Press release

Arlo Reports Fourth Quarter 2019 and Full Year 2019 Results

0
Sponsored by Businesswire

Arlo Technologies, Inc. (NYSE: ARLO), a global network connected camera company that delivers innovative internet connected products to consumers and businesses, today reported financial results for the fourth quarter and year ended December 31, 2019.

Financial Highlights (1)

  • Fourth quarter revenue of $122.4 million, an increase of 0.2% year over year.
  • Fourth quarter GAAP gross margin of 11.2%; non-GAAP gross margin of 12.2%.
  • Fourth quarter GAAP net income per diluted share of $0.26, non-GAAP net loss per diluted share of $(0.26).
  • 2019 revenue of $370.0 million.
  • 2019 GAAP gross margin of 9.7%; non-GAAP gross margin of 10.6%.
  • 2019 GAAP net loss per diluted share of $(1.14), non-GAAP net loss per diluted share of $(1.42).

“Arlo finished 2019 with strong execution in the market, meeting or beating our guidance, while delivering on our strategic and operational initiatives to position us to make greater strides in 2020. We closed on our strategic partnership with Verisure, securing future revenue growth and channel expansion opportunities while improving our liquidity and our path to profitability,” said Matthew McRae, Chief Executive Officer of Arlo Technologies. “While the Pro 3 and video doorbell hit retailers in Q4 to instant acclaim, we continued our innovation and expanded our leading product portfolio with the addition of the Floodlight Camera, the first wire-free integrated floodlight camera in the market, and launched Arlo SmartCloud, a SaaS version of our Arlo Smart service platform. Combined with our restructuring plan to drive efficiencies, we have positioned Arlo well for 2020 with greatly improved liquidity and a slate of award winning, best-in-class products.”

 

Three Months Ended

 

Twelve Months Ended

 

December 31, 2019

 

September 29, 2019

 

December 31, 2018

 

December 31, 2019

 

December 31, 2018

 

(in thousands, except percentage and per share data)

Revenue

$

122,413

 

 

$

106,116

 

 

$

122,158

 

 

$

370,007

 

 

$

464,918

 

GAAP Gross Margin

11.2

%

 

9.9

%

 

4.1

%

 

9.7

%

 

19.8

%

Non-GAAP Gross Margin

12.2

%

 

10.7

%

 

4.6

%

 

10.6

%

 

20.4

%

GAAP Net Income (Loss) per Diluted Share

$

0.26

 

 

$

(0.41

)

 

$

(0.53

)

 

$

(1.14

)

 

$

(1.12

)

Non-GAAP Net Income (Loss) per Diluted Share

$

(0.26

)

 

$

(0.32

)

 

$

(0.43

)

 

$

(1.42

)

 

$

(0.49

)

________________________

(1)

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

Business Highlights

  • Full year service revenue of $46.8 million, for growth of 23.7% year over year.
  • 59.7% year over year paid account growth in Q4.
  • 40.9% year over year cumulative registered account growth in Q4.
  • Launched the Arlo SmartCloud, a SaaS version of our Arlo Smart service platform. This robust offering delivers reliable and scalable security cloud services to any company, community, or smart city, making Arlo the ideal choice for those looking to bring intelligent subscription services to their customers.
  • Announced our all-new Arlo Floodlight Camera, the first wire-free integrated floodlight camera on the market, featuring powerful LEDs, an integrated 2K HDR camera, 160-degree field of view, two-way audio, custom lighting configurations, a rechargeable battery, and a built-in siren. The Floodlight Camera is paired with a three month subscription to Arlo Smart.
  • Announced our Privacy Pledge, reaffirming our commitment to our users’ right to privacy and control of their personal information, clearly differentiating Arlo from others in our industry.
  • Arlo products garnered numerous awards at CES, including the CES 2020 Innovation Award Honoree and Best of CES awards for our newly announced Floodlight Camera. Our Video Doorbell was awarded the CNET Editor’s Choice Award, and the Pro 3 camera also was named a CES 2020 Innovation Award Honoree and won numerous Editor’s Choice awards across CNET, PC Magazine, TechHive, Digital Trends, and Gotta Be Mobile.
  • Closed our strategic partnership with Verisure, a leading provider of professionally monitored security solutions. This partnership will provide cash, revenue, and diversification for Arlo on both a regional and channel basis. Verisure paid Arlo $50 million for Arlo’s European commercial operations. Additionally, Verisure committed to purchase a minimum of $500 million cumulatively of Arlo products over the next five years to be distributed by Verisure and will also purchase associated Arlo cloud services.

First Quarter 2020 Business Outlook (2)

  • Revenue of $60.0 million to $70.0 million.
  • GAAP gross margin between 6.1% and 9.4%, and non-GAAP gross margin between 8.0% and 11.0%.
  • GAAP net loss per diluted share of $(0.44) to $(0.47), and non-GAAP net loss per diluted share of $(0.33) to $(0.36).

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

 

Three Months Ending March 29, 2020

 

Revenue

 

Gross Margin

Rate

 

Net Loss per

Diluted Share

 

(in millions, except percent and per share data)

GAAP

$60.0 – $70.0

 

6.1% – 9.4%

 

($0.44) – ($0.47)

Estimated adjustments for (2):

 

 

 

 

 

Stock-based compensation expense

 

1.2%

 

0.1

Strategic initiative expense

 

 

0.01

Amortization of intangibles

 

0.6%

 

Restructuring and other charges

 

 

Tax effects of non-GAAP adjustments

 

 

Non-GAAP

$60.0 – $70.0

 

8.0% – 11.0%

 

($0.33) – ($0.36)

________________________

(2)

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.

Full Year 2020 Business Outlook (3)

  • Revenue of $370.0 million to $400.0 million.
  • GAAP loss from operations between $(97.6 million) and $(107.6 million), and non-GAAP loss from operations between $(65.0 million) and $(75.0 million).

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

 

 

Year Ending December 31, 2020

 

Revenue

 

Loss from

Operations

 

(in millions)

GAAP

$370.0 – $400.0

 

($97.6) – ($107.6)

Estimated adjustments for (3):

 

 

 

Stock-based compensation expense

 

30.1

Strategic initiative expense

 

0.9

Amortization of intangibles

 

1.5

Restructuring and other charges

 

0.1

Non-GAAP

$370.0 – $400.0

 

($65.0) – ($75.0)

________________________

(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 fourth quarter of 2019 results and discuss management’s expectations for the first quarter of 2020 today, Monday, February 24, 2020 at 5:00 p.m. ET (2:00 p.m. PT). The toll free dial-in number for the live audio call is (866) 393-4306. The international dial-in number for the live audio call is (734) 385-2616. The conference ID for the call is 6093615. A live webcast of the conference call will be available on Arlo’s Investor Relations website at https://investor.arlo.com. A replay of the call will be available via the web at https://investor.arlo.com.

About Arlo Technologies, Inc.

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

© 2019 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 expectations or beliefs concerning future events based on information available at the time such statements were made and include statements regarding: Arlo’s future operating performance and financial condition, expected revenue, GAAP and non-GAAP gross margins, operating margins, and tax expense; expectations regarding market expansion and future growth; plans to invest in product innovation; Arlo’s future product offerings; and the quote from Arlo’s Chief Executive Officer. These statements are based on management’s current expectations and are subject to certain risks and uncertainties, including the following: future demand for the Company’s products may be lower than anticipated; consumers may choose not to adopt the Company’s new product offerings or adopt competing products; product performance may be adversely affected by real world operating conditions; the Company may be unsuccessful or experience delays in manufacturing and distributing its new and existing products; telecommunications service providers may choose to slow their deployment of the Company’s products or utilize competing products; the Company may be unable to collect receivables as they become due; the Company may fail to manage costs, including the cost of developing new products and manufacturing and distribution of its existing offerings; the Company may incur additional costs and charges associated with the transactions contemplated by the Verisure partnership; the Company may not receive the minimum commitment amounts from Verisure; health epidemics and other outbreaks; the Company may fail to successfully continue to effect operating expense savings; changes in the level of Arlo’s cash resources and the Company’s planned usage of such resources; changes in the Company’s stock price and developments in the business that could increase the Company’s cash needs; fluctuations in foreign exchange rates; the actions and financial health of the Company’s customers; the anticipated financial capacity under Arlo’s revolving credit line may not be available when expected, or at all; and the Company may not be able to carry out its restructuring plan. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Further information on potential risk factors that could affect Arlo 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 “Part II – Item 1A. Risk Factors,” in the Company’s quarterly report on Form 10-Q for the fiscal quarter ended September 29, 2019, filed with the Securities and Exchange Commission on November 7, 2019. Given these circumstances, you should not place undue reliance on these forward-looking statements. Arlo 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 provision for income taxes, non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share. These supplemental measures exclude adjustments for separation expense, stock-based compensation expense, amortization of intangibles, activist shareholder response costs, restructuring and other charges, strategic initiative and transaction expenses, gain on sale of business, litigation reserves, and the related tax effects. These non-GAAP measures are not in accordance with or an alternative for GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance.

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

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

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

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

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

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

Separation expense consists of expenses that are related to the separation of our business from NETGEAR. These consist primarily of third-party consulting fees, legal fees, IT costs, employee bonuses for services related to the separation, and other one-time expenses incurred to complete the separation. 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 and shares under the employee stock purchase plan granted to employees. We believe that the exclusion of these charges provides for more accurate comparisons of our operating results to peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, we believe it is useful to investors to understand the specific impact stock-based compensation expense has on our operating results.

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

Activist shareholder response costs primarily consist of legal fees and third-party consulting costs incurred. 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.

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

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

Other items are the result of either unique or unplanned events, including, when applicable: restructuring and other charges and litigation reserves, net. 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

 

December 31,

2019

 

December 31,

2018

 

(in thousands)

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

236,680

 

 

$

151,290

 

Short-term investments

19,990

 

 

49,737

 

Accounts receivable, net

127,317

 

 

166,045

 

Inventories

68,624

 

 

124,791

 

Prepaid expenses and other current assets

16,958

 

 

23,611

 

Total current assets

469,569

 

 

515,474

 

Property and equipment, net

21,352

 

 

49,428

 

Operating lease right-of-use assets, net

31,300

 

 

 

Intangibles, net

1,306

 

 

2,823

 

Goodwill

11,038

 

 

15,638

 

Restricted cash

4,139

 

 

4,134

 

Other non-current assets

4,008

 

 

8,449

 

Total assets

$

542,712

 

 

$

595,946

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

111,650

 

 

$

82,542

 

Deferred revenue

50,362

 

 

26,678

 

Accrued liabilities

127,400

 

 

172,036

 

Income tax payable

4,489

 

 

734

 

Total current liabilities

293,901

 

 

281,990

 

Non-current deferred revenue

15,736

 

 

23,313

 

Non-current operating lease liabilities

29,001

 

 

 

Non-current financing lease obligation

 

 

19,978

 

Non-current income taxes payable

92

 

 

22

 

Other non-current liabilities

606

 

 

1,141

 

Total liabilities

339,336

 

 

326,444

 

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: 75,785,952 at December 31, 2019 and 74,247,250 at December 31, 2018

76

 

 

74

 

Additional paid-in capital

334,821

 

 

315,277

 

Accumulated other comprehensive income

(2

)

 

 

Accumulated deficit

(131,519

)

 

(45,849

)

Total stockholders’ equity

203,376

 

 

269,502

 

Total liabilities and stockholders’ equity

$

542,712

 

 

$

595,946

 

ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

Three Months Ended

 

Twelve Months Ended

 

December 31,

2019

 

September 29,

2019

 

December 31,

2018

 

December 31,

2019

 

December 31,

2018

 

(in thousands, except percentage and per share data)

Revenue:

 

 

 

 

 

 

 

 

 

Products

$

109,883

 

 

$

94,306

 

 

$

111,435

 

 

$

323,242

 

 

$

427,113

 

Services

12,530

 

 

11,810

 

 

10,723

 

 

46,765

 

 

37,805

 

Total revenue

122,413

 

 

106,116

 

 

122,158

 

 

370,007

 

 

464,918

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

Products

100,470

 

 

88,755

 

 

112,215

 

 

307,348

 

 

354,023

 

Services

8,237

 

 

6,858

 

 

4,962

 

 

26,855

 

 

18,820

 

Total cost of revenue

108,707

 

 

95,613

 

 

117,177

 

 

334,203

 

 

372,843

 

Gross profit

13,706

 

 

10,503

 

 

4,981

 

 

35,804

 

 

92,075

 

Gross margin

11.2

%

 

9.9

%

 

4.1

%

 

9.7

%

 

19.8

%

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

16,928

 

 

16,701

 

 

16,865

 

 

69,384

 

 

58,794

 

Sales and marketing

14,596

 

 

13,657

 

 

15,470

 

 

56,985

 

 

52,593

 

General and administrative

15,112

 

 

11,062

 

 

8,656

 

 

47,624

 

 

28,209

 

Separation expense

153

 

 

137

 

 

3,603

 

 

1,913

 

 

27,252

 

Gain on sale of business

(54,881

)

 

 

 

 

 

(54,881

)

 

 

Total operating expenses

(8,092

)

 

41,557

 

 

44,594

 

 

121,025

 

 

166,848

 

Income (loss) from operations

21,798

 

 

(31,054

)

 

(39,613

)

 

(85,221

)

 

(74,773

)

Operating margin

17.8

%

 

(29.3

)%

 

(32.4

)%

 

(23.0

)%

 

(16.1

)%

Interest income

567

 

 

596

 

 

736

 

 

2,737

 

 

1,239

 

Other income (expense), net

775

 

 

154

 

 

(254

)

 

913

 

 

(1,177

)

Income (loss) before income taxes

23,140

 

 

(30,304

)

 

(39,131

)

 

(81,571

)

 

(74,711

)

Provision for income taxes

3,525

 

 

286

 

 

(58

)

 

4,380

 

 

772

 

Net income (loss)

$

19,615

 

 

$

(30,590

)

 

$

(39,073

)

 

$

(85,951

)

 

$

(75,483

)

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

Basic

$

0.26

 

 

$

(0.41

)

 

$

(0.53

)

 

$

(1.14

)

 

$

(1.12

)

Diluted

$

0.26

 

 

$

(0.41

)

 

$

(0.53

)

 

$

(1.14

)

 

$

(1.12

)

Weighted average shares used to compute net income (loss) per share:

 

 

 

 

 

 

 

 

 

Basic

75,805

 

 

75,337

 

 

74,247

 

 

75,074

 

 

67,231

 

Diluted

76,090

 

 

75,337

 

 

74,247

 

 

75,074

 

 

67,231

ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Twelve Months Ended

 

December 31,

2019

 

December 31,

2018

 

(In thousands)

Cash flows from operating activities:

 

 

 

Net loss

$

(85,951

)

 

$

(75,483

)

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

 

 

 

Depreciation and amortization

10,681

 

 

5,307

 

Stock-based compensation

22,894

 

 

8,831

 

Provision for (release of) bad debts and inventory

(2,921

)

 

6,739

 

Gain on sale of business

(54,881

)

 

 

Deferred income taxes

(210

)

 

(1,108

)

Premium amortization / discount accretion on investments, net

(461

)

 

(120

)

Changes in assets and liabilities:

 

 

 

Accounts receivable, net

38,247

 

 

(118,778

)

Inventories

53,604

 

 

(48,934

)

Prepaid expenses and other assets

11,525

 

 

(16,592

)

Accounts payable

28,791

 

 

87,307

 

Deferred revenue

22,567

 

 

11,253

 

Accrued and other liabilities

(34,714

)

 

123,892

 

Net cash provided by (used in) operating activities

9,171

 

 

(17,686

)

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

(6,664

)

 

(21,666

)

Proceeds from sale of business

52,694

 

 

 

Purchases of short-term investments

(29,768

)

 

(54,619

)

Maturities of short-term investments

60,000

 

 

5,000

 

Net cash provided by (used in) used in investing activities

76,262

 

 

(71,285

)

Cash flows from financing activities:

 

 

 

Proceeds from initial public offering, net of offering costs

 

 

173,395

 

Proceeds related to employee benefit plans

1,837

 

 

 

Restricted stock unit withholdings

(1,875

)

 

 

Net investment from NETGEAR

 

 

70,892

 

Net cash provided by (used in) financing activities

(38

)

 

244,287

 

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

85,395

 

 

155,316

 

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

155,424

 

 

108

 

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

$

240,819

 

 

$

155,424

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

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

$

1,086

 

 

$

16,003

 

De-recognition of build-to-suit assets and liabilities

$

(21,610

)

 

$

 

Estimated fair value of a facility under build-to-suit lease

$

 

 

$

28,357

 

Supplemental cash flow information:

 

 

 

Cash paid for income taxes

$

960

 

 

$

89

 

ARLO TECHNOLOGIES, INC.

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES

STATEMENT OF OPERATIONS DATA:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Twelve Months Ended

 

December 31,

2019

 

September 29,

2019

 

December 31,

2018

 

December 31,

2019

 

December 31,

2018

 

(in thousands, except percentage data)

GAAP gross profit

$

13,706

 

 

$

10,503

 

 

$

4,981

 

 

$

35,804

 

 

$

92,075

 

GAAP gross margin

11.2

%

 

9.9

%

 

4.1

%

 

9.7

%

 

19.8

%

Stock-based compensation expense

727

 

 

467

 

 

272

 

 

2,013

 

 

1,191

 

Amortization of intangibles

373

 

 

381

 

 

382

 

 

1,517

 

 

1,526

 

Restructuring and other charges

69

 

 

 

 

 

 

69

 

 

 

Non-GAAP gross profit

$

14,875

 

 

$

11,351

 

 

$

5,635

 

 

$

39,403

 

 

$

94,792

 

Non-GAAP gross margin

12.2

%

 

10.7

%

 

4.6

%

 

10.6

%

 

20.4

%

 

 

 

 

 

 

 

 

 

 

GAAP research and development

$

16,928

 

 

$

16,701

 

 

$

16,865

 

 

$

69,384

 

 

$

58,794

 

Stock-based compensation expense

(2,367

)

 

(1,569

)

 

(892

)

 

(6,868

)

 

(3,474

)

Restructuring and other charges

(262

)

 

 

 

 

 

(262

)

 

 

Non-GAAP research and development

$

14,299

 

 

$

15,132

 

 

$

15,973

 

 

$

62,254

 

 

$

55,320

 

 

 

 

 

 

 

 

 

 

 

GAAP sales and marketing

$

14,596

 

 

$

13,657

 

 

$

15,470

 

 

$

56,985

 

 

$

52,593

 

Stock-based compensation expense

(1,137

)

 

(791

)

 

(753

)

 

(3,859

)

 

(2,961

)

Restructuring and other charges

(198

)

 

 

 

 

 

(198

)

 

 

Non-GAAP sales and marketing

$

13,261

 

 

$

12,866

 

 

$

14,717

 

 

$

52,928

 

 

$

49,632

 

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative

$

15,112

 

 

$

11,062

 

 

$

8,656

 

 

$

47,624

 

 

$

28,209

 

Stock-based compensation expense

(3,402

)

 

(2,392

)

 

(1,578

)

 

(10,154

)

 

(5,253

)

Restructuring and other charges

(102

)

 

 

 

 

 

(102

)

 

(74

)

Strategic initiative and transaction expenses

(1,868

)

 

(502

)

 

 

 

(2,370

)

 

 

Activist shareholder response costs

 

 

 

 

 

 

(237

)

 

 

Litigation reserves, net

(1,287

)

 

(140

)

 

 

 

(1,427

)

 

 

Non-GAAP general and administrative

$

8,453

 

 

$

8,028

 

 

$

7,078

 

 

$

33,334

 

 

$

22,882

 

 

 

 

 

 

 

 

 

 

 

GAAP total operating expenses

$

(8,092

)

 

$

41,557

 

 

$

44,594

 

 

$

121,025

 

 

$

166,848

 

Separation expense

(154

)

 

(136

)

 

(3,603

)

 

(1,913

)

 

(27,252

)

Strategic initiative and transaction expenses

(1,868

)

 

(502

)

 

 

 

(2,370

)

 

 

Stock-based compensation expense

(6,906

)

 

(4,752

)

 

(3,223

)

 

(20,881

)

 

(11,688

)

Restructuring and other charges

(562

)

 

 

 

 

 

(562

)

 

(74

)

Litigation reserves, net

(1,287

)

 

(140

)

 

 

 

(1,427

)

 

 

Activist shareholder response costs

 

 

 

 

 

 

(237

)

 

 

Gain on sale of business

54,881

 

 

 

 

 

 

54,881

 

 

 

Non-GAAP total operating expenses

$

36,012

 

 

$

36,027

 

 

$

37,768

 

 

$

148,516

 

 

$

127,834

 

ARLO TECHNOLOGIES, INC.

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

STATEMENT OF OPERATIONS DATA (CONTINUED):

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Twelve Months Ended

 

December 31,

2019

 

September 29,

2019

 

December 31,

2018

 

December 31,

2019

 

December 31,

2018

 

(in thousands, except percentage and per share data)

GAAP operating income (loss)

$

21,798

 

 

$

(31,054

)

 

$

(39,613

)

 

$

(85,221

)

 

$

(74,773

)

GAAP operating margin

17.8

%

 

(29.3

)%

 

(32.4

)%

 

(23.0

)%

 

(16.1

)%

Separation expense

154

 

 

136

 

 

3,603

 

 

1,913

 

 

27,252

 

Strategic initiative and transaction expenses

1,868

 

 

502

 

 

 

 

2,370

 

 

 

Stock-based compensation expense

7,633

 

 

5,219

 

 

3,495

 

 

22,894

 

 

12,879

 

Amortization of intangibles

373

 

 

381

 

 

382

 

 

1,517

 

 

1,526

 

Restructuring and other charges

631

 

 

 

 

 

 

631

 

 

74

 

Litigation reserves, net

1,287

 

 

140

 

 

 

 

1,427

 

 

 

Activist shareholder response costs

 

 

 

 

 

 

237

 

 

 

Gain on sale of business

(54,881

)

 

 

 

 

 

(54,881

)

 

 

Non-GAAP operating loss

$

(21,137

)

 

$

(24,676

)

 

$

(32,133

)

 

$

(109,113

)

 

$

(33,042

)

Non-GAAP operating margin

(17.3

)%

 

(23.3

)%

 

(26.3

)%

 

(29.5

)%

 

(7.1

)%

 

 

 

 

 

 

 

 

 

 

GAAP provision for (benefit from) income taxes

$

3,525

 

 

$

286

 

 

$

(58

)

 

$

4,380

 

 

$

772

 

GAAP income tax rate

15.2

%

 

(0.9

)%

 

0.1

%

 

(5.4

)%

 

(1.0

)%

Tax effects

3,241

 

 

(46

)

 

200

 

 

3,337

 

 

423

 

Non-GAAP provision for (benefit from) income taxes

$

284

 

 

$

332

 

 

$

(258

)

 

$

1,043

 

 

$

349

 

Non-GAAP income tax rate

(1.4

)%

 

(1.4

)%

 

%

 

(1.0

)%

 

(1.1

)%

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss)

$

19,615

 

 

$

(30,590

)

 

$

(39,073

)

 

$

(85,951

)

 

$

(75,483

)

Separation expense

154

 

 

136

 

 

3,603

 

 

1,913

 

 

27,252

 

Strategic initiative and transaction expenses

1,868

 

 

502

 

 

 

 

2,370

 

 

 

Stock-based compensation expense

7,633

 

 

5,219

 

 

3,495

 

 

22,894

 

 

12,879

 

Amortization of intangibles

373

 

 

381

 

 

382

 

 

1,517

 

 

1,526

 

Restructuring and other charges

631

 

 

 

 

 

 

631

 

 

74

 

Litigation reserves, net

1,287

 

 

140

 

 

 

 

1,427

 

 

 

Activist shareholder response costs

 

 

 

 

 

 

237

 

 

 

Gain on sale of business

(54,881

)

 

 

 

 

 

(54,881

)

 

 

Tax effects

3,241

 

 

(46

)

 

200

 

 

3,337

 

 

423

 

Non-GAAP net loss

$

(20,079

)

 

$

(24,258

)

 

$

(31,393

)

 

$

(106,506

)

 

$

(33,329

)

ARLO TECHNOLOGIES, INC.

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

STATEMENT OF OPERATIONS DATA (CONTINUED):

 

 

 

 

 

 

 

Three Months Ended

Twelve Months Ended

 

December 31,

2019

September 29,

2019

December 31,

2018

December 31,

2019

December 31,

2018

 

(in thousands, except percentage and per share data)

NET INCOME (LOSS) PER DILUTED SHARE:

 

 

 

GAAP net income (loss) per diluted share

$

0.26

 

$

(0.41

)

$

(0.53

)

$

(1.14

)

$

(1.12

)

Separation expense

 

0.05

 

 

0.02

 

 

0.41

 

Strategic initiative and transaction expenses

 

0.02

 

 

0.01

 

 

0.03

 

Stock-based compensation expense

 

0.10

 

 

0.07

 

 

0.05

 

 

0.31

 

 

0.19

 

Amortization of intangibles

 

0.01

 

 

0.02

 

 

0.02

 

Restructuring and other charges

 

0.01

 

 

0.01

 

Litigation reserves, net

 

0.02

 

 

0.02

 

Activist shareholder response costs

Gain on sale of business

 

(0.72

)

 

(0.72

)

Tax effects

 

0.05

 

 

0.04

 

 

0.01

 

Non-GAAP net loss per diluted share

$

(0.26

)

$

(0.32

)

$

(0.43

)

$

(1.42

)

$

(0.49

)

 

 

 

 

 

 

Shares used in computing GAAP net income (loss) per diluted share

 

76,090

 

 

75,337

 

 

74,247

 

 

75,074

 

 

67,231

 

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

 

76,090

 

 

75,337

 

 

74,247

 

 

75,074

 

 

67,231

 

ARLO TECHNOLOGIES, INC.

UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION

 

Three Months Ended

 

December 31,

2019

September 29,

2019

June 30,

2019

March 31,

2019

December 31,

2018

 

(in thousands, except headcount and per share data)

Cash, cash equivalents and short-term investments

$

256,670

$

153,811

$

137,927

$

180,374

$

201,027

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

$

3.37

$

2.04

$

1.85

$

2.42

$

2.71

 

 

 

 

 

 

Accounts receivable, net

$

127,317

$

99,698

$

79,707

$

71,566

$

166,045

Days sales outstanding

 

97

 

85

 

87

 

111

 

125

 

 

 

 

 

 

Inventories

$

68,624

$

74,117

$

97,222

$

131,227

$

124,791

Ending inventory turns

 

5.9

 

4.8

 

2.8

 

1.5

 

3.6

 

 

 

 

 

 

Weeks of channel inventory:

 

 

 

 

 

U.S. retail channel

 

6.3

 

13.3

 

10.1

 

14.5

 

8.1

U.S. distribution channel

 

8.0

 

3.3

 

8.9

 

8.9

 

10.9

APAC distribution channel

 

3.6

 

4.3

 

5.1

 

6.7

 

6.0

 

 

 

 

 

 

Deferred revenue (current and non-current)

$

66,098

$

47,995

$

47,464

$

47,737

$

49,991

 

 

 

 

 

 

Cumulative registered accounts (1)

 

4,015

 

3,691

 

3,397

 

3,126

 

2,850

Cumulative paid accounts (2)

 

230

 

211

 

187

162

*

 

144

 

 

 

 

 

 

Headcount

 

349

 

406

 

402

 

401

 

386

Non-GAAP diluted shares

 

76,090

 

75,337

 

74,729

 

74,409

 

74,247

________________________

*

We factored in an adjustment to our Q1’19 paid account number and have subsequently revised the Q1’19 total to 162,000.

(1)

 

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

(2)

 

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

REVENUE BY GEOGRAPHY

 

Three Months Ended

 

Twelve Months Ended

 

December 31,

2019

 

September 29,

2019

 

December 31,

2018

 

December 31,

2019

 

December 31,

2018

 

(in thousands, except percentage data)

Americas

$

94,668

 

77

%

 

$

85,562

 

81

%

 

$

102,552

 

84

%

 

$

289,160

 

78

%

 

$

376,805

 

81

%

EMEA

19,862

 

16

%

 

13,002

 

12

%

 

15,046

 

12

%

 

57,232

 

15

%

 

65,462

 

14

%

APAC

7,883

 

7

%

 

7,552

 

7

%

 

4,560

 

4

%

 

23,615

 

7

%

 

22,651

 

5

%

Total

$

122,413

 

100

%

 

$

106,116

 

100

%

 

$

122,158

 

100

%

 

$

370,007

 

100

%

 

$

464,918

 

100

%