see something like a mid-teens percentage decline in the market from Q4 into Q1. So that's the main driver for why revenues would be coming down, and that was mentioned back in December at the Analyst Day as well. We continue to see that playing out as discussed in December, and that's the primary driver for the sequential decline in revenue.

Yes. No, I understand the commentary you gave in December. I understand the commentary now. What I'm trying to understand is how you can say it's stable if you're projecting revenue to decline year-over-year from Q1 '23 to Q1 '24. That doesn't come across as stable.

Yes. So again, the comment I made earlier regarding what signals lead us to believe that the market has stabilized is because we have returned to normal seasonal patterns. At some point, it will play out as a year-over-year flattening and hopefully turn into growth, which, again, the point David made and I mentioned earlier, will come as WiFi 7 becomes more prominent in the market. These are the signals we see driving our belief that the market is stabilizing.

And then, Bryan, what's happened since the Analyst Day that leads you to believe Q1 is going to be lower than perceived? I think at your quote during Investor Day, it was indicated that the first half would see mid-single-digit declines, right? Now this is quite a bit more than that.

Yes. We mentioned a sequential decline would be mid-single digits. I think we're in that general direction with the guidance, depending on where we land within that range. There's not much that has changed from the December guidance on the top line.

Okay. And then why hasn't there been any progress regarding your cash? I mean at $284 million, that's quite a bit of change, and there hasn't been any activity on buying back any stock.

Yes. There is no doubt we've been successful in quickly turning the ship around. At the end of Q2, we were at $203 million, and we exited the year just shy of $284 million. We've generated a lot of cash in a short period due to compressing our inventory levels. This is a very near-term trend. We are going through a leadership change and will continue to have the same conversations we had historically about capital allocation. We believe we need about $125 million to run the business, and any amounts beyond that, we continue to discuss strategic uses. M&A is something we talk about continuously, and stock repurchase remains a consideration. We have 2.5 million shares left in the program. We quickly turned the tides from earlier in the year, with Q4 performance generating over $54 million in free cash flow, which is a great improvement. If you recall my comments from October, we expected around $25 million to $30 million range, so we exceeded that mark and still believe we will generate more cash in Q1.

There are no further questions at this time. C.J., I turn the call back over to you.

Yes, thank you for joining us today. Like I said, I couldn't be more excited about the opportunity ahead. And that's it for us; NETGEAR team signing off.

This concludes today's conference call. You may now disconnect.