NETGEAR, Inc. (NTGR) Earnings Call Transcript & Summary

Thank you. All right. We are going to get started. Welcome, and I want to start by thanking everybody for being here, both in person and online. For those of you who are in person, many of you traveled from a long way, and I really appreciate that. We really appreciate that. It's not a trivial time to be doing across the coast trips. So thanks for being here. Today is an awesome milestone for NETGEAR. We've been largely under the radar, transforming the business. And today, we get to share our plans for scaling the business and some midterm, long-term goals that we're going after. So it's a big, big milestone for us. I want to start by thanking Crestron for hosting us today. So for those of you who are joining online, we're doing this Investor Day from Crestron Experience Center in New York. And we have Crestron, EVP of Marketing here, Brad Hintze. And in addition to this being a great venue, the price being right, thank you, Brad. This whole experience center is powered by NETGEAR. Our enterprise -- or our NETGEAR enterprise solutions, both on the AV side and on the WiFi side. So as you all know, we've been doing -- working hard to bring more visibility to the work that we're doing on the enterprise side. We figured what better way to do that than to host an Investor Day that's powered by NETGEAR Enterprise. Here's the plan for today. I'm going to kick things off talking about our transformation, really the foundation that we've built that will allow us to scale. Pramod Badjate, who leads NETGEAR Enterprise, he's going to share his vision and strategy for that business. Jonathan Oakes, who leads NETGEAR Consumer is going to do the same for our Consumer business. Bryan is going to share some info on our financial goals, a little bit about 2026, some midterm goals, some long-term goals. I'll wrap things up briefly after Bryan, and then we're going to go into a Q&A. We have about 90 minutes of presentation planned. So buckle up, we've got a lot to share, and we're planning for about 30 minutes of Q&A. And for those of you who are in person, we're planning for a small reception. We've got some great demos to share as well. It wouldn't be an Investor Day without a safe harbor. We'll obviously be sharing stuff about the future that are subject to risks and uncertainties that we talk about those things in our SEC filings, so we'll direct you to those. So I strategized about how to get off this slide as quickly as possible. And so instead of giving any type of background about myself, I'm going to direct you all to my LinkedIn, and you can look at my career and accomplishments there. And instead, I'm going to jump right in to talk about why I joined NETGEAR, and why we're so excited about the opportunity ahead. There's 4 main points I want to share here. First is, we have a number of tailwinds working in our favor, whether it's the transition to IP-based AV, the growing complexity and importance of connectivity in the home, the scrutiny that's being faced by China-based or China affiliated companies. We just have a lot of macro factors working in our favor. Second, NETGEAR has incredibly strong bones. So we've got great brands, global distribution and supply chain. We are very early to exit China a long time ago, that predates me and a very strong balance sheet. So really, we're really well positioned for a significant transformation. Third, kind of as I alluded to at the outset, we have a real opportunity to unlock our enterprise business. That business has been on a great trajectory despite the fact that it's been built in the context of a company that's largely been consumer focused from a leadership and strategy perspective. And then relatedly, after 30 years of kind of operations under the same CEO, same -- most of the same leadership team, we have a lot of opportunity to modernize our operations, change how we do things and unlock value in the process. So I'm about 20 months in, and I'm very happy to say that like my thesis for NETGEAR and the reasons for joining feeling very good about all of those. I wanted to make the point that our aspirations for unlocking the opportunity at NETGEAR are really significant. So we're not here as a leadership team, as a broader team to optimize the dials on some existing businesses. We're truly focused on transforming NETGEAR to deliver long-term value to shareholders. And a good proxy for what we're looking to achieve is what we achieved [indiscernible]. When we transition that business from a packaged goods, retail business, transactional business model to a digital services business. In doing so, we unlocked billions of dollars of shareholder value by growing our margin, growing our profitability. Another one that's maybe a little closer to home to NETGEAR because it's a device business, is Logitech. Bracken Darrell led an 11-year transformation of Logitech as CEO there. And again, in both of these examples, a ton of profit and gross margin expansion and a ton of value creation for shareholders. So those are our aspirations, and we're confident in our ability to deliver that. So how do we do it? We've developed and are following a 3-phase transformation approach. Phase 1 is all about building the foundation. That's largely what I'm going to talk about. That will allow us to scale. We're largely exiting this phase now. So I'll be looking back at what we've set up for NETGEAR. Phase 2 will largely be what you'll hear from Pramod and Jonathan. This is all about strengthening our core businesses so we can build value back into NETGEAR. That's our -- the phase that we're just entering. And then once we've done that, that will give -- that will put us in a position to be more aggressive in accelerating the growth of our business, particularly on the inorganic side of things. So in terms of Phase 1, we structured our transformation initiatives in three buckets: strategic, organizational and operational, and we really couldn't be more proud of what we've accomplished in each of those areas. So I'll talk about each of those now. So first and foremost, for us to be successful in delivering on our long-term value creation goals and aspirations, we really had to reset our company's North Star, and the expectations that we set for ourselves on what we plan to deliver for our customers. And our new purpose as a company, really captures this at the most fundamental level. Going forward, NETGEAR exists to power extraordinary experiences. So whether it's powering edge share in concerts, protecting your business, truly solving connectivity in the home, our new purpose sets the bar for what we're seeking to enable for our customers. Similarly, we redefined our mission. This is really the how and what we do behind our purpose. And every word of this mission was chosen with care, but I'll just elaborate on a few. Intelligent solutions is a nod to the fact that we'll leverage AI and other technologies to deliver innovative software experiences, the power the extraordinary. And Protect is there because delighting customers with exceptional software experience isn't enough in today's cyber landscape. Security, privacy, peace of mind that comes with that are paramount to winning the hearts and minds of customers. So our new purpose and mission are being integrated into the DNA of the company. There's themes you're going to hear more about today and in the years to come. We also translated this North Star into a set of specific long-term business outcomes that we're pursuing. Bryan is going to talk a lot more about these, but let me elaborate a little bit. From a market perspective, we're focused on investing in markets that are big, growing and profitable. From a product perspective, NETGEAR is known for incredible hardware, the reliability, the quality, the performance. We are going to combine that with Intelligent Solutions that delight and protect great software experiences the power of the extraordinary. That will open the door to growing our subscription and services businesses. And when you combine those three things, big markets that are growing and profitable, software differentiation, subscription and services, that will allow us to continue to expand gross margins on the long term. We've done a great job of that over the last couple of years, but this remains a long-term focus for us. Much of my career has been driving transformations from transactional businesses to services businesses. I mentioned EA upfront. We have conviction that, that opportunity exists for us here at NETGEAR. And the reason for it is a little bit different when you look at enterprise and consumer. On the enterprise side, that business today for us is nascent. And we actually lag competition and customers are asking us for these services. We launched professional services a couple of quarters ago. That was at the behest of our customers and our partners. So we have a lot of catching up to do, and we see a ton of opportunity on the enterprise side. Pramod will talk more about that. In consumer, we actually have a $35 million AR business today that's growing double digits despite the fact that we've created a top-of-funnel problem for ourselves, and we haven't historically been good at subscription fundamentals. So when we address those two things and then add value into our subscription service, Jonathan will talk about that, that will allow us to accelerate the growth of our ARR on the consumer side. Now we couldn't do any of that without the right organization structure, the right team and the right set of values. So from an organizational structure perspective, the biggest shift that we've made is to really elevate our enterprise team so that it's equal weighted to our consumer team, which is, on a legacy basis, been the focus of NETGEAR. If anything, we're maybe overcorrecting a little bit, to make up for that on the enterprise side. So we now have two true business units that are fully -- have fully integrated product development and go-to-market capabilities, that are driving those businesses forward. And that's really why today, Pramod and Jonathan are kind of the stars of our Investor Day. Their business units are supported by lean central teams so that we can get scale from those investments, whether we're talking about central technology, G&A, operations, central marketing, it allows us to get leverage from those lean teams that are supporting the business unit structure. The organizational shifts have been combined with a significant leadership team reset. So this is our executive team today. The top row of folks have joined us over the last 18 months. You can see the BU structure reflected here with Pramod leading enterprise with his commercial leader, Eric Law; Jonathan leading consumer with his commercial leader, Kristin. These are folks as this will become obvious when you hear from them, folks that have a deep pedigree in the businesses that they're driving. But it's not just about the new leaders. NETGEAR has an incredible existing team. And we saw an opportunity to elevate a number of those up-and-coming leaders from the existing team. And those people that really share the passion and the same vision and conviction in our opportunity ahead. I'm also happy to report that as part of our transformation, we've really restructured performance compensation really across the whole company. As it relates to the executive team, we've increased the number of executives who, as part of their equity allotment received PSUs. This whole group gets PSUs. We've increased the percentage mix of PSUs and then we've tied our PSU structure to shareholder value creation, which wasn't historically the case. So this team is aligned with shareholders on growing value -- the value of NETGEAR. That leadership team partnered with the rest of the organization to redefine our values. We're incredibly proud of these. These are the behaviors and mindsets that are really needed to accomplish our long-term goals. They're now embedded across everything we do, whether it's hiring, performance management, compensation, these are part of our daily conversation. I won't describe all of them. Some of them are pretty well understood by their names, my favorite is, of course, dare to transform. We also have a great Board with a strong mix of consumer and enterprise and public company experience. After I joined, two of our longest tenured Board members chose to retire, that gave us an opportunity to recruit Laura Orvidas to the Board. She's a 20-year Amazon veteran and is now CEO of a prominent consumer app-based subscription company. We also wanted to keep the Board lean and mean. So we've built an advisory board and added strategic capabilities and experience for areas that are important to our transformation. Some of you will recognize some of these names. But just to call it Michael Marcellin, we've historically not been strong as an enterprise marketing company. Michael was the former longtime CMO of Juniper. Software. This is a critical part of our transformation. When I joined, we pretty much had exclusively outsourced software developers. This presents a major challenge for powering extraordinary experiences. But I'm happy to report we've made great progress in in-sourcing this capability. Over the last 18 months, we've onboarded about 100 badge software developers. And the best part of all of this is it's cost neutral. But at the same time, these internal teams are going to be able to deliver higher quality experiences more efficiently for our customers and what better time to be building this capability from scratch with all of the progress that we're seeing in AI tools and capabilities that can help us accelerate. So the last pillar of the Phase 1 transformation is really on the operational front. And as you can imagine, with a number one value of dare to transform. We've changed a lot of stuff, too many things really to highlight, though, we're very happy with the results and the predictability that we're bringing to the business. I have a group of CEOs that I look to for inspiration and advice from time to time. I mentioned Logitech upfront and the transformation that Bracken drove there over 11 years. I believe during his tenure there, he missed guidance once. So we're looking to model our value creation, our predictability off of examples like Logitech and what Bracken accomplish there. AI, I mentioned, is obviously a hot topic, and we've really resisted the temptation to put AI in front of everything. That said, if you look under the hood, we're being very aggressive at adopting AI, really three key areas: one, to improve our product performance, things like self-healing networks, another to improve the customer experience. There's a bunch of areas where we can actually dramatically improve the customer experience while driving cost down a huge win-win. And then third is just on the operational efficiency side of things. Given the extent of the transformation at NETGEAR, it just gives us an opportunity as we're making all of these changes to ensure that we're being ultra-aggressive at building AI into our processes and workflows. So we're thrilled with the impact we've had on the financial side of things. We're just getting started. But the foundational financial profile that we're building from is obviously much stronger. We're back on a growth trajectory. We've expanded gross margin. We've expanded profitability, and we've grown our cash balance despite the fact that we've been repurchasing shares. A lot of this is tied to the work that we've done to really reduce our working capital, inventory, in particular. But the most exciting thing is we've implemented philosophies and processes that will allow us to ensure we keep this in check going forward, whether it's matching selling with sell-through. We're going to chase supply versus chasing demand. And all of that's allowed us to be smart and responsible allocators of capital. We've made some really smart acquisitions. I mentioned the stock buybacks. We've -- I don't know if anybody is keeping score, but we've repurchased about just under $70 million worth of shares at under $20 a share over the last 18 months or so, and we plan to continue to return capital to shareholders. Bryan will cover our capital allocation strategy in his section. And so before turning it over to Pramod and Jonathan to talk about Phase II strengthening our core businesses, I just wanted to touch on and tee up for them kind of the priorities you're going to hear. For Pramod, it's really about maximizing our opportunity on the AV side of things. We have a strong moat, strong momentum. That's our #1 priority. Then also growing our share in enterprise networking and security to very significant markets. For Jonathan, what you'll hear, it's all about solving connectivity in a differentiated way in the home and then also on the go. And for both of them, it's about delivering intelligent solutions that delight and protect, differentiated software experiences and expanding our services and subscription and services revenue. So with that, I will hand it over to Pramod.

Thank you, CJ. Hello, everyone. So I joined NETGEAR last year, and I come from an enterprise networking background. I was with the start-up building WiFi products got acquired by Cisco, saw that huge growth within Cisco. After that, I was with Ruckus. I was running that business before it got acquired. And then I was with Arista or a little bit running their campus business. So you can see all enterprise networking businesses. So when I engaged with CJ and the Board initially about the opportunity here, my initial reaction was like, wow, NETGEAR is a great consumer brand, but I'm not sure there's anything for me to offer. But as I engage with CJ and learnt more about the business here, I was really excited about the opportunity really in the B2B side of things. So my goal today is to hopefully share with you why I got excited about the opportunity here at NETGEAR. So I really have two pillars of my business, and I'll be talking about both of them in detail. One is NETGEAR AV, which is our AV line of business. The other is NETGEAR Enterprise, which is building -- we are building a solution for small and medium enterprises for both networking and security. Let's start with AV. What is AV, I think, you all know. AV is audiovisual. In a room like this, you have cameras and microphones, which are sources for audio video. We have destinations like these LED screens or speakers, and what an AV solution does is get the signals from the source to the destination. Now it's not as simple as it sounds because there's a lot of timing, latency, precision that is involved in sort of enabling these solutions. And I'll share with you sort of why we are differentiated in terms of the solution we offer here. In fact, if you take this room as an example, there are over 100 AV end points that are connected with over 14 NETGEAR AV switches, managed by NETGEAR AV operating system that makes it so that the network doesn't get overwhelmed with all this audiovisual traffic. And we also have engaged software that helps the people managing this to be able to set this up. Let me go through some examples of end user applications where NETGEAR AV is deployed. So you get a sense of what this means in terms of the opportunity itself. So let's start with live events. For those of you from New York, if you attended a broadway show or if you attended concerts from Taylor Swift or Dua Lipa, my daughter took me to these concerts, and I realized that there's actually NETGEAR behind it. Or if you watch the latest Pope's inauguration live, that was over a NETGEAR AV switch itself. So we are considered as a leader in this space. And when it comes to any experiences like this, when it comes to live events, there's more often than not in NETGEAR AV solution behind it. Conference rooms like this is another example with the post-COVID hybrid work and the return to work, there has been an increase in upgrade to conference rooms to be able to set up -- set them up for those multisite conferencing, if you will, which requires multiple microphones in the ceiling, multiple cameras and so on and so forth. So we play a role there. In fact, one of the largest retailers in the world is in the process of upgrading thousands of their conference rooms, and they're planning to use NETGEAR AV behind it. So again, a huge opportunity. Another example to illustrate the mission-critical nature of this. The recent G7 Summit that happened in Canada, that was powered by NETGEAR AV solution as well. So hopefully, that gives you an example. Digital signage and video wall is another good example. From those of you from New York, you probably heard of the new JPMorgan Chase building on 270 Park. That building has a huge video wall inside. I haven't seen it myself. I'm planning to go there tomorrow, very excited about it. But that video wall is again powered through our partner, and there's a NETGEAR AV solution behind it. Broadcast is an example when it comes to studios, whether it's private enterprises that have studios to create content, there's a NETGEAR AV solution behind it. An example here in New York is a NASDAQ where they use it for broadcasting their new listings, live events and speaker engagements and so on. So hopefully, all of that gives you an example of how wide sort of AV is not simple AV. All of these experiences I'm talking about is not just like concerts. It's not just audio anymore. These are all digital experiences with huge video walls, synchronized lighting and video and audio, and it requires the precision timing that requires specialized hardware beyond regular networking switches. So moving on to the portfolio. This is the NETGEAR portfolio that powers it all. We have a very extensive line of switches. That's obviously is the heart of that AV fabric. It's running AV OS that optimizes that network and makes it plug and play. We also have software, and you'll see a demo later on, Engage, which really makes it and brings it all together to make the lives of installers easy. And we have WiFi, which is increasingly used in live events to power network. If you go to any of these trade shows, and I have attended three big trade shows since I've joined, we usually walk away with the best of show category award in each of these. And the awards you see at the bottom are just a subset of the awards that we won. So let's look at what are the market drivers driving this business or driving this segment overall. First of all, all those examples that I talked to you about, there is an increase in adoption. We try to call something like the number of pixels being deployed, right? When people move from 4K to 8K when they deploy more digital screens, all of that is powered by greater capacity. So you increase the capacity of video and audio, you require greater capacity of AV switches behind it. The other trend in this space is the move from sort of matrix connections for connecting this audio/video signals to their destinations to an AV over IP network. The reason that transition is happening is because AV over IP is more scalable, it's more flexible, and it's more cost effective. Because when you transfer the signal to over IP, it allows you to do a lot of processing in software. So when you look at the type of deployments, which were enabling these in the older days versus now with AV over IP you have a much simpler deployment. So that's what is driving the transition. And the third thing which is true about this segment is the AV installers who are responsible for putting these networks together. Unfortunately, they are not networking experts, right? So when initially, the move happened to AV over IP. People realized the flexibility and the importance of this transition, but there were a lot of challenges really putting it together because these installers took a lot of time, and many of these networks were not prepared for that multicast traffic, which sort of overrun the network. And this is where NETGEAR has been uniquely focused over the last many years in learning from this market and tailoring a solution, which uniquely solves the problems of this segment. So I'm going to explain to you how. But first, let's look at the market size itself. The broader AV market is about $332 billion, a fairly large market. It includes the endpoints like microphones and TV screens and all of that, so not the market we play in. What is more relevant for us is that $7 billion AV signal and routing space, and within that, about roughly, we estimate 38% of that, $2.7 billion is that AV over IP market where we offer the solution. And if you look at the CAGR growth of this market itself, the broader market is growing at a 4% CAGR. But if you see that AV over IP market, that's growing at 14% CAGR according to what we have seen in the industry. At NETGEAR Solution, NETGEAR AV has grown at much faster than that over the last few years, and we expect to continue to grow at a faster pace than the industry and grow share. And I'll explain to you why. So here -- this slide, I'll spend some time trying to capture what is truly differentiated about what we are doing in this space. First of all, as I said, we really invested in this to make this solution plug and play to help those AV installers like when they go in and try to put together a network, they're not experts in IP, but they understand the AV terminology. So we make sure that our interfaces were geared towards that segment. We have innovations in our OS so that when you install an AV network, it doesn't overwhelm your IT network. That was a challenge before. There's something called IGMP Plus that we invested in that makes it so that you install a network, and you don't have to worry about overwhelming your IT network. We have, by the way, demos for all of this later on. So for those of you sticking around, you should experience that. The second thing, as important as our investment in products is we have over 500 partnerships with AV manufacturers. What happened in the space is there are unique idiosyncrasies of each of these AV manufacturers. And so we stepped in to make sure that we exchange products with these manufacturers. We test it. We make sure that we address any unique challenges that we have, making these run over our network. And then we have created simpler profile so that when somebody tries to set up that network, like a Crestron network as an example, if you have a Crestron endpoint, all you do in our switch or in our software is just pick that hey, I have got a Crestron at the other end. And everything that is required to make that work flawlessly is taken care of. And we have done this over the last many years with over 500 different manufacturers. And then lastly, we have some of the best AV over IP expertise in my team. If you have a complex setup, if it's mission-critical, like a G7 summit and things are not going right, you can rely on the experts and my team. If they can't solve it, probably no one else in the world can, right? And all of these things, the product, the partnerships, the support, all of this has resulted in a level of loyalty and preference for our products, which, frankly, have not seen with any of the product or solution in my career. I'm proud of a lot of things I've built, but this type of loyalty that I hear from our partners is just amazing in what the team has accomplished. In fact, when I visit -- like I said before, I visited this AV trade shows, what I noticed there in some of the larger trade shows like NAB and InfoComm is you go to booth after booth, and you'll have these AV manufacturer displaying their next-gen solution, and they have a sign in each of these booths powered by NETGEAR AV. And when they see me come in and they see, I'm at NETGEAR, they actually reach out to me and actually thank me saying, "You guys are awesome. We love you because you have enabled this industry, you made our jobs easier." So what we did is we captured the video in the voice of these partners. So hopefully, you get a sense of what we hear at this show. [Presentation]

So hopefully, you get a sense. That's just a subset of the partners. Like I said, we have 500 partnerships where we have enabled a lot of work involved in testing with them, making sure that the solution works flawlessly. So let's shift gear a little bit and talk about the software behind it. So like I said before, key parts of the solution is the hardware. The hardware is purpose built because it requires some precise timing. There is operating system on top of that. We call it AV US, which makes sure that this system is plug-and-play. But there's also the software called Engage, which makes it all come together like a system. So if you're deploying a live event and you have switches, the installer needs to go and plug in the audio video sources to destinations they want to set up a WiFi for live event. We make it all so that you can do it literally within minutes -- and we are even investing in this further to make sure that we continue using AI and other technologies to make it so that you don't even need to go on-site to configure it. You can preconfigure these things, you show up on site. You have color coded and you'll see this from Laurent, you just plug in the cables and the system should be up and running. Another area where we have really helped this industry transform. Like I said, there was a dearth of knowledge and AV over IP. So we came up with training courses to train AV professionals in this space. And we have become the go-to destination when it comes to AV over IP training. We have trained over 30,000 users, over 10,000 installers. In fact, some of our partners drive their end customers to our platforms for training. And that's very helpful because these people who are getting trained are getting trained on our software, our technologies, and that's very helpful to our plans. So let me walk you what is the end result of all of this in terms of how do our partners and customers see the value that we have created. And I'll walk you through a few examples in terms of customer testimonials. The first one is from Eric Snider, who is the CTO of CTI, one of the fastest-growing AV integrators worldwide, probably amongst the top 3 or 4 in the world. So Eric decided to transition to NETGEAR AV few years back. And he had data with him to really analyze how many labor arts and how long it took to set up these networks when they did it before they were -- they had NETGEAR in their system solution versus afterwards. And this is based on his calculations that he saw over 90% reduction in average configuration time. And for these installers, that savings directly translates into their OpEx savings. And in many cases, the savings that they realize is more than probably the cost of what they're spending with NETGEAR AV. So this is huge. And this is something we are continuing to be focused on in terms of differentiating our solutions with. L'Oreal is another customer. They were deploying an internal AV solution. They decided to go with NETGEAR AV because they were really concerned about overwhelming their IT network with AV, so they wanted to prevent this bottleneck. And because of that innovation in our software that I talked about, they were able to deploy it flawlessly without any concerns. And then lastly, as I said earlier, G7 Summit, this was a partner who got this project to deploy a multisite deployment of over 40 switches. In their own words, it was like an impossible time line. They deployed using NETGEAR AV, and they were able to deploy it fairly quickly because of all of those integrations that I talked about earlier. So -- how do we continue to grow in AV? I think I talked about all the things that we have done in products and innovations, but we're not stopping there. And here are some things that we'll continue to invest in, where we have opportunities that we see to realize in this space. First, -- we believe we can grow in broadcast as well as residential spaces. In broadcast, while we serve sort of the lower end of that market in terms of audio and small- to medium-sized broadcast houses, -- we are going to be launching products next year that allow us to address a larger portion of that market. And this is based on feedback that we directly heard from our partners. The second thing we are doing is we are continuing to enhance that plug-and-play nature of our software -- so we're going to come out with an edge device, which will run that Engage software, but it will also run our security software that we acquired last year, and I'm going to talk about it later, because many of our partners are worried about security when it comes to AV network. So we'll have an edge platform that runs our Engage software that runs the AV -- the security software -- and we'll also allow running third-party software, creating like a platform play, for instance, for edge, AV networks. Very excited about the opportunities there. Third, we're going to be investing in professional services and support so that we can continue to offer as we go upstream, as we are reaching more mission-critical networks, we are being asked for professional services. We are being asked for SLAs. And so we're going to be offering these over the coming months as well. So to wrap it all up on the AV side of things, I'm really proud about what the team has created. It's truly differentiated. It's very transformation. It's very heartening to see what we hear in terms of the feedback from our customers and very excited about the opportunities that we still have ahead of us. So I'm going to shift gear now and talk about the second pillar that I talked about, which is networking and security for small and medium enterprises. What do I mean by small and medium enterprise. Let's go through some examples of the type of customers I'm talking about where we are actually deployed today. Education. These are private schools, K-12 schools. Hospitality and multi-dwelling units, apartments, student housing, senior living, distributed enterprises, distributed franchises. This could be a dentist office, lawyers office, burger chains were deployed in some of those. So anywhere where you really have many, many sites and think of it as 500 users or less. We call that a small and medium enterprise. And the portfolio that sort of powers all of that is a very comprehensive set of WiFi APs. We have various form factors of APs. We have a fairly rich portfolio of switches for previous form factors. We have routing. We have even mobile hotspot, which serves consumers, but many of our partners actually use mobile hotspot as the redundant WAN link or for failover. So it serves that need. And all of this is managed in the cloud by NETGEAR Insight, a cloud-based management solution. And all of it is secured in the cloud by solution NETGEAR XCM, which I'll talk about later. So as you can see, for this segment, -- and I've been in this space for some time, as I said earlier, this set of wide portfolio, both on the software as well as the hardware side, especially for this SME segment, it's fairly unique. So let's talk about what are the dynamics of this market. When I talk about small and medium enterprise, there are some things which are true for this space. One, they have the same need of reliability as a large enterprise. Their businesses depend on this. It might be the point-of-sale terminals. It might be that application in the cloud. If they can't reach that, they can't run their business. So they have the same need for reliability. They have limited IT. Often, their networks are managed by MSPs instead of being managed by them directly. They are probably even more vulnerable when it comes to security as compared to larger enterprises because they're vulnerable to the same. You probably you all have heard about ransomware and malware and all of that, and they have limited IT so they're more vulnerable than others. And they have a tighter budget, so they're looking to spend and get their money to go further. We believe that this market has not served well today, and this set of customers and partners are faced with 2 suboptimal choices. Choice number 1 is if they really care about reliability they go with a solution from a larger enterprise, 1 of the top 3 vendors. And I built this product before in my past life, really proud of what we built before, but I know that what we built was targeted for larger enterprises. It is targeted for what we call as a muscular IT. It was not targeted for an MSP driven organization. So what ends up happening is these customers end up paying for complexity for features that they don't need. The second suboptimal choice before them is then to either take and do-it-yourself networks, patch together solutions with either something which is not reliable, something which is not backed by support when they need it or it's not integrated enough to end up playing in sort of the paying in terms of the total cost of ownership. So I'm going to share with you sort of what we are doing to be uniquely addressing this market. But first, look at the total market size of the opportunity itself. I'm sure you all know wireless LAN switching, security in terms of on-prem and SASE security. These are huge markets. But the portion of it, when it comes to small and medium enterprise is still fairly big anywhere from 30% to 50%, depending on the category you look at, -- and we believe this market is right for transition and right for disruption. Let's look at how we do that. What I look at is my mission in this space and the team's mission is to really deliver a solution which is purposeful for MSPs, which is purpose-built for SMEs, which provides enterprise level reliability, which provides enterprise-level support, yet with SME level simplicity and price right, so the customers don't end up paying for the complexity they don't need. And it has to be a solution which has to be servable by MSP. So it has to be integrated into their platforms because again, it's not the end customer who is often managing their network. It's the partners who are managing their networks on behalf of their customers. Let me walk you through a few examples of our existing customers and the value they see in our solution to hopefully illustrate this. SIMATS is a medical institute. It's an institute in India that deployed a campus-wide network, both wireless and switching using NETGEAR APs and switches as well as cloud management, the Insight management I talked about earlier. They were looking for something which is simple to manage. They had a constrained IT organization, so they're looking for somebody else to manage it for them and yet they did not want to compromise on reliability. So they went with us and very happy with a fairly large network with us. The second example is here in the U.S., Northwest Ohio School District. And it's a very interesting example. They actually were a customer of 1 of the top 3 vendors for that entire school district. And during the post-COVID years, I'm sure many of you remember about the supply chain crisis that we had. They were looking to upgrade 1 of their schools who are desperate to get gear, but they couldn't find gear because it was just not available from the existing suppliers. So they turned to NETGEAR and said, "You know what, I'll try you in this classroom. What the heck. If it doesn't work out, it's just 1 classroom, but I need to do it now." Fast forward now, they realized that our solution was as reliable and was as performant as others. And they didn't need the other features that they were looking for from larger enterprises. So they've since then upgraded 25 schools with us and are continuing to expand with us. So hopefully, this gives you an example of the type of customers and the type of value prop they see with that solution that I talked about earlier. Switching gear a little bit. Let me talk about now the software investments we are making in terms of how we are differentiating and adding this value prop that I talked about. So first one is NETGEAR Insight. It's our cloud management platform. It -- all those devices that I talked about, when they are plugged in, they reach into the cloud, they get discovered in the NETGEAR Insight and then you start managing it from there. It's fairly rich. It's built in automations for integrations with MSPs -- you can see a demo later today with how we use AI to help MSPs quickly troubleshoot issues. So it's differentiated in terms of having the right features, and we are in the process of revamping completely the user experience. The new version of this is going to be launched -- we are ready for beta trials in the next few weeks, and then it's going to be launched early next year. It's also going to be integrated with security. So when I talked about that XCM, very, very unique in this space. We're going to take that MSP platform for security and integrate it with management so that MSPs have one stop for their switching, for their routing, for their security and even their cellular failure. All of that managed in one place. The second area where we are investing is XCM. This is our security solution. This is a company we acquired earlier this year. XCM was built specifically with MSPs in mind and specifically for small and medium enterprises. And they're unique in that. They offer both a SASE solution, so that if you have a hybrid workforce, you can secure them, no matter where they are, but they also have an next-gen firewall, which allows protecting the workspace like your IoT devices and so on. What we are doing uniquely is we are taking the firewall and integrating with our routing so that when you deploy a networking solution, you have a security built in that you need for those small enterprises, and you just need to turn on the license to be able to realize that. The second thing we're doing is that Insight cloud management, I talked about earlier, that and XCM's cloud management portal, those get integrated. So you have 1 single pane of glass. You don't have to log in into 2 places. If you're managing networking, you can also see what the situation is on the security side of things. So on the portfolio side, I also want to talk about NETGEAR Essentials is also a part of my portfolio. This is a line of switches, which are primarily sold through retail and e-com channels, it's a cost-effective way. Many of our enterprise customers also use. It allows them to extend their existing networks, if you will. It's a brand which is very well recognized for hardware reliability for flexibility that is built in, in terms of power options. And it's also a trusted brand when it comes to security. So -- so let me now shift gear from products and solutions to our go-to-market. So when I joined -- and we looked at what will be required in growing this business. We realize that it's not just about product and solutions. We also had to focus on go to market. Part of that was building a team. A lot of my senior team, as CJ said earlier, came from other companies where they've been leaders in this space. They have sold through this channel. After building the team, we set a goal for ourselves that we really wanted to be the company that is seen as amongst the easiest to do business with because frankly, NETGEAR was not, right? Because we were I think, in terms of how we interacted with our partners, how we reached our partners. There's a lot of opportunity to do things better. So we started taking steps towards that. One of that is simplifying our pricing so that when our partners quote something to their end customers, it doesn't require to many back and forth, right? So we just did that a few months back, great results and great feedback. The other thing we did is launch a new partner program, so that it's easy for us to engage with our partners, and I'll talk about that later. We're also investing in technologies, AI and others so that we can just use that both internally in our own sales team in terms of tracking progress towards our reach to customers, but also in terms of being able to interact with our partners. So let's talk about the partnership program. We just launched this earlier this month. And the partner program is very competitive to the industry. It has tiers of various tiers for the partners, depending on the amount of business they do, depending on the amount of certification they have with our products. But we also invested in a portal which makes it very easy for us to reach these partners. If they want to get certified, if they want to get trained, if they want new collateral from NETGEAR, if they want to do bring a deal and register that deal with us, -- all of that has been greatly simplified. And again, it's -- we just launched it earlier this month with great feedback from the partners who have tried it. So CJ called out earlier that one of the goals for NETGEAR overall is growing our subscription and services revenue, and that applies to my businesses as well. So here are the things that we believe will help us grow subscription and services revenue in general first. As I talked about that NETGEAR Insight platform, the cloud management platform, we're going to be revamping the subscription for that, including support as part of it. And as we add more value to it in terms of the use cases that it enables in terms of integration with security, we believe we'll be driving a greater attach of that product as we grow the NETGEAR Enterprise business. And so that's one area where we'll grow subscriptions, security stand-alone itself. SASE, these are all well-known markets. Customers know to pay for these through subscriptions. So as we grow it, that will naturally result in growing our subscription revenue. Second, on the AV side, we will offer differentiated support because, again, many of our customers are asking us for specific SLAs when it comes to support, our customers are asking us for next business day, replacement of hardware. So we're going to be packaging all of this in terms of offering a premium support service, and we expect a greater attach, especially as we go upstream to larger accounts. And then lastly, as CJ called out earlier, we launched Professional Services, but there are greater opportunities there not just in terms of professional services, but in terms of validating a design instead of -- in terms of monitoring it later on because we are going into more mission-critical networks, and these customers want someone from the vendor side to be present there. So we feel that there's an opportunity for us to grow this business as well. So to sum it all up, this is my last slide. Very excited about the opportunities before us. If I wear sort of the lens of long term, what does it look like beyond 2030, I'm confident we can grow our top line double digits. I believe with all of the services that I talked about that will grow the subscription and services revenue at a faster clip, and it will be greater than 20% of our business. And I think our gross margins will be north of 55%. I think when it comes to gross margins, what we are focused on right now is, like I said, there's an opportunity we see for a player that offers solutions which are right-priced, but yet offer a great value compared to the larger enterprises, if you will, -- so our goal is to be able to offer this in a way such that we can grow our market share and yet being accretive to our gross margins overall. But the priority, obviously, is to make sure that we can continue to gain share there. So with that, thank you for listening. Hopefully, I was able to convey a little bit about what I'm excited about in terms of the opportunities here. And with that, I'll turn it over to Jonathan to talk about the consumer business.

[Audio Gap] consumer devices and services space for 20-plus years. And a couple of highlights along the way. I ran product management for the Kindle products at Amazon. So I oversaw the paper white and the fire tablets. And I also led product in UX at Fitbit for 7.5 years. 3.5 years of that at Google, where I oversaw the Pixel watch, all of the Fitbit devices as well as the Google Fit app, the Fitbit app, and I grew our premium subscription service from the ground up to an over $100 million business during that time. So CJ talked about our purpose to power extraordinary experiences for our customers. And what we know is that our products are essential sit on the couch to watch a favorite TV show, a movie, the network has to be there for them. It has to work perfectly. 68% of families say that, that TV time is something that really brings them closer together. So there's a lot of meaning and powering that experience. We know how important hybrid work is that majority of them, 75% say that their network connectivity directly impacts their productivity and their professional image. So we know how important our work is here. We know how important the smart home has become. This isn't a gadget world. This is really how you get into your home. It's how you unlock your garage door. It's how you know your family made it home safely. 70% of consumers consider their smart home devices essential for their safety, their security and their comfort. Gaming has exploded. We know that 25% of households have a modern game console. And so there it's putting a lot of stress on their network. 35% of those gamers are live streaming their game content. So gaming is an essential experience that we power. And we also know that customers want to take those experiences, that connectivity on the go with them, whether it's a business trip or a family vacation, 70% of travelers actually rate WiFi as their #1 travel amenity. But public hotspots are notoriously insecure and kludgy. So we build our mobile hotspots to solve this solution for our customers. And so I'm proud of the portfolio we've built. Behind this portfolio is a team at NETGEAR who's committed to solving these customer problems. We're customer obsessed. We go through those use cases. We try to figure out all the intricacies of what customers might see across our product line. We have our Nighthawk routers, our Orbi mesh systems, our cable business. We have our range extenders, our mobile hotspots, and we thread all of it together with our mobile apps and our services. We're moving our portfolio towards a good, better, best lineup. CJ talked about that. We, as a business, previously had focused much more on the high end of the market, on the premium segment in home networking. And we've made a shift to bring in lower ASP products to both expand to new segments, but also to create a top of funnel for our subscription services. So we're excited about the focus that we're starting to see in our product lineup. At the top of the line is our Orbi 970 series. And this product, if you read the reviews, you'll see that they say over and over again that this is an industry leader as a product line. And there's a lot of engineering behind the Orbi 970. It's unique in providing a dedicated backhaul, that connection between satellites and routers so that, that communication isn't interfering with that movie night or game play, et cetera. And another product that I'll celebrate across our product line is the Orbi 370. This product launched over the summer, and we were able to take a lot of that engineering that went into the 970 and really pioneering mesh systems and bring it into a lower ASP product in the 370. So our goal was to make something much more affordable, much more accessible in the mesh space. I'll talk a little bit about our mobile hotspots. With the M6 Pro and the M7 Pro. We have created the most powerful no compromises set of specs and performance in mobile hotspots today. But in keeping with the strategy to expand our product lineup, I'm super excited to announce and you may have seen the press release this morning that we have a new product in our lineup. This is the Nighthawk 5G M7. And so our goal here is to help you stay connected on the go with secure portable WiFi powered by 5G. So this is a super powerful product. It supports 3.6 gigabit per second connectivity and can connect 32 devices simultaneously. But we brought this out at an affordable price point. It's launching at $499. It will be available in January of next year of 2026. And one of the great design elements of this product is that it's pocketable. So we've designed it to fit right into a bag, right into a front pocket while still having 10 hours of battery life. Another great part of the M7 is that it will launch with a new NETGEAR mobile app that will come with an eSIM marketplace. So with the eSIM marketplace, consumers can choose the data package that's right for them when they're traveling. And so they'll have the choice. They could use a physical SIM, they'll be able to bring their own eSIM or they'll be able to just go into the NETGEAR app and shop for the data package that's right for them. So very excited about this product, and I'll show you a little video, so you get a better feel for it. [Presentation]

Great. So excited to see this one launch, a great product development effort by our team to pull this together, and you'll get to see it early next year. So as excited as I am about the products we have today, and I'm really excited about the vision for the future and where we're going. We want to be the trusted partner for connectivity wherever you are as a business unit. And so as I talk about the future, maybe think back 10 years and think about what your home network was like. This was the early days of Nest that you might have been an early adopter and had a Nest thermostat 4K TVs were really at their beginning. Even though Netflix had started streaming 4K, not a lot of homes could actually consume that content. So fast forward to today, think about what your homes like, the number of devices you have, the number of streaming services coming in at 4K. There is penetration of over 60% of 4K televisions. AK is just starting to take hold. So then fast forward into the future. Think about what 10 years from now is going to be like with immersive virtual reality content will have personalized AI-powered gaming. And then all of those devices in your home are going to be higher bandwidth and even more demanding because of AI and their need to connect have a robust connection to the cloud. And so we see ourselves building this foundation for the future by solving these hard problems of the network of today, but also the network of the future. And I'll talk about how we'll do that. First off, let's take a look at the market that we're in today. We largely are in the home and on-the-go networking segment, which is the combination of the home networking, retail space, the ISP consumer premise equipment space plus mobile hotspots. And -- but -- we see ourselves having an opportunity to expand here. And that's because we're really focused on the hardest problem. The hardest problem is that last mile, that last 100 yards, the intricacies of the home and getting a network to work and work the right way in the complex environment and unique environment of each home. We also have the opportunity to play in these two adjacent spaces, the smart home space and the consumer cybersecurity space, both of which are growing at a 10% plus CAGR. So I'll talk about our vision for growing in these segments. So first, let's start off with connectivity. And this is really our heritage. This is what we're known for. We've been building connectivity solutions for 30 years as a business. One of the reasons I joined NETGEAR is because it has such a heritage, such an amazing brand and such a history of building connected products. And standing behind that are millions of customers who trust us and trust us to deliver these products for them. We have an IP portfolio of over 150 patents, and we have an engineering capability behind all this. That brought solutions like the 970 that I talked about earlier. And so all of this gives us a lot of confidence that we have a strong foundation that we can build our connectivity road map on. Behind this, we also have two really amazing consumer brands, the Nighthawk brand and the Orbi brand. And Nighthawk is the brand we use for our routers and mobile hotspots. And it's meant to be a tech-forward brand with a tech-forward design to match. And our goal with the design is to signify technological mastery in our products. And we also have the Orbi line and Orbi is focused on the advanced home user. And Orbi solves as a mesh system, those complex home problems that I talked about. We give you a lot of flexibility to put satellites in different parts of your home to use wired or wireless connections between them. And there's a lot of sophistication under the hood of Orbi, but we've built a design that is really elegant, that's refined and that is ultimately very minimalist. Orbi is designed to fit on any bookshelf, any end table in any home as a design. So where is this going? What's coming is WiFi 8? And WiFi 8 is going to intersect with an AI era for home connectivity. So if you think about the progression of WiFi. It's really gone from a numbers game, number of devices, bandwidth, speeds, adding more bands, and we're moving towards the reliability era with WiFi 8. So what we expect to see in WiFi 8 is 2x lower latency and 10x higher reliability. That's driven largely by the WiFi 8 standard, which focuses on more intelligent coordination across the network, batching out bandwidth to the right device at the right time. A better experience moving between routers and satellites so that you can roam about the house and then enhanced performance at the edge of the network so that when you get to that fringe of your network, you'll be able to stay connected more consistently. But the timing is really set up well to align with the future of AI. And that's both cloud-based AI models and operating at the edge. And so what we'll be able to do in this next generation is build proactive fixes for your network. We'll be able to build models that identify anomalies that identify problems and fix those problems before the customer sees them. When customers do have issues, we'll have ways for them to get more proactive support, and we'll be able to build tools with AI to give them proactive help and self-help. So we're excited for what this is going to mean for the customer experience in the future. And to sum it up, where we see this networking of the next generation going is more predictive networks the more personalized networks that can really understand the uniqueness of your environment, ultimately giving you a higher performance product. So I'll shift gears and talk about how we'll grow in the smart home. So I talked about this proliferation of smart home devices and the sheer number of devices in the home and that the increase we've seen. That's only going to increase and the capability and expectations for those devices are only going to increase. And we also know that most homes are not single ecosystem. They actually operate across multiple ecosystems, whether that's Alexa, Google Home, Apple but also dozens of other major players who build smart home solutions. And so we see an opportunity to connect these ecosystems together to be the company that can be multi-platform, that can be multi ecosystem and really support every kind of device on the network. And as a part of this, we're excited to be partnering with Google. We are taking this first big step in our move towards the smart home and announcing that we're working with Google to implement the Google Home run time in upcoming and existing Orbi products. So this is something you'll see rolling out over the course of 2026, but wanted to share this partnership with you today. And as I said, this is the first step of many as we move towards our vision of being the trusted smart home of the future. And so that means our ability to connect, to orchestrate these devices and keep them secure. So if you think about NETGEAR, we're in a pretty unique position here. We are an independent company. We don't have a different business. We're not a subsidiary of some other business that has other goals and motivations. Our motivation is very simple. That's to help make your home network work really well. We are conforming and a part of driving standards in this space. And are -- we're a U.S.-based company that's focused on your safety, your security and your privacy as a core value of our business. We think that gives us an advantage in the smart home space in the future. And so now I'm going to talk about cybersecurity, and where we see this going. We know just how great the threats are to homes today. And the new frontline is the smart home, the same way that you wouldn't leave your physical front door unlocked, you shouldn't leave your digital front door unlocked. And so we're doing a lot of work to protect the home with 29 attacks on home networks every 24 hours. That's staggering. So we protect your home and your data in three ways. The first is with our physical devices. So we use standards like WPA 3. We do a lot of third-party testing of our products before they ever leave. We do regular firmware updates that we push out to our devices in the field to make sure they have the latest and greatest security fixes. But then we know that there are emerging threats that happen in real time. So we have something called advanced router protection. This is a dynamic AI-powered system that looks for and identifies new threats, whether those are brute force attacks, denial of service attacks, and we're able to push out a capability to block those attacks in near real time to our routers and mesh systems that are out in the field. We're also excited to have this advanced router protection capability, launching with the new M7 that I announced earlier. So you're really bringing a secured network with you wherever you go. The third plank of our cyber strategy is Armor. Armor is our subscription service, and it delivers you a powerful suite of tools to keep you safe when you're online. We have a trial that we include with our routers when you purchase and then convert to a paid service thereafter. And our goal with Armor is to protect you from scams, from viruses, from malware and not just those devices in your home, but also you can take that protection with you on the go on your phone, your laptop, as well. So Armor is the tent pole. It's really the starting point of our recurring revenue and subscription service. Our goal as a business unit is to move more and more of our revenue into services into more predictable recurring revenue streams. But to do that, we have to build a foundation. The first piece of that is building a world-class mobile app architecture. So we have that underway. You'll see the first instantiation of that when we launched the M7. We're hardening our subscription and payments capability, and we're also building affordances in our product to support new revenue models that M7s eSIM marketplace is just one example of that. And so then as we look out at our subscription revenue strategy, we have three major appliance to that. The first is strengthen our current service. And there's a lot of low-hanging fruit here for us to just optimize what we have today with Armor through better conversion, retention and those kinds of tools. Second, we're going to add more intellectual property to our services. We see our hardware really as a catalyst as a flywheel to drive new types of service. that we'll see coming out with AI, with some of the self-healing capabilities that we'll have. And finally, we see the smart home as a great launching point for new service types for us as well. So with all of that in mind, as we look at this consumer business and the beyond 2030 time frame, we anticipate a single-digit growth in our top line but we'll start moving more of our revenue to subscription and recurring revenue, 25% plus. And we will expand our gross margins to greater than 35% as a part of this transition. And so with that, I'm going to hand it over to Bryan, our CFO. Thanks a lot for your time.

Thank you, Jonathan. Good afternoon, everyone. Very excited to be here today to share with you all how our efforts to transform the business have already started to bear fruit in terms of financial performance and some of the strategies you've heard today and how those will impact us in the future. I wanted to start with looking at what we said at the start of 2025, and how we thought the year would play out, starting with our top line where we said we expect it to grow. Happy to report that we're up 5% year-to-date. This has been driven by the AV business thus far, which has propelled the enterprise revenues to be up 20% year-on-year. We also said we'd expand our gross margin performance. We're up 900 basis points year-to-date. And lastly, we said we would not be profitable, but we expect to improve our performance off of 2024. And while this one we're not really delivering on, I think we're quite pleased to be reporting positive non-GAAP EPS of $0.19 year-to-date. Our objective is long-term value creation. And to deliver on this, we've got some planning philosophies that are really important to guide us as we go. So the first is we're going to invest in the portions of the business that we think have the highest opportunity for long-term revenue -- profitable revenue growth. We're also going to fund the competencies that we think are required to deliver on the transformation. These would include software development being in-sourced and the go-to-market resources that Pramod touched on earlier. We're also going to continue to look and scrutinize the slower-performing portions of our business and look to optimize costs there to help fund our investments. And lastly, we're going to balance near-term profitability with long-term value creation. As I said earlier, we've made tremendous progress thus far in terms of expanding our non-GAAP gross margin. We're up 900 basis points year-to-date at 37.5%, which is great, but we think there's a lot of opportunity to expand further. And so we're going to drive towards our long-term target of 50%. And there are three key pillars to help us deliver on that. The first being increasing our mix of enterprise revenues, growing our recurring revenue streams and driving operational efficiencies. Led by the momentum of the AV business, we've been able to expand the mix of our revenues coming from the enterprise business from 40% just 2 years ago to 49% this year. And with the investments that we're making and continue -- we'll continue to make in the enterprise business, we expect this can grow to 65% or higher. And with the gross margin of enterprise at about 48% year-to-date, Obviously, this will be a major contributor to expanding our total company gross margin performance. As you heard from Pramod and Jonathan common to both of our businesses, we have a strategy to expand our subscription and service revenue base. While consumers further ahead today with the Armor offering and with the M7 launch, expected early next year, we'll have mobile services, Pramod laid out the opportunities that we have on the enterprise side with the cloud management platform Insights as well as security with XCM. So today, we're sitting about 5% of our revenue is coming from recurring services. And we think over the long term, we can grow this to 20% or even higher. NETGEAR has a diverse supply chain. Today, we're manufacturing in Vietnam, Thailand and Indonesia. Not only are we not manufacturing in China, we are not sourcing any connected components from China. We've been participants in the CVPs, CTP program for over 18 years, which I think speaks to our commitment to a resilient and secure supply chain. With the strength of our relationships with the supply chain, we think we can extract further cost efficiencies in our business. One such example is that as we recently signed a perpetual license for our managed switch OS that will not only allow us to execute faster and deliver on the capabilities that our customers are demanding in that space, but it's also going to provide P&L benefits. We expect to continue to be good stewards of capital. We have a three-pronged approach. One is to invest in the organic business, capitalize on those opportunities. We're going to continue to look at strategic M&A opportunities that can accelerate our plans. And lastly, returning capital to shareholders. To capitalize on the opportunities that Pramod and Jonathan has spoken about today, we're going to have to make further investments. Enterprise, the focus will continue to be on in-sourcing software and go-to-market capabilities. On the consumer side, we're going to be more measured, and we're going to minimally run that business to be contribution profit breakeven or slightly better. And while the service provider and cable revenue stream within the consumer business is declining, it's down about 20% year-to-date, and we expect it to decline at a rate of about high single digits to low double digits in the future years. We do think that we're going to be able to harvest those profits to allow us to make the investments required to expand the core business and really drive the subscription business. Of course, we'll look at operational efficiencies, leveraging heavily on AI. And while for 2026, we expect to grow our OpEx at a rate slightly higher than revenue, we do think in 2027 and years beyond that will normalize. There are really three key areas that we're looking at in terms of M&A. One is capabilities, the VaaG transaction from earlier this year provided the foundation for our software resource center in Chennai, India. We're also looking at product adjacencies, so XCM is security platform. When we did our enterprise business strategy, the first iteration of that security was the top of the list. And obviously, given that both businesses individually are subscale today, anything that we think can create further scale in our business is something that we'll look at. And of course, we're going to maintain a very high bar when we're evaluating these potential targets. We view share repurchase as an efficient way to return capital to shareholders. From 2024 -- start of 2024, we repurchased 3.4 million shares, $69 million, at $19.99 per share. We expect to continue to buy stock, and we will at least offset dilution as we look forward, and there's 2 million shares remaining on the current authorization. While we're not providing very specific guidance for 2026, we did want to give some directional indication of where we think the business is going to go. We do expect to grow our top line. AV will still be the driving force, but we do expect to finish the trajectory of the enterprise networking business. We expect to further expand our gross margins, which after we've made these incremental investments will still allow us to improve our profitability year-over-year. As CJ said at the onset, we wanted to provide kind of a medium-term and a long-term target. I'd frame the medium term to be a few years out, 2028, and how we think these businesses will be performing and what the combined impact would be. Starting with revenue growth. We think enterprise will continue to grow at a double-digit rate. On the consumer side, we expect if you exclude the service provider and cable business, that business will be growing at a low to mid-single-digit rate. Combined, this would be -- net year in total would be high single digit to low double-digit revenue growth. With the efforts of both businesses focusing on subscription revenue streams, we think we can grow the combined mix of our overall revenues coming from these services to 5% to 10%. The enterprise gross margin is expected to be in the range of 50% to 53%. And we think consumer can be at 30% or higher, and the blend of this would be in the 40% to 43% range. Contribution margin for enterprise, we think would operate at 24% to 27%. And on the consumer side, we think we'll be breakeven to 3%. The combined non-GAAP operating margin performance of the combined business would be expected to be in the range of 5% to 8%. Looking to long term, again, 2030 or beyond. We think the growth profiles of the top line would be double digit for enterprise. Single digits for the consumer, excluding service provider and cable and combined net year would be double digits. We think enterprise can grow its revenue mix to about 20% coming from subscription and services, and on the consumer side, 25% or higher. This would blend to about 20% or higher on the combined business. Gross margin for Enterprise will be 55% or higher and 35% are higher on the consumer side, lending to total net year gross margins at 50% or higher. And then lastly, contribution margins will be about 30% or higher for Enterprise and double digits on the consumer side, driving total combined non-GAAP operating margins in the range of 15% to 20%. And with that, I'm going to pass it back to CJ for some closing remarks.

We're going to shift to Q&A in a minute, but I wanted to make sure just to sum up kind of the key things I hope you all -- or we hope you all took away from this. I guess it's not on the slide, but hopefully, you recognize that we're pretty excited about the opportunity ahead. And then I guess moving to kind of the six things we wanted to specifically highlight is achieving that opportunity, we really feel like we've set the right foundation. We've got a different financial profile from a couple of years ago. So we're really well positioned and on a strong trajectory forward. Second, Pramod spent a good bit of time talking about AV. That's our #1 priority. We've got a strong moat, got momentum. I want to build off of that. Third, in terms of how we think about investing in other opportunities, we're focused on large, growing, more profitable markets. Fourth, whether it's consumer or enterprise, it's all about software differentiation that enables recurring revenue growth. Fifth, we plan to continue to be responsible allocators of capital. So for enterprise, we plan to expand profitability while we invest back into that business. For consumer over the next few years, we plan to keep that business, as Bryan said, roughly contribution margin neutral to enable us to transform it. But overall, we're committed to steadily increasing profitability and continuing to return capital to shareholders. And then finally, if you think about 2026, as Bryan said, we plan to continue to grow revenue, continue to expand margin, expand profitability. And then when you reflect on those mid- and long-term targets, we're just excited about getting on that path of long-term value creation for shareholders. So with that, I think we need 2 minutes to just set up for Q&A, and then we'll get right into it. I think we're going to move these chairs to the front.

Maximizing the opportunity, building on the momentum. Can you just take a step back a little bit? Because obviously, when you came in, you saw that business, you saw the opportunity. How far along are we in maximize that momentum. I mean, because it's been a strong business in the last two years. I just want to understand a little bit how much longer you can have that very unique momentum to continue on the side?

Yes. I can start and hand and Pramod, I'll hand to you. We think we're early based there. The whole transition is really just beginning. We've got markets that we haven't expanded fully into like broadcast. We're just launching services. So we're in the early days disrupting that market. And yes, so we're looking forward to the years ahead. Pramod, if you want to add?

Yes. I think CJ said it, there's AV over IP transition that is happening that is accelerating. It's not done yet. So the market itself is growing, We're still, from a market share perspective, our estimate is we are still a tinier portion compared to the big players in this space. So just in the existing place where we play in, and there is still a room for us to continue to grow, to capture share because of all the things I talked about earlier. And then there are net new markets like broadcast and others, where with the new products that we'll be launching next year, we'll have further opportunity to grow in there. So I think we still are, I would say, early in terms of being able to capture that entire share.

Great. And as my follow-up question, maybe for you, Bryan. So it sounds like you're going to grow OpEx a little bit faster than the top line growth next year, but because of the gross margin expansion you're still expecting profit growth. I guess as we look at 2027, would you say that some of that heavier lift on the OpEx side starts to come down so that beyond gross margin leverage, the actual operating leverage starts to kick in.

Yes, that's right. Yes. As you said, we're going to invest in 2026. Really, we're focused on the long-term value creation. So '26 will be ahead of revenue pace. '27, I would expect to be growing in line with revenues. And then from there, I think we will get some additional scale.

This is Logan on for Adam, we're at Raymond James. Our first question was just wanted to ask about the decision to run consumer contribution margin at 0 to 3% in the near term. Maybe what different scenarios were considered? Any more color on where those investments are going? And any mechanisms you're using to monitor ROI on those investments?

Yes. Great question. I'm happy to start. The -- I guess the foundational premise there is that we see a really significant long-term opportunity in consumer, but a lot of what's put us here is a mix of some self-inflicted decision-making, combined with some natural market forces. So we're quite bullish about the long-term opportunity there. Now in the short term, that business could obviously change significantly if there is a -- we've talked a lot about potential action on TP-Link. But even irrespective of that, if you -- hopefully, it's hard to convey some of what Jonathan shared in earnings releases, right? We are quite bullish about being able to disrupt regain our leadership position in that market, independent of that, but we do think that headwind's coming -- that tailwind is coming anyway, so...

Yes. I would just say we know how long it takes to get these -- the subscription business to really take off, and we have to invest in the tools and the foundation that get us there. At the same time, we need to expand the top of funnel part of that portfolio with our hardware. So we're doing those things, and we're, I'd say, responsibly allocating capital to those infrastructure, those foundational projects that we think will bear the most return in the long run for us.

Yes. Maybe the one other thing I'll add that it would be hard for Jonathan to say it, so -- but I can say it. When we launched the search for Jonathan's role, there is a lot of interest for that position. And Jonathan was our first choice because he brings a very deep product capability to the table. And when you think about products in this space, like solving connectivity in the home is just ripe for disruption. Everybody knows it. We all have homes, we all struggle with that, right? So having a product-oriented leader really with -- especially with all of the technology shifts that are happening. I mean, Jonathan is a perfect person to lead us through this.

That's helpful. My follow-up question is the medium long-term targets you provided, and you kind of touched on it with the potential TP-Link band. How would those be impacted if that does happen? And any color that you guys want to provide potentially there?

Maybe I can start and then Bryan can add in. So those assume status quo. The businesses that where we compete heavily with TP-Link is obviously on the home networking side. But then also Pramod ended his presentation with NETGEAR Essentials. So that's a fairly sizable business for Pramod. In those two areas we're head-to-head with TP-Link. Do you want to add?

I think the obvious is that it would get us some scale much earlier in the trajectory that we showed here today that would help.

Tim Savajo at Northland. I want to try and get a little more detail on the Pro AV stuff, given it is the top priority. And that is just to draw out a few deals there, various metric counts. Are these million dollar deals, $100,000 type deals? If you can attach a dollar value to the -- I know it's probably tough to do that difficultly, but I'd love to get a sense of kind of what we're talking about there. And then higher level, can you talk in more detail about the competitive environment? So who specifically are we talking about here? And how would you break it down? I know you think you have a small share, but any more detail would be appreciated there, too.

You want to take it?

Yes. So the way the market is today, when it comes to live events and stuff like that, there's a lot of small deals as well. So it's actually -- I look at it as a positive, it's very well-diversified business. But we do have some of those, which I talked about, the G7 Summit. I talked about the largest retailer in the world, thousands of conference rooms. Boeing is another one, which is deploying thousands of conference rooms. So these are all million dollar deals, right? So we are beginning to see -- the positive thing is, we are beginning to see those larger deals. When it comes to competition, many of the networking switch vendors compete in this space. When it comes to broadcast, the big players, obviously, there are Cisco and Arista. But specifically on the AV side, what we did in terms of our partnerships, the 500 partnerships that I talked about earlier, competition probably has badly to, right? So I think the differentiation in the product, the differentiation in partnership, making it simple. And frankly, this is an area that the team here uniquely focused on solving, right? I mean it's other companies, there are other places they are focused on, not on the AV side of things. So I think those are the differentiations, if you will. The one thing which I didn't mention earlier is I talked about Boeing and the largest retailer. Unified communications is also a place where we're beginning to see increasing traction -- it used to not be before it was more AV. But now when it comes to conferencing, when people are deploying and upgrading their rooms, they're often going with seeing the value of putting a NETGEAR AV switch in there.

Yes. The one thing I would add we've consistently reported on the number of AV partners we have. We're over 500 now. I want to make sure it's clear that's not like we sign a 1-page deal, and you can like co-market with logos. Like we're actually taking equipment into our lab. We're testing it. We're ensuring that the protocols of one of those partners is integrated into our software. So when a system integrator goes to deploy an AV solution, it's a button click versus command line interface coating. So 500 partners is a really, really big deal. And [indiscernible], who's here, a product leader for that, just demo how simplistic we have made the deployments by virtue of that upfront work of partnership in lab and integrating their code into our software experience.

I just had one quick follow-up, if I could. Any meaningful difference within enterprise between Pro AV margins and the rest of the business, or really, you could expand that to all three of your segments if you can.

There's a greater subscription attached to the enterprise side because that's how the market is. We're not the only ones. Others offering that solution also offers subscription services. And as I said during my presentation, we are sort of making sure that we are priced right to capture market share in that space because we are establishing our presence compared to a relatively small base right now. But as on the Pro AV side, we are already sees the leader. So hopefully, that helps.

Scott Roll with ROTH. Maybe sort of on the home side of the business consumer side, I wonder if you could calibrate us in terms of subscription attach rates right now when I think about Armor being attached to home network deployments, kind of where are we? Where do you think that gets to and very much in terms of the core skill set of the company is networking and connectivity. But there are a lot of adjacencies then that start to come along with that, that you're thinking about. I wonder if you could expand a little bit about that in the home and monetization opportunities and strategies because there are different applications, there's different other content that you get on kind of how you see the evolution of NETGEAR over the next couple of years?

Yes. I'll talk about where we're going in the future. And if you want to share more on the attach rates. I would say, first off, on the attach rate, there's a lot of optimization that can happen in the onboarding experience so that customers understand why Armor is valuable, what it does for them, why they should subscribe. So there's a lot to still be unlocked there that I would just call -- we call it the low-hanging fruit of the -- of that subscription space. As we look out on the horizon, we know that we're going to be able to solve more and more problems. Some of those are cloud-based AI applications. Those cost money. There are tokens that are behind those. And so we're going to design the business models around it so that there is a service component. That's just the nature of those kind of solutions. So yes, I think what we'll be able to build models that look at what's unique about a network to do so in a privacy safe way, create the model in a way that is -- where in the customers control and be able to apply that as a service. So that's sort of the core vision, and we'll hopefully be able to share more product details down the road.

I'll just add to the attach rates. So we're not going to share specific percentages, though I will say we have a lot of headroom. So we're not attaching very well today. And this is when I said we weren't good at the subscription fundamentals. It's things like including a year for free of the subscription when somebody buys a product. So then they deploy the product. They don't realize that they're actually benefiting from a paid service. And then you asked them to make the purchase again a year later. Another example is like we look at the credit card upfront, right? So it's not like, oh, you're in for a year and then you've got to -- it just automatically rolls over. It's like, no, no, we have to resell you on the value of Armor. And so there's just -- another one is you go to pay with your credit card, your credit card doesn't pre-populate. Just a lot of basic stuff that we will get excellent at. And so that provides headroom on there, and that's beyond the top of the funnel expansion that's beyond adding value into the subscription.

And if I could, on the Enterprise side, I wonder if you could expand a little bit about I guess, monetization of XCM, right, in terms of attach rates there. Is that more explicit subscription going forward? And then as I think about the evolution on the Enterprise side, certainly, again, the enterprise in the world has been more WiFi centric in terms of connectivity, but private networks and cellular starting to find their way into the equation now. And I think, I guess, in your past life at Ruckus, there were some solutions that combine both WiFi and solar capabilities. So I'm kind of wondering where private networks on that side kind of fits in the evolution? Do you see participation there and other monetization opportunities?

Yes. So I'll answer your first question about security first. So security absolutely will be a new subscription opportunity in addition to the network. We offer security, offer it as a subscription. If they buy a routing product, and they want to add security in there as an edge firewall, then they buy a subscription for that, and they enable that. We are in the process of sort of learning from our partners and integrating that. The first phase of integration is going to be coming out soon. So we are introducing and talking to our partners right now. There's a lot of excitement about that. So we expect that once we launch this integrated product that will drive increased attach and increased growth of the enterprise business. On the cellular and private network side, let me talk about cellular first. So I went on a customer tour along with CJ, and we asked many of our partners, the opportunity they see on the cellular router side. So absolutely, customers see this as a redundant [indiscernible]. They already use our mobile hotspots. So we see an opportunity to potentially build cellular router type of product to enable this segment. Private networking, we are watching. I mean, I've watched this, if you said in previous companies, and I know people in this industry, I feel like right now, this segment is going for certain segments like oil and gas, difficult to reach places, logistics, not exactly our initial focus area. But if we see this as developing, if you hear this from our partners, then we'll look at it more closely. I don't know if you want to add anything?

No, you covered it well.

Given the importance of Pro AV and driving growth in the near term and longer term, how do you have conviction that, that engine will keep moving forward?

Yes. I think I talked about all the differentiation that Laurent and team have built over many years, right? These are not things that are just a feature that you go ahead and implement. It's not -- there are features that we've implemented, but on top of that, those partnerships, those learnings about making our solutions plug and play. That's truly differentiated. The other thing unique about this is the relationship we have built with our partners, both on the integrator side as well as the manufacturers, that gives us leverage in terms of our go-to-market as well. Many of these deals that I talked about earlier, the smaller deals, our sales team is not even involved in that. We are influencing the integrator base, and when they have a project, an AV project that goes in, they basically just prefer and get AV switch, and we see the order for that. It's not somebody on my side who is selling that, right? So great leverage on that side. And so I'm very excited about some of the product road map items I won't share it here, but we have some exciting ideas about how we can be innovating in this space even further, so...

Great. And then a quick follow-up. On the other side of your business. How do you see 5G mobile hotspot products actually helping grow the enterprise side of the business?

I think I answered that question earlier for Scott, right? The mobile hotspot is -- the unique thing about what we do compared to any of the previous companies I worked at is that we supported mobile hotspot supported insight. So think of a partner who's deploying a small and medium branch, and they want redundancy. They want WAN to be cellular. So that in case the primary network goes down, the network trails over to cellular. Well, they can manage all of that using network NETGEAR Insight. So that central manageability is important. Many customers already use it. And the opportunity with cellular router is, again, we can harden that mobile hotspot, integrate it better with our security solution. Now you have security, WAN, SD-WAN security, everything integrated, everything managed in the cloud, right? It's just beautiful. I don't think anybody has that type of solution.

Yes, I'd also just add that the carrier relationship that we have, and we've had for a long time are super strategic. And the way that we've worked with carriers, we expect to change going forward. So we've historically responded to RFPs when there's a device need for the carriers. But we're spending more time working with the carriers more strategic go-to-market partners so that we can capitalize on some of the opportunities that Pramod [indiscernible]

Tore from Stifel. I had two follow-ups. First one for you, Jonathan. So when you think about -- I think you mentioned the good, better, best where you're now starting to add the lower end to the portfolio to drive more subscriber and recurring revenue going forward. I mean that sounds a bit of a balancing act. Maybe I'm incorrect here, but would the lower-end products be lower gross margin? I mean, obviously, the recurring revenue will be higher gross margin. But to me, that sounds like a little bit of a balancing act. So will there be a significant lag time you think, with getting that actual services revenue up and running?

Yes. I think the -- that's obviously a balance that we have deployed. But I think if we're feeding that top of funnel, if we have a very rigorous front end for getting people into trial, doing all the things CJ mentioned before of getting those basics in place, that cycle from trial to that initial conversion can be much shorter. I think it's much more about also making sure that the service and the way we position it is going to appeal to that buyer. And if they came in, they're fully price conscious. Do they -- are they going to want a subscription? So we need to make sure it's really a compelling narrative for them also. So we're getting both a high attach rate and then a quick conversion cycle to see a turnaround and show up more quickly in the revenue.

Yes. The 2 things I would add is that there's real benefits to being up and down the market. One of those is that Amazon is a growing platform, an important go-to-market platform for us. If you're not in the volume part of the segment, it is very hard to get visibility and traction. And a lot of our consumers, the behaviors that we see as people step up, right? They want the best, but they discover us through our lower-end products. The other thing, and this is relevant to me because I've got two college-age kids, is that's when they start to discover NETGEAR when they want better connectivity in their door rooms or their apartments. If you don't have those products, it's hard to build that relationship with customers. And we're going to do a better job when they become a NETGEAR customer of retaining them. That's not -- that hasn't been historically kind of a focus with our software in a relationship management piece. So that's why we've got to be in the good, better, best.

Yes. That's great perspective. And as my follow-up, you mentioned it very briefly at the beginning, CJ, you talked about some better inventory management. You didn't discuss supply a lot here today. We do know that you're catching up with some supply, especially on the enterprise side of your business. But we also know that semiconductor supply continues to be exceptionally tight if anything is probably getting even tighter. So what's the company? What are you putting in place to make sure that you don't go through these periods again where you don't have enough supply for your demand?

Yes. Great question. Do you want to take that?

Yes, let me start. One is we've revamped our S&OP process. So we're scrutinizing down to the product level. We're looking at much longer to get ahead of things. Certainly, we've made a lot of progress on the managed switch, which we were alluding to or every quarter, we've been able to improve that supply position and still remain very confident by the first quarter of next year that we'll be in a place where we'll have some buffer stock, which very important just given the growth profile of that business. Now there are things out there. We've talked about the memory market, where there is obviously major suppliers that have exited a certain portion of that market that have created some pricing challenges, and that certainly is partly because of supply out there. But we're having conversations. I would say we punch above our weight with some of the chip suppliers where we have very strategic relationships and ongoing conversations where we're actively having -- giving them some visibility and have some flexibility to move things in. And for Managed Switch, even is a good example, where stated lead times, it's the longest lead time component we have is 52 weeks. We've probably overachieved and gotten that down to -- in the low 40 weeks. So we are actively working with the entire supply chain. We touch probably 60% of the active BOM with the 40% is handled by the ODMs.

Yes. That's an area, actually, we're using AI quite aggressively, whether it's forecasting or how we present data, provide access to data. And Bryan mentioned the S&OP process, which is kind of the overlay of that and how the data gets presented. So it's an area that we're really -- we've really made a big shift over the last 18 months.

And actually 1 more question from the audience following up on the theme of AI. How do you see AI making it into your products?

Yes, there are some good demos actually that we'll be able to answer that directly. But why don't I -- I covered it a bit, do you want to -- each want to take a shot at how it is relevant to your business.

I think -- you'll see it in the demo where, one obvious use case of AI is to make it very easy for the end customer who's trying to troubleshoot things. And my view is all the interfaces in the world will move to a conversational UI, and that's what we are enabling. You'll just be able to us an AI agent behind software to do things. So that's something. We also believe our managed switches, and I talked about this earlier, we've seen some of our customers use it in AI data centers and they use it because they find but they're deploying a data center switch, there is a part of it which is called management network, where you take the management boards and you manage that and switch that, and you need switches for that as well. It seems like an overkill to use sort of more expensive data center switches. So we've seen early deployments where customers use our switches for management network. And so that's something we're also going to explore and see how we can push that further. So lots of opportunities with AI.

Yes, we're starting to use it already for presales. These are places where language and language processing really matter, and that takes off a support call that would otherwise be an inbound cost for us that we can then direct into a sales flow. So that's one example with customer support we can do a lot of training of models to understand really common issues that customers face and either give those tools to CS agents or put those out as a chat interface that customers can interact with directly. And then some of the pieces that I talked about earlier, using AI models that can really understand what's unique about your network and model out solutions for you to identify problems that are really unique to your environment. Those are pieces that -- where we see opportunities with AI.

Yes. What may not be obvious to folks is that we get a lot of data relating to the performance of our products. So our experience is a perfect one to apply AI to. And again, I think you'll see it come out in the product demos that we're going to share, but there's a lot of opportunity for us in that regard. I think Logan might have had another question.

This is Logan on for Adam again from Raymond James. The subscription side of the business is interesting. I guess, first, I was curious how you would stack rank the opportunities of your subscription offerings in the Enterprise and Consumer segment. And then I have a follow-up.

So is this a stack rank of Enterprise and -- or Consumer or more within each of those business units, the...

Let's do it combined, yes, if you can. If not, you can break it up into each segment.

No, no, it's okay. I mean the way to think about it is consumer, we have product market fit today, right, with the subscription service we have. We just have a lot of low-hanging fruit on the top of funnel on the subscription, just fundamentals. And then on top of that, there's going to be a ton of opportunity to add value to subscription over time. So we've got a great starting point out of the gate with $35 million ARR. On the -- in Pramod's business, the most logical place for services and subscriptions is on the networking side. I mean customers are accustomed to it, they pay for it. They've been pushing us for these services, which again, led to the professional services launch. And then even AV, we haven't talked about it much today, but AV, we see opportunities down the road as well. Today, that's not a recurring -- there's not a recurring revenue element to that business, but we do see opportunities for that in the future.

That's helpful. Maybe back to the consumer side of the business. I know you've had some subscription offerings for a few years now on that side of the business. I guess, how did you guys come to the determination that this was more of an execution issue versus demand issue on that side of the business? Maybe another way to phrase it is, is home networking in the right category for these subscriptions, or is that more just a onetime purchase and they just kind of leave it after that?

I mean, I might start off by saying, I think in the short-term execution in the long term, it's creating more value and capability in the subscriptions that we offer. So that the near-term piece, we can start addressing immediately. It's obvious if you've worked in subscription as CJ and I both worked on consumer subscriptions, the things that we can fix on the execution side. Longer term is where we have a lot of ideas that will take some time to get out into the market that add a lot more value to customers, some spaces that go beyond cybersecurity as a core theme. And we do think there is obviously that initial post-purchase moment where we really have your attention. But as we add capability, we have an installed base that's very large that we can go out to and bring those people back and put offers in front of them, let them know about new capabilities we're building. So we see opportunities on both sides there.

I wanted to revisit an earlier question about TP-Link. Senator Ernst and 23 of her colleagues set a pretty strongly worded letter to Commerce last week. And so I wanted to see if you had any sort of broad update on what that process is looking like. And just hypothetically speaking, if TP-Link got shut off today, would you have the capacity to fill their -- fill that void?

We missed that. Why don't you prepare to cover the last piece of that, and I'll take the first piece. So based on a letter we got from TP-Link after our last earnings call, they don't like us reporting what's been reported in the news, but we're going to do it anyway. Yes, there's been a lot of activity. I mean it's just escalating the day after earnings, there was a WAPO article that said Commerce is recommending banning TP-Link. It's supported by six federal agencies. They're all the state activity. There's the bipartisan support, the shutdowns coming through. And I mean, yes, it's hard to miss. And -- but like in a day like today, what we're most proud about, of course, is like what we're going to do to solve like a customer's problem. So while we love hearing that, like we're heads down delivering for the customer and Pramod's side of the business, we've been seeing already, well, both sides of the business, frankly, we're seeing tailwinds from just the fact that like we're focused on security, we're focused on privacy. We're a U.S.-based company. Jonathan said it, well, we have no other motors. But it really is hard. I mean, we read all the same things that you all do. We bring it up on earnings, TP-Link doesn't like that, but we'll keep doing it.

Yes. And on the inventory front, we've obviously been watching the press like everyone in here and having conversations with our supply chain partners and preparing and planning for a response. We've made some inventory investments already, but we've been characterizing the inventory investment to be in that $75 million range, and that clearly has not played out yet. So it really depends on the form of any potential action that's rolled out there in how much time that would take to where we need to be able to respond. And certainly, there will be near-term demand shifts, I would think if that were to happen. But it would depend on how quickly the retailers change their footprints.

You want to share your interest, JC, so you can get a letter to?

So another quick one from the audience. Can you tell us a little more about the AV software acquisition?

Who wants to do that?

I can take that. AV software acquisition that -- you want to take that to explain that, or do you want me to..

Sure. I mean, we've talked about Vogue and XCM. We haven't talked too much about this publicly, but we have acquired the operating system that powers our AV switches. And that's going to have a lot of different benefits. You referenced the financial benefits. You can come back to that. But the most important thing is it's just going to allow us to iterate more quickly. It's just like in-sourcing the software capability. We now have like a much stronger foundation to allow us to iterate more quickly. Now it hasn't held us back to date. But over the long term, it's going to pay big dividends. And then it does have a P&L impact. I don't know what you want to say about that.

Yes. I mean it's roughly 100 to 150 basis point impact to our overall gross margins.

Yes. I'll just add that. Laurent over that has a long list of innovations he has in mind. And having our own software engineering team and having access to being able to innovate on top of that software, we believe we'll be able to innovate and differentiate faster. Like in that case, I talked about broadcast to go into the higher-end broadcast space, requires addressing some features that are needed that allows us to do that faster.

Is that 100, 150 to the AV business, not the overall?

Overall.

Okay. Maybe one more on the partner front. Can you tell us a little more about the partnership with Google?

Sure. Well, I can tell you what I shared today. So -- but I would say it's exciting opportunity just for customers to make it easier for them to set up matter-based devices to make it very simple, if you have an Orbi system to use the Google Home app to set up those devices. So I would say, stay tuned and -- but that's the foundation for, I think, a longer view of where we can go in the smart home space.

Yes, I would add, we are limited what we can say there, but we're really excited about the partnership. And I think the bigger picture is if you think about what we've done in Pro AV to build an ecosystem of partners to solve a specific end customer issue, like that's the opportunity we have in the home, right? Like we're the only player that can do that. Everybody else has whether it's government security scrutiny or you're part of a bigger company that has its own kind of home agenda like we're the Switzerland of the home. And so it's the beginning of what we see as a big opportunity for us there.

Okay. One more. Obviously, the team has changed quite a bit in the 18 months you've been around, CJ. How is the team handling this? It sounds like there's a solid foundation, but do you feel like you're in good shape going forward, or is there some more transition there?

Yes. We're asking a lot of our team. People are fired up like the purpose, the mission, the values, people are excited. I will say we're driving more attrition than has historically been the case at NETGEAR. We've got a very thoughtful and new kind of performance management approach. And some folks that aren't -- and I say this directly to the team, and I'm sure many of them are listening, like transformations are hard and requires extra effort and extra commitment and conviction and some people just aren't up for that. And so we're really excited about the capabilities we have on the existing team. I mentioned the leaders -- existing leaders that have been elevated NETGEAR. And I think people are really excited about like the path that we're on.

Anything else from the audience?

Okay. Well, let me maybe just wrap. I think that's a great note to end on. Just thank you -- a big thank you to the NETGEAR team. I'm sure lots of folks are watching. We're just -- what I like to tell the team is we're just out of the starting blocks. We're just getting started on this transformation. Thank you for everybody who made the trip here, not trivial. I know the shutdowns in it, but it travels still not trivial. So thank you and many West Coast attendees in particular. And then I want to thank all the folks that made this possible and thank Crestron again. I think we've lost Brad, but his team, Jonathan, [indiscernible] -- oh, there's Brad, Jonathan, [indiscernible], Brad, Joanne, they've been great host. And again, remember, this is all powered by NETGEAR. Thank you.