Quarterly Report for Quarter Ending September 28, 2025 (Form 10-Q)

Management's Discussion and Analysis ofFinancial Condition and Results of Operations

Forward-looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words "believes," "anticipates," "plans," "expects," "intends," "could," "may," "will," and similar expressions are intended to identify forward-looking statements. The forward-looking statements represent NETGEAR's expectations or beliefs concerning future events based on information available at the time such statements were made and include statements regarding: NETGEAR's future operating performance and financial condition, including expectations regarding growth, revenue, expenses, operating margin, gross margin, continued profitability and cash generation; NETGEAR's reporting structure; NETGEAR's belief of the principal competitive factors in the business, consumer, and service provider markets for networking products; expectations regarding more predictable performance that is aligned to the market, including as a result of our efforts to work with our channel partners to optimize their inventory carrying levels; expectations regarding transportation costs; NETGEAR's strategy of capitalizing on technological inflection points, developing products that serve a broader segment and simplifying and developing service offerings that build recurring service revenue streams; expectations regarding paid revenue from paid subscription service plans; expectations regarding product mix and market demand for NETGEAR's products and services, including Enterprise, Home Networking and Mobile products and subscription services and NETGEAR's ability to respond to this demand; expectations regarding competition, competitive factors, consumer price sensitivity and demand for NETGEAR's products and services; expectations regarding sales channels, direct online store and in-app offerings; expectations regarding macroeconomic conditions and impacts to NETGEAR's operational and financial performance and business strategies; expectations regarding the consumer retail networking market; expectations regarding existing cash, cash equivalents and short-term investments and anticipated cash requirements; expectations regarding inventory levels, inventory management and inventory costs; expectations regarding research and development expenses, sales and marketing expenses and general and administration expenses; expectations regarding expected tax rates or tax expenses and changes in legislation related to the taxation of business entities; expectations regarding the impact of acquisitions, including the acquisition of Exium; expectations regarding our product portfolio, and expectations regarding NETGEAR's subscription services and service revenue. These statements are based on management's current expectations and are subject to a number of risks and uncertainties, including but not limited to those described in "Part II-Item 1A-Risk Factors" and "Liquidity and Capital Resources" below and in our other SEC filings, including our Annual Report. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. All forward-looking statements in this document are based on information available to us as of the date hereof and we assume no obligation to update any such forward-looking statements except as required by law. The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes contained in this quarterly report. Unless expressly stated or the context otherwise requires, the terms "we," "our," "us" and "NETGEAR" refer to NETGEAR, Inc. and its subsidiaries.

Business and Executive Overview

We are a global leader in innovative and advanced networking technologies for businesses, homes, and service providers. We deliver a wide range of intelligent solutions designed to unleash the full potential of connectivity. Our goal is to power extraordinary experiences where people collaborate and connect to a world of information and innovation. Our highly differentiated connected solutions range from switching and wireless products to augment business networks and audio and video ("AV") over Ethernet for Pro AV applications to our good, better, and best WiFi solutions, security and support services to protect and enhance business and home networks. Additionally, we continually invest in research and development to create new technologies and services and to capitalize on technological inflection points and trends, including cybersecurity and product security, audio and video over Ethernet, multi-Gigabit internet service to homes, WiFi 7, eSIM and future technologies. Our product line helps to create and extend wired and wireless networks as well as devices that attach to the network, such 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.

As we announced in February 2025, beginning with the first quarter of 2025, we realigned our business structure by separating the previously disclosed Connected Home segment into two distinct reportable segments: Home Networking and Mobile. This realignment strengthened our operational and financial management and enabled greater focus on

segment-specific growth opportunities while maintaining financial discipline. Effective January 1, 2025, we operate and report in three segments: Enterprise, Home Networking and Mobile. The leadership team of each segment focuses on serving the unique needs of their customers through product and service development from both a product marketing and engineering standpoint, while also managing the sales and marketing functions that support their businesses. The Enterprise 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. The Home Networking segment focuses on consumers and provides high-performance, dependable and easy-to-use WiFi internet networking solutions such as WiFi 6, WiFi 6E and WiFi 7 multi-band mesh systems, routers, and subscription services that provide consumers a range of value-added services focused on performance, security, privacy, and premium support. The Mobile segment focuses on both consumers and businesses and provides high-performance Mobile (4G/5G) products, including WiFi 7, WiFi 6/6E-enabled portable mobile hotspots and mobile routers, designed to meet the growing demand for on-the-go, high-speed and reliable internet connectivity with advanced security features. The prior-year segment financial information has been recast to conform to the current-year presentation.

Beginning in the fourth quarter of 2025, we plan to further streamline our reporting structure by transitioning to two reportable segments: NETGEAR Enterprise and NETGEAR Consumer. This next phase of realignment is intended to align our financial reporting more closely with our go-forward business strategy and customer focus. The simplified structure is designed to enhance operational efficiency, better align resources with our strategic priorities, and provide greater transparency into business performance.

We conduct business across three geographic regions: Americas, EMEA, and APAC.

Business Overview

The markets in which our segments operate are intensely competitive and subject to rapid technological evolution. We believe that the principal competitive factors in the business, consumer, and service provider markets for networking products include product breadth, price points, brand name, security and privacy, performance, features, functionality and reliability, product availability, timeliness of new product introductions, size and scope of the sales channel, ease-of-installation, maintenance and use, and customer service and support. To remain competitive, we believe we must continue to aggressively invest resources in highly differentiated, "good, better, best", high performance reliable and trusted connectivity solutions, complemented by valuable subscription services, expanding our sales channels including our direct-to-consumer capabilities and custom installers, increasing engagement with our customers and manufacturing partners, and maintaining customer satisfaction worldwide. Our investments reflect our enhanced focus on the security of our products and systems, as the threat of cyber-attacks and exploitation of potential security vulnerabilities in our industry is on the rise and is increasingly a significant consumer concern.

We sell our products through multiple sales channels worldwide, including traditional and online retailers, wholesale distributors, DMRs, VARs, broadband service providers, and through our direct online store at www.netgear.com. Our retail channel includes traditional and online retail locations both domestically and internationally, such as Amazon.com (worldwide), Best Buy, Wal-Mart, 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 Connection in domestic markets. Our main wholesale distributors include Ingram Micro, TD Synnex, and D&H Distribution Company. In addition, we also sell our products through broadband service providers, such as multiple system operators, xDSL, mobile, and other broadband technology operators domestically and internationally. Some of these retailers and broadband service providers purchase directly from us, while others are fulfilled through wholesale distributors around the world. A substantial portion of our net revenue is derived from a limited number of wholesale distributors, service providers and retailers. While we expect these channels to continue to be a significant part of our sales strategy, additionally customers are purchasing products and services directly from us. We expect revenue through our direct online store or in-app offerings to continue to increase for the foreseeable future.

Financial Overview

During the three months ended September 28, 2025, our net revenue increased by $1.7 million, compared to the prior year period, primarily due to a $12.3 million increase in the Enterprise segment, partially offset by a $5.5 million decline in the Mobile segment and a $5.1 million decline in the Home Networking segment. The increase in Enterprise net revenue was mainly attributable to continued strong demand for Pro AV product line of managed switches, which achieved double-digit end-market sales growth, benefiting from higher average selling prices and increased unit volumes. The decline in the Mobile

segment was mainly due to lower service provider channel sales. The decline in the Home Networking segment was primarily due to a reduction in market share amid increased competition. Gross margin improved by 820 basis points year-over-year, primarily due to a favorable product mix weighted toward Enterprise and lower inventory costs resulting from the depletion of older, higher-cost inventory. These improvements, along with higher net revenue, partially offset the operating loss for the current period. We recorded an operating loss of $7.1 million, compared to operating income of $95.8 million in the prior year period. The change was mainly attributable to the payment received from the successful settlement of TP-Link litigation in the prior year, which resulted in the recognition of a $92.7 million contra-expense in litigation reserves, the reversal of an $8.2 million contingent liability for success-based legal fees, and a $10.9 million reduction in general and administrative expenses to offset the related legal fees incurred. Additionally, we incurred higher facility-related costs in the current quarter associated with the completion of our relocation to the new San Jose headquarters.

Geographically, net revenue from Enterprise segment increased in all three regions, while net revenue from Mobile segment slightly increased in EMEA but decreased in Americas and APAC, and net revenue from Home Networking segment declined in all three regions, during the three months ended September 28, 2025, compared to the prior year period, respectively.

Global Events Affecting our Business and Operations

Macroeconomic and geopolitical trends have continued to create uncertainty in the global economic environment. Contributing factors include persistent inflation, recent delays in the release of certain U.S. economic data, elevated though declining interest rates, foreign exchange rate fluctuation, particularly involving the U.S. dollar, and ongoing trade policy shifts, including tariffs related to the U.S. and key international countries as well as recently proposed U.S. tariffs and intensified trade actions. Geopolitical tensions and episodic maritime security incidents along with evolving supply chain disruptions and volatile ocean freight spot rates have further added to the complexity of the global landscape. In light of this environment, we continue to invest in cybersecurity, product security, and sourcing to enhance security of our products as well as regulatory compliance readiness. The extent of impacts from these macroeconomic and geopolitical trends and from our ongoing investment and go-to-market initiatives on our 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 remain unpredictable. Refer to Item 1A, Risk Factors of Part II of this Quarterly Report on Form 10-Q for various risks and uncertainties associated with the macroeconomic trends, uncertainty and strategic investment initiatives.

Looking forward, we expect continued strong end-user demand for our Pro AV product line of managed switches within the Enterprise segment. While we anticipate ongoing improvements in our supply position, we expect supply constraints to persist, which may limit our ability to fully capture the topline potential of this growing business. For our Home Networking segment, we are seeing positive signs from our broader product portfolio as it continues to address market needs. For our Mobile segment, we expect revenue to remain consistent with the third fiscal quarter as we await new product introductions to expand the portfolio, with benefits expected to materialize next year. As we further ramp our planned investments, with a focus on insourcing software development capabilities and enhancing our go-to-market efforts to support our Enterprise business, we are also executing on our strategy of capitalizing on the technological inflection points of audio and video over Ethernet, WiFi 7, WiFi 6E, WiFi 6, and 5G, to develop products that serve a broader segment of the market with a good, better, best product strategy, and to simplify, develop and roll out service offerings that build recurring service revenue streams.

Critical Accounting Estimates

In preparing our condensed consolidated financial statements, we make assumptions, judgments and estimates that can have a significant impact on our revenue, operating income, and net income, as well as on the value of certain assets and liabilities on our condensed consolidated balance sheets. We base these estimates on historical and anticipated results, trends and various other assumptions that we believe are reasonable under the circumstances. As of the date of issuance of these condensed consolidated financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates, judgments or revise the carrying value of our assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ materially from those estimates under different assumptions and conditions.

For a complete description of what we believe to be the critical accounting estimates used in the preparation of our Unaudited Condensed Consolidated Financial Statements, refer to Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report.

Results of Operations

The following table sets forth the unaudited condensed consolidated statements of operations for the periods presented.

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.

For reporting purposes, revenue is generally attributed to each geographic region based upon the location of the customer.

Americas

Net revenue in Americas increased in the three and nine months ended September 28, 2025, compared to the prior year periods, primarily due to growth in Enterprise segment's net revenue of 13.2% and 25.8%, partially offset by decreases in the Mobile segment's net revenue of 21.0% and 25.2%, respectively. Enterprise net revenue increased primarily due to higher demand for Pro AV product line of managed switches, while Mobile segment net revenue declined primarily due to lower sales in the service provider channel, compared to the prior year periods. Additionally, Enterprise net revenue for the nine-month period benefited from the prior year's first-half inventory optimization efforts with channel partners.

EMEA

Net revenue in EMEA increased in the three and nine months ended September 28, 2025, compared to the prior year periods, primarily driven by growth in the Enterprise segment, which increased 21.9% and 22.8%, respectively. The improvement reflected continued strong demand for the Pro AV product line of managed switches. Net revenue in EMEA in the nine-month period also benefited from the prior-year first-half inventory optimization efforts with our channel partners.

APAC

Net revenue in APAC decreased in the three and nine months ended September 28, 2025, compared to the prior year periods, primarily attributable to declines in the Home Networking segment's net revenue of 52.0% and 45.8%, respectively, mainly driven by lower sales in both the retail and the service provider channels. These declines were partially offset by growth in the Enterprise segment's net revenue of 12.7% and 11.0%, respectively, primarily attributable to higher demand for the Pro AV product line of managed switches.

For further discussions specific to our Enterprise, Home Networking and Mobile segments, refer to the "Segment Information" section below.

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 intangible assets and software development costs; and costs attributable to the provision of service offerings.

We outsource our manufacturing, warehousing and distribution logistics. We believe this outsourcing strategy allows us to better manage our product costs and gross margin. Our gross margin can be affected by a number of factors, including fluctuation in foreign exchange rates, sales returns, changes in average selling prices, end-user customer rebates and other channel sales incentives, changes in our cost of goods sold due to fluctuations and increases in prices paid for components, net of vendor rebates, royalty and licensing fees, warranty and overhead costs, inbound freight and duty/tariffs, conversion costs, charges for excess or obsolete inventory, amortization of acquired intangible assets and capitalized software development costs. The following table presents costs of revenue and gross margin, for the periods indicated:

Our gross margin increased for the three and nine months ended September 28, 2025, compared to the prior year periods, primarily due to a higher mix of Enterprise products, which generally carry higher gross margins, and lower inventory costs resulting from the depletion of older, higher-cost inventory. The increase in the nine-month period also benefited from reduced sales returns and lower charges for excess and obsolete inventory.

We expect our gross margin in the fourth fiscal quarter of 2025 to be in line with or slightly decrease from the third quarter of 2025 level. 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. 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. 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.

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. Our research and development organization is focused on enhancing our ability to introduce innovative and easy-to-use products and services. The following table presents research and development expenses, for the periods indicated:

Research and development expenses increased for the three and nine months ended September 28, 2025, compared to the prior year periods, primarily driven by higher personnel-related expenditures of $1.9 million and $3.8 million, respectively, mainly due to higher head count and higher variable compensation. These increases were partially offset by decreases in engineering projects and outside professional services of $0.5 million and $1.9 million, for the three- and nine-month periods, respectively. Additionally, IT and facility allocations increased by $0.7 million for the three-month period but decreased by $0.7 million for the nine-month period.

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 in absolute dollar amount in the fourth fiscal quarter of 2025 to be in line or slightly increase from the third quarter of 2025 level. We continue to invest in research and development to grow audio and video over Ethernet, web-managed, AV over IP managed switches, Enterprise wireless products, our cloud platform capabilities, our recurring services and mobile applications, and to broaden our WiFi 7 offerings for consumers to align to our good-better-best strategy and broaden our 5G mobile products. Our Enterprise segment will continue to receive most of our incremental investments in the remainder of 2025 and we will be focused on in-sourcing our software capabilities, expanding our product portfolio that will allow us to grow our share in the sizable AV and enterprise WiFi markets. In the second quarter of 2025, we established an in-house research and development center in Chennai, India through the hiring of a team of experienced engineers, and completed the acquisition of Exium. These strategic initiatives are expected to accelerate the transition to internally managed software development, increase innovation velocity, reduce development costs, and reduce reliance on third-party vendors. The recently onboarded teams focus on leveraging artificial intelligence or integrating networking security to significantly simplify networking solutions for small and medium-sized businesses. 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.

Sales and Marketing

Sales and marketing expenses consist primarily of advertising, trade shows, corporate communications and other marketing expenses, product marketing expenses, outbound freight costs, amortization of certain intangible assets, personnel expenses for sales and marketing staff, technical support expenses, and IT and facility allocations. The following table presents sales and marketing expenses, for the periods indicated:

Sales and marketing expenses increased for the three and nine months ended September 28, 2025, compared to the prior year periods, primarily driven by higher personnel-related expenditures of $3.1 million and $6.8 million, respectively, mainly due to higher headcount and variable compensation. These increases were partially offset by decreases in brand marketing expenditures of $0.8 million and $2.9 million and in outside professional services of $0.7 million and $2.1 million for the three- and nine-month periods, respectively. Additionally, outbound freight costs increased by $0.5 million for the three-month period but decreased by $0.6 million for the nine-month period.

We expect sales and marketing expenses in absolute dollar amount in the fourth fiscal quarter of 2025 to be in line with the third quarter of 2025 level. We expect most of our incremental investments in sales and marketing in 2025 will be related to go-to-market capabilities of our product offerings in the Enterprise segment, partially offset by efficiencies in marketing on the consumer side. Expenses may fluctuate depending on revenue levels achieved as certain expenses, such as commissions, are determined based upon the revenues achieved. Forecasting sales and marketing expenses is highly dependent on expected revenue levels and could vary significantly depending on actual revenue achieved in any given quarter. 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.

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 and business acquisition related expenses, allowance for doubtful accounts, IT and facility allocations, and other general corporate expenses. The following table presents general and administrative expenses, for the periods indicated:

General and administrative expenses increased for the three and nine months ended September 28, 2025, compared to the prior year periods, primarily due to the absence of a $10.9 million reduction in expenses recorded in the prior year periods to offset legal fees associated with the successful TP-Link litigation settlement. The increases for the three- and nine-month periods were also driven by higher personnel-related expenditures of $2.0 million and $4.0 million, respectively. The higher personnel-related expenditures were mainly due to increased stock-based compensation associated with executive transitions, and higher variable compensation.

We expect general and administration expenses in absolute dollar amount in the fourth fiscal quarter of 2025 to decrease from the third quarter of 2025 level. General and administrative expenses could fluctuate depending on a number of factors, including the level and timing of expenditures associated with litigation defense costs in connection with the litigation matters described in Note 9, Commitments and Contingencies,in Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q. Future increases or decreases in general and administrative expenses are difficult to predict in absolute dollars due to the lack of visibility of certain costs, including legal costs associated with defending claims against us, asserting and enforcing our intellectual property portfolio, acquisition related activities, and other factors.

Litigation Reserves, Net

** Percentage change not meaningful.

The increases in litigation reserves, net for the three and nine months ended September 28, 2025, compared to the prior year periods, were primarily attributable to the prior-year recognition of a $92.7 million contra-expense and the reversal of an $8.2 million contingent liability for success-based legal fees, both resulting from payment received from the successful settlement of TP-Link litigation.

Restructuring and Other Charges

Restructuring and other charges increased for the three and nine months ended September 28, 2025, compared to the prior year periods, primarily due to restructuring activities initiated in January 2025 and carried out throughout the year. This restructuring was aimed at reducing costs, and reinvesting into the business to capitalize on our highest priority opportunities to drive revenue growth and improve profitability. For a detailed discussion of restructuring and other charges, refer to Note 14, Restructuring and Other Charges, in Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Other Income, Net

Other income, 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. The following table presents other income, net for the periods indicated:

The decrease in other income, net for the three months ended September 28, 2025, compared to the prior year period, was primarily due to lower interest income resulting from lower cash and short-term investment balances. The increase in other income, net for the nine months ended September 28, 2025, compared to the prior year period, was primarily due to $4.7 million of proceeds from the sale of patents in the current year, higher net gains on foreign currency transactions and contracts, and higher interest income resulting from higher average cash and short-term investment balances.

Provision for Income Taxes

Due to our full valuation allowance for U.S. federal and state tax purposes, the changes in taxes for the three and nine months ended September 28, 2025, compared to the prior year periods, were primarily a result of our reporting $99.3 million and $36.3 million of pretax book income for the three and nine months ended September 29, 2024, respectively, and the current income tax implications of this income with no deferred tax benefit in the 2024 year as compared to our reporting $4.0 million and $14.2 million of pretax book loss for the three and nine months ended September 28, 2025 and the current income tax implications in the 2025 year with no deferred tax benefit.

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 under examination in various U.S. and foreign jurisdictions.

The One Big Beautiful Bill Act ("OBBBA") was enacted on July 4, 2025 and we continue to evaluate the impact on its financial position. The OBBBA is not currently expected to materially impact our effective tax rate or cash flows in the current fiscal year.

Segment Information

As disclosed above, in the first fiscal quarter of 2025, we realigned our business structure by separating the Connected Home segment into two distinct reportable segments: Home Networking and Mobile. Effective January 1, 2025, we operate and report in three segments: Enterprise, Home Networking and Mobile. The prior-year segment financial information has been recast to conform to the current-year presentation. Additional information on the realignment, 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 12,Segment Information, and information on net revenue by sales channels can be found in Disaggregation of Revenue in Note 3,Revenue, in the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Enterprise Segment

Enterprise segment's net revenue increased in the three and nine months ended September 28, 2025, primarily driven by continued strong demand for Pro AV product line of managed switches, compared to the prior year periods. This growth reflected double-digit end-market sales expansion, benefiting from higher average selling prices and increased unit volumes. We also began to see more predictable performance aligned to the market. Geographically, net revenue increased in all three regions in the three- and nine-month periods, driven by higher demand for the Pro AV product line of managed switches, with the nine-month period also benefiting from first-half prior-year inventory optimization efforts with our channel partners.

Enterprise segment's contribution income increased in the three and nine months ended September 28, 2025, compared to the prior year periods, primarily due to higher net revenue and improved gross margins, mainly driven by a higher mix of our Pro AV product line of managed switches. The increase for the nine-month period was also attributable to the reduced charges for excess or obsolete inventory.

Home Networking Segment

** Percentage change not meaningful.

Home Networking segment's net revenue decreased in the three and nine months ended September 28, 2025, compared to the prior year periods. The decrease in the three-month period was primarily driven by reduced market share amid increased competition, while the decline in the nine-month period reflected the impact of broader market softness experienced earlier in the year. Our premium portfolio of products continued to outperform the market, and we saw growth in our service revenue, compared to the prior year periods. Geographically, Home Networking segment's net revenue declined across all three regions

for the three and nine months ended September 28, 2025, compared to the prior year periods, except for an increase in Americas during the nine-month period.

Home Networking segment generated contribution income in the three and nine months ended September 28, 2025, compared to contribution losses in the prior year periods. The improvements were primarily driven by higher gross margins, which benefited from a more favorable product mix of WiFi 7 products, higher service revenue, lower product costs, reduced sales returns, decreased contra-revenue marketing expenses, and lower charges for excess and obsolete inventory. Additionally, operating expenses declined, largely due to the restructuring initiated in January 2025 and carried out throughout the year.

Mobile Segment

** Percentage change not meaningful.

Mobile segment's net revenue decreased in the three and nine months ended September 28, 2025, compared to the prior year periods, primarily due to declines in net revenue in service provider channel. Geographically, Mobile segment's net revenue declined across all three regions for the three and nine months ended September 28, 2025, except for a slight increase in EMEA during the three-month period, compared to the prior year periods.

Mobile segment generated contribution income in the three and nine months ended September 28, 2025, compared to contribution losses in the prior year periods. The improvements were primarily due to higher gross margins, mainly driven by lower product cost, decreased contra-revenue marketing expenses, lower charges for excess or obsolete inventory, and favorable changes in product mix.

Liquidity and Capital Resources

Our principal sources of liquidity are cash, cash equivalents, short-term investments and cash generated from operations. As of September 28, 2025, we had cash, cash equivalents and short-term investment of $326.4 million, a decrease of $82.3 million from December 31, 2024.

As of September 28, 2025, approximately 27% of our cash and cash equivalents and short-term investments were outside of the U.S., which are subject to fluctuation based on the settlement of intercompany balances. As we repatriate these funds in accordance with our designation of funds not permanently reinvested outside of the U.S., we will be required to pay income taxes in certain U.S. states and applicable foreign withholding taxes during the period when such repatriation occurs. We have recorded deferred taxes for the tax effect of repatriating the funds to the U.S.

Cash Flows

The following table presents our cash flows for the periods presented.

Operating activities

Net cash used in operating activities was $17.9 million for the nine months ended September 28, 2025, compared to $143.3 million provided in the prior year period, The change was primarily due to $103.6 million of pre-tax net proceeds

received in the prior year period from the TP- Link litigation settlement, as well as unfavorable working capital movements in the current year period. Accounts receivable increased from $156.2 million as of December 31, 2024 to $159.9 million as of September 28, 2025, primarily due to the timing of cash collections. Our inventory increased from $162.5 million as of December 31, 2024 to $166.6 million as of September 28, 2025, as we work to realign inventory carrying levels with projected demands. Accounts payable (excluding payables related to property and equipment) decreased from $57.4 million as of December 31, 2024 to $54.9 million as of September 28, 2025, primarily due to the timing of inventory receipts and supplier payments.

Investing activities

Net cash used in investing activities increased by $2.7 million for the nine months ended September 28, 2025, compared to the prior year period, mainly due to $12.2 million of payments related to the acquisition of Exium, and higher purchases of property and equipment, primarily related to leasehold improvements for our new headquarters office, partially offset by lower net purchases of short-term investments.

Financing activities

Net cash used in financing activities increased by $16.1 million for the nine months ended September 28, 2025, compared to the prior year period, primarily due to higher repurchases of our common stock and higher payments for restricted stock unit tax withholdings, partially offset by higher proceeds from the exercise of stock options.

Based on our current plans and market conditions, we believe that our existing cash, cash equivalents and short-term investments, together with cash generated from operations, will be sufficient to satisfy our anticipated cash requirements in the short-term and long-term. 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. 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.

Stock Repurchases and Restricted Stock Unit Withholdings

From time to time, our Board of Directors has authorized programs under which we may repurchase shares of our common stock. Under the authorizations, the timing and actual number of shares subject to repurchase are at the discretion of management and are contingent on a number of factors, such as levels of cash generation from operations, cash requirements for acquisitions and the price of our common stock. As of September 28, 2025, approximately 2.0 million shares remained authorized for repurchase under the repurchase program. We repurchased, retired and reported, based on trade date, approximately 1.3 million and 1.7 million shares of common stock, at a cost of approximately $35.0 million and $22.9 million under the repurchase authorization during the nine months ended September 28, 2025 and September 29, 2024, respectively. We also withheld and reported, based on trade date, approximately 452,000 shares and 222,000 shares of common stock, at a cost of approximately $11.8 million and $3.3 million during the nine months ended September 28, 2025 and September 29, 2024, respectively, to facilitate the administrative process of withholding and remitting personal income and payroll taxes for individuals receiving Restricted Stock Units. For a detailed discussion of our common stock repurchases, refer to Note 10, Stockholders' Equity, in Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Contractual and Other Obligations

Except as follows, there were no material changes outside of the ordinary course of business in our contractual obligations as of September 28, 2025, from those as of December 31, 2024, disclosed in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report.

As of September 28, 2025, we had $60.5 million of purchase obligations which represented short-term non-cancellable inventory-related purchase agreements with suppliers, as compared to $57.4 million as of December 31, 2024. Due to an elongation of the time from order placement to production that occurred several years ago, we issued purchase orders to supply chain partners beyond contractual termination periods. As of September 28, 2025, $171.3 million of purchase orders beyond contractual termination periods remained outstanding. These purchase 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 have historically not been significant relative to the original order value.

During the third fiscal quarter of 2025, the lease commencement date for the new headquarters office lease, which was executed in 2024, occurred. While the contractual commencement date under the lease agreement differs from the accounting commencement date, the lease has a remaining non-cancelable term of 11 years and is now recognized on the unaudited consolidated balance sheets. Short-term and long-term undiscounted non-cancelable lease payments associated with this lease totaled approximately $3.1 million and $39.8 million, respectively, as of September 28, 2025. This lease replaced our previous headquarters lease, which expired in September 2025, around the time of our relocation to the new facility.

For a detailed discussion, refer to Note 9,Commitments and Contingencies, in Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Recent Accounting Pronouncements

Information with respect to this item may be found in Note 2, Summary of Significant Accounting Policies, in Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, which are hereby incorporated by reference.