All right, thanks everybody for joining. My name is Adam Tindall and this is part of my connected devices coverage here at Raymond James. Very happy to have CJ and Brian, CEO and CFO of Netgear here today. In terms of our format, I know it's getting towards the end of the day. We'd love to keep it engaging and we'd love to have questions. If you do, please feel free to raise your hand along the way. No slides, no presentation. We're just going to do a fireside chat, but I will start with some high-level questions if you're kind of re-engaging or less familiar with the Netgear story since there's been a lot of change over the past couple of years with CJ. So, guys, thanks for being here. CJ, maybe we'll just start. I think a lot of folks are familiar with Netgear from a customer standpoint, but those not as familiar with the business. Just give us a little background of the company and the evolution that I was alluding to.

Yeah, so we actually just hit a big milestone, 30-year anniversary in January, which is pretty impressive. And for 28 of those years, we had the same CEO, which Brian and I were reflecting on that. Like, how many Silicon Valley-based companies can say they've had the same CEO for 28 years? So, incredible run. That having been said, we have the same leader for so long, it does create an opportunity to bring in new leadership and reinvent the company. So we've been engaged in a very significant transformation that started a couple years ago and we really couldn't be prouder of the results we've accomplished. So if you look at our 2025, we grew revenue, that we've grown revenue since the company. We had three consecutive Q2 all-time record, Q3 all-time record, Q4 all-time record, and then we entered the year expecting or setting the expectation in context because what's really driving that is our enterprise business. So when we spend time with investors, there's a fairly significant re-education that happens because nobody recognizes next year as an enterprise brand or an enterprise business. That's now half of our top line and really the driver of those financial results. So last year, enterprise revenue just under 19%, again, record gross margin, over 51%, 23% contribution margin. and in the enterprise segment we're disrupting and traditional enterprise players there and that's the big that's why it's so great that we had our investor date in the last year and we're starting to engage more actively in the investment community because it's time to tell the new Nick Gear story. I think that's a good segue into some of the actual changes you've made at the company as well with a lot of times we hear executives talk about you know boots on the ground changes in terms of leadership that you've implemented maybe just recap some of those leadership changes yeah yeah so the biggest like organizational change is we established the true enterprise business unit so when I joined you're very much consumer led leadership team I had inherited 13 direct reports only one of those enterprise focus so we've rebalanced the company, we've got a very clear enterprise business unit, full R&D, full go-to-market, we've got a consumer business unit. Both of those have new leaders. In fact, if you look at, I still have about 13 direct reports. 12 of those are new to the executive team. Most of those from the outside, but a number of people that were leveled up from the organization. So a really big shift And those folks are driving their own transformations within their own teams. But the biggest change is on the enterprise side. So Promote Bajani leads that. He was the former head of Ruckus, the former head of Arista's Canvas networking business. He's brought in a whole experience enterprise networking leadership team. They've built out their teams. So that's a big, probably the biggest shift. I'd say the second biggest shift is when I joined, we didn't really have software development. So software development was largely outsourced to contractors and one of the big efforts that's happening across both of our businesses is to in-source that capability and like what better time to do that than now when we've got these AI capabilities that allow us to accelerate that. And so if you, you know, fast forward to where we are today, we kind of set the foundation to allow us to scale both businesses, this business unit structure, new leadership, and yeah, couldn't be prouder of the team that we have in place to do that.

Great. Brian, if you could, you know, maybe.

Okay. User error.

Sorry. Sorry, webcast.

Hopefully, Brian's mic was picking up my.

She gave me a thumbs up right there, so we don't have to recap.

Brian, I was just going to ask you, on the financial profile, CJ kind of gave us a little bit of an overview and the focus on the company. maybe bring that into financial terms and if you want to recap some of the targets that you gave at the analyst day as well yeah and maybe just kind of provide a foundation for it so we just delivered our third sequential quarter of record gross margins for the company a lot has to do with CJ's comments with regards to the transformation of the company and the emphasis for the on the enterprise business that's really contributing there so we did put up midterm and long-term targets I would urge people to look at our slides that are out there or listen to the webcast if you have not seen it yet a lot of information in there but from a financial profile you know we are we're 49% of our revenue today is coming from enterprise and we expect over the long term that can get to 65% or higher the enterprise business we expect to grow double digits it's really going to drive the overall performance which you think in the midterm, which is kind of 20-28 timeframe, would be a high single-digit to low double-digit growth profile. On the gross margin, we expect the full company to be about 40% to 43%, again, because of the mix of enterprise and how that's expected to increase. That in of itself, the enterprise portion would be in the 50% to 53% range. We're also developing non-device revenue streams subscription and services we're further along on the consumer side today but we expect both businesses to be contributing in that midterm time frame we're talking about probably five to ten percent of our overall revenues coming from from those streams and then contribution margin from the businesses enterprise is in the 24 to 27 range consumer we have more work to do in terms of transforming that business, it's probably in the zero to 3% range, which would drive the overall performance to the 5% to 8% non-GAAP operating margin. Longer term, again, the mix will continue to shift towards enterprise. We would expect the overall gross margins to be more in the 50% plus range. Overall revenues would be growing double digits. Contribution from non-device revenue would be 20% plus. Probably a little ahead of that on the consumer side. And then contribution margin range wise enterprise would be 30% plus and consumer would be about 10% plus. So I know there's a lot of numbers there but again if you look at the investor day deck it will outline a lot of that.

Perfect. CJ we just had your I guess former brethren in the next room. Former sister from Arlo next door. And they were talking about some things that obviously impact them, but may impact you as well from a competitive environment standpoint. So I'll ask the question broadly in terms of how the competitive environment has changed. But I know there's a lot of specific focus on the potential ban of some of your competitors as well. So if you could touch on that, it would be helpful.

Well, let me start with enterprise, of course. So on the enterprise side, the AI and data center build out, putting aside the cost of memory that's being applied to everyone, we view it as a significant accelerant to our business because the companies that we compete with, that we're taking share from today, are focused on the data center build out, right? So the big traditional networking companies that have historically played in the AV space, which is a multi-billion dollar market where we still only have 8% share, but clear product market fit and differentiation. And so we're actually quite excited about what's happening in the AI space from that perspective, from the perspective of software insourcing, et cetera. On the consumer side, we do face competition from a number of players that really allow us to stand out as kind of an independent, U.S.-based and public company trusted brand. So if you look at our two biggest competitors, you've got Amazon on the one hand, and there's a certain consumer perception that goes with buying Amazon products, if you look at some of the challenges that ring his face recently. And then you have TP-Link. And I can only speak to what I read in the news about TP-Link. But if you read the reports from WAPO or Bloomberg or otherwise, it does seem like there's an escalating level of scrutiny being applied to the company. And, you know, the smoke is increasing, maybe some, you know, at the state level, there's formal actions that have been taken. TB Link's being sued by Florida. They're being sued by Texas for misleading customers. And so we do view that as a potential inflection point in that business. And we're as confident as ever that something's going to happen there. We don't know when. We don't control the decision. But it's important to note that on the consumer side, we have a vision and a roadmap to be successful that doesn't require any of that to happen. It's almost like, okay, it's a near-term catalyst that really broadens the scope of that business, given the extent of the market share that they would have if it were to happen. But if you look at the long-term plans that we have and how we plan to leverage our position as kind of the Switzerland of the home and work across partners in a way that neither Eero as part of Amazon or TP-Link could do, we're very bullish about the long-term potential of that. we announced at investor day the google partnership we can't say a whole lot about that now there's going to be more on that coming next year but it is the first proof point of how we can be an independent platform in the home that just helps everything work better and uh for all of us homeowners we know that like connectivity hasn't been solved and we're on a mission to truly solve it and so whether there's a ban or not you know we're extremely confident about what we're doing to build out that business.

One of the investors was asking about, you know, market share to Arlo, I guess maybe the same question. Do you have a sense of market share for TP-Link and, you know, what would potentially become available were they to be banned?

Yeah, like rough numbers, and Brian can keep me honest here, like the retail market in the U.S. is roughly a billion dollars for networking. TP-Link is the market leader. So let's call it, let's say, like hypothetically, if they had 40% share, that'd be, you know, a $400 million business. And then, you know, there's other parts of the market that aren't counted in retail. You've got the professional installer channel, which is separate. You've got partnerships with ISPs, which doesn't count to retail. So it's a pretty big number. Like that business today for us is $350 million. So if you do the math, it's significant.

I'm going to ask one more, and then I'll pause for questions. You had mentioned component costs. This one might be for Brian. Maybe just since that's been such a topical thing lately, how does that impact Netgear, and what are you doing to navigate the supply chain?

Yeah, I can start, and if you want to chime in.

I am officially the chief memory officer of Netgear. Yeah, I've been promoted, but I'll let Brian take it, and then I can fill in any gaps.

Yeah, as CJ alluded to, like everybody in the market is facing this memory situation, primarily today hitting DDR4, but I think even more broadly, I think even DDR3 probably is starting to see some of that. We have been largely able to mitigate this. It's been going on for the better part of 2025, and it started this year. We've been able to mitigate that through working with our supply chain partners. We did provide guidance in Q1 that we thought it would be about 100 basis point headwind to our gross margin performance in Q1. We have about four and a half months of inventory, so we have line of sight and visibility that covers most of the first half of this year. I think the other challenge out there is that the ability to access supply is what is out there in question. And we said about a month ago, providing guidance that the second half is a little less certain in that regard. Given we have two businesses on the enterprise side, it's almost something we can mitigate. We've announced that we're raising prices there. The rest of the competitive landscape is also raising prices. It is a lower percentage of the overall BOM. Consumer side, it's a little more challenging. It's a higher percentage of the BOM. Competitive landscape is very different there, as CJ was mentioning a minute ago. And so we're working through a number of actions that we'll find other ways to mitigate. And so we'll be working through that through the first half of the year and anticipating what will happen. The market today, pricing is month by month. So one thing I should mention is that we actually have insourced procurement of memory, which is not something we've done historically given its commodity component. That's something that we have historically outsourced to our ODM partners to do that. But given the importance, given this environment, we've taken this direct, which is why CJ has called himself the chief memory officer.

I'm glad you didn't hire for that position.

Well, we are hoping it's transitory.

I'll give up the title in six to nine months. Yeah, exactly.

I don't think there's anything else you want to add.

No, no, that was good. But I mean, the thing that I guess you go back to our investor day, we shared mid-range targets, long-range targets. And, you know, the real focus in the near term was on enterprise, because if you just do the math on Netgear's enterprise value, using our enterprise business, applying enterprise multiples, like there's just, we're so undervalued. It's not our job to assess value to Netgear. it's our job to deliver the results but just looking at it outside and objectively it it's there's there's clearly uh we're clearly undervalued and people haven't kind of moved away from oh next year's a consumer company that having been said we tell this guy to buy back more stock we're doing that 84 million since i joined but um on the on what we said to investors and investor day on the consumer side is hey we're just going to manage that business to contribution margin neutral as we transform it, reinvent it, innovate it. It's not going to be a drag on profitability, but there's real value and option value there. And so that's the goal that we're, the line that we're looking to hold as we mitigate the memory challenge on consumer. It's like, how do we not let this be a drag on operating income? And how do we let, you know, enterprise continue to shine and grow and expand profitability while we innovate on consumer and enable this kind of home of the future.

Yes, thank you.

Yeah, yeah, so great, great question. So the way to think about our enterprise business is in two different buckets. On the one hand, we have, we're enabling IP-based AV deployments. So if you think about conference rooms, digital signage, live events, that business is where we're disrupting. We said at our last earnings that in 2025, the sell through for that business grew more than 25%. And revenue for that business actually grew more, but we didn't want to overstate it because we had some channel de-stocking that happened the year before, but sell through, so true demand grew over 25%. That business today does not have a recurring revenue component. So that business is being driven by the device sale. Now, we do have a very compelling software offering, and we do have a path to introducing recurring revenue. But that's not an immediate term focus for us. The immediate term focus in AV is for us to take that 8% market share of a $3 billion market that's growing 14% and make that much bigger from a share perspective. So capture the growth, grow share, and over time we can introduce recurring revenue. The second half of the enterprise business is a very different story. So the second half of the enterprise business, we compete against the campus Wi-Fi networking folks like Ruckus and Cisco Meraki. And customers there are accustomed to cloud management, licensing fees. We've also introduced security, both Firewall and then a SASE platform. So the Insight licensing, the security, those businesses are just coming. Those products are just in the process of getting relaunched security late last year, Insight early this year. And so we have, if you look at the investor day targets for the midterm and long term, we're expecting to grow our non-device revenue for our enterprise business quite significantly. And a large part of that is driven by insight and security. Now, there's things that fall in between kind of recurring and device, and those apply to both. So if you look at like professional services on the AV side, we've had our integration partners, and this is a bit counterintuitive, come to us and say, hey, Nick here, we really need your support in these more complex deployments. You should have a professional services organization. So we launched that at the end of last year. So that's a non-device, higher margin kind of piece of that business. And then support across the board, which on the networking and security side will be integrated, at least in part, into our cloud management. So there are aspects that cut across both, but the main levers on recurring will be our cloud management and security products, which we expect to start. You know, we've got plans for how we get from here to the mid-range targets we shared. So we're actually changing it. But today, for Insight today, it attaches to a device. So it's like a typical one year, three year, five year licensing model. We're actually we haven't announced how we're going to revamp it, but we're revamping that in a way that's much more customer friendly in a way that customers are asking for. Because if you look at the big networking providers and the complexity of their licensing models, it's like you need a physics degree to kind of figure out how to do the math on what it is. we want it to be really simple, where our partners are paying for true value. And so that will be part of our relaunch in the first half of this year. Security, the SASE platform is seat-based. So it's based on the number of employees you have on SASE. And then the firewall is tied to the number of devices that you have deployed.

Hey, we've got seven minutes, 45 seconds. Pardon me?

Could I make this picture of the job house? I'll be running for a few.

Yeah, we actually think of it at completely opposite from that. So we view AI for us as a big accelerant. And the four main reasons are one, again, on the AV side, if you look at the competition that we have in that market, they're all focused on the data center to neck gear. this is part of the transformation I mentioned. We've never had software engineering. We're now accelerating the insourcing of our software capabilities. That's typically a really hard thing to do. But when you have AI to help you understand the code, refactor the code, that's a huge accelerator. And so we're getting massive benefits from that. And then we have across all of these businesses, like, troves of data. So on the enterprise side, like, we're the disruptors. So we view ourselves as AI being an enabler to catch and pass, like, competition. Whereas that previously would have been hard to do, right? Because it's like you kind of get pixels and features tied exactly to kind of your software resourcing. And because we're now, we've got a software, former software leader running our enterprise business, we're insourcing these teams, we've acquired, you know, startup folks that have been quite aggressive using AI, we're really well positioned to capitalize on this to catch up and exceed competition. So we're actually thrilled about it. The only little asterisk is memory, but everybody's facing that.

Yeah. One of the things that also comes up with this story is the balance sheet. So I want to ask Brian a question on that. Obviously, very healthy balance sheet. You know, maybe just recap the capital structure, your view of sort of normalized free cash flow and capital allocation.

Yeah, today we're sitting on about $323 million in cash, and we believe we need about $125 to $150 million to operate the business. CJ touched on, we have been acquisitive. Some of this was an acquihire to accelerate the insourcing of software development. Some of it was the SASE security platform, the adjacency there to add to the portfolio. And then we have been active repurchases of our stock. we've repurchased 84 million dollars worth of stock over the last two years uh and we have a remaining authorization about 1.5 million shares which is about five five percent of the outstanding so we're going to continue to be opportunistic buyers of our stock but we have we're looking at all three facets the organic investments that we need in the business m&a opportunities as well as stock repurchasing cj you mentioned earlier uh kind of the some of the parts and and how valuation seems to be dislocated if you look at it on that basis.

Have you kind of looked at that internally with your kind of current view on these two businesses together or separate? What would be the potential dis-synergy? Maybe just talk us through like the logistics of having these two businesses together and the opportunity from a sum of the parts standpoint.

Yeah, we've been clear from the outset that these are really different businesses that, you know, could at some point be separated. So we have nothing to announce or talk about relating to that today. But if you think about it from like a product, go-to-market innovation perspective, they're completely different. On the one hand, we're competing with Arista, developing products that are, you know, cost end customer thousands of dollars. On the other hand, you know, we're competing with Eero at Best Buy. Like, it's just, they're completely different businesses. And so, at some point, it may make sense to separate them. But in the meantime, like, our focus, like, part of the big shift in kind of how we report the business, how we structure the business, is we do want to create, like, operating independence. Like, the two of us are standing up here, but the reality is we have Promode, who's a very experienced enterprise leader running, he's a CEO of our enterprise business. You have Jonathan, very experienced, connected device, consumer leader. He's the number two at Fitbit, sold to Google, was at Google for several years. He's running the consumer business. And so we do have shared, you know, G&A. We've got a shared operations team. But at some point in the future, I think it would be a big potential to unlock value by separating the businesses.

We've got about two minutes left. Any final questions? CJ, I guess, you know, maybe just a final question would be, how would you like to leave investors as they think about Netgear today and in the future? What's kind of the key message you want them to take away?

Well, I'd really encourage investors who either don't know Netgear or have the kind of legacy perspective on Netgear to go take a look at our investor day from November. Those mid-range targets still stand. The long-range targets still stand. We outlined kind of the markets we play in, the strategies for driving ongoing differentiation. Like we're, of course, the emphasis, we're overemphasizing enterprise because everybody thinks about Medicare as consumer. But the reality is we're bullish on both businesses and the long-term value creation opportunity. So that would be the first thing. I guess the second is one of the things that I think made Nikkei successful, but I think has also been a hindrance to kind of long-term value creation, is a very short-term orientation, right? It's like new chip comes out from a, you know, one of our chip partners. We can create a new product on that, get it to market quickly. Software's outsourced. very kind of lean model without kind of thinking about the future, the long-term, and how to create long-term value. And that's something that we've really instilled in our teams. So we have five-year strategies, five-year plans that we're religiously implementing against. And so yes, while we've had a real impact on the near-term financial profile of the company, like our focus is on long-term value creation and we're confident we're going to get there.

Perfect. The breakout is in Cordova 5 as we'd like to join. T.J. Bryan, thank you so much.

Thank you. Thank you.