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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Arlo Technologies Inc | NYSE:ARLO | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.15 | 0.89% | 17.00 | 1,250 | 13:13:19 |
Delaware
|
38-4061754
|
|
(State or other Jurisdiction of Incorporation or Organization)
|
(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
|
Item
|
PART I
|
Page
|
Item 1.
|
||
Item 1A.
|
||
Item 1B.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
PART II
|
||
Item 5.
|
||
Item 6.
|
||
Item 7.
|
||
Item 7A.
|
||
Item 8.
|
||
Item 9.
|
||
Item 9A.
|
||
Item 9B.
|
||
PART III
|
||
Item 10.
|
||
Item 11.
|
||
Item 12.
|
||
Item 13.
|
||
Item 14.
|
||
PART IV
|
||
Item 15.
|
||
Item 16.
|
||
|
Item 1.
|
Business
|
•
|
The Devices screen provides a quick at-a-glance dashboard of the user’s devices linked to their account, with valuable status icons like device battery life, and actionable buttons to live stream from their Arlo camera, call e911, activate a siren, or access the device’s settings.
|
•
|
The Library screen delivers a timeline view of recorded video clips in the user’s Arlo Smart account, with additional tagging of clips that contain subject matter identified by Arlo Smart’s AI- and CV-based object detection, such as person, package, vehicle or even animal.
|
•
|
The Mode screen enables users to quickly Arm or Disarm their Arlo system.
|
•
|
The Settings screen provides access to additional device or account level information and features, including customization of Arlo Smart notifications and detection capabilities.
|
Name
|
Age
|
Position(s)
|
Matthew McRae
|
46
|
Chief Executive Officer and Director
|
Christine M. Gorjanc
|
63
|
Chief Financial Officer
|
Brian Busse
|
51
|
General Counsel and Corporate Secretary
|
Item 1A.
|
Risk Factors
|
•
|
changes in the pricing policies of, or the introduction of new products by, us or our competitors;
|
•
|
delays in the introduction of new products by us or market acceptance of these products;
|
•
|
health epidemics and other outbreaks, including the COVID-19, which could significantly disrupt our operations
|
•
|
introductions of new technologies and changes in consumer preferences that result in either unanticipated or unexpectedly rapid product category shifts;
|
•
|
competition with greater resources may cause us to lower prices and in turn could result in reduced margins and loss of market share;
|
•
|
epidemic or widespread product failure, or unanticipated safety issues, in one or more of our products;
|
•
|
slow or negative growth in the connected lifestyle, home electronics, and related technology markets;
|
•
|
seasonal shifts in end-market demand for our products;
|
•
|
unanticipated decreases or delays in purchases of our products by our significant retailers, distributors, and other channel partners;
|
•
|
component supply constraints from our vendors;
|
•
|
unanticipated increases in costs, including air freight, associated with shipping and delivery of our products;
|
•
|
the inability to maintain stable operations by our suppliers and other parties with whom we have commercial relationships;
|
•
|
discovery of security vulnerabilities in our products, services or systems, leading to negative publicity, decreased demand, or potential liability;
|
•
|
foreign currency exchange rate fluctuations in the jurisdictions where we transact sales and expenditures in local currency;
|
•
|
excess levels of inventory and low turns;
|
•
|
changes in or consolidation of our sales channels and wholesale distributor relationships or failure to manage our sales channel inventory and warehousing requirements;
|
•
|
delay or failure to fulfill orders for our products on a timely basis;
|
•
|
delay or failure of our retailers, distributors, and other channel partners to purchase at their historic volumes or at the volumes that they or we forecast;
|
•
|
changes in tax rates or adverse changes in tax laws that expose us to additional income tax liabilities;
|
•
|
changes in U.S. and international tax policy, including changes that adversely affect customs, tax or duty rates (such as the tariffs on products imported from China enacted by the Trump administration), as well as income tax legislation and regulations that affect the countries where we conduct business;
|
•
|
operational disruptions, such as transportation delays or failure of our order processing system, particularly if they occur at the end of a fiscal quarter;
|
•
|
disruptions or delays related to our financial and enterprise resource planning systems;
|
•
|
our inability to accurately forecast product demand, resulting in increased inventory exposure;
|
•
|
allowance for doubtful accounts exposure with our existing retailers, distributors and other channel partners and new retailers, distributors and other channel partners, particularly as we expand into new international markets;
|
•
|
geopolitical disruption, including sudden changes in immigration policies, leading to disruption in our workforce or delay or even stoppage of our operations in manufacturing, transportation, technical support, and research and development;
|
•
|
terms of our contracts with channel partners or suppliers that cause us to incur additional expenses or assume additional liabilities;
|
•
|
an increase in price protection claims, redemptions of marketing rebates, product warranty and stock rotation returns or allowance for doubtful accounts;
|
•
|
litigation involving alleged patent infringement;
|
•
|
failure to effectively manage our third-party customer support partners, which may result in customer complaints and/or harm to the Arlo brand;
|
•
|
our inability to monitor and ensure compliance with our code of ethics, our anti-corruption compliance program, and domestic and international anti-corruption laws and regulations, whether in relation to our employees or with our suppliers or retailers, distributors, or other channel partners;
|
•
|
labor unrest at facilities managed by our third-party manufacturers;
|
•
|
workplace or human rights violations in certain countries in which our third-party manufacturers or suppliers operate, which may affect the Arlo brand and negatively affect our products’ acceptance by consumers;
|
•
|
unanticipated shifts or declines in profit by geographical region that would adversely impact our tax rate;
|
•
|
failure to implement and maintain the appropriate internal controls over financial reporting, which may result in restatements of our financial statements; and
|
•
|
any changes in accounting rules.
|
•
|
loss of or delay in revenue and loss of market share;
|
•
|
negative publicity and damage to our reputation and brand;
|
•
|
a decline in the average selling price of our products and services;
|
•
|
adverse reactions in our sales channels, such as reduced shelf space, reduced online product visibility, or loss of sales channels; and
|
•
|
increased levels of product returns.
|
•
|
our channel partner agreements generally do not require minimum purchases;
|
•
|
our retailers, distributors, and other channel partners can stop purchasing and stop marketing our products at any time; and
|
•
|
our channel partner agreements generally are not exclusive.
|
•
|
actual or anticipated fluctuations in our results of operations or our competitors’ operating results;
|
•
|
actual or anticipated changes in the growth rate of the connected lifestyle market, our growth rate or our competitors’ growth rates;
|
•
|
delays in the introduction of new products by us or market acceptance of these products;
|
•
|
conditions in the financial markets in general or changes in general economic conditions;
|
•
|
changes in governmental regulation, including taxation and tariff policies;
|
•
|
interest rate or currency exchange rate fluctuations;
|
•
|
our ability to forecast or report accurate financial results; and
|
•
|
changes in stock market analyst recommendations regarding our common stock, other comparable companies, or our industry generally.
|
•
|
unexpected increases in manufacturing and repair costs;
|
•
|
inability to control the quality and reliability of finished products;
|
•
|
inability to control delivery schedules;
|
•
|
potential liability for expenses incurred by third-party manufacturers in reliance on our forecasts that later prove to be inaccurate;
|
•
|
potential lack of adequate capacity to manufacture all or a part of the products we require; and
|
•
|
potential labor unrest affecting the ability of the third-party manufacturers to produce our products.
|
•
|
exchange rate fluctuations;
|
•
|
political and economic instability, international terrorism, and anti-American sentiment, particularly in emerging markets;
|
•
|
potential for violations of anti-corruption laws and regulations, such as those related to bribery and fraud;
|
•
|
preference for locally branded products, and laws and business practices favoring local competition;
|
•
|
potential consequences of, and uncertainty related to, the “Brexit” process in the United Kingdom, which could lead to additional expense and complexity in doing business there;
|
•
|
increased difficulty in managing inventory;
|
•
|
delayed revenue recognition;
|
•
|
less effective protection of intellectual property;
|
•
|
stringent consumer protection and product compliance regulations, including but not limited to General Data Protection Regulation in the European Union, European competition law, the Restriction of Hazardous Substances directive, the Waste Electrical and Electronic Equipment directive and the European Ecodesign directive, that are costly to comply with and may vary from country to country;
|
•
|
difficulties and costs of staffing and managing foreign operations;
|
•
|
business difficulties, including potential bankruptcy or liquidation, of any of our worldwide third-party logistics providers; and
|
•
|
changes in local tax and customs duty laws or changes in the enforcement, application, or interpretation of such laws.
|
•
|
changes in tax laws or the regulatory environment;
|
•
|
changes in accounting and tax standards or practices;
|
•
|
changes in the composition of operating income by tax jurisdiction; and
|
•
|
our operating results before taxes.
|
•
|
the failure of securities analysts to cover our common stock or changes in financial estimates by analysts;
|
•
|
the inability to meet the financial estimates of securities analysts who follow our common stock or changes in earnings estimates by analysts;
|
•
|
strategic actions by us or our competitors;
|
•
|
announcements by us or our competitors of significant contracts, acquisitions, joint marketing relationships, joint ventures or capital commitments;
|
•
|
our quarterly or annual earnings, or those of other companies in our industry;
|
•
|
actual or anticipated fluctuations in our operating results and those of our competitors;
|
•
|
general economic and stock market conditions;
|
•
|
the public reaction to our press releases, our other public announcements and our filings with the SEC;
|
•
|
risks related to our business and our industry, including those discussed above;
|
•
|
changes in conditions or trends in our industry, markets or customers;
|
•
|
the trading volume of our common stock;
|
•
|
future sales of our common stock or other securities; and
|
•
|
investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives.
|
•
|
the inability of our stockholders to call a special meeting;
|
•
|
the inability of our stockholders to act without a meeting of stockholders;
|
•
|
rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings;
|
•
|
the right of our board of directors to issue preferred stock without stockholder approval;
|
•
|
the division of our board of directors into three classes of directors, with each class serving a staggered three-year term, and this classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult;
|
•
|
a provision that stockholders may only remove directors with cause while the board of directors is classified; and
|
•
|
the ability of our directors, and not stockholders, to fill vacancies on our board of directors.
|
Item 1B.
|
Unresolved Staff Comments
|
Item 2.
|
Properties
|
Item 3.
|
Legal Proceedings
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
Item 6.
|
Selected Financial Data
|
|
Year Ended December 31,
|
||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2016
|
||||||||
|
(In thousands, except per share data)
|
||||||||||||||
Revenue (1)
|
$
|
370,007
|
|
|
$
|
464,918
|
|
|
$
|
370,658
|
|
|
$
|
184,604
|
|
Cost of revenue (2)
|
334,203
|
|
|
372,843
|
|
|
279,424
|
|
|
146,570
|
|
||||
Gross profit
|
35,804
|
|
|
92,075
|
|
|
91,234
|
|
|
38,034
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and development (2)
|
69,384
|
|
|
58,794
|
|
|
34,683
|
|
|
24,438
|
|
||||
Sales and marketing (2)
|
56,985
|
|
|
52,593
|
|
|
34,340
|
|
|
18,455
|
|
||||
General and administrative (2)
|
47,624
|
|
|
28,209
|
|
|
15,096
|
|
|
8,289
|
|
||||
Separation expense
|
1,913
|
|
|
27,252
|
|
|
1,384
|
|
|
—
|
|
||||
Gain on sale of business (3)
|
(54,881
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total operating expenses
|
121,025
|
|
|
166,848
|
|
|
85,503
|
|
|
51,182
|
|
||||
Income (loss) from operations
|
(85,221
|
)
|
|
(74,773
|
)
|
|
5,731
|
|
|
(13,148
|
)
|
||||
Interest income
|
2,737
|
|
|
1,239
|
|
|
—
|
|
|
—
|
|
||||
Other income (expense), net
|
913
|
|
|
(1,177
|
)
|
|
1,946
|
|
|
(512
|
)
|
||||
Income (loss) before income taxes
|
(81,571
|
)
|
|
(74,711
|
)
|
|
7,677
|
|
|
(13,660
|
)
|
||||
Provision for income taxes
|
4,380
|
|
|
772
|
|
|
1,128
|
|
|
83
|
|
||||
Net income (loss)
|
$
|
(85,951
|
)
|
|
$
|
(75,483
|
)
|
|
$
|
6,549
|
|
|
$
|
(13,743
|
)
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Basic (4)
|
$
|
(1.14
|
)
|
|
$
|
(1.12
|
)
|
|
$
|
0.11
|
|
|
$
|
(0.22
|
)
|
Diluted (4)
|
$
|
(1.14
|
)
|
|
$
|
(1.12
|
)
|
|
$
|
0.11
|
|
|
$
|
(0.22
|
)
|
(1)
|
On January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606) (“ASC 606”) and applied this guidance to those contracts which were not completed at the date of adoption using the modified retrospective method. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods (“ASC 605”). The Company recognized the cumulative effect of initially applying ASC 606 as an adjustment to the opening balance of Net parent investment.
|
(2)
|
Stock-based compensation expense was allocated as follows:
|
|
Year Ended December 31,
|
||||||||||||||||||||||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2016
|
||||||||||||||||||||||||||||||||
|
Total
|
|
Direct
|
|
Indirect
|
|
Total
|
|
Direct
|
|
Indirect
|
|
Total
|
|
Direct
|
|
Indirect
|
|
Total
|
||||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||||||||||
Cost of revenue
|
$
|
2,013
|
|
|
$
|
608
|
|
|
$
|
583
|
|
|
$
|
1,191
|
|
|
$
|
102
|
|
|
$
|
599
|
|
|
$
|
701
|
|
|
$
|
61
|
|
|
$
|
266
|
|
|
$
|
327
|
|
Research and development
|
6,868
|
|
|
3,078
|
|
|
396
|
|
|
3,474
|
|
|
1,959
|
|
|
455
|
|
|
2,414
|
|
|
1,349
|
|
|
195
|
|
|
1,544
|
|
||||||||||
Sales and marketing
|
3,859
|
|
|
1,992
|
|
|
969
|
|
|
2,961
|
|
|
390
|
|
|
866
|
|
|
1,256
|
|
|
110
|
|
|
407
|
|
|
517
|
|
||||||||||
General and administrative
|
10,154
|
|
|
3,153
|
|
|
2,100
|
|
|
5,253
|
|
|
—
|
|
|
2,547
|
|
|
2,547
|
|
|
—
|
|
|
1,216
|
|
|
1,216
|
|
||||||||||
Total
|
$
|
22,894
|
|
|
$
|
8,831
|
|
|
$
|
4,048
|
|
|
$
|
12,879
|
|
|
$
|
2,451
|
|
|
$
|
4,467
|
|
|
$
|
6,918
|
|
|
$
|
1,520
|
|
|
$
|
2,084
|
|
|
$
|
3,604
|
|
(3)
|
Relates to the sale of our commercial operations in Europe in the fourth quarter of 2019. Refer to Note 4, Disposal of business, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for a complete discussion of this disposal.
|
|
As of December 31,
|
||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2016
|
||||||||
|
(In thousands)
|
||||||||||||||
Cash, cash equivalents and short-term investments (1)
|
$
|
256,670
|
|
|
$
|
201,027
|
|
|
$
|
108
|
|
|
$
|
220
|
|
Working capital
|
$
|
175,668
|
|
|
$
|
233,484
|
|
|
$
|
112,878
|
|
|
$
|
54,967
|
|
Total assets (2)
|
$
|
542,712
|
|
|
$
|
595,946
|
|
|
$
|
269,820
|
|
|
$
|
158,581
|
|
Deferred revenue (current and non-current)
|
$
|
66,098
|
|
|
$
|
49,991
|
|
|
$
|
47,404
|
|
|
$
|
23,393
|
|
Non-current operating lease liabilities (2)
|
$
|
29,001
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-current financing lease obligation (3)
|
$
|
—
|
|
|
$
|
19,978
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total liabilities
|
$
|
339,336
|
|
|
$
|
326,444
|
|
|
$
|
144,401
|
|
|
$
|
85,407
|
|
Stockholders’ equity
|
$
|
203,376
|
|
|
$
|
269,502
|
|
|
$
|
125,419
|
|
|
$
|
73,174
|
|
(1)
|
In fiscal year 2018, reflects $70.9 million in cash contributed by NETGEAR prior to the completion of the IPO in 2018, and the net proceeds of $173.4 million raised from the IPO, net of the portion of the offering cost paid by Arlo, which portion was $1.4 million. Our total offering cost is $4.6 million, of which $3.2 million was paid by NETGEAR. In fiscal year 2019, reflects $75.2 million from Verisure related to sale of the Company's commercial operations in Europe and advance payment on the product purchase and NRE services under the Supply Agreement.
|
(2)
|
On January 1, 2019, the Company adopted ASU 2016-12, "Leases" (Topic 842) and applied this guidance utilizing the modified retrospective transition method through a cumulative-effect adjustment at the beginning of the first fiscal quarter of 2019. Refer to Note 11, Commitments and Contingencies in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for further information about our leases.
|
(3)
|
The Company was deemed to be the accounting owner of its build-to-suit lease arrangement for its San Jose corporate headquarters and the construction was in progress at adoption date. As such, the Company reevaluated its build-to-suit lease arrangement under ASU 2016-02 to ascertain whether it meets the criteria as the accounting owner of the build-to-suit lease arrangement through control of the underlying leased asset. The Company concluded that it did not have control over the underlying leased asset. As a result, the Company de-recognized the build to suit asset and liability as of January 1, 2019. Refer to Note 11, Commitments and Contingencies, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for further details.
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Year Ended December 31,
|
|||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|||||||||||||||
|
(In thousands, except percentage data)
|
|||||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Products
|
$
|
323,242
|
|
|
87.4
|
%
|
|
$
|
427,113
|
|
|
91.9
|
%
|
|
$
|
341,581
|
|
|
92.2
|
%
|
Services
|
46,765
|
|
|
12.6
|
%
|
|
37,805
|
|
|
8.1
|
%
|
|
29,077
|
|
|
7.8
|
%
|
|||
Total revenue
|
370,007
|
|
|
100.0
|
%
|
|
464,918
|
|
|
100.0
|
%
|
|
370,658
|
|
|
100.0
|
%
|
|||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Products
|
307,348
|
|
|
83.1
|
%
|
|
354,023
|
|
|
76.1
|
%
|
|
270,382
|
|
|
72.9
|
%
|
|||
Services
|
26,855
|
|
|
7.3
|
%
|
|
18,820
|
|
|
4.0
|
%
|
|
9,042
|
|
|
2.4
|
%
|
|||
Total cost of revenue
|
334,203
|
|
|
90.3
|
%
|
|
372,843
|
|
|
80.2
|
%
|
|
279,424
|
|
|
75.4
|
%
|
|||
Gross profit
|
35,804
|
|
|
9.7
|
%
|
|
92,075
|
|
|
19.8
|
%
|
|
91,234
|
|
|
24.6
|
%
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Research and development
|
69,384
|
|
|
18.8
|
%
|
|
58,794
|
|
|
12.6
|
%
|
|
34,683
|
|
|
9.4
|
%
|
|||
Sales and marketing
|
56,985
|
|
|
15.4
|
%
|
|
52,593
|
|
|
11.3
|
%
|
|
34,340
|
|
|
9.3
|
%
|
|||
General and administrative
|
47,624
|
|
|
12.9
|
%
|
|
28,209
|
|
|
6.1
|
%
|
|
15,096
|
|
|
4.1
|
%
|
|||
Separation expense
|
1,913
|
|
|
0.5
|
%
|
|
27,252
|
|
|
5.9
|
%
|
|
1,384
|
|
|
0.4
|
%
|
|||
Gain on sale of business
|
(54,881
|
)
|
|
(14.8
|
)%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|||
Total operating expenses
|
121,025
|
|
|
32.7
|
%
|
|
166,848
|
|
|
35.9
|
%
|
|
85,503
|
|
|
23.1
|
%
|
|||
Income (loss) from operations
|
(85,221
|
)
|
|
(23.0
|
)%
|
|
(74,773
|
)
|
|
(16.1
|
)%
|
|
5,731
|
|
|
1.5
|
%
|
|||
Interest income
|
2,737
|
|
|
0.7
|
%
|
|
1,239
|
|
|
0.3
|
%
|
|
—
|
|
|
—
|
%
|
|||
Other income (expense), net
|
913
|
|
|
0.3
|
%
|
|
(1,177
|
)
|
|
(0.3
|
)%
|
|
1,946
|
|
|
0.5
|
%
|
|||
Income (loss) before income taxes
|
(81,571
|
)
|
|
(22.0
|
)%
|
|
(74,711
|
)
|
|
(16.1
|
)%
|
|
7,677
|
|
|
2.1
|
%
|
|||
Provision for income taxes
|
4,380
|
|
|
1.2
|
%
|
|
772
|
|
|
0.1
|
%
|
|
1,128
|
|
|
0.3
|
%
|
|||
Net income (loss)
|
$
|
(85,951
|
)
|
|
(23.2
|
)%
|
|
$
|
(75,483
|
)
|
|
(16.2
|
)%
|
|
$
|
6,549
|
|
|
1.8
|
%
|
|
Year Ended December 31,
|
||||||||||||||||
|
2019
|
|
% Change
|
|
2018
|
|
% Change
|
|
2017
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
Americas
|
$
|
289,160
|
|
|
(23.3
|
)%
|
|
$
|
376,805
|
|
|
28.7
|
%
|
|
$
|
292,671
|
|
Percentage of revenue
|
78.1
|
%
|
|
|
|
81.0
|
%
|
|
|
|
79.0
|
%
|
|||||
EMEA
|
$
|
57,232
|
|
|
(12.6
|
)%
|
|
$
|
65,462
|
|
|
11.3
|
%
|
|
$
|
58,795
|
|
Percentage of revenue
|
15.5
|
%
|
|
|
|
14.1
|
%
|
|
|
|
15.9
|
%
|
|||||
APAC
|
$
|
23,615
|
|
|
4.3
|
%
|
|
$
|
22,651
|
|
|
18.0
|
%
|
|
$
|
19,192
|
|
Percentage of revenue
|
6.4
|
%
|
|
|
|
4.8
|
%
|
|
|
|
5.1
|
%
|
|||||
Total revenue
|
$
|
370,007
|
|
|
(20.4
|
)%
|
|
$
|
464,918
|
|
|
25.4
|
%
|
|
$
|
370,658
|
|
|
Year Ended December 31,
|
||||||||||||||||
|
2019
|
|
% Change
|
|
2018
|
|
% Change
|
|
2017
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
||||||||
Products
|
$
|
307,348
|
|
|
(13.2
|
)%
|
|
$
|
354,023
|
|
|
30.9
|
%
|
|
$
|
270,382
|
|
Services
|
26,855
|
|
|
42.7
|
%
|
|
18,820
|
|
|
108.1
|
%
|
|
9,042
|
|
|||
Total cost of revenue
|
$
|
334,203
|
|
|
(10.4
|
)%
|
|
$
|
372,843
|
|
|
33.4
|
%
|
|
$
|
279,424
|
|
Gross margin
|
9.7
|
%
|
|
|
|
19.8
|
%
|
|
|
|
24.6
|
%
|
|
Year Ended December 31,
|
||||||||||||||||
|
2019
|
|
% Change
|
|
2018
|
|
% Change
|
|
2017
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
Research and development expense
|
$
|
69,384
|
|
|
18.0
|
%
|
|
$
|
58,794
|
|
|
69.5
|
%
|
|
$
|
34,683
|
|
|
Year Ended December 31,
|
||||||||||||||||
|
2019
|
|
% Change
|
|
2018
|
|
% Change
|
|
2017
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
Sales and marketing expense
|
$
|
56,985
|
|
|
8.4
|
%
|
|
$
|
52,593
|
|
|
53.2
|
%
|
|
$
|
34,340
|
|
|
Year Ended December 31,
|
||||||||||||||||
|
2019
|
|
% Change
|
|
2018
|
|
% Change
|
|
2017
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
General and administrative expense
|
$
|
47,624
|
|
|
68.8
|
%
|
|
$
|
28,209
|
|
|
86.9
|
%
|
|
$
|
15,096
|
|
|
Year Ended December 31,
|
|||||||||||||||
|
2019
|
|
% Change
|
|
2018
|
|
% Change
|
|
2017
|
|||||||
|
(In thousands, except percentage data)
|
|||||||||||||||
Separation expense
|
$
|
1,913
|
|
|
(93.0
|
)%
|
|
$
|
27,252
|
|
|
**
|
|
$
|
1,384
|
|
|
Year Ended December 31,
|
||||||||||||||
|
2019
|
|
% Change
|
|
2018
|
|
% Change
|
|
2017
|
||||||
|
(In thousands, except percentage data)
|
||||||||||||||
Gain on sale of business
|
$
|
(54,881
|
)
|
|
**
|
|
$
|
—
|
|
|
**
|
|
$
|
—
|
|
|
Year Ended December 31,
|
|||||||||||
|
2019
|
|
% Change
|
|
2018
|
|
% Change
|
|
2017
|
|||
|
(In thousands, except percentage data)
|
|||||||||||
Interest income
|
2,737
|
|
|
**
|
|
1,239
|
|
|
**
|
|
—
|
|
Other income (expense), net
|
913
|
|
|
**
|
|
(1,177
|
)
|
|
**
|
|
1,946
|
|
|
Year Ended December 31,
|
||||||||||||||||
|
2019
|
|
% Change
|
|
2018
|
|
% Change
|
|
2017
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
Provision for income taxes
|
$
|
4,380
|
|
|
467.4
|
%
|
|
$
|
772
|
|
|
(31.6
|
)%
|
|
$
|
1,128
|
|
Effective tax rate
|
(5.4
|
)%
|
|
|
|
(1.0
|
)%
|
|
|
|
14.7
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(In thousands)
|
||||||||||
Net cash provided by (used in) operating activities
|
$
|
9,171
|
|
|
$
|
(17,686
|
)
|
|
$
|
(38,985
|
)
|
Net cash provided by (used in) investing activities
|
76,262
|
|
|
(71,285
|
)
|
|
(4,315
|
)
|
|||
Net cash provided by (used in) financing activities
|
(38
|
)
|
|
244,287
|
|
|
43,188
|
|
|||
Net increase (decrease) in cash and cash equivalents and restricted cash
|
$
|
85,395
|
|
|
$
|
155,316
|
|
|
$
|
(112
|
)
|
|
Payments due by period
|
||||||||||||||||||
|
|
|
Less Than
|
|
1-3
|
|
3-5
|
|
More Than
|
||||||||||
|
Total
|
|
1 Year
|
|
Years
|
|
Years
|
|
5 Years
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Operating leases
|
$
|
41,011
|
|
|
$
|
5,660
|
|
|
$
|
11,324
|
|
|
$
|
9,358
|
|
|
$
|
14,669
|
|
Purchase obligations
|
29,615
|
|
|
29,615
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
$
|
70,626
|
|
|
$
|
35,275
|
|
|
$
|
11,324
|
|
|
$
|
9,358
|
|
|
$
|
14,669
|
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 8.
|
Financial Statements and Supplementary Data
|
|
As of December 31,
|
||||||
|
2019
|
|
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
|
|
||
Commitments and contingencies (Note 11)
|
|
|
|
|
|
||
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 (loss)
|
(2
|
)
|
|
—
|
|
||
Accumulated deficit
|
(131,519
|
)
|
|
(45,849
|
)
|
||
Total stockholders’ equity
|
203,376
|
|
|
269,502
|
|
||
Total liabilities and stockholders’ equity
|
$
|
542,712
|
|
|
$
|
595,946
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(In thousands, except per share data)
|
||||||||||
Revenue:
|
|
|
|
|
|
||||||
Products
|
$
|
323,242
|
|
|
$
|
427,113
|
|
|
$
|
341,581
|
|
Services
|
46,765
|
|
|
37,805
|
|
|
29,077
|
|
|||
Total revenue
|
370,007
|
|
|
464,918
|
|
|
370,658
|
|
|||
Cost of revenue:
|
|
|
|
|
|
||||||
Products
|
307,348
|
|
|
354,023
|
|
|
270,382
|
|
|||
Services
|
26,855
|
|
|
18,820
|
|
|
9,042
|
|
|||
Total cost of revenue
|
334,203
|
|
|
372,843
|
|
|
279,424
|
|
|||
Gross profit
|
35,804
|
|
|
92,075
|
|
|
91,234
|
|
|||
|
|
|
|
|
|
||||||
Operating expenses:
|
|
|
|
|
|
||||||
Research and development
|
69,384
|
|
|
58,794
|
|
|
34,683
|
|
|||
Sales and marketing
|
56,985
|
|
|
52,593
|
|
|
34,340
|
|
|||
General and administrative
|
47,624
|
|
|
28,209
|
|
|
15,096
|
|
|||
Separation expense
|
1,913
|
|
|
27,252
|
|
|
1,384
|
|
|||
Gain on sale of business
|
(54,881
|
)
|
|
—
|
|
|
—
|
|
|||
Total operating expenses
|
121,025
|
|
|
166,848
|
|
|
85,503
|
|
|||
|
|
|
|
|
|
||||||
Income (loss) from operations
|
(85,221
|
)
|
|
(74,773
|
)
|
|
5,731
|
|
|||
Interest income
|
2,737
|
|
|
1,239
|
|
|
—
|
|
|||
Other income (expense), net
|
913
|
|
|
(1,177
|
)
|
|
1,946
|
|
|||
Income (loss) before income taxes
|
(81,571
|
)
|
|
(74,711
|
)
|
|
7,677
|
|
|||
Provision for income taxes
|
4,380
|
|
|
772
|
|
|
1,128
|
|
|||
Net income (loss)
|
$
|
(85,951
|
)
|
|
$
|
(75,483
|
)
|
|
$
|
6,549
|
|
|
|
|
|
|
|
||||||
Net income (loss) per share:
|
|
|
|
|
|
||||||
Basic
|
$
|
(1.14
|
)
|
|
$
|
(1.12
|
)
|
|
$
|
0.11
|
|
Diluted
|
$
|
(1.14
|
)
|
|
$
|
(1.12
|
)
|
|
$
|
0.11
|
|
Weighted average shares used to compute net income (loss) per share:
|
|
|
|
|
|
||||||
Basic
|
75,074
|
|
|
67,231
|
|
|
62,250
|
|
|||
Diluted
|
75,074
|
|
|
67,231
|
|
|
62,250
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(In thousands)
|
||||||||||
Net income (loss)
|
$
|
(85,951
|
)
|
|
$
|
(75,483
|
)
|
|
$
|
6,549
|
|
Other comprehensive income (loss), before and after tax:
|
|
|
|
|
|
||||||
Unrealized gain (loss) on derivative instruments
|
(27
|
)
|
|
2
|
|
|
—
|
|
|||
Unrealized gain (loss) on available-for-sale securities
|
25
|
|
|
(2
|
)
|
|
—
|
|
|||
Total other comprehensive income (loss), before tax
|
(2
|
)
|
|
—
|
|
|
—
|
|
|||
Tax provision related to derivative instruments
|
—
|
|
|
—
|
|
|
—
|
|
|||
Tax benefit related to available-for-sale securities
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total other comprehensive income (loss), net of tax
|
(2
|
)
|
|
—
|
|
|
—
|
|
|||
Comprehensive income (loss)
|
$
|
(85,953
|
)
|
|
$
|
(75,483
|
)
|
|
$
|
6,549
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Shares
|
|
Amount
|
|
Additional Paid-In Capital
|
|
Net Parent Investment
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Accumulated Deficit
|
|
Total
|
|||||||||||||
|
(In thousands)
|
|||||||||||||||||||||||||
Balance as of December 31, 2016
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
73,174
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
73,174
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
6,549
|
|
|
—
|
|
|
—
|
|
|
6,549
|
|
||||||
Net transfer from Parent
|
—
|
|
|
—
|
|
|
—
|
|
|
43,245
|
|
|
—
|
|
|
—
|
|
|
43,245
|
|
||||||
Stock-based compensation expense funded by Parent
|
—
|
|
|
—
|
|
|
—
|
|
|
2,451
|
|
|
—
|
|
|
—
|
|
|
2,451
|
|
||||||
Balance as of December 31, 2017
|
—
|
|
|
—
|
|
|
—
|
|
|
125,419
|
|
|
—
|
|
|
—
|
|
|
125,419
|
|
||||||
Cumulative impact from adoption of ASC 606, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,061
|
)
|
|
—
|
|
|
—
|
|
|
(3,061
|
)
|
||||||
Net loss, prior to the completion of the Contribution
|
—
|
|
|
—
|
|
|
—
|
|
|
(29,634
|
)
|
|
—
|
|
|
—
|
|
|
(29,634
|
)
|
||||||
Net loss, after the completion of the Contribution
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45,849
|
)
|
|
(45,849
|
)
|
||||||
Issuance of common stock from initial public offering
|
11,747
|
|
|
12
|
|
|
174,725
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
174,737
|
|
||||||
Initial public offering costs paid by the Company
|
—
|
|
|
—
|
|
|
(1,404
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,404
|
)
|
||||||
Initial public offering costs paid by Parent
|
—
|
|
|
—
|
|
|
(3,148
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,148
|
)
|
||||||
Net transfer from Parent
|
—
|
|
|
—
|
|
|
—
|
|
|
43,549
|
|
|
—
|
|
|
—
|
|
|
43,549
|
|
||||||
Conversion of Net parent investment into common stock
|
62,500
|
|
|
62
|
|
|
139,030
|
|
|
(139,030
|
)
|
|
—
|
|
|
—
|
|
|
62
|
|
||||||
Stock-based compensation expense funded by Parent
|
—
|
|
|
—
|
|
|
—
|
|
|
2,757
|
|
|
—
|
|
|
—
|
|
|
2,757
|
|
||||||
Stock-based compensation expense post-initial public offering
|
—
|
|
|
—
|
|
|
6,074
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,074
|
|
||||||
Change in unrealized gains and losses on available-for-sale securities, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
||||||
Change in unrealized gains and losses on derivatives, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||||
Balance as of December 31, 2018
|
74,247
|
|
|
74
|
|
|
315,277
|
|
|
—
|
|
|
—
|
|
|
(45,849
|
)
|
|
269,502
|
|
||||||
Cumulative-effect adjustment from adoption of ASC 842, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
281
|
|
|
281
|
|
||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(85,951
|
)
|
|
(85,951
|
)
|
||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
19,582
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,582
|
|
||||||
Issuance of common stock under stock-based compensation plans
|
1,152
|
|
|
1
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
||||||
Issuance of common stock under Employee Stock Purchase Plan
|
767
|
|
|
1
|
|
|
1,825
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,826
|
|
||||||
Restricted stock unit withholdings
|
(380
|
)
|
|
—
|
|
|
(1,875
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,875
|
)
|
||||||
Change in unrealized gains and losses on available-for-sale securities, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
25
|
|
||||||
Change in unrealized gains and losses on derivatives, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27
|
)
|
|
—
|
|
|
(27
|
)
|
||||||
Balance as of December 31, 2019
|
75,786
|
|
|
$
|
76
|
|
|
$
|
334,821
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
(131,519
|
)
|
|
$
|
203,376
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(In thousands)
|
||||||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
(85,951
|
)
|
|
$
|
(75,483
|
)
|
|
$
|
6,549
|
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
10,681
|
|
|
5,307
|
|
|
3,740
|
|
|||
Stock-based compensation expense
|
22,894
|
|
|
8,831
|
|
|
2,451
|
|
|||
Provision for (release of) bad debts and inventory
|
(2,921
|
)
|
|
6,739
|
|
|
404
|
|
|||
Gain on sale of business
|
(54,881
|
)
|
|
—
|
|
|
—
|
|
|||
Deferred income taxes
|
(210
|
)
|
|
(1,108
|
)
|
|
(388
|
)
|
|||
Premium amortization/discount accretion on investments, net
|
(461
|
)
|
|
(120
|
)
|
|
—
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable, net
|
38,247
|
|
|
(118,778
|
)
|
|
(75,838
|
)
|
|||
Inventories
|
53,604
|
|
|
(48,934
|
)
|
|
(35,639
|
)
|
|||
Prepaid expenses and other assets
|
11,525
|
|
|
(16,592
|
)
|
|
62
|
|
|||
Accounts payable
|
28,791
|
|
|
87,307
|
|
|
(350
|
)
|
|||
Deferred revenue
|
22,567
|
|
|
11,253
|
|
|
24,011
|
|
|||
Accrued liabilities
|
(34,714
|
)
|
|
123,892
|
|
|
36,013
|
|
|||
Net cash provided by (used in) operating activities
|
9,171
|
|
|
(17,686
|
)
|
|
(38,985
|
)
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Purchases of property and equipment
|
(6,664
|
)
|
|
(21,666
|
)
|
|
(3,578
|
)
|
|||
Proceeds from sale of business
|
52,694
|
|
|
—
|
|
|
—
|
|
|||
Purchases of short-term investments
|
(29,768
|
)
|
|
(54,619
|
)
|
|
—
|
|
|||
Proceeds from maturities of short-term investments
|
60,000
|
|
|
5,000
|
|
|
—
|
|
|||
Payments made in connection with business acquisition, net of cash acquired
|
—
|
|
|
—
|
|
|
(737
|
)
|
|||
Net cash provided by (used in) investing activities
|
76,262
|
|
|
(71,285
|
)
|
|
(4,315
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Proceeds from initial public offering, net of offering costs
|
—
|
|
|
173,395
|
|
|
—
|
|
|||
Restricted stock unit withholdings
|
(1,875
|
)
|
|
—
|
|
|
|
||||
Proceeds related to employee benefit plans
|
1,837
|
|
|
—
|
|
|
—
|
|
|||
Net investment from NETGEAR
|
—
|
|
|
70,892
|
|
|
43,188
|
|
|||
Net cash provided by (used in) financing activities
|
(38
|
)
|
|
244,287
|
|
|
43,188
|
|
|||
Net increase (decrease) in cash and cash equivalents and restricted cash
|
85,395
|
|
|
155,316
|
|
|
(112
|
)
|
|||
Cash and cash equivalents and restricted cash, at beginning of period
|
155,424
|
|
|
108
|
|
|
220
|
|
|||
Cash and cash equivalents and restricted cash, at end of period
|
$
|
240,819
|
|
|
$
|
155,424
|
|
|
$
|
108
|
|
|
|
|
|
|
|
||||||
Non-cash investing and financing activities:
|
|
|
|
|
|
||||||
Purchases of property and equipment included in accounts payable and accrued liabilities
|
$
|
1,086
|
|
|
$
|
16,003
|
|
|
$
|
81
|
|
De-recognized fair value of build-to-suit lease
|
$
|
(21,610
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Estimated fair value of a facility under build-to-suit lease including tenant improvements
|
$
|
—
|
|
|
$
|
28,357
|
|
|
$
|
—
|
|
Supplemental cash flow information:
|
|
|
|
|
|
||||||
Cash paid for income taxes, net
|
$
|
960
|
|
|
$
|
89
|
|
|
$
|
—
|
|
|
As of December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(In thousands)
|
||||||||||
Cash and cash equivalents
|
$
|
236,680
|
|
|
$
|
151,290
|
|
|
$
|
108
|
|
Restricted cash
|
4,139
|
|
|
4,134
|
|
|
—
|
|
|||
Total as presented on the consolidated statements of cash flows
|
$
|
240,819
|
|
|
$
|
155,424
|
|
|
$
|
108
|
|
Asset Category:
|
|
Range of Useful Lives
|
Computer equipment
|
|
2 years
|
Furniture and fixtures
|
|
5 years
|
Software
|
|
2-5 years
|
Machinery and equipment
|
|
2-3 years
|
Leasehold improvements
|
|
Shorter of remaining lease term or 7 years
|
•
|
The time-based vesting RSUs will vest in three equal annual installments during the period that begins on the RSU grant date.
|
•
|
The PSUs will vest in three equal annual installments during the period that begins on the PSU grant date based on the extent to which a revenue milestone for the fiscal year ending December 31, 2019 is achieved.
|
•
|
The MPSUs will vest on the three-year anniversary of the MPSU grant date based on the performance of the Company's common stock relative to the Russell 2000 Index (“the Benchmark”) during the three-year period from grant date. A positive 3.3x or negative 2.5x multiplier will be applied to the total shareholder returns (“TSR”), such that the number of shares vested will increase by 3.3% or decrease by 2.5% of the target numbers, for each 1% of positive or negative relative TSR relative to the Benchmark. In the event the Company's common stock performance is below negative 30% relative to the Benchmark, no shares will vest. In no event will the number of shares vested in each tranche exceed 200% of the target for that tranche.
|
|
|
1 year
|
|
2 years
|
|
Greater than 2 years
|
|
Total
|
||||||||
|
|
(In thousands)
|
||||||||||||||
Performance obligations
|
|
$
|
58,441
|
|
|
$
|
12,108
|
|
|
$
|
3,915
|
|
|
$
|
74,464
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2019
|
|||||||||
|
Balance Sheet Location
|
|
December 31, 2019
|
|
December 31, 2018
|
|
January 1, 2018
|
|
$ change
|
|
% change
|
|||||||||
|
|
|
(In thousands)
|
|
|
|||||||||||||||
Accounts receivable, net
|
Accounts receivable, net
|
|
$
|
127,317
|
|
|
$
|
166,045
|
|
|
$
|
158,507
|
|
|
$
|
(38,728
|
)
|
|
(23.3
|
)%
|
Contract liabilities - current
|
Deferred revenue
|
|
$
|
50,362
|
|
|
$
|
26,678
|
|
|
$
|
24,746
|
|
|
$
|
23,684
|
|
|
88.8
|
%
|
Contract liabilities - non-current
|
Non-current deferred revenue
|
|
$
|
15,736
|
|
|
$
|
23,313
|
|
|
$
|
13,091
|
|
|
$
|
(7,577
|
)
|
|
(32.5
|
)%
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||||||||||||||||||||||
|
Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Estimated Fair Value
|
|
Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Estimated Fair Value
|
||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||
U.S. treasuries
|
$
|
19,967
|
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
19,990
|
|
|
$
|
49,739
|
|
|
$
|
2
|
|
|
$
|
(4
|
)
|
|
$
|
49,737
|
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In thousands)
|
||||||
Gross accounts receivable
|
$
|
127,926
|
|
|
$
|
166,172
|
|
Allowance for doubtful accounts
|
(609
|
)
|
|
(127
|
)
|
||
Total accounts receivable, net
|
$
|
127,317
|
|
|
$
|
166,045
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(In thousands)
|
||||||||||
Balance at the beginning of the period
|
$
|
127
|
|
|
$
|
207
|
|
|
$
|
206
|
|
Additions
|
482
|
|
|
—
|
|
|
1
|
|
|||
Deductions
|
—
|
|
|
(80
|
)
|
|
—
|
|
|||
Balance at the end of the period
|
$
|
609
|
|
|
$
|
127
|
|
|
$
|
207
|
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In thousands)
|
||||||
Machinery and equipment
|
$
|
13,402
|
|
|
$
|
11,415
|
|
Software
|
11,945
|
|
|
10,624
|
|
||
Computer equipment
|
4,047
|
|
|
4,342
|
|
||
Leasehold improvements
|
8,087
|
|
|
3,007
|
|
||
Furniture and fixtures
|
4,075
|
|
|
2,698
|
|
||
Construction in progress (1)
|
—
|
|
|
28,357
|
|
||
Total property and equipment, gross
|
41,556
|
|
|
60,443
|
|
||
Accumulated depreciation
|
(20,204
|
)
|
|
(11,015
|
)
|
||
Total property and equipment, net
|
$
|
21,352
|
|
|
$
|
49,428
|
|
(1)
|
The Company had a build-to-suit lease arrangement under its corporate headquarters lease in San Jose, California. Upon the adoption of ASU 2016-02, the Company concluded that it did not have control over the underlying leased asset and de-recognized $21.6 million of construction in progress. Refer to Note 11, Commitments and Contingencies, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for further details.
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||||||||||||||
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Technology
|
$
|
9,800
|
|
|
$
|
(8,540
|
)
|
|
$
|
1,260
|
|
|
$
|
9,800
|
|
|
$
|
(7,165
|
)
|
|
$
|
2,635
|
|
Other
|
500
|
|
|
(454
|
)
|
|
46
|
|
|
800
|
|
|
(612
|
)
|
|
188
|
|
||||||
Total intangibles, net
|
$
|
10,300
|
|
|
$
|
(8,994
|
)
|
|
$
|
1,306
|
|
|
$
|
10,600
|
|
|
$
|
(7,777
|
)
|
|
$
|
2,823
|
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In thousands)
|
||||||
Goodwill
|
$
|
11,038
|
|
|
$
|
15,638
|
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In thousands)
|
||||||
Non-current deferred income taxes
|
$
|
1,318
|
|
|
$
|
1,108
|
|
Deposits
|
764
|
|
|
4,084
|
|
||
Other
|
1,926
|
|
|
3,257
|
|
||
Total other non-current assets
|
$
|
4,008
|
|
|
$
|
8,449
|
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In thousands)
|
||||||
Sales and marketing
|
$
|
53,974
|
|
|
75,863
|
|
|
Sales returns
|
28,817
|
|
|
49,247
|
|
||
Warranty obligation
|
3,169
|
|
|
3,712
|
|
||
Accrued employee compensation
|
11,795
|
|
|
11,897
|
|
||
Operating lease liabilities
|
3,912
|
|
|
—
|
|
||
Freight
|
2,690
|
|
|
3,913
|
|
||
Current financing lease obligation
|
—
|
|
|
1,632
|
|
||
Other
|
23,043
|
|
|
25,772
|
|
||
Total accrued liabilities
|
$
|
127,400
|
|
|
$
|
172,036
|
|
|
As of December 31, 2019
|
||||||||||
|
Total
|
|
Quoted market
prices in active
markets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
||||||
|
(In thousands)
|
||||||||||
Assets:
|
|
|
|
|
|
||||||
Cash equivalents: money-market funds (<90 days)
|
$
|
31,472
|
|
|
$
|
31,472
|
|
|
$
|
—
|
|
Available-for-sale securities: U.S. treasuries (1)
|
19,990
|
|
|
19,990
|
|
|
—
|
|
|||
Foreign currency forward contracts (2)
|
27
|
|
|
—
|
|
|
27
|
|
|||
Total assets measured at fair value
|
$
|
51,489
|
|
|
$
|
51,462
|
|
|
$
|
27
|
|
Liabilities:
|
|
|
|
|
|
||||||
Foreign currency forward contracts (3)
|
$
|
375
|
|
|
$
|
—
|
|
|
$
|
375
|
|
Total liabilities measured at fair value
|
$
|
375
|
|
|
$
|
—
|
|
|
$
|
375
|
|
|
December 31, 2018
|
||||||||||
|
Total
|
|
Quoted market
prices in active
markets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
||||||
|
(In thousands)
|
||||||||||
Assets:
|
|
|
|
|
|
||||||
Cash equivalents: U.S. treasuries (<90 days)
|
$
|
438
|
|
|
$
|
438
|
|
|
$
|
—
|
|
Available-for-sale securities: U.S. treasuries (1)
|
49,737
|
|
|
49,737
|
|
|
—
|
|
|||
Foreign currency forward contracts (2)
|
322
|
|
|
—
|
|
|
322
|
|
|||
Total assets measured at fair value
|
$
|
50,497
|
|
|
$
|
50,175
|
|
|
$
|
322
|
|
Liabilities:
|
|
|
|
|
|
||||||
Foreign currency forward contracts (3)
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
71
|
|
Total liabilities measured at fair value
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
71
|
|
(1)
|
Included in Short-term investments on the Company’s consolidated balance sheets.
|
(2)
|
Included in Prepaid expenses and other current assets on the Company’s consolidated balance sheets.
|
(3)
|
Included in Accrued liabilities on the Company’s consolidated balance sheets.
|
|
|
|
|
December 31,
|
|
|
|
December 31,
|
||||||||||||
Derivative Assets
|
|
Balance Sheet
Location
|
|
2019
|
|
2018
|
|
Balance Sheet
Location
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
(In thousands)
|
|
|
|
(In thousands)
|
||||||||||||
Derivative assets not designated as hedging instruments
|
|
Prepaid expenses and other current assets
|
|
$
|
27
|
|
|
$
|
293
|
|
|
Other accrued liabilities
|
|
$
|
347
|
|
|
$
|
46
|
|
Derivative assets designated as hedging instruments
|
|
Prepaid expenses and other current assets
|
|
—
|
|
|
29
|
|
|
Other accrued liabilities
|
|
28
|
|
|
25
|
|
||||
Total
|
|
|
|
$
|
27
|
|
|
$
|
322
|
|
|
|
|
$
|
375
|
|
|
$
|
71
|
|
As of December 31, 2019
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheets
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Assets
|
|
Gross Amounts Offset in the Consolidated Balance Sheets
|
|
Net Amounts Of Assets Presented in the Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Pledged
|
|
Net Amount
|
|||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
HSBC
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
(6
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Wells Fargo Bank
|
|
21
|
|
|
—
|
|
|
21
|
|
|
(21
|
)
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
$
|
27
|
|
|
$
|
—
|
|
|
$
|
27
|
|
|
$
|
(27
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
As of December 31, 2019
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheets
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Liabilities
|
|
Gross Amounts Offset in the Consolidated Balance Sheets
|
|
Net Amounts Of Liabilities Presented in the Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Pledged
|
|
Net Amount
|
|||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
HSBC
|
|
$
|
83
|
|
|
$
|
—
|
|
|
$
|
83
|
|
|
$
|
(6
|
)
|
|
$
|
—
|
|
|
$
|
77
|
|
Wells Fargo Bank
|
|
292
|
|
|
—
|
|
|
292
|
|
|
(21
|
)
|
|
—
|
|
|
271
|
|
||||||
Total
|
|
$
|
375
|
|
|
$
|
—
|
|
|
$
|
375
|
|
|
$
|
(27
|
)
|
|
$
|
—
|
|
|
$
|
348
|
|
As of December 31, 2018
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheets
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Assets
|
|
Gross Amounts Offset in the Consolidated Balance Sheets
|
|
Net Amounts Of Assets Presented in the Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Pledged
|
|
Net Amount
|
|||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
HSBC
|
|
$
|
100
|
|
|
$
|
—
|
|
|
$
|
100
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
100
|
|
Wells Fargo Bank
|
|
222
|
|
|
—
|
|
|
222
|
|
|
(68
|
)
|
|
—
|
|
|
154
|
|
||||||
Total
|
|
$
|
322
|
|
|
$
|
—
|
|
|
$
|
322
|
|
|
$
|
(68
|
)
|
|
$
|
—
|
|
|
$
|
254
|
|
As of December 31, 2018
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheets
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Liabilities
|
|
Gross Amounts Offset in the Consolidated Balance Sheets
|
|
Net Amounts Of Assets Presented in the Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Pledged
|
|
Net Amount
|
|||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
JP Morgan
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
Wells Fargo Bank
|
|
68
|
|
|
—
|
|
|
68
|
|
|
(68
|
)
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
71
|
|
|
$
|
(68
|
)
|
|
$
|
—
|
|
|
$
|
3
|
|
|
|
Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges
|
||||||||||||||||||
Year Ended December 31, 2019
|
|
Revenue
|
|
Cost of revenue
|
|
Research and development
|
|
Sales and marketing
|
|
General and administrative
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Statements of operations
|
|
$
|
370,007
|
|
|
$
|
334,203
|
|
|
$
|
69,384
|
|
|
$
|
56,985
|
|
|
$
|
47,624
|
|
Gains (losses) on cash flow hedge
|
|
$
|
390
|
|
|
$
|
(3
|
)
|
|
$
|
(28
|
)
|
|
$
|
(44
|
)
|
|
$
|
(13
|
)
|
|
|
Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges
|
||||||||||||||||||
Year Ended December 31, 2018
|
|
Revenue
|
|
Cost of revenue
|
|
Research and development
|
|
Sales and marketing
|
|
General and administrative
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Statements of operations
|
|
$
|
464,918
|
|
|
$
|
372,843
|
|
|
$
|
58,794
|
|
|
$
|
52,593
|
|
|
$
|
28,209
|
|
Gains (losses) on cash flow hedge
|
|
$
|
315
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
(28
|
)
|
|
$
|
(11
|
)
|
|
|
|
|
December 31,
|
||||||
Derivatives Not Designated as
Hedging Instruments
|
|
Location of Gains (Losses)
Recognized in Income on Derivative
|
|
2019
|
|
2018
|
||||
|
|
|
|
(In thousands)
|
||||||
Foreign currency forward contracts
|
|
Other income (expense), net
|
|
$
|
(24
|
)
|
|
$
|
589
|
|
|
Unrealized gains (losses) on available-for-sale securities
|
|
Unrealized gains (losses) on derivatives
|
|
Estimated tax benefit (provision)
|
|
Total
|
||||||||
|
(In thousands)
|
||||||||||||||
Balance as of December 31, 2017
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other comprehensive income (loss) before reclassifications
|
(2
|
)
|
|
276
|
|
|
—
|
|
|
274
|
|
||||
Less: Amount reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
274
|
|
|
—
|
|
|
274
|
|
||||
Net current period other comprehensive income (loss)
|
(2
|
)
|
|
2
|
|
|
—
|
|
|
—
|
|
||||
Balance as of December 31, 2018
|
(2
|
)
|
|
2
|
|
|
—
|
|
|
—
|
|
||||
Other comprehensive income (loss) before reclassifications
|
25
|
|
|
275
|
|
|
—
|
|
|
300
|
|
||||
Less: Amount reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
302
|
|
|
—
|
|
|
302
|
|
||||
Net current period other comprehensive income (loss)
|
25
|
|
|
(27
|
)
|
|
—
|
|
|
(2
|
)
|
||||
Balance as of December 31, 2019
|
$
|
23
|
|
|
$
|
(25
|
)
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
|
Year Ended December 31, 2019
|
|
Year Ended December 31, 2018
|
|
|
||||||||||||
|
|
Gains (Losses) Recognized in OCI - Effective Portion
|
|
Gains (Losses) Reclassified from OCI to Income - Effective Portion
|
|
Gains (Losses) Recognized in OCI - Effective Portion
|
|
Gains (Losses) Reclassified from OCI to Income - Effective Portion
|
|
Affected Line Item in the Statements of Operations
|
||||||||
|
|
(In thousands)
|
|
|
|
|
|
|
||||||||||
Gains (losses) on cash flow hedge:
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency contracts
|
|
$
|
275
|
|
|
$
|
390
|
|
|
$
|
276
|
|
|
$
|
315
|
|
|
Revenue
|
Foreign currency contracts
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
Cost of revenue
|
||||
Foreign currency contracts
|
|
—
|
|
|
(28
|
)
|
|
—
|
|
|
(2
|
)
|
|
Research and development
|
||||
Foreign currency contracts
|
|
—
|
|
|
(44
|
)
|
|
—
|
|
|
(28
|
)
|
|
Sales and marketing
|
||||
Foreign currency contracts
|
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
(11
|
)
|
|
General and administrative
|
||||
|
|
$
|
275
|
|
|
$
|
302
|
|
|
$
|
276
|
|
|
$
|
274
|
|
|
Total *
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(In thousands)
|
||||||||||
United States
|
$
|
(103,836
|
)
|
|
$
|
(79,581
|
)
|
|
$
|
3,318
|
|
International
|
22,265
|
|
|
4,870
|
|
|
4,359
|
|
|||
Total
|
$
|
(81,571
|
)
|
|
$
|
(74,711
|
)
|
|
$
|
7,677
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(In thousands)
|
||||||||||
Current:
|
|
|
|
|
|
||||||
U.S. Federal
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
58
|
|
|
16
|
|
|
260
|
|
|||
Foreign
|
4,524
|
|
|
1,425
|
|
|
1,255
|
|
|||
|
4,582
|
|
|
1,441
|
|
|
1,515
|
|
|||
Deferred:
|
|
|
|
|
|
||||||
U.S. Federal
|
—
|
|
|
—
|
|
|
(66
|
)
|
|||
State
|
—
|
|
|
—
|
|
|
—
|
|
|||
Foreign
|
(202
|
)
|
|
(669
|
)
|
|
(321
|
)
|
|||
|
(202
|
)
|
|
(669
|
)
|
|
(387
|
)
|
|||
Total
|
$
|
4,380
|
|
|
$
|
772
|
|
|
$
|
1,128
|
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In thousands)
|
||||||
Deferred Tax Assets:
|
|
|
|
||||
Accruals and allowances
|
$
|
11,334
|
|
|
$
|
17,974
|
|
Net operating loss carryforwards
|
14,355
|
|
|
2,946
|
|
||
Stock-based compensation
|
3,228
|
|
|
1,927
|
|
||
Lease liabilities
|
8,212
|
|
|
—
|
|
||
Deferred revenue
|
4,417
|
|
|
2,573
|
|
||
Tax credit carryforwards
|
3,262
|
|
|
—
|
|
||
Depreciation and amortization
|
7,877
|
|
|
567
|
|
||
Deferred rent
|
—
|
|
|
373
|
|
||
Total deferred tax assets
|
52,685
|
|
|
26,360
|
|
||
Deferred Tax Liabilities:
|
|
|
|
||||
Depreciation and amortization
|
—
|
|
|
(775
|
)
|
||
Lease assets
|
(7,450
|
)
|
|
—
|
|
||
Total deferred tax liabilities
|
(7,450
|
)
|
|
(775
|
)
|
||
Valuation Allowance
|
(43,917
|
)
|
|
(24,477
|
)
|
||
Net deferred tax assets
|
$
|
1,318
|
|
|
$
|
1,108
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(In thousands)
|
||||||||||
Balance at the beginning of the period
|
$
|
24,477
|
|
|
$
|
15,611
|
|
|
$
|
22,155
|
|
Additions
|
38,336
|
|
|
13,760
|
|
|
10,896
|
|
|||
Deductions
|
(18,896
|
)
|
|
(4,894
|
)
|
|
(17,440
|
)
|
|||
Balance at the end of the period
|
$
|
43,917
|
|
|
$
|
24,477
|
|
|
$
|
15,611
|
|
|
|
Amount
|
|
Beginning Year of Expiration
|
||
|
|
(in thousands)
|
|
|
||
U.S. Federal (1)
|
|
$
|
14,028
|
|
|
2031
|
U.S. Federal
|
|
47,059
|
|
|
Indefinite
|
|
California
|
|
44,613
|
|
|
2039
|
|
Other State (tax effected, net of federal benefit)
|
|
836
|
|
|
2024
|
(1)
|
All of the losses are subject to annual usage limitations under Internal Revenue Code Section 382.
|
|
|
Amount
|
|
Beginning Year of Expiration
|
||
|
|
(in thousands)
|
|
|
||
U.S. Federal
|
|
$
|
1,664
|
|
|
2039
|
California
|
|
1,395
|
|
|
Indefinite
|
|
Foreign
|
|
814
|
|
|
2038
|
|
Year Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
2017
|
|||
Tax at federal statutory rate (1)
|
21.0
|
%
|
|
21.0
|
%
|
|
35.0
|
%
|
State, net of federal benefit
|
3.0
|
%
|
|
5.9
|
%
|
|
(8.7
|
)%
|
Impact of international operations
|
1.4
|
%
|
|
0.4
|
%
|
|
(6.2
|
)%
|
U.S. Taxes on Foreign Entities
|
(3.6
|
)%
|
|
(1.8
|
)%
|
|
—
|
%
|
Stock-based compensation
|
(2.6
|
)%
|
|
(0.1
|
)%
|
|
(5.0
|
)%
|
Tax credits
|
1.6
|
%
|
|
1.5
|
%
|
|
(6.8
|
)%
|
Change in valuation allowance
|
(23.8
|
)%
|
|
(25.2
|
)%
|
|
(105.1
|
)%
|
Impact of the Tax Act
|
—
|
%
|
|
—
|
%
|
|
115.6
|
%
|
Non-deductible transaction costs
|
(0.7
|
)%
|
|
(2.6
|
)%
|
|
—
|
%
|
Goodwill derecognition
|
(1.2
|
)%
|
|
—
|
%
|
|
—
|
%
|
Others
|
(0.5
|
)%
|
|
(0.1
|
)%
|
|
(4.1
|
)%
|
Provision for income taxes
|
(5.4
|
)%
|
|
(1.0
|
)%
|
|
14.7
|
%
|
|
Federal, State, and Foreign Tax
|
||
|
(In thousands)
|
||
Balance as of December 31, 2016
|
$
|
676
|
|
Additions based on tax positions related to the current year
|
361
|
|
|
Additions for tax positions of prior years
|
30
|
|
|
Reductions for tax positions of prior years
|
(45
|
)
|
|
Balance as of December 31, 2017
|
1,022
|
|
|
Additions based on tax positions related to the current year
|
338
|
|
|
Adjustments to Net parent investments
|
(1,338
|
)
|
|
Balance as of December 31, 2018
|
22
|
|
|
Additions based on tax positions related to the current year
|
674
|
|
|
Additions for tax positions of prior years
|
8
|
|
|
Balance as of December 31, 2019
|
$
|
704
|
|
Leases
|
|
Balance Sheet Location
|
|
December 31, 2019
|
|
January 1, 2019
|
|
December 31, 2018
|
||||||
|
|
|
|
(In thousands)
|
||||||||||
Build-to-suit lease (1)
|
|
Property and equipment, net
|
|
$
|
—
|
|
|
$
|
(21,610
|
)
|
|
$
|
21,610
|
|
Build-to-suit lease (1)
|
|
Accrued liabilities
|
|
—
|
|
|
(281
|
)
|
|
281
|
|
|||
Build-to-suit lease (1)
|
|
Accrued liabilities
|
|
—
|
|
|
(1,632
|
)
|
|
1,632
|
|
|||
Build-to-suit lease (1)
|
|
Non-current financing lease obligation
|
|
—
|
|
|
(19,978
|
)
|
|
19,978
|
|
|||
Build-to-suit lease (1)
|
|
Retained earnings (Accumulated deficit)
|
|
281
|
|
|
281
|
|
|
—
|
|
|||
|
|
|
|
|
|
|
|
|
||||||
Operating leases (2)
|
|
Operating lease right-of-use assets, net
|
|
31,300
|
|
|
14,400
|
|
|
—
|
|
|||
Operating leases (2)
|
|
Accrued liabilities
|
|
—
|
|
|
(107
|
)
|
|
107
|
|
|||
Operating leases (2)
|
|
Accrued liabilities
|
|
3,912
|
|
|
2,356
|
|
|
—
|
|
|||
Operating leases (2)
|
|
Non-current deferred rent
|
|
—
|
|
|
(1,141
|
)
|
|
1,141
|
|
|||
Operating leases (2)
|
|
Non-current operating lease liabilities
|
|
29,001
|
|
|
12,044
|
|
|
—
|
|
(1)
|
The Company was deemed to be the accounting owner of its build-to-suit lease arrangement for its San Jose corporate headquarters and the construction was in progress at adoption date. As such, the Company reevaluated its build-to-suit lease arrangement under ASU 2016-02 to ascertain whether it meets the criteria as the accounting owner of the build-to-suit lease arrangement through control of the underlying leased asset. The Company concluded that it did not have control over the underlying leased asset. As a result, the Company de-recognized the build to suit asset and liability as of adoption date of $21.6 million of Property and equipment and $21.9 million of financing lease obligations. The difference of $0.3 million between the de-recognized assets and the associated financing lease obligations was recorded as an adjustment to Accumulated deficit as of the adoption date.
|
(2)
|
The Company adopted ASU 2016-02 on January 1, 2019 which resulted in the recognition of ROU assets and lease liabilities for operating leases of $14.4 million on its consolidated balance sheets. The ROU assets were reduced by $0.1 million current deferred rent and $1.1 million non-current deferred rent which were de-recognized along with the adoption. As of March 31, 2019, the construction of the Company’s leasehold improvements for its San Jose corporate headquarters was partially completed and partially occupied by the Company, resulting in lease commencement inception for the portion that was completed and occupied by the Company. Therefore, the Company proportionally recorded ROU assets and lease liabilities of $14.3 million, representing two thirds of the total value of the ROU assets and lease liabilities. As of June 30, 2019, upon the completion of the leasehold improvements and full occupation of the entire building, the Company recognized the remaining value of ROU assets and lease liabilities of $7.2 million. As of September 29, 2019, the Company received $3.1 million reimbursement for leasehold improvements that the Company de-recognized during the quarter.
|
|
|
Year Ended December 31,
|
||
|
|
2019
|
||
|
|
(in thousands)
|
||
Cash paid for amounts included in the measurement of lease liabilities
|
|
|
||
Operating cash flows from operating leases
|
|
$
|
4,888
|
|
Right-of-use assets obtained in exchange for lease liabilities
|
|
|
||
Operating leases
|
|
$
|
21,742
|
|
Other non-cash increases in operating right of use assets
|
|
$
|
788
|
|
Weighted average remaining lease term
|
|
7.7 years
|
|
Weighted average discount rate
|
|
5.67
|
%
|
2020
|
$
|
5,660
|
|
2021
|
5,735
|
|
|
2022
|
5,589
|
|
|
2023
|
4,908
|
|
|
2024
|
4,450
|
|
|
Thereafter
|
14,669
|
|
|
Total lease payments
|
41,011
|
|
|
Less: interest (1)
|
(8,098
|
)
|
|
Total
|
$
|
32,913
|
|
|
|
||
Accrued liabilities
|
$
|
3,912
|
|
Non-current operating lease liabilities
|
29,001
|
|
|
Total
|
$
|
32,913
|
|
(1)
|
Calculated using the Company’s incremental borrowing rate on a collateralized basis plus LIBOR rate that closely matches contractual term of most leases on adoption date.
|
|
Leases (1)
|
||
2019
|
$
|
4,634
|
|
2020
|
5,813
|
|
|
2021
|
5,678
|
|
|
2022
|
5,580
|
|
|
2023
|
4,903
|
|
|
Thereafter
|
19,252
|
|
|
Total
|
$
|
45,860
|
|
(1)
|
Amounts are based on ASC 840, Leases that was superseded upon the adoption of ASC 842, Leases on January 1, 2019.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(In thousands)
|
||||||||||
Balance at the beginning of the period
|
$
|
3,712
|
|
|
$
|
31,756
|
|
|
$
|
15,949
|
|
Reclassified to sales returns upon adoption of ASC 606 (1)
|
—
|
|
|
(28,713
|
)
|
|
—
|
|
|||
Provision for warranty obligation made during the period
|
260
|
|
|
1,477
|
|
|
51,709
|
|
|||
Settlements made during the period
|
(803
|
)
|
|
(808
|
)
|
|
(35,902
|
)
|
|||
Balance at the end of the period
|
$
|
3,169
|
|
|
$
|
3,712
|
|
|
$
|
31,756
|
|
|
|
Year Ended December 31, 2019
|
||
|
|
(In thousands)
|
||
Cost of revenue
|
|
$
|
69
|
|
Research and development
|
|
262
|
|
|
Sales and marketing
|
|
198
|
|
|
General and administrative
|
|
102
|
|
|
Total
|
|
$
|
631
|
|
|
|
Year Ended December 31, 2019
|
||
|
|
(In thousands)
|
||
Balance at the beginning of the period
|
|
$
|
—
|
|
Additions
|
|
631
|
|
|
Cash payments
|
|
(511
|
)
|
|
Balance at the end of the period
|
|
$
|
120
|
|
•
|
NETGEAR stock options granted prior to August 3, 2018 (the “cutoff date”) were converted into both an adjusted NETGEAR stock option and an Arlo stock option. The formulas applicable to the adjustment are set forth in the employee matters agreement and, in each case, the exercise price and number of shares subject to each option was adjusted to preserve the aggregate intrinsic value of the original NETGEAR stock option as measured immediately prior to and immediately following the Distribution, subject to rounding. Following the Distribution, the NETGEAR
|
•
|
NETGEAR restricted stock units granted prior to the cutoff date were converted into both an adjusted NETGEAR restricted stock unit covering the same number of shares of NETGEAR common stock subject to the award prior to the distribution and an Arlo restricted stock unit covering a number of shares of Arlo common stock equal to the number of shares of NETGEAR common stock subject to the award prior to the distribution multiplied by 1.980295, subject to rounding, which is the number of shares of Arlo common stock that was distributed in respect of each share of NETGEAR common stock in the Distribution. The formulas applicable to the foregoing NETGEAR restricted stock unit adjustment are set forth in the employee matters agreement. Following the Distribution, the NETGEAR restricted stock units and Arlo restricted stock units are subject to substantially the same terms and vesting conditions that applied to the original NETGEAR restricted stock units immediately prior to the Distribution.
|
•
|
NETGEAR stock options and NETGEAR restricted stock units held by non-U.S. holders: NETGEAR, in its sole discretion, determined to treat certain NETGEAR stock options and NETGEAR restricted stock unit awards that were outstanding as of the effective time of the Distribution and held by current and former service providers of Arlo and NETGEAR in jurisdictions other than the United States in a manner inconsistent with the immediately preceding two paragraphs, which, in certain jurisdiction, resulted in the issuance of additional Arlo stock options and/or Arlo restricted stock units.
|
|
Number of Shares
|
|
|
(In thousands)
|
|
Shares reserved as of August 2, 2018
|
7,500
|
|
Granted at IPO (1)
|
(3,403
|
)
|
Granted during the period
|
(137
|
)
|
Additional authorized shares in the Distribution
|
6,823
|
|
Converted in the Distribution (2)
|
(6,823
|
)
|
Cancelled
|
9
|
|
Shares available for grants as of December 31, 2018
|
3,969
|
|
Additional authorized shares
|
2,970
|
|
Granted (4)
|
(6,700
|
)
|
Forfeited/ cancelled (3)
|
2,011
|
|
Shares traded for taxes
|
380
|
|
Shares available for grants as of December 31, 2019
|
2,630
|
|
(1)
|
Includes Arlo IPO Options of 2.8 million shares granted to the Company’s NEOs with performance-based vesting criteria (in addition to service-based vesting criteria for any of such IPO Options that are deemed to have been earned). Each of the IPO Options will have a ten-year contractual term and an exercise price equal to the fair value of a share of Arlo common stock on the date of grant and will vest as follows:
|
•
|
The Tranche 1 Service Option will vest in equal monthly installments during the 24-month period that begins on the two-year anniversary of the option grant date;
|
•
|
The Tranche 2 Performance Option will vest on the later of (i) the date (prior to the four-year anniversary of the grant date) of satisfaction of a cumulative registered accounts milestone and (ii) if the milestone has been satisfied prior to the applicable date, then (a) with respect to 25% of the Tranche 2 Performance Option, on the first anniversary of the option grant date, (b) with respect to 25% of the Tranche 2 Performance Option, on the second anniversary of the option grant date, and (c) with respect to the remaining 50% of the Tranche 2 Performance Option, in equal monthly installments during the 24-month period on the first day of each month beginning on September 1, 2020;
|
•
|
The Tranche 3 Performance Option will vest on the later of (i) the date (prior to the four-year anniversary of the grant date) of satisfaction of a paid recurring revenue milestone and (ii) if the milestone has been satisfied prior to the applicable date, then (a) with respect to 25% of the Tranche 3 Performance Option, on the first anniversary of the option grant date, (b) with respect to 25% of the Tranche 3 Performance Option, on the second anniversary of the option grant date, and (c) with respect to the remaining 50% of the Tranche 3 Performance Option, in equal monthly installments during the 24-month period on the first day of each month beginning on September 1, 2020;
|
•
|
The Tranche 4 Performance Option will vest on the one-year anniversary of the grant date based on the extent to which the revenue and non-GAAP gross profit milestones for the second half of fiscal 2018 are achieved; and
|
•
|
The Tranche 5 Performance Option will vest on the two-year anniversary of the grant date based on the extent to which the revenue and non-GAAP gross profit milestones for the fiscal 2019 are achieved.
|
(2)
|
On December 31, 2018, in connection with the Distribution, certain NETGEAR equity awards held by Arlo non-employee directors and employees and NETGEAR non-employee directors and employees were adjusted into equity awards with respect to Arlo common stock and NETGEAR common stock as described in more detail in the employee matters agreement.
|
(3)
|
Includes 0.3 million shares subject to awards that were cancelled in connection with Mr. Collins’ separation from the Company, 0.5 million shares subject to the IPO Options that were voluntarily forfeited by the Chief Executive Officer as the performance metrics for Tranches 4 and 5 of the IPO Options were not achieved, 59 thousand shares subject to the IPO Options issued to the Chief Financial Officer were cancelled as the performance metrics for Tranches 4 were not achieved, and 0.2 million shares as a result of modification for the employees transferred in the Verisure transaction.
|
(4)
|
Includes $0.8 million shares consisting of RSUs (50% of the grant), PSUs (25% of the grant) and MPSUs (25% of the grant) granted to the Company's NEOs during the fiscal quarter ended September 29, 2019. The RSUs will vest in three equal annual installments during the period that begins on the RSU grant date. The PSUs will vest in three equal annual installments during the period that begins on the PSU grant date based on the extent to which a revenue milestone for the fiscal year ended December 31, 2019 is achieved. As of December 31, 2019, the revenue milestone was not achieved, hence the PSUs were pending cancellation. The MPSUs will vest at the end of the three-year period that begins on the MPSU grant date based on performance of the Company's common stock relative to the Russell 2000 Index (“the Benchmark”) during the three-year period from the grant date. This also includes 0.2 million shares as a result of modification for the employees transferred in the Verisure transaction.
|
|
|
Stock Options
|
|
ESPP
|
|||||
|
|
2019
|
|
2018
|
|
2019
|
|||
Expected life (in years)
|
|
6.3
|
|
|
6.3
|
|
|
0.5
|
|
Risk-free interest rate
|
|
2.28
|
%
|
|
2.86
|
%
|
|
2.49
|
%
|
Expected volatility
|
|
73.0
|
%
|
|
40.0
|
%
|
|
97.6
|
%
|
Dividend yield
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Number of Shares
|
|
Weighted Average Exercise Price Per Share
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value (1)
|
|||||
|
(In thousands)
|
|
(In dollars)
|
|
(In years)
|
|
(In thousands)
|
|||||
Outstanding as of December 31, 2018
|
7,209
|
|
|
$
|
12.08
|
|
|
|
|
|
||
Granted
|
10
|
|
|
3.90
|
|
|
|
|
|
|||
Exercised
|
(4
|
)
|
|
3.03
|
|
|
|
|
|
|||
Forfeited/ Cancelled (2)
|
(938
|
)
|
|
15.88
|
|
|
|
|
|
|||
Expired
|
(237
|
)
|
|
10.00
|
|
|
|
|
|
|||
Outstanding as of December 31, 2019
|
6,040
|
|
|
$
|
11.56
|
|
|
6.39
|
|
$
|
3,100
|
|
Vested and expected to vest as of December 31, 2019
|
6,040
|
|
|
$
|
11.56
|
|
|
6.39
|
|
$
|
3,100
|
|
Exercisable Options as of December 31, 2019
|
3,238
|
|
|
$
|
8.54
|
|
|
4.64
|
|
$
|
—
|
|
(1)
|
Representing the total pre-tax intrinsic values (the difference between the Company’s closing stock price on the last trading day of 2019 and the exercise price, multiplied by the number of shares underlying the in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2019. This amount changes based on the fair market value of the Company’s stock.
|
(2)
|
Includes 0.3 million shares subject to awards that were cancelled in connection with Mr. Collins’ separation from the Company. In addition, also includes 0.5 million shares subject to the IPO Options that were voluntarily forfeited by the Chief Executive Officer as the performance metrics for Tranches 4 and 5 of the IPO Options were not expected to be achieved.
|
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions, except per share data)
|
||||||
Total intrinsic value of options exercised
|
$
|
—
|
|
|
$
|
—
|
|
Total fair value of options vested
|
$
|
3.10
|
|
|
$
|
—
|
|
Weighted-average grant date fair value per share of options granted
|
$
|
2.59
|
|
|
$
|
7.02
|
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||
Range of Exercise Prices
|
Shares
Outstanding
|
|
Weighted-
Average
Remaining
Contractual
Life
|
|
Weighted-
Average
Exercise
Price Per
Share
|
|
Shares
Exercisable
|
|
Weighted-
Average
Exercise
Price Per
Share
|
||||||
|
(In thousands)
|
|
(In years)
|
|
(In dollars)
|
|
(In thousands)
|
|
(In dollars)
|
||||||
3.90 - 6.68
|
1,241
|
|
|
3.79
|
|
$
|
6.52
|
|
|
1,231
|
|
|
$
|
6.54
|
|
6.80 - 8.11
|
1,107
|
|
|
3.56
|
|
7.59
|
|
|
1,071
|
|
|
7.58
|
|
||
8.21 - 10.09
|
637
|
|
|
6.92
|
|
8.84
|
|
|
407
|
|
|
8.83
|
|
||
13.23 - 13.23
|
60
|
|
|
8.59
|
|
13.23
|
|
|
20
|
|
|
13.23
|
|
||
14.39 - 14.39
|
616
|
|
|
7.49
|
|
14.39
|
|
|
321
|
|
|
14.39
|
|
||
16.00 - 16.00
|
2,379
|
|
|
8.59
|
|
16.00
|
|
|
188
|
|
|
16.00
|
|
||
3.90 - 16.00
|
6,040
|
|
|
6.39
|
|
11.56
|
|
|
3,238
|
|
|
8.54
|
|
|
Stock Options
|
|
ESPP (1)
|
||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
Expected life (in years)
|
4.4
|
|
|
4.4
|
|
|
0.5
|
|
|
0.5
|
|
Risk-free interest rate
|
2.32
|
%
|
|
1.66
|
%
|
|
1.81
|
%
|
|
0.93
|
%
|
Expected volatility
|
30.9
|
%
|
|
31.6
|
%
|
|
37.1
|
%
|
|
29.7
|
%
|
Dividend yield
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(1)
|
Arlo employees have completed their participation into NETGEAR’s ESPP by the end of the second quarter of fiscal 2018. As of December 31, 2018, no shares had been purchased under the 2018 ESPP by Arlo employees, as the program was suspended until the completion of the Distribution.
|
|
Number of Shares
|
|
Weighted Average Exercise Price Per Share
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|||||
|
(In thousands)
|
|
(In dollars)
|
|
(In years)
|
|
(In thousands)
|
|||||
Outstanding as of December 31, 2018
|
283
|
|
|
$
|
26.53
|
|
|
|
|
|
||
Exercised
|
(48
|
)
|
|
21.35
|
|
|
|
|
|
|||
Forfeited/cancelled
|
(16
|
)
|
|
36.27
|
|
|
|
|
|
|||
Expired
|
(14
|
)
|
|
41.67
|
|
|
|
|
|
|||
Outstanding as of December 31, 2019
|
205
|
|
|
25.94
|
|
|
5.76
|
|
$
|
427
|
|
|
Vested and expected to vest as of December 31, 2019
|
205
|
|
|
25.94
|
|
|
5.76
|
|
$
|
427
|
|
|
Exercisable options as of December 31, 2019
|
162
|
|
|
24.08
|
|
|
5.25
|
|
$
|
425
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(In millions, except per share data)
|
||||||||||
Total intrinsic value of options exercised
|
$
|
0.6
|
|
|
$
|
0.6
|
|
|
$
|
0.5
|
|
Total fair value of options vested
|
$
|
0.8
|
|
|
$
|
1.1
|
|
|
$
|
0.2
|
|
Weighted-average grant date fair value per share of NETGEAR’s stock options granted to employees specifically identifiable to Arlo
|
NA
|
|
|
$
|
20.63
|
|
|
$
|
12.25
|
|
Range of Exercise Prices
|
Number of Shares
|
|
Weighted Average Grant Date Fair Value Per Share
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|||||
|
(In thousands)
|
|
(In dollars)
|
|
(In years)
|
|
(In thousands)
|
|||||
Outstanding as of December 31, 2018
|
3,141
|
|
|
$
|
12.22
|
|
|
|
|
|
||
Granted (1)
|
6,690
|
|
|
4.77
|
|
|
|
|
|
|||
Vested
|
(1,146
|
)
|
|
11.22
|
|
|
|
|
|
|
||
Cancelled (2)
|
(834
|
)
|
|
7.68
|
|
|
|
|
|
|||
Outstanding as of December 31, 2019
|
7,851
|
|
|
$
|
6.50
|
|
|
1.55
|
|
$
|
33,051
|
|
(1)
|
Includes 0.8 million shares consisting of RSUs (50% of the grant), PSUs (25% of the grant) and MPSUs (25% of the grant) granted to a group of NEOs during the fiscal quarter ended September 29, 2019. The RSUs will vest in three equal annual installments during the period that begins on the RSU grant date. The PSUs will vest in three equal annual installments during the period that begins on the PSU grant date based on the extent to which a revenue milestone for the fiscal year ended December 31, 2019 is achieved. As of December 31, 2019, the revenue milestone was not achieved, hence the PSUs were pending cancellation. The MPSUs will vest at the end of the three-year period that begins on the MPSU grant date based on performance of the Company's common stock relative to the Benchmark during the three-year period from the grant date. A positive 3.3x or negative 2.5x multiplier will be applied to the total shareholder returns (“TSR”), such that the number of shares vested will increase by 3.3% or decrease by 2.5% of the target numbers, for each 1% of positive or negative TSR relative to the Benchmark. In the event the Company's common stock performance is below negative 30% relative to the Benchmark, no shares will be vested. In no event will the number of shares vested exceed 200% of the target for that tranche. In addition, includes 0.2 million shares as a result of modification for the employees transferred in the Verisure transaction.
|
(2)
|
Includes 0.2 million shares as a result of modification for the employees transferred in the Verisure transaction.
|
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In millions, except per share data)
|
||||||
Total intrinsic value of RSUs vested (the release date fair value)
|
$
|
5.51
|
|
|
$
|
0.04
|
|
Total fair value of RSUs vested (the grant date fair value)
|
$
|
12.90
|
|
|
$
|
0.04
|
|
Weighted-average fair value of RSUs granted
|
$
|
4.77
|
|
|
$
|
14.46
|
|
|
Year Ended
|
|
|
||
Expected life
|
3.0
|
|
Risk-free interest rate
|
1.52
|
%
|
Expected volatility
|
65.1
|
%
|
Dividend yield
|
—
|
|
Stock Beta
|
0.30
|
|
|
Number of Shares
|
|
Weighted Average Grant Date Fair Value Per Share
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|||||
|
(In thousands)
|
|
(In dollars)
|
|
(In years)
|
|
(In thousands)
|
|||||
Outstanding as of December 31, 2018
|
522
|
|
|
$
|
34.89
|
|
|
|
|
|
||
Transferred (1)
|
2
|
|
|
|
|
|
|
|
||||
Vested
|
(175
|
)
|
|
32.04
|
|
|
|
|
|
|||
Forfeited
|
(71
|
)
|
|
36.98
|
|
|
|
|
|
|||
Outstanding as of December 31, 2019
|
278
|
|
|
36.14
|
|
|
1.08
|
|
$
|
6,804
|
|
(1)
|
Transferred RSUs are attributable to employees that transferred from NETGEAR’s in the fourth quarter of 2019.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(In millions, except per share data)
|
||||||||||
Total intrinsic value of RSUs vested (the release date fair value)
|
$
|
5.8
|
|
|
$
|
6.9
|
|
|
$
|
2.7
|
|
Total fair value of RSUs vested (the grant date fair value)
|
$
|
5.6
|
|
|
$
|
5.0
|
|
|
$
|
2.0
|
|
weighted-average fair value of RSUs granted
|
NA
|
|
|
$
|
67.24
|
|
|
$
|
52.89
|
|
|
Year Ended December 31,
|
||||||||||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||||||||||||||||||
|
Total
|
|
Direct (1)
|
|
Indirect
|
|
Total
|
|
Direct
|
|
Indirect
|
|
Total
|
||||||||||||||
|
|
||||||||||||||||||||||||||
Cost of revenue
|
$
|
2,013
|
|
|
$
|
608
|
|
|
$
|
583
|
|
|
$
|
1,191
|
|
|
$
|
102
|
|
|
$
|
599
|
|
|
$
|
701
|
|
Research and development
|
6,868
|
|
|
3,078
|
|
|
396
|
|
|
3,474
|
|
|
1,959
|
|
|
455
|
|
|
2,414
|
|
|||||||
Sales and marketing
|
3,859
|
|
|
1,992
|
|
|
969
|
|
|
2,961
|
|
|
390
|
|
|
866
|
|
|
1,256
|
|
|||||||
General and administrative
|
10,154
|
|
|
3,153
|
|
|
2,100
|
|
|
5,253
|
|
|
—
|
|
|
2,547
|
|
|
2,547
|
|
|||||||
Total stock-based compensation expense (2)
|
$
|
22,894
|
|
|
$
|
8,831
|
|
|
$
|
4,048
|
|
|
$
|
12,879
|
|
|
$
|
2,451
|
|
|
$
|
4,467
|
|
|
$
|
6,918
|
|
(1)
|
Reflecting expenses for those legacy NETGEAR stock-based plans that have converted to equivalent Arlo stock-based plans upon the spin-off transaction.
|
(2)
|
There was no tax benefit as a result of the Company's net operating loss position.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(In thousands, except for per share data)
|
||||||||||
Numerator:
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
(85,951
|
)
|
|
$
|
(75,483
|
)
|
|
$
|
6,549
|
|
Denominator:
|
|
|
|
|
|
||||||
Weighted average common shares - basic
|
75,074
|
|
|
67,231
|
|
|
62,250
|
|
|||
Potentially dilutive common shares
|
—
|
|
|
—
|
|
|
—
|
|
|||
Stock option and RSU conversion (1)
|
—
|
|
|
—
|
|
|
—
|
|
|||
Weighted average common shares - dilutive
|
75,074
|
|
|
67,231
|
|
|
62,250
|
|
|||
|
|
|
|
|
|
||||||
Basic net income (loss) per share
|
$
|
(1.14
|
)
|
|
$
|
(1.12
|
)
|
|
$
|
0.11
|
|
Diluted net income (loss) per share
|
$
|
(1.14
|
)
|
|
$
|
(1.12
|
)
|
|
$
|
0.11
|
|
|
|
|
|
|
|
||||||
Anti-dilutive employee stock-based awards, excluded
|
9,692
|
|
|
1,109
|
|
|
—
|
|
(1)
|
On December 31, 2018, 6.8 million of stock options and RSUs were added to the Company’s equity awards as issued and outstanding resulting from the adjustment of NETGEAR’s equity awards that were granted to both NETGEAR and Arlo employees and non-employee directors, a portion of which were converted as Arlo awards. The dilutive effect of these converted stock options and RSUs is reflected above per share by application of the treasury stock method and none are potentially dilutive.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(In thousands)
|
||||||||||
Americas
|
|
|
|
|
|
||||||
United States (“U.S.”)
|
$
|
190,061
|
|
|
$
|
359,936
|
|
|
$
|
279,504
|
|
Americas (excluding U.S.)
|
99,099
|
|
|
16,869
|
|
|
13,167
|
|
|||
EMEA
|
57,232
|
|
|
65,462
|
|
|
58,795
|
|
|||
APAC
|
23,615
|
|
|
22,651
|
|
|
19,192
|
|
|||
Total revenue
|
$
|
370,007
|
|
|
$
|
464,918
|
|
|
$
|
370,658
|
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(In thousands)
|
||||||
Americas
|
|
|
|
||||
United States (“U.S.”)
|
$
|
17,100
|
|
|
$
|
45,053
|
|
Americas (excluding U.S.)
|
904
|
|
|
218
|
|
||
EMEA
|
316
|
|
|
567
|
|
||
APAC
|
|
|
|
||||
China
|
2,089
|
|
|
3,040
|
|
||
APAC (excluding China)
|
943
|
|
|
550
|
|
||
Total property and equipment, net
|
$
|
21,352
|
|
|
$
|
49,428
|
|
•
|
a transition services agreement with NETGEAR, governing NETGEAR’s provision of various services to the Company, and the Company’s provision of various services to NETGEAR, on a transitional basis (the “transition services agreement”). During the year ended December 31, 2018, $6.3 million NETGEAR TSA related costs were incurred, which included $0.4 million for research and development, $1.6 million for sales and marketing, and $4.3 million for general and administrative expense. During the year ended December 31, 2019, $0.7 million NETGEAR TSA related costs were incurred, which included $0.1 million for cost of revenue, $0.3 million for research and development, $0.1 million for sales and marketing, and $0.2 million for general and administrative expense;
|
•
|
a tax matters agreement with NETGEAR that governs the respective rights, responsibilities and obligations of NETGEAR and Arlo after the completion of the IPO with respect to tax matters (including responsibility for taxes attributable to the Company and its subsidiaries, entitlement to refunds, allocation of tax attributes, preparation of tax returns, control of tax contests and other matters) (the “tax matters agreement”);
|
•
|
an employee matters agreement with NETGEAR that addresses employment, compensation and benefits matters, including the allocation and treatment of assets and liabilities relating to employees and compensation and benefit plans and programs in which the Company’s employees participate prior to the distribution, as well as other human resources, employment and employee benefit matters (the “employee matters agreement”);
|
•
|
an intellectual property rights cross-license agreement with NETGEAR, which governs the Company’s and NETGEAR’s rights, responsibilities and obligations to use NETGEAR and Arlo intellectual property, respectively (the “intellectual property rights cross-license agreement”); and
|
•
|
a registration rights agreement with NETGEAR, pursuant to which the Company granted NETGEAR and its affiliates certain registration rights with respect to Arlo’s common stock owned by them (the “registration rights agreement”).
|
|
December 31, 2019 (3)
|
|
September 29,
2019 |
|
June 30,
2019 |
|
March 31,
2019 |
||||||||
|
(In thousands, except per share amounts)
|
||||||||||||||
Revenue
|
$
|
122,413
|
|
|
$
|
106,116
|
|
|
$
|
83,598
|
|
|
$
|
57,880
|
|
Gross profit
|
$
|
13,706
|
|
|
$
|
10,503
|
|
|
$
|
9,650
|
|
|
$
|
1,945
|
|
Provision for (benefit from) income taxes
|
$
|
3,525
|
|
|
$
|
286
|
|
|
$
|
349
|
|
|
$
|
220
|
|
Net income (loss)
|
$
|
19,615
|
|
|
$
|
(30,590
|
)
|
|
$
|
(33,692
|
)
|
|
$
|
(41,284
|
)
|
Net income (loss) per share—basic (1)
|
$
|
0.26
|
|
|
$
|
(0.41
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.55
|
)
|
Net income (loss) per share—diluted
|
$
|
0.26
|
|
|
$
|
(0.41
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.55
|
)
|
|
|
|
|
|
|
|
|
||||||||
|
December 31,
2018 |
|
September 30,
2018 |
|
July 1,
2018 |
|
April 1,
2018 |
||||||||
|
(In thousands, except per share amounts)
|
||||||||||||||
Revenue
|
$
|
122,158
|
|
|
$
|
131,174
|
|
|
$
|
110,948
|
|
|
$
|
100,638
|
|
Gross profit
|
$
|
4,981
|
|
|
$
|
29,747
|
|
|
$
|
28,294
|
|
|
$
|
29,053
|
|
Provision for income taxes
|
$
|
(58
|
)
|
|
$
|
223
|
|
|
$
|
288
|
|
|
$
|
319
|
|
Net loss
|
$
|
(39,073
|
)
|
|
$
|
(13,225
|
)
|
|
$
|
(17,822
|
)
|
|
$
|
(5,363
|
)
|
Net loss per share—basic (1)
|
$
|
(0.53
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
(0.09
|
)
|
Net loss per share—diluted (2)
|
$
|
(0.53
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
(0.09
|
)
|
(1)
|
Net loss per share basic and diluted are computed independently for each quarters presented based on the weighted-average basic and fully diluted shares outstanding for each quarters. As a result, the sum of quarterly Net loss per share basic and diluted information may not equal annual Net loss per share basic and diluted.
|
(2)
|
On December 31, 2018, 6.8 million of stock options and RSUs were added to the Company’s equity awards as issued and outstanding resulting from the adjustment of NETGEAR’s equity awards that were granted to both NETGEAR and Arlo employees and non-employee directors, a portion of which were converted as Arlo awards. The dilutive effect of these converted stock options and RSUs is reflected above per share by application of the treasury stock method and none are potentially dilutive.
|
(3)
|
The Company disposed its commercial operations in Europe in the fourth quarter of 2019. Refer to Note 4, Disposal of business, in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for a complete discussion of the disposal.
|
Item 9.
|
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
Item 9B.
|
Other Information
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
Item 11.
|
Executive Compensation
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
Item 14.
|
Principal Accounting Fees and Services
|
Item 15.
|
Exhibits and Financial Statement Schedules
|
|
Page
|
Report of Independent Registered Public Accounting Firm
|
|
Consolidated Balance Sheets as of December 31, 2019 and 2018
|
|
Consolidated Statements of Operations for the three years ended December 31, 2019, 2018 and 2017
|
|
Consolidated Statements of Comprehensive Income for the three years ended December 31, 2019, 2018 and 2017
|
|
Consolidated Statements of Stockholders’ Equity for the three years ended December 31, 2019, 2018 and 2017
|
|
Consolidated Statements of Cash Flows for the three years ended December 31, 2019, 2018 and 2017
|
|
Notes to Consolidated Financial Statements
|
|
Quarterly Financial Data (unaudited)
|
|
|
|
|
Incorporated by Reference
|
|
|
||||
Exhibit Number
|
|
Exhibit Description
|
|
Form
|
|
Date
|
|
Number
|
|
Filed Herewith
|
|
|
8-K
|
|
8/7/2018
|
|
3.1
|
|
|
||
|
|
8-K
|
|
8/7/2018
|
|
3.2
|
|
|
||
|
|
S-1/A
|
|
7/23/2018
|
|
4.1
|
|
|
||
|
|
|
|
|
|
|
|
X
|
||
|
|
8-K
|
|
8/7/2018
|
|
10.1
|
|
|
||
|
|
8-K
|
|
8/7/2018
|
|
10.2
|
|
|
||
|
|
8-K
|
|
8/7/2018
|
|
10.3
|
|
|
||
|
|
8-K
|
|
8/7/2018
|
|
10.4
|
|
|
||
|
|
8-K
|
|
8/7/2018
|
|
10.5
|
|
|
||
|
|
8-K
|
|
8/7/2018
|
|
10.6
|
|
|
||
|
|
S-1
|
|
7/6/2018
|
|
10.7
|
|
|
||
10.8 *
|
|
|
8-K
|
|
8/7/2018
|
|
10.7
|
|
|
|
10.9 *
|
|
|
8-K
|
|
8/7/2018
|
|
10.8
|
|
|
|
10.10 *
|
|
|
8-K
|
|
8/7/2018
|
|
10.9
|
|
|
|
10.11 *
|
|
|
8-K
|
|
8/7/2018
|
|
10.10
|
|
|
|
10.12 *
|
|
|
8-K
|
|
8/7/2018
|
|
10.11
|
|
|
|
10.13 *
|
|
|
8-K
|
|
8/7/2018
|
|
10.12
|
|
|
|
10.14 *
|
|
|
10-K
|
|
2/22/2019
|
|
10.14
|
|
|
|
10.15 *
|
|
|
8-K
|
|
8/7/2018
|
|
10.14
|
|
|
|
10.16 *
|
|
|
S-1/A
|
|
7/23/2018
|
|
10.16
|
|
|
|
10.17 *
|
|
|
10-Q
|
|
8/27/2018
|
|
10.17
|
|
|
|
|
|
8-K
|
|
5/1/2019
|
|
10.1
|
|
|
||
10.19 *
|
|
|
10-Q
|
|
8/6/2019
|
|
10.2
|
|
|
|
10.20 *
|
|
|
10-Q
|
|
11/8/2019
|
|
10.1
|
|
|
|
10.21 *
|
|
|
10-Q
|
|
11/8/2019
|
|
10.2
|
|
|
|
10.22 *
|
|
|
10-Q
|
|
11/8/2019
|
|
10.3
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
Item 16.
|
Form 10-K Summary
|
|
ARLO TECHNOLOGIES, INC.
|
|||||||
|
Registrant
|
|||||||
|
|
|||||||
|
|
|||||||
|
/s/ MATTHEW MCRAE
|
|||||||
|
Matthew McRae
|
|||||||
|
Chief Executive Officer
|
|||||||
|
(Principal Executive Officer)
|
|||||||
|
|
|||||||
|
|
|||||||
|
/s/ CHRISTINE M. GORJANC
|
|||||||
|
Christine M. Gorjanc
|
|||||||
|
Chief Financial Officer
|
|||||||
|
(Principal Financial and Accounting Officer)
|
|||||||
|
|
|||||||
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ MATTHEW MCRAE
|
|
Chief Executive Officer
|
|
February 28, 2020
|
Matthew McRae
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ CHRISTINE M. GORJANC
|
|
Chief Financial Officer
|
|
February 28, 2020
|
Christine M. Gorjanc
|
|
(Principal Financial and Accounting Officer)
|
|
|
|
|
|
|
|
/s/ PRASHANT AGGARWAL
|
|
Director
|
|
February 28, 2020
|
Prashant Aggarwal
|
|
|
|
|
|
|
|
|
|
/s/ JOCELYN E. CARTER-MILLER
|
|
Director
|
|
February 28, 2020
|
Jocelyn E. Carter-Miller
|
|
|
|
|
|
|
|
|
|
/s/ RALPH E. FAISON
|
|
Director
|
|
February 28, 2020
|
Ralph E. Faison
|
|
|
|
|
|
|
|
|
|
/s/ MICHAEL W. POPE
|
|
Director
|
|
February 28, 2020
|
Michael W. Pope
|
|
|
|
|
|
|
|
|
|
/s/ AMY ROTHSTEIN
|
|
Director
|
|
February 28, 2020
|
Amy Rothstein
|
|
|
|
|
|
|
|
|
|
/s/ GRADY K. SUMMERS
|
|
Director
|
|
February 28, 2020
|
Grady K. Summers
|
|
|
|
|
1 Year Arlo Technologies Chart |
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