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Arlo Reports Third Quarter 2021 Results

November 09, 2021

Exceeded High-End of both Revenue and non-GAAP EPS Guidance for the Quarter

Announced Annual Recurring Revenue of $80 million, growing 103% year over year

42% Year over Year growth in Service Revenue

146% Year over Year growth in Cumulative Paid Accounts

Ended Quarter with Cash, Cash Equivalents and Short-term Investments Balance at $166.1 million, with No Debt

CARLSBAD, Calif.--(BUSINESS WIRE)-- Arlo Technologies, Inc. (NYSE: ARLO), a leading internet-connected security camera brand, today reported financial results for the third quarter ended October 3, 2021.

Financial Highlights (1)

  • Revenue of $111.1 million, an increase of 0.8% year over year.
  • GAAP gross profit of $24.3 million, an increase of 13.7% year over year; non-GAAP gross profit of $25.1 million, an increase of 10.7% year over year.
  • GAAP gross margin of 21.9%; non-GAAP gross margin of 22.6%.
  • GAAP net loss per diluted share of $(0.18); non-GAAP net loss per diluted share of $(0.08).
  • Cash, cash equivalents and short-term investments of $166.1 million and no debt.

“I am proud to say the Arlo team delivered strong results across the entire business in Q3. Revenue and non-GAAP EPS both came in above the high end of our guidance range, as our team navigated considerable global supply chain challenges. Our new business model for services continued to gather momentum, adding a record 182,000 paid accounts in the quarter, an increase of 214% year over year. We surpassed 900,000 total paid accounts on October 18th, which we believe puts us on a clear path to meet our 1,000,000 paid account goal significantly ahead of our year-end earnings call and exceed $100 million in service revenue this year. Our impressive paid account growth propelled our service revenue to a record $27.0 million, up 42% year over year, while our non-GAAP service gross margin of 59.5% was also a record for Arlo as a standalone company. In addition, to provide new insight into our rapidly growing services business, we reported our Annual Recurring Revenue (or ARR) as $80 million dollars in Q3, growing 103% year over year. Our ARR is the fastest growing and highest margin portion of our total services revenue and represents the annualized recurring service revenue we derive from our paid accounts.” said Matthew McRae, Chief Executive Officer of Arlo Technologies. “While our product revenue was constrained by global supply chain challenges, our total revenue grew year over year by 0.8% and was significantly over-indexed by non-GAAP gross profit, which grew 10.7% year-over-year. Our innovation continues on all fronts. We are pleased with the early results we are seeing from the recent launch of Arlo Secure and Arlo Secure Plus, our new Service plans, which extend Arlo’s technological leadership, while adding significant value to our customers. Our industry-leading hardware continues to garner acclaim, winning multiple awards, while we just launched the new Arlo Go 2 smart-security camera exclusively with Verizon. With tremendous progress across the business, we are raising our revenue guidance for Q4, raising guidance for full year, and raising guidance for our year-end cash balance.”

 

Three Months Ended

 

Nine Months Ended

 

October 3,
2021

 

June 27, 2021

 

September 27,
2020

 

October 3,
2021

 

September 27,
2020

 

(in thousands, except percentage and per share data)

Revenue

$

111,149

 

 

 

$

98,571

 

 

 

$

110,236

 

 

 

$

292,276

 

 

 

$

242,318

 

 

GAAP Gross Margin

21.9

 

%

 

26.6

 

%

 

19.4

 

%

 

26.1

 

%

 

12.7

 

%

Non-GAAP Gross Margin (1)

22.6

 

%

 

27.9

 

%

 

20.6

 

%

 

27.1

 

%

 

14.0

 

%

GAAP Net Income (Loss) per Diluted Share

$

(0.18

)

 

 

$

(0.28

)

 

 

$

(0.22

)

 

 

$

(0.60

)

 

 

$

(1.11

)

 

Non-GAAP Net Income (Loss) per Diluted Share (1)

$

(0.08

)

 

 

$

(0.04

)

 

 

$

(0.10

)

 

 

$

(0.16

)

 

 

$

(0.74

)

 

_________________________

(1)

 

Reconciliation of financial measures computed on a GAAP basis to the most directly comparable financial measures computed on a non-GAAP basis are provided at the end of this press release.

Financial and Business Highlights

  • Service revenue of $27.0 million for Q3, for growth of 42.4% year over year, the ninth consecutive quarter of record service revenue.
  • Announced ARR of $80 million, growing 103% year over year. (2)
  • Non-GAAP service gross margin a record for Arlo as a standalone company at 59.5%.
  • Added a record 182,000 paid accounts in Q3, a sequential increase of 24.7% over Q2, and a year over year increase of 213.8%.
  • Launched new Arlo Go 2 smart-security camera exclusively with Verizon.
  • Won three Editors' Choice awards, multiple design awards, and features in Best of 2021 lists across the industry.

_________________________

(2)

 

ARR is calculated by taking our recurring paid service revenue for the last calendar month in the fiscal quarter, multiplied by 12 months. Recurring paid service revenue represents the revenue we recognized from our paid accounts and excludes prepaid service revenue and non-recurring engineering (NRE) service revenue from strategic partners.

Fourth Quarter 2021 Business Outlook (3)

  • Revenue of $130.0 million to $140.0 million.
  • GAAP net loss per diluted share of $(0.16) to $(0.09), and non-GAAP net loss per diluted share of $(0.07) to $0.00.

A reconciliation of our business outlook on a GAAP and non-GAAP basis is provided in the following table:

 

Three Months Ending December 31, 2021

 

Revenue

 

Net Loss per Diluted Share

 

(in millions, except per share data)

GAAP

$130.0 - $140.0

 

$(0.16) - $(0.09)

Estimated adjustments for (3):

 

 

 

Stock-based compensation expense

 

0.08

Separation expense

 

0.01

Tax effects of non-GAAP adjustments

 

Non-GAAP

$130.0 - $140.0

 

$(0.07) - $0.00

_________________________

(3)

 

Business outlook does not include estimates for any currently unknown income and expense items which, by their nature, could arise late in a quarter, including: litigation reserves, net; acquisition-related charges; impairment charges; discrete tax benefits or detriments relating to tax windfalls or shortfalls from equity awards; and any additional impacts relating to the implementation of U.S. tax reform. New material income and expense items such as these could have a significant effect on our guidance and future results.

Investor Conference Call / Webcast Details

Arlo will review the third quarter of 2021 results and discuss management’s expectations for the fourth quarter of 2021 today, Tuesday, November 9, 2021 at 5:00 p.m. ET (2:00 p.m. PT). The toll-free dial-in number for the live audio call is (888) 660-6387. The international dial-in number for the live audio call is (929) 203-1909. The conference ID for the call is 7749064. A live webcast of the conference call will be available on Arlo’s Investor Relations website at https://investor.arlo.com. A replay of the call will be available via the web at https://investor.arlo.com.

About Arlo Technologies, Inc.

Arlo (NYSE: ARLO) is the award-winning, industry leader that is transforming the way people experience the connected lifestyle. Arlo’s deep expertise in product design, wireless connectivity, cloud infrastructure and cutting-edge AI capabilities focuses on delivering a seamless, smart home experience for Arlo users that is easy to setup and interact with every day. Arlo’s cloud-based platform provides users with visibility, insight and a powerful means to help protect and connect in real-time with the people and things that matter most, from any location with a Wi-Fi or a cellular connection. To date, Arlo has launched several categories of award-winning smart connected devices, including wire-free smart Wi-Fi and LTE-enabled security cameras, indoor security cameras, video doorbells, and floodlights.

With a mission to bring users peace of mind, Arlo is as passionate about protecting user privacy as it is about safeguarding homes and families. Arlo is committed to supporting industry standards for data protection designed to keep users' personal information private and in their control. Arlo doesn't monetize personal data, provides enhanced controls for user data, supports privacy legislation, keeps user data safely secure, and puts security at the forefront of company culture.

© 2021 Arlo Technologies, Inc., Arlo and the Arlo logo are trademarks and/or registered trademarks of Arlo Technologies, Inc. and/or certain of its affiliates in the United States and/or other countries. Other brand and product names are for identification purposes only and may be trademarks or registered trademarks of their respective holder(s). The information contained herein is subject to change without notice. Arlo shall not be liable for technical or editorial errors or omissions contained herein. All rights reserved.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. The words “anticipate,” “expect,” “believe,” “will,” “may,” “should,” “estimate,” “project,” “outlook,” “forecast” or other similar words are used to identify such forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. The forward-looking statements represent Arlo Technologies, Inc.’s (the "Company") expectations or beliefs concerning future events based on information available at the time such statements were made and include statements regarding its potential future business, operating performance and financial condition, including descriptions of its expected revenue, GAAP and non-GAAP gross margins, operating margins, tax rates, expenses, and cash outlook; the Company's transition to a services-first business model; the commercial launch and momentum of new products and services; strategic objectives and initiatives, including the Company's collaboration with Verisure; expectations regarding market expansion and future growth; plans to invest in product innovation; the Company's future product offerings; supply chain challenges; and the quote from the Company's Chief Executive Officer. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: future demand for the Company's products may be lower than anticipated; consumers may choose not to adopt the Company's new product offerings or adopt competing products; product performance may be adversely affected by real world operating conditions; the Company may be unsuccessful or experience delays in manufacturing and distributing its new and existing products; telecommunications service providers may choose to slow their deployment of the Company's products or utilize competing products; the Company may be unable to collect receivables as they become due; the Company may fail to manage costs, including the cost of developing new products and manufacturing and distribution of its existing offerings; the Company may incur additional costs and charges associated with the transactions contemplated by the Verisure partnership; the Company may not receive the minimum commitment amounts from Verisure; the COVID-19 pandemic could continue to have an adverse impact on the Company's business, operations and the markets and communities in which the Company and its partners and customers operate; the Company may fail to successfully continue to effect operating expense savings; changes in the level of the Company's cash resources and the Company's planned usage of such resources; changes in the Company's stock price and developments in the business that could increase the Company's cash needs; fluctuations in foreign exchange rates; the actions and financial health of the Company's customers; the anticipated financial capacity under the Company's revolving credit line may not be available when expected, or at all; and the Company may not be able to carry out its restructuring plan. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Further information on potential risk factors that could affect the Company's and its business are detailed in the Company's periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled “Risk Factors” in the Company's most recently filed Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (the “SEC”) and subsequent filings with the SEC. Given these circumstances, you should not place undue reliance on these forward-looking statements. The Company undertakes no obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Non-GAAP Financial Information:

To supplement our unaudited selected financial data presented on a basis consistent with U.S. Generally Accepted Accounting Principles (“GAAP”), we disclose certain non-GAAP financial measures that exclude certain charges, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development, non-GAAP sales and marketing, non-GAAP general and administrative, non-GAAP total operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP other income (expenses), net, non-GAAP provision for income taxes, non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share. These supplemental measures exclude adjustments for separation expense, stock-based compensation expense, amortization of intangibles, impairment charges, restructuring and other charges, strategic initiative and transaction expenses, gain on sale of business, litigation reserves, and the related tax effects. These non-GAAP measures are not in accordance with or an alternative for GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance.

In calculating non-GAAP financial measures, we exclude certain items to facilitate a review of the comparability of our operating performance on a period-to-period basis because such items are not, in our view, related to our ongoing operational performance. We use non-GAAP measures to evaluate the operating performance of our business, for comparison with forecasts and strategic plans, and for benchmarking performance externally against competitors. In addition, management’s incentive compensation is determined using certain non-GAAP measures. Since we find these measures to be useful, we believe that investors benefit from seeing results “through the eyes” of management in addition to seeing GAAP results. We believe that these non-GAAP measures, when read in conjunction with our GAAP measures, provide useful information to investors by offering:

– the ability to make more meaningful period-to-period comparisons of our on-going operating results;

– the ability to better identify trends in our underlying business and perform related trend analyses;

– a better understanding of how management plans and measures our underlying business; and

– an easier way to compare our operating results against analyst financial models and operating results of competitors that supplement their GAAP results with non-GAAP financial measures.

The following are explanations of the adjustments that we incorporate into non-GAAP measures, as well as the reasons for excluding them in the reconciliations of these non-GAAP financial measures:

Separation expense consists of expenses that are related to the separation of our business from NETGEAR. These consist primarily of costs of legal and professional services for IPO-related litigation associated with our separation from NETGEAR. We consider our operating results without these charges when evaluating our ongoing performance and forecasting our earnings trends, and therefore exclude such charges when presenting non-GAAP financial measures. We believe that the assessment of our operations excluding these costs is relevant to our assessment of internal operations and comparisons to the performance of our competitors.

Stock-based compensation expense consists of non-cash charges for the estimated fair value of stock options, performance-based stock options, restricted stock units, performance-based restricted stock units, shares under the employee stock purchase plan granted to employees and employees' annual bonus in RSU form. We believe that the exclusion of these charges provides for more accurate comparisons of our operating results to peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, we believe it is useful to investors to understand the specific impact stock-based compensation expense has on our operating results.

Amortization of intangibles consists primarily of non-cash charges that can be impacted by, among other things, the timing and magnitude of acquisitions. We consider our operating results without these charges when evaluating our ongoing performance and forecasting our earnings trends, and therefore exclude such charges when presenting non-GAAP financial measures. We believe that the assessment of our operations excluding these costs is relevant to an assessment of our internal operations and comparisons to our prior and future periods and to the performance of our competitors.

Strategic initiative and transaction expenses consist of legal fees associated with the strategic review of the Company and legal fees, accounting fees and other one-time costs incurred to complete the Verisure transaction. We consider our operating results without these charges when evaluating our ongoing performance and forecasting our earnings trends, and therefore exclude such charges when presenting non-GAAP financial measures. We believe that the assessment of our operations excluding these costs is relevant to our assessment of internal operations and comparisons to the performance of our competitors.

Gain on sale of business represents gain from sale of the Company's commercial operations in Europe. We consider our operating results without this gain when evaluating our ongoing performance and forecasting our earnings trends, and therefore exclude such gain when presenting non-GAAP financial measures. We believe that the assessment of our operations excluding the gain is relevant to our assessment of internal operations and comparisons to the performance of our competitors.

Other items are the result of either unique or unplanned events, including, when applicable: restructuring and other charges, litigation reserves, net and impairment charges. It is difficult to predict the occurrence or estimate the amount or timing of these items in advance. Although these events are reflected in our GAAP financial statements, these unique transactions may limit the comparability of our on-going operations with prior and future periods. The amounts result from events that often arise from unforeseen circumstances, which often occur outside of the ordinary course of continuing operations. Therefore, the amounts do not accurately reflect the underlying performance of our continuing business operations for the period in which they are incurred.

Tax effects consist of the various above adjustments that we incorporate into non-GAAP measures in order to provide a more meaningful measure on non-GAAP net income. We also believe providing financial information with and without the income tax effects relating to our non-GAAP financial measures provides our management and users of the financial statements with better clarity regarding the on-going performance of our business.

Source: Arlo-F

ARLO TECHNOLOGIES, INC.

 

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

As of

 

October 3,
2021

 

December 31,
2020

 

(In thousands, except share and per share data)

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

166,057

 

 

 

$

186,127

 

 

Short-term investments (amortized cost of $— and $19,996)

 

 

 

19,997

 

 

Accounts receivable, net (net of allowance for credit losses of $326 and $519)

70,124

 

 

 

77,643

 

 

Inventories

39,769

 

 

 

64,705

 

 

Prepaid expenses and other current assets

12,147

 

 

 

8,076

 

 

Total current assets

288,097

 

 

 

356,548

 

 

Property and equipment, net

10,681

 

 

 

15,821

 

 

Operating lease right-of-use assets, net

15,619

 

 

 

23,998

 

 

Goodwill

11,038

 

 

 

11,038

 

 

Restricted cash

4,105

 

 

 

4,164

 

 

Other non-current assets

3,786

 

 

 

2,399

 

 

Total assets

$

333,326

 

 

 

$

413,968

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

61,660

 

 

 

$

62,171

 

 

Deferred revenue

39,513

 

 

 

53,142

 

 

Accrued liabilities

93,444

 

 

 

121,766

 

 

Income tax payable

106

 

 

 

267

 

 

Total current liabilities

194,723

 

 

 

237,346

 

 

Non-current deferred revenue

2,173

 

 

 

16,563

 

 

Non-current operating lease liabilities

22,611

 

 

 

25,029

 

 

Non-current income taxes payable

114

 

 

 

104

 

 

Other non-current liabilities

1,481

 

 

 

1,159

 

 

Total liabilities

221,102

 

 

 

280,201

 

 

Stockholders’ Equity:

 

 

 

Preferred stock: $0.001 par value; 50,000,000 shares authorized; none issued or outstanding

 

 

 

 

 

Common stock: : $0.001 par value; 500,000,000 shares authorized; shares issued and outstanding: 84,266,833 at October 3, 2021 and 79,336,242 at December 31, 2020

84

 

 

 

79

 

 

Additional paid-in capital

394,136

 

 

 

366,455

 

 

Accumulated other comprehensive income

11

 

 

 

3

 

 

Accumulated deficit

(282,007

)

 

 

(232,770

)

 

Total stockholders’ equity

112,224

 

 

 

133,767

 

 

Total liabilities and stockholders’ equity

$

333,326

 

 

 

$

413,968

 

 

ARLO TECHNOLOGIES, INC.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

Three Months Ended

 

Nine Months Ended

 

October 3,
2021

 

June 27, 2021

 

September 27,
2020

 

October 3,
2021

 

September 27,
2020

 

(in thousands, except percentage and per share data)

Revenue:

 

 

 

 

 

 

 

 

 

Products

$

84,152

 

 

 

$

73,311

 

 

 

$

91,271

 

 

 

$

217,224

 

 

 

$

191,597

 

 

Services

26,997

 

 

 

25,260

 

 

 

18,965

 

 

 

75,052

 

 

 

50,721

 

 

Total revenue

111,149

 

 

 

98,571

 

 

 

110,236

 

 

 

292,276

 

 

 

242,318

 

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

Products

75,682

 

 

 

62,019

 

 

 

79,107

 

 

 

184,858

 

 

 

182,481

 

 

Services

11,124

 

 

 

10,383

 

 

 

9,720

 

 

 

31,099

 

 

 

28,986

 

 

Total cost of revenue

86,806

 

 

 

72,402

 

 

 

88,827

 

 

 

215,957

 

 

 

211,467

 

 

Gross profit

24,343

 

 

 

26,169

 

 

 

21,409

 

 

 

76,319

 

 

 

30,851

 

 

Gross margin

21.9

 

%

 

26.6

 

%

 

19.4

 

%

 

26.1

 

%

 

12.7

 

%

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

14,377

 

 

 

16,251

 

 

 

15,436

 

 

 

45,419

 

 

 

44,871

 

 

Sales and marketing

12,779

 

 

 

12,459

 

 

 

12,720

 

 

 

36,445

 

 

 

35,471

 

 

General and administrative

12,119

 

 

 

13,559

 

 

 

11,137

 

 

 

36,905

 

 

 

39,758

 

 

Impairment charges

 

 

 

9,116

 

 

 

 

 

 

9,116

 

 

 

 

 

Separation expense

683

 

 

 

605

 

 

 

77

 

 

 

1,342

 

 

 

238

 

 

Gain on sale of business

 

 

 

 

 

 

 

 

 

 

 

 

(292

)

 

Total operating expenses

39,958

 

 

 

51,990

 

 

 

39,370

 

 

 

129,227

 

 

 

120,046

 

 

Loss from operations

(15,615

)

 

 

(25,821

)

 

 

(17,961

)

 

 

(52,908

)

 

 

(89,195

)

 

Operating margin

(14.0

)

%

 

(26.2

)

%

 

(16.3

)

%

 

(18.1

)

%

 

(36.8

)

%

Interest income (expense), net

(1

)

 

 

3

 

 

 

74

 

 

 

26

 

 

 

760

 

 

Other income (expense), net

599

 

 

 

2,662

 

 

 

543

 

 

 

4,170

 

 

 

2,837

 

 

Loss before income taxes

(15,017

)

 

 

(23,156

)

 

 

(17,344

)

 

 

(48,712

)

 

 

(85,598

)

 

Provision for income taxes

181

 

 

 

164

 

 

 

115

 

 

 

525

 

 

 

443

 

 

Net loss

$

(15,198

)

 

 

$

(23,320

)

 

 

$

(17,459

)

 

 

$

(49,237

)

 

 

$

(86,041

)

 

Net loss per share:

 

 

 

 

 

 

 

 

 

Basic

$

(0.18

)

 

 

$

(0.28

)

 

 

$

(0.22

)

 

 

$

(0.60

)

 

 

$

(1.11

)

 

Diluted

$

(0.18

)

 

 

$

(0.28

)

 

 

$

(0.22

)

 

 

$

(0.60

)

 

 

$

(1.11

)

 

Weighted average shares used to compute net loss per share:

 

 

 

 

 

 

 

 

 

Basic

83,809

 

 

 

82,134

 

 

 

78,662

 

 

 

82,191

 

 

 

77,705

 

 

Diluted

83,809

 

 

 

82,134

 

 

 

78,662

 

 

 

82,191

 

 

 

77,705

 

 

ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Nine Months Ended

 

October 3,
2021

 

September 27,
2020

 

(In thousands)

Cash flows from operating activities:

 

 

 

Net loss

$

(49,237

)

 

 

$

(86,041

)

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

Stock-based compensation expense

27,548

 

 

 

26,338

 

 

Impairment charges

9,116

 

 

 

 

 

Depreciation and amortization

4,546

 

 

 

8,024

 

 

Loss on disposal of property and equipment

57

 

 

 

19

 

 

Allowance for credit losses and inventory reserves

(2,530

)

 

 

1,322

 

 

Deferred income taxes

(284

)

 

 

63

 

 

Premium amortization (discount accretion) on investments, net

(3

)

 

 

60

 

 

Gain on sale of business

 

 

 

(292

)

 

Changes in assets and liabilities:

 

 

 

Accounts receivable, net

7,712

 

 

 

70,985

 

 

Inventories

27,274

 

 

 

(1,838

)

 

Prepaid expenses and other assets

(5,166

)

 

 

8,369

 

 

Accounts payable

(27

)

 

 

(37,554

)

 

Deferred revenue

(28,019

)

 

 

(27,569

)

 

Accrued and other liabilities

(23,643

)

 

 

(21,203

)

 

Net cash used in operating activities

(32,656

)

 

 

(59,317

)

 

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

(1,938

)

 

 

(2,070

)

 

Purchases of short-term investments

 

 

 

(45,085

)

 

Maturities of short-term investments

20,000

 

 

 

45,000

 

 

Net cash provided by (used in) investing activities

18,062

 

 

 

(2,155

)

 

Cash flows from financing activities:

 

 

 

Proceeds related to employee benefit plans

7,403

 

 

 

3,051

 

 

Restricted stock unit withholdings

(12,938

)

 

 

(4,632

)

 

Net cash used in financing activities

(5,535

)

 

 

(1,581

)

 

Net decrease in cash and cash equivalents and restricted cash

(20,129

)

 

 

(63,053

)

 

Cash and cash equivalents and restricted cash, at beginning of period

190,291

 

 

 

240,819

 

 

Cash and cash equivalents and restricted cash, at end of period

$

170,162

 

 

 

$

177,766

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

Purchases of property and equipment included in accounts payable and accrued liabilities

$

423

 

 

 

$

1,470

 

 

ARLO TECHNOLOGIES, INC.

 

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES

UNAUDITED STATEMENT OF OPERATIONS DATA:

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

October 3,
2021

 

June 27,
2021

 

September 27,
2020

 

October 3,
2021

 

September 27,
2020

 

(in thousands, except percentage data)

GAAP gross profit:

 

 

 

 

 

 

 

 

 

Products

$

8,470

 

 

 

$

11,292

 

 

 

$

12,164

 

 

 

$

32,366

 

 

 

$

9,116

 

 

Services

15,873

 

 

 

14,877

 

 

 

9,245

 

 

 

43,953

 

 

 

21,735

 

 

Total GAAP gross profit

24,343

 

 

 

26,169

 

 

 

21,409

 

 

 

76,319

 

 

 

30,851

 

 

GAAP gross margin:

 

 

 

 

 

 

 

 

 

Products

10.1

 

%

 

15.4

 

%

 

13.3

 

%

 

14.9

 

%

 

4.8

 

%

Services

58.8

 

%

 

58.9

 

%

 

48.8

 

%

 

58.6

 

%

 

42.9

 

%

Total GAAP gross margin

21.9

 

%

 

26.6

 

%

 

19.4

 

%

 

26.1

 

%

 

12.7

 

%

Stock-based compensation expense - Products

593

 

 

 

1,289

 

 

 

942

 

 

 

2,756

 

 

 

2,007

 

 

Stock-based compensation expense - Services

194

 

 

 

 

 

 

 

 

 

194

 

 

 

 

 

Amortization of intangibles - Products

 

 

 

 

 

 

356

 

 

 

 

 

 

1,069

 

 

Restructuring and other charges - Products

 

 

 

 

 

 

 

 

 

 

 

 

23

 

 

Non-GAAP gross profit:

 

 

 

 

 

 

 

 

 

Products

9,063

 

 

 

12,581

 

 

 

13,462

 

 

 

35,122

 

 

 

12,215

 

 

Services

16,067

 

 

 

14,877

 

 

 

9,245

 

 

 

44,147

 

 

 

21,735

 

 

Total Non-GAAP gross profit

$

25,130

 

 

 

$

27,458

 

 

 

$

22,707

 

 

 

$

79,269

 

 

 

$

33,950

 

 

Non-GAAP gross margin:

 

 

 

 

 

 

 

 

 

Products

10.8

 

%

 

17.2

 

%

 

14.8

 

%

 

16.2

 

%

 

6.4

 

%

Services

59.5

 

%

 

58.9

 

%

 

48.8

 

%

 

58.8

 

%

 

42.9

 

%

Total Non-GAAP gross margin

22.6

 

%

 

27.9

 

%

 

20.6

 

%

 

27.1

 

%

 

14.0

 

%

 

 

 

 

 

 

 

 

 

 

GAAP research and development

$

14,377

 

 

 

$

16,251

 

 

 

$

15,436

 

 

 

$

45,419

 

 

 

$

44,871

 

 

Stock-based compensation expense

(2,086

)

 

 

(3,832

)

 

 

(2,870

)

 

 

(8,474

)

 

 

(6,259

)

 

Non-GAAP research and development

$

12,291

 

 

 

$

12,419

 

 

 

$

12,566

 

 

 

$

36,945

 

 

 

$

38,612

 

 

 

 

 

 

 

 

 

 

 

 

GAAP sales and marketing

$

12,779

 

 

 

$

12,459

 

 

 

$

12,720

 

 

 

$

36,445

 

 

 

$

35,471

 

 

Stock-based compensation expense

(1,119

)

 

 

(1,638

)

 

 

(1,160

)

 

 

(3,947

)

 

 

(2,895

)

 

Non-GAAP sales and marketing

$

11,660

 

 

 

$

10,821

 

 

 

$

11,560

 

 

 

$

32,498

 

 

 

$

32,576

 

 

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative

$

12,119

 

 

 

$

13,559

 

 

 

$

11,137

 

 

 

$

36,905

 

 

 

$

39,758

 

 

Stock-based compensation expense

(3,607

)

 

 

(4,850

)

 

 

(4,029

)

 

 

(12,177

)

 

 

(15,177

)

 

Restructuring and other charges

 

 

 

 

 

 

 

 

 

 

 

 

(21

)

 

Strategic initiative and transaction expenses

 

 

 

 

 

 

(17

)

 

 

 

 

 

(768

)

 

Litigation reserves, net

 

 

 

(157

)

 

 

 

 

 

(167

)

 

 

(256

)

 

Non-GAAP general and administrative

$

8,512

 

 

 

$

8,552

 

 

 

$

7,091

 

 

 

$

24,561

 

 

 

$

23,536

 

 

ARLO TECHNOLOGIES, INC.

 

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)

UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED):

 

 

Three Months Ended

Nine Months Ended

 

October 3,
2021

June 27,
2021

September 27,
2020

October 3,
2021

September 27,
2020

 

(in thousands, except percentage and per share data)

GAAP total operating expenses

$

39,958

 

$

51,990

 

$

39,370

 

$

129,227

 

$

120,046

 

Separation expense

(683

)

(605

)

(77

)

(1,342

)

(238

)

Strategic initiative and transaction expenses

 

 

(17

)

 

(768

)

Stock-based compensation expense

(6,812

)

(10,320

)

(8,059

)

(24,598

)

(24,331

)

Impairment charges

 

(9,116

)

 

(9,116

)

 

Restructuring and other charges

 

 

 

 

(21

)

Litigation reserves, net

 

(157

)

 

(167

)

(256

)

Gain on sale of business

 

 

 

 

292

 

Non-GAAP total operating expenses

$

32,463

 

$

31,792

 

$

31,217

 

$

94,004

 

$

94,724

 

 

 

 

 

 

 

GAAP operating loss

$

(15,615

)

$

(25,821

)

$

(17,961

)

$

(52,908

)

$

(89,195

)

GAAP operating margin

(14.0

)%

(26.2

)%

(16.3

)%

(18.1

)%

(36.8

)%

Separation expense

683

 

605

 

77

 

1,342

 

238

 

Strategic initiative and transaction expenses

 

 

17

 

 

768

 

Stock-based compensation expense

7,599

 

11,609

 

9,001

 

27,548

 

26,338

 

Impairment charges

 

9,116

 

 

9,116

 

 

Amortization of intangibles

 

 

356

 

 

1,069

 

Restructuring and other charges

 

 

 

 

44

 

Litigation reserves, net

 

157

 

 

167

 

256

 

Gain on sale of business

 

 

 

 

(292

)

Non-GAAP operating loss

$

(7,333

)

$

(4,334

)

$

(8,510

)

$

(14,735

)

$

(60,774

)

Non-GAAP operating margin

(6.6

)%

(4.4

)%

(7.7

)%

(5.0

)%

(25.1

)%

 

 

 

 

 

 

GAAP other income (expense), net

$

599

 

$

2,662

 

$

543

 

$

4,170

 

$

2,837

 

Employee Retention Credit

(196

)

(1,811

)

 

(2,007

)

 

Non-GAAP other income (expense), net

$

403

 

$

851

 

$

543

 

$

2,163

 

$

2,837

 

 

 

 

 

 

 

GAAP provision for income taxes

$

181

 

$

164

 

$

115

 

$

525

 

$

443

 

GAAP income tax rate

(1.2

)%

(0.7

)%

(0.7

)%

(1.1

)%

(0.5

)%

Tax effects

 

 

 

 

31

 

Non-GAAP provision for income taxes

$

181

 

$

164

 

$

115

 

$

525

 

$

412

 

Non-GAAP income tax rate

(2.6

)%

(4.7

)%

(1.5

)%

(4.2

)%

(0.7

)%

ARLO TECHNOLOGIES, INC.

 

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)

UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

October 3,
2021

 

June 27,
2021

 

September 27,
2020

 

October 3,
2021

 

September 27,
2020

 

(in thousands, except percentage and per share data)

GAAP net loss

$

(15,198

)

 

 

$

(23,320

)

 

 

$

(17,459

)

 

 

$

(49,237

)

 

 

$

(86,041

)

 

Separation expense

683

 

 

 

605

 

 

 

77

 

 

 

1,342

 

 

 

238

 

 

Strategic initiative and transaction expenses

 

 

 

 

 

 

17

 

 

 

 

 

 

768

 

 

Stock-based compensation expense

7,599

 

 

 

11,609

 

 

 

9,001

 

 

 

27,548

 

 

 

26,338

 

 

Impairment charges

 

 

 

9,116

 

 

 

 

 

 

9,116

 

 

 

 

 

Amortization of intangibles

 

 

 

 

 

 

356

 

 

 

 

 

 

1,069

 

 

Restructuring and other charges

 

 

 

 

 

 

 

 

 

 

 

 

44

 

 

Litigation reserves, net

 

 

 

157

 

 

 

 

 

 

167

 

 

 

256

 

 

Gain on sale of business

 

 

 

 

 

 

 

 

 

 

 

 

(292

)

 

Employee Retention Credit

(196

)

 

 

(1,811

)

 

 

 

 

 

(2,007

)

 

 

 

 

Tax effects

 

 

 

 

 

 

 

 

 

 

 

 

31

 

 

Non-GAAP net loss

$

(7,112

)

 

 

$

(3,644

)

 

 

$

(8,008

)

 

 

$

(13,071

)

 

 

$

(57,589

)

 

 

 

 

 

 

 

 

 

 

 

NET LOSS PER DILUTED SHARE:

 

 

 

 

 

 

GAAP net loss per diluted share

$

(0.18

)

 

 

$

(0.28

)

 

 

$

(0.22

)

 

 

$

(0.60

)

 

 

$

(1.11

)

 

Separation expense

0.01

 

 

 

0.01

 

 

 

 

 

 

0.02

 

 

 

0.01

 

 

Strategic initiative and transaction expenses

 

 

 

 

 

 

 

 

 

 

 

 

0.01

 

 

Stock-based compensation expense

0.09

 

 

 

0.14

 

 

 

0.11

 

 

 

0.34

 

 

 

0.34

 

 

Impairment charges

 

 

 

0.11

 

 

 

 

 

 

0.11

 

 

 

 

 

Amortization of intangibles

 

 

 

 

 

 

0.01

 

 

 

 

 

 

0.01

 

 

Employee Retention Credit

 

 

 

(0.02

)

 

 

 

 

 

(0.03

)

 

 

 

 

Non-GAAP net loss per diluted share

$

(0.08

)

 

 

$

(0.04

)

 

 

$

(0.10

)

 

 

$

(0.16

)

 

 

$

(0.74

)

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing GAAP net loss per diluted share

83,809

 

 

 

82,134

 

 

 

78,662

 

 

 

82,191

 

 

 

77,705

 

 

Shares used in computing non-GAAP net loss per diluted share

83,809

 

 

 

82,134

 

 

 

78,662

 

 

 

82,191

 

 

 

77,705

 

 

ARLO TECHNOLOGIES, INC.

 

UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION

 

Three Months Ended

 

October 3,
2021

 

June 27,
2021

 

March 28,
2021

 

December 31,
2020

 

September 27,
2020

 

(in thousands, except headcount and per share data)

Cash, cash equivalents and short-term investments

$

166,057

 

 

$

178,698

 

 

$

177,113

 

 

$

206,124

 

 

$

193,611

 

Cash, cash equivalents and short-term investments per diluted share

$

1.98

 

 

$

2.18

 

 

$

2.20

 

 

$

2.60

 

 

$

2.46

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

$

70,124

 

 

$

51,890

 

 

$

51,121

 

 

$

77,643

 

 

$

56,431

 

Days sales outstanding

62

 

 

48

 

 

54

 

 

64

 

 

47

 

 

 

 

 

 

 

 

 

 

 

Inventories

$

39,769

 

 

$

43,155

 

 

$

55,972

 

 

$

64,705

 

 

$

69,038

 

Inventory turns

7.6

 

 

5.7

 

 

3.4

 

 

5.0

 

 

4.6

 

 

 

 

 

 

 

 

 

 

 

Weeks of channel inventory:

 

 

 

 

 

 

 

 

 

U.S. retail channel

14.0

 

 

8.0

 

 

12.5

 

 

9.2

 

 

8.4

 

U.S. distribution channel

8.0

 

 

12.5

 

 

9.6

 

 

11.7

 

 

8.6

 

APAC distribution channel

10.2

 

 

8.6

 

 

6.9

 

 

2.8

 

 

4.2

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue (current and non-current)

$

41,686

 

 

$

50,903

 

 

$

61,604

 

 

$

69,705

 

 

$

38,530

 

 

 

 

 

 

 

 

 

 

 

Cumulative registered accounts (1)

5,822

 

 

5,527

 

 

5,275

 

 

5,047

 

 

4,774

 

Cumulative paid accounts (2)

877

 

 

695

 

 

549

 

 

435

 

 

356

 

Annual recurring revenue (ARR) (3)

$

80,400

 

 

$

69,753

 

 

$

58,238

 

 

$

46,552

 

 

$

39,634

 

 

 

 

 

 

 

 

 

 

 

Headcount

346

 

 

349

 

 

355

 

 

359

 

 

358

 

Non-GAAP diluted shares

83,809

 

 

82,134

 

 

80,370

 

 

79,164

 

 

78,662

 

_________________________

(1)

 

We define our registered accounts at the end of a particular period as the number of unique registered accounts on the Arlo platform as of the end of such particular period, and includes accounts owned by Verisure S.a.r.l.. The number of registered accounts does not necessarily reflect the number of end-users on the Arlo platform, as one registered account may be used by multiple people.

 

 

 

(2)

 

Paid Accounts worldwide measured as any account where a subscription to a paid service is being collected (either by the Company or by the Company’s customers or channel partners), plus paid service plans of a duration of more than 3 months bundled with products (such bundles being counted as a paid account after 90 days have elapsed from the date of registration). Paid accounts includes accounts transferred to Verisure S.a.r.l..

 

 

 

(3)

 

Effective as of the quarter ended October 3, 2021, we have adopted ARR as one of the key indicators of our business performance. ARR represents the amount of paid service revenue that we expect to recur annually and is calculated by taking our recurring paid service revenue for the last calendar month in the fiscal quarter, multiplied by 12 months. Recurring paid service revenue represents the revenue we recognize from our Paid Accounts and excludes prepaid service revenue, and NRE service revenue from strategic partners. The ARR for the comparative periods presented was derived following the same methodology.

REVENUE BY GEOGRAPHY

 

Three Months Ended

 

Nine Months Ended

 

October 3,
2021

 

June 27,
2021

 

September 27,
2020

 

October 3,
2021

 

September 27,
2020

 

(in thousands, except percentage data)

Americas

$

74,511

 

67

%

 

$

66,681

 

68

%

 

$

75,861

 

69

%

 

$

190,828

 

65

%

 

$

177,030

 

73

%

EMEA

30,931

 

28

%

 

25,101

 

25

%

 

28,010

 

25

%

 

80,623

 

28

%

 

46,531

 

19

%

APAC

5,707

 

5

%

 

6,789

 

7

%

 

6,365

 

6

%

 

20,825

 

7

%

 

18,757

 

8

%

Total

$

111,149

 

100

%

 

$

98,571

 

100

%

 

$

110,236

 

100

%

 

$

292,276

 

100

%

 

$

242,318

 

100

%

 

Arlo Investor Relations
Erik Bylin
investors@arlo.com
(510) 315-1004

Source: Arlo Technologies, Inc.

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