Business Wire

Arlo Reports Fourth Quarter 2021 and Full Year 2021 Results

Exited 2021 with Annual Recurring Revenue of $90 million, growing 94% year over year

Exceeded High-End of both Revenue and non-GAAP EPS Guidance for the Quarter

145% Year over Year growth in Cumulative Paid Accounts

Delivered GAAP operating loss of $7.2 million, non-GAAP Operating Profit of $3.5 million

Ended with Cash and Cash Equivalents Balance at $175.7 million, with No Debt

CARLSBAD, Calif.–(BUSINESS WIRE)–Arlo Technologies, Inc. (NYSE: ARLO), a leading internet-connected security camera brand, today reported financial results for the fourth quarter and fiscal year ended December 31, 2021.

Financial Highlights (1)

Q4’2021 Summary

  • Revenue of $142.9 million, an increase of 24.4% year over year.
  • GAAP gross profit of $31.7 million, an increase of 29.3% year over year; non-GAAP gross profit of $32.7 million, an increase of 27.0% year over year.
  • GAAP gross margin of 22.2%; non-GAAP gross margin of 22.9%.
  • GAAP operating loss of $7.2 million, a decrease of $8.4 million year over year; non-GAAP operating profit of $3.5 million, an increase of $10.0 million year over year.
  • GAAP net loss per diluted share of $(0.08); non-GAAP net income per diluted share of $0.04.

FY’2021 Summary

  • 2021 revenue of $435.1 million, an increase of 21.8% year over year.
  • 2021 GAAP gross profit of $108.0 million, an increase of 95.0% year over year; non-GAAP gross profit of $112.0 million, an increase of 87.6% year over year.
  • 2021 GAAP gross margin of 24.8%; non-GAAP gross margin of 25.7%.
  • 2021 GAAP net loss per diluted share of $(0.68); non-GAAP net loss per diluted share of $(0.11).
  • Cash and cash equivalents of $175.7 million and no debt.

“I am proud to say the Arlo team successfully navigated considerable global supply chain challenges to deliver strong results across the entire business in Q4. Revenue and non-GAAP EPS both came in above the high end of our guidance and we are very pleased to share that we crossed over to a non-GAAP operating profit for the first time in our history as a public company. Our new business model for subscriptions continued its momentum, adding a record 190,000 paid accounts in Q4, an increase of 141% year over year. Our impressive paid account growth drove our strong recurring revenue growth as we exited 2021 with Annual Recurring Revenue (ARR) of $90.1 million growing at 94% year over year,” said Matthew McRae, Chief Executive Officer of Arlo Technologies. “Importantly, our innovation continues on all fronts. We are pleased with the early results we are seeing from the recent launch of Arlo Secure and Arlo Secure Plus, our new service plans, which extend Arlo’s differentiation and produces considerable value for our customers. Recently, we expanded our industry-leading product and service portfolio with the award-winning Arlo Security System as well as Arlo Safe. With tremendous progress across the business, we are excited to capitalize on the opportunities ahead of us.”

 

Three Months Ended

 

Twelve Months Ended

 

December 31,

2021

 

October 3,

2021

 

December 31,

2020

 

December 31,

2021

 

December 31,

2020

 

(in thousands, except percentage and per share data)

Revenue

$

142,861

 

 

$

111,149

 

 

$

114,836

 

 

$

435,137

 

 

$

357,154

 

GAAP Gross Margin

 

22.2

%

 

 

21.9

%

 

 

21.4

%

 

 

24.8

%

 

 

15.5

%

Non-GAAP Gross Margin (1)

 

22.9

%

 

 

22.6

%

 

 

22.4

%

 

 

25.7

%

 

 

16.7

%

GAAP Net Loss per Diluted Share

$

(0.08

)

 

$

(0.18

)

 

$

(0.19

)

 

$

(0.68

)

 

$

(1.30

)

Non-GAAP Net Income (Loss) per Diluted Share (1)

$

0.04

 

 

$

(0.08

)

 

$

(0.08

)

 

$

(0.11

)

 

$

(0.82

)

_________________________

(1)

 

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

Financial and Business Highlights

  • Full year service revenue of $103.5 million, for growth of 43.2% year over year.
  • Service revenue of $28.5 million for Q4, for growth of 32.0% year over year, the tenth consecutive quarter of record service revenue.
  • Exited 2021 with ARR of $90.1 million, growing 93.5% year over year. (2)

  • GAAP service gross margin of 62.5%; non-GAAP service gross margin of 63.2% in Q4 a record for Arlo as a standalone company. (1)

  • Added a record 190,000 paid accounts in Q4, a sequential increase of 4.4% over Q3, and a year over year increase of 140.5%.
  • Announced significant expansion of our service and product offerings with the Arlo Security Systems and Arlo Safe.
  • Won two Editors’ Choice awards, multiple design awards, and features in Best of 2021 lists across the industry.

_________________________

(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.

First Quarter 2022 Business Outlook (3)

  • Revenue of $110.0 million to $120.0 million.
  • GAAP net loss per diluted share of $(0.19) to $(0.13), and non-GAAP net loss per diluted share of $(0.06) to $0.00.

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

 

Three Months Ending April 3, 2022

 

Revenue

 

Net Loss per

Diluted Share

 

(in millions, except per share data)

GAAP

$110.0 – $120.0

 

$(0.19) – $(0.13)

Estimated adjustments for (3):

 

 

 

Stock-based compensation expense

 

0.13

Tax effects of non-GAAP adjustments

 

Non-GAAP

$110.0 – $120.0

 

$(0.06) – $0.00

_________________________

(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 Q4 and full year 2021 results and discuss management’s expectations for the first quarter of 2022 today, Tuesday, March 1, 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) 394-8218. The international dial-in number for the live audio call is +1 (773) 377-9070. The conference ID for the call is 3670093. 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 Company’s transition to a services-first business model; the commercial launch and momentum of new products and services; strategic objectives and initiatives, including the Company’s collaboration with Verisure; expectations regarding market expansion and future growth; plans to invest in product innovation; the Company’s future product offerings; supply chain challenges; and quotes from the Company’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; the Company may be unsuccessful in developing and expanding its sales and marketing capabilities; 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 not receive the minimum commitment amounts from Verisure; 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; the Company may fail to successfully continue to effect operating expense savings; changes in the level of the Company’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; 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’s 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, amortization of intangibles, impairment charges, 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 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.

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.

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, litigation reserves, net and impairment charges. 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

 

December 31,

2021

 

December 31,

2020

 

(In thousands, except share and per share data)

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

175,749

 

 

$

186,127

 

Short-term investments (amortized cost of $— and $19,996)

 

 

 

 

19,997

 

Accounts receivable, net (net of allowance for credit losses of $337 and $519)

 

79,564

 

 

 

77,643

 

Inventories

 

38,390

 

 

 

64,705

 

Prepaid expenses and other current assets

 

9,919

 

 

 

8,076

 

Total current assets

 

303,622

 

 

 

356,548

 

Property and equipment, net

 

9,595

 

 

 

15,821

 

Operating lease right-of-use assets, net

 

14,814

 

 

 

23,998

 

Goodwill

 

11,038

 

 

 

11,038

 

Restricted cash

 

4,107

 

 

 

4,164

 

Other non-current assets

 

4,314

 

 

 

2,399

 

Total assets

$

347,490

 

 

$

413,968

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

84,098

 

 

$

62,171

 

Deferred revenue

 

29,442

 

 

 

53,142

 

Accrued liabilities

 

97,377

 

 

 

121,766

 

Income tax payable

 

12

 

 

 

267

 

Total current liabilities

 

210,929

 

 

 

237,346

 

Non-current deferred revenue

 

1,344

 

 

 

16,563

 

Non-current operating lease liabilities

 

21,470

 

 

 

25,029

 

Non-current income taxes payable

 

94

 

 

 

104

 

Other non-current liabilities

 

1,001

 

 

 

1,159

 

Total liabilities

 

234,838

 

 

 

280,201

 

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: 84,453,212 at December 31, 2021 and 79,336,242 at December 31, 2020

 

84

 

 

 

79

 

Additional paid-in capital

 

401,367

 

 

 

366,455

 

Accumulated other comprehensive income

 

 

 

 

3

 

Accumulated deficit

 

(288,799

)

 

 

(232,770

)

Total stockholders’ equity

 

112,652

 

 

 

133,767

 

Total liabilities and stockholders’ equity

$

347,490

 

 

$

413,968

 

 
ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

Three Months Ended

 

Twelve Months Ended

 

December 31,

2021

 

October 3,

2021

 

December 31,

2020

 

December 31,

2021

 

December 31,

2020

 

(in thousands, except percentage and per share data)

Revenue:

 

 

 

 

 

 

 

 

 

Products

$

114,396

 

 

$

84,152

 

 

$

93,271

 

 

$

331,620

 

 

$

284,868

 

Services

 

28,465

 

 

 

26,997

 

 

 

21,565

 

 

 

103,517

 

 

 

72,286

 

Total revenue

 

142,861

 

 

 

111,149

 

 

 

114,836

 

 

 

435,137

 

 

 

357,154

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

Products

 

100,476

 

 

 

75,682

 

 

 

81,424

 

 

 

285,334

 

 

 

263,905

 

Services

 

10,669

 

 

 

11,124

 

 

 

8,874

 

 

 

41,768

 

 

 

37,860

 

Total cost of revenue

 

111,145

 

 

 

86,806

 

 

 

90,298

 

 

 

327,102

 

 

 

301,765

 

Gross profit

 

31,716

 

 

 

24,343

 

 

 

24,538

 

 

 

108,035

 

 

 

55,389

 

Gross margin

 

22.2

%

 

 

21.9

%

 

 

21.4

%

 

 

24.8

%

 

 

15.5

%

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

13,644

 

 

 

14,377

 

 

 

15,266

 

 

 

59,063

 

 

 

60,137

 

Sales and marketing

 

12,464

 

 

 

12,779

 

 

 

13,593

 

 

 

48,909

 

 

 

49,064

 

General and administrative

 

12,584

 

 

 

12,119

 

 

 

11,338

 

 

 

49,489

 

 

 

51,096

 

Impairment charges

 

 

 

 

 

 

 

 

 

 

9,116

 

 

 

 

Separation expense

 

254

 

 

 

683

 

 

 

10

 

 

 

1,596

 

 

 

248

 

Gain on sale of business

 

 

 

 

 

 

 

 

 

 

 

 

 

(292

)

Total operating expenses

 

38,946

 

 

 

39,958

 

 

 

40,207

 

 

 

168,173

 

 

 

160,253

 

Loss from operations

 

(7,230

)

 

 

(15,615

)

 

 

(15,669

)

 

 

(60,138

)

 

 

(104,864

)

Operating margin

 

(5.1

) %

 

 

(14.0

) %

 

 

(13.6

)%

 

 

(13.8

) %

 

 

(29.4

)%

Interest income (expense), net

 

(15

)

 

 

(1

)

 

 

42

 

 

 

11

 

 

 

802

 

Other income (expense), net

 

605

 

 

 

599

 

 

 

599

 

 

 

4,775

 

 

 

3,436

 

Loss before income taxes

 

(6,640

)

 

 

(15,017

)

 

 

(15,028

)

 

 

(55,352

)

 

 

(100,626

)

Provision for income taxes

 

152

 

 

 

181

 

 

 

182

 

 

 

677

 

 

 

625

 

Net loss

$

(6,792

)

 

$

(15,198

)

 

$

(15,210

)

 

$

(56,029

)

 

$

(101,251

)

Net loss per share:

 

 

 

 

 

 

 

 

 

Basic

$

(0.08

)

 

$

(0.18

)

 

$

(0.19

)

 

$

(0.68

)

 

$

(1.30

)

Diluted

$

(0.08

)

 

$

(0.18

)

 

$

(0.19

)

 

$

(0.68

)

 

$

(1.30

)

Weighted average shares used to compute net loss per share:

 

 

 

 

 

 

 

 

 

Basic

 

84,367

 

 

 

83,809

 

 

 

79,164

 

 

 

82,688

 

 

 

78,084

 

Diluted

 

84,367

 

 

 

83,809

 

 

 

79,164

 

 

 

82,688

 

 

 

78,084

 

 

Contacts

Arlo Investor Relations

Erik Bylin

investors@arlo.com
(510) 315-1004

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