Arlo Reports Second Quarter 2022 Results

Rhea-AI Summary

Arlo Technologies reported strong Q2 financial results, with a revenue of $119 million, a 20.7% year-over-year increase, surpassing guidance. The company achieved a record GAAP gross profit of $33.7 million, marking a 28.9% increase year-over-year. Non-GAAP gross profit also reached a record $35.1 million, up 27.7% year-over-year. Cumulative paid accounts grew 113% year-over-year, exceeding 1.5 million. Despite a GAAP operating loss of $11.3 million, Arlo reported a non-GAAP operating profit of $1 million for the third consecutive quarter.

Positive

• Record revenue of $119 million in Q2, up 20.7% year-over-year.
• Record GAAP gross profit of $33.7 million, a 28.9% increase year-over-year.
• Non-GAAP gross profit reached $35.1 million, a record for the company.
• 113% year-over-year growth in cumulative paid accounts, surpassing 1.5 million.
• Non-GAAP operating profit of $1 million, marking the third consecutive quarter of profitability.

Negative

• GAAP operating loss of $11.3 million.

Q2 ARR ended at $117 million, growing 67% year over year

Revenue Growth of 20.7% year over year, exceeding high-end of Guidance for the Quarter

Record GAAP gross profit of $33.7 million, record non-GAAP gross profit of $35.1 million

113% Year over Year growth in Cumulative Paid Accounts, surpassing 1.5 million in July

Delivered GAAP operating loss of $11.3 million, third consecutive quarter of non-GAAP Operating Profit of $1.0 million

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

Financial Highlights ⁽¹⁾

• Record revenue for any second fiscal quarter of $119.0 million, an increase of 20.7% year over year.

• GAAP gross profit of $33.7 million, an increase of 28.9% year over year; non-GAAP gross profit of $35.1 million, an increase of 27.7% year over year and an all-time record for the company.

• GAAP gross margin of 28.4%; non-GAAP gross margin of 29.5%.

• GAAP operating loss of $11.3 million, a decrease of $14.5 million year over year; non-GAAP operating profit of $1.0 million, an increase of $5.3 million year over year and the third consecutive quarter of non-GAAP operating profitability.

• GAAP net loss per diluted share of $(0.13); non-GAAP net income per diluted share of $0.01.

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

		Three Months Ended												Six Months Ended
		July 3, 2022				April 3, 2022				June 27, 2021				July 3, 2022				June 27, 2021
		(in thousands, except percentage and per share data)
Revenue		$	118,979			$	124,751			$	98,571			$	243,730			$	181,127
GAAP Gross Margin			28.4	%			26.9	%			26.6	%			27.6	%			28.7	%
Non-GAAP Gross Margin (1)			29.5	%			27.6	%			27.9	%			28.5	%			29.9	%
GAAP Net Loss per Diluted Share		$	(0.13	)		$	(0.10	)		$	(0.28	)		$	(0.23	)		$	(0.42	)
Non-GAAP Net Income (Loss) per Diluted Share (1)		$	0.01			$	0.01			$	(0.04	)		$	0.02			$	(0.07	)

_________________________

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

Financial and Business Highlights

• Record Q2 service revenue of $32.8 million, for growth of 29.8% year over year.
• Ended Q2 with ARR of $116.6 million, growing 67.2% year over year. ⁽²⁾
• GAAP service gross margin of 65.2%. Non-GAAP service gross margin of 65.8% in Q2 which is a record for Arlo as a standalone company. ⁽¹⁾
• Added a record 206,000 paid accounts in Q2, a sequential increase of 0.5% over Q1, and a year over year increase of 41.1%.
• Our Go 2 LTE/Wi-Fi camera won the Editor’s Choice Award at PCMag.

_________________________

(1)	Reconciliation of financial measures computed on a GAAP basis to the most directly comparable financial measures computed on a non-GAAP basis is provided at the end of this press release.
(2)	ARR is calculated by taking our recurring paid service revenue for the last calendar month in the fiscal quarter, multiplied by 12 months. Recurring paid service revenue represents the revenue we recognized from our paid accounts and excludes prepaid service revenue and non-recurring engineering (NRE) service revenue from strategic partners.

Third Quarter 2022 Business Outlook ⁽³⁾

• Revenue of $125.0 million to $135.0 million.

• GAAP net loss per diluted share of $(0.28) to $(0.21), and non-GAAP net loss per diluted share of $(0.17) to $(0.10).

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

		Three Months Ending October 2, 2022
		Revenue		Net Loss per Diluted Share
		(in millions, except per share data)
GAAP		$125.0 - $135.0		$(0.28) - $(0.21)
Estimated adjustments for (3):
Stock-based compensation expense		—		0.11
Tax effects of non-GAAP adjustments		—		—
Non-GAAP		$125.0 - $135.0		$(0.17) - $(0.10)

_________________________

(3)

Business outlook does not include estimates for any currently unknown income and expense items which, by their nature, could arise late in a quarter, including: litigation reserves, net; acquisition-related charges; impairment charges; discrete tax benefits or detriments relating to tax windfalls or shortfalls from equity awards; and any additional impacts relating to the implementation of U.S. tax reform. New material income and expense items such as these could have a significant effect on our guidance and future results.

Investor Conference Call / Webcast Details

Arlo will review the second quarter of 2022 results and discuss management’s expectations for the third quarter of 2022 today, Tuesday, August 9, 2022 at 5:00 p.m. ET (2:00 p.m. PT). The toll-free dial-in number for the live audio call is (888) 660-6387. The international dial-in number for the live audio call is +1 (929) 203-1909. The conference ID for the call is 7749064. A live webcast of the conference call will be available on Arlo’s Investor Relations website at https://investor.arlo.com. A replay of the call will be available via the web at https://investor.arlo.com.

About Arlo Technologies, Inc.

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

With a mission to bring users peace of mind, Arlo is as passionate about protecting user privacy as it is about safeguarding homes and families. Arlo is committed to supporting industry standards for data protection designed to keep users' personal information private and in their control. Arlo does not monetize personal data, provides enhanced controls for user data, supports privacy legislation, keeps user data safely secure, and puts security at the forefront of company culture.

© 2022 Arlo Technologies, Inc., Arlo and the Arlo logo are trademarks and/or registered trademarks of Arlo Technologies, Inc. and/or certain of its affiliates in the United States and/or other countries. Other brand and product names are for identification purposes only and may be trademarks or registered trademarks of their respective holder(s). The information contained herein is subject to change without notice. Arlo shall not be liable for technical or editorial errors or omissions contained herein. All rights reserved.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. The words “anticipate,” “expect,” “believe,” “will,” “may,” “should,” “estimate,” “project,” “outlook,” “forecast” or other similar words are used to identify such forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. The forward-looking statements represent Arlo Technologies, Inc.’s (the "Company") expectations or beliefs concerning future events based on information available at the time such statements were made and include statements regarding its potential future business, operating performance and financial condition, including descriptions of its expected revenue, GAAP and non-GAAP gross margins, operating margins, tax rates, expenses, and cash outlook; the deployment of elements of the Company’s long-range plan in the second half of 2022; the commencement of the deployment of the brand awareness advertising campaign and the targeting thereof; the expansion of the Company’s product portfolio with Arlo Safe and the new security system, the timing of availability thereof and the potential to provide opportunities for new subscription and increased ARPU; and the broadening of routes to market and continued relationships with Verisure, Calix, Verizon, and T-Mobile. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: deployment of elements of the Company’s long-range plans may be delayed or may not occur; the deployment of the brand awareness advertising campaign may be delayed or may not occur and the risk that it may not drive incremental paid accounts; the expansion of the Company’s product portfolio with Arlo Safe and the new security system may not materialize; routes to market may not materialize or prove as successful as anticipated; the relationships with Verisure, Calix, Verizon, and T-Mobile may deteriorate; future demand for the Company's products may be lower than anticipated; the Company may be unsuccessful in developing and expanding its sales and marketing capabilities; the COVID-19 pandemic could continue to have an adverse impact on the Company's business, operations and the markets and communities in which the Company and its partners and customers operate; and the actions and financial health of the Company's customers. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Further information on potential risk factors that could affect the Company and its business are detailed in the Company's periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled “Risk Factors” in the Company's most recently filed Annual Report and Quarterly Report filed with the Securities and Exchange Commission (the “SEC”) and subsequent filings with the SEC. Given these circumstances, you should not place undue reliance on these forward-looking statements. The Company undertakes no obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Non-GAAP Financial Information:

To supplement our unaudited selected financial data presented on a basis consistent with U.S. Generally Accepted Accounting Principles (“GAAP”), we disclose certain non-GAAP financial measures that exclude certain charges, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development, non-GAAP sales and marketing, non-GAAP general and administrative, non-GAAP total operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP other income (expenses), net, non-GAAP provision for income taxes, non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share. These supplemental measures exclude adjustments for separation expense, stock-based compensation expense, litigation reserves, employee retention credit and the related tax effects. These non-GAAP measures are not in accordance with or an alternative for GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance.

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

– the ability to make more meaningful period-to-period comparisons of our on-going operating results;
– the ability to better identify trends in our underlying business and perform related trend analyses;
– a better understanding of how management plans and measures our underlying business; and
– an easier way to compare our operating results against analyst financial models and operating results of competitors that supplement their GAAP results with non-GAAP financial measures.

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

Separation expense consists of expenses that are related to the separation of our business from NETGEAR. These consist primarily of costs of legal and professional services for IPO-related litigation associated with our separation from NETGEAR. We consider our operating results without these charges when evaluating our ongoing performance and forecasting our earnings trends, and therefore exclude such charges when presenting non-GAAP financial measures. We believe that the assessment of our operations excluding these costs is relevant to our assessment of internal operations and comparisons to the performance of our competitors.

Stock-based compensation expense consists of non-cash charges for the estimated fair value of stock options, performance-based stock options, restricted stock units, performance-based restricted stock units, shares under the employee stock purchase plan granted to employees and employees' annual bonus in RSU form. We believe that the exclusion of these charges provides for more accurate comparisons of our operating results to peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, we believe it is useful to investors to understand the specific impact stock-based compensation expense has on our operating results.

Other items are the result of either unique or unplanned events, including, when applicable: litigation reserves, net and employee retention credit. It is difficult to predict the occurrence or estimate the amount or timing of these items in advance. Although these events are reflected in our GAAP financial statements, these unique transactions may limit the comparability of our on-going operations with prior and future periods. The amounts result from events that often arise from unforeseen circumstances, which often occur outside of the ordinary course of continuing operations. Therefore, the amounts do not accurately reflect the underlying performance of our continuing business operations for the period in which they are incurred.

Tax effects consist of the various above adjustments that we incorporate into non-GAAP measures in order to provide a more meaningful measure on non-GAAP net income. We also believe providing financial information with and without the income tax effects relating to our non-GAAP financial measures provides our management and users of the financial statements with better clarity regarding the on-going performance of our business.

Source: Arlo-F

ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
		As of
		July 3, 2022				December 31, 2021
		(In thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents		$	85,537			$	175,749
Short-term investments (amortized cost of $49,901 and $—)			49,721				—
Accounts receivable, net (net of allowance for credit losses of $405 and $337)			73,998				79,564
Inventories			39,208				38,390
Prepaid expenses and other current assets			8,890				9,919
Total current assets			257,354				303,622
Property and equipment, net			7,478				9,595
Operating lease right-of-use assets, net			15,242				14,814
Goodwill			11,038				11,038
Restricted cash			4,125				4,107
Other non-current assets			4,441				4,314
Total assets		$	299,678			$	347,490
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	77,423			$	84,098
Deferred revenue			13,445				29,442
Accrued liabilities			82,225				97,377
Income tax payable			138				12
Total current liabilities			173,231				210,929
Non-current deferred revenue			577				1,344
Non-current operating lease liabilities			21,469				21,470
Non-current income taxes payable			94				94
Other non-current liabilities			1,906				1,001
Total liabilities			197,277				234,838
Stockholders’ Equity:
Preferred stock: $0.001 par value; 50,000,000 shares authorized; none issued or outstanding			—				—
Common stock: : $0.001 par value; 500,000,000 shares authorized; shares issued and outstanding: 87,529,758 at July 3, 2022 and 84,453,212 at December 31, 2021			88				84
Additional paid-in capital			411,316				401,367
Accumulated other comprehensive income			(168	)			—
Accumulated deficit			(308,835	)			(288,799	)
Total stockholders’ equity			102,401				112,652
Total liabilities and stockholders’ equity		$	299,678			$	347,490

ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		Three Months Ended												Six Months Ended
		July 3, 2022				April 3, 2022				June 27, 2021				July 3, 2022				June 27, 2021
		(in thousands, except percentage and per share data)
Revenue:
Products		$	86,191			$	94,825			$	73,311			$	181,016			$	133,072
Services			32,788				29,926				25,260				62,714				48,055
Total revenue			118,979				124,751				98,571				243,730				181,127
Cost of revenue:
Products			73,829				80,777				62,019				154,606				109,176
Services			11,410				10,399				10,383				21,809				19,975
Total cost of revenue			85,239				91,176				72,402				176,415				129,151
Gross profit			33,740				33,575				26,169				67,315				51,976
Gross margin			28.4	%			26.9	%			26.6	%			27.6	%			28.7	%
Operating expenses:
Research and development			17,402				16,379				16,251				33,781				31,042
Sales and marketing			14,506				13,168				12,459				27,674				23,666
General and administrative			13,149				12,621				13,559				25,770				24,786
Impairment charges			—				—				9,116				—				9,116
Separation expense			25				79				605				104				659
Total operating expenses			45,082				42,247				51,990				87,329				89,269
Loss from operations			(11,342	)			(8,672	)			(25,821	)			(20,014	)			(37,293	)
Operating margin			(9.5	) %			(7.0	) %			(26.2	) %			(8.2	) %			(20.6	) %
Interest income (expense), net			129				(5	)			3				124				27
Other income (expense), net			(116	)			411				2,662				295				3,571
Loss before income taxes			(11,329	)			(8,266	)			(23,156	)			(19,595	)			(33,695	)
Provision for income taxes			228				213				164				441				344
Net loss		$	(11,557	)		$	(8,479	)		$	(23,320	)		$	(20,036	)		$	(34,039	)
Net loss per share:
Basic		$	(0.13	)		$	(0.10	)		$	(0.28	)		$	(0.23	)		$	(0.42	)
Diluted		$	(0.13	)		$	(0.10	)		$	(0.28	)		$	(0.23	)		$	(0.42	)
Weighted average shares used to compute net loss per share:
Basic			86,868				85,222				82,134				85,966				81,275
Diluted			86,868				85,222				82,134				85,966				81,275

ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		Six Months Ended
		July 3, 2022				June 27, 2021
		(In thousands)
Cash flows from operating activities:
Net loss		$	(20,036	)		$	(34,039	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense			21,834				19,949
Impairment charges			—				9,116
Depreciation and amortization			2,523				3,169
Allowance for credit losses and inventory reserves			(120	)			(1,085	)
Deferred income taxes			133				(115	)
Premium amortization (discount accretion) on investments, net			89				(3	)
Changes in assets and liabilities:
Accounts receivable, net			5,498				25,736
Inventories			(628	)			22,652
Prepaid expenses and other assets			767				(4,782	)
Accounts payable			(6,565	)			(19,189	)
Deferred revenue			(16,763	)			(18,802	)
Accrued and other liabilities			(16,113	)			(26,073	)
Net cash used in operating activities			(29,381	)			(23,466	)
Cash flows from investing activities:
Purchases of property and equipment			(451	)			(1,066	)
Purchases of short-term investments			(59,490	)			—
Proceeds from maturities of short-term investments			9,512				20,000
Net cash provided by (used in) investing activities			(50,429	)			18,934
Cash flows from financing activities:
Proceeds related to employee benefit plans			3,171				6,136
Restricted stock unit withholdings			(13,555	)			(9,084	)
Net cash used in financing activities			(10,384	)			(2,948	)
Net decrease in cash and cash equivalents and restricted cash			(90,194	)			(7,480	)
Cash and cash equivalents and restricted cash, at beginning of period			179,856				190,291
Cash and cash equivalents and restricted cash, at end of period		$	89,662			$	182,811
Non-cash investing and financing activities:
Purchases of property and equipment included in accounts payable and accrued liabilities		$	333			$	549

ARLO TECHNOLOGIES, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
UNAUDITED STATEMENT OF OPERATIONS DATA:
		Three Months Ended												Six Months Ended
		July 3, 2022				April 3, 2022				June 27, 2021				July 3, 2022				June 27, 2021
		(in thousands, except percentage data)
GAAP gross profit:
Products		$	12,362			$	14,048			$	11,292			$	26,410			$	23,896
Services			21,378				19,527				14,877				40,905				28,080
Total GAAP gross profit			33,740				33,575				26,169				67,315				51,976
GAAP gross margin:
Products			14.3	%			14.8	%			15.4	%			14.6	%			18.0	%
Services			65.2	%			65.3	%			58.9	%			65.2	%			58.4	%
Total GAAP gross margin			28.4	%			26.9	%			26.6	%			27.6	%			28.7	%
Stock-based compensation expense - Products			1,148				855				1,289				2,003				2,163
Stock-based compensation expense - Services			187				55				—				242				—
Non-GAAP gross profit:
Products			13,510				14,903				12,581				28,413				26,059
Services			21,565				19,582				14,877				41,147				28,080
Total Non-GAAP gross profit		$	35,075			$	34,485			$	27,458			$	69,560			$	54,139
Non-GAAP gross margin:
Products			15.7	%			15.7	%			17.2	%			15.7	%			19.6	%
Services			65.8	%			65.4	%			58.9	%			65.6	%			58.4	%
Total Non-GAAP gross margin			29.5	%			27.6	%			27.9	%			28.5	%			29.9	%
GAAP research and development		$	17,402			$	16,379			$	16,251			$	33,781			$	31,042
Stock-based compensation expense			(3,621	)			(2,302	)			(3,832	)			(5,923	)			(6,388	)
Non-GAAP research and development		$	13,781			$	14,077			$	12,419			$	27,858			$	24,654
GAAP sales and marketing		$	14,506			$	13,168			$	12,459			$	27,674			$	23,666
Stock-based compensation expense			(1,790	)			(1,380	)			(1,638	)			(3,170	)			(2,828	)
Non-GAAP sales and marketing		$	12,716			$	11,788			$	10,821			$	24,504			$	20,838
GAAP general and administrative		$	13,149			$	12,621			$	13,559			$	25,770			$	24,786
Stock-based compensation expense			(5,499	)			(4,997	)			(4,850	)			(10,496	)			(8,570	)
Litigation reserves, net			(65	)			(47	)			(157	)			(112	)			(167	)
Non-GAAP general and administrative		$	7,585			$	7,577			$	8,552			$	15,162			$	16,049

ARLO TECHNOLOGIES, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)
UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED):
		Three Months Ended												Six Months Ended
		July 3, 2022				April 3, 2022				June 27, 2021				July 3, 2022				June 27, 2021
		(in thousands, except percentage and per share data)
GAAP total operating expenses		$	45,082			$	42,247			$	51,990			$	87,329			$	89,269
Separation expense			(25	)			(79	)			(605	)			(104	)			(659	)
Stock-based compensation expense			(10,910	)			(8,679	)			(10,320	)			(19,589	)			(17,786	)
Impairment charges			—				—				(9,116	)			—				(9,116	)
Litigation reserves, net			(65	)			(47	)			(157	)			(112	)			(167	)
Non-GAAP total operating expenses		$	34,082			$	33,442			$	31,792			$	67,524			$	61,541
GAAP operating loss		$	(11,342	)		$	(8,672	)		$	(25,821	)		$	(20,014	)		$	(37,293	)
GAAP operating margin			(9.5	) %			(7.0	) %			(26.2	) %			(8.2	) %			(20.6	) %
Separation expense			25				79				605				104				659
Stock-based compensation expense			12,245				9,589				11,609				21,834				19,949
Impairment charges			—				—				9,116				—				9,116
Litigation reserves, net			65				47				157				112				167
Non-GAAP operating income (loss)		$	993			$	1,043			$	(4,334	)		$	2,036			$	(7,402	)
Non-GAAP operating margin			0.8	%			0.8	%			(4.4	) %			0.8	%			(4.1	) %
GAAP other income (expense), net		$	(116	)		$	411			$	2,662			$	295			$	3,571
Employee Retention Credit			(26	)			(39	)			(1,811	)			(65	)			(1,811	)
Non-GAAP other income (expense), net		$	(142	)		$	372			$	851			$	230			$	1,760
GAAP provision for income taxes		$	228			$	213			$	164			$	441			$	344
GAAP income tax rate			(2.0	) %			(2.6	) %			(0.7	) %			(2.3	) %			(1.0	) %
Tax effects			—				—				—				—				—
Non-GAAP provision for income taxes		$	228			$	213			$	164			$	441			$	344
Non-GAAP income tax rate			23.3	%			15.1	%			(4.7	) %			18.5	%			(6.1	) %

ARLO TECHNOLOGIES, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)
UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED):
		Three Months Ended												Six Months Ended
		July 3, 2022				April 3, 2022				June 27, 2021				July 3, 2022				June 27, 2021
		(in thousands, except percentage and per share data)
GAAP net loss		$	(11,557	)		$	(8,479	)		$	(23,320	)		$	(20,036	)		$	(34,039	)
Separation expense			25				79				605				104				659
Stock-based compensation expense			12,245				9,589				11,609				21,834				19,949
Impairment charges			—				—				9,116				—				9,116
Litigation reserves, net			65				47				157				112				167
Employee Retention Credit			(26	)			(39	)			(1,811	)			(65	)			(1,811	)
Tax effects			—				—				—				—				—
Non-GAAP net income (loss)		$	752			$	1,197			$	(3,644	)		$	1,949			$	(5,959	)
NET LOSS PER SHARE - BASIC AND DILUTED:
GAAP net loss per share - basic and diluted		$	(0.13	)		$	(0.10	)		$	(0.28	)		$	(0.23	)		$	(0.42	)
Separation expense			—				—				0.01				—				0.01
Stock-based compensation expense			0.14				0.11				0.14				0.25				0.25
Impairment charges			—				—				0.11				—				0.11
Tax effects			—				—				—				—				—
Employee Retention Credit			—				—				(0.02	)			—				(0.02	)
Non-GAAP net income (loss) - diluted		$	0.01			$	0.01			$	(0.04	)		$	0.02			$	(0.07	)
Shares used in computing GAAP net income (loss) - basic			86,868				85,222				82,134				85,966				81,275
Shares used in computing non-GAAP net income (loss) - diluted			91,787				93,135				82,134				92,687				81,275

ARLO TECHNOLOGIES, INC.
UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION
		Three Months Ended
		July 3, 2022			April 3, 2022			December 31, 2021			October 3, 2021			June 27, 2021
		(in thousands, except headcount and per share data)
Cash, cash equivalents and short-term investments		$	135,258		$	145,541		$	175,749		$	166,057		$	178,698
Cash, cash equivalents and short-term investments per diluted share		$	1.47		$	1.56		$	1.94		$	1.98		$	2.18
Accounts receivable, net		$	73,998		$	78,054		$	79,564		$	70,124		$	51,890
Days sales outstanding			57			58			50			62			48
Inventories		$	39,208		$	37,038		$	38,390		$	39,769		$	43,155
Inventory turns			7.5			8.7			10.5			7.6			5.7
Weeks of channel inventory:
U.S. retail channel			11.9			15.8			7.0			14.0			8.0
U.S. distribution channel			7.4			10.5			8.5			8.0			12.5
APAC distribution channel			9.8			18.1			8.9			10.2			8.6
Deferred revenue (current and non-current)		$	14,022		$	17,375		$	30,786		$	41,686		$	50,903
Cumulative registered accounts (1)			6,640			6,389			6,131			5,822			5,527
Cumulative paid accounts (2)			1,478			1,272			1,067			877			695
Annual recurring revenue (ARR) (3)		$	116,601		$	101,341		$	90,100		$	80,400		$	69,753
Headcount			354			358			353			346			349
Non-GAAP diluted shares			91,787			93,135			90,679			83,809			82,134

_________________________

(1)	We define our registered accounts at the end of a particular period as the number of unique registered accounts on the Arlo platform as of the end of such particular period, and includes accounts owned by Verisure. The number of registered accounts does not necessarily reflect the number of end-users on the Arlo platform, as one registered account may be used by multiple people.
(2)	Paid accounts worldwide measured as any account where a subscription to a paid service is being collected (either by the Company or by the Company’s customers or channel partners), plus paid service plans of a duration of more than 3 months bundled with products (such bundles being counted as a paid account after 90 days have elapsed from the date of registration). Paid accounts includes accounts transferred to Verisure.
(3)	Effective as of the third quarter of 2021, we adopted ARR as one of the key indicators of our business performance. ARR represents the amount of paid service revenue that we expect to recur annually and is calculated by taking our recurring paid service revenue for the last calendar month in the fiscal quarter, multiplied by 12 months. Recurring paid service revenue represents the revenue we recognize from our paid accounts and excludes prepaid service revenue, and NRE service revenue from strategic partners. The ARR for the comparative periods presented was derived following the same methodology. ARR is a performance metric and should be viewed independently of revenue and deferred revenue, and is not intended to be a substitute for, or combined with, any of these items.

REVENUE BY GEOGRAPHY
		Three Months Ended																		Six Months Ended
		July 3, 2022						April 3, 2022						June 27, 2021						July 3, 2022						June 27, 2021
		(in thousands, except percentage data)
Americas		$	60,345		51	%		$	68,466		55	%		$	66,681		68	%		$	128,811		53	%		$	116,317		65	%
EMEA			54,483		46	%			49,975		40	%			25,101		25	%			104,458		43	%			49,692		27	%
APAC			4,151		3	%			6,310		5	%			6,789		7	%			10,461		4	%			15,118		8	%
Total		$	118,979		100	%		$	124,751		100	%		$	98,571		100	%		$	243,730		100	%		$	181,127		100	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220809005503/en/

Arlo Investor Relations

Erik Bylin

investors@arlo.com

(510) 315-1004

Source: Arlo Technologies, Inc.

FAQ

What were the Q2 2022 revenue figures for Arlo Technologies (ARLO)?

Arlo Technologies reported a Q2 2022 revenue of $119 million, which is a 20.7% increase year-over-year.

How did Arlo Technologies' gross profit perform in Q2 2022?

In Q2 2022, Arlo Technologies achieved a record GAAP gross profit of $33.7 million, up 28.9% year-over-year.

What was Arlo Technologies' non-GAAP operating profit in Q2 2022?

Arlo Technologies reported a non-GAAP operating profit of $1 million in Q2 2022, making it the third consecutive quarter of profitability.

How many paid accounts did Arlo Technologies add in Q2 2022?

Arlo Technologies added a record 206,000 paid accounts in Q2 2022, representing a 41.1% year-over-year increase.

What is the outlook for Arlo Technologies in Q3 2022?

Arlo Technologies expects Q3 2022 revenue to range between $125 million and $135 million, with a GAAP net loss per diluted share estimated between $(0.28) and $(0.21).