Business Wire | Aug 5, 2020 04:06PM EDT

Arlo Reports Second Quarter 2020 Results

Aug. 05, 2020

SAN JOSE, Calif.--(BUSINESS WIRE)--Aug. 05, 2020--Arlo Technologies, Inc. (NYSE: ARLO), a leading internet-connected security camera brand, today reported financial results for the second quarter ended June 28, 2020.

Financial Highlights (1)

* Revenue of $66.6 million, a decrease of 20.3% year over year. * GAAP gross margin of 8.2%; non-GAAP gross margin of 9.6%. * GAAP net loss per diluted share of $(0.38); non-GAAP net loss per diluted share of $(0.31). * Cash, cash equivalents and short-term investments of $205.5 million and no debt at the end of Q2.

"I am extraordinarily proud of the team at Arlo for their remarkable execution in outperforming our expectations for the quarter, delivering top and bottom line results above the upper end of our guidance, despite supply and go-to-market challenges," said Matthew McRae, Chief Executive Officer of Arlo Technologies. "Importantly, our new business model that includes a free 90-day trial of Arlo Smart continues to show very strong conversion rates and once again we set records for registered accounts, paid accounts and service revenue. The launch of the Arlo Essential Spotlight Camera, the latest addition to our award-winning smart home security ecosystem, completes our transition to this new business model and addresses the fastest growing price segment in the market. I believe the second quarter marks an inflection point in our subscription business and expect this momentum to continue."

Three Months Ended Six Months Ended

June 28, March 29, June 30, June 28, June 30, 2020 2020 2019 2020 2019

(in thousands, except percentage and per share data)

Revenue $ 66,632 $ 65,450 $ 83,598 $ 132,082 $ 141,478

GAAP Gross 8.2 % 6.0 % 11.5 % 7.1 % 8.2 %Margin

Non-GAAP 9.6 % 7.4 % 12.5 % 8.5 % 9.3 %Gross Margin

GAAP NetIncome(Loss) per $ (0.38) $ (0.51) $ (0.45) $ (0.89) $ (1.01) DilutedShare

Non-GAAP NetIncome(Loss) per $ (0.31) $ (0.34) $ (0.36) $ (0.64) $ (0.83) DilutedShare

_________________________

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

Business Highlights

* Added a record 43,000 paid accounts in Q2, a sequential increase of 72% over Q1. * Cash, cash equivalents, and short term investments balance of $205.5 million and no debt at the end of Q2. * 59.4% year over year paid account growth in Q2. * Service revenue of $17.0 million for Q2, for growth of 52.7% year over year. * Announced an agreement with Securitas Security Services USA for integration of Arlo SmartCloud and our award winning cameras into their platform, enabling centralized, remote monitoring of their commercial assets and efficient deployment of their Remote Guarding services for their commercial clients. * Launched the all-new Arlo Essential Spotlight Camera, which features high definition video, two-way audio, an integrated spotlight, color night vision, and six months of battery life. The Essential Spotlight Camera can connect directly to a Wi-Fi network without the optional smart hub, providing users greater flexibility, and is also paired with a three month subscription to Arlo Smart.

Third Quarter 2020 Business Outlook (2)

* Revenue of $85.0 million to $95.0 million. * GAAP net loss per diluted share of $(0.41) to $(0.32), and non-GAAP net loss per diluted share of $(0.33) to $(0.24).

Due to the uncertainty presented by the ongoing COVID-19 pandemic Arlo has suspended providing full year guidance.

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

Three Months Ending September 27, 2020

Revenue Net Loss per Diluted Share

(in millions, except per share data)

GAAP $85.0 - $95.0 ($0.41) - ($0.32)

Estimated adjustments for ^(2):

Stock-based compensation expense - 0.08

Tax effects of non-GAAP adjustments - -

Non-GAAP $85.0 - $95.0 ($0.33) - ($0.24)

_________________________

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(2) 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 2020 results and discuss management's expectations for the third quarter of 2020 today, Wednesday, August 5, 2020 at 5:00 p.m. ET (2:00 p.m. PT). The toll free dial-in number for the live audio call is (866) 393-4306. The international dial-in number for the live audio call is (734) 385-2616. The conference ID for the call is 9584805. 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 (NYSE: 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 cameras, video doorbells and floodlight cameras.

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.

(c) 2020 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 expectations or beliefs concerning future events based on information available at the time such statements were made and include statements regarding: Arlo's future operating performance and financial condition, expected revenue, GAAP and non-GAAP gross margins, operating margins, and tax expense; expectations regarding market expansion and future growth; plans to invest in product innovation; Arlo's future product offerings; and the quote from Arlo's Chief Executive Officer. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: future demand for the Company's products may be lower than anticipated; consumers may choose not to adopt the Company's new product offerings or adopt competing products; product performance may be adversely affected by real world operating conditions; the Company may be unsuccessful or experience delays in manufacturing and distributing its new and existing products; telecommunications service providers may choose to slow their deployment of the Company's products or utilize competing products; the Company may be unable to collect receivables as they become due; the Company may fail to manage costs, including the cost of developing new products and manufacturing and distribution of its existing offerings; the Company may incur additional costs and charges associated with the transactions contemplated by the Verisure partnership; the Company may not receive the minimum commitment amounts from Verisure; the COVID-19 pandemic could have an adverse impact on the Company's business, operations and the markets and communities in which Arlo and its partners and customers operate; the Company may fail to successfully continue to effect operating expense savings; changes in the level of Arlo's cash resources and the Company's planned usage of such resources; changes in the Company's stock price and developments in the business that could increase the Company's cash needs; fluctuations in foreign exchange rates; the actions and financial health of the Company's customers; the anticipated financial capacity under Arlo's revolving credit line may not be available when expected, or at all; and the Company may not be able to carry out its restructuring plan. 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 Arlo 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 "Part II - Item 1A. Risk Factors," in the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2020, filed with the Securities and Exchange Commission on May 11, 2020 and other periodic filings with the Securities and Exchange Commission. Given these circumstances, you should not place undue reliance on these forward-looking statements. Arlo 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 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, amortization of intangibles, activist shareholder response costs, restructuring and other charges, strategic initiative and transaction expenses, gain on sale of business, litigation reserves, 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 third-party consulting fees, legal fees, IT costs, employee bonuses for services related to the separation, and other one-time expenses incurred to complete the separation. 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 and shares under the employee stock purchase plan granted to employees. 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.

Amortization of intangibles consists primarily of non-cash charges that can be impacted by, among other things, the timing and magnitude of acquisitions. 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 an assessment of our internal operations and comparisons to our prior and future periods and to the performance of our competitors.

Activist shareholder response costs primarily consist of legal fees and third-party consulting costs incurred. 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.

Strategic initiative and transaction expenses consist of legal fees associated with the strategic review of the Company and legal fees, accounting fees and other one-time costs incurred to complete the Verisure transaction. 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.

Gain on sale of business represents gain from sale of the Company's commercial operations in Europe. We consider our operating results without this gain when evaluating our ongoing performance and forecasting our earnings trends, and therefore exclude such gain when presenting non-GAAP financial measures. We believe that the assessment of our operations excluding the gain is relevant to our assessment of internal operations and comparisons to the performance of our competitors.

Other items are the result of either unique or unplanned events, including, when applicable: restructuring and other charges and litigation reserves, net. 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

June 28, December 2020 31, 2019

(in thousands)

ASSETS

Current assets:

Cash and cash equivalents $ 185,424 $ 236,680

Short-term investments 20,030 19,990

Accounts receivable, net 46,466 127,317

Inventories 65,814 68,624

Prepaid expenses and other current assets 9,948 16,958

Total current assets 327,682 469,569

Property and equipment, net 18,210 21,352

Operating lease right-of-use assets, net 26,048 31,300

Intangibles, net 594 1,306

Goodwill 11,038 11,038

Restricted cash 4,141 4,139

Other non-current assets 2,244 4,008

Total assets $ 389,957 $ 542,712



LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 52,902 $ 111,650

Deferred revenue 44,287 50,362

Accrued liabilities 99,423 127,400

Income tax payable 3,491 4,489

Total current liabilities 200,103 293,901

Non-current deferred revenue 10,259 15,736

Non-current operating lease liabilities 27,026 29,001

Non-current income taxes payable 92 92

Other non-current liabilities 573 606

Total liabilities 238,053 339,336

Stockholders' Equity:

Preferred stock: $0.001 par value; 50,000,000 - - shares authorized; none issued or outstanding

Common stock: : $0.001 par value; 500,000,000shares authorized; shares issued and outstanding: 78 76 78,089,035 at June 28, 2020 and 75,785,952 at December 31, 2019

Additional paid-in capital 351,913 334,821

Accumulated other comprehensive income 14 (2)

Accumulated deficit (200,101) (131,519)

Total stockholders' equity 151,904 203,376

Total liabilities and stockholders' equity $ 389,957 $ 542,712

ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



Three Months Ended Six Months Ended

June 28, March 29, June 30, June 28, June 30, 2020 2020 2019 2020 2019

(in thousands, except percentage and per share data)

Revenue:

Products $ 49,603 $ 50,723 $ 72,445 $ 100,326 $ 119,053

Services 17,029 14,727 11,153 31,756 22,425

Total revenue 66,632 65,450 83,598 132,082 141,478

Cost of revenue:

Products 51,186 52,188 67,839 103,374 118,123

Services 9,957 9,309 6,109 19,266 11,760

Total cost of 61,143 61,497 73,948 122,640 129,883 revenue

Gross profit 5,489 3,953 9,650 9,442 11,595

Gross margin 8.2 % 6.0 % 11.5 % 7.1 % 8.2 %

Operating expenses:

Research and 14,192 15,243 17,594 29,435 35,755 development

Sales and 11,713 11,038 14,511 22,751 28,732 marketing

General and 9,837 18,784 10,914 28,621 21,450 administrative

Separation 82 79 717 161 1,623 expense

Gain on sale - (292) - (292) - of business

Totaloperating 35,824 44,852 43,736 80,676 87,560 expenses

Loss from (30,335) (40,899) (34,086) (71,234) (75,965) operations

Operating (45.5) % (62.5) % (40.8) % (53.9) % (53.7) %margin

Interest 151 535 712 686 1,574 income

Other income 1,111 1,183 31 2,294 (16) (expense), net

Loss before (29,073) (39,181) (33,343) (68,254) (74,407) income taxes

Provision for 183 145 349 328 569 income taxes

Net loss $ (29,256) $ (39,326) $ (33,692) $ (68,582) $ (74,976)

Net loss per share:

Basic $ (0.38) $ (0.51) $ (0.45) $ (0.89) $ (1.01)

Diluted $ (0.38) $ (0.51) $ (0.45) $ (0.89) $ (1.01)

Weightedaverage sharesused to compute net loss pershare:

Basic 77,885 76,560 74,729 77,229 74,569

Diluted 77,885 76,560 74,729 77,229 74,569

ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



Six Months Ended

June 28, June 30, 2020 2019

(In thousands)

Cash flows from operating activities:

Net loss $ (68,582) $ (74,976)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 5,476 4,980

Stock-based compensation expense 17,337 10,042

Allowance for (Release of) credit losses and 1,182 (51) inventory reserves

Gain on sale of business (292) -

Deferred income taxes 27 74

Premium amortization / discount accretion on 44 (274) investments, net

Changes in assets and liabilities:

Accounts receivable, net 80,650 85,916

Inventories 1,827 28,042

Prepaid expenses and other assets 8,745 1,784

Accounts payable (58,669) (59,865)

Deferred revenue (11,553) (2,527)

Accrued and other liabilities (24,875) (47,806)

Net cash used in operating activities (48,683) (54,661)

Cash flows from investing activities:

Purchases of property and equipment (1,184) (7,116)

Purchases of short-term investments (25,094) (24,793)

Maturities of short-term investments 25,000 30,000

Net cash used in investing activities (1,278) (1,909)

Cash flows from financing activities:

Proceeds related to employee benefit plans 1,856 12

Restricted stock unit withholdings (3,149) (1,682)

Net cash used in financing activities (1,293) (1,670)

Net decrease in cash and cash equivalents and (51,254) (58,240) restricted cash

Cash and cash equivalents and restricted cash, at 240,819 155,424 beginning of period

Cash and cash equivalents and restricted cash, at $ 189,565 $ 97,184 end of period



Non-cash investing and financing activities:

Purchases of property and equipment included in $ 1,523 $ (2,753) accounts payable and accrued liabilities

De-recognition of build-to-suit assets and $ - $ (21,610) liabilities

ARLO TECHNOLOGIES, INC.

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES



STATEMENT OF OPERATIONS DATA:



Three Months Ended Six Months Ended

June 28, March 29, June 30, June 28, June 30, 2020 2020 2019 2020 2019

(in thousands, except percentage data)

GAAP gross $ 5,489 $ 3,953 $ 9,650 $ 9,442 $ 11,595 profit

GAAP gross 8.2 % 6.0 % 11.5 % 7.1 % 8.2 %margin

Stock-basedcompensation 562 503 450 1,065 819 expense

Amortization of 357 356 382 713 763 intangibles

Restructuringand other - 23 - 23 - charges

Non-GAAP gross $ 6,408 $ 4,835 $ 10,482 $ 11,243 $ 13,177 profit

Non-GAAP gross 9.6 % 7.4 % 12.5 % 8.5 % 9.3 %margin



GAAP research $ 14,192 $ 15,243 $ 17,594 $ 29,435 $ 35,755 and development

Stock-basedcompensation (1,729) (1,660) (1,635) (3,389) (2,932) expense

Restructuringand other - - - - - charges

Non-GAAPresearch and $ 12,463 $ 13,583 $ 15,959 $ 26,046 $ 32,823 development



GAAP sales and $ 11,713 $ 11,038 $ 14,511 $ 22,751 $ 28,732 marketing

Stock-basedcompensation (984) (751) (991) (1,735) (1,931) expense

Restructuringand other - - - - - charges

Non-GAAP sales $ 10,729 $ 10,287 $ 13,520 $ 21,016 $ 26,801 and marketing



GAAP generaland $ 9,837 $ 18,784 $ 10,914 $ 28,621 $ 21,450 administrative

Stock-basedcompensation (1,289) (9,859) (2,313) (11,148) (4,360) expense

Restructuringand other - (21) - (21) - charges

Strategicinitiative and (206) (545) - (751) - transaction expenses

Litigation (249) (7) - (256) - reserves, net

Non-GAAPgeneral and $ 8,093 $ 8,352 $ 8,601 $ 16,445 $ 17,090 administrative



GAAP totaloperating $ 35,824 $ 44,852 $ 43,736 $ 80,676 $ 87,560 expenses

Separation (82) (79) (717) (161) (1,623) expense

Strategicinitiative and (206) (545) - (751) - transaction expenses

Stock-basedcompensation (4,002) (12,270) (4,939) (16,272) (9,223) expense

Restructuringand other - (21) - (21) - charges

Litigation (249) (7) - (256) - reserves, net

Activistshareholder - - (237) - (237) response costs

Gain on sale of - 292 - 292 - business

Non-GAAP totaloperating $ 31,285 $ 32,222 $ 37,843 $ 63,507 $ 76,477 expenses

ARLO TECHNOLOGIES, INC.

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)



STATEMENT OF OPERATIONS DATA (CONTINUED):



Three Months Ended Six Months Ended

June 28, March 29, June 30, June 28, June 30, 2020 2020 2019 2020 2019

(in thousands, except percentage and per share data)

GAAPoperating $ (30,335) $ (40,899) $ (34,086) $ (71,234) $ (75,965) loss

GAAPoperating (45.5) % (62.5) % (40.8) % (53.9) % (53.7) %margin

Separation 82 79 717 161 1,623 expense

Strategicinitiativeand 206 545 - 751 - transactionexpenses

Stock-basedcompensation 4,564 12,773 5,389 17,337 10,042 expense

Amortizationof 357 356 382 713 763 intangibles

Restructuringand other - 44 - 44 - charges

Litigation 249 7 - 256 - reserves, net

Activistshareholder - - 237 - 237 response costs

Gain on sale - (292) - (292) - of business

Non-GAAPoperating $ (24,877) $ (27,387) $ (27,361) $ (52,264) $ (63,300) loss

Non-GAAPoperating (37.3) % (41.8) % (32.7) % (39.6) % (44.7) %margin



GAAPprovision for $ 183 $ 145 $ 349 $ 328 $ 569 income taxes

GAAP income (0.6) % (0.4) % (1.0) % (0.5) % (0.8) %tax rate

Tax effects 2 29 142 31 142

Non-GAAPprovision for $ 181 $ 116 $ 207 $ 297 $ 427 income taxes

Non-GAAPincome tax (0.8) % (0.5) % (0.8) % (0.6) % (0.7) %rate



GAAP net loss $ (29,256) $ (39,326) $ (33,692) $ (68,582) $ (74,976)

Separation 82 79 717 161 1,623 expense

Strategicinitiativeand 206 545 - 751 - transactionexpenses

Stock-basedcompensation 4,564 12,773 5,389 17,337 10,042 expense

Amortizationof 357 356 382 713 763 intangibles

Restructuringand other - 44 - 44 - charges

Litigation 249 7 - 256 - reserves, net

Activistshareholder - - 237 - 237 response costs

Gain on sale - (292) - (292) - of business

Tax effects 2 29 142 31 142

Non-GAAP net $ (23,796) $ (25,785) $ (26,825) $ (49,581) $ (62,169) loss

ARLO TECHNOLOGIES, INC.

RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)



STATEMENT OF OPERATIONS DATA (CONTINUED):



Three Months Ended Six Months Ended

June 28, March 29, June 30, June 28, June 30, 2020 2020 2019 2020 2019

(in thousands, except percentage and per share data)

NET INCOME (LOSS) PER DILUTED SHARE:

GAAP netincome (loss) $ (0.38) $ (0.51) $ (0.45) $ (0.89) $ (1.01) per diluted share

Separation - - 0.01 0.01 0.02 expense

Strategicinitiative and - 0.01 - 0.01 - transaction expenses

Stock-basedcompensation 0.06 0.16 0.07 0.22 0.15 expense

Amortization 0.01 - 0.01 0.01 0.01 of intangibles

Restructuringand other - - - - - charges

Litigation - - - - - reserves, net

Gain on sale - - - - - of business

Tax effects - - - - 0.00

Non-GAAP netloss per $ (0.31) $ (0.34) $ (0.36) $ (0.64) $ (0.83) diluted share



Shares used incomputing GAAPnet income 77,885 76,560 74,729 77,229 74,569 (loss) perdiluted share

Shares used incomputingnon-GAAP net 77,885 76,560 74,729 77,229 74,569 income (loss) per dilutedshare

ARLO TECHNOLOGIES, INC.

UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION



Three Months Ended

June 28, March 29, December September June 30, 2020 2020 31, 29, 2019 2019 2019

(in thousands, except headcount and per share data)

Cash, cashequivalents and $ 205,454 $ 206,582 $ 256,670 $ 153,811 $ 137,927short-term investments

Cash, cashequivalents andshort-term $ 2.64 $ 2.70 $ 3.37 $ 2.04 $ 1.85investments perdiluted share



Accounts $ 46,466 $ 61,376 $ 127,317 $ 99,698 $ 79,707receivable, net

Days sales 63 83 97 85 87outstanding



Inventories $ 65,814 $ 61,027 $ 68,624 $ 74,117 $ 97,222

Inventory turns 3.1 3.4 5.9 4.8 2.8



Weeks of channel inventory:

U.S. retail channel 6.6 13.7 6.3 13.3 10.1

U.S. distribution 8.4 20.3 8.0 3.3 8.9channel

APAC distribution 6.8 6.0 3.6 4.3 5.1channel



Deferred revenue(current and $ 54,546 $ 59,848 $ 66,098 $ 47,995 $ 47,464non-current)



Cumulativeregistered accounts 4,518 4,245 4,015 3,691 3,397^(1)

Cumulative paid 298 255 230 211 187accounts ^(2)



Headcount 355 356 349 406 402

Non-GAAP diluted 77,885 76,560 76,090 75,337 74,729shares

_________________________

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(1) end of such particular period, and includes accounts owned by Verisure S.a.r.l.. 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.

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(2) 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 S.a.r.l..

REVENUE BY GEOGRAPHY

Three Months Ended Six Months Ended

June 28, March 29, June 30, June 28, June 30, 2020 2020 2019 2020 2019

(in thousands, except percentage data)

Americas $ 50,971 76 % $ 50,158 77 % $ 64,564 77 % $ 101,129 77 % $ 108,930 77 %

EMEA 11,263 17 % 7,573 11 % 15,066 18 % 18,836 14 % 24,368 17 %

APAC 4,398 7 % 7,719 12 % 3,968 5 % 12,117 9 % 8,180 6 %

Total $ 66,632 100 % $ 65,450 100 % $ 83,598 100 % $ 132,082 100 % $ 141,478 100 %

View source version on businesswire.com: https://www.businesswire.com/news/home/20200805005901/en/

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