Netgear 2012 Annual Report Download - page 52

Table of Contents
2011 vs 2010
We experienced strong net revenue growth in the commercial business unit from 2010 to 2011. The increase was driven by an increase in
demand across our product lines. In particular, revenue from our network storage product line and switch products increased by 15.1% and 18.6%,
respectively. We also experienced strong growth in contribution income. The increase in contribution income was primarily due to revenue growth,
while the increase in operating expenses was moderate. Net revenue increased by 16.5%, while commercial-
related operating expenses increased by
only 13.0% over the same period.
Service Provider
2012 vs 2011
We experienced strong net revenue growth in the service provider unit from 2011 to 2012. The increase was primarily attributable to sales
growth of our broadband gateway products, primarily driven by service provider demand for our Docsis 3.0 products, and to a lesser extent, the
acquisition of the Customer Networking Solutions division of Westell Technologies, Inc. Contribution income remained in line with revenue growth,
with net revenue increasing by 24.9%
, while costs of revenue and operating expenses increased by 25.2% and 22.3% respectively. The increase in
costs of revenue was primarily due to revenue growth and the increase in operating expenses was primarily attributable to increased investments in
research and development.
2011 vs 2010
We experienced exceptional net revenue growth in the service provider unit from 2010 to 2011. The increase was primarily driven by the
adoption of Docsis 3.0 products. We also experienced exceptional growth in contribution income. The increase in contribution income was primarily
due to revenue growth, while the increase in operating expenses was moderate. Net revenue increased by 102.0%, while service-provider-
related
operating expenses increased by only 48.1%, due to an increase in research and development and sales and marketing, over the same period.
Liquidity and Capital Resources
As of December 31, 2012 , we had cash, cash equivalents and short-term investments totaling $376.9 million .
Our cash and cash equivalents balance decreased from $208.9 million as of December 31, 2011 to $149.0 million as of December 31, 2012
.
Our short-term investments, which represent the investment of funds available for current operations, increased from $144.8 million
as of
December 31, 2011 to $227.8 million as of December 31, 2012
, as we shifted assets from money market funds to Treasuries with higher returns.
Operating activities during the year ended December 31, 2012 , generated cash of $55.0 million
. Investing activities during the year ended
December 31, 2012 used $130.3 million , which includes the net purchases of short-term investments of $85.5 million
, payments made in connection
with business acquisitions of $28.6 million , primarily related to the AVAAK acquisition, and purchases of property and equipment of $14.8 million
.
During the year ended December 31, 2012 , financing activities provided $15.4 million
, primarily due to the issuance of our common stock upon
exercise of stock options and our employee stock purchase program, as well as the excess tax benefit from exercises and cancellations of stock
options.
Our days sales outstanding as of December 31, 2012 was 76 days, which was consistent with 2011 .
Our accounts payable decreased from $117.3 million at December 31, 2011 to $87.3 million at December 31, 2012
primarily as a result of
timing of payments.
Inventory increased from $163.7 million at December 31, 2011 to $174.9 million at December 31, 2012
. Ending inventory turns decreased
from 5.2 turns in the three months ended December 31, 2011 , to 5.0 turns in the three months ended December 31,
48
Year Ended December 31,
2012 % Change 2011 % Change 2010
( in thousands, except percentage data)
Net revenue
$
459,179
24.9
%
$
367,784
102.0
%
$
182,029
Percentage of net revenue
36.1
%
31.1
%
20.2
%
Contribution income
40,794
24.4
%
32,797
133.8
%
14,026
Contribution margin
8.9
%
8.9
%
7.7
%