ARLO Arlo Technologies Inc

Record service revenue of $61.9 million, growing 21.2% year over year

GAAP service gross margin of 76.7%; non-GAAP service gross margin of 77.4%

GAAP net loss per share of $(0.04); non-GAAP net income per share of $0.11

Annual recurring revenue (ARR) ended at $241.6 million, growing 20.8% year over year (1)

Free cash flow (FCF) of $17.4 million with FCF margin of 12.6%(2)

Arlo Technologies, Inc. (NYSE: ARLO), a leading smart home security company, today reported financial results for the third quarter ended September 29, 2024.

“Arlo demonstrated operational excellence in the third quarter, driven by our services business, with our highly profitable ARR growing 21% to reach $242 million and non-GAAP service gross margin at 77%. The record non-GAAP operating margin translated to non-GAAP net income per share of $0.11 and robust free cash flow of $17 million with double-digit free cash flow margin,” said Matthew McRae, Chief Executive Officer of Arlo Technologies. “The innovation in our subscription services is fueling our success and we are thrilled to have launched Arlo Secure 5.0 during the period, which represents another groundbreaking step with our industry-leading innovation cycle. Our focus on innovation and operational excellence gives us confidence in our ability to hit our long-range targets.”

Financial and Business Highlights

• Q3 total revenue of $137.7 million, an increase of 5.9% year over year.

• Record Q3 service revenue of $61.9 million, an increase of 21.2% year over year.

• Record Q3 GAAP services gross margin of 76.7% and record non-GAAP services gross margin of 77.4%.

• GAAP gross profit of $48.4 million, an increase of 12.2% year over year; non-GAAP gross profit of $49.5 million, an increase of 12.1% year over year.

• GAAP gross margin of 35.2%; non-GAAP gross margin of 36.0%.

• GAAP net loss per share of $(0.04) and non-GAAP net income per share of $0.11.

• Cumulative paid accounts increased to 4.24 million, growing 70.4% year over year.

• Ended the quarter with ARR(1) of $241.6 million, growing 20.8% year over year.

• Ended with cash and cash equivalents and short-term investments of $146.6 million, up $20.5 million year over year.

 

Three Months Ended

 

Nine Months Ended

 

September 29, 2024

 

June 30, 2024

 

October 1, 2023

 

September 29, 2024

 

October 1, 2023

 

(In thousands, except percentage and per share data)

Revenue

$

137,667

 

 

$

127,447

 

 

$

130,003

 

 

$

389,314

 

 

$

356,083

 

GAAP Gross Margin

 

35.2

%

 

 

36.8

%

 

 

33.2

%

 

 

36.6

%

 

 

33.8

%

Non-GAAP Gross Margin (3)

 

36.0

%

 

 

37.9

%

 

 

34.0

%

 

 

37.7

%

 

 

34.6

%

GAAP Net Loss per Share - Basic and Diluted

$

(0.04

)

 

$

(0.12

)

 

$

(0.01

)

 

$

(0.26

)

 

$

(0.25

)

Non-GAAP Net Income per Share - Basic and Diluted (3)

$

0.11

 

 

$

0.10

 

 

$

0.09

 

 

$

0.30

 

 

$

0.17

 

 

(1)

In the first fiscal quarter of 2024, we changed the methodology on paid service revenue recognition from a mid-month convention to a daily recognition model which recognizes paid service revenue based on the number of service days within the fiscal reporting period, commencing on the start date of the subscription and continuing over the term of the arrangement. Accordingly, the methodology used to calculate ARR was also changed as of March 31, 2024 and is now calculated by taking the average daily paid service revenue of the last calendar month in the fiscal quarter, multiplied by 365 days. We believe the daily recognition model aligns with our customers’ subscription period and service usage and allows for a more precise measurement of paid service revenue relative to the former methodology of a mid-month convention, which was based on paid service revenue for the last calendar month in the fiscal quarter, multiplied by 12 months. This change in calculation methodology has no material impact on our financial statements or any previously reported ARR numbers.

 

 

(2)

FCF is calculated as net cash provided by operating activities less capital expenditures. FCF margin is the FCF divided by revenue.

 

 

(3)

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.

Fourth Quarter 2024 Business Outlook (4)

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

 

Three Months Ended December 31, 2024

 

Revenue

 

Net Income (Loss)

per Diluted Share

 

(In millions, except per share data)

GAAP

$116 - $126

 

$(0.06) - $0.00

Estimated adjustment for stock-based compensation and other expense

—

 

$0.13

Non-GAAP

$116 - $126

 

$0.07 - $0.13

 

(4)

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 third quarter 2024 results and discuss management’s expectations for the fourth quarter 2024 today, Thursday, November 7, 2024 at 5:00 p.m. ET (2:00 p.m. PT). To view the accompanying presentation, a live webcast of the conference call will be available on Arlo’s Investor Relations website at https://investor.arlo.com. The toll-free dial-in number for the live audio call is (833) 470-1428. The international dial-in number for the live audio call is (404) 975-4839. The conference ID for the call is 293127. A replay of the call will be available via the web at https://investor.arlo.com.

About Arlo Technologies, Inc.

Arlo is an award-winning, industry leader that is transforming the ways in which people can protect everything that matters to them with advanced home, business, and personal security solutions. Arlo’s deep expertise in AI- and CV-powered analytics, cloud services, user experience and product design, and innovative wireless and RF connectivity enables the delivery of a seamless, smart security experience for Arlo users that is easy to set up 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 connected devices, software and services. These include wire-free, smart Wi-Fi and LTE-enabled security cameras, video doorbells, floodlights, security system, and Arlo's subscription services: Arlo Secure, and Arlo Safe.

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 implementing 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.

© 2024 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 our potential future business, operating performance and financial condition, including descriptions of our expected revenue and profitability (and related timing), GAAP and non-GAAP gross margins, operating margins, tax rates, expenses, cash outlook, free cash flow and free cash flow margins; strategic objectives and initiatives; the recurring revenue business model; expectations regarding market expansion and future growth, including with respect to our long-range plan targets; optimism for the holiday season due to the expansion our retail partnership lineup; the expected benefits of Arlo Secure 5.0; and others. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: future demand for our products may be lower than anticipated, including due to inflation, fluctuating consumer confidence, banking failures and rising interest rates; we may be unsuccessful in developing and expanding our sales and marketing capabilities; we may not be able to increase sales of our 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 our new and existing products; and we may fail to manage costs and cost saving initiatives, the cost of developing new products and manufacturing and distribution of our 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, write-off of deferred financing, separation expenses, amortization of development of software cost, litigation reserves, net, and the related tax effects. In addition, we use free cash flow as non-GAAP measure when assessing the sources of liquidity, capital resources, and quality of earnings. We believe that free cash flow (usage) is helpful in understanding our capital requirements and provides an additional means to reflect the cash flow trends in our business. 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, write-off of deferred financing, separation expenses, amortization of development of software cost, 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

 

September 29, 2024

 

December 31, 2023

 

(In thousands, except share and per share data)

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

77,032

 

 

$

56,522

 

Short-term investments

 

69,542

 

 

 

79,974

 

Accounts receivable, net

 

68,567

 

 

 

65,360

 

Inventories

 

51,975

 

 

 

38,408

 

Prepaid expenses and other current assets

 

12,424

 

 

 

10,271

 

Total current assets

 

279,540

 

 

 

250,535

 

Property and equipment, net

 

4,436

 

 

 

4,761

 

Operating lease right-of-use assets, net

 

9,510

 

 

 

11,450

 

Goodwill

 

11,038

 

 

 

11,038

 

Restricted cash

 

3,654

 

 

 

4,131

 

Other non-current assets

 

4,197

 

 

 

3,623

 

Total assets

$

312,375

 

 

$

285,538

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

93,745

 

 

$

55,201

 

Deferred revenue

 

24,596

 

 

 

18,041

 

Accrued liabilities

 

78,933

 

 

 

88,209

 

Total current liabilities

 

197,274

 

 

 

161,451

 

Non-current operating lease liabilities

 

14,479

 

 

 

17,021

 

Other non-current liabilities

 

3,713

 

 

 

3,790

 

Total liabilities

 

215,466

 

 

 

182,262

 

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: 100,321,524 at September 29, 2024 and 95,380,281 at December 31, 2023

 

100

 

 

 

95

 

Additional paid-in capital

 

489,677

 

 

 

470,322

 

Accumulated other comprehensive income

 

236

 

 

 

320

 

Accumulated deficit

 

(393,104

)

 

 

(367,461

)

Total stockholders’ equity

 

96,909

 

 

 

103,276

 

Total liabilities and stockholders’ equity

$

312,375

 

 

$

285,538

 

ARLO TECHNOLOGIES, INC.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

Three Months Ended

 

Nine Months Ended

 

September 29, 2024

 

June 30, 2024

 

October 1, 2023

 

September 29, 2024

 

October 1, 2023

 

(In thousands, except percentage and per share data)

Revenue:

 

 

 

 

 

 

 

 

 

Products

$

75,784

 

 

$

67,186

 

 

$

78,961

 

 

$

210,463

 

 

$

210,770

 

Services

 

61,883

 

 

 

60,261

 

 

 

51,042

 

 

 

178,851

 

 

 

145,313

 

Total revenue

 

137,667

 

 

 

127,447

 

 

 

130,003

 

 

 

389,314

 

 

 

356,083

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

Products

 

74,820

 

 

 

66,036

 

 

 

73,335

 

 

 

204,080

 

 

 

197,520

 

Services

 

14,431

 

 

 

14,557

 

 

 

13,529

 

 

 

42,584

 

 

 

38,349

 

Total cost of revenue

 

89,251

 

 

 

80,593

 

 

 

86,864

 

 

 

246,664

 

 

 

235,869

 

Gross profit

 

48,416

 

 

 

46,854

 

 

 

43,139

 

 

 

142,650

 

 

 

120,214

 

Gross margin

 

35.2

%

 

 

36.8

%

 

 

33.2

%

 

 

36.6

%

 

 

33.8

%

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

17,562

 

 

 

19,561

 

 

 

16,829

 

 

 

57,916

 

 

 

52,197

 

Sales and marketing

 

17,832

 

 

 

17,698

 

 

 

15,863

 

 

 

52,900

 

 

 

48,137

 

General and administrative

 

17,052

 

 

 

21,430

 

 

 

12,460

 

 

 

57,830

 

 

 

43,089

 

Others

 

1,423

 

 

 

966

 

 

 

263

 

 

 

2,868

 

 

 

1,236

 

Total operating expenses

 

53,869

 

 

 

59,655

 

 

 

45,415

 

 

 

171,514

 

 

 

144,659

 

Loss from operations

 

(5,453

)

 

 

(12,801

)

 

 

(2,276

)

 

 

(28,864

)

 

 

(24,445

)

Operating margin

 

(4.0

)%

 

 

(10.0

)%

 

 

(1.8

)%

 

 

(7.4

)%

 

 

(6.9

)%

Interest income, net

 

1,400

 

 

 

1,495

 

 

 

1,175

 

 

 

4,281

 

 

 

2,736

 

Other income (loss), net

 

(57

)

 

 

(18

)

 

 

10

 

 

 

(100

)

 

 

23

 

Loss before income taxes

 

(4,110

)

 

 

(11,324

)

 

 

(1,091

)

 

 

(24,683

)

 

 

(21,686

)

Provision for income taxes

 

329

 

 

 

236

 

 

 

29

 

 

 

960

 

 

 

1,042

 

Net loss

$

(4,439

)

 

$

(11,560

)

 

$

(1,120

)

 

$

(25,643

)

 

$

(22,728

)

 

 

 

 

 

 

 

 

 

 

Net loss per share - basic and diluted

$

(0.04

)

 

$

(0.12

)

 

$

(0.01

)

 

$

(0.26

)

 

$

(0.25

)

Weighted average shares used to compute net loss per share - basic and diluted

 

99,731

 

 

 

97,843

 

 

 

94,243

 

 

 

97,932

 

 

 

92,069

 

ARLO TECHNOLOGIES, INC.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

Nine Months Ended

 

September 29, 2024

 

October 1, 2023

 

(In thousands)

Cash flows from operating activities:

 

 

 

Net loss

$

(25,643

)

 

$

(22,728

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Stock-based compensation expense

 

54,159

 

 

 

37,851

 

Depreciation and amortization

 

2,395

 

 

 

3,809

 

Allowance for credit losses and non-cash changes to reserves

 

2,930

 

 

 

1,218

 

Deferred income taxes

 

(23

)

 

 

257

 

Others

 

(2,493

)

 

 

(1,224

)

Changes in assets and liabilities:

 

 

 

Accounts receivable

 

(3,095

)

 

 

(4,262

)

Inventories

 

(16,609

)

 

 

(8,250

)

Prepaid expenses and other assets

 

(2,703

)

 

 

(4,353

)

Accounts payable

 

38,159

 

 

 

31,049

 

Deferred revenue

 

6,714

 

 

 

6,202

 

Accrued and other liabilities

 

(9,157

)

 

 

(9,202

)

Net cash provided by operating activities

 

44,634

 

 

 

30,367

 

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

 

(1,612

)

 

 

(2,448

)

Purchases of short-term investments

 

(145,955

)

 

 

(110,905

)

Proceeds from maturities of short-term investments

 

158,796

 

 

 

67,259

 

Net cash provided by (used in) investing activities

 

11,229

 

 

 

(46,094

)

Cash flows from financing activities:

 

 

 

Proceeds related to employee benefit plans

 

7,113

 

 

 

5,293

 

Restricted stock unit withholdings

 

(42,943

)

 

 

(22,533

)

Net cash used in financing activities

 

(35,830

)

 

 

(17,240

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

20,033

 

 

 

(32,967

)

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

 

60,653

 

 

 

88,179

 

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

$

80,686

 

 

$

55,212

 

 

 

 

 

Non-cash investing activities:

 

 

 

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

$

647

 

 

$

726

 

ARLO TECHNOLOGIES, INC.

 

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES

 

UNAUDITED STATEMENT OF OPERATIONS DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 29, 2024

 

June 30, 2024

 

October 1, 2023

 

September 29, 2024

 

October 1, 2023

 

(In thousands, except percentage data)

GAAP gross profit:

 

 

 

 

 

 

 

 

 

Products

$

964

 

 

$

1,150

 

 

$

5,626

 

 

$

6,383

 

 

$

13,250

 

Services

 

47,452

 

 

 

45,704

 

 

 

37,513

 

 

 

136,267

 

 

 

106,964

 

Total GAAP gross profit

 

48,416

 

 

 

46,854

 

 

 

43,139

 

 

 

142,650

 

 

 

120,214

 

GAAP gross margin:

 

 

 

 

 

 

 

 

 

Products

 

1.3

%

 

 

1.7

%

 

 

7.1

%

 

 

3.0

%

 

 

6.3

%

Services

 

76.7

%

 

 

75.8

%

 

 

73.5

%

 

 

76.2

%

 

 

73.6

%

Total GAAP gross margin

 

35.2

%

 

 

36.8

%

 

 

33.2

%

 

 

36.6

%

 

 

33.8

%

Stock-based compensation expense - Products

 

666

 

 

 

1,127

 

 

 

723

 

 

 

2,907

 

 

 

2,483

 

Stock-based compensation expense - Services

 

289

 

 

 

165

 

 

 

145

 

 

 

711

 

 

 

213

 

Amortization of development of software cost - Services

 

152

 

 

 

151

 

 

 

152

 

 

 

454

 

 

 

454

 

Non-GAAP gross profit:

 

 

 

 

 

 

 

 

 

Products

 

1,630

 

 

 

2,277

 

 

 

6,349

 

 

 

9,290

 

 

 

15,733

 

Services

 

47,893

 

 

 

46,020

 

 

 

37,810

 

 

 

137,432

 

 

 

107,631

 

Total Non-GAAP gross profit

$

49,523

 

 

$

48,297

 

 

$

44,159

 

 

$

146,722

 

 

$

123,364

 

Non-GAAP gross margin:

 

 

 

 

 

 

 

 

 

Products

 

2.2

%

 

 

3.4

%

 

 

8.0

%

 

 

4.4

%

 

 

7.5

%

Services

 

77.4

%

 

 

76.4

%

 

 

74.1

%

 

 

76.8

%

 

 

74.1

%

Total Non-GAAP gross margin

 

36.0

%

 

 

37.9

%

 

 

34.0

%

 

 

37.7

%

 

 

34.6

%

 

 

 

 

 

 

 

 

 

 

GAAP research and development

$

17,562

 

 

$

19,561

 

 

$

16,829

 

 

$

57,916

 

 

$

52,197

 

Stock-based compensation expense

 

(3,584

)

 

 

(4,778

)

 

 

(2,847

)

 

 

(13,266

)

 

 

(10,069

)

Non-GAAP research and development

$

13,978

 

 

$

14,783

 

 

$

13,982

 

 

$

44,650

 

 

$

42,128

 

Percentage of revenue

 

10.2

%

 

 

11.6

%

 

 

10.8

%

 

 

11.5

%

 

 

11.8

%

 

 

 

 

 

 

 

 

 

 

GAAP sales and marketing

$

17,832

 

 

$

17,698

 

 

$

15,863

 

 

$

52,900

 

 

$

48,137

 

Stock-based compensation expense

 

(1,594

)

 

 

(2,176

)

 

 

(1,224

)

 

 

(6,010

)

 

 

(4,616

)

Non-GAAP sales and marketing

$

16,238

 

 

$

15,522

 

 

$

14,639

 

 

$

46,890

 

 

$

43,521

 

Percentage of revenue

 

11.8

%

 

 

12.2

%

 

 

11.3

%

 

 

12.0

%

 

 

12.2

%

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative

$

17,052

 

 

$

21,430

 

 

$

12,460

 

 

$

57,830

 

 

$

43,089

 

Stock-based compensation expense

 

(8,556

)

 

 

(12,674

)

 

 

(5,348

)

 

 

(31,265

)

 

 

(20,470

)

Non-GAAP general and administrative

$

8,496

 

 

$

8,756

 

 

$

7,112

 

 

$

26,565

 

 

$

22,619

 

Percentage of revenue

 

6.2

%

 

 

6.9

%

 

 

5.5

%

 

 

6.8

%

 

 

6.4

%

ARLO TECHNOLOGIES, INC.

 

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

 

UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 29, 2024

 

June 30, 2024

 

October 1, 2023

 

September 29, 2024

 

October 1, 2023

 

(In thousands, except percentage data)

GAAP total operating expenses

$

53,869

 

 

$

59,655

 

 

$

45,415

 

 

$

171,514

 

 

$

144,659

 

Stock-based compensation expense

 

(13,734

)

 

 

(19,628

)

 

 

(9,419

)

 

 

(50,541

)

 

 

(35,155

)

Others

 

(1,423

)

 

 

(966

)

 

 

(263

)

 

 

(2,868

)

 

 

(1,236

)

Non-GAAP total operating expenses

$

38,712

 

 

$

39,061

 

 

$

35,733

 

 

$

118,105

 

 

$

108,268

 

 

 

 

 

 

 

 

 

 

 

GAAP operating loss

$

(5,453

)

 

$

(12,801

)

 

$

(2,276

)

 

$

(28,864

)

 

$

(24,445

)

GAAP operating margin

 

(4.0

)%

 

 

(10.0

)%

 

 

(1.8

)%

 

 

(7.4

)%

 

 

(6.9

)%

Stock-based compensation expense

 

14,689

 

 

 

20,920

 

 

 

10,287

 

 

 

54,159

 

 

 

37,851

 

Others

 

1,575

 

 

 

1,117

 

 

 

415

 

 

 

3,322

 

 

 

1,690

 

Non-GAAP operating income

$

10,811

 

 

$

9,236

 

 

$

8,426

 

 

$

28,617

 

 

$

15,096

 

Non-GAAP operating margin

 

7.9

%

 

 

7.2

%

 

 

6.5

%

 

 

7.4

%

 

 

4.2

%

 

 

 

 

 

 

 

 

 

 

GAAP provision for income taxes

$

329

 

 

$

236

 

 

$

29

 

 

$

960

 

 

$

1,042

 

GAAP income tax rate

 

(8.0

)%

 

 

(2.1

)%

 

 

(2.7

)%

 

 

(3.9

)%

 

 

(4.8

)%

Non-GAAP provision for income taxes

$

329

 

 

$

236

 

 

$

29

 

 

$

960

 

 

$

1,042

 

Non-GAAP income tax rate

 

2.7

%

 

 

2.2

%

 

 

0.3

%

 

 

2.9

%

 

 

5.8

%

ARLO TECHNOLOGIES, INC.

 

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

 

UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 29, 2024

 

June 30, 2024

 

October 1, 2023

 

September 29, 2024

 

October 1, 2023

 

(In thousands, except percentage and per share data)

GAAP net loss

$

(4,439

)

 

$

(11,560

)

 

$

(1,120

)

 

$

(25,643

)

 

$

(22,728

)

Stock-based compensation expense

 

14,689

 

 

 

20,920

 

 

 

10,287

 

 

 

54,159

 

 

 

37,851

 

Others

 

1,575

 

 

 

1,117

 

 

 

415

 

 

 

3,322

 

 

 

1,690

 

Non-GAAP net income

$

11,825

 

 

$

10,477

 

 

$

9,582

 

 

$

31,838

 

 

$

16,813

 

 

 

 

 

 

 

 

 

 

 

GAAP net loss per share - basic

$

(0.04

)

 

$

(0.12

)

 

$

(0.01

)

 

$

(0.26

)

 

$

(0.25

)

Stock-based compensation expense

 

0.13

 

 

 

0.21

 

 

 

0.10

 

 

 

0.52

 

 

 

0.41

 

Others

 

0.02

 

 

 

0.01

 

 

 

—

 

 

 

0.04

 

 

 

0.01

 

Non-GAAP net income per share - diluted

$

0.11

 

 

$

0.10

 

 

$

0.09

 

 

$

0.30

 

 

$

0.17

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing GAAP net loss - basic

 

99,731

 

 

 

97,843

 

 

 

94,243

 

 

 

97,932

 

 

 

92,069

 

Shares used in computing non-GAAP net income - diluted

 

107,294

 

 

 

106,127

 

 

 

102,116

 

 

 

106,368

 

 

 

99,238

 

 

 

 

 

 

 

 

 

 

 

Free cash flow:

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

$

18,366

 

 

$

6,463

 

 

$

7,459

 

 

$

44,634

 

 

$

30,367

 

Less: Purchases of property and equipment

 

(961

)

 

 

(295

)

 

 

(494

)

 

 

(1,612

)

 

 

(2,448

)

Free cash flow (1)

$

17,405

 

 

$

6,168

 

 

$

6,965

 

 

$

43,022

 

 

$

27,919

 

Free cash flow margin (1)

 

12.6

%

 

 

4.8

%

 

 

5.4

%

 

 

11.1

%

 

 

7.8

%

 

(1)

Free cash flow is calculated as net cash provided by operating activities less capital expenditures. Free cash flow margin is the free cash flow divided by revenue.

ARLO TECHNOLOGIES, INC.

 

UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION

 

 

As of and for the three months ended

 

September 29, 2024

 

June 30, 2024

 

March 31, 2024

 

December 31, 2023

 

October 1, 2023

 

(In thousands, except headcount and per share data)

Cash, cash equivalents and short-term investments

$

146,574

 

$

144,005

 

$

142,863

 

$

136,496

 

$

126,049

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

$

68,567

 

$

61,746

 

$

56,496

 

$

65,360

 

$

70,313

Days sales outstanding

 

45

 

 

44

 

 

41

 

 

44

 

 

49

 

 

 

 

 

 

 

 

 

 

Inventories

$

51,975

 

$

45,227

 

$

44,676

 

$

38,408

 

$

53,496

Inventory turns

 

5.8

 

 

5.8

 

 

5.7

 

 

7.6

 

 

5.5

 

 

 

 

 

 

 

 

 

 

Weeks of channel inventory:

 

 

 

 

 

 

 

 

 

U.S. retail channel

 

14.2

 

 

14.8

 

 

12.9

 

 

11.1

 

 

10.9

U.S. distribution channel

 

7.1

 

 

12.5

 

 

11.4

 

 

20.5

 

 

7.4

APAC distribution channel

 

7.5

 

 

3.9

 

 

6.4

 

 

3.9

 

 

7.2

 

 

 

 

 

 

 

 

 

 

Deferred revenue

(current and non-current)

$

24,827

 

$

23,695

 

$

21,540

 

$

18,114

 

$

17,706

 

 

 

 

 

 

 

 

 

 

Cumulative registered accounts (1)

 

10,383

 

 

9,987

 

 

9,173

 

 

8,652

 

 

8,193

Cumulative paid accounts (2)

 

4,235

 

 

3,980

 

 

3,235

 

 

2,813

 

 

2,486

Annual recurring revenue (ARR) (3)

$

241,572

 

$

234,981

 

$

226,968

 

$

210,078

 

$

199,993

 

 

 

 

 

 

 

 

 

 

Headcount

 

355

 

 

362

 

 

373

 

 

363

 

 

353

Non-GAAP diluted shares

 

107,294

 

 

106,127

 

 

103,803

 

 

101,938

 

 

102,116

  (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).

 

 

(3)

In the first fiscal quarter of 2024, we changed the methodology on paid service revenue recognition from a mid-month convention to a daily recognition model which recognizes paid service revenue based on the number of service days within the fiscal reporting period, commencing on the start date of the subscription and continuing over the term of the arrangement. Accordingly, the methodology used to calculate ARR was also changed as of March 31, 2024 and is now calculated by taking the average daily paid service revenue of the last calendar month in the fiscal quarter, multiplied by 365 days. We believe the daily recognition model aligns with our customers’ subscription period and service usage and allows for a more precise measurement of paid service revenue relative to the former methodology of a mid-month convention, which was based on paid service revenue for the last calendar month in the fiscal quarter, multiplied by 12 months. This change in calculation methodology has no material impact on our financial statements or any previously reported ARR numbers.

REVENUE BY GEOGRAPHY

 

Three Months Ended

 

Nine Months Ended

 

September 29, 2024

 

June 30, 2024

 

October 1, 2023

 

September 29, 2024

 

October 1, 2023

 

(In thousands, except percentage data)

Americas

$

73,303

53.2

%

 

$

65,294

51.2

%

 

$

79,948

61.5

%

 

$

195,766

50.3

%

 

$

214,716

60.3

%

EMEA

 

57,773

42.0

%

 

 

56,827

44.6

%

 

 

42,887

33.0

%

 

 

175,980

45.2

%

 

 

122,317

34.4

%

APAC

 

6,591

4.8

%

 

 

5,326

4.2

%

 

 

7,168

5.5

%

 

 

17,568

4.5

%

 

 

19,050

5.3

%

Total

$

137,667

100.0

%

 

$

127,447

100.0

%

 

$

130,003

100.0

%

 

$

389,314

100.0

%

 

$

356,083

100.0

%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241107741439/en/

Arlo Investor Relations Tahmin Clarke investors@arlo.com