We could not find any results for:
Make sure your spelling is correct or try broadening your search.
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 | |
---|---|---|---|---|---|---|---|---|
0.09 | 0.70% | 12.96 | 13.2098 | 12.87 | 13.05 | 1,223,839 | 01:00:00 |
Delaware
|
|
38-4061754
|
(State or other Jurisdiction of
Incorporation or Organization)
|
|
(I.R.S. Employer
Identification Number)
|
|
|
|
350 East Plumeria Drive
San Jose, California 95134
|
|
95134
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Item 1.
|
||
|
||
|
||
|
||
|
||
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 5.
|
||
Item 6.
|
||
|
Item 1.
|
Financial Statements
|
|
As of
|
||||||
|
September 30,
2018 |
|
December 31,
2017 |
||||
|
(In thousands)
|
||||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
148,073
|
|
|
$
|
108
|
|
Short-term investments
|
39,773
|
|
|
—
|
|
||
Accounts receivable, net
|
117,119
|
|
|
157,680
|
|
||
Receivables from NETGEAR
|
27,588
|
|
|
—
|
|
||
Inventories
|
132,479
|
|
|
82,952
|
|
||
Prepaid expenses and other current assets
|
9,529
|
|
|
3,018
|
|
||
Total current assets
|
474,561
|
|
|
243,758
|
|
||
Property and equipment, net
|
39,610
|
|
|
3,883
|
|
||
Intangibles, net
|
3,204
|
|
|
4,348
|
|
||
Goodwill
|
15,638
|
|
|
15,638
|
|
||
Other non-current assets
|
10,198
|
|
|
2,193
|
|
||
Total assets
|
$
|
543,211
|
|
|
$
|
269,820
|
|
LIABILITIES AND STOCKHOLDERS
’
EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
49,947
|
|
|
$
|
20,711
|
|
Payables to NETGEAR
|
15,204
|
|
|
—
|
|
||
Deferred revenue
|
26,514
|
|
|
34,072
|
|
||
Accrued liabilities
|
104,519
|
|
|
76,097
|
|
||
Income tax payable
|
199
|
|
|
—
|
|
||
Total current liabilities
|
196,383
|
|
|
130,880
|
|
||
Non-current deferred revenue
|
19,392
|
|
|
13,332
|
|
||
Non-current financing lease obligation
|
20,639
|
|
|
—
|
|
||
Non-current income taxes payable
|
22
|
|
|
189
|
|
||
Other non-current liabilities
|
1,066
|
|
|
—
|
|
||
Total liabilities
|
237,502
|
|
|
144,401
|
|
||
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: 74,247,250 as of September 30, 2018 and none as of December 31, 2017
|
74
|
|
|
—
|
|
||
Additional paid-in capital
|
312,397
|
|
|
—
|
|
||
Accumulated other comprehensive income
|
14
|
|
|
—
|
|
||
Net parent investment
|
—
|
|
|
125,419
|
|
||
Accumulated deficit
|
(6,776
|
)
|
|
—
|
|
||
Total stockholders’ equity
|
305,709
|
|
|
125,419
|
|
||
Total liabilities and stockholders’ equity
|
$
|
543,211
|
|
|
$
|
269,820
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
2018 |
|
October 1,
2017 |
|
September 30,
2018 |
|
October 1,
2017 |
||||||||
|
(In thousands, except per share data)
|
||||||||||||||
Revenue
|
$
|
131,174
|
|
|
$
|
104,887
|
|
|
$
|
342,760
|
|
|
$
|
245,884
|
|
Cost of revenue
|
101,427
|
|
|
76,535
|
|
|
255,666
|
|
|
184,467
|
|
||||
Gross profit
|
29,747
|
|
|
28,352
|
|
|
87,094
|
|
|
61,417
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and development
|
16,100
|
|
|
8,289
|
|
|
41,929
|
|
|
24,886
|
|
||||
Sales and marketing
|
12,843
|
|
|
9,983
|
|
|
37,123
|
|
|
23,067
|
|
||||
General and administrative
|
8,357
|
|
|
4,337
|
|
|
19,553
|
|
|
10,426
|
|
||||
Separation expense
|
5,823
|
|
|
—
|
|
|
23,649
|
|
|
—
|
|
||||
Total operating expenses
|
43,123
|
|
|
22,609
|
|
|
122,254
|
|
|
58,379
|
|
||||
Income (loss) from operations
|
(13,376
|
)
|
|
5,743
|
|
|
(35,160
|
)
|
|
3,038
|
|
||||
Interest income
|
503
|
|
|
—
|
|
|
503
|
|
|
—
|
|
||||
Other income (expense), net
|
(129
|
)
|
|
716
|
|
|
(923
|
)
|
|
1,649
|
|
||||
Income (loss) before income taxes
|
(13,002
|
)
|
|
6,459
|
|
|
(35,580
|
)
|
|
4,687
|
|
||||
Provision for income taxes
|
223
|
|
|
445
|
|
|
830
|
|
|
801
|
|
||||
Net income (loss)
|
$
|
(13,225
|
)
|
|
$
|
6,014
|
|
|
$
|
(36,410
|
)
|
|
$
|
3,886
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.19
|
)
|
|
$
|
0.10
|
|
|
$
|
(0.56
|
)
|
|
$
|
0.06
|
|
Diluted
|
$
|
(0.19
|
)
|
|
$
|
0.10
|
|
|
$
|
(0.56
|
)
|
|
$
|
0.06
|
|
Weighted average shares used to compute net income (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
69,600
|
|
|
62,500
|
|
|
64,867
|
|
|
62,500
|
|
||||
Diluted
|
69,600
|
|
|
62,500
|
|
|
64,867
|
|
|
62,500
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
2018 |
|
October 1,
2017 |
|
September 30,
2018 |
|
October 1,
2017 |
||||||||
|
(In thousands)
|
||||||||||||||
Net income (loss)
|
$
|
(13,225
|
)
|
|
$
|
6,014
|
|
|
$
|
(36,410
|
)
|
|
$
|
3,886
|
|
Other comprehensive income, before tax:
|
|
|
|
|
|
|
|
||||||||
Unrealized gain on derivative instruments
|
20
|
|
|
—
|
|
|
20
|
|
|
—
|
|
||||
Unrealized loss on available-for-sale securities
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
||||
Total other comprehensive income, before tax
|
16
|
|
|
—
|
|
|
16
|
|
|
—
|
|
||||
Tax provision related to derivative instruments
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
||||
Tax benefit related to available-for-sale securities
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Total other comprehensive income, net of tax
|
14
|
|
|
—
|
|
|
14
|
|
|
—
|
|
||||
Comprehensive income (loss)
|
$
|
(13,211
|
)
|
|
$
|
6,014
|
|
|
$
|
(36,396
|
)
|
|
$
|
3,886
|
|
|
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 NETGEAR
|
—
|
|
|
—
|
|
|
—
|
|
|
2,451
|
|
|
—
|
|
|
—
|
|
|
2,451
|
|
||||||
Balance as of December 31, 2017
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
125,419
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
125,419
|
|
Cumulative-effect adjustment 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
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,776
|
)
|
|
(6,776
|
)
|
||||||
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 NETGEAR
|
|
|
|
|
(3,148
|
)
|
|
|
|
|
|
|
|
(3,148
|
)
|
|||||||||||
Net transfer from Parent
|
—
|
|
|
—
|
|
|
—
|
|
|
44,164
|
|
|
—
|
|
|
—
|
|
|
44,164
|
|
||||||
Conversion of Net parent investment into common stock
|
62,500
|
|
|
62
|
|
|
139,645
|
|
|
(139,645
|
)
|
|
—
|
|
|
—
|
|
|
62
|
|
||||||
Stock-based compensation expense funded by NETGEAR
|
—
|
|
|
—
|
|
|
—
|
|
|
2,757
|
|
|
—
|
|
|
—
|
|
|
2,757
|
|
||||||
Stock-based compensation expense post-initial public offering
|
—
|
|
|
—
|
|
|
2,579
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,579
|
|
||||||
Change in unrealized gains and losses on available-for-sale securities, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
||||||
Change in unrealized gains and losses on derivatives, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
17
|
|
||||||
Balance as of September 30, 2018
|
74,247
|
|
|
$
|
74
|
|
|
$
|
312,397
|
|
|
$
|
—
|
|
|
$
|
14
|
|
|
$
|
(6,776
|
)
|
|
$
|
305,709
|
|
|
Nine Months Ended
|
||||||
|
September 30,
2018 |
|
October 1,
2017 |
||||
|
(In thousands)
|
||||||
Cash flows from operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
(36,410
|
)
|
|
$
|
3,886
|
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
3,406
|
|
|
2,811
|
|
||
Stock-based compensation
|
5,336
|
|
|
1,855
|
|
||
Deferred income taxes
|
(438
|
)
|
|
(220
|
)
|
||
Premium amortization / discount accretion on investments, net
|
(3
|
)
|
|
—
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
|
(69,724
|
)
|
|
(12,292
|
)
|
||
Receivables from NETGEAR
|
(24,611
|
)
|
|
—
|
|
||
Inventories
|
(50,009
|
)
|
|
(27,465
|
)
|
||
Prepaid expenses and other assets
|
(6,845
|
)
|
|
(202
|
)
|
||
Accounts payable
|
53,717
|
|
|
(2,398
|
)
|
||
Payables to NETGEAR
|
14,137
|
|
|
—
|
|
||
Deferred revenue
|
7,169
|
|
|
13,914
|
|
||
Accrued liabilities
|
57,823
|
|
|
14,021
|
|
||
Income taxes payable
|
143
|
|
|
1,018
|
|
||
Net cash used in operating activities
|
(46,309
|
)
|
|
(5,072
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(10,854
|
)
|
|
(2,182
|
)
|
||
Purchases of short-term investments
|
(39,774
|
)
|
|
—
|
|
||
Payments made in connection with business acquisition, net of cash acquired
|
—
|
|
|
(737
|
)
|
||
Net cash used in investing activities
|
(50,628
|
)
|
|
(2,919
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from initial public offering, net of offering costs
|
173,395
|
|
|
—
|
|
||
Net investment from parent
|
71,507
|
|
|
7,950
|
|
||
Net cash provided by financing activities
|
244,902
|
|
|
7,950
|
|
||
Net increase (decrease) in cash and cash equivalents
|
147,965
|
|
|
(41
|
)
|
||
Cash and cash equivalents, at beginning of period
|
108
|
|
|
220
|
|
||
Cash and cash equivalents, at end of period
|
$
|
148,073
|
|
|
$
|
179
|
|
|
|
|
|
||||
Non-cash investing and financing activities:
|
|
|
|
||||
Purchases and transfers of property and equipment
|
$
|
5,279
|
|
|
$
|
574
|
|
Estimated fair value of a facility under build-to-suit lease
|
$
|
21,858
|
|
|
$
|
—
|
|
Note 1.
|
The Company and Basis of Presentation
|
Note 2.
|
Summary of Significant Accounting Policies
|
|
As of
|
|
Adjustments
|
|
As of
|
||||||
|
December 31,
2017 |
|
|
January 1,
2018 |
|||||||
|
(In thousands)
|
||||||||||
Assets:
|
|
|
|
|
|
||||||
Accounts receivable, net
|
$
|
157,680
|
|
|
$
|
827
|
|
|
$
|
158,507
|
|
Inventories
|
$
|
82,952
|
|
|
$
|
(377
|
)
|
|
$
|
82,575
|
|
Other non-current assets
|
$
|
2,193
|
|
|
$
|
244
|
|
|
$
|
2,437
|
|
Liabilities:
|
|
|
|
|
|
||||||
Accounts payable
|
$
|
20,711
|
|
|
$
|
(48
|
)
|
|
$
|
20,663
|
|
Deferred revenue
|
$
|
34,072
|
|
|
$
|
(9,326
|
)
|
|
$
|
24,746
|
|
Accrued liabilities
|
$
|
76,097
|
|
|
$
|
13,370
|
|
|
$
|
89,467
|
|
Non-current deferred revenue
|
$
|
13,332
|
|
|
$
|
(241
|
)
|
|
$
|
13,091
|
|
Equity:
|
|
|
|
|
|
||||||
Net parent investment
|
$
|
125,419
|
|
|
$
|
(3,061
|
)
|
|
$
|
122,358
|
|
|
As reported
|
|
Adjustments
|
|
Balance without adoption of ASC 606
|
||||||
|
(In thousands)
|
||||||||||
Assets
|
|
|
|
|
|
||||||
Accounts receivable, net
|
$
|
117,119
|
|
|
$
|
(6,262
|
)
|
|
$
|
110,857
|
|
Inventories
|
$
|
132,479
|
|
|
$
|
175
|
|
|
$
|
132,654
|
|
Other non-current assets
|
$
|
10,198
|
|
|
$
|
—
|
|
|
$
|
10,198
|
|
Liabilities:
|
|
|
|
|
|
||||||
Accounts payable
|
$
|
49,947
|
|
|
$
|
—
|
|
|
$
|
49,947
|
|
Deferred revenue
|
$
|
26,514
|
|
|
$
|
5,069
|
|
|
$
|
31,583
|
|
Accrued liabilities
|
$
|
104,519
|
|
|
$
|
(21,456
|
)
|
|
$
|
83,063
|
|
Non-current deferred revenue
|
$
|
19,392
|
|
|
$
|
1,852
|
|
|
$
|
21,244
|
|
Stockholders
’
Equity:
|
|
|
|
|
|
||||||
Retained earnings (Accumulated deficit)
|
$
|
(6,776
|
)
|
|
$
|
8,448
|
|
|
$
|
1,672
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||
|
As reported
|
|
Adjustments
|
|
Balance without adoption of ASC 606
|
|
As reported
|
|
Adjustments
|
|
Balance without adoption of ASC 606
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Revenue
|
$
|
131,174
|
|
|
$
|
3,195
|
|
|
$
|
134,369
|
|
|
$
|
342,760
|
|
|
$
|
5,654
|
|
|
$
|
348,414
|
|
Cost of revenue
|
$
|
101,427
|
|
|
$
|
172
|
|
|
$
|
101,599
|
|
|
$
|
255,666
|
|
|
$
|
202
|
|
|
$
|
255,868
|
|
Gross profit
|
$
|
29,747
|
|
|
$
|
3,023
|
|
|
$
|
32,770
|
|
|
$
|
87,094
|
|
|
$
|
5,452
|
|
|
$
|
92,546
|
|
Provision for income taxes
|
$
|
223
|
|
|
$
|
29
|
|
|
$
|
252
|
|
|
$
|
830
|
|
|
$
|
65
|
|
|
$
|
895
|
|
Net loss
|
$
|
(13,225
|
)
|
|
$
|
2,994
|
|
|
$
|
(10,231
|
)
|
|
$
|
(36,410
|
)
|
|
$
|
5,387
|
|
|
$
|
(31,023
|
)
|
|
|
1 year
|
|
2 years
|
|
Greater than 2 years
|
|
Total
|
||||||||
|
|
(In thousands)
|
||||||||||||||
Performance obligations
|
|
$
|
47,793
|
|
|
$
|
12,434
|
|
|
$
|
8,174
|
|
|
$
|
68,401
|
|
|
Balance Sheet Location
|
|
September 30, 2018
|
|
January 1, 2018
(1)
|
|
$ change
(2)
|
|
% change
|
|||||||
|
|
|
(In thousands)
|
|
|
|||||||||||
Accounts receivable, net
|
Accounts receivable, net
|
|
$
|
117,119
|
|
|
$
|
158,507
|
|
|
$
|
(41,388
|
)
|
|
(26.1
|
)%
|
Contract liabilities - current
|
Deferred revenue
|
|
$
|
26,514
|
|
|
$
|
24,746
|
|
|
$
|
1,768
|
|
|
7.1
|
%
|
Contract liabilities - non-current
|
Non-current deferred revenue
|
|
$
|
19,392
|
|
|
$
|
13,091
|
|
|
$
|
6,301
|
|
|
48.1
|
%
|
(1)
|
Includes the adjustments made to those contracts which were not completed at the date of ASC 606 adoption using the modified retrospective method.
|
(2)
|
Accounts receivable, net as of July 1, 2018 were not contributed to Arlo from NETGEAR. Accounts receivable, net as of September 30, 2018 were as a result of sales transactions generated subsequent to July 1, 2018.
|
Note 4.
|
Business Acquisition
|
Cash and cash equivalents
|
$
|
8
|
|
Accounts receivable
|
11
|
|
|
Prepaid expenses and other current assets
|
130
|
|
|
Property and equipment
|
83
|
|
|
Intangibles
|
6,000
|
|
|
Goodwill
|
3,742
|
|
|
Accounts payable
|
(40
|
)
|
|
Accrued liabilities
|
(74
|
)
|
|
Deferred tax liabilities
|
(308
|
)
|
|
Total purchase price
|
$
|
9,552
|
|
Note 5.
|
Balance Sheet Components
|
|
As of September 30, 2018
|
||||||||||||||
|
Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Estimated Fair Value
|
||||||||
|
(In thousands)
|
||||||||||||||
U.S. treasuries
|
$
|
39,777
|
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
$
|
39,773
|
|
Total short-term investments
|
$
|
39,777
|
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
$
|
39,773
|
|
|
As of
|
||||||
|
September 30,
2018 |
|
December 31,
2017 |
||||
|
(In thousands)
|
||||||
Gross accounts receivable
|
$
|
117,119
|
|
|
$
|
164,157
|
|
Allowance for doubtful accounts
|
—
|
|
|
(207
|
)
|
||
Allowance for sales returns
|
—
|
|
*
|
(5,868
|
)
|
||
Allowance for price protection
|
—
|
|
*
|
(402
|
)
|
||
Total allowances
|
—
|
|
|
(6,477
|
)
|
||
Total accounts receivable, net
|
$
|
117,119
|
|
|
$
|
157,680
|
|
|
As of
|
||||||
|
September 30,
2018 |
|
December 31,
2017 |
||||
|
(In thousands)
|
||||||
Machinery and equipment
|
$
|
9,879
|
|
|
$
|
6,067
|
|
Computer equipment
|
4,245
|
|
|
50
|
|
||
Software
|
9,499
|
|
|
180
|
|
||
Leasehold improvements
|
2,590
|
|
|
530
|
|
||
Furniture and fixtures
|
1,043
|
|
|
443
|
|
||
Construction in progress
(1)
|
21,858
|
|
|
—
|
|
||
Total property and equipment, gross
|
49,114
|
|
|
7,270
|
|
||
Accumulated depreciation and amortization
|
(9,504
|
)
|
|
(3,387
|
)
|
||
Total property and equipment, net
|
$
|
39,610
|
|
|
$
|
3,883
|
|
(1)
|
The Company has a build-to-suit lease arrangement under its headquarters lease in San Jose, California. Refer to Note 11,
Commitments and Contingencies
, for details of this lease. The construction is expected to be completed in January 2019.
|
|
As of September 30, 2018
|
|
As of December 31, 2017
|
||||||||||||||||||||
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Technology
|
$
|
9,800
|
|
|
$
|
(6,821
|
)
|
|
$
|
2,979
|
|
|
$
|
9,800
|
|
|
$
|
(5,790
|
)
|
|
$
|
4,010
|
|
Trademarks and trade names
|
1,400
|
|
|
(1,400
|
)
|
|
—
|
|
|
1,400
|
|
|
(1,400
|
)
|
|
—
|
|
||||||
Other
|
800
|
|
|
(575
|
)
|
|
225
|
|
|
800
|
|
|
(462
|
)
|
|
338
|
|
||||||
Total intangibles, net
|
$
|
12,000
|
|
|
$
|
(8,796
|
)
|
|
$
|
3,204
|
|
|
$
|
12,000
|
|
|
$
|
(7,652
|
)
|
|
$
|
4,348
|
|
2018 (remaining three months)
|
$
|
381
|
|
2019
|
1,517
|
|
|
2020
|
1,306
|
|
|
Total estimated amortization expense
|
$
|
3,204
|
|
As of December 31, 2017
|
$
|
15,638
|
|
As of September 30, 2018
|
$
|
15,638
|
|
|
As of
|
||||||
|
September 30,
2018 |
|
December 31, 2017
|
||||
|
(In thousands)
|
||||||
Non-current deferred income taxes
|
$
|
438
|
|
|
$
|
865
|
|
Deposits
|
6,000
|
|
|
—
|
|
||
Other
|
3,760
|
|
|
1,328
|
|
||
Total other non-current assets
|
$
|
10,198
|
|
|
$
|
2,193
|
|
|
As of
|
||||||
|
September 30,
2018 |
|
December 31,
2017 |
||||
|
(In thousands)
|
||||||
Sales and marketing
|
$
|
36,142
|
|
|
31,613
|
|
|
Sales returns
(1)
|
33,304
|
|
|
—
|
|
||
Warranty obligation
(1)
|
3,618
|
|
|
31,756
|
|
||
Accrued employee compensation
|
7,969
|
|
|
3,184
|
|
||
Freight
|
2,023
|
|
|
3,862
|
|
||
Current financing lease obligation
(2)
|
917
|
|
|
—
|
|
||
Other
|
20,546
|
|
|
5,682
|
|
||
Total accrued liabilities
|
$
|
104,519
|
|
|
$
|
76,097
|
|
(1)
|
Upon adoption of ASC 606 on January 1, 2018, warranty reserve balances totaling
$28.7 million
were reclassified to sales returns as these liabilities are payable to the Company’s customers and settled in cash or by credit on account. Under ASC 606, these amounts are to be accounted for as sales with right of return.
|
(2)
|
The Company has a build-to-suit lease arrangement under its headquarters lease in San Jose, California.
$20.6 million
was included in Non-current financing lease obligation on the Company’s unaudited condensed consolidated financial statements as of September 30, 2018. Refer to Note 11,
Commitments and Contingencies
, for details of this lease. The construction is expected to be completed in January 2019.
|
Note 6.
|
Fair Value Measurements
|
|
As of September 30, 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)
|
$
|
10,113
|
|
|
$
|
10,113
|
|
|
$
|
—
|
|
Available-for-sale securities: U.S. treasuries
(1)
|
39,773
|
|
|
39,773
|
|
|
—
|
|
|||
Foreign currency forward contracts
(2)
|
272
|
|
|
—
|
|
|
272
|
|
|||
Total assets measured at fair value
|
$
|
50,158
|
|
|
$
|
49,886
|
|
|
$
|
272
|
|
Liabilities:
|
|
|
|
|
|
||||||
Foreign currency forward contracts
(3)
|
$
|
59
|
|
|
$
|
—
|
|
|
$
|
59
|
|
Total liabilities measured at fair value
|
$
|
59
|
|
|
$
|
—
|
|
|
$
|
59
|
|
(1)
|
Included in Short-term investments on the Company’s unaudited condensed consolidated balance sheets.
|
(2)
|
Included in Prepaid expenses and other current assets on the Company’s unaudited condensed consolidated balance sheets.
|
(3)
|
Included in Accrued liabilities on the Company’s unaudited condensed consolidated balance sheets.
|
Note 7.
|
Derivative Financial Instruments
|
Derivative Assets
|
|
Balance Sheet
Location
|
|
September 30, 2018
|
|
|
Balance Sheet
Location
|
|
September 30, 2018
|
|
||
|
|
|
|
(In thousands)
|
|
|
|
(In thousands)
|
||||
Derivative assets not designated as hedging instruments
|
|
Prepaid expenses and other current assets
|
|
$
|
248
|
|
|
Other accrued liabilities
|
|
$
|
55
|
|
Derivative assets designated as hedging instruments
|
|
Prepaid expenses and other current assets
|
|
24
|
|
|
Other accrued liabilities
|
|
4
|
|
||
Total
|
|
|
|
$
|
272
|
|
|
|
|
$
|
59
|
|
As of September 30, 2018
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Assets
|
|
Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets
|
|
Net Amounts Of Assets Presented in the Unaudited Condensed Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Pledged
|
|
Net Amount
|
|||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
HSBC
|
|
$
|
272
|
|
|
$
|
—
|
|
|
$
|
272
|
|
|
$
|
(59
|
)
|
|
$
|
—
|
|
|
$
|
213
|
|
As of September 30, 2018
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Liabilities
|
|
Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets
|
|
Net Amounts Of Liabilities Presented in the Unaudited Condensed Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Pledged
|
|
Net Amount
|
|||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
HSBC
|
|
$
|
59
|
|
|
$
|
—
|
|
|
$
|
59
|
|
|
$
|
(59
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges
|
||||||||||||||||||
Three Months Ended September 30, 2018
|
|
Revenue
|
|
Cost of revenue
|
|
Research and development
|
|
Sales and marketing
|
|
General and administrative
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Statements of operations
|
|
$
|
131,174
|
|
|
$
|
101,427
|
|
|
$
|
16,100
|
|
|
$
|
12,843
|
|
|
$
|
8,357
|
|
Gains (losses) on cash flow hedge
|
|
$
|
281
|
|
|
$
|
(1
|
)
|
|
$
|
2
|
|
|
$
|
(24
|
)
|
|
$
|
(9
|
)
|
|
|
Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges
|
||||||||||||||||||
Nine Months Ended September 30, 2018
|
|
Revenue
|
|
Cost of revenue
|
|
Research and development
|
|
Sales and marketing
|
|
General and administrative
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Statements of operations
|
|
$
|
342,760
|
|
|
$
|
255,666
|
|
|
$
|
41,929
|
|
|
$
|
37,123
|
|
|
$
|
19,553
|
|
Gains (losses) on cash flow hedge
|
|
$
|
281
|
|
|
$
|
(1
|
)
|
|
$
|
2
|
|
|
$
|
(24
|
)
|
|
$
|
(9
|
)
|
Derivatives Not Designated as Hedging Instruments
|
|
Location of Gains (Losses)
Recognized in Income on Derivative
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30, 2018
|
|
|
October 1, 2017
|
|
|
September 30, 2018
|
|
|
October 1, 2017
|
|
|||||||
|
|
|
|
(In thousands)
|
||||||||||||||
Foreign currency forward contracts
|
|
Other income (expense), net
|
|
$
|
(57
|
)
|
|
$
|
—
|
|
|
$
|
(57
|
)
|
|
$
|
—
|
|
Note 8.
|
Accumulated Other Comprehensive Income (Loss)
|
|
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
|
(4
|
)
|
|
269
|
|
|
(2
|
)
|
|
263
|
|
||||
Less: Amount reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
249
|
|
|
—
|
|
|
249
|
|
||||
Net current period other comprehensive income (loss)
|
(4
|
)
|
|
20
|
|
|
(2
|
)
|
|
14
|
|
||||
Balance as of September 30, 2018
|
$
|
(4
|
)
|
|
$
|
20
|
|
|
$
|
(2
|
)
|
|
$
|
14
|
|
Accumulated Other Comprehensive Income (Loss) Components
|
|
Three Months Ended
September 30, 2018
|
|
Nine Months Ended
September 30, 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
|
|
$
|
269
|
|
|
$
|
281
|
|
|
$
|
269
|
|
|
$
|
281
|
|
|
Revenue
|
Foreign currency contracts
|
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
|
Cost of revenue
|
||||||
Foreign currency contracts
|
|
|
|
2
|
|
|
|
|
2
|
|
|
Research and development
|
||||||
Foreign currency contracts
|
|
|
|
(24
|
)
|
|
|
|
(24
|
)
|
|
Sales and marketing
|
||||||
Foreign currency contracts
|
|
|
|
(9
|
)
|
|
|
|
(9
|
)
|
|
General and administrative
|
||||||
|
|
|
|
249
|
|
|
|
|
249
|
|
|
Total before tax
|
||||||
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Tax impact *
|
||||||
|
|
|
|
$
|
249
|
|
|
|
|
$
|
249
|
|
|
Total, net of tax
|
Note 9.
|
Net Income (Loss) Per Share
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30, 2018
|
|
October 1, 2017
|
|
September 30, 2018
|
|
October 1, 2017
|
||||||||
|
(In thousands, except per share data)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
(13,225
|
)
|
|
$
|
6,014
|
|
|
$
|
(36,410
|
)
|
|
$
|
3,886
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares - basic
|
69,600
|
|
|
62,500
|
|
|
64,867
|
|
|
62,500
|
|
||||
Potentially dilutive common share equivalent
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Weighted average common shares - dilutive
|
69,600
|
|
|
62,500
|
|
|
64,867
|
|
|
62,500
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Basic net income (loss) per share
|
$
|
(0.19
|
)
|
|
$
|
0.10
|
|
|
$
|
(0.56
|
)
|
|
$
|
0.06
|
|
Diluted net income (loss) per share
|
$
|
(0.19
|
)
|
|
$
|
0.10
|
|
|
$
|
(0.56
|
)
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
||||||||
Anti-dilutive employee stock-based awards, excluded
|
1,929
|
|
|
—
|
|
|
643
|
|
|
—
|
|
Note 10.
|
Income Taxes
|
Note 11.
|
Commitments and Contingencies
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
2018 |
|
October 1,
2017 |
|
September 30,
2018 |
|
October 1,
2017 |
||||||||
|
(In thousands)
|
||||||||||||||
Balance at the beginning of the period
|
$
|
3,487
|
|
|
$
|
18,000
|
|
|
$
|
31,756
|
|
|
$
|
15,949
|
|
Reclassified to sales returns upon adoption of ASC 606
|
—
|
|
|
—
|
|
|
(28,713
|
)
|
*
|
—
|
|
||||
Provision for warranty obligation made during the period
|
344
|
|
|
16,476
|
|
|
1,166
|
|
|
36,660
|
|
||||
Settlements made during the period
|
(213
|
)
|
|
(8,985
|
)
|
|
(591
|
)
|
|
(27,118
|
)
|
||||
Balance at the end of the period
|
$
|
3,618
|
|
|
$
|
25,491
|
|
|
$
|
3,618
|
|
|
$
|
25,491
|
|
Note 12.
|
Employee Benefit Plans
|
|
Number of shares
|
|
Weighted Average Exercise Price Per Share
|
|||
|
(In thousands)
|
|
(In dollars)
|
|||
Outstanding as of August 2, 2018
|
—
|
|
|
$
|
—
|
|
Granted
(1)
|
3,343
|
|
|
$
|
16.00
|
|
Outstanding as of September 30, 2018
|
3,343
|
|
|
$
|
16.00
|
|
|
Number of shares
|
|
Weighted Average Exercise Price Per Share
|
|||
|
(In thousands)
|
|
(In dollars)
|
|||
Outstanding as of December 31, 2017
|
78
|
|
|
$
|
35.56
|
|
Granted
|
60
|
|
|
$
|
70.15
|
|
Exercised
|
(10
|
)
|
|
$
|
19.87
|
|
Expired
|
(1
|
)
|
|
$
|
15.22
|
|
Transferred
(1)
|
154
|
|
|
$
|
37.41
|
|
Outstanding as of September 30, 2018
|
281
|
|
|
$
|
44.87
|
|
|
Number of shares
|
|
Weighted Average Grant Date Fair Value Per Share
|
|||
|
(In thousands)
|
|
(In dollars)
|
|||
Outstanding as of August 2, 2018
|
—
|
|
|
$
|
—
|
|
Granted
|
60
|
|
|
$
|
18.51
|
|
Cancelled
|
(5
|
)
|
|
$
|
22.71
|
|
Outstanding as of September 30, 2018
|
55
|
|
|
$
|
18.17
|
|
|
Number of shares
|
|
Weighted Average Grant Date Fair Value Per Share
|
|||
|
(In thousands)
|
|
(In dollars)
|
|||
Outstanding as of December 31, 2017
|
132
|
|
|
$
|
45.54
|
|
Granted
|
335
|
|
|
$
|
67.22
|
|
Vested
|
(93
|
)
|
|
$
|
41.34
|
|
Cancelled
|
(3
|
)
|
|
$
|
51.69
|
|
Transferred
(1)
|
166
|
|
|
$
|
43.71
|
|
Outstanding as of September 30, 2018
|
537
|
|
|
$
|
59.09
|
|
(1)
|
Transferred RSUs are attributable to employees that transferred from other NETGEAR’s divisions.
|
|
|
Three Months Ended
|
|
|
|
September 30,
2018 |
|
Expected life (in years)
|
|
6.3
|
|
Risk-free interest rate
|
|
2.86
|
%
|
Expected volatility
|
|
40.0
|
%
|
Dividend yield
|
|
—
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
|
Stock Options
|
|
ESPP
|
|
Stock Options
|
|
ESPP
|
||||||||||||||
|
September 30,
2018 |
|
October 1,
2017 |
|
September
30,
2018
(1)
|
|
October 1,
2017 |
|
September 30,
2018 |
|
October 1,
2017 |
|
September
30,
2018
(1)
|
|
October 1,
2017 |
||||||
Expected life (in years)
|
4.4
|
|
|
NA
|
|
NA
|
|
0.5
|
|
|
4.4
|
|
|
4.4
|
|
|
0.5
|
|
|
0.5
|
|
Risk-free interest rate
|
2.79
|
%
|
|
NA
|
|
NA
|
|
1.12
|
%
|
|
2.32
|
%
|
|
1.65
|
%
|
|
1.81
|
%
|
|
0.93
|
%
|
Expected volatility
|
33.5
|
%
|
|
NA
|
|
NA
|
|
31.3
|
%
|
|
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 September 30, 2018, no shares had been purchased under the 2018 ESPP by Arlo employees, as the program is temporarily suspended until the completion of the Distribution.
|
|
Three Months Ended
|
||||||||||||||||||||||
|
September 30, 2018
|
|
October 1, 2017
|
||||||||||||||||||||
|
Direct
|
|
Indirect
|
|
Total
|
|
Direct
|
|
Indirect
|
|
Total
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Cost of revenue
|
$
|
236
|
|
|
$
|
—
|
|
|
$
|
236
|
|
|
$
|
26
|
|
|
$
|
168
|
|
|
$
|
194
|
|
Research and development
|
872
|
|
|
—
|
|
|
872
|
|
|
314
|
|
|
125
|
|
|
439
|
|
||||||
Sales and marketing
|
754
|
|
|
—
|
|
|
754
|
|
|
163
|
|
|
234
|
|
|
397
|
|
||||||
General and administrative
|
1,575
|
|
|
—
|
|
|
1,575
|
|
|
—
|
|
|
723
|
|
|
723
|
|
||||||
Total stock-based compensation
|
$
|
3,437
|
|
|
$
|
—
|
|
|
$
|
3,437
|
|
|
$
|
503
|
|
|
$
|
1,250
|
|
|
$
|
1,753
|
|
|
Nine Months Ended
|
||||||||||||||||||||||
|
September 30, 2018
|
|
October 1, 2017
|
||||||||||||||||||||
|
Direct
|
|
Indirect
|
|
Total
|
|
Direct
|
|
Indirect
|
|
Total
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Cost of revenue
|
$
|
336
|
|
|
$
|
583
|
|
|
$
|
919
|
|
|
$
|
74
|
|
|
$
|
419
|
|
|
$
|
493
|
|
Research and development
|
2,186
|
|
|
396
|
|
|
2,582
|
|
|
1,545
|
|
|
318
|
|
|
1,863
|
|
||||||
Sales and marketing
|
1,239
|
|
|
969
|
|
|
2,208
|
|
|
236
|
|
|
581
|
|
|
817
|
|
||||||
General and administrative
|
1,575
|
|
|
2,100
|
|
|
3,675
|
|
|
—
|
|
|
1,768
|
|
|
1,768
|
|
||||||
Total stock-based compensation
|
$
|
5,336
|
|
|
$
|
4,048
|
|
|
$
|
9,384
|
|
|
$
|
1,855
|
|
|
$
|
3,086
|
|
|
$
|
4,941
|
|
Note 13.
|
Segment and Geographic Information
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
2018 |
|
October 1,
2017 |
|
September 30,
2018 |
|
October 1,
2017 |
||||||||
|
(In thousands)
|
||||||||||||||
United States (U.S.)
|
$
|
108,236
|
|
|
$
|
77,370
|
|
|
$
|
263,798
|
|
|
$
|
185,347
|
|
Americas (excluding U.S.)
|
4,613
|
|
|
5,064
|
|
|
10,455
|
|
|
10,009
|
|
||||
EMEA
|
11,760
|
|
|
17,433
|
|
|
50,416
|
|
|
37,662
|
|
||||
APAC
|
6,565
|
|
|
5,020
|
|
|
18,091
|
|
|
$
|
12,866
|
|
|||
Total revenue
|
$
|
131,174
|
|
|
$
|
104,887
|
|
|
$
|
342,760
|
|
|
$
|
245,884
|
|
|
As of
|
||||||
|
September 30,
2018 |
|
December 31,
2017 |
||||
|
(In thousands)
|
||||||
United States (“U.S.”)
|
$
|
36,583
|
|
|
$
|
2,053
|
|
Americas (excluding U.S.)
|
212
|
|
|
61
|
|
||
EMEA
|
273
|
|
|
1
|
|
||
China
|
2,157
|
|
|
1,702
|
|
||
APAC (excluding China)
|
385
|
|
|
66
|
|
||
Total property and equipment, net
|
$
|
39,610
|
|
|
$
|
3,883
|
|
Note 14.
|
Related Party Transactions
|
•
|
a transition services agreement 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 three months ended September 30, 2018,
$4.2 million
transition services agreement-related costs incurred, which included
$0.1 million
for cost of revenue,
$0.4 million
for research and development,
$0.9 million
for sales and marketing, and
$2.8 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”).
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
|
September 30, 2018
|
|
% Change
|
|
October 1, 2017
|
|
September 30, 2018
|
|
% Change
|
|
October 1, 2017
|
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Cumulative registered users
|
2,498
|
|
|
87.5
|
%
|
|
1,332
|
|
|
2,498
|
|
|
87.5
|
%
|
|
1,332
|
|
||||
Devices shipped
|
1,421
|
|
|
31.5
|
%
|
|
1,081
|
|
|
3,402
|
|
|
38.2
|
%
|
|
2,462
|
|
||||
Service revenue
|
$
|
9,827
|
|
|
25.9
|
%
|
|
$
|
7,803
|
|
|
$
|
27,082
|
|
|
34.7
|
%
|
|
$
|
20,109
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||||||
|
September 30,
2018 |
|
October 1,
2017 |
|
September 30,
2018 |
|
October 1,
2017 |
||||||||||||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||||||||
Revenue
|
$
|
131,174
|
|
|
100.0
|
%
|
|
$
|
104,887
|
|
|
100.0
|
%
|
|
$
|
342,760
|
|
|
100.0
|
%
|
|
$
|
245,884
|
|
|
100.0
|
%
|
Cost of revenue
|
101,427
|
|
|
77.3
|
%
|
|
76,535
|
|
|
73.0
|
%
|
|
255,666
|
|
|
74.6
|
%
|
|
184,467
|
|
|
75.0
|
%
|
||||
Gross profit
|
29,747
|
|
|
22.7
|
%
|
|
28,352
|
|
|
27.0
|
%
|
|
87,094
|
|
|
25.4
|
%
|
|
61,417
|
|
|
25.0
|
%
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Research and development
|
16,100
|
|
|
12.3
|
%
|
|
8,289
|
|
|
7.9
|
%
|
|
41,929
|
|
|
12.2
|
%
|
|
24,886
|
|
|
10.1
|
%
|
||||
Sales and marketing
|
12,843
|
|
|
9.8
|
%
|
|
9,983
|
|
|
9.5
|
%
|
|
37,123
|
|
|
10.9
|
%
|
|
23,067
|
|
|
9.5
|
%
|
||||
General and administrative
|
8,357
|
|
|
6.4
|
%
|
|
4,337
|
|
|
4.1
|
%
|
|
19,553
|
|
|
5.7
|
%
|
|
10,426
|
|
|
4.2
|
%
|
||||
Separation expense
|
5,823
|
|
|
4.4
|
%
|
|
—
|
|
|
—
|
%
|
|
23,649
|
|
|
6.9
|
%
|
|
—
|
|
|
—
|
%
|
||||
Total operating expenses
|
43,123
|
|
|
32.9
|
%
|
|
22,609
|
|
|
21.5
|
%
|
|
122,254
|
|
|
35.7
|
%
|
|
58,379
|
|
|
23.8
|
%
|
||||
Income (loss) from operations
|
(13,376
|
)
|
|
(10.2
|
)%
|
|
5,743
|
|
|
5.5
|
%
|
|
(35,160
|
)
|
|
(10.3
|
)%
|
|
3,038
|
|
|
1.2
|
%
|
||||
Interest income
|
503
|
|
|
0.4
|
%
|
|
—
|
|
|
—
|
%
|
|
503
|
|
|
0.2
|
%
|
|
—
|
|
|
—
|
%
|
||||
Other income (expense), net
|
(129
|
)
|
|
(0.1
|
)%
|
|
716
|
|
|
0.7
|
%
|
|
(923
|
)
|
|
(0.3
|
)%
|
|
1,649
|
|
|
0.7
|
%
|
||||
Income (loss) before income taxes
|
(13,002
|
)
|
|
(9.9
|
)%
|
|
6,459
|
|
|
6.2
|
%
|
|
(35,580
|
)
|
|
(10.4
|
)%
|
|
4,687
|
|
|
1.9
|
%
|
||||
Provision for income taxes
|
223
|
|
|
0.2
|
%
|
|
445
|
|
|
0.5
|
%
|
|
830
|
|
|
0.2
|
%
|
|
801
|
|
|
0.3
|
%
|
||||
Net income (loss)
|
$
|
(13,225
|
)
|
|
(10.1
|
)%
|
|
$
|
6,014
|
|
|
5.7
|
%
|
|
$
|
(36,410
|
)
|
|
(10.6
|
)%
|
|
$
|
3,886
|
|
|
1.6
|
%
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
|
September 30,
2018 |
|
% Change
|
|
October 1,
2017 |
|
September 30,
2018 |
|
% Change
|
|
October 1,
2017 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Americas
|
$
|
112,849
|
|
|
36.9
|
%
|
|
$
|
82,434
|
|
|
$
|
274,253
|
|
|
40.4
|
%
|
|
$
|
195,356
|
|
Percentage of revenue
|
86.0
|
%
|
|
|
|
78.6
|
%
|
|
80.0
|
%
|
|
|
|
79.5
|
%
|
||||||
EMEA
|
$
|
11,760
|
|
|
(32.5
|
)%
|
|
$
|
17,433
|
|
|
$
|
50,416
|
|
|
33.9
|
%
|
|
$
|
37,662
|
|
Percentage of revenue
|
9.0
|
%
|
|
|
|
16.6
|
%
|
|
14.7
|
%
|
|
|
|
15.3
|
%
|
||||||
APAC
|
$
|
6,565
|
|
|
30.8
|
%
|
|
$
|
5,020
|
|
|
$
|
18,091
|
|
|
40.6
|
%
|
|
$
|
12,866
|
|
Percentage of revenue
|
5.0
|
%
|
|
|
|
4.8
|
%
|
|
5.3
|
%
|
|
|
|
5.2
|
%
|
||||||
Total revenue
|
$
|
131,174
|
|
|
25.1
|
%
|
|
$
|
104,887
|
|
|
$
|
342,760
|
|
|
39.4
|
%
|
|
$
|
245,884
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
|
September 30,
2018 |
|
% Change
|
|
October 1,
2017 |
|
September 30,
2018 |
|
% Change
|
|
October 1,
2017 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Cost of revenue
|
$
|
101,427
|
|
|
32.5
|
%
|
|
$
|
76,535
|
|
|
$
|
255,666
|
|
|
38.6
|
%
|
|
$
|
184,467
|
|
Gross margin
|
22.7
|
%
|
|
|
|
27.0
|
%
|
|
25.4
|
%
|
|
|
|
25.0
|
%
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
|
September 30,
2018 |
|
% Change
|
|
October 1,
2017 |
|
September 30,
2018 |
|
% Change
|
|
October 1,
2017 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Research and development expense
|
$
|
16,100
|
|
|
94.2
|
%
|
|
$
|
8,289
|
|
|
$
|
41,929
|
|
|
68.5
|
%
|
|
$
|
24,886
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
|
September 30,
2018 |
|
% Change
|
|
October 1,
2017 |
|
September 30,
2018 |
|
% Change
|
|
October 1,
2017 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Sales and marketing expense
|
$
|
12,843
|
|
|
28.6
|
%
|
|
$
|
9,983
|
|
|
$
|
37,123
|
|
|
60.9
|
%
|
|
$
|
23,067
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
|
September 30,
2018 |
|
% Change
|
|
October 1,
2017 |
|
September 30,
2018 |
|
% Change
|
|
October 1,
2017 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
General and administrative expense
|
$
|
8,357
|
|
|
92.7
|
%
|
|
$
|
4,337
|
|
|
$
|
19,553
|
|
|
87.5
|
%
|
|
$
|
10,426
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||
|
September 30,
2018 |
|
% Change
|
|
October 1,
2017 |
|
September 30,
2018 |
|
% Change
|
|
October 1,
2017 |
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||
Separation expense
|
$
|
5,823
|
|
|
**
|
|
$
|
—
|
|
|
$
|
23,649
|
|
|
**
|
|
$
|
—
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
|
September 30,
2018 |
|
% Change
|
|
October 1,
2017 |
|
September 30,
2018 |
|
% Change
|
|
October 1,
2017 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Provision for income taxes
|
$
|
223
|
|
|
(49.9
|
)%
|
|
$
|
445
|
|
|
$
|
830
|
|
|
3.6
|
%
|
|
$
|
801
|
|
Effective tax rate
|
(1.7
|
)%
|
|
|
|
6.9
|
%
|
|
(2.3
|
)%
|
|
|
|
17.1
|
%
|
|
Nine Months Ended
|
||||||
|
September 30,
2018 |
|
October 1,
2017 |
||||
|
(In thousands)
|
||||||
Net cash used in operating activities
|
$
|
(46,309
|
)
|
|
$
|
(5,072
|
)
|
Net cash used in investing activities
|
(50,628
|
)
|
|
(2,919
|
)
|
||
Net cash provided by financing activities
|
244,902
|
|
|
7,950
|
|
||
Net cash increase (decrease)
|
$
|
147,965
|
|
|
$
|
(41
|
)
|
|
Payments due by period
|
||||||||||||||||||
|
|
|
Less Than
|
|
1-3
|
|
3-5
|
|
More Than
|
||||||||||
|
Total
|
|
1 Year
|
|
Years
|
|
Years
|
|
5 Years
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Operating leases
|
$
|
10,849
|
|
|
$
|
2,196
|
|
|
$
|
4,412
|
|
|
$
|
3,816
|
|
|
$
|
425
|
|
Purchase obligations
|
44,894
|
|
|
44,894
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
$
|
55,743
|
|
|
$
|
47,090
|
|
|
$
|
4,412
|
|
|
$
|
3,816
|
|
|
$
|
425
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
•
|
changes in the pricing policies of, or the introduction of new products by, us or our competitors;
|
•
|
introductions of new technologies and changes in consumer preferences that result in either unanticipated or unexpectedly rapid product category shifts;
|
•
|
slow or negative growth in the connected lifestyle, home electronics, and related technology markets;
|
•
|
seasonal shifts in end-market demand for our products;
|
•
|
delays in the introduction of new products by us or market acceptance of these 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 recently 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;
|
•
|
epidemic or widespread product failure, or unanticipated safety issues, in one or more of our products;
|
•
|
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 rates or our competitors’ growth rates;
|
•
|
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.
|
•
|
corporate opportunities;
|
•
|
the impact that operating or capital decisions (including the incurrence of indebtedness) relating to our business may have on NETGEAR’s consolidated financial statements and/or current or future indebtedness (including related covenants);
|
•
|
business combinations involving us;
|
•
|
our dividend and stock repurchase policies;
|
•
|
compensation and benefit programs and other human resources policy decisions;
|
•
|
management stock ownership;
|
•
|
the intercompany agreements and services between us and NETGEAR, including the agreements relating to our separation from NETGEAR;
|
•
|
the payment of dividends on our common stock; and
|
•
|
determinations with respect to our tax returns.
|
•
|
tax, employee benefit, indemnification, and other matters arising from the Separation;
|
•
|
the nature, quality, and pricing of services NETGEAR agrees to provide to us; and
|
•
|
sales and other disposals by NETGEAR of all or a portion of its ownership interest in us.
|
•
|
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;
|
•
|
whether, when, and in what manner NETGEAR completes the Distribution; and
|
•
|
investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives.
|
•
|
a majority of our board of directors consists of independent directors;
|
•
|
we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
|
•
|
we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
|
•
|
the inability of our stockholders to call a special meeting;
|
•
|
the inability of our stockholders to act without a meeting of stockholders, from and after such time as NETGEAR beneficially owns shares of our common stock representing less than a majority of the voting rights of our common stock;
|
•
|
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, from and after such time as NETGEAR beneficially owns shares of our common stock representing less than a majority of the voting rights of our common stock, 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 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibits
|
|
|
|
|
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
|
|
|
||
|
|
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
|
|
|
||
10.7
*
|
|
|
8-K
|
|
8/7/2018
|
|
10.7
|
|
|
|
10.8
*
|
|
|
8-K
|
|
8/7/2018
|
|
10.8
|
|
|
|
10.9
*
|
|
|
8-K
|
|
8/7/2018
|
|
10.9
|
|
|
|
10.10
*
|
|
|
8-K
|
|
8/7/2018
|
|
10.10
|
|
|
|
10.11
*
|
|
|
8-K
|
|
8/7/2018
|
|
10.11
|
|
|
|
10.12
*
|
|
|
8-K
|
|
8/7/2018
|
|
10.12
|
|
|
|
10.13
*
|
|
|
8-K
|
|
8/7/2018
|
|
10.13
|
|
|
|
10.14
*
|
|
|
8-K
|
|
8/7/2018
|
|
10.14
|
|
|
|
10.15
*
|
|
|
S-1/A
|
|
7/23/2018
|
|
10.16
|
|
|
|
10.16
*
|
|
|
10-Q
|
|
8/27/2018
|
|
10.17
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
X
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
X
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
X
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
X
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
X
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Indicates management contract or compensatory plan or arrangement.
|
|
|
|
|
|
|
|
|
#
|
|
This certification is deemed to accompany this Quarterly Report on Form 10-Q and will not be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section. This certification will not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
|
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)
|
1 Year Arlo Technologies Chart |
1 Month Arlo Technologies Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions