arlo-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-38618

ARLO TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


Delaware		38-4061754
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

2200 Faraday Ave.,	Suite #150
Carlsbad,	California	92008
(Address of principal executive offices)		(Zip Code)

(408) 890-3900

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

ARLO

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The number of outstanding shares of the registrant’s Common Stock, $0.001 par value, was 97,579,315 as of May 3, 2024.


PART I: FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets	3
	Unaudited Condensed Consolidated Statements of Comprehensive Loss	4
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity	5
	Unaudited Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

PART II: OTHER INFORMATION

Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 5.	Other Information	33
Item 6.	Exhibits	34
Signatures		35


	As of
	March 31, 2024		December 31, 2023
	(In thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	62,054	$	56,522
Short-term investments	80,809		79,974
Accounts receivable, net	56,496		65,360
Inventories	44,676		38,408
Prepaid expenses and other current assets	11,896		10,271
Total current assets	255,931		250,535
Property and equipment, net	4,311		4,761
Operating lease right-of-use assets, net	10,697		11,450
Goodwill	11,038		11,038
Restricted cash	4,183		4,131
Other non-current assets	3,602		3,623
Total assets	$	289,762	$	285,538
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	69,878	$	55,201
Deferred revenue	21,394		18,041
Accrued liabilities	79,100		88,209
Total current liabilities	170,372		161,451
Non-current operating lease liabilities	16,133		17,021
Other non-current liabilities	3,320		3,790
Total liabilities	189,825		182,262
Commitments and contingencies (Note 8)
Stockholders’ Equity:
Preferred stock: $0.001 par value; 50,000,000 shares authorized; none issued or outstanding	—		—
Common stock: $0.001 par value; 500,000,000 shares authorized; shares issued and outstanding: 97,202,042 at March 31, 2024 and 95,380,281 at December 31, 2023	97		95
Additional paid-in capital	476,665		470,322
Accumulated other comprehensive income	280		320
Accumulated deficit	(377,105)		(367,461)
Total stockholders’ equity	99,937		103,276
Total liabilities and stockholders’ equity	$	289,762	$	285,538


	Three Months Ended
	March 31, 2024		April 2, 2023
	(In thousands, except per share data)
Revenue:
Products	$	67,493	$	67,060
Services	56,707		43,944
Total revenue	124,200		111,004
Cost of revenue:
Products	63,224		64,041
Services	13,596		11,746
Total cost of revenue	76,820		75,787
Gross profit	47,380		35,217

Operating expenses:
Research and development	20,793		17,750
Sales and marketing	17,370		15,353
General and administrative	19,348		15,622
Others	479		632
Total operating expenses	57,990		49,357

Loss from operations	(10,610)		(14,140)
Interest income, net	1,386		726
Other loss, net	(25)		(39)
Loss before income taxes	(9,249)		(13,453)
Provision for income taxes	395		792
Net loss	$	(9,644)	$	(14,245)

Net loss per share:
Basic and diluted	$	(0.10)	$	(0.16)

Weighted average shares used to compute net loss per share:
Basic and diluted	96,264		89,653


Comprehensive loss:
Net loss	$	(9,644)	$	(14,245)
Other comprehensive income (loss), net of tax	(40)		128
Total comprehensive loss	$	(9,684)	$	(14,117)


	As of March 31, 2024								As of December 31, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
	(In thousands)
U.S. Treasuries	$	80,529	$	280	$	—	$	80,809	$	79,654	$	320	$	—	$	79,974


	Total		Severance Expense		Office Exit Expense		Other Exit Expense
	(In thousands)
Balance as of December 31, 2021	$	—	$	—	$	—	$	—
Restructuring charges	1,805		798		928		79
Cash payments	(588)		(579)		—		(9)
Non-cash and other adjustments	48		—		63		(15)
Balance as of December 31, 2022	$	1,265	$	219	$	991	$	55
Restructuring charges	692		564		117		11
Cash payments	(1,479)		(694)		(745)		(40)
Non-cash and other adjustments	(26)		—		—		(26)
Balance as of December 31, 2023	$	452	$	89	$	363	$	—
Restructuring charges	484		484		—		—
Cash payments	(640)		(525)		(115)		—
Non-cash and other adjustments	—		—		—		—
Balance as of March 31, 2024	$	296	$	48	$	248	$	—
Total costs incurred inception to date	$	3,003	$	1,846	$	1,108	$	49


	Operating Lease Payments		Sublease Payments		Net
	(In thousands)
2024 (Remaining nine months)	$	3,923	$	(1,598)	$	2,325
2025	4,488		(2,006)		2,482
2026	4,631		(2,066)		2,565
2027	4,594		(2,322)		2,272
2028	3,659		(2,392)		1,267
Thereafter	1,750		(1,228)		522
Total future lease payments	$	23,045	$	(11,612)	$	11,433
Less: imputed interest	(2,909)
Present value of future minimum lease payments	$	20,136

Accrued liabilities	$	4,003
Non-current operating lease liabilities	16,133
Total lease liabilities	$	20,136


			Number of Shares
			(In thousands)
Shares available for grants as of December 31, 2023			3,516
Additional authorized shares			3,808
Granted			(5,257)
Forfeited / cancelled			327
Shares traded for taxes			1,399
Shares available for grants as of March 31, 2024			3,793


	Number of Shares	Weighted Average Exercise Price Per Share
	(In thousands)	(In dollars)
Outstanding as of December 31, 2023	1,096	$	12.48
Granted	—	$	—
Exercised	(68)	$	8.35
Forfeited / cancelled	—	$	—
Expired	—	$	—
Outstanding as of March 31, 2024	1,028	$	12.76
Vested and exercisable as of March 31, 2024	1,028	$	12.76


	Number of Shares	Weighted Average Grant Date Fair Value Per Share
	(In thousands)	(In dollars)
Outstanding as of December 31, 2023	9,043	$	6.15
Granted	2,332	$	9.79
Vested	(2,411)	$	7.63
Forfeited	(301)	$	6.49
Outstanding as of March 31, 2024	8,663	$	6.71


	Three Months Ended
	March 31, 2024		April 2, 2023
	(In thousands)
Total stockholders’ equity, beginning balances	$	103,276	$	87,695

Common stock:
Beginning balances	$	95	$	89
Issuance of common stock under stock-based compensation plans	3		3

Restricted stock unit withholdings	(1)		(1)
Ending balances	$	97	$	91

Additional paid-in capital:
Beginning balances	$	470,322	$	433,138
Stock-based compensation expense	13,224		10,270
Settlement of liability classified restricted stock units	6,903		6,739
Issuance of common stock under stock-based compensation plans	570		355

Restricted stock unit withholdings	(14,354)		(4,693)
Ending balances	$	476,665	$	445,809

Accumulated deficit:
Beginning balances	$	(367,461)	$	(345,425)
Net loss	(9,644)		(14,245)
Ending balances	$	(377,105)	$	(359,670)

Accumulated other comprehensive income:
Beginning balances	$	320	$	(107)
Other comprehensive income (loss), net of tax	(40)		128
Ending balances	$	280	$	21

Total stockholders’ equity, ending balances	$	99,937	$	86,251

Common stock shares:
Beginning balances	95,380		88,887
Issuance of common stock under stock-based compensation plans	3,221		3,165

Restricted stock unit withholdings	(1,399)		(1,267)
Ending balances	97,202		90,785


	Three Months Ended
	March 31, 2024		April 2, 2023
	(In thousands)
Cash flows from operating activities:
Net loss	$	(9,644)	$	(14,245)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation expense	18,550		14,591
Depreciation and amortization	903		1,149
Allowance for credit losses and non-cash changes to reserves	(107)		198
Deferred income taxes	68		127
Other	(792)		(124)
Changes in assets and liabilities:
Accounts receivable	8,978		13,216
Inventories	(6,275)		6,341
Prepaid expenses and other assets	(1,672)		(900)
Accounts payable	14,561		(6,093)
Deferred revenue	3,427		3,785
Accrued and other liabilities	(8,191)		(7,716)
Net cash provided by operating activities	19,806		10,329
Cash flows from investing activities:
Purchases of property and equipment	(356)		(923)
Purchases of short-term investments	(40,802)		(36,755)
Proceeds from maturities of short-term investments	40,718		15,006
Net cash used in investing activities	(440)		(22,672)
Cash flows from financing activities:
Proceeds related to employee benefit plans	573		3
Restricted stock unit withholdings	(14,355)		(4,694)
Net cash used in financing activities	(13,782)		(4,691)
Net increase (decrease) in cash, cash equivalents, and restricted cash	5,584		(17,034)
Cash, cash equivalents, and restricted cash, at beginning of period	60,653		88,179
Cash, cash equivalents, and restricted cash, at end of period	$	66,237	$	71,145
Reconciliation of cash, cash equivalents, and restricted cash to Unaudited Condensed Consolidated Balance Sheets
Cash and cash equivalents	$	62,054	$	66,970
Restricted cash	4,183		4,175
Total cash, cash equivalents, and restricted cash	$	66,237	$	71,145
Supplemental cash flow information:
Non-cash investing activities:
Purchases of property and equipment included in accounts payable and accrued liabilities	$	180	$	894


	As of
	March 31, 2024		December 31, 2023
	(In thousands)
Machinery and equipment	$	14,531	$	14,148
Software	15,676		15,639
Computer equipment	855		1,438
Leasehold improvements	4,572		4,661
Furniture and fixtures	2,544		2,544
Total property and equipment, gross	38,178		38,430
Accumulated depreciation	(33,867)		(33,669)
Total property and equipment, net (1)	$	4,311	$	4,761

SEC Form 10-Q filed by Arlo Technologies Inc.