Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Arlo Reports Fourth Quarter and Full Year 2022 Results By: Arlo Technologies, Inc. via Business Wire March 07, 2023 at 16:05 PM EST Full year revenue of $490 million, growing 13% year over year Full year service revenue of $136 million, growing 32% year over year Full year service gross margin of 67% Q4 ARR ended at $138 million, growing 53% year over year 1.9 million in Cumulative Paid Accounts Arlo Technologies, Inc. (NYSE: ARLO), a leading smart home security brand, today reported financial results for the fourth quarter and full year ended December 31, 2022. “Arlo executed well during a transformative 2022, delivering Q4 revenue above guidance and full year revenue that rose 13% year over year. Our high-margin subscription business continues its strong growth, adding almost 800,000 paid accounts in 2022 and surpassing 2 million total paid accounts next week. This milestone reflects an inflection point in our business that will lead to record levels of profitability for Arlo going forward," said Matthew McRae, Chief Executive Officer of Arlo Technologies. “Armed with a slate of critically acclaimed products and a new strategic partnership with Citizens Pay, Arlo is poised to disrupt the antiquated home security market and deliver even greater shareholder value in 2023 as we drive to full year non-GAAP profitability.” Financial and Business Highlights (1) Q4 2022 Summary Q4 total revenue of $118.5 million, a decrease of 17.0% year over year. Record Q4 service revenue of $38.3 million, for growth of 34.6% year over year. Ended the quarter with ARR of $137.8 million, growing 52.9% year over year. (2) GAAP services gross margin of 69.1%; non-GAAP services gross margin of 69.7% in Q4. Added 189,000 paid accounts in Q4, a year over year decrease of 0.5%. GAAP gross profit of $32.0 million, an increase of 0.8% year over year; non-GAAP gross profit of $33.2 million, an increase of 1.6% year over year. GAAP gross margin of 27.0%; non-GAAP gross margin of 28.0%. GAAP net loss per diluted share of $(0.25); non-GAAP net loss per diluted share of $(0.04). FY2022 Summary 2022 total revenue of $490.4 million, an increase of 12.7% year over year. 2022 GAAP gross profit of $136.0 million, an increase of 25.9% year over year; non-GAAP gross profit of $140.9 million, an increase of 25.8% year over year. 2022 GAAP gross margin of 27.7%; non-GAAP gross margin of 28.7%. 2022 GAAP net loss per diluted share of $(0.65); non-GAAP net loss per diluted share of $(0.07). Ending cash and cash equivalents and short-term investments balance of $113.7 million and no outstanding balance drawn under our credit facility as of December 31, 2022. Three Months Ended Twelve Months Ended December 31, 2022 October 2, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage and per share data) Revenue $ 118,527 $ 128,157 $ 142,861 $ 490,414 $ 435,137 GAAP Gross Margin 27.0 % 28.7 % 22.2 % 27.7 % 24.8 % Non-GAAP Gross Margin (1) 28.0 % 29.7 % 22.9 % 28.7 % 25.7 % GAAP Net Loss per Diluted Share $ (0.25 ) $ (0.16 ) $ (0.08 ) $ (0.65 ) $ (0.68 ) Non-GAAP Net Income (Loss) per Diluted Share (1) $ (0.04 ) $ (0.05 ) $ 0.04 $ (0.07 ) $ (0.11 ) _________________________ (1) Reconciliation of financial measures computed on a GAAP basis to the most directly comparable financial measures computed on a non-GAAP basis is provided at the end of this press release. (2) ARR is calculated by taking our recurring paid service revenue for the last calendar month in the fiscal quarter, multiplied by 12 months. Recurring paid service revenue represents the revenue we recognized from our paid accounts and excludes prepaid service revenue and non-recurring engineering (NRE) service revenue from strategic partners. First Quarter 2023 Business Outlook (3) A reconciliation of our business outlook on a GAAP and non-GAAP basis is provided in the following table: Three Months Ended April 2, 2023 Revenue Net Income (Loss) per Diluted Share (in millions, except per share data) GAAP $100 - $110 $(0.23) - $(0.17) Estimated adjustments for (3): Stock-based compensation expense — 0.16 Non-GAAP $100 - $110 $(0.07) - $(0.01) _________________________ (3) Business outlook does not include estimates for any currently unknown income and expense items which, by their nature, could arise late in a quarter, including: litigation reserves, net; impairment charges; discrete tax benefits or detriments relating to tax windfalls or shortfalls from equity awards; and any additional impacts relating to the implementation of U.S. tax reform. New material income and expense items such as these could have a significant effect on our guidance and future results. Investor Conference Call / Webcast Details Arlo will review the fourth quarter and full year 2022 results and discuss management’s expectations for the first quarter of 2023 today, Tuesday, March 7, 2023 at 5:00 p.m. ET (2:00 p.m. PT). The toll-free dial-in number for the live audio call is (888) 660-6387. The international dial-in number for the live audio call is +1 (929) 203-1909. The conference ID for the call is 7749064. A live webcast of the conference call will be available on Arlo’s Investor Relations website at https://investor.arlo.com. A replay of the call will be available via the web at https://investor.arlo.com. About Arlo Technologies, Inc. Arlo is the award-winning, industry leader that is transforming the way people experience the connected lifestyle. Arlo’s deep expertise in product design, wireless connectivity, cloud infrastructure and cutting-edge AI capabilities focuses on delivering a seamless, smart home experience for Arlo users that is easy to setup and interact with every day. Arlo’s cloud-based platform provides users with visibility, insight and a powerful means to help protect and connect in real-time with the people and things that matter most, from any location with a Wi-Fi or a cellular connection. To date, Arlo has launched several categories of award-winning smart connected devices, software and services, including wire-free smart Wi-Fi and LTE-enabled security cameras, audio and video doorbells, a floodlight, home security systems, and the Arlo Apps: Arlo Secure, and Arlo Safe, AI-based subscription services designed to maximize security through personalized notifications and emergency services for quicker help during a crisis. With a mission to bring users peace of mind, Arlo is as passionate about protecting user privacy as it is about safeguarding homes and families. Arlo is committed to supporting industry standards for data protection designed to keep users' personal information private and in their control. Arlo does not monetize personal data, provides enhanced controls for user data, supports privacy legislation, keeps user data safely secure, and puts security at the forefront of company culture. © 2023 Arlo Technologies, Inc., Arlo and the Arlo logo are trademarks and/or registered trademarks of Arlo Technologies, Inc. and/or certain of its affiliates in the United States and/or other countries. Other brand and product names are for identification purposes only and may be trademarks or registered trademarks of their respective holder(s). The information contained herein is subject to change without notice. Arlo shall not be liable for technical or editorial errors or omissions contained herein. All rights reserved. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 for Arlo Technologies, Inc.: This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. The words “anticipate,” “expect,” “believe,” “will,” “may,” “should,” “estimate,” “project,” “outlook,” “forecast” or other similar words are used to identify such forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. The forward-looking statements represent our expectations or beliefs concerning future events based on information available at the time such statements were made and include statements regarding its potential future business, operating performance and financial condition, including descriptions of its expected revenue and profitability (and related timing), GAAP and non-GAAP gross margins, operating margins, tax rates, expenses, and cash outlook; the expansion of our product portfolio with Arlo Safe and the Security System; strategic objectives and initiatives; the recurring revenue business model; expectations regarding market expansion and future growth; and others. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: the expansion of our product portfolio with Arlo Safe and the Security System may not materialize; the relationships with strategic enterprise partners may deteriorate; future demand for our products may be lower than anticipated, including due to inflation, lower consumer confidence and rising interest rates; we may be unsuccessful in developing and expanding its sales and marketing capabilities; we may not be able to increase sales of its paid subscription services; consumers may choose not to adopt our new product offerings or adopt competing products; product performance may be adversely affected by real world operating conditions; we may be unsuccessful or experience delays in manufacturing and distributing its new and existing products; we may fail to manage costs and cost saving initiatives, including the cost of developing new products and manufacturing and distribution of its existing offerings. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Further information on potential risk factors that could affect our business are detailed in our periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled “Risk Factors” in the most recently filed Annual Report and Quarterly Report filed with the Securities and Exchange Commission (the “SEC”) and subsequent filings with the SEC. Given these circumstances, you should not place undue reliance on these forward-looking statements. We undertake no obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Non-GAAP Financial Information: To supplement our unaudited selected financial data presented on a basis consistent with U.S. Generally Accepted Accounting Principles (“GAAP”), we disclose certain non-GAAP financial measures that exclude certain charges, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development, non-GAAP sales and marketing, non-GAAP general and administrative, non-GAAP total operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP other income (expenses), net, non-GAAP provision for income taxes, non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share. These supplemental measures exclude adjustments for stock-based compensation expense, restructuring charges, impairment charges, separation expense, litigation reserves, employee retention credit and the related tax effects. These non-GAAP measures are not in accordance with or an alternative for GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance. In calculating non-GAAP financial measures, we exclude certain items to facilitate a review of the comparability of our operating performance on a period-to-period basis because such items are not, in our view, related to our ongoing operational performance. We use non-GAAP measures to evaluate the operating performance of our business, for comparison with forecasts and strategic plans, and for benchmarking performance externally against competitors. In addition, management’s incentive compensation is determined using certain non-GAAP measures. Since we find these measures to be useful, we believe that investors benefit from seeing results “through the eyes” of management in addition to seeing GAAP results. We believe that these non-GAAP measures, when read in conjunction with our GAAP measures, provide useful information to investors by offering: the ability to make more meaningful period-to-period comparisons of our on-going operating results; the ability to better identify trends in our underlying business and perform related trend analyses; a better understanding of how management plans and measures our underlying business; and an easier way to compare our operating results against analyst financial models and operating results of competitors that supplement their GAAP results with non-GAAP financial measures. The following are explanations of the adjustments that we incorporate into non-GAAP measures, as well as the reasons for excluding them in the reconciliations of these non-GAAP financial measures: Stock-based compensation expense consists of non-cash charges for the estimated fair value of stock options, performance-based stock options, restricted stock units (RSU), performance-based restricted stock units, shares under the employee stock purchase plan granted to employees and employees' annual bonus in RSU form. We believe that the exclusion of these charges provides for more accurate comparisons of our operating results to peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, we believe it is useful to investors to understand the specific impact stock-based compensation expense has on our operating results. Other non-GAAP items are the result of either unique or unplanned events, including, when applicable: restructuring charges, impairment charges, separation expense, amortization of capitalized software, litigation reserves, net and employee retention credit. It is difficult to predict the occurrence or estimate the amount or timing of these items in advance. Although these events are reflected in our GAAP financial statements, these unique transactions may limit the comparability of our on-going operations with prior and future periods. The amounts result from events that often arise from unforeseen circumstances, which often occur outside of the ordinary course of continuing operations. Therefore, the amounts do not accurately reflect the underlying performance of our continuing business operations for the period in which they are incurred. Source: Arlo-F ARLO TECHNOLOGIES, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS As of December 31, 2022 2021 (In thousands, except share and per share data) ASSETS Current assets: Cash and cash equivalents $ 84,024 $ 175,749 Short-term investments 29,700 — Accounts receivable, net 65,960 79,564 Inventories 46,554 38,390 Prepaid expenses and other current assets 6,544 9,919 Total current assets 232,782 303,622 Property and equipment, net 7,336 9,595 Operating lease right-of-use assets, net 12,809 14,814 Goodwill 11,038 11,038 Restricted cash 4,155 4,107 Other non-current assets 4,081 4,314 Total assets $ 272,201 $ 347,490 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 52,132 $ 84,098 Deferred revenue 11,291 29,442 Accrued liabilities 98,855 97,389 Total current liabilities 162,278 210,929 Non-current operating lease liabilities 19,279 21,470 Other non-current liabilities 2,949 2,439 Total liabilities 184,506 234,838 Commitments and contingencies Stockholders’ Equity: Preferred stock: $0.001 par value; 50,000,000 shares authorized; none issued or outstanding — — Common stock: $0.001 par value; 500,000,000 shares authorized; shares issued and outstanding: 88,887,139 at December 31, 2022 and 84,453,212 at December 31, 2021 89 84 Additional paid-in capital 433,138 401,367 Accumulated other comprehensive loss (107 ) — Accumulated deficit (345,425 ) (288,799 ) Total stockholders’ equity 87,695 112,652 Total liabilities and stockholders’ equity $ 272,201 $ 347,490 ARLO TECHNOLOGIES, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Twelve Months Ended December 31, 2022 October 2, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage and per share data) Revenue: Products $ 80,199 $ 92,720 $ 114,396 $ 353,935 $ 331,620 Services 38,328 35,437 28,465 136,479 103,517 Total revenue 118,527 128,157 142,861 490,414 435,137 Cost of revenue: Products 74,700 79,386 100,476 308,692 285,334 Services 11,857 12,021 10,669 45,687 41,768 Total cost of revenue 86,557 91,407 111,145 354,379 327,102 Gross profit 31,970 36,750 31,716 136,035 108,035 Gross margin 27.0 % 28.7 % 22.2 % 27.7 % 24.8 % Operating expenses: Research and development 14,457 16,471 13,644 64,709 59,063 Sales and marketing 20,214 22,193 12,464 70,081 48,909 General and administrative 17,909 12,253 12,584 55,932 49,489 Restructuring charges 1,805 — — 1,805 — Impairment charges — — — — 9,116 Others 10 273 254 387 1,596 Total operating expenses 54,395 51,190 38,946 192,914 168,173 Loss from operations (22,425 ) (14,440 ) (7,230 ) (56,879 ) (60,138 ) Operating margin (18.9 )% (11.3 )% (5.1 )% (11.6 )% (13.8 )% Interest income (expense), net 512 290 (15 ) 926 11 Other income (expense), net (12 ) 19 605 302 4,775 Loss before income taxes (21,925 ) (14,131 ) (6,640 ) (55,651 ) (55,352 ) Provision for income taxes 230 304 152 975 677 Net loss $ (22,155 ) $ (14,435 ) $ (6,792 ) $ (56,626 ) $ (56,029 ) Net loss per share: Basic $ (0.25 ) $ (0.16 ) $ (0.08 ) $ (0.65 ) $ (0.68 ) Diluted $ (0.25 ) $ (0.16 ) $ (0.08 ) $ (0.65 ) $ (0.68 ) Weighted average shares used to compute net loss per share: Basic 88,743 88,124 84,367 87,173 82,688 Diluted 88,743 88,124 84,367 87,173 82,688 ARLO TECHNOLOGIES, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2022 2021 (In thousands) Cash flows from operating activities: Net loss $ (56,626 ) $ (56,029 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 48,476 38,030 Impairment charges — 9,116 Depreciation and amortization 4,768 5,975 Allowance for credit losses and inventory reserves (190 ) (3,125 ) Deferred income taxes 181 (296 ) Others 24 (3 ) Changes in assets and liabilities: Accounts receivable, net 13,517 (1,739 ) Inventories (7,887 ) 29,258 Prepaid expenses and other assets 3,427 (3,463 ) Accounts payable (32,520 ) 22,156 Deferred revenue (19,281 ) (38,919 ) Accrued and other liabilities 149 (24,158 ) Net cash used in operating activities (45,962 ) (23,197 ) Cash flows from investing activities: Purchases of property and equipment (2,010 ) (2,268 ) Purchases of short-term investments (69,305 ) — Proceeds from maturities of short-term investments 39,542 20,000 Net cash provided by (used in) investing activities (31,773 ) 17,732 Cash flows from financing activities: Proceeds related to employee benefit plans 4,260 8,231 Restricted stock unit withholdings (18,202 ) (13,201 ) Net cash used in financing activities (13,942 ) (4,970 ) Net decrease in cash, cash equivalents and restricted cash (91,677 ) (10,435 ) Cash, cash equivalents and restricted cash, at beginning of period 179,856 190,291 Cash, cash equivalents and restricted cash, at end of period $ 88,179 $ 179,856 Non-cash investing activities: Purchases of property and equipment included in accounts payable and accrued liabilities $ 946 $ 379 Supplemental cash flow information: Cash paid for income taxes, net $ 415 $ 964 ARLO TECHNOLOGIES, INC.RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES UNAUDITED STATEMENT OF OPERATIONS DATA: Three Months Ended Twelve Months Ended December 31, 2022 October 2, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage data) GAAP gross profit: Products $ 5,499 $ 13,334 $ 13,920 $ 45,243 $ 46,286 Services 26,471 23,416 17,796 90,792 61,749 Total GAAP gross profit 31,970 36,750 31,716 136,035 108,035 GAAP gross margin: Products 6.9 % 14.4 % 12.2 % 12.8 % 14.0 % Services 69.1 % 66.1 % 62.5 % 66.5 % 59.7 % Total GAAP gross margin 27.0 % 28.7 % 22.2 % 27.7 % 24.8 % Stock-based compensation expense - Products 1,001 1,132 776 4,136 3,532 Stock-based compensation expense - Services 230 233 191 705 385 Non-GAAP gross profit: Products 6,500 14,466 14,696 49,379 49,818 Services 26,701 23,649 17,987 91,497 62,134 Total Non-GAAP gross profit $ 33,201 $ 38,115 $ 32,683 $ 140,876 $ 111,952 Non-GAAP gross margin: Products 8.1 % 15.6 % 12.9 % 14.0 % 15.0 % Services 69.7 % 66.7 % 63.2 % 67.0 % 60.0 % Total Non-GAAP gross margin 28.0 % 29.7 % 22.9 % 28.7 % 25.7 % GAAP research and development $ 14,457 $ 16,471 $ 13,644 $ 64,709 $ 59,063 Stock-based compensation expense (3,715 ) (2,679 ) (2,391 ) (12,317 ) (10,865 ) Non-GAAP research and development $ 10,742 $ 13,792 $ 11,253 $ 52,392 $ 48,198 Percentage of revenue 9.1 % 10.8 % 7.9 % 10.7 % 11.1 % GAAP sales and marketing $ 20,214 $ 22,193 $ 12,464 $ 70,081 $ 48,909 Stock-based compensation expense (1,731 ) (1,389 ) (1,444 ) (6,290 ) (5,391 ) Non-GAAP sales and marketing $ 18,483 $ 20,804 $ 11,020 $ 63,791 $ 43,518 Percentage of revenue 15.6 % 16.2 % 7.7 % 13.0 % 10.0 % GAAP general and administrative $ 17,909 $ 12,253 $ 12,584 $ 55,932 $ 49,489 Stock-based compensation expense (10,012 ) (4,520 ) (5,680 ) (25,028 ) (17,857 ) Litigation reserves, net (30 ) (5 ) (3 ) (147 ) (170 ) Non-GAAP general and administrative $ 7,867 $ 7,728 $ 6,901 $ 30,757 $ 31,462 Percentage of revenue 6.6 % 6.0 % 4.8 % 6.3 % 7.2 % ARLO TECHNOLOGIES, INC.RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED) UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED): Three Months Ended Twelve Months Ended December 31, 2022 October 2, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage and per share data) GAAP total operating expenses $ 54,395 $ 51,190 $ 38,946 $ 192,914 $ 168,173 Stock-based compensation expense (15,458 ) (8,588 ) (9,515 ) (43,635 ) (34,113 ) Restructuring charges (1,805 ) — — (1,805 ) — Impairment charges — — — — (9,116 ) Other (40 ) (278 ) (257 ) (534 ) (1,766 ) Non-GAAP total operating expenses $ 37,092 $ 42,324 $ 29,174 $ 146,940 $ 123,178 GAAP operating loss $ (22,425 ) $ (14,440 ) $ (7,230 ) $ (56,879 ) $ (60,138 ) GAAP operating margin (18.9 )% (11.3 )% (5.1 )% (11.6 )% (13.8 )% Stock-based compensation expense 16,689 9,953 10,482 48,476 38,030 Restructuring charges 1,805 — — 1,805 — Impairment charges — — — — 9,116 Other 40 278 257 534 1,766 Non-GAAP operating income (loss) $ (3,891 ) $ (4,209 ) $ 3,509 $ (6,064 ) $ (11,226 ) Non-GAAP operating margin (3.3 )% (3.3 )% 2.5 % (1.2 )% (2.6 )% GAAP other income (expense), net $ (12 ) $ 19 $ 605 $ 302 $ 4,775 Employee retention credit — — (103 ) (65 ) (2,110 ) Non-GAAP other income (expense), net $ (12 ) $ 19 $ 502 $ 237 $ 2,665 GAAP provision for income taxes $ 230 $ 304 $ 152 $ 975 $ 677 GAAP income tax rate (1.0 )% (2.2 )% (2.3 )% (1.8 )% (1.2 )% Non-GAAP provision for income taxes $ 230 $ 304 $ 152 $ 975 $ 677 Non-GAAP income tax rate (6.8 )% (7.8 )% 3.8 % (19.9 )% (7.9 )% ARLO TECHNOLOGIES, INC.RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED) UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED): Three Months Ended Twelve Months Ended December 31, 2022 October 2, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage and per share data) GAAP net loss $ (22,155 ) $ (14,435 ) $ (6,792 ) $ (56,626 ) $ (56,029 ) Stock-based compensation expense 16,689 9,953 10,482 48,476 38,030 Restructuring charges 1,805 — — 1,805 — Impairment charges — — — — 9,116 Other 40 278 154 469 (344 ) Non-GAAP net income (loss) $ (3,621 ) $ (4,204 ) $ 3,844 $ (5,876 ) $ (9,227 ) GAAP net loss per share - basic and diluted $ (0.25 ) $ (0.16 ) $ (0.08 ) $ (0.65 ) $ (0.68 ) Stock-based compensation expense 0.19 0.11 0.12 0.56 0.46 Restructuring charges 0.02 — — 0.02 — Impairment charges — — — — 0.11 Other — — — — — Non-GAAP net income (loss) - diluted $ (0.04 ) $ (0.05 ) $ 0.04 $ (0.07 ) $ (0.11 ) Shares used in computing GAAP net income (loss) - basic 88,743 88,124 84,367 87,173 82,688 Shares used in computing non-GAAP net income (loss) - diluted 88,743 88,124 90,679 87,173 82,688 ARLO TECHNOLOGIES, INC.UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION Three Months Ended December 31, 2022 October 2, 2022 July 3, 2022 April 3, 2022 December 31, 2021 (in thousands, except headcount and per share data) Cash, cash equivalents and short-term investments $ 113,724 $ 125,272 $ 135,258 $ 145,541 $ 175,749 Cash, cash equivalents and short-term investments per diluted share $ 1.28 $ 1.42 $ 1.47 $ 1.56 $ 1.94 Accounts receivable, net $ 65,960 $ 82,707 $ 73,998 $ 78,054 $ 79,564 Days sales outstanding 50 59 57 58 50 Inventories $ 46,554 $ 73,243 $ 39,208 $ 37,038 $ 38,390 Inventory turns 6.4 4.3 7.5 8.7 10.5 Weeks of channel inventory: U.S. retail channel 11.9 13.6 11.9 15.8 7.0 U.S. distribution channel 14.1 5.5 7.4 10.5 8.5 APAC distribution channel 4.7 9.4 9.8 18.1 8.9 Deferred revenue (current and non-current) $ 11,503 $ 12,242 $ 14,022 $ 17,375 $ 30,786 Cumulative registered accounts (1) 7,220 6,930 6,640 6,389 6,131 Cumulative paid accounts (2) 1,862 1,673 1,478 1,272 1,067 Annual recurring revenue (ARR) (3) $ 137,764 $ 125,402 $ 116,601 $ 101,341 $ 90,100 Headcount 343 360 354 358 353 Non-GAAP diluted shares 88,743 88,124 91,787 93,135 90,679 _________________________ (1) We define our registered accounts at the end of a particular period as the number of unique registered accounts on the Arlo platform as of the end of such period. The number of registered accounts does not necessarily reflect the number of end-users on the Arlo platform as one registered account may be used by multiple end-users to monitor the devices attached to that household. (2) Paid accounts are defined as any account worldwide where a subscription to a paid service is being collected (either by us or by our customers or channel partners, including Verisure), plus paid service plans of a duration of more than three months bundled with products (such bundles being counted as a paid account after 90 days have elapsed from the date of registration). (3) ARR represents the amount of paid service revenue that we expect to recur annually and is calculated by taking our recurring paid service revenue for the last calendar month in the fiscal quarter, multiplied by 12 months. Recurring paid service revenue represents the revenue we recognize from our paid accounts and excludes prepaid service revenue, and NRE service revenue from strategic partners. ARR is a performance metric and should be viewed independently of revenue and deferred revenue, and is not intended to be a substitute for, or combined with, any of these items. REVENUE BY GEOGRAPHY Three Months Ended Twelve Months Ended December 31, 2022 October 3, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage data) Americas $ 74,131 63 % $ 71,040 55 % $ 80,354 56 % $ 273,981 56 % $ 271,182 62 % EMEA 39,464 33 % 52,542 41 % 53,609 38 % 196,465 40 % 134,232 31 % APAC 4,932 4 % 4,575 4 % 8,898 6 % 19,968 4 % 29,723 7 % Total $ 118,527 100 % $ 128,157 100 % $ 142,861 100 % $ 490,414 100 % $ 435,137 100 % View source version on businesswire.com: https://www.businesswire.com/news/home/20230307005674/en/Contacts Arlo Investor Relations Erik Bylin investors@arlo.com (510) 315-1004 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Arlo Reports Fourth Quarter and Full Year 2022 Results By: Arlo Technologies, Inc. via Business Wire March 07, 2023 at 16:05 PM EST Full year revenue of $490 million, growing 13% year over year Full year service revenue of $136 million, growing 32% year over year Full year service gross margin of 67% Q4 ARR ended at $138 million, growing 53% year over year 1.9 million in Cumulative Paid Accounts Arlo Technologies, Inc. (NYSE: ARLO), a leading smart home security brand, today reported financial results for the fourth quarter and full year ended December 31, 2022. “Arlo executed well during a transformative 2022, delivering Q4 revenue above guidance and full year revenue that rose 13% year over year. Our high-margin subscription business continues its strong growth, adding almost 800,000 paid accounts in 2022 and surpassing 2 million total paid accounts next week. This milestone reflects an inflection point in our business that will lead to record levels of profitability for Arlo going forward," said Matthew McRae, Chief Executive Officer of Arlo Technologies. “Armed with a slate of critically acclaimed products and a new strategic partnership with Citizens Pay, Arlo is poised to disrupt the antiquated home security market and deliver even greater shareholder value in 2023 as we drive to full year non-GAAP profitability.” Financial and Business Highlights (1) Q4 2022 Summary Q4 total revenue of $118.5 million, a decrease of 17.0% year over year. Record Q4 service revenue of $38.3 million, for growth of 34.6% year over year. Ended the quarter with ARR of $137.8 million, growing 52.9% year over year. (2) GAAP services gross margin of 69.1%; non-GAAP services gross margin of 69.7% in Q4. Added 189,000 paid accounts in Q4, a year over year decrease of 0.5%. GAAP gross profit of $32.0 million, an increase of 0.8% year over year; non-GAAP gross profit of $33.2 million, an increase of 1.6% year over year. GAAP gross margin of 27.0%; non-GAAP gross margin of 28.0%. GAAP net loss per diluted share of $(0.25); non-GAAP net loss per diluted share of $(0.04). FY2022 Summary 2022 total revenue of $490.4 million, an increase of 12.7% year over year. 2022 GAAP gross profit of $136.0 million, an increase of 25.9% year over year; non-GAAP gross profit of $140.9 million, an increase of 25.8% year over year. 2022 GAAP gross margin of 27.7%; non-GAAP gross margin of 28.7%. 2022 GAAP net loss per diluted share of $(0.65); non-GAAP net loss per diluted share of $(0.07). Ending cash and cash equivalents and short-term investments balance of $113.7 million and no outstanding balance drawn under our credit facility as of December 31, 2022. Three Months Ended Twelve Months Ended December 31, 2022 October 2, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage and per share data) Revenue $ 118,527 $ 128,157 $ 142,861 $ 490,414 $ 435,137 GAAP Gross Margin 27.0 % 28.7 % 22.2 % 27.7 % 24.8 % Non-GAAP Gross Margin (1) 28.0 % 29.7 % 22.9 % 28.7 % 25.7 % GAAP Net Loss per Diluted Share $ (0.25 ) $ (0.16 ) $ (0.08 ) $ (0.65 ) $ (0.68 ) Non-GAAP Net Income (Loss) per Diluted Share (1) $ (0.04 ) $ (0.05 ) $ 0.04 $ (0.07 ) $ (0.11 ) _________________________ (1) Reconciliation of financial measures computed on a GAAP basis to the most directly comparable financial measures computed on a non-GAAP basis is provided at the end of this press release. (2) ARR is calculated by taking our recurring paid service revenue for the last calendar month in the fiscal quarter, multiplied by 12 months. Recurring paid service revenue represents the revenue we recognized from our paid accounts and excludes prepaid service revenue and non-recurring engineering (NRE) service revenue from strategic partners. First Quarter 2023 Business Outlook (3) A reconciliation of our business outlook on a GAAP and non-GAAP basis is provided in the following table: Three Months Ended April 2, 2023 Revenue Net Income (Loss) per Diluted Share (in millions, except per share data) GAAP $100 - $110 $(0.23) - $(0.17) Estimated adjustments for (3): Stock-based compensation expense — 0.16 Non-GAAP $100 - $110 $(0.07) - $(0.01) _________________________ (3) Business outlook does not include estimates for any currently unknown income and expense items which, by their nature, could arise late in a quarter, including: litigation reserves, net; impairment charges; discrete tax benefits or detriments relating to tax windfalls or shortfalls from equity awards; and any additional impacts relating to the implementation of U.S. tax reform. New material income and expense items such as these could have a significant effect on our guidance and future results. Investor Conference Call / Webcast Details Arlo will review the fourth quarter and full year 2022 results and discuss management’s expectations for the first quarter of 2023 today, Tuesday, March 7, 2023 at 5:00 p.m. ET (2:00 p.m. PT). The toll-free dial-in number for the live audio call is (888) 660-6387. The international dial-in number for the live audio call is +1 (929) 203-1909. The conference ID for the call is 7749064. A live webcast of the conference call will be available on Arlo’s Investor Relations website at https://investor.arlo.com. A replay of the call will be available via the web at https://investor.arlo.com. About Arlo Technologies, Inc. Arlo is the award-winning, industry leader that is transforming the way people experience the connected lifestyle. Arlo’s deep expertise in product design, wireless connectivity, cloud infrastructure and cutting-edge AI capabilities focuses on delivering a seamless, smart home experience for Arlo users that is easy to setup and interact with every day. Arlo’s cloud-based platform provides users with visibility, insight and a powerful means to help protect and connect in real-time with the people and things that matter most, from any location with a Wi-Fi or a cellular connection. To date, Arlo has launched several categories of award-winning smart connected devices, software and services, including wire-free smart Wi-Fi and LTE-enabled security cameras, audio and video doorbells, a floodlight, home security systems, and the Arlo Apps: Arlo Secure, and Arlo Safe, AI-based subscription services designed to maximize security through personalized notifications and emergency services for quicker help during a crisis. With a mission to bring users peace of mind, Arlo is as passionate about protecting user privacy as it is about safeguarding homes and families. Arlo is committed to supporting industry standards for data protection designed to keep users' personal information private and in their control. Arlo does not monetize personal data, provides enhanced controls for user data, supports privacy legislation, keeps user data safely secure, and puts security at the forefront of company culture. © 2023 Arlo Technologies, Inc., Arlo and the Arlo logo are trademarks and/or registered trademarks of Arlo Technologies, Inc. and/or certain of its affiliates in the United States and/or other countries. Other brand and product names are for identification purposes only and may be trademarks or registered trademarks of their respective holder(s). The information contained herein is subject to change without notice. Arlo shall not be liable for technical or editorial errors or omissions contained herein. All rights reserved. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 for Arlo Technologies, Inc.: This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. The words “anticipate,” “expect,” “believe,” “will,” “may,” “should,” “estimate,” “project,” “outlook,” “forecast” or other similar words are used to identify such forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. The forward-looking statements represent our expectations or beliefs concerning future events based on information available at the time such statements were made and include statements regarding its potential future business, operating performance and financial condition, including descriptions of its expected revenue and profitability (and related timing), GAAP and non-GAAP gross margins, operating margins, tax rates, expenses, and cash outlook; the expansion of our product portfolio with Arlo Safe and the Security System; strategic objectives and initiatives; the recurring revenue business model; expectations regarding market expansion and future growth; and others. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: the expansion of our product portfolio with Arlo Safe and the Security System may not materialize; the relationships with strategic enterprise partners may deteriorate; future demand for our products may be lower than anticipated, including due to inflation, lower consumer confidence and rising interest rates; we may be unsuccessful in developing and expanding its sales and marketing capabilities; we may not be able to increase sales of its paid subscription services; consumers may choose not to adopt our new product offerings or adopt competing products; product performance may be adversely affected by real world operating conditions; we may be unsuccessful or experience delays in manufacturing and distributing its new and existing products; we may fail to manage costs and cost saving initiatives, including the cost of developing new products and manufacturing and distribution of its existing offerings. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Further information on potential risk factors that could affect our business are detailed in our periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled “Risk Factors” in the most recently filed Annual Report and Quarterly Report filed with the Securities and Exchange Commission (the “SEC”) and subsequent filings with the SEC. Given these circumstances, you should not place undue reliance on these forward-looking statements. We undertake no obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Non-GAAP Financial Information: To supplement our unaudited selected financial data presented on a basis consistent with U.S. Generally Accepted Accounting Principles (“GAAP”), we disclose certain non-GAAP financial measures that exclude certain charges, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development, non-GAAP sales and marketing, non-GAAP general and administrative, non-GAAP total operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP other income (expenses), net, non-GAAP provision for income taxes, non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share. These supplemental measures exclude adjustments for stock-based compensation expense, restructuring charges, impairment charges, separation expense, litigation reserves, employee retention credit and the related tax effects. These non-GAAP measures are not in accordance with or an alternative for GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance. In calculating non-GAAP financial measures, we exclude certain items to facilitate a review of the comparability of our operating performance on a period-to-period basis because such items are not, in our view, related to our ongoing operational performance. We use non-GAAP measures to evaluate the operating performance of our business, for comparison with forecasts and strategic plans, and for benchmarking performance externally against competitors. In addition, management’s incentive compensation is determined using certain non-GAAP measures. Since we find these measures to be useful, we believe that investors benefit from seeing results “through the eyes” of management in addition to seeing GAAP results. We believe that these non-GAAP measures, when read in conjunction with our GAAP measures, provide useful information to investors by offering: the ability to make more meaningful period-to-period comparisons of our on-going operating results; the ability to better identify trends in our underlying business and perform related trend analyses; a better understanding of how management plans and measures our underlying business; and an easier way to compare our operating results against analyst financial models and operating results of competitors that supplement their GAAP results with non-GAAP financial measures. The following are explanations of the adjustments that we incorporate into non-GAAP measures, as well as the reasons for excluding them in the reconciliations of these non-GAAP financial measures: Stock-based compensation expense consists of non-cash charges for the estimated fair value of stock options, performance-based stock options, restricted stock units (RSU), performance-based restricted stock units, shares under the employee stock purchase plan granted to employees and employees' annual bonus in RSU form. We believe that the exclusion of these charges provides for more accurate comparisons of our operating results to peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, we believe it is useful to investors to understand the specific impact stock-based compensation expense has on our operating results. Other non-GAAP items are the result of either unique or unplanned events, including, when applicable: restructuring charges, impairment charges, separation expense, amortization of capitalized software, litigation reserves, net and employee retention credit. It is difficult to predict the occurrence or estimate the amount or timing of these items in advance. Although these events are reflected in our GAAP financial statements, these unique transactions may limit the comparability of our on-going operations with prior and future periods. The amounts result from events that often arise from unforeseen circumstances, which often occur outside of the ordinary course of continuing operations. Therefore, the amounts do not accurately reflect the underlying performance of our continuing business operations for the period in which they are incurred. Source: Arlo-F ARLO TECHNOLOGIES, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS As of December 31, 2022 2021 (In thousands, except share and per share data) ASSETS Current assets: Cash and cash equivalents $ 84,024 $ 175,749 Short-term investments 29,700 — Accounts receivable, net 65,960 79,564 Inventories 46,554 38,390 Prepaid expenses and other current assets 6,544 9,919 Total current assets 232,782 303,622 Property and equipment, net 7,336 9,595 Operating lease right-of-use assets, net 12,809 14,814 Goodwill 11,038 11,038 Restricted cash 4,155 4,107 Other non-current assets 4,081 4,314 Total assets $ 272,201 $ 347,490 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 52,132 $ 84,098 Deferred revenue 11,291 29,442 Accrued liabilities 98,855 97,389 Total current liabilities 162,278 210,929 Non-current operating lease liabilities 19,279 21,470 Other non-current liabilities 2,949 2,439 Total liabilities 184,506 234,838 Commitments and contingencies Stockholders’ Equity: Preferred stock: $0.001 par value; 50,000,000 shares authorized; none issued or outstanding — — Common stock: $0.001 par value; 500,000,000 shares authorized; shares issued and outstanding: 88,887,139 at December 31, 2022 and 84,453,212 at December 31, 2021 89 84 Additional paid-in capital 433,138 401,367 Accumulated other comprehensive loss (107 ) — Accumulated deficit (345,425 ) (288,799 ) Total stockholders’ equity 87,695 112,652 Total liabilities and stockholders’ equity $ 272,201 $ 347,490 ARLO TECHNOLOGIES, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Twelve Months Ended December 31, 2022 October 2, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage and per share data) Revenue: Products $ 80,199 $ 92,720 $ 114,396 $ 353,935 $ 331,620 Services 38,328 35,437 28,465 136,479 103,517 Total revenue 118,527 128,157 142,861 490,414 435,137 Cost of revenue: Products 74,700 79,386 100,476 308,692 285,334 Services 11,857 12,021 10,669 45,687 41,768 Total cost of revenue 86,557 91,407 111,145 354,379 327,102 Gross profit 31,970 36,750 31,716 136,035 108,035 Gross margin 27.0 % 28.7 % 22.2 % 27.7 % 24.8 % Operating expenses: Research and development 14,457 16,471 13,644 64,709 59,063 Sales and marketing 20,214 22,193 12,464 70,081 48,909 General and administrative 17,909 12,253 12,584 55,932 49,489 Restructuring charges 1,805 — — 1,805 — Impairment charges — — — — 9,116 Others 10 273 254 387 1,596 Total operating expenses 54,395 51,190 38,946 192,914 168,173 Loss from operations (22,425 ) (14,440 ) (7,230 ) (56,879 ) (60,138 ) Operating margin (18.9 )% (11.3 )% (5.1 )% (11.6 )% (13.8 )% Interest income (expense), net 512 290 (15 ) 926 11 Other income (expense), net (12 ) 19 605 302 4,775 Loss before income taxes (21,925 ) (14,131 ) (6,640 ) (55,651 ) (55,352 ) Provision for income taxes 230 304 152 975 677 Net loss $ (22,155 ) $ (14,435 ) $ (6,792 ) $ (56,626 ) $ (56,029 ) Net loss per share: Basic $ (0.25 ) $ (0.16 ) $ (0.08 ) $ (0.65 ) $ (0.68 ) Diluted $ (0.25 ) $ (0.16 ) $ (0.08 ) $ (0.65 ) $ (0.68 ) Weighted average shares used to compute net loss per share: Basic 88,743 88,124 84,367 87,173 82,688 Diluted 88,743 88,124 84,367 87,173 82,688 ARLO TECHNOLOGIES, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2022 2021 (In thousands) Cash flows from operating activities: Net loss $ (56,626 ) $ (56,029 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 48,476 38,030 Impairment charges — 9,116 Depreciation and amortization 4,768 5,975 Allowance for credit losses and inventory reserves (190 ) (3,125 ) Deferred income taxes 181 (296 ) Others 24 (3 ) Changes in assets and liabilities: Accounts receivable, net 13,517 (1,739 ) Inventories (7,887 ) 29,258 Prepaid expenses and other assets 3,427 (3,463 ) Accounts payable (32,520 ) 22,156 Deferred revenue (19,281 ) (38,919 ) Accrued and other liabilities 149 (24,158 ) Net cash used in operating activities (45,962 ) (23,197 ) Cash flows from investing activities: Purchases of property and equipment (2,010 ) (2,268 ) Purchases of short-term investments (69,305 ) — Proceeds from maturities of short-term investments 39,542 20,000 Net cash provided by (used in) investing activities (31,773 ) 17,732 Cash flows from financing activities: Proceeds related to employee benefit plans 4,260 8,231 Restricted stock unit withholdings (18,202 ) (13,201 ) Net cash used in financing activities (13,942 ) (4,970 ) Net decrease in cash, cash equivalents and restricted cash (91,677 ) (10,435 ) Cash, cash equivalents and restricted cash, at beginning of period 179,856 190,291 Cash, cash equivalents and restricted cash, at end of period $ 88,179 $ 179,856 Non-cash investing activities: Purchases of property and equipment included in accounts payable and accrued liabilities $ 946 $ 379 Supplemental cash flow information: Cash paid for income taxes, net $ 415 $ 964 ARLO TECHNOLOGIES, INC.RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES UNAUDITED STATEMENT OF OPERATIONS DATA: Three Months Ended Twelve Months Ended December 31, 2022 October 2, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage data) GAAP gross profit: Products $ 5,499 $ 13,334 $ 13,920 $ 45,243 $ 46,286 Services 26,471 23,416 17,796 90,792 61,749 Total GAAP gross profit 31,970 36,750 31,716 136,035 108,035 GAAP gross margin: Products 6.9 % 14.4 % 12.2 % 12.8 % 14.0 % Services 69.1 % 66.1 % 62.5 % 66.5 % 59.7 % Total GAAP gross margin 27.0 % 28.7 % 22.2 % 27.7 % 24.8 % Stock-based compensation expense - Products 1,001 1,132 776 4,136 3,532 Stock-based compensation expense - Services 230 233 191 705 385 Non-GAAP gross profit: Products 6,500 14,466 14,696 49,379 49,818 Services 26,701 23,649 17,987 91,497 62,134 Total Non-GAAP gross profit $ 33,201 $ 38,115 $ 32,683 $ 140,876 $ 111,952 Non-GAAP gross margin: Products 8.1 % 15.6 % 12.9 % 14.0 % 15.0 % Services 69.7 % 66.7 % 63.2 % 67.0 % 60.0 % Total Non-GAAP gross margin 28.0 % 29.7 % 22.9 % 28.7 % 25.7 % GAAP research and development $ 14,457 $ 16,471 $ 13,644 $ 64,709 $ 59,063 Stock-based compensation expense (3,715 ) (2,679 ) (2,391 ) (12,317 ) (10,865 ) Non-GAAP research and development $ 10,742 $ 13,792 $ 11,253 $ 52,392 $ 48,198 Percentage of revenue 9.1 % 10.8 % 7.9 % 10.7 % 11.1 % GAAP sales and marketing $ 20,214 $ 22,193 $ 12,464 $ 70,081 $ 48,909 Stock-based compensation expense (1,731 ) (1,389 ) (1,444 ) (6,290 ) (5,391 ) Non-GAAP sales and marketing $ 18,483 $ 20,804 $ 11,020 $ 63,791 $ 43,518 Percentage of revenue 15.6 % 16.2 % 7.7 % 13.0 % 10.0 % GAAP general and administrative $ 17,909 $ 12,253 $ 12,584 $ 55,932 $ 49,489 Stock-based compensation expense (10,012 ) (4,520 ) (5,680 ) (25,028 ) (17,857 ) Litigation reserves, net (30 ) (5 ) (3 ) (147 ) (170 ) Non-GAAP general and administrative $ 7,867 $ 7,728 $ 6,901 $ 30,757 $ 31,462 Percentage of revenue 6.6 % 6.0 % 4.8 % 6.3 % 7.2 % ARLO TECHNOLOGIES, INC.RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED) UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED): Three Months Ended Twelve Months Ended December 31, 2022 October 2, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage and per share data) GAAP total operating expenses $ 54,395 $ 51,190 $ 38,946 $ 192,914 $ 168,173 Stock-based compensation expense (15,458 ) (8,588 ) (9,515 ) (43,635 ) (34,113 ) Restructuring charges (1,805 ) — — (1,805 ) — Impairment charges — — — — (9,116 ) Other (40 ) (278 ) (257 ) (534 ) (1,766 ) Non-GAAP total operating expenses $ 37,092 $ 42,324 $ 29,174 $ 146,940 $ 123,178 GAAP operating loss $ (22,425 ) $ (14,440 ) $ (7,230 ) $ (56,879 ) $ (60,138 ) GAAP operating margin (18.9 )% (11.3 )% (5.1 )% (11.6 )% (13.8 )% Stock-based compensation expense 16,689 9,953 10,482 48,476 38,030 Restructuring charges 1,805 — — 1,805 — Impairment charges — — — — 9,116 Other 40 278 257 534 1,766 Non-GAAP operating income (loss) $ (3,891 ) $ (4,209 ) $ 3,509 $ (6,064 ) $ (11,226 ) Non-GAAP operating margin (3.3 )% (3.3 )% 2.5 % (1.2 )% (2.6 )% GAAP other income (expense), net $ (12 ) $ 19 $ 605 $ 302 $ 4,775 Employee retention credit — — (103 ) (65 ) (2,110 ) Non-GAAP other income (expense), net $ (12 ) $ 19 $ 502 $ 237 $ 2,665 GAAP provision for income taxes $ 230 $ 304 $ 152 $ 975 $ 677 GAAP income tax rate (1.0 )% (2.2 )% (2.3 )% (1.8 )% (1.2 )% Non-GAAP provision for income taxes $ 230 $ 304 $ 152 $ 975 $ 677 Non-GAAP income tax rate (6.8 )% (7.8 )% 3.8 % (19.9 )% (7.9 )% ARLO TECHNOLOGIES, INC.RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED) UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED): Three Months Ended Twelve Months Ended December 31, 2022 October 2, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage and per share data) GAAP net loss $ (22,155 ) $ (14,435 ) $ (6,792 ) $ (56,626 ) $ (56,029 ) Stock-based compensation expense 16,689 9,953 10,482 48,476 38,030 Restructuring charges 1,805 — — 1,805 — Impairment charges — — — — 9,116 Other 40 278 154 469 (344 ) Non-GAAP net income (loss) $ (3,621 ) $ (4,204 ) $ 3,844 $ (5,876 ) $ (9,227 ) GAAP net loss per share - basic and diluted $ (0.25 ) $ (0.16 ) $ (0.08 ) $ (0.65 ) $ (0.68 ) Stock-based compensation expense 0.19 0.11 0.12 0.56 0.46 Restructuring charges 0.02 — — 0.02 — Impairment charges — — — — 0.11 Other — — — — — Non-GAAP net income (loss) - diluted $ (0.04 ) $ (0.05 ) $ 0.04 $ (0.07 ) $ (0.11 ) Shares used in computing GAAP net income (loss) - basic 88,743 88,124 84,367 87,173 82,688 Shares used in computing non-GAAP net income (loss) - diluted 88,743 88,124 90,679 87,173 82,688 ARLO TECHNOLOGIES, INC.UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION Three Months Ended December 31, 2022 October 2, 2022 July 3, 2022 April 3, 2022 December 31, 2021 (in thousands, except headcount and per share data) Cash, cash equivalents and short-term investments $ 113,724 $ 125,272 $ 135,258 $ 145,541 $ 175,749 Cash, cash equivalents and short-term investments per diluted share $ 1.28 $ 1.42 $ 1.47 $ 1.56 $ 1.94 Accounts receivable, net $ 65,960 $ 82,707 $ 73,998 $ 78,054 $ 79,564 Days sales outstanding 50 59 57 58 50 Inventories $ 46,554 $ 73,243 $ 39,208 $ 37,038 $ 38,390 Inventory turns 6.4 4.3 7.5 8.7 10.5 Weeks of channel inventory: U.S. retail channel 11.9 13.6 11.9 15.8 7.0 U.S. distribution channel 14.1 5.5 7.4 10.5 8.5 APAC distribution channel 4.7 9.4 9.8 18.1 8.9 Deferred revenue (current and non-current) $ 11,503 $ 12,242 $ 14,022 $ 17,375 $ 30,786 Cumulative registered accounts (1) 7,220 6,930 6,640 6,389 6,131 Cumulative paid accounts (2) 1,862 1,673 1,478 1,272 1,067 Annual recurring revenue (ARR) (3) $ 137,764 $ 125,402 $ 116,601 $ 101,341 $ 90,100 Headcount 343 360 354 358 353 Non-GAAP diluted shares 88,743 88,124 91,787 93,135 90,679 _________________________ (1) We define our registered accounts at the end of a particular period as the number of unique registered accounts on the Arlo platform as of the end of such period. The number of registered accounts does not necessarily reflect the number of end-users on the Arlo platform as one registered account may be used by multiple end-users to monitor the devices attached to that household. (2) Paid accounts are defined as any account worldwide where a subscription to a paid service is being collected (either by us or by our customers or channel partners, including Verisure), plus paid service plans of a duration of more than three months bundled with products (such bundles being counted as a paid account after 90 days have elapsed from the date of registration). (3) ARR represents the amount of paid service revenue that we expect to recur annually and is calculated by taking our recurring paid service revenue for the last calendar month in the fiscal quarter, multiplied by 12 months. Recurring paid service revenue represents the revenue we recognize from our paid accounts and excludes prepaid service revenue, and NRE service revenue from strategic partners. ARR is a performance metric and should be viewed independently of revenue and deferred revenue, and is not intended to be a substitute for, or combined with, any of these items. REVENUE BY GEOGRAPHY Three Months Ended Twelve Months Ended December 31, 2022 October 3, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage data) Americas $ 74,131 63 % $ 71,040 55 % $ 80,354 56 % $ 273,981 56 % $ 271,182 62 % EMEA 39,464 33 % 52,542 41 % 53,609 38 % 196,465 40 % 134,232 31 % APAC 4,932 4 % 4,575 4 % 8,898 6 % 19,968 4 % 29,723 7 % Total $ 118,527 100 % $ 128,157 100 % $ 142,861 100 % $ 490,414 100 % $ 435,137 100 % View source version on businesswire.com: https://www.businesswire.com/news/home/20230307005674/en/Contacts Arlo Investor Relations Erik Bylin investors@arlo.com (510) 315-1004
Full year revenue of $490 million, growing 13% year over year Full year service revenue of $136 million, growing 32% year over year Full year service gross margin of 67% Q4 ARR ended at $138 million, growing 53% year over year 1.9 million in Cumulative Paid Accounts
Arlo Technologies, Inc. (NYSE: ARLO), a leading smart home security brand, today reported financial results for the fourth quarter and full year ended December 31, 2022. “Arlo executed well during a transformative 2022, delivering Q4 revenue above guidance and full year revenue that rose 13% year over year. Our high-margin subscription business continues its strong growth, adding almost 800,000 paid accounts in 2022 and surpassing 2 million total paid accounts next week. This milestone reflects an inflection point in our business that will lead to record levels of profitability for Arlo going forward," said Matthew McRae, Chief Executive Officer of Arlo Technologies. “Armed with a slate of critically acclaimed products and a new strategic partnership with Citizens Pay, Arlo is poised to disrupt the antiquated home security market and deliver even greater shareholder value in 2023 as we drive to full year non-GAAP profitability.” Financial and Business Highlights (1) Q4 2022 Summary Q4 total revenue of $118.5 million, a decrease of 17.0% year over year. Record Q4 service revenue of $38.3 million, for growth of 34.6% year over year. Ended the quarter with ARR of $137.8 million, growing 52.9% year over year. (2) GAAP services gross margin of 69.1%; non-GAAP services gross margin of 69.7% in Q4. Added 189,000 paid accounts in Q4, a year over year decrease of 0.5%. GAAP gross profit of $32.0 million, an increase of 0.8% year over year; non-GAAP gross profit of $33.2 million, an increase of 1.6% year over year. GAAP gross margin of 27.0%; non-GAAP gross margin of 28.0%. GAAP net loss per diluted share of $(0.25); non-GAAP net loss per diluted share of $(0.04). FY2022 Summary 2022 total revenue of $490.4 million, an increase of 12.7% year over year. 2022 GAAP gross profit of $136.0 million, an increase of 25.9% year over year; non-GAAP gross profit of $140.9 million, an increase of 25.8% year over year. 2022 GAAP gross margin of 27.7%; non-GAAP gross margin of 28.7%. 2022 GAAP net loss per diluted share of $(0.65); non-GAAP net loss per diluted share of $(0.07). Ending cash and cash equivalents and short-term investments balance of $113.7 million and no outstanding balance drawn under our credit facility as of December 31, 2022. Three Months Ended Twelve Months Ended December 31, 2022 October 2, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage and per share data) Revenue $ 118,527 $ 128,157 $ 142,861 $ 490,414 $ 435,137 GAAP Gross Margin 27.0 % 28.7 % 22.2 % 27.7 % 24.8 % Non-GAAP Gross Margin (1) 28.0 % 29.7 % 22.9 % 28.7 % 25.7 % GAAP Net Loss per Diluted Share $ (0.25 ) $ (0.16 ) $ (0.08 ) $ (0.65 ) $ (0.68 ) Non-GAAP Net Income (Loss) per Diluted Share (1) $ (0.04 ) $ (0.05 ) $ 0.04 $ (0.07 ) $ (0.11 ) _________________________ (1) Reconciliation of financial measures computed on a GAAP basis to the most directly comparable financial measures computed on a non-GAAP basis is provided at the end of this press release. (2) ARR is calculated by taking our recurring paid service revenue for the last calendar month in the fiscal quarter, multiplied by 12 months. Recurring paid service revenue represents the revenue we recognized from our paid accounts and excludes prepaid service revenue and non-recurring engineering (NRE) service revenue from strategic partners. First Quarter 2023 Business Outlook (3) A reconciliation of our business outlook on a GAAP and non-GAAP basis is provided in the following table: Three Months Ended April 2, 2023 Revenue Net Income (Loss) per Diluted Share (in millions, except per share data) GAAP $100 - $110 $(0.23) - $(0.17) Estimated adjustments for (3): Stock-based compensation expense — 0.16 Non-GAAP $100 - $110 $(0.07) - $(0.01) _________________________ (3) Business outlook does not include estimates for any currently unknown income and expense items which, by their nature, could arise late in a quarter, including: litigation reserves, net; impairment charges; discrete tax benefits or detriments relating to tax windfalls or shortfalls from equity awards; and any additional impacts relating to the implementation of U.S. tax reform. New material income and expense items such as these could have a significant effect on our guidance and future results. Investor Conference Call / Webcast Details Arlo will review the fourth quarter and full year 2022 results and discuss management’s expectations for the first quarter of 2023 today, Tuesday, March 7, 2023 at 5:00 p.m. ET (2:00 p.m. PT). The toll-free dial-in number for the live audio call is (888) 660-6387. The international dial-in number for the live audio call is +1 (929) 203-1909. The conference ID for the call is 7749064. A live webcast of the conference call will be available on Arlo’s Investor Relations website at https://investor.arlo.com. A replay of the call will be available via the web at https://investor.arlo.com. About Arlo Technologies, Inc. Arlo is the award-winning, industry leader that is transforming the way people experience the connected lifestyle. Arlo’s deep expertise in product design, wireless connectivity, cloud infrastructure and cutting-edge AI capabilities focuses on delivering a seamless, smart home experience for Arlo users that is easy to setup and interact with every day. Arlo’s cloud-based platform provides users with visibility, insight and a powerful means to help protect and connect in real-time with the people and things that matter most, from any location with a Wi-Fi or a cellular connection. To date, Arlo has launched several categories of award-winning smart connected devices, software and services, including wire-free smart Wi-Fi and LTE-enabled security cameras, audio and video doorbells, a floodlight, home security systems, and the Arlo Apps: Arlo Secure, and Arlo Safe, AI-based subscription services designed to maximize security through personalized notifications and emergency services for quicker help during a crisis. With a mission to bring users peace of mind, Arlo is as passionate about protecting user privacy as it is about safeguarding homes and families. Arlo is committed to supporting industry standards for data protection designed to keep users' personal information private and in their control. Arlo does not monetize personal data, provides enhanced controls for user data, supports privacy legislation, keeps user data safely secure, and puts security at the forefront of company culture. © 2023 Arlo Technologies, Inc., Arlo and the Arlo logo are trademarks and/or registered trademarks of Arlo Technologies, Inc. and/or certain of its affiliates in the United States and/or other countries. Other brand and product names are for identification purposes only and may be trademarks or registered trademarks of their respective holder(s). The information contained herein is subject to change without notice. Arlo shall not be liable for technical or editorial errors or omissions contained herein. All rights reserved. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 for Arlo Technologies, Inc.: This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. The words “anticipate,” “expect,” “believe,” “will,” “may,” “should,” “estimate,” “project,” “outlook,” “forecast” or other similar words are used to identify such forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. The forward-looking statements represent our expectations or beliefs concerning future events based on information available at the time such statements were made and include statements regarding its potential future business, operating performance and financial condition, including descriptions of its expected revenue and profitability (and related timing), GAAP and non-GAAP gross margins, operating margins, tax rates, expenses, and cash outlook; the expansion of our product portfolio with Arlo Safe and the Security System; strategic objectives and initiatives; the recurring revenue business model; expectations regarding market expansion and future growth; and others. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: the expansion of our product portfolio with Arlo Safe and the Security System may not materialize; the relationships with strategic enterprise partners may deteriorate; future demand for our products may be lower than anticipated, including due to inflation, lower consumer confidence and rising interest rates; we may be unsuccessful in developing and expanding its sales and marketing capabilities; we may not be able to increase sales of its paid subscription services; consumers may choose not to adopt our new product offerings or adopt competing products; product performance may be adversely affected by real world operating conditions; we may be unsuccessful or experience delays in manufacturing and distributing its new and existing products; we may fail to manage costs and cost saving initiatives, including the cost of developing new products and manufacturing and distribution of its existing offerings. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Further information on potential risk factors that could affect our business are detailed in our periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled “Risk Factors” in the most recently filed Annual Report and Quarterly Report filed with the Securities and Exchange Commission (the “SEC”) and subsequent filings with the SEC. Given these circumstances, you should not place undue reliance on these forward-looking statements. We undertake no obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Non-GAAP Financial Information: To supplement our unaudited selected financial data presented on a basis consistent with U.S. Generally Accepted Accounting Principles (“GAAP”), we disclose certain non-GAAP financial measures that exclude certain charges, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development, non-GAAP sales and marketing, non-GAAP general and administrative, non-GAAP total operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP other income (expenses), net, non-GAAP provision for income taxes, non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share. These supplemental measures exclude adjustments for stock-based compensation expense, restructuring charges, impairment charges, separation expense, litigation reserves, employee retention credit and the related tax effects. These non-GAAP measures are not in accordance with or an alternative for GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance. In calculating non-GAAP financial measures, we exclude certain items to facilitate a review of the comparability of our operating performance on a period-to-period basis because such items are not, in our view, related to our ongoing operational performance. We use non-GAAP measures to evaluate the operating performance of our business, for comparison with forecasts and strategic plans, and for benchmarking performance externally against competitors. In addition, management’s incentive compensation is determined using certain non-GAAP measures. Since we find these measures to be useful, we believe that investors benefit from seeing results “through the eyes” of management in addition to seeing GAAP results. We believe that these non-GAAP measures, when read in conjunction with our GAAP measures, provide useful information to investors by offering: the ability to make more meaningful period-to-period comparisons of our on-going operating results; the ability to better identify trends in our underlying business and perform related trend analyses; a better understanding of how management plans and measures our underlying business; and an easier way to compare our operating results against analyst financial models and operating results of competitors that supplement their GAAP results with non-GAAP financial measures. The following are explanations of the adjustments that we incorporate into non-GAAP measures, as well as the reasons for excluding them in the reconciliations of these non-GAAP financial measures: Stock-based compensation expense consists of non-cash charges for the estimated fair value of stock options, performance-based stock options, restricted stock units (RSU), performance-based restricted stock units, shares under the employee stock purchase plan granted to employees and employees' annual bonus in RSU form. We believe that the exclusion of these charges provides for more accurate comparisons of our operating results to peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, we believe it is useful to investors to understand the specific impact stock-based compensation expense has on our operating results. Other non-GAAP items are the result of either unique or unplanned events, including, when applicable: restructuring charges, impairment charges, separation expense, amortization of capitalized software, litigation reserves, net and employee retention credit. It is difficult to predict the occurrence or estimate the amount or timing of these items in advance. Although these events are reflected in our GAAP financial statements, these unique transactions may limit the comparability of our on-going operations with prior and future periods. The amounts result from events that often arise from unforeseen circumstances, which often occur outside of the ordinary course of continuing operations. Therefore, the amounts do not accurately reflect the underlying performance of our continuing business operations for the period in which they are incurred. Source: Arlo-F ARLO TECHNOLOGIES, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS As of December 31, 2022 2021 (In thousands, except share and per share data) ASSETS Current assets: Cash and cash equivalents $ 84,024 $ 175,749 Short-term investments 29,700 — Accounts receivable, net 65,960 79,564 Inventories 46,554 38,390 Prepaid expenses and other current assets 6,544 9,919 Total current assets 232,782 303,622 Property and equipment, net 7,336 9,595 Operating lease right-of-use assets, net 12,809 14,814 Goodwill 11,038 11,038 Restricted cash 4,155 4,107 Other non-current assets 4,081 4,314 Total assets $ 272,201 $ 347,490 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 52,132 $ 84,098 Deferred revenue 11,291 29,442 Accrued liabilities 98,855 97,389 Total current liabilities 162,278 210,929 Non-current operating lease liabilities 19,279 21,470 Other non-current liabilities 2,949 2,439 Total liabilities 184,506 234,838 Commitments and contingencies Stockholders’ Equity: Preferred stock: $0.001 par value; 50,000,000 shares authorized; none issued or outstanding — — Common stock: $0.001 par value; 500,000,000 shares authorized; shares issued and outstanding: 88,887,139 at December 31, 2022 and 84,453,212 at December 31, 2021 89 84 Additional paid-in capital 433,138 401,367 Accumulated other comprehensive loss (107 ) — Accumulated deficit (345,425 ) (288,799 ) Total stockholders’ equity 87,695 112,652 Total liabilities and stockholders’ equity $ 272,201 $ 347,490 ARLO TECHNOLOGIES, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Twelve Months Ended December 31, 2022 October 2, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage and per share data) Revenue: Products $ 80,199 $ 92,720 $ 114,396 $ 353,935 $ 331,620 Services 38,328 35,437 28,465 136,479 103,517 Total revenue 118,527 128,157 142,861 490,414 435,137 Cost of revenue: Products 74,700 79,386 100,476 308,692 285,334 Services 11,857 12,021 10,669 45,687 41,768 Total cost of revenue 86,557 91,407 111,145 354,379 327,102 Gross profit 31,970 36,750 31,716 136,035 108,035 Gross margin 27.0 % 28.7 % 22.2 % 27.7 % 24.8 % Operating expenses: Research and development 14,457 16,471 13,644 64,709 59,063 Sales and marketing 20,214 22,193 12,464 70,081 48,909 General and administrative 17,909 12,253 12,584 55,932 49,489 Restructuring charges 1,805 — — 1,805 — Impairment charges — — — — 9,116 Others 10 273 254 387 1,596 Total operating expenses 54,395 51,190 38,946 192,914 168,173 Loss from operations (22,425 ) (14,440 ) (7,230 ) (56,879 ) (60,138 ) Operating margin (18.9 )% (11.3 )% (5.1 )% (11.6 )% (13.8 )% Interest income (expense), net 512 290 (15 ) 926 11 Other income (expense), net (12 ) 19 605 302 4,775 Loss before income taxes (21,925 ) (14,131 ) (6,640 ) (55,651 ) (55,352 ) Provision for income taxes 230 304 152 975 677 Net loss $ (22,155 ) $ (14,435 ) $ (6,792 ) $ (56,626 ) $ (56,029 ) Net loss per share: Basic $ (0.25 ) $ (0.16 ) $ (0.08 ) $ (0.65 ) $ (0.68 ) Diluted $ (0.25 ) $ (0.16 ) $ (0.08 ) $ (0.65 ) $ (0.68 ) Weighted average shares used to compute net loss per share: Basic 88,743 88,124 84,367 87,173 82,688 Diluted 88,743 88,124 84,367 87,173 82,688 ARLO TECHNOLOGIES, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2022 2021 (In thousands) Cash flows from operating activities: Net loss $ (56,626 ) $ (56,029 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 48,476 38,030 Impairment charges — 9,116 Depreciation and amortization 4,768 5,975 Allowance for credit losses and inventory reserves (190 ) (3,125 ) Deferred income taxes 181 (296 ) Others 24 (3 ) Changes in assets and liabilities: Accounts receivable, net 13,517 (1,739 ) Inventories (7,887 ) 29,258 Prepaid expenses and other assets 3,427 (3,463 ) Accounts payable (32,520 ) 22,156 Deferred revenue (19,281 ) (38,919 ) Accrued and other liabilities 149 (24,158 ) Net cash used in operating activities (45,962 ) (23,197 ) Cash flows from investing activities: Purchases of property and equipment (2,010 ) (2,268 ) Purchases of short-term investments (69,305 ) — Proceeds from maturities of short-term investments 39,542 20,000 Net cash provided by (used in) investing activities (31,773 ) 17,732 Cash flows from financing activities: Proceeds related to employee benefit plans 4,260 8,231 Restricted stock unit withholdings (18,202 ) (13,201 ) Net cash used in financing activities (13,942 ) (4,970 ) Net decrease in cash, cash equivalents and restricted cash (91,677 ) (10,435 ) Cash, cash equivalents and restricted cash, at beginning of period 179,856 190,291 Cash, cash equivalents and restricted cash, at end of period $ 88,179 $ 179,856 Non-cash investing activities: Purchases of property and equipment included in accounts payable and accrued liabilities $ 946 $ 379 Supplemental cash flow information: Cash paid for income taxes, net $ 415 $ 964 ARLO TECHNOLOGIES, INC.RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES UNAUDITED STATEMENT OF OPERATIONS DATA: Three Months Ended Twelve Months Ended December 31, 2022 October 2, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage data) GAAP gross profit: Products $ 5,499 $ 13,334 $ 13,920 $ 45,243 $ 46,286 Services 26,471 23,416 17,796 90,792 61,749 Total GAAP gross profit 31,970 36,750 31,716 136,035 108,035 GAAP gross margin: Products 6.9 % 14.4 % 12.2 % 12.8 % 14.0 % Services 69.1 % 66.1 % 62.5 % 66.5 % 59.7 % Total GAAP gross margin 27.0 % 28.7 % 22.2 % 27.7 % 24.8 % Stock-based compensation expense - Products 1,001 1,132 776 4,136 3,532 Stock-based compensation expense - Services 230 233 191 705 385 Non-GAAP gross profit: Products 6,500 14,466 14,696 49,379 49,818 Services 26,701 23,649 17,987 91,497 62,134 Total Non-GAAP gross profit $ 33,201 $ 38,115 $ 32,683 $ 140,876 $ 111,952 Non-GAAP gross margin: Products 8.1 % 15.6 % 12.9 % 14.0 % 15.0 % Services 69.7 % 66.7 % 63.2 % 67.0 % 60.0 % Total Non-GAAP gross margin 28.0 % 29.7 % 22.9 % 28.7 % 25.7 % GAAP research and development $ 14,457 $ 16,471 $ 13,644 $ 64,709 $ 59,063 Stock-based compensation expense (3,715 ) (2,679 ) (2,391 ) (12,317 ) (10,865 ) Non-GAAP research and development $ 10,742 $ 13,792 $ 11,253 $ 52,392 $ 48,198 Percentage of revenue 9.1 % 10.8 % 7.9 % 10.7 % 11.1 % GAAP sales and marketing $ 20,214 $ 22,193 $ 12,464 $ 70,081 $ 48,909 Stock-based compensation expense (1,731 ) (1,389 ) (1,444 ) (6,290 ) (5,391 ) Non-GAAP sales and marketing $ 18,483 $ 20,804 $ 11,020 $ 63,791 $ 43,518 Percentage of revenue 15.6 % 16.2 % 7.7 % 13.0 % 10.0 % GAAP general and administrative $ 17,909 $ 12,253 $ 12,584 $ 55,932 $ 49,489 Stock-based compensation expense (10,012 ) (4,520 ) (5,680 ) (25,028 ) (17,857 ) Litigation reserves, net (30 ) (5 ) (3 ) (147 ) (170 ) Non-GAAP general and administrative $ 7,867 $ 7,728 $ 6,901 $ 30,757 $ 31,462 Percentage of revenue 6.6 % 6.0 % 4.8 % 6.3 % 7.2 % ARLO TECHNOLOGIES, INC.RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED) UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED): Three Months Ended Twelve Months Ended December 31, 2022 October 2, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage and per share data) GAAP total operating expenses $ 54,395 $ 51,190 $ 38,946 $ 192,914 $ 168,173 Stock-based compensation expense (15,458 ) (8,588 ) (9,515 ) (43,635 ) (34,113 ) Restructuring charges (1,805 ) — — (1,805 ) — Impairment charges — — — — (9,116 ) Other (40 ) (278 ) (257 ) (534 ) (1,766 ) Non-GAAP total operating expenses $ 37,092 $ 42,324 $ 29,174 $ 146,940 $ 123,178 GAAP operating loss $ (22,425 ) $ (14,440 ) $ (7,230 ) $ (56,879 ) $ (60,138 ) GAAP operating margin (18.9 )% (11.3 )% (5.1 )% (11.6 )% (13.8 )% Stock-based compensation expense 16,689 9,953 10,482 48,476 38,030 Restructuring charges 1,805 — — 1,805 — Impairment charges — — — — 9,116 Other 40 278 257 534 1,766 Non-GAAP operating income (loss) $ (3,891 ) $ (4,209 ) $ 3,509 $ (6,064 ) $ (11,226 ) Non-GAAP operating margin (3.3 )% (3.3 )% 2.5 % (1.2 )% (2.6 )% GAAP other income (expense), net $ (12 ) $ 19 $ 605 $ 302 $ 4,775 Employee retention credit — — (103 ) (65 ) (2,110 ) Non-GAAP other income (expense), net $ (12 ) $ 19 $ 502 $ 237 $ 2,665 GAAP provision for income taxes $ 230 $ 304 $ 152 $ 975 $ 677 GAAP income tax rate (1.0 )% (2.2 )% (2.3 )% (1.8 )% (1.2 )% Non-GAAP provision for income taxes $ 230 $ 304 $ 152 $ 975 $ 677 Non-GAAP income tax rate (6.8 )% (7.8 )% 3.8 % (19.9 )% (7.9 )% ARLO TECHNOLOGIES, INC.RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED) UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED): Three Months Ended Twelve Months Ended December 31, 2022 October 2, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage and per share data) GAAP net loss $ (22,155 ) $ (14,435 ) $ (6,792 ) $ (56,626 ) $ (56,029 ) Stock-based compensation expense 16,689 9,953 10,482 48,476 38,030 Restructuring charges 1,805 — — 1,805 — Impairment charges — — — — 9,116 Other 40 278 154 469 (344 ) Non-GAAP net income (loss) $ (3,621 ) $ (4,204 ) $ 3,844 $ (5,876 ) $ (9,227 ) GAAP net loss per share - basic and diluted $ (0.25 ) $ (0.16 ) $ (0.08 ) $ (0.65 ) $ (0.68 ) Stock-based compensation expense 0.19 0.11 0.12 0.56 0.46 Restructuring charges 0.02 — — 0.02 — Impairment charges — — — — 0.11 Other — — — — — Non-GAAP net income (loss) - diluted $ (0.04 ) $ (0.05 ) $ 0.04 $ (0.07 ) $ (0.11 ) Shares used in computing GAAP net income (loss) - basic 88,743 88,124 84,367 87,173 82,688 Shares used in computing non-GAAP net income (loss) - diluted 88,743 88,124 90,679 87,173 82,688 ARLO TECHNOLOGIES, INC.UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION Three Months Ended December 31, 2022 October 2, 2022 July 3, 2022 April 3, 2022 December 31, 2021 (in thousands, except headcount and per share data) Cash, cash equivalents and short-term investments $ 113,724 $ 125,272 $ 135,258 $ 145,541 $ 175,749 Cash, cash equivalents and short-term investments per diluted share $ 1.28 $ 1.42 $ 1.47 $ 1.56 $ 1.94 Accounts receivable, net $ 65,960 $ 82,707 $ 73,998 $ 78,054 $ 79,564 Days sales outstanding 50 59 57 58 50 Inventories $ 46,554 $ 73,243 $ 39,208 $ 37,038 $ 38,390 Inventory turns 6.4 4.3 7.5 8.7 10.5 Weeks of channel inventory: U.S. retail channel 11.9 13.6 11.9 15.8 7.0 U.S. distribution channel 14.1 5.5 7.4 10.5 8.5 APAC distribution channel 4.7 9.4 9.8 18.1 8.9 Deferred revenue (current and non-current) $ 11,503 $ 12,242 $ 14,022 $ 17,375 $ 30,786 Cumulative registered accounts (1) 7,220 6,930 6,640 6,389 6,131 Cumulative paid accounts (2) 1,862 1,673 1,478 1,272 1,067 Annual recurring revenue (ARR) (3) $ 137,764 $ 125,402 $ 116,601 $ 101,341 $ 90,100 Headcount 343 360 354 358 353 Non-GAAP diluted shares 88,743 88,124 91,787 93,135 90,679 _________________________ (1) We define our registered accounts at the end of a particular period as the number of unique registered accounts on the Arlo platform as of the end of such period. The number of registered accounts does not necessarily reflect the number of end-users on the Arlo platform as one registered account may be used by multiple end-users to monitor the devices attached to that household. (2) Paid accounts are defined as any account worldwide where a subscription to a paid service is being collected (either by us or by our customers or channel partners, including Verisure), plus paid service plans of a duration of more than three months bundled with products (such bundles being counted as a paid account after 90 days have elapsed from the date of registration). (3) ARR represents the amount of paid service revenue that we expect to recur annually and is calculated by taking our recurring paid service revenue for the last calendar month in the fiscal quarter, multiplied by 12 months. Recurring paid service revenue represents the revenue we recognize from our paid accounts and excludes prepaid service revenue, and NRE service revenue from strategic partners. ARR is a performance metric and should be viewed independently of revenue and deferred revenue, and is not intended to be a substitute for, or combined with, any of these items. REVENUE BY GEOGRAPHY Three Months Ended Twelve Months Ended December 31, 2022 October 3, 2022 December 31, 2021 December 31, 2022 December 31, 2021 (in thousands, except percentage data) Americas $ 74,131 63 % $ 71,040 55 % $ 80,354 56 % $ 273,981 56 % $ 271,182 62 % EMEA 39,464 33 % 52,542 41 % 53,609 38 % 196,465 40 % 134,232 31 % APAC 4,932 4 % 4,575 4 % 8,898 6 % 19,968 4 % 29,723 7 % Total $ 118,527 100 % $ 128,157 100 % $ 142,861 100 % $ 490,414 100 % $ 435,137 100 % View source version on businesswire.com: https://www.businesswire.com/news/home/20230307005674/en/