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Classified in: Science and technology, Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

Arlo Reports Second Quarter 2022 Results


Arlo Technologies, Inc. (NYSE: ARLO), a leading smart home security brand, today reported financial results for the second quarter ended July 3, 2022.

Financial Highlights (1)

"The strong growth of our service business coupled with solid execution by the Arlo team continues to deliver exceptional results across all metrics. In Q2, revenue reached $119.0 million for 20.7% growth year over year, above the top end of our guidance and a record for the quarter. This growth was driven by highly profitable ARR, which ended Q2 at $117 million. Arlo posted record non-GAAP gross profit and our third consecutive quarter of non-GAAP operating profitability. These exceptional Q2 results underline how the powerful combination of our recurring revenue business model coupled with our successful channel and product diversification are delivering truly transformative results for Arlo," said Matthew McRae, Chief Executive Officer of Arlo Technologies. "Having delivered a record-breaking first half year of non-GAAP operating profit, we are looking forward to deploying the building blocks of our long-range plan in the second half of the year. Firstly, we are excited to commence the roll out of our brand awareness advertising campaign this month, which we will conduct in a targeted manner focused on new household formation to drive incremental subscription revenue. Secondly, we will be expanding our product portfolio with our new personal protection app, Arlo Safe, and our new innovative security system, which will bring full sensor-based security functionality to our ecosystem of smart cameras. We expect both of these will be available before the end of the year and will provide significant opportunities to drive new subscriptions and increase ARPU. Thirdly, we continue to broaden our routes to market and build on the success we are seeing with partners such as Verisure, Calix, Verizon and T-Mobile. We look forward to reporting more to you on the success of these initiatives which we believe will drive incremental long-term growth and profitability."

 

Three Months Ended

Six Months Ended

 

July 3, 2022

April 3, 2022

June 27, 2021

July 3, 2022

June 27, 2021

 

(in thousands, except percentage and per share data)

Revenue

$

118,979

 

$

124,751

 

$

98,571

 

$

243,730

 

$

181,127

 

GAAP Gross Margin

 

28.4

%

 

26.9

%

 

26.6

%

 

27.6

%

 

28.7

%

Non-GAAP Gross Margin (1)

 

29.5

%

 

27.6

%

 

27.9

%

 

28.5

%

 

29.9

%

GAAP Net Loss per Diluted Share

$

(0.13

)

$

(0.10

)

$

(0.28

)

$

(0.23

)

$

(0.42

)

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

$

0.01

 

$

0.01

 

$

(0.04

)

$

0.02

 

$

(0.07

)

_________________________

(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.

Financial and Business Highlights

_________________________

(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.

Third Quarter 2022 Business Outlook (3)

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

 

Three Months Ending October 2, 2022

 

Revenue

Net Loss per Diluted Share

 

(in millions, except per share data)

GAAP

$125.0 - $135.0

$(0.28) - $(0.21)

Estimated adjustments for (3):

 

 

Stock-based compensation expense

?

0.11

Tax effects of non-GAAP adjustments

?

?

Non-GAAP

$125.0 - $135.0

$(0.17) - $(0.10)

_________________________

(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 second quarter of 2022 results and discuss management's expectations for the third quarter of 2022 today, Tuesday, August 9, 2022 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, including wire-free smart Wi-Fi and LTE-enabled security cameras, indoor security cameras, audio and 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 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.

© 2022 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 deployment of elements of the Company's long-range plan in the second half of 2022; the commencement of the deployment of the brand awareness advertising campaign and the targeting thereof; the expansion of the Company's product portfolio with Arlo Safe and the new security system, the timing of availability thereof and the potential to provide opportunities for new subscription and increased ARPU; and the broadening of routes to market and continued relationships with Verisure, Calix, Verizon, and T-Mobile. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: deployment of elements of the Company's long-range plans may be delayed or may not occur; the deployment of the brand awareness advertising campaign may be delayed or may not occur and the risk that it may not drive incremental paid accounts; the expansion of the Company's product portfolio with Arlo Safe and the new security system may not materialize; routes to market may not materialize or prove as successful as anticipated; the relationships with Verisure, Calix, Verizon, and T-Mobile may deteriorate; future demand for the Company's products may be lower than anticipated; the Company may be unsuccessful in developing and expanding its sales and marketing capabilities; 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; and the actions and financial health of the Company's customers. 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 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 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. 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, 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:

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.

Other items are the result of either unique or unplanned events, including, when applicable: 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.

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

 

July 3,
2022

December 31,
2021

 

(In thousands, except share and per share data)

ASSETS

 

 

Current assets:

 

 

Cash and cash equivalents

$

85,537

 

$

175,749

 

Short-term investments (amortized cost of $49,901 and $?)

 

49,721

 

 

?

 

Accounts receivable, net (net of allowance for credit losses of $405 and $337)

 

73,998

 

 

79,564

 

Inventories

 

39,208

 

 

38,390

 

Prepaid expenses and other current assets

 

8,890

 

 

9,919

 

Total current assets

 

257,354

 

 

303,622

 

Property and equipment, net

 

7,478

 

 

9,595

 

Operating lease right-of-use assets, net

 

15,242

 

 

14,814

 

Goodwill

 

11,038

 

 

11,038

 

Restricted cash

 

4,125

 

 

4,107

 

Other non-current assets

 

4,441

 

 

4,314

 

Total assets

$

299,678

 

$

347,490

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

Current liabilities:

 

 

Accounts payable

$

77,423

 

$

84,098

 

Deferred revenue

 

13,445

 

 

29,442

 

Accrued liabilities

 

82,225

 

 

97,377

 

Income tax payable

 

138

 

 

12

 

Total current liabilities

 

173,231

 

 

210,929

 

Non-current deferred revenue

 

577

 

 

1,344

 

Non-current operating lease liabilities

 

21,469

 

 

21,470

 

Non-current income taxes payable

 

94

 

 

94

 

Other non-current liabilities

 

1,906

 

 

1,001

 

Total liabilities

 

197,277

 

 

234,838

 

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: 87,529,758 at July 3, 2022 and 84,453,212 at December 31, 2021

 

88

 

 

84

 

Additional paid-in capital

 

411,316

 

 

401,367

 

Accumulated other comprehensive income

 

(168

)

 

?

 

Accumulated deficit

 

(308,835

)

 

(288,799

)

Total stockholders' equity

 

102,401

 

 

112,652

 

Total liabilities and stockholders' equity

$

299,678

 

$

347,490

 

ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

Three Months Ended

Six Months Ended

 

July 3,
2022

April 3,
2022

June 27,
2021

July 3,
2022

June 27,
2021

 

(in thousands, except percentage and per share data)

Revenue:

 

 

 

 

 

Products

$

86,191

 

$

94,825

 

$

73,311

 

$

181,016

 

$

133,072

 

Services

 

32,788

 

 

29,926

 

 

25,260

 

 

62,714

 

 

48,055

 

Total revenue

 

118,979

 

 

124,751

 

 

98,571

 

 

243,730

 

 

181,127

 

Cost of revenue:

 

 

 

 

 

Products

 

73,829

 

 

80,777

 

 

62,019

 

 

154,606

 

 

109,176

 

Services

 

11,410

 

 

10,399

 

 

10,383

 

 

21,809

 

 

19,975

 

Total cost of revenue

 

85,239

 

 

91,176

 

 

72,402

 

 

176,415

 

 

129,151

 

Gross profit

 

33,740

 

 

33,575

 

 

26,169

 

 

67,315

 

 

51,976

 

Gross margin

 

28.4

%

 

26.9

%

 

26.6

%

 

27.6

%

 

28.7

%

Operating expenses:

 

 

 

 

 

Research and development

 

17,402

 

 

16,379

 

 

16,251

 

 

33,781

 

 

31,042

 

Sales and marketing

 

14,506

 

 

13,168

 

 

12,459

 

 

27,674

 

 

23,666

 

General and administrative

 

13,149

 

 

12,621

 

 

13,559

 

 

25,770

 

 

24,786

 

Impairment charges

 

?

 

 

?

 

 

9,116

 

 

?

 

 

9,116

 

Separation expense

 

25

 

 

79

 

 

605

 

 

104

 

 

659

 

Total operating expenses

 

45,082

 

 

42,247

 

 

51,990

 

 

87,329

 

 

89,269

 

Loss from operations

 

(11,342

)

 

(8,672

)

 

(25,821

)

 

(20,014

)

 

(37,293

)

Operating margin

 

(9.5

) %

 

(7.0

) %

 

(26.2

) %

 

(8.2

) %

 

(20.6

) %

Interest income (expense), net

 

129

 

 

(5

)

 

3

 

 

124

 

 

27

 

Other income (expense), net

 

(116

)

 

411

 

 

2,662

 

 

295

 

 

3,571

 

Loss before income taxes

 

(11,329

)

 

(8,266

)

 

(23,156

)

 

(19,595

)

 

(33,695

)

Provision for income taxes

 

228

 

 

213

 

 

164

 

 

441

 

 

344

 

Net loss

$

(11,557

)

$

(8,479

)

$

(23,320

)

$

(20,036

)

$

(34,039

)

Net loss per share:

 

 

 

 

 

Basic

$

(0.13

)

$

(0.10

)

$

(0.28

)

$

(0.23

)

$

(0.42

)

Diluted

$

(0.13

)

$

(0.10

)

$

(0.28

)

$

(0.23

)

$

(0.42

)

Weighted average shares used to compute net loss per share:

 

 

 

 

 

Basic

 

86,868

 

 

85,222

 

 

82,134

 

 

85,966

 

 

81,275

 

Diluted

 

86,868

 

 

85,222

 

 

82,134

 

 

85,966

 

 

81,275

 

ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Six Months Ended

 

July 3,
2022

June 27,
2021

 

(In thousands)

Cash flows from operating activities:

 

 

Net loss

$

(20,036

)

$

(34,039

)

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

 

 

Stock-based compensation expense

 

21,834

 

 

19,949

 

Impairment charges

 

?

 

 

9,116

 

Depreciation and amortization

 

2,523

 

 

3,169

 

Allowance for credit losses and inventory reserves

 

(120

)

 

(1,085

)

Deferred income taxes

 

133

 

 

(115

)

Premium amortization (discount accretion) on investments, net

 

89

 

 

(3

)

Changes in assets and liabilities:

 

 

Accounts receivable, net

 

5,498

 

 

25,736

 

Inventories

 

(628

)

 

22,652

 

Prepaid expenses and other assets

 

767

 

 

(4,782

)

Accounts payable

 

(6,565

)

 

(19,189

)

Deferred revenue

 

(16,763

)

 

(18,802

)

Accrued and other liabilities

 

(16,113

)

 

(26,073

)

Net cash used in operating activities

 

(29,381

)

 

(23,466

)

Cash flows from investing activities:

 

 

Purchases of property and equipment

 

(451

)

 

(1,066

)

Purchases of short-term investments

 

(59,490

)

 

?

 

Proceeds from maturities of short-term investments

 

9,512

 

 

20,000

 

Net cash provided by (used in) investing activities

 

(50,429

)

 

18,934

 

Cash flows from financing activities:

 

 

Proceeds related to employee benefit plans

 

3,171

 

 

6,136

 

Restricted stock unit withholdings

 

(13,555

)

 

(9,084

)

Net cash used in financing activities

 

(10,384

)

 

(2,948

)

Net decrease in cash and cash equivalents and restricted cash

 

(90,194

)

 

(7,480

)

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

 

179,856

 

 

190,291

 

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

$

89,662

 

$

182,811

 

 

 

 

Non-cash investing and financing activities:

 

 

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

$

333

 

$

549

 

ARLO TECHNOLOGIES, INC.

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES

UNAUDITED STATEMENT OF OPERATIONS DATA:

 

 

 

 

 

 

 

Three Months Ended

Six Months Ended

 

July 3,
2022

April 3,
2022

June 27,
2021

July 3,
2022

June 27,
2021

 

(in thousands, except percentage data)

GAAP gross profit:

 

 

 

 

 

Products

$

12,362

 

$

14,048

 

$

11,292

 

$

26,410

 

$

23,896

 

Services

 

21,378

 

 

19,527

 

 

14,877

 

 

40,905

 

 

28,080

 

Total GAAP gross profit

 

33,740

 

 

33,575

 

 

26,169

 

 

67,315

 

 

51,976

 

GAAP gross margin:

 

 

 

 

 

Products

 

14.3

%

 

14.8

%

 

15.4

%

 

14.6

%

 

18.0

%

Services

 

65.2

%

 

65.3

%

 

58.9

%

 

65.2

%

 

58.4

%

Total GAAP gross margin

 

28.4

%

 

26.9

%

 

26.6

%

 

27.6

%

 

28.7

%

Stock-based compensation expense - Products

 

1,148

 

 

855

 

 

1,289

 

 

2,003

 

 

2,163

 

Stock-based compensation expense - Services

 

187

 

 

55

 

 

?

 

 

242

 

 

?

 

Non-GAAP gross profit:

 

 

 

 

 

Products

 

13,510

 

 

14,903

 

 

12,581

 

 

28,413

 

 

26,059

 

Services

 

21,565

 

 

19,582

 

 

14,877

 

 

41,147

 

 

28,080

 

Total Non-GAAP gross profit

$

35,075

 

$

34,485

 

$

27,458

 

$

69,560

 

$

54,139

 

Non-GAAP gross margin:

 

 

 

 

 

Products

 

15.7

%

 

15.7

%

 

17.2

%

 

15.7

%

 

19.6

%

Services

 

65.8

%

 

65.4

%

 

58.9

%

 

65.6

%

 

58.4

%

Total Non-GAAP gross margin

 

29.5

%

 

27.6

%

 

27.9

%

 

28.5

%

 

29.9

%

 

 

 

 

 

 

GAAP research and development

$

17,402

 

$

16,379

 

$

16,251

 

$

33,781

 

$

31,042

 

Stock-based compensation expense

 

(3,621

)

 

(2,302

)

 

(3,832

)

 

(5,923

)

 

(6,388

)

Non-GAAP research and development

$

13,781

 

$

14,077

 

$

12,419

 

$

27,858

 

$

24,654

 

 

 

 

 

 

 

GAAP sales and marketing

$

14,506

 

$

13,168

 

$

12,459

 

$

27,674

 

$

23,666

 

Stock-based compensation expense

 

(1,790

)

 

(1,380

)

 

(1,638

)

 

(3,170

)

 

(2,828

)

Non-GAAP sales and marketing

$

12,716

 

$

11,788

 

$

10,821

 

$

24,504

 

$

20,838

 

 

 

 

 

 

 

GAAP general and administrative

$

13,149

 

$

12,621

 

$

13,559

 

$

25,770

 

$

24,786

 

Stock-based compensation expense

 

(5,499

)

 

(4,997

)

 

(4,850

)

 

(10,496

)

 

(8,570

)

Litigation reserves, net

 

(65

)

 

(47

)

 

(157

)

 

(112

)

 

(167

)

Non-GAAP general and administrative

$

7,585

 

$

7,577

 

$

8,552

 

$

15,162

 

$

16,049

 

ARLO TECHNOLOGIES, INC.

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

UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED):

 

 

 

 

 

 

 

Three Months Ended

Six Months Ended

 

July 3,
2022

April 3,
2022

June 27,
2021

July 3,
2022

June 27,
2021

 

(in thousands, except percentage and per share data)

GAAP total operating expenses

$

45,082

 

$

42,247

 

$

51,990

 

$

87,329

 

$

89,269

 

Separation expense

 

(25

)

 

(79

)

 

(605

)

 

(104

)

 

(659

)

Stock-based compensation expense

 

(10,910

)

 

(8,679

)

 

(10,320

)

 

(19,589

)

 

(17,786

)

Impairment charges

 

?

 

 

?

 

 

(9,116

)

 

?

 

 

(9,116

)

Litigation reserves, net

 

(65

)

 

(47

)

 

(157

)

 

(112

)

 

(167

)

Non-GAAP total operating expenses

$

34,082

 

$

33,442

 

$

31,792

 

$

67,524

 

$

61,541

 

 

 

 

 

 

 

GAAP operating loss

$

(11,342

)

$

(8,672

)

$

(25,821

)

$

(20,014

)

$

(37,293

)

GAAP operating margin

 

(9.5

) %

 

(7.0

) %

 

(26.2

) %

 

(8.2

) %

 

(20.6

) %

Separation expense

 

25

 

 

79

 

 

605

 

 

104

 

 

659

 

Stock-based compensation expense

 

12,245

 

 

9,589

 

 

11,609

 

 

21,834

 

 

19,949

 

Impairment charges

 

?

 

 

?

 

 

9,116

 

 

?

 

 

9,116

 

Litigation reserves, net

 

65

 

 

47

 

 

157

 

 

112

 

 

167

 

Non-GAAP operating income (loss)

$

993

 

$

1,043

 

$

(4,334

)

$

2,036

 

$

(7,402

)

Non-GAAP operating margin

 

0.8

%

 

0.8

%

 

(4.4

) %

 

0.8

%

 

(4.1

) %

 

 

 

 

 

 

GAAP other income (expense), net

$

(116

)

$

411

 

$

2,662

 

$

295

 

$

3,571

 

Employee Retention Credit

 

(26

)

 

(39

)

 

(1,811

)

 

(65

)

 

(1,811

)

Non-GAAP other income (expense), net

$

(142

)

$

372

 

$

851

 

$

230

 

$

1,760

 

 

 

 

 

 

 

GAAP provision for income taxes

$

228

 

$

213

 

$

164

 

$

441

 

$

344

 

GAAP income tax rate

 

(2.0

) %

 

(2.6

) %

 

(0.7

) %

 

(2.3

) %

 

(1.0

) %

Tax effects

 

?

 

 

?

 

 

?

 

 

?

 

 

?

 

Non-GAAP provision for income taxes

$

228

 

$

213

 

$

164

 

$

441

 

$

344

 

Non-GAAP income tax rate

 

23.3

%

 

15.1

%

 

(4.7

) %

 

18.5

%

 

(6.1

) %

ARLO TECHNOLOGIES, INC.

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

UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED):

 

 

Three Months Ended

Six Months Ended

 

July 3,
2022

April 3,
2022

June 27,
2021

July 3,
2022

June 27,
2021

 

(in thousands, except percentage and per share data)

GAAP net loss

$

(11,557

)

$

(8,479

)

$

(23,320

)

$

(20,036

)

$

(34,039

)

Separation expense

 

25

 

 

79

 

 

605

 

 

104

 

 

659

 

Stock-based compensation expense

 

12,245

 

 

9,589

 

 

11,609

 

 

21,834

 

 

19,949

 

Impairment charges

 

?

 

 

?

 

 

9,116

 

 

?

 

 

9,116

 

Litigation reserves, net

 

65

 

 

47

 

 

157

 

 

112

 

 

167

 

Employee Retention Credit

 

(26

)

 

(39

)

 

(1,811

)

 

(65

)

 

(1,811

)

Tax effects

 

?

 

 

?

 

 

?

 

 

?

 

 

?

 

Non-GAAP net income (loss)

$

752

 

$

1,197

 

$

(3,644

)

$

1,949

 

$

(5,959

)

 

 

 

 

 

 

NET LOSS PER SHARE - BASIC AND DILUTED:

 

 

 

GAAP net loss per share - basic and diluted

$

(0.13

)

$

(0.10

)

$

(0.28

)

$

(0.23

)

$

(0.42

)

Separation expense

 

?

 

 

?

 

 

0.01

 

 

?

 

 

0.01

 

Stock-based compensation expense

 

0.14

 

 

0.11

 

 

0.14

 

 

0.25

 

 

0.25

 

Impairment charges

 

?

 

 

?

 

 

0.11

 

 

?

 

 

0.11

 

Tax effects

 

?

 

 

?

 

 

?

 

 

?

 

 

?

 

Employee Retention Credit

 

?

 

 

?

 

 

(0.02

)

 

?

 

 

(0.02

)

Non-GAAP net income (loss) - diluted

$

0.01

 

$

0.01

 

$

(0.04

)

$

0.02

 

$

(0.07

)

 

 

 

 

 

 

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

 

86,868

 

 

85,222

 

 

82,134

 

 

85,966

 

 

81,275

 

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

 

91,787

 

 

93,135

 

 

82,134

 

 

92,687

 

 

81,275

 

ARLO TECHNOLOGIES, INC.

UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION

 

Three Months Ended

 

July 3,
2022

April 3,
2022

December 31,
2021

October 3,
2021

June 27,
2021

(in thousands, except headcount and per share data)

Cash, cash equivalents and short-term investments

$

135,258

$

145,541

$

175,749

$

166,057

$

178,698

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

$

1.47

$

1.56

$

1.94

$

1.98

$

2.18

 

 

 

 

 

 

Accounts receivable, net

$

73,998

$

78,054

$

79,564

$

70,124

$

51,890

Days sales outstanding

 

57

 

58

 

50

 

62

 

48

 

 

 

 

 

 

Inventories

$

39,208

$

37,038

$

38,390

$

39,769

$

43,155

Inventory turns

 

7.5

 

8.7

 

10.5

 

7.6

 

5.7

 

 

 

 

 

 

Weeks of channel inventory:

 

 

 

 

 

U.S. retail channel

 

11.9

 

15.8

 

7.0

 

14.0

 

8.0

U.S. distribution channel

 

7.4

 

10.5

 

8.5

 

8.0

 

12.5

APAC distribution channel

 

9.8

 

18.1

 

8.9

 

10.2

 

8.6

 

 

 

 

 

 

Deferred revenue (current and non-current)

$

14,022

$

17,375

$

30,786

$

41,686

$

50,903

 

 

 

 

 

 

Cumulative registered accounts (1)

 

6,640

 

6,389

 

6,131

 

5,822

 

5,527

Cumulative paid accounts (2)

 

1,478

 

1,272

 

1,067

 

877

 

695

Annual recurring revenue (ARR) (3)

$

116,601

$

101,341

$

90,100

$

80,400

$

69,753

 

 

 

 

 

 

Headcount

 

354

 

358

 

353

 

346

 

349

Non-GAAP diluted shares

 

91,787

 

93,135

 

90,679

 

83,809

 

82,134

_________________________

(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. 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.

(3)

Effective as of the third quarter of 2021, we 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. 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

Six Months Ended

 

July 3,
2022

April 3,
2022

June 27,
2021

July 3,
2022

June 27,
2021

 

(in thousands, except percentage data)

Americas

$

60,345

51

%

$

68,466

55

%

$

66,681

68

%

$

128,811

53

%

$

116,317

65

%

EMEA

 

54,483

46

%

 

49,975

40

%

 

25,101

25

%

 

104,458

43

%

 

49,692

27

%

APAC

 

4,151

3

%

 

6,310

5

%

 

6,789

7

%

 

10,461

4

%

 

15,118

8

%

Total

$

118,979

100

%

$

124,751

100

%

$

98,571

100

%

$

243,730

100

%

$

181,127

100

%

 


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