Arlo Reports Fourth Quarter and Full Year 2022 Results

March 7, 2023

Full year revenue of $490 million, growing 13% year over year

Full year service revenue of $136 million, growing 32% year over year

Full year service gross margin of 67%

Q4 ARR ended at $138 million, growing 53% year over year

1.9 million in Cumulative Paid Accounts

Arlo Technologies, Inc. (NYSE: ARLO), a leading smart home security brand, today reported financial results for the fourth quarter and full year ended December 31, 2022.

“Arlo executed well during a transformative 2022, delivering Q4 revenue above guidance and full year revenue that rose 13% year over year. Our high-margin subscription business continues its strong growth, adding almost 800,000 paid accounts in 2022 and surpassing 2 million total paid accounts next week. This milestone reflects an inflection point in our business that will lead to record levels of profitability for Arlo going forward," said Matthew McRae, Chief Executive Officer of Arlo Technologies. “Armed with a slate of critically acclaimed products and a new strategic partnership with Citizens Pay, Arlo is poised to disrupt the antiquated home security market and deliver even greater shareholder value in 2023 as we drive to full year non-GAAP profitability.”

Financial and Business Highlights (1)

Q4 2022 Summary

  • Q4 total revenue of $118.5 million, a decrease of 17.0% year over year.
  • Record Q4 service revenue of $38.3 million, for growth of 34.6% year over year.
  • Ended the quarter with ARR of $137.8 million, growing 52.9% year over year. (2)
  • GAAP services gross margin of 69.1%; non-GAAP services gross margin of 69.7% in Q4.
  • Added 189,000 paid accounts in Q4, a year over year decrease of 0.5%.
  • GAAP gross profit of $32.0 million, an increase of 0.8% year over year; non-GAAP gross profit of $33.2 million, an increase of 1.6% year over year.
  • GAAP gross margin of 27.0%; non-GAAP gross margin of 28.0%.
  • GAAP net loss per diluted share of $(0.25); non-GAAP net loss per diluted share of $(0.04).

FY2022 Summary

  • 2022 total revenue of $490.4 million, an increase of 12.7% year over year.
  • 2022 GAAP gross profit of $136.0 million, an increase of 25.9% year over year; non-GAAP gross profit of $140.9 million, an increase of 25.8% year over year.
  • 2022 GAAP gross margin of 27.7%; non-GAAP gross margin of 28.7%.
  • 2022 GAAP net loss per diluted share of $(0.65); non-GAAP net loss per diluted share of $(0.07).
  • Ending cash and cash equivalents and short-term investments balance of $113.7 million and no outstanding balance drawn under our credit facility as of December 31, 2022.

 

 

Three Months Ended

 

Twelve Months Ended

 

 

December 31, 2022

 

October 2, 2022

 

December 31, 2021

 

December 31, 2022

 

December 31, 2021

 

 

(in thousands, except percentage and per share data)

Revenue

 

$

118,527

 

 

$

128,157

 

 

$

142,861

 

 

$

490,414

 

 

$

435,137

 

GAAP Gross Margin

 

 

27.0

%

 

 

28.7

%

 

 

22.2

%

 

 

27.7

%

 

 

24.8

%

Non-GAAP Gross Margin (1)

 

 

28.0

%

 

 

29.7

%

 

 

22.9

%

 

 

28.7

%

 

 

25.7

%

GAAP Net Loss per Diluted Share

 

$

(0.25

)

 

$

(0.16

)

 

$

(0.08

)

 

$

(0.65

)

 

$

(0.68

)

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

 

$

(0.04

)

 

$

(0.05

)

 

$

0.04

 

 

$

(0.07

)

 

$

(0.11

)

_________________________

(1)

 

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

 

 

 

(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.

First Quarter 2023 Business Outlook (3)

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

 

 

Three Months Ended April 2, 2023

 

 

Revenue

 

Net Income (Loss)
per Diluted Share

 

 

(in millions, except per share data)

GAAP

 

$100 - $110

 

$(0.23) - $(0.17)

Estimated adjustments for (3):

 

 

 

 

Stock-based compensation expense

 

 

0.16

Non-GAAP

 

$100 - $110

 

$(0.07) - $(0.01)

_________________________

(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; 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 fourth quarter and full year 2022 results and discuss management’s expectations for the first quarter of 2023 today, Tuesday, March 7, 2023 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 +1 (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 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, software and services, including wire-free smart Wi-Fi and LTE-enabled security cameras, audio and video doorbells, a floodlight, home security systems, and the Arlo Apps: Arlo Secure, and Arlo Safe, AI-based subscription services designed to maximize security through personalized notifications and emergency services for quicker help during a crisis.

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 does not 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.

© 2023 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 for Arlo Technologies, Inc.:

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 our 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 and profitability (and related timing), GAAP and non-GAAP gross margins, operating margins, tax rates, expenses, and cash outlook; the expansion of our product portfolio with Arlo Safe and the Security System; strategic objectives and initiatives; the recurring revenue business model; expectations regarding market expansion and future growth; and others. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: the expansion of our product portfolio with Arlo Safe and the Security System may not materialize; the relationships with strategic enterprise partners may deteriorate; future demand for our products may be lower than anticipated, including due to inflation, lower consumer confidence and rising interest rates; we may be unsuccessful in developing and expanding its sales and marketing capabilities; we may not be able to increase sales of its paid subscription services; consumers may choose not to adopt our new product offerings or adopt competing products; product performance may be adversely affected by real world operating conditions; we may be unsuccessful or experience delays in manufacturing and distributing its new and existing products; we may fail to manage costs and cost saving initiatives, including the cost of developing new products and manufacturing and distribution of its existing offerings. 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 our business are detailed in our 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 most recently filed Annual Report and Quarterly Report 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. We undertake 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 stock-based compensation expense, restructuring charges, impairment charges, separation expense, litigation reserves, employee retention credit 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:

Stock-based compensation expense consists of non-cash charges for the estimated fair value of stock options, performance-based stock options, restricted stock units (RSU), 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.

Other non-GAAP items are the result of either unique or unplanned events, including, when applicable: restructuring charges, impairment charges, separation expense, amortization of capitalized software, litigation reserves, net and employee retention credit. 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.

Source: Arlo-F

ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

As of December 31,

 

 

2022

 

2021

 

 

(In thousands, except share and per share data)

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

84,024

 

 

$

175,749

 

Short-term investments

 

 

29,700

 

 

 

 

Accounts receivable, net

 

 

65,960

 

 

 

79,564

 

Inventories

 

 

46,554

 

 

 

38,390

 

Prepaid expenses and other current assets

 

 

6,544

 

 

 

9,919

 

Total current assets

 

 

232,782

 

 

 

303,622

 

Property and equipment, net

 

 

7,336

 

 

 

9,595

 

Operating lease right-of-use assets, net

 

 

12,809

 

 

 

14,814

 

Goodwill

 

 

11,038

 

 

 

11,038

 

Restricted cash

 

 

4,155

 

 

 

4,107

 

Other non-current assets

 

 

4,081

 

 

 

4,314

 

Total assets

 

$

272,201

 

 

$

347,490

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

52,132

 

 

$

84,098

 

Deferred revenue

 

 

11,291

 

 

 

29,442

 

Accrued liabilities

 

 

98,855

 

 

 

97,389

 

Total current liabilities

 

 

162,278

 

 

 

210,929

 

Non-current operating lease liabilities

 

 

19,279

 

 

 

21,470

 

Other non-current liabilities

 

 

2,949

 

 

 

2,439

 

Total liabilities

 

 

184,506

 

 

 

234,838

 

Commitments and contingencies

 

 

 

 

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: 88,887,139 at December 31, 2022 and 84,453,212 at December 31, 2021

 

 

89

 

 

 

84

 

Additional paid-in capital

 

 

433,138

 

 

 

401,367

 

Accumulated other comprehensive loss

 

 

(107

)

 

 

 

Accumulated deficit

 

 

(345,425

)

 

 

(288,799

)

Total stockholders’ equity

 

 

87,695

 

 

 

112,652

 

Total liabilities and stockholders’ equity

 

$

272,201

 

 

$

347,490

ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

Three Months Ended

 

Twelve Months Ended

 

 

December 31,
2022

 

October 2,
2022

 

December 31,
2021

 

December 31,
2022

 

December 31,
2021

 

 

(in thousands, except percentage and per share data)

Revenue:

 

 

 

 

 

 

 

 

 

 

Products

 

$

80,199

 

 

$

92,720

 

 

$

114,396

 

 

$

353,935

 

 

$

331,620

 

Services

 

 

38,328

 

 

 

35,437

 

 

 

28,465

 

 

 

136,479

 

 

 

103,517

 

Total revenue

 

 

118,527

 

 

 

128,157

 

 

 

142,861

 

 

 

490,414

 

 

 

435,137

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

Products

 

 

74,700

 

 

 

79,386

 

 

 

100,476

 

 

 

308,692

 

 

 

285,334

 

Services

 

 

11,857

 

 

 

12,021

 

 

 

10,669

 

 

 

45,687

 

 

 

41,768

 

Total cost of revenue

 

 

86,557

 

 

 

91,407

 

 

 

111,145

 

 

 

354,379

 

 

 

327,102

 

Gross profit

 

 

31,970

 

 

 

36,750

 

 

 

31,716

 

 

 

136,035

 

 

 

108,035

 

Gross margin

 

 

27.0

%

 

 

28.7

%

 

 

22.2

%

 

 

27.7

%

 

 

24.8

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

14,457

 

 

 

16,471

 

 

 

13,644

 

 

 

64,709

 

 

 

59,063

 

Sales and marketing

 

 

20,214

 

 

 

22,193

 

 

 

12,464

 

 

 

70,081

 

 

 

48,909

 

General and administrative

 

 

17,909

 

 

 

12,253

 

 

 

12,584

 

 

 

55,932

 

 

 

49,489

 

Restructuring charges

 

 

1,805

 

 

 

 

 

 

 

 

 

1,805

 

 

 

 

Impairment charges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,116

 

Others

 

 

10

 

 

 

273

 

 

 

254

 

 

 

387

 

 

 

1,596

 

Total operating expenses

 

 

54,395

 

 

 

51,190

 

 

 

38,946

 

 

 

192,914

 

 

 

168,173

 

Loss from operations

 

 

(22,425

)

 

 

(14,440

)

 

 

(7,230

)

 

 

(56,879

)

 

 

(60,138

)

Operating margin

 

 

(18.9

)%

 

 

(11.3

)%

 

 

(5.1

)%

 

 

(11.6

)%

 

 

(13.8

)%

Interest income (expense), net

 

 

512

 

 

 

290

 

 

 

(15

)

 

 

926

 

 

 

11

 

Other income (expense), net

 

 

(12

)

 

 

19

 

 

 

605

 

 

 

302

 

 

 

4,775

 

Loss before income taxes

 

 

(21,925

)

 

 

(14,131

)

 

 

(6,640

)

 

 

(55,651

)

 

 

(55,352

)

Provision for income taxes

 

 

230

 

 

 

304

 

 

 

152

 

 

 

975

 

 

 

677

 

Net loss

 

$

(22,155

)

 

$

(14,435

)

 

$

(6,792

)

 

$

(56,626

)

 

$

(56,029

)

Net loss per share:

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.25

)

 

$

(0.16

)

 

$

(0.08

)

 

$

(0.65

)

 

$

(0.68

)

Diluted

 

$

(0.25

)

 

$

(0.16

)

 

$

(0.08

)

 

$

(0.65

)

 

$

(0.68

)

Weighted average shares used to compute net loss per share:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

88,743

 

 

 

88,124

 

 

 

84,367

 

 

 

87,173

 

 

 

82,688

 

Diluted

 

 

88,743

 

 

 

88,124

 

 

 

84,367

 

 

 

87,173

 

 

 

82,688

 

ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

Year Ended December 31,

 

 

2022

 

2021

 

 

(In thousands)

Cash flows from operating activities:

 

 

 

 

Net loss

 

$

(56,626

)

 

$

(56,029

)

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

 

 

 

 

Stock-based compensation expense

 

 

48,476

 

 

 

38,030

 

Impairment charges

 

 

 

 

 

9,116

 

Depreciation and amortization

 

 

4,768

 

 

 

5,975

 

Allowance for credit losses and inventory reserves

 

 

(190

)

 

 

(3,125

)

Deferred income taxes

 

 

181

 

 

 

(296

)

Others

 

 

24

 

 

 

(3

)

Changes in assets and liabilities:

 

 

 

 

Accounts receivable, net

 

 

13,517

 

 

 

(1,739

)

Inventories

 

 

(7,887

)

 

 

29,258

 

Prepaid expenses and other assets

 

 

3,427

 

 

 

(3,463

)

Accounts payable

 

 

(32,520

)

 

 

22,156

 

Deferred revenue

 

 

(19,281

)

 

 

(38,919

)

Accrued and other liabilities

 

 

149

 

 

 

(24,158

)

Net cash used in operating activities

 

 

(45,962

)

 

 

(23,197

)

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

 

 

(2,010

)

 

 

(2,268

)

Purchases of short-term investments

 

 

(69,305

)

 

 

 

Proceeds from maturities of short-term investments

 

 

39,542

 

 

 

20,000

 

Net cash provided by (used in) investing activities

 

 

(31,773

)

 

 

17,732

 

Cash flows from financing activities:

 

 

 

 

Proceeds related to employee benefit plans

 

 

4,260

 

 

 

8,231

 

Restricted stock unit withholdings

 

 

(18,202

)

 

 

(13,201

)

Net cash used in financing activities

 

 

(13,942

)

 

 

(4,970

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(91,677

)

 

 

(10,435

)

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

 

 

179,856

 

 

 

190,291

 

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

 

$

88,179

 

 

$

179,856

 

 

 

 

 

 

Non-cash investing activities:

 

 

 

 

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

 

$

946

 

 

$

379

 

Supplemental cash flow information:

 

 

 

 

Cash paid for income taxes, net

 

$

415

 

 

$

964

 

ARLO TECHNOLOGIES, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES

UNAUDITED STATEMENT OF OPERATIONS DATA:

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

December 31,
2022

 

October 2,
2022

 

December 31,
2021

 

December 31,
2022

 

December 31,
2021

 

 

(in thousands, except percentage data)

GAAP gross profit:

 

 

 

 

 

 

 

 

 

 

Products

 

$

5,499

 

 

$

13,334

 

 

$

13,920

 

 

$

45,243

 

 

$

46,286

 

Services

 

 

26,471

 

 

 

23,416

 

 

 

17,796

 

 

 

90,792

 

 

 

61,749

 

Total GAAP gross profit

 

 

31,970

 

 

 

36,750

 

 

 

31,716

 

 

 

136,035

 

 

 

108,035

 

GAAP gross margin:

 

 

 

 

 

 

 

 

 

 

Products

 

 

6.9

%

 

 

14.4

%

 

 

12.2

%

 

 

12.8

%

 

 

14.0

%

Services

 

 

69.1

%

 

 

66.1

%

 

 

62.5

%

 

 

66.5

%

 

 

59.7

%

Total GAAP gross margin

 

 

27.0

%

 

 

28.7

%

 

 

22.2

%

 

 

27.7

%

 

 

24.8

%

Stock-based compensation expense - Products

 

 

1,001

 

 

 

1,132

 

 

 

776

 

 

 

4,136

 

 

 

3,532

 

Stock-based compensation expense - Services

 

 

230

 

 

 

233

 

 

 

191

 

 

 

705

 

 

 

385

 

Non-GAAP gross profit:

 

 

 

 

 

 

 

 

 

 

Products

 

 

6,500

 

 

 

14,466

 

 

 

14,696

 

 

 

49,379

 

 

 

49,818

 

Services

 

 

26,701

 

 

 

23,649

 

 

 

17,987

 

 

 

91,497

 

 

 

62,134

 

Total Non-GAAP gross profit

 

$

33,201

 

 

$

38,115

 

 

$

32,683

 

 

$

140,876

 

 

$

111,952

 

Non-GAAP gross margin:

 

 

 

 

 

 

 

 

 

 

Products

 

 

8.1

%

 

 

15.6

%

 

 

12.9

%

 

 

14.0

%

 

 

15.0

%

Services

 

 

69.7

%

 

 

66.7

%

 

 

63.2

%

 

 

67.0

%

 

 

60.0

%

Total Non-GAAP gross margin

 

 

28.0

%

 

 

29.7

%

 

 

22.9

%

 

 

28.7

%

 

 

25.7

%

 

 

 

 

 

 

 

 

 

 

 

GAAP research and development

 

$

14,457

 

 

$

16,471

 

 

$

13,644

 

 

$

64,709

 

 

$

59,063

 

Stock-based compensation expense

 

 

(3,715

)

 

 

(2,679

)

 

 

(2,391

)

 

 

(12,317

)

 

 

(10,865

)

Non-GAAP research and development

 

$

10,742

 

 

$

13,792

 

 

$

11,253

 

 

$

52,392

 

 

$

48,198

 

Percentage of revenue

 

 

9.1

%

 

 

10.8

%

 

 

7.9

%

 

 

10.7

%

 

 

11.1

%

 

 

 

 

 

 

 

 

 

 

 

GAAP sales and marketing

 

$

20,214

 

 

$

22,193

 

 

$

12,464

 

 

$

70,081

 

 

$

48,909

 

Stock-based compensation expense

 

 

(1,731

)

 

 

(1,389

)

 

 

(1,444

)

 

 

(6,290

)

 

 

(5,391

)

Non-GAAP sales and marketing

 

$

18,483

 

 

$

20,804

 

 

$

11,020

 

 

$

63,791

 

 

$

43,518

 

Percentage of revenue

 

 

15.6

%

 

 

16.2

%

 

 

7.7

%

 

 

13.0

%

 

 

10.0

%

 

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative

 

$

17,909

 

 

$

12,253

 

 

$

12,584

 

 

$

55,932

 

 

$

49,489

 

Stock-based compensation expense

 

 

(10,012

)

 

 

(4,520

)

 

 

(5,680

)

 

 

(25,028

)

 

 

(17,857

)

Litigation reserves, net

 

 

(30

)

 

 

(5

)

 

 

(3

)

 

 

(147

)

 

 

(170

)

Non-GAAP general and administrative

 

$

7,867

 

 

$

7,728

 

 

$

6,901

 

 

$

30,757

 

 

$

31,462

 

Percentage of revenue

 

 

6.6

%

 

 

6.0

%

 

 

4.8

%

 

 

6.3

%

 

 

7.2

%

ARLO TECHNOLOGIES, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)

UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED):

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

December 31,
2022

 

October 2,
2022

 

December 31,
2021

 

December 31,
2022

 

December 31,
2021

 

 

(in thousands, except percentage and per share data)

GAAP total operating expenses

 

$

54,395

 

 

$

51,190

 

 

$

38,946

 

 

$

192,914

 

 

$

168,173

 

Stock-based compensation expense

 

 

(15,458

)

 

 

(8,588

)

 

 

(9,515

)

 

 

(43,635

)

 

 

(34,113

)

Restructuring charges

 

 

(1,805

)

 

 

 

 

 

 

 

 

(1,805

)

 

 

 

Impairment charges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,116

)

Other

 

 

(40

)

 

 

(278

)

 

 

(257

)

 

 

(534

)

 

 

(1,766

)

Non-GAAP total operating expenses

 

$

37,092

 

 

$

42,324

 

 

$

29,174

 

 

$

146,940

 

 

$

123,178

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating loss

 

$

(22,425

)

 

$

(14,440

)

 

$

(7,230

)

 

$

(56,879

)

 

$

(60,138

)

GAAP operating margin

 

 

(18.9

)%

 

 

(11.3

)%

 

 

(5.1

)%

 

 

(11.6

)%

 

 

(13.8

)%

Stock-based compensation expense

 

 

16,689

 

 

 

9,953

 

 

 

10,482

 

 

 

48,476

 

 

 

38,030

 

Restructuring charges

 

 

1,805

 

 

 

 

 

 

 

 

 

1,805

 

 

 

 

Impairment charges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,116

 

Other

 

 

40

 

 

 

278

 

 

 

257

 

 

 

534

 

 

 

1,766

 

Non-GAAP operating income (loss)

 

$

(3,891

)

 

$

(4,209

)

 

$

3,509

 

 

$

(6,064

)

 

$

(11,226

)

Non-GAAP operating margin

 

 

(3.3

)%

 

 

(3.3

)%

 

 

2.5

%

 

 

(1.2

)%

 

 

(2.6

)%

 

 

 

 

 

 

 

 

 

 

 

GAAP other income (expense), net

 

$

(12

)

 

$

19

 

 

$

605

 

 

$

302

 

 

$

4,775

 

Employee retention credit

 

 

 

 

 

 

 

 

(103

)

 

 

(65

)

 

 

(2,110

)

Non-GAAP other income (expense), net

 

$

(12

)

 

$

19

 

 

$

502

 

 

$

237

 

 

$

2,665

 

 

 

 

 

 

 

 

 

 

 

 

GAAP provision for income taxes

 

$

230

 

 

$

304

 

 

$

152

 

 

$

975

 

 

$

677

 

GAAP income tax rate

 

 

(1.0

)%

 

 

(2.2

)%

 

 

(2.3

)%

 

 

(1.8

)%

 

 

(1.2

)%

Non-GAAP provision for income taxes

 

$

230

 

 

$

304

 

 

$

152

 

 

$

975

 

 

$

677

 

Non-GAAP income tax rate

 

 

(6.8

)%

 

 

(7.8

)%

 

 

3.8

%

 

 

(19.9

)%

 

 

(7.9

)%

ARLO TECHNOLOGIES, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)

UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED):

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

December 31,
2022

 

October 2,
2022

 

December 31,
2021

 

December 31,
2022

 

December 31,
2021

 

 

(in thousands, except percentage and per share data)

GAAP net loss

 

$

(22,155

)

 

$

(14,435

)

 

$

(6,792

)

 

$

(56,626

)

 

$

(56,029

)

Stock-based compensation expense

 

 

16,689

 

 

 

9,953

 

 

 

10,482

 

 

 

48,476

 

 

 

38,030

 

Restructuring charges

 

 

1,805

 

 

 

 

 

 

 

 

 

1,805

 

 

 

 

Impairment charges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,116

 

Other

 

 

40

 

 

 

278

 

 

 

154

 

 

 

469

 

 

 

(344

)

Non-GAAP net income (loss)

 

$

(3,621

)

 

$

(4,204

)

 

$

3,844

 

 

$

(5,876

)

 

$

(9,227

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net loss per share - basic and diluted

 

$

(0.25

)

 

$

(0.16

)

 

$

(0.08

)

 

$

(0.65

)

 

$

(0.68

)

Stock-based compensation expense

 

 

0.19

 

 

 

0.11

 

 

 

0.12

 

 

 

0.56

 

 

 

0.46

 

Restructuring charges

 

 

0.02

 

 

 

 

 

 

 

 

 

0.02

 

 

 

 

Impairment charges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.11

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP net income (loss) - diluted

 

$

(0.04

)

 

$

(0.05

)

 

$

0.04

 

 

$

(0.07

)

 

$

(0.11

)

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing GAAP net income (loss) - basic

 

 

88,743

 

 

 

88,124

 

 

 

84,367

 

 

 

87,173

 

 

 

82,688

 

Shares used in computing non-GAAP net income (loss) - diluted

 

 

88,743

 

 

 

88,124

 

 

 

90,679

 

 

 

87,173

 

 

 

82,688

 

ARLO TECHNOLOGIES, INC.
UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION

 

 

Three Months Ended

 

 

December 31,
2022

 

October 2,
2022

 

July 3,
2022

 

April 3,
2022

 

December 31,
2021

 

 

(in thousands, except headcount and per share data)

Cash, cash equivalents and short-term investments

 

$

113,724

 

$

125,272

 

$

135,258

 

$

145,541

 

$

175,749

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

 

$

1.28

 

$

1.42

 

$

1.47

 

$

1.56

 

$

1.94

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

65,960

 

$

82,707

 

$

73,998

 

$

78,054

 

$

79,564

Days sales outstanding

 

 

50

 

 

59

 

 

57

 

 

58

 

 

50

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

$

46,554

 

$

73,243

 

$

39,208

 

$

37,038

 

$

38,390

Inventory turns

 

 

6.4

 

 

4.3

 

 

7.5

 

 

8.7

 

 

10.5

 

 

 

 

 

 

 

 

 

 

 

Weeks of channel inventory:

 

 

 

 

 

 

 

 

 

 

U.S. retail channel

 

 

11.9

 

 

13.6

 

 

11.9

 

 

15.8

 

 

7.0

U.S. distribution channel

 

 

14.1

 

 

5.5

 

 

7.4

 

 

10.5

 

 

8.5

APAC distribution channel

 

 

4.7

 

 

9.4

 

 

9.8

 

 

18.1

 

 

8.9

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue (current and non-current)

 

$

11,503

 

$

12,242

 

$

14,022

 

$

17,375

 

$

30,786

 

 

 

 

 

 

 

 

 

 

 

Cumulative registered accounts (1)

 

 

7,220

 

 

6,930

 

 

6,640

 

 

6,389

 

 

6,131

Cumulative paid accounts (2)

 

 

1,862

 

 

1,673

 

 

1,478

 

 

1,272

 

 

1,067

Annual recurring revenue (ARR) (3)

 

$

137,764

 

$

125,402

 

$

116,601

 

$

101,341

 

$

90,100

 

 

 

 

 

 

 

 

 

 

 

Headcount

 

 

343

 

 

360

 

 

354

 

 

358

 

 

353

Non-GAAP diluted shares

 

 

88,743

 

 

88,124

 

 

91,787

 

 

93,135

 

 

90,679

_________________________

(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 period. 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 end-users to monitor the devices attached to that household.

 

 

 

(2)

 

Paid accounts are defined as any account worldwide where a subscription to a paid service is being collected (either by us or by our customers or channel partners, including Verisure), plus paid service plans of a duration of more than three months bundled with products (such bundles being counted as a paid account after 90 days have elapsed from the date of registration).

 

 

 

(3)

 

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. ARR is a performance metric and should be viewed independently of revenue and deferred revenue, and is not intended to be a substitute for, or combined with, any of these items.

REVENUE BY GEOGRAPHY

 

 

Three Months Ended

 

Twelve Months Ended

 

 

December 31,
2022

 

October 3,
2022

 

December 31,
2021

 

December 31,
2022

 

December 31,
2021

 

 

(in thousands, except percentage data)

Americas

 

$

74,131

 

63

%

 

$

71,040

 

55

%

 

$

80,354

 

56

%

 

$

273,981

 

56

%

 

$

271,182

 

62

%

EMEA

 

 

39,464

 

33

%

 

 

52,542

 

41

%

 

 

53,609

 

38

%

 

 

196,465

 

40

%

 

 

134,232

 

31

%

APAC

 

 

4,932

 

4

%

 

 

4,575

 

4

%

 

 

8,898

 

6

%

 

 

19,968

 

4

%

 

 

29,723

 

7

%

Total

 

$

118,527

 

100

%

 

$

128,157

 

100

%

 

$

142,861

 

100

%

 

$

490,414

 

100

%

 

$

435,137

 

100

%

 

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

Source: Arlo Technologies, Inc.