EX-99.1 2 arloex99122q2earningsrelea.htm EX-99.1 Document

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NEWS RELEASE

Arlo Reports Second Quarter 2022 Results

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, California - August 9, 2022 - 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."

Page 1

Three Months EndedSix Months Ended
July 3, 2022April 3, 2022June 27, 2021July 3, 2022June 27, 2021
(in thousands, except percentage and per share data)
Revenue$118,979 $124,751 $98,571 $243,730 $181,127 
GAAP Gross Margin28.4 %26.9 %26.6 %27.6 %28.7 %
Non-GAAP Gross Margin (1)
29.5 %27.6 %27.9 %28.5 %29.9 %
GAAP Net Loss per Diluted Share$(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
RevenueNet 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.
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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.




Contact:

Arlo Investor Relations
Erik Bylin
investors@arlo.com
(510) 315-1004

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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.

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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

***Financial Tables Attached***
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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 
Inventories39,208 38,390 
Prepaid expenses and other current assets8,890 9,919 
Total current assets257,354 303,622 
Property and equipment, net7,478 9,595 
Operating lease right-of-use assets, net15,242 14,814 
Goodwill11,038 11,038 
Restricted cash4,125 4,107 
Other non-current assets4,441 4,314 
Total assets$299,678 $347,490 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$77,423 $84,098 
Deferred revenue13,445 29,442 
Accrued liabilities82,225 97,377 
Income tax payable138 12 
Total current liabilities173,231 210,929 
Non-current deferred revenue577 1,344 
Non-current operating lease liabilities21,469 21,470 
Non-current income taxes payable94 94 
Other non-current liabilities1,906 1,001 
Total liabilities197,277 234,838 
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 capital411,316 401,367 
Accumulated other comprehensive income(168)— 
Accumulated deficit(308,835)(288,799)
Total stockholders’ equity102,401 112,652 
Total liabilities and stockholders’ equity$299,678 $347,490 

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ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months EndedSix Months Ended
July 3,
2022		April 3, 2022June 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 $133,072 
Services32,788 29,926 25,260 62,714 48,055 
Total revenue118,979 124,751 98,571 243,730 181,127 
Cost of revenue:
Products73,829 80,777 62,019 154,606 109,176 
Services11,410 10,399 10,383 21,809 19,975 
Total cost of revenue85,239 91,176 72,402 176,415 129,151 
Gross profit33,740 33,575 26,169 67,315 51,976 
Gross margin28.4 %26.9 %26.6 %27.6 %28.7 %
Operating expenses:
Research and development17,402 16,379 16,251 33,781 31,042 
Sales and marketing14,506 13,168 12,459 27,674 23,666 
General and administrative13,149 12,621 13,559 25,770 24,786 
Impairment charges— — 9,116 — 9,116 
Separation expense25 79 605 104 659 
Total operating expenses45,082 42,247 51,990 87,329 89,269 
Loss from operations(11,342)(8,672)(25,821)(20,014)(37,293)
Operating margin(9.5)%(7.0)%(26.2)%(8.2)%(20.6)%
Interest income (expense), net129 (5)3 124 27 
Other income (expense), net(116)411 2,662 295 3,571 
Loss before income taxes(11,329)(8,266)(23,156)(19,595)(33,695)
Provision for income taxes228 213 164 441 344 
Net loss$(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:
Basic86,868 85,222 82,134 85,966 81,275 
Diluted86,868 85,222 82,134 85,966 81,275 

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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 expense21,834 19,949 
Impairment charges— 9,116 
Depreciation and amortization2,523 3,169 
Allowance for credit losses and inventory reserves(120)(1,085)
Deferred income taxes133 (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 investments9,512 20,000 
Net cash provided by (used in) investing activities(50,429)18,934 
Cash flows from financing activities:
Proceeds related to employee benefit plans3,171 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 period179,856 190,291 
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 
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ARLO TECHNOLOGIES, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
UNAUDITED STATEMENT OF OPERATIONS DATA:
Three Months EndedSix 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 
Services21,378 19,527 14,877 40,905 28,080 
Total GAAP gross profit33,740 33,575 26,169 67,315 51,976 
GAAP gross margin:
Products14.3 %14.8 %15.4 %14.6 %18.0 %
Services65.2 %65.3 %58.9 %65.2 %58.4 %
Total GAAP gross margin28.4 %26.9 %26.6 %27.6 %28.7 %
Stock-based compensation expense - Products1,148 855 1,289 2,003 2,163 
Stock-based compensation expense - Services187 55 — 242 — 
Non-GAAP gross profit:
Products13,510 14,903 12,581 28,413 26,059 
Services21,565 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:
Products15.7 %15.7 %17.2 %15.7 %19.6 %
Services65.8 %65.4 %58.9 %65.6 %58.4 %
Total Non-GAAP gross margin29.5 %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 

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ARLO TECHNOLOGIES, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)
UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED):
Three Months EndedSix 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 expense25 79 605 104 659 
Stock-based compensation expense12,245 9,589 11,609 21,834 19,949 
Impairment charges— — 9,116 — 9,116 
Litigation reserves, net65 47 157 112 167 
Non-GAAP operating income (loss)$993 $1,043 $(4,334)$2,036 $(7,402)
Non-GAAP operating margin0.8 %0.8 %(4.4)%0.8 %(4.1)%
GAAP other income (expense), net$(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 rate23.3 %15.1 %(4.7)%18.5 %(6.1)%

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ARLO TECHNOLOGIES, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)
UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED):
Three Months EndedSix 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 expense25 79 605 104 659 
Stock-based compensation expense12,245 9,589 11,609 21,834 19,949 
Impairment charges— — 9,116 — 9,116 
Litigation reserves, net65 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 expense0.14 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) - basic86,868 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 

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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 outstanding57 58 50 62 48 
Inventories$39,208 $37,038 $38,390 $39,769 $43,155 
Inventory turns7.5 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 channel7.4 10.5 8.5 8.0 12.5 
APAC distribution channel9.8 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 
Headcount354 358 353 346 349 
Non-GAAP diluted shares91,787 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.

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REVENUE BY GEOGRAPHY
Three Months EndedSix 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 %
EMEA54,483 46 %49,975 40 %25,101 25 %104,458 43 %49,692 27 %
APAC4,151 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 %

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