NETGEAR (NTGR) 6 Feb 202019 Q4 Earnings call transcript

Ladies and gentlemen thank you for standing by and welcome to NETGEAR fourth quarter 2019 results conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions].

I would now like to turn the conference over to your speaker today, Erik Bylin. you. Thank sir. ahead, go Please

you David. quarter call. to fourth and Good full year afternoon and conference welcome XXXX NETGEAR's Thank financial results

Joining Murray, are CEO us company Lo, from and Chairman Mr. and CFO. Patrick Bryan Mr. the

provided The quarter year review the the Bryan. a start by by of the Bryan, by and the XXXX followed format with and and financials Patrick full business commentary call on of quarter will with we fourth guidance provided for first by finish details provided

We questions. will for any then have time

you not release, Relations www.netgear.com. If have of received today's please website a press copy Investor visit NETGEAR's at

Before we the remarks, forward-looking contains that we advise begin conference call today's formal statements. you

trends the Forward-looking operating statements outlook. tax revenue, could include forward-looking from rates, or margins, differ contemplated those statements. regarding future materially expenses by statements expected and results business Actual

refer Any forward-looking periodic NETGEAR's most For on NETGEAR a obligation today and the more these filings recent future to statements undertakes including this result no as as information, of are forward-looking Form events. on that SEC, information with please discussed or risk make new call the update factors in of statements XX-Q. assumptions to the based we

will reconciliation In today's non-GAAP financial on non-GAAP measures today. website. on our A release mentioned press addition, can call be of several the to GAAP in the be measures found Investor Relations

the to Mr. over to Bryan call time, this turn now would At like I Murray.

today's for and range, a and call. guidance top Thank fourth X.X% revenue XX.X% of the everyone $XXX ended joining basis. down year-over-year Net XXXX, end you Erik but was December near sequential on million, thank for you quarter the down XX, our

the regions perspective. the step in of saw boost XXXX. an for seasonal enjoyed all region, to demand adjusting push to we while prepare China WiFi the visible initial Greater As end-user worldwide to the inventory channel quarter-over-quarter strong X able holiday from declines were take We in anticipated, other

down was million, ended the net X.X% year year revenues XXXX, which the were December NETGEAR full XX, compared For $XXX.X XXXX. to

to saw technology Day presented our new inflections, top at Analyst robust during As a bottom and growth our early AV strategy developing committed going strategy in with will we leading this November, lines to WiFi and of products push will subscription stream. delivering in our these off X, expanding come. into we growing markets adjacent XXXX. our are confident We Pro in years past forward and success We QX the and revenue in to directions in subscriber remain pay continue

our our ramping for resulting just of operating non-GAAP from tariffs season inefficiencies that were for non-GAAP $XX.X in year our confident year this revenue. new end Our XXXX headwinds margins of a the the of and below outside improve felt was related we gross We and cost very a will X.X%, additional the the guidance prepared quarter market of operations. margin moving operating remove will fourth range. manufacturing due throughout million, was the China low It holiday benefit at came feel took arrival to income to promote operating competitor and advantage products of margins U.S. in in course reaching efficiency We of generate non-GAAP to operating the and our XXXX X.X%. and share increase production as which a we we full our opportunities in competitive Full we from the to non-GAAP in the

net of sequential inventory and X.X% our on quarter-over-quarter. was revenue quarter year-over-year EMEA year-over-year a million, and XX.X% planned adjustments. the fourth of $XX.X a basis. was down the million, year-over-year Americas down up For XXXX, were and was channel sequential primarily the in was down Both which for downturn X.X% which $XXX.X revenue XX.X% revenue net result

year comparable challenges down in region. prior million, $XX.X from a XX.X% of was continued primarily revenue as sequentially, net China APAC quarter was Greater result geopolitical Our and the the XX.X% which the down

XXXX, quarter a about quarter approximately months was fourth wired For about products XX%, last shipments, about and between The months in constituted units and the products. gateways last million we introduced respectively. million our between and of fourth products XX XX% and X.X about shipped wireless shipments. revenue the contributed quarter of split of Products about XX%, business total wireless the combined The million products net units, XX% was in quarter of of XX wired routers Shipments respectively. were and all wireless fourth introduced net of split revenue nodes XX% fourth for home XX% X.X our and including of the XXXX. while X.X

non-GAAP on, From detailed numbers. on non-GAAP release reconciliation points A distributed is today. discussion point to GAAP my our focus in earlier will earnings from this

year-over-year XXX XXX third basis, basis the in gross burdened we additional The of in the XXXX. points in XX.X% XXXX from incremental effect the previous of was on tariffs down to points the basis Asia, to in non-GAAP down compared and the compared in transfer residual cost Southeast quarter which by and a quarter margin On tariffs the fourth inventory. the as quarter were some prior XX.X%, China the QX year comparable XX.X% implemented production of still of September was to XXXX

half adverse manufacturing the first the see of inefficiencies year. to the effects and of fade tariffs entirely this during expect We

in at up operating and came Total sequentially. $XX.X X.X% non-GAAP million, QX down which was year-over-year expenses X.X%

resources portions while our making to need that As of the expenses prudently, also always, succeed. manage have sure we the business our that they growth

of in our headcount service Our XXX to the the offerings. the quarter. workforce, as end enhance of specifically XXXX was our at expand to area in R&D intend We

services areas will Pro investment R&D invest to the was critical in fourth year as to X.X% prior quarter and as of net here expense in revenue we remains non-GAAP the the net the Our of compared of for come, and such period X.X% X.X% the our of success net of to business in to quarters XXXX. the and quarter R&D comparable especially in third revenue, AV. revenues future continue growth

Our on foreign and in non-GAAP XX.X% fourth tax XXXX. revisions the benefited In liabilities the for the rate domestic we quarter of both quarter, was full to year. from favorable tax estimates

the Looking for net $X.XX. of for of $XX.X line diluted year was EPS income and per of the non-GAAP Non-GAAP diluted full $X.XX. non-GAAP bottom XXXX share QX. reported earnings We at million

to of successfully us. balance quarter away million sheet. heavy fourth the Turning by XXXX and from with $XX $XXX.X the We our ended term China production cash the We is in inventory the migration in quarter as lift the million investments. behind of short reduced

We cash XXXX. expect reductions in our will benefit further to position continue inventory which

for $XX.X total cash over which our provided trailing purchases cash cash forward. total months of property quarter, during the million. the and in trailing XX which we to capital continuing XX operations confident brings generate million the from over operations During $XX.X expenditures cash ability quarter, $X.X equipment generated our million. We from to used the $XX.X to flow going in months our million continuing used brings in remain We

approximately in million In spent QX, we common have Since average $XX an per million of QX at repurchase XXX,XXX shares. repurchase $XXX.X our share. $XX.XX price shares spent XXXX, the XX.X to of to stock repurchase activity we million of NETGEAR start

the approximately XX.X fourth end the repurchase to in million shares Our the come. quarters fully is as our opportunistically share diluted of to to quarter. stock continue count We plan at

number revenue to segment, quarter, Gaming factors. Pro home on Nighthawk, $XXX.X net industry-leading segments. of which decline Orbi, and due to down X.X% was includes a turning Nighthawk brands, the The Now basis million was sequentially. a down results the connected generated during for Meural XX.X% year-over-year which our of The product year-over-year the and

shift North towards in steps occur Firstly, reduce America, to took in X an WiFi anticipated to inventories we half the XXXX. channel first for proactive accelerated of to prepare

Secondly, geopolitical our And carriers we service the we are provider business declines rollouts XG in offerings. saw experienced fast region declining Greater due reduced revenue to awaiting of lastly, in product issues. China as

quarter ticked Our for share to competitive the of market up increased the fourth WiFi environment. in in face U.S. XX% consumer the

The region. U.K. X.X% year-over-year SMB the the generated Brexit in quarter revenue seen driven was geopolitical and segment The the to which basis China were in down sequential, both a decline year-on-year fourth sequentially. market the Greater of declines, of $XX.X million due for X.X% situation net by down on and and XXXX,

to the the in lines our On AV well front, Pro continued product PoE+ switching market. and perform

U.S. Our strong quarter. remained the sold through in retail market fourth at channels XX% for switches share

will Patrick commentary, turn to his of quarter first after the call for guidance the for I XXXX. over provide which now I will

Bryan and you Thank everyone. hello

Mesh are shift to we over switching. were which three reception excited strategy. X the the a garnered have to and Ethernet accelerated quarter Power We progress about made Plus the growth along technology in strong growth we in market and pillars WiFi the debut first our fourth We of

AV XXXX new the won project We we Olympics the the quarter. during digital Pro for XX-inch also the Canvas Meural worldwide debuted and first

in we side, to strong our subscriber and XXX,XXX sequential race in are service now a we growth year-over-year paid On the that to XXXX. total and subscriber count with increased double

with off money consumers. the the tri-band line fastest Many holiday and the commented top by WiFi X press It the kicked received both Orbi and at reviewers it WiFi tech was nodes. for $XXX We well two Mesh that season is best selling can of worldwide our buy.

WiFi our consumers for WiFi to mesh with their January every the at two follow fast X in for We are that house. up dual-band with corner homes quickly in that $XXX Nighthawk of offering nodes proud early desire smaller

Vegas award the Our cable in gateway industry-first CES in WiFi won Las X DOCSIS X.X honoree January. innovation

in QX Las had to of the allowed line-up America CES January. strong Our We all technology promotions a continue gain us in well-executed North Vegas in share market. successful retail very and leading-edge to important in

also Beyond WiFi mentioned, new second showcasing mobile our line-up include extender, that the just we second I the a WiFi that router products new XG generation introduced will plus in X. X a

routers. a grow rival extenders have market. us portfolio No average expand of can routers, X offerings, allowing X the of now and selling mobile in thus price mesh, and WiFi cable comprehensive We offerings gateways, to broad competitor WiFi our line-up

in the WiFi world, about the With front market XXXX. we around strong excited of in opportunities us the are X of smartphones adoption

over Turning to in from where growth new switches Pro new switches, a end of further year-over-year the QX, QX. switches These sales QX power our Plus ourselves busy and SMB four market introduced distancing also to worldwide. switches Power last our Ethernet introduced in competition. plus new year, in business, quarter-over-quarter had AV We continue our we

AV. our provider equally CES we for Pro business, with leading SMB event the Semtech, press chip for a XXXX where joint exciting was held

Ethernet will share unparalleled speed to continue us in gain Ethernet the up in which to are the power. also over in switches and cameras, new our enable worldwide to XXX providing AV PoE and debuted models per Ethernet speakers access performance ability and power switch PoE while and two price run simultaneously Ultra Power to deployment Their competitors over that XX Ultra per The space. users the of at lighting. available port, gigabit connect new ports displays, watt is watt We now IP points, give Power industry against enable

We continued to make streams. initiative recurring progress our build with to revenue

the As XX.X of we users. the registered approximately have million of fourth end quarter,

count has over Our end the registered XXX,XXX XX% grown to of paid app QX we which X.X growth at users importantly, XXXX. Most XXXX. user represents million, subscribers had sequential approximately

the technology successful teams Shutterfly finance of at years Financial was to several am planning During expertise additions Silicon EVP Laura NETGEAR's leadership background recently Chief most I Officer than Board Durr our Valley leading Laura Mickey Directors. more and to in team. Adobe and of quarter, strategy Polycom. business, welcome Board. with and across our brings we led Board to of and and Mericle XX excited and announced strategic marketing joins Mickey to and a the companies

to technology pleased extensive will be team team responsible to to also a cloud have complement of strengthening prowess. be offerings networking solutions. our and we to am us Martin Groupon as the CTO our Westhead of comes apps critical of software Dr. for continue member overall Software. will our service and Martin and app build Martin product I to line-up as from

QX, capitalize will inflections on to WiFi Ethernet. the Power continue in we In X, over XG, technology

through mix component channel our inventory continue China, quarter. region diligently in our growth logistic sales. to Coronavirus challenges the will Also, the supply digital reach X to and outbreak continue every subscriber presented by WiFi will and work towards channel work We importance We to chain expand we market adjust in of end to accelerate our and a our canvas. to believe will Pro our and AV market

Bryan call I first quarter will now to the back turn guidance. for

you Thank Patrick.

XG the for second quarter believe that expected Our quarter deployments the of million. We to half provider per for is year, $XX revenue $XXX gain XXXX. million range net be in first quarter to $XXX first $XX it would on in currently half the service return the of more expect the average be when approximately million revenue average of million We on to to per our momentum. will

we towards X addition, in inventory of rebalance the channel quarter the continue efforts our to first expect mix In to XXXX. WiFi

in X.X% range GAAP be X% expected negative operating range and be is of margin X.X% the margin expected operating is of to to in non-GAAP to to negative the X%.

be GAAP is XXXX. XX% is rate expected XX% first to expected quarter approximately rate Our for and tax non-GAAP to our of the be tax

we Operator, questions. take can that comments now concludes our and

Thank you. [Operator Instructions].

Your Tindle with of the line Raymond Adam first from question comes James.

Your is line open.

pricing product Good on out technology. Madison, have legacy yet market thanks there in this their afternoon. there have but to products my the on chosen only of a be few is larger X and Adam This more introduce the notably, to questions. for most for new and players Patrick, with aggressive into competitors taking WiFi standard are

cycle this do versus details prior discounting cycle of ones, contrasting cycle if this products comparing is kind the versus So maybe prior of heavy cadence more upgrade upgrade as add years? of versus legacy prior you think could and affecting think ones? you you any And about the this

We don't so. believe

is leaders, need as of the upgrade the it cycle, in it that as those speed adopters, absolutely typical XX technology months six think be of primarily well to the early consumers, I the WiFi. months first will who the fastest pretty

end. introduced why the still in high we that's our So, mainly products

router most Mesh. for routers the X $XXX On the WiFi side, popular WiFi and are Similarly above. our X

the really those of X our contested WiFi of not by pleased really any products. So with and competitors we those are are adoption

be were I see fact, the market our the because as X at WiFi routers, of of of even X looked end serious price a end, is in the router though WiFi we we our matter share to there market able market our in router mean, router As especially introduction demand to as competition, lower growing. well

and desperation out deter us our leaders WiFi the we in of X. is to adopt the the actually believe the some discounting from early that But So legacy of competitors. product adopters not would it technology

X. Now, to as points. span and delta are to premium, over lower be WiFi and WiFi have of be that to PCs more will they a look at around And WiFi the switching we market with will would will and more progress, X of more mass we tablets course, going products X then the the able phones low price world as

the the multiple will than we see be And think to I because upgrade PC tablets providers this course, angles to upgrade partners to the see actually and the faster cycle. the cycle cycle. like transition for from before of also would and see the like channel cellphone, the us, would like upgrade

estimate we market. be would this fastest year, more of in the Christmas overall that our probably the than And XX% transitions. one is products of will by market X this believe So the constitute WiFi

It Okay. here. to on for guidance going in be that out Thanks like need XXXX. you the for follow-up it margin X% like color looks there. to all laid then X% seems to just Analyst Day, that's the And a reset to a get to Bryan. target operating At based

So we starting, just with the here? can us can And in than this obviously lower point year. how a improving you you much about think operating of margin year progression at help QX are last from

So Thanks. see operating do can year-over-year? you actually plausible think margin that it's you expansion

A lot the as points. came will chain inefficiencies see of supply November. laid in the of come removal out from And Yes. tariffs we will with believe margin tune basis year the expansion of we definitely to migrating the this we XXX our that that and

margin mid still target low the that we the see that see we we expansion. to topline that So on we and out single digits expect of growth operating the there. put think to margin the And can

do to X, first which the leverage down, run expansion channel $XX X% WiFi service towards off losing reason in year. in need operating first inventory the with which through is recent quarter, margin some quarter, with the of at Clearly per margin culprit so and provider are But or it kind revenues, is see of to mix the the we we coming the to shift million the reduced rate move the expect continue call on as quarter, our average range. we million the $XX most coupled to X% topline of are the

will mix of this expect provider, do X, see these continue we the mid a CHP, And execute be seasonality would the majority a in in WiFi normal our take quarter QX as the I high service we a to that QX. expect efforts to to as we first channel growth of I towards will for single where excluding there see shift digit shift we flat. bit the that in lift revenues little in

Okay. for the again details, Thanks guys.

Your with BWS Financial. the line comes question of from next Hamed Khorsand

is Your line open.

taking for my Thanks Hi. call.

Just important us margin revenue the gains help to seem to operating when drive be direction? in so it why understand going is wrong

think is I X. drive. which that, and subscription gain acquiring, of we we as Well, service basis customers number naturally continue shelf-space revenue share are also the move do gain also to and the to the important that And of we gain WiFi form our we market

we trade believe get tariff. that's we would But the is do us short and overhead thing the through margin this we to quickly back thrown the cost that that believe So term we operating a the on work war at by growth. as

like beyond the a seems So you in again. quarter paths But actually converging if the be will short two, are or the path term, it divergent. look

We are very confident of that.

Okay.

help as same? like remaining it still is the understand that the on X, inventory down me the is WiFi pretty products? on to WiFi going regarding seems level focus It WiFi related Or your is that, X. Just X much moving

QX promotional inventory we get additional actually as as QX down down. in we channel open more as the then we fast WiFi X some But mentioned, for going it's and because slots of well originally our X order as is that do channel in we inventory to that, our X of partners. advantage channel. going definitely as WiFi the own the not took anticipated And Well, some of shipped in from into we WiFi in in products

going why to are in we continue So that's that do to adjustment QX.

tick And the market we U.S. saw in in a up our share positive

occupy well now, display and operating which very able the improve topline our So thus XXXX. share for of continue a progress and more X products WiFi our in more really lay will to position margin groundwork good we right market as through as to be to are to we us as our shelf-space

a about talked in QX. seeing you is the your translating And that bit in price are little that points? you in prepared product how your comments competitiveness competitiveness? Where into And offering

is is The the One And naturally TV shelf-space primarily the in get the competition well say, put as both aggressive Eero. competition seen pretty they comes Best hardware from Every because own in from is come pricing. We Amazon with the its areas, that to website that other needless that's as pretty aggressive knows market, in they is, time who on price to into have Echo right. Dot. Amazon's from Well, they products Ring as Buy. all the two shelf-space. the cameras competitor everybody competition they to out, come that. And we in on the Fire anticipated

From market as perspective, strategy we our able gain So a them both believe as pay worked to share will as be with QX WiFi we yet we shelf-space that the for hold for us, our share expand and can would WiFi it's we off WiFi bring X, our X this in shelf-space to compete X. that out hold progresses. do Then could we important shelf-space. better so year well and it additional that that

comes question with Yun Bank. of from Brian the next Your line Deutsche

open. is line Your

But think paid your quarter Thanks for noise. for I at apologize taking the provided presentation and actually the any this where in service subscribers background is you Hi. first question XXX,XXX.

color maybe if to be that's just churn? any whether growth additional So Any subscriber I that wondering there was would rate quantitative there there, might helpful. be able ARPU, metrics is expectations, general you share

subscribers. time, the we I disclosed Yes. Analyst year. our it number Actually, mid-November, it was XXX,XXX was that in it's our see, mean, back At second November Day time. subscriber last on

That the between another our prepared XX,XXX. double aim That, that we we from double added course, end existing want XXX,XXX, this and And So December, our XXX,XXX. to of of churns we to just, in include number. then said that remark, of the is year. we that going

we We we could good on have a plan that. and execute that believe

very now, and details, impact because of Right up will think I numbers do I rate, impact at closer be and start be still bottomline XXX,XXX-plus, we not once ARPU, then we more to think it would even break But the subscribers, disclosing churn et in have million material. of X.X cetera. we the terms even reach further revenue meaningful would not

more there? then, And weakness China, you us of just information anticipate expand Great. in do you how just on that saw kind little to headwinds and Okay. you long the these And give can a last? bit

mean, Well, economy war. lot Chinese first I and trade of the in damper networking enterprise a to trade war purchase And foremost, American so goods. the state-directed it's basically put

entities So our Chinese of a which sell state lot used SMB to pretty into declined have schools, universities, manufacturing, significantly. as such products

the a some was from there China were consumer to Secondly there buy buying than intention that rather time American. basis,

phase by. we has that confronted this with Coronavirus. are that now Fortunately Unfortunately, passed

we So, China. those the two Mainland in facing headwinds are are

since street has not in Hong out and been Kong, it's knows Kong year shopping. Hong that And the in July ever just significant And everybody last then many of in people unrest. social

So that consumer our both really and SMB business. affects

buy signed, better. we local with the the will away, kind first, for Mainland both thought new first with passing get at places China cannot But that the trade count outbreak the Coronavirus of Kong, that on in So of of with blow-over then agreement and of Hong we upswing. consumers in phase things now

you. Thank Okay.

Instructions]. [Operator

of the with from Cowen. comes question line Paul next Silverstein Your

open. is line Your

Bryan. the that taking several nature. clarification have you Patrick are questions. appreciate Thanks got I a I and of

misheard of thought hear that QX to you back expecting I X% to I maybe correctly or you First growth? the [but go Bryan, order you on heard misunderstood. to off, year-over-year are I did I XX% say

And talking you growth, to business actually efforts the some of flat provider would seasonality, Typical see sequential consumer QX is service we our taking revenues. referenced QX. about as exclude we in when you to said, But I What QX are Yes. seasonality to the the tune high of portion thus, to we growth in sequential channel mid actually to that X. of we think further shift the WiFi will business the see single mix digits. in that

the I clarification. appreciate it. Got

do to So will on you thinking you Has see return growth? that year-over-year think when your changed issue?

We this definitely expect year. see year-over-year to growth

could I be early QX. we certainly go think as the it. But will of back it the see we as as year, half into

forward sufficient be et technology, with to translating shelf-space g, the shelf-space, Okay. about your I order critical to terms is to that's in think sufficient buy of the so drive consumers the have the front the share ac, next until iteration response mean, cetera, And answered then are trust thereby revenue retail respect have there. where future already commentary of we share to you about so talking one-time I the market we n are or market share revenue. the have got Otherwise, of you your before. the you about why When customers, is obviously when enterprise-focused going I in in interest response markets last whether and But is in, and not share in talking important, are growth. market it's question company, of

in influence much we you to brands sales as walk stores, are is presented is our presented space, there number right. the a that is number Costco the phasings sell they and everything share think still to clearly that give And future the of if them exactly lot are and that as a happened they the XX% of bottomline. important. whatever retail two physical shelf-space stores. lot and I are the very on In will and with you topline is you And market influence into stores, more phasings. sales. one, you You people whatever when of your And online, more has walk going present mean will into are that shelf-space

share. space very to market retail the have important is So

I me, for it. may. Got last if One question

order respect and you It's with revenue not for and reduce yourselves that's pressure. on Amazon bit they I impact to life. in permanent to trust improve thereby is battle you and constant margins trust, are to But the So growth no? I going permanent obvious, are I margin maintain They a for Eero, going to and mean, cost critical margin of enhance pricing of fit a clearly, thereby that's away. forward. a fact stating And profile there structure. it's a drive

Yes, absolutely. to And the revenue, services so important why, that's for right. us, all it's subscription develop

cost, right. compete in what So scenario, the in toe-to-toe them systems all WiFi on we the, worst and call terms we have on case to with of all

Now we still have of a that lot compete with other us. categories they don't

are We Those as such in as extenders. in such mobile, cable do and as such unique modems, pretty WiFi not categories, they gateways in cable compete.

And reach compete money subscription the on base. pretty to revenue However, them is we customer in derive basically the and really WiFi our loyal toe-to-toe make from we to aggressively, competitively cost. to continue on our with then routers/mesh system space, definitely are to that prepared capability

queue. I the the will appreciate Fair enough. the responses. I rest Thanks. offline. I in get will take back

Sure.

Guggenheim Securities. question of with Gutman comes the Your line Robert next from

open. is line Your

XX% Thanks quarter, first decline all is taking sure sequential what that not all Of was all you the, I to I that ex-service with number do provider? to a before. growth recapped. In I where now? numbers the question. you for of heard of the sure am be XX% expect Because And am changes, the not about in the CHP, that

Yes.

You are right.

single in WiFi we in shipped provider. excluding efforts decline an that on it decline. And the mix a taking the we which channel. we QX would thought And said had given we for as back service to what bit be earlier, gain is low that the allowed CHP, were promotions of be XX% Patrick channel products So increase seasonality saw in we X muted, But shift to that said the to some it opportunity in some November normal thought, time, we would digit at us in mid would to share. a be the

inventory channel mix. still have So on some we work do the to

of So you somewhere XX% seasonality into to the think kind between range. I probably normal are XX%, looking back

I Okay. to compares And with said Day, to, XX% to that compares the XX% that that number, Analyst for you XX%? XX% think

Correct.

revenue? then, But in mid teens million midpoint if year-over-year reason? with that that, or I SMB would to what or your guidance that implies get overall to so $XX implies, of year-over-year the be does decline a teens like it on Okay. the side mid the think for I service growth think provider, So

right, That's Rob.

had exceptional U.K. at Brexit a time, recall, of and occur XXXX in an was said channel you we into if of that holding inventory end March. deadline was So, QX. for We saw we the SMB. correction original the large because QX quarter QX partners our had of fairly the into some pull-in And

I appropriate So it's and to look QX of QX a comparative at average last between from year. standpoint probably think the more

it. Got

I Okay. one if And am I other sorry, thing, may.

you but right. know I the through margin year, the it Just just to I talked about I heard want make of sure cadence

full significant guidance So of for second margin quarters X% in that last guidance, XQ much is same would X%, guidance to quarter, to a get the two higher the to year X% the year. but of the imply X%, the to small uplift than

that the is right? to that? there there But more know for quantify Or any tariffs. XXX the is way I is basis So points

Yes.

pattern right lift that QX topline are holiday leverage. QX normal promotions, we where see get back-to-school, more see seasonal that's the You actually would a and we in we from

year. the the half typically margins operating we of back non-GAAP higher experience So our in

it. Okay. Thanks for the taking Got questions.

the question Your with comes of Silverstein Cowen. next Paul from line

is line open. Your

apologize. missed I one can is If more. impact the did, have I Bryan, you was? There this. what might China quantify But always I

Yes.

provider some APAC the that the region. So did as We would declines well region would XX% I there of Greater service the decline to to bulk the have of say, would the China decline but be bulk attributable attributable be in that region.

or is, as China but back, which psyche confidence you rapprochement, the universities buying state be Patrick back? buy let's be American less your that will year, in is underlies may Bryan, but would say, And arises happy geopolitical supplier. part thought Coronavirus they state-directed they your the Coronavirus, about you Chinese. if on U.S. to those that, back buying other coming thought never any of may other The terms it they come that that unless may the institutions, American enough for confidence the be institutions similarly for directing or coming impacts What Chinese arises There the state-controlled, from this will. and of

Let referring me the little make side on SMB clearer. to Kong Hong I a bit and consumer side. referring was it the to the

over, are SMB consumer right. they China, for Mainland you the wind as XX, in side did it iPhone on for it, side, on pretty mean, is never SMB well. purchase. have the come You back the But after blowing the seen may I

finally side, is So dovetail it's has unrest business the original over we was that's the that's we a coming Kong, just about I to the were assume success the because on the riding And back, normal, for January. there what in calming consumer that what down referring Hong then, the back hook. to. And

so Patrick, expecting to business? you not Mainland clear, of and be Bryan are right. All SMB China return a

view. our factored into is we year not. are full No, That

much how as was question, the begs opposed it But SMB of consumer? right. the China All to decline

mean, declining both very rapidly Well, so far. I are

were terms two China in [Indiscernible]. But, your of they business? XX-XX

much, much. XX-XX. Yes, pretty Pretty

Thank that. you. appreciate I

Sure.

this no I further Patrick are the turn time. will call Lo. over questions at to There back

joining for you Thank today's call.

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today's this conference you Ladies call. Thank concludes gentlemen, participating. for and

now disconnect. may You