Arlo Technologies, Inc 8-K, filed Feb 24, 2020

Arlo Technologies, Inc. (ARLO)

8-K 2020-02-24 For: 2020-02-24

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Added on April 08, 2026

About this 8-K

Arlo Technologies, Inc filed this 8-K on February 24, 2020.

Items reported

Item 2.02: Financial results

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Delaware		001-38618	38-4061754
(State or other Jurisdiction of Incorporation or Organization)		(Commission file number)	(I.R.S. Employer Identification Number)

3030 Orchard Parkway
San Jose,	California		95134
(Address of principal executive offices)			(Zip Code)



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



Exhibit Number		Description
99.1		Press Release, Dated February 24, 2020
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)



	Three Months Ended									Twelve Months Ended
	December 31, 2019			September 29, 2019			December 31, 2018			December 31, 2019			December 31, 2018
	(in thousands, except percentage and per share data)
Revenue	$	122,413		$	106,116		$	122,158		$	370,007		$	464,918
GAAP Gross Margin	11.2		%	9.9		%	4.1		%	9.7		%	19.8		%
Non-GAAP Gross Margin	12.2		%	10.7		%	4.6		%	10.6		%	20.4		%
GAAP Net Income (Loss) per Diluted Share	$	0.26		$	(0.41	)	$	(0.53	)	$	(1.14	)	$	(1.12	)
Non-GAAP Net Income (Loss) per Diluted Share	$	(0.26	)	$	(0.32	)	$	(0.43	)	$	(1.42	)	$	(0.49	)



	Three Months Ending March 29, 2020
	Revenue	Gross Margin Rate	Net Loss per Diluted Share
	(in millions, except percent and per share data)
GAAP	$60.0 - $70.0	6.1% - 9.4%	($0.44) - ($0.47)
Estimated adjustments for ⁽²⁾:
Stock-based compensation expense	—	1.2%	0.1
Strategic initiative expense	—	—	0.01
Amortization of intangibles	—	0.6%	—
Restructuring and other charges	—	—	—
Tax effects of non-GAAP adjustments	—	—	—
Non-GAAP	$60.0 - $70.0	8.0% - 11.0%	($0.33) - ($0.36)



☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)



☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)



☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))



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.	☐


•	Fourth quarter revenue of $122.4 million, an increase of 0.2% year over year.


•	Fourth quarter GAAP gross margin of 11.2%; non-GAAP gross margin of 12.2%.


•	Fourth quarter GAAP net income per diluted share of $0.26, non-GAAP net loss per diluted share of $(0.26).


•	2019 GAAP gross margin of 9.7%; non-GAAP gross margin of 10.6%.


•	2019 GAAP net loss per diluted share of $(1.14), non-GAAP net loss per diluted share of $(1.42).


•	Full year service revenue of $46.8 million, for growth of 23.7% year over year.



Emerging growth company	☒


•	Launched the Arlo SmartCloud, a SaaS version of our Arlo Smart service platform. This robust offering delivers reliable and scalable security cloud services to any company, community, or smart city, making Arlo the ideal choice for those looking to bring intelligent subscription services to their customers.


•	Announced our all-new Arlo Floodlight Camera, the first wire-free integrated floodlight camera on the market, featuring powerful LEDs, an integrated 2K HDR camera, 160-degree field of view, two-way audio, custom lighting configurations, a rechargeable battery, and a built-in siren. The Floodlight Camera is paired with a three month subscription to Arlo Smart.


•	Announced our Privacy Pledge, reaffirming our commitment to our users’ right to privacy and control of their personal information, clearly differentiating Arlo from others in our industry.


•	40.9% year over year cumulative registered account growth in Q4.


•	GAAP gross margin between 6.1% and 9.4%, and non-GAAP gross margin between 8.0% and 11.0%.


•	GAAP net loss per diluted share of $(0.44) to $(0.47), and non-GAAP net loss per diluted share of $(0.33) to $(0.36).


•	GAAP loss from operations between $(97.6 million) and $(107.6 million), and non-GAAP loss from operations between $(65.0 million) and $(75.0 million).



	Year Ending December 31, 2020
	Revenue	Loss from Operations
	(in millions)
GAAP	$370.0 - $400.0	($97.6) - ($107.6)
Estimated adjustments for ⁽³⁾:
Stock-based compensation expense	—	30.1
Strategic initiative expense	—	0.9
Amortization of intangibles	—	1.5
Restructuring and other charges	—	0.1
Non-GAAP	$370.0 - $400.0	($65.0) - ($75.0)


–	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.



	As of
	December 31, 2019			December 31, 2018
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	236,680		$	151,290
Short-term investments	19,990			49,737
Accounts receivable, net	127,317			166,045
Inventories	68,624			124,791
Prepaid expenses and other current assets	16,958			23,611
Total current assets	469,569			515,474
Property and equipment, net	21,352			49,428
Operating lease right-of-use assets, net	31,300			—
Intangibles, net	1,306			2,823
Goodwill	11,038			15,638
Restricted cash	4,139			4,134
Other non-current assets	4,008			8,449
Total assets	$	542,712		$	595,946

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	111,650		$	82,542
Deferred revenue	50,362			26,678
Accrued liabilities	127,400			172,036
Income tax payable	4,489			734
Total current liabilities	293,901			281,990
Non-current deferred revenue	15,736			23,313
Non-current operating lease liabilities	29,001			—
Non-current financing lease obligation	—			19,978
Non-current income taxes payable	92			22
Other non-current liabilities	606			1,141
Total liabilities	339,336			326,444
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: 75,785,952 at December 31, 2019 and 74,247,250 at December 31, 2018	76			74
Additional paid-in capital	334,821			315,277
Accumulated other comprehensive income	(2		)	—
Accumulated deficit	(131,519		)	(45,849		)
Total stockholders’ equity	203,376			269,502
Total liabilities and stockholders’ equity	$	542,712		$	595,946



STATEMENT OF OPERATIONS DATA:

	Three Months Ended									Twelve Months Ended
	December 31, 2019			September 29, 2019			December 31, 2018			December 31, 2019			December 31, 2018
	(in thousands, except percentage data)
GAAP gross profit	$	13,706		$	10,503		$	4,981		$	35,804		$	92,075
GAAP gross margin	11.2		%	9.9		%	4.1		%	9.7		%	19.8		%
Stock-based compensation expense	727			467			272			2,013			1,191
Amortization of intangibles	373			381			382			1,517			1,526
Restructuring and other charges	69			—			—			69			—
Non-GAAP gross profit	$	14,875		$	11,351		$	5,635		$	39,403		$	94,792
Non-GAAP gross margin	12.2		%	10.7		%	4.6		%	10.6		%	20.4		%

GAAP research and development	$	16,928		$	16,701		$	16,865		$	69,384		$	58,794
Stock-based compensation expense	(2,367		)	(1,569		)	(892		)	(6,868		)	(3,474		)
Restructuring and other charges	(262		)	—			—			(262		)	—
Non-GAAP research and development	$	14,299		$	15,132		$	15,973		$	62,254		$	55,320

GAAP sales and marketing	$	14,596		$	13,657		$	15,470		$	56,985		$	52,593
Stock-based compensation expense	(1,137		)	(791		)	(753		)	(3,859		)	(2,961		)
Restructuring and other charges	(198		)	—			—			(198		)	—
Non-GAAP sales and marketing	$	13,261		$	12,866		$	14,717		$	52,928		$	49,632

GAAP general and administrative	$	15,112		$	11,062		$	8,656		$	47,624		$	28,209
Stock-based compensation expense	(3,402		)	(2,392		)	(1,578		)	(10,154		)	(5,253		)
Restructuring and other charges	(102		)	—			—			(102		)	(74		)
Strategic initiative and transaction expenses	(1,868		)	(502		)	—			(2,370		)	—
Activist shareholder response costs	—			—			—			(237		)	—
Litigation reserves, net	(1,287		)	(140		)	—			(1,427		)	—
Non-GAAP general and administrative	$	8,453		$	8,028		$	7,078		$	33,334		$	22,882

GAAP total operating expenses	$	(8,092	)	$	41,557		$	44,594		$	121,025		$	166,848
Separation expense	(154		)	(136		)	(3,603		)	(1,913		)	(27,252		)
Strategic initiative and transaction expenses	(1,868		)	(502		)	—			(2,370		)	—
Stock-based compensation expense	(6,906		)	(4,752		)	(3,223		)	(20,881		)	(11,688		)
Restructuring and other charges	(562		)	—			—			(562		)	(74		)
Litigation reserves, net	(1,287		)	(140		)	—			(1,427		)	—
Activist shareholder response costs	—			—			—			(237		)	—
Gain on sale of business	54,881			—			—			54,881			—
Non-GAAP total operating expenses	$	36,012		$	36,027		$	37,768		$	148,516		$	127,834



STATEMENT OF OPERATIONS DATA (CONTINUED):

	Three Months Ended									Twelve Months Ended
	December 31, 2019			September 29, 2019			December 31, 2018			December 31, 2019			December 31, 2018
	(in thousands, except percentage and per share data)
GAAP operating income (loss)	$	21,798		$	(31,054	)	$	(39,613	)	$	(85,221	)	$	(74,773	)
GAAP operating margin	17.8		%	(29.3		)%	(32.4		)%	(23.0		)%	(16.1		)%
Separation expense	154			136			3,603			1,913			27,252
Strategic initiative and transaction expenses	1,868			502			—			2,370			—
Stock-based compensation expense	7,633			5,219			3,495			22,894			12,879
Amortization of intangibles	373			381			382			1,517			1,526
Restructuring and other charges	631			—			—			631			74
Litigation reserves, net	1,287			140			—			1,427			—
Activist shareholder response costs	—			—			—			237			—
Gain on sale of business	(54,881		)	—			—			(54,881		)	—
Non-GAAP operating loss	$	(21,137	)	$	(24,676	)	$	(32,133	)	$	(109,113	)	$	(33,042	)
Non-GAAP operating margin	(17.3		)%	(23.3		)%	(26.3		)%	(29.5		)%	(7.1		)%

GAAP provision for (benefit from) income taxes	$	3,525		$	286		$	(58	)	$	4,380		$	772
GAAP income tax rate	15.2		%	(0.9		)%	0.1		%	(5.4		)%	(1.0		)%
Tax effects	3,241			(46		)	200			3,337			423
Non-GAAP provision for (benefit from) income taxes	$	284		$	332		$	(258	)	$	1,043		$	349
Non-GAAP income tax rate	(1.4		)%	(1.4		)%	—		%	(1.0		)%	(1.1		)%

GAAP net income (loss)	$	19,615		$	(30,590	)	$	(39,073	)	$	(85,951	)	$	(75,483	)
Separation expense	154			136			3,603			1,913			27,252
Strategic initiative and transaction expenses	1,868			502			—			2,370			—
Stock-based compensation expense	7,633			5,219			3,495			22,894			12,879
Amortization of intangibles	373			381			382			1,517			1,526
Restructuring and other charges	631			—			—			631			74
Litigation reserves, net	1,287			140			—			1,427			—
Activist shareholder response costs	—			—			—			237			—
Gain on sale of business	(54,881		)	—			—			(54,881		)	—
Tax effects	3,241			(46		)	200			3,337			423
Non-GAAP net loss	$	(20,079	)	$	(24,258	)	$	(31,393	)	$	(106,506	)	$	(33,329	)


^*	We factored in an adjustment to our Q1’19 paid account number and have subsequently revised the Q1’19 total to 162,000.


(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 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.