arlo-20231001

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 October 1, 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 94,628,607 as of November 3, 2023.

Table of Contents

Arlo Technologies, Inc.

Form 10-Q

For the Quarterly Period Ended October 1, 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	33
Item 4.	Controls and Procedures	33

PART II: OTHER INFORMATION

Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
Signatures		36

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1.Financial Statements

ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


	As of
	October 1, 2023		December 31, 2022
	(In thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	51,133	$	84,024
Short-term investments	74,916		29,700
Accounts receivable, net	70,313		65,960
Inventories	53,496		46,554
Prepaid expenses and other current assets	11,100		6,544
Total current assets	260,958		232,782
Property and equipment, net	5,752		7,336
Operating lease right-of-use assets, net	12,190		12,809
Goodwill	11,038		11,038
Restricted cash	4,079		4,155
Other non-current assets	3,620		4,081
Total assets	$	297,637	$	272,201
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	82,479	$	52,132
Deferred revenue	17,678		11,291
Accrued liabilities	85,999		98,855
Total current liabilities	186,156		162,278
Non-current operating lease liabilities	17,970		19,279
Other non-current liabilities	3,318		2,949
Total liabilities	207,444		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: 94,581,808 at October 1, 2023 and 88,887,139 at December 31, 2022	94		89
Additional paid-in capital	458,015		433,138
Accumulated other comprehensive income (loss)	237		(107)
Accumulated deficit	(368,153)		(345,425)
Total stockholders’ equity	90,193		87,695
Total liabilities and stockholders’ equity	$	297,637	$	272,201

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

Table of Contents

ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS


	Three Months Ended				Nine Months Ended
	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
	(In thousands, except per share data)
Revenue:
Products	$	78,961	$	92,720	$	210,770	$	273,736
Services	51,042		35,437		145,313		98,151
Total revenue	130,003		128,157		356,083		371,887
Cost of revenue:
Products	73,335		79,386		197,520		233,992
Services	13,529		12,021		38,349		33,830
Total cost of revenue	86,864		91,407		235,869		267,822
Gross profit	43,139		36,750		120,214		104,065

Operating expenses:
Research and development	16,829		16,471		52,197		50,252
Sales and marketing	15,863		22,193		48,137		49,867
General and administrative	12,460		12,253		43,089		38,023
Others	263		273		1,236		377
Total operating expenses	45,415		51,190		144,659		138,519

Loss from operations	(2,276)		(14,440)		(24,445)		(34,454)
Interest income, net	1,175		290		2,736		414
Other income, net	10		19		23		314
Loss before income taxes	(1,091)		(14,131)		(21,686)		(33,726)
Provision for income taxes	29		304		1,042		745
Net loss	$	(1,120)	$	(14,435)	$	(22,728)	$	(34,471)

Net loss per share:
Basic and diluted	$	(0.01)	$	(0.16)	$	(0.25)	$	(0.40)

Weighted average shares used to compute net loss per share:
Basic and diluted	94,243		88,124		92,069		86,677


Comprehensive loss:
Net loss	$	(1,120)	$	(14,435)	$	(22,728)	$	(34,471)
Other comprehensive income (loss), net of tax	85		(56)		344		(224)
Total comprehensive loss	$	(1,035)	$	(14,491)	$	(22,384)	$	(34,695)

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				Nine Months Ended
	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
	(In thousands)
Total stockholders’ equity, beginning balances	$	81,756	$	102,401	$	87,695	$	112,652

Common stock:
Beginning balances	$	94	$	88	$	89	$	84
Issuance of common stock under stock-based compensation plans	1		1		8		6

Restricted stock unit withholdings	(1)		(1)		(3)		(2)
Ending balances	$	94	$	88	$	94	$	88

Additional paid-in capital:
Beginning balances	$	448,543	$	411,316	$	433,138	$	401,367
Stock-based compensation expense	8,021		9,953		28,643		25,228
Settlement of liability classified restricted stock units	6,741		3,669		13,480		8,731
Issuance of common stock under stock-based compensation plans	681		—		3,667		1,419
Issuance of common stock under Employee Stock Purchase Plan	—		—		1,617		1,746
Restricted stock unit withholdings	(5,971)		(4,211)		(22,530)		(17,764)
Ending balances	$	458,015	$	420,727	$	458,015	$	420,727

Accumulated deficit:
Beginning balances	$	(367,033)	$	(308,835)	$	(345,425)	$	(288,799)
Net loss	(1,120)		(14,435)		(22,728)		(34,471)
Ending balances	$	(368,153)	$	(323,270)	$	(368,153)	$	(323,270)

Accumulated other comprehensive income (loss):
Beginning balances	$	152	$	(168)	$	(107)	$	—
Other comprehensive income (loss), net of tax	85		(56)		344		(224)
Ending balances	$	237	$	(224)	$	237	$	(224)

Total stockholders’ equity, ending balances	$	90,193	$	97,321	$	90,193	$	97,321

Common stock shares:
Beginning balances	93,654		87,530		88,887		84,453
Issuance of common stock under stock-based compensation plans	1,488		1,464		8,629		5,885
Issuance of common stock under Employee Stock Purchase Plan	—		—		460		304
Restricted stock unit withholdings	(560)		(584)		(3,394)		(2,232)
Ending balances	94,582		88,410		94,582		88,410

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


	Nine Months Ended
	October 1, 2023		October 2, 2022
	(In thousands)
Cash flows from operating activities:
Net loss	$	(22,728)	$	(34,471)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock-based compensation expense	37,851		31,787
Depreciation and amortization	3,809		3,653
Allowance for credit losses and inventory reserves	1,218		(211)
Deferred income taxes	257		259
Others	(1,224)		39
Changes in assets and liabilities:
Accounts receivable, net	(4,262)		(3,171)
Inventories	(8,250)		(34,613)
Prepaid expenses and other assets	(4,353)		(105)
Accounts payable	31,049		23,229
Deferred revenue	6,202		(18,544)
Accrued and other liabilities	(9,202)		(2,635)
Net cash provided by (used in) operating activities	30,367		(34,783)
Cash flows from investing activities:
Purchases of property and equipment	(2,448)		(815)
Purchases of short-term investments	(110,905)		(69,305)
Proceeds from maturities of short-term investments	67,259		24,542
Net cash used in investing activities	(46,094)		(45,578)
Cash flows from financing activities:
Proceeds related to employee benefit plans	5,293		3,172
Restricted stock unit withholdings	(22,533)		(17,766)
Net cash used in financing activities	(17,240)		(14,594)
Net decrease in cash, cash equivalents, and restricted cash	(32,967)		(94,955)
Cash, cash equivalents, and restricted cash, at beginning of period	88,179		179,856
Cash, cash equivalents, and restricted cash, at end of period	$	55,212	$	84,901
Reconciliation of cash, cash equivalents, and restricted cash to Unaudited Condensed Consolidated Balance Sheets
Cash and cash equivalents	$	51,133	$	80,773
Restricted cash	4,079		4,128
Total cash, cash equivalents, and restricted cash	$	55,212	$	84,901
Supplemental cash flow information:
Non-cash investing activities:
Purchases of property and equipment included in accounts payable and accrued liabilities	$	726	$	209

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 platfor

SEC Form 10-Q filed by Arlo Technologies Inc.