arlo-20230402

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 2, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-38618

ARLO TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


Delaware		38-4061754
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

2200 Faraday Ave.,	Suite #150
Carlsbad,	California	92008
(Address of principal executive offices)		(Zip Code)

(408) 890-3900

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

ARLO

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer

☐

Accelerated filer

☒

Non-Accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The number of outstanding shares of the registrant’s Common Stock, $0.001 par value, was 91,841,900 as of May 5, 2023.

Table of Contents

Arlo Technologies, Inc.

Form 10-Q

For the Quarterly Period Ended April 2, 2023

TABLE OF CONTENTS


PART I: FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets	3
	Unaudited Condensed Consolidated Statements of Comprehensive Loss	4
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity	5
	Unaudited Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

PART II: OTHER INFORMATION

Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 6.	Exhibits	33
Signatures		34

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1.Financial Statements

ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


	As of
	April 2, 2023		December 31, 2022
	(In thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	66,970	$	84,024
Short-term investments	51,703		29,700
Accounts receivable, net	52,837		65,960
Inventories	39,922		46,554
Prepaid expenses and other current assets	7,415		6,544
Total current assets	218,847		232,782
Property and equipment, net	7,055		7,336
Operating lease right-of-use assets, net	11,985		12,809
Goodwill	11,038		11,038
Restricted cash	4,175		4,155
Other non-current assets	3,983		4,081
Total assets	$	257,083	$	272,201
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	46,031	$	52,132
Deferred revenue	15,175		11,291
Accrued liabilities	88,216		98,855
Total current liabilities	149,422		162,278
Non-current operating lease liabilities	18,168		19,279
Other non-current liabilities	3,242		2,949
Total liabilities	170,832		184,506
Commitments and contingencies (Note 8)
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: 90,785,158 at April 2, 2023 and 88,887,139 at December 31, 2022	91		89
Additional paid-in capital	445,809		433,138
Accumulated other comprehensive income (loss)	21		(107)
Accumulated deficit	(359,670)		(345,425)
Total stockholders’ equity	86,251		87,695
Total liabilities and stockholders’ equity	$	257,083	$	272,201

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS


	Three Months Ended
	April 2, 2023		April 3, 2022
	(In thousands, except per share data)
Revenue:
Products	$	67,060	$	94,825
Services	43,944		29,926
Total revenue	111,004		124,751
Cost of revenue:
Products	64,041		80,777
Services	11,746		10,399
Total cost of revenue	75,787		91,176
Gross profit	35,217		33,575

Operating expenses:
Research and development	17,750		16,379
Sales and marketing	15,353		13,168
General and administrative	15,622		12,621
Others	632		79
Total operating expenses	49,357		42,247

Loss from operations	(14,140)		(8,672)
Interest income (expense), net	726		(5)
Other income (expense), net	(39)		411
Loss before income taxes	(13,453)		(8,266)
Provision for income taxes	792		213
Net loss	$	(14,245)	$	(8,479)

Net loss per share:
Basic	$	(0.16)	$	(0.10)
Diluted	$	(0.16)	$	(0.10)
Weighted average shares used to compute net loss per share:
Basic	89,653		85,222
Diluted	89,653		85,222

Comprehensive loss:
Net loss	$	(14,245)	$	(8,479)
Other comprehensive income (loss), net of tax	128		(46)
Total comprehensive loss	$	(14,117)	$	(8,525)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


	Three Months Ended
	April 2, 2023		April 3, 2022
	(In thousands)
Total stockholders’ equity, beginning balances	$	87,695	$	112,652

Common stock:
Beginning balances	$	89	$	84
Issuance of common stock under stock-based compensation plans	3		3

Restricted stock unit withholdings	(1)		(1)
Ending balances	$	91	$	86

Additional paid-in capital:
Beginning balances	$	433,138	$	401,367
Stock-based compensation expense	10,270		8,183
Settlement of liability classified restricted stock units	6,739		4,966
Issuance of common stock under stock-based compensation plans	355		1,385

Restricted stock unit withholdings	(4,693)		(6,659)
Ending balances	$	445,809	$	409,242

Accumulated deficit:
Beginning balances	$	(345,425)	$	(288,799)
Net loss	(14,245)		(8,479)
Ending balances	$	(359,670)	$	(297,278)

Accumulated other comprehensive income (loss):
Beginning balances	$	(107)	$	—
Other comprehensive income (loss), net of tax	128		(46)
Ending balances	$	21	$	(46)

Total stockholders’ equity, ending balances	$	86,251	$	112,004

Common stock shares:
Beginning balances	88,887		84,453
Issuance of common stock under stock-based compensation plans	3,165		2,127

Restricted stock unit withholdings	(1,267)		(745)
Ending balances	90,785		85,835

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended
	April 2, 2023		April 3, 2022
	(In thousands)
Cash flows from operating activities:
Net loss	$	(14,245)	$	(8,479)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock-based compensation expense	14,591		9,589
Depreciation and amortization	1,149		1,302
Allowance for credit losses and inventory reserves	198		(135)
Deferred income taxes	127		(9)
Others	(124)		28
Changes in assets and liabilities:
Accounts receivable, net	13,216		1,508
Inventories	6,341		1,490
Prepaid expenses and other assets	(900)		556
Accounts payable	(6,093)		(15,676)
Deferred revenue	3,785		(13,411)
Accrued and other liabilities	(7,716)		(1,320)
Net cash provided by (used in) operating activities	10,329		(24,557)
Cash flows from investing activities:
Purchases of property and equipment	(923)		(298)
Purchases of short-term investments	(36,755)		(44,640)
Proceeds from maturities of short-term investments	15,006		—
Net cash used in investing activities	(22,672)		(44,938)
Cash flows from financing activities:
Proceeds related to employee benefit plans	3		1,388
Restricted stock unit withholdings	(4,694)		(6,660)
Net cash used in financing activities	(4,691)		(5,272)
Net decrease in cash, cash equivalents, and restricted cash	(17,034)		(74,767)
Cash, cash equivalents, and restricted cash, at beginning of period	88,179		179,856
Cash, cash equivalents, and restricted cash, at end of period	$	71,145	$	105,089
Reconciliation of cash, cash equivalents, and restricted cash to Unaudited Condensed Consolidated Balance Sheets
Cash and cash equivalents	$	66,970	$	100,975
Restricted cash	4,175		4,114
Total cash, cash equivalents, and restricted cash	$	71,145	$	105,089
Supplemental cash flow information:
Non-cash investing activities:
Purchases of property and equipment included in accounts payable and accrued liabilities	$	894	$	310

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Description of Business and Basis of Presentation

Description of Business

Arlo Technologies, Inc. (“Arlo”) combines an intelligent cloud infrastructure and mobile app with a variety of smart connected devices that transform the way people experience the connected lifestyle. Our 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. Our 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.

We conduct business across three geographic regions—(i) the Americas; (ii) Eur

SEC Form 10-Q filed by Arlo Technologies Inc.