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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 | |
---|---|---|---|---|---|---|---|---|
0.59 | 5.26% | 11.80 | 11.87 | 11.30 | 11.30 | 709,072 | 21:02:13 |
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
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)
|
|
|
Page No.
|
Item 1.
|
||
|
||
|
||
|
||
|
||
|
||
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
|
|
|
|
|
Item 1.
|
||
Item 1A.
|
||
Item 6.
|
||
|
Item 1.
|
Financial Statements
|
|
As of
|
||||||
|
September 29,
2019 |
|
December 31,
2018 |
||||
|
(In thousands)
|
||||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
113,870
|
|
|
$
|
151,290
|
|
Short-term investments
|
39,941
|
|
|
49,737
|
|
||
Accounts receivable, net
|
99,698
|
|
|
166,045
|
|
||
Inventories
|
74,117
|
|
|
124,791
|
|
||
Prepaid expenses and other current assets
|
16,088
|
|
|
23,611
|
|
||
Total current assets
|
343,714
|
|
|
515,474
|
|
||
Property and equipment, net
|
24,216
|
|
|
49,428
|
|
||
Operating lease right-of-use assets, net
|
32,008
|
|
|
—
|
|
||
Intangibles, net
|
1,679
|
|
|
2,823
|
|
||
Goodwill
|
15,638
|
|
|
15,638
|
|
||
Restricted cash
|
4,130
|
|
|
4,134
|
|
||
Other non-current assets
|
5,610
|
|
|
8,449
|
|
||
Total assets
|
$
|
426,995
|
|
|
$
|
595,946
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
57,772
|
|
|
$
|
82,542
|
|
Deferred revenue
|
28,443
|
|
|
26,678
|
|
||
Accrued liabilities
|
110,071
|
|
|
172,036
|
|
||
Income tax payable
|
995
|
|
|
734
|
|
||
Total current liabilities
|
197,281
|
|
|
281,990
|
|
||
Non-current deferred revenue
|
19,552
|
|
|
23,313
|
|
||
Non-current operating lease liabilities
|
30,484
|
|
|
—
|
|
||
Non-current financing lease obligation
|
—
|
|
|
19,978
|
|
||
Non-current income taxes payable
|
58
|
|
|
22
|
|
||
Other non-current liabilities
|
14
|
|
|
1,141
|
|
||
Total liabilities
|
247,389
|
|
|
326,444
|
|
||
Commitments and contingencies (Note 8)
|
|
|
|
|
|
||
Stockholders’ Equity:
|
|
|
|
||||
Preferred stock
|
—
|
|
|
—
|
|
||
Common stock
|
76
|
|
|
74
|
|
||
Additional paid-in capital
|
330,618
|
|
|
315,277
|
|
||
Accumulated other comprehensive income
|
46
|
|
|
—
|
|
||
Accumulated deficit
|
(151,134
|
)
|
|
(45,849
|
)
|
||
Total stockholders’ equity
|
179,606
|
|
|
269,502
|
|
||
Total liabilities and stockholders’ equity
|
$
|
426,995
|
|
|
$
|
595,946
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 29,
2019 |
|
September 30,
2018 |
|
September 29,
2019 |
|
September 30,
2018 |
||||||||
|
(In thousands, except per share data)
|
||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Products
|
$
|
94,306
|
|
|
$
|
121,347
|
|
|
$
|
213,359
|
|
|
$
|
315,678
|
|
Services
|
11,810
|
|
|
9,827
|
|
|
34,235
|
|
|
27,082
|
|
||||
Total revenue
|
106,116
|
|
|
131,174
|
|
|
247,594
|
|
|
342,760
|
|
||||
Cost of revenue:
|
|
|
|
|
|
|
|
||||||||
Products
|
88,755
|
|
|
96,754
|
|
|
206,878
|
|
|
241,808
|
|
||||
Services
|
6,858
|
|
|
4,673
|
|
|
18,618
|
|
|
13,858
|
|
||||
Total cost of revenue
|
95,613
|
|
|
101,427
|
|
|
225,496
|
|
|
255,666
|
|
||||
Gross profit
|
10,503
|
|
|
29,747
|
|
|
22,098
|
|
|
87,094
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and development
|
16,701
|
|
|
16,100
|
|
|
52,456
|
|
|
41,929
|
|
||||
Sales and marketing
|
13,657
|
|
|
12,843
|
|
|
42,389
|
|
|
37,123
|
|
||||
General and administrative
|
11,062
|
|
|
8,357
|
|
|
32,512
|
|
|
19,553
|
|
||||
Separation expense
|
137
|
|
|
5,823
|
|
|
1,760
|
|
|
23,649
|
|
||||
Total operating expenses
|
41,557
|
|
|
43,123
|
|
|
129,117
|
|
|
122,254
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Loss from operations
|
(31,054
|
)
|
|
(13,376
|
)
|
|
(107,019
|
)
|
|
(35,160
|
)
|
||||
Interest income
|
596
|
|
|
503
|
|
|
2,170
|
|
|
503
|
|
||||
Other income (expense), net
|
154
|
|
|
(129
|
)
|
|
138
|
|
|
(923
|
)
|
||||
Loss before income taxes
|
(30,304
|
)
|
|
(13,002
|
)
|
|
(104,711
|
)
|
|
(35,580
|
)
|
||||
Provision for income taxes
|
286
|
|
|
223
|
|
|
855
|
|
|
830
|
|
||||
Net loss
|
$
|
(30,590
|
)
|
|
$
|
(13,225
|
)
|
|
$
|
(105,566
|
)
|
|
$
|
(36,410
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.41
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(1.41
|
)
|
|
$
|
(0.56
|
)
|
Diluted
|
$
|
(0.41
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(1.41
|
)
|
|
$
|
(0.56
|
)
|
Weighted average shares used to compute net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
75,337
|
|
|
69,600
|
|
|
74,831
|
|
|
64,867
|
|
||||
Diluted
|
75,337
|
|
|
69,600
|
|
|
74,831
|
|
|
64,867
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 29,
2019 |
|
September 30,
2018 |
|
September 29,
2019 |
|
September 30,
2018 |
||||||||
|
(In thousands)
|
||||||||||||||
Net loss
|
$
|
(30,590
|
)
|
|
$
|
(13,225
|
)
|
|
$
|
(105,566
|
)
|
|
$
|
(36,410
|
)
|
Other comprehensive income (loss), before tax:
|
|
|
|
|
|
|
|
||||||||
Unrealized gain (loss) on derivative instruments
|
22
|
|
|
20
|
|
|
—
|
|
|
20
|
|
||||
Unrealized gain (loss) on available-for-sale securities
|
(27
|
)
|
|
(4
|
)
|
|
46
|
|
|
(4
|
)
|
||||
Total other comprehensive income (loss), before tax
|
(5
|
)
|
|
16
|
|
|
46
|
|
|
16
|
|
||||
Tax benefit (provision) related to derivative instruments
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
||||
Tax benefit (provision) related to available-for-sale securities
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
Total other comprehensive income (loss), net of tax
|
(5
|
)
|
|
14
|
|
|
46
|
|
|
14
|
|
||||
Comprehensive loss
|
$
|
(30,595
|
)
|
|
$
|
(13,211
|
)
|
|
$
|
(105,520
|
)
|
|
$
|
(36,396
|
)
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Shares
|
|
Amount
|
|
Additional Paid-In Capital
|
|
Net Parent Investment
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Accumulated Deficit
|
|
Total
|
|||||||||||||
|
(In thousands)
|
|||||||||||||||||||||||||
Balance as of June 30, 2019
|
74,869
|
|
|
$
|
75
|
|
|
$
|
323,648
|
|
|
$
|
—
|
|
|
$
|
51
|
|
|
$
|
(120,544
|
)
|
|
$
|
203,230
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
(30,590
|
)
|
|
(30,590
|
)
|
|||||||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
5,219
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,219
|
|
||||||
Issuance of common stock under stock-based compensation plans
|
88
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Issuance of common stock under Employee Stock Purchase Plan
|
767
|
|
|
1
|
|
|
1,824
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,825
|
|
||||||
Restricted stock unit withholdings
|
(18
|
)
|
|
—
|
|
|
(73
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(73
|
)
|
||||||
Change in unrealized gains and losses on available-for-sale securities, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27
|
)
|
|
—
|
|
|
(27
|
)
|
||||||
Change in unrealized gains and losses on derivatives, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
—
|
|
|
22
|
|
||||||
Balance as of September 29, 2019
|
75,706
|
|
|
$
|
76
|
|
|
$
|
330,618
|
|
|
$
|
—
|
|
|
$
|
46
|
|
|
$
|
(151,134
|
)
|
|
$
|
179,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Shares
|
|
Amount
|
|
Additional Paid-In Capital
|
|
Net Parent Investment
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Accumulated Deficit
|
|
Total
|
|||||||||||||
|
(In thousands)
|
|||||||||||||||||||||||||
Balance as of July 1, 2018
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
111,443
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
111,443
|
|
Net loss, prior to the completion of the Contribution
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,449
|
)
|
|
—
|
|
|
—
|
|
|
(6,449
|
)
|
||||||
Net loss, after the completion of the Contribution
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,776
|
)
|
|
(6,776
|
)
|
||||||
Issuance of common stock from initial public offering, net of offering costs
|
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
|
—
|
|
|
—
|
|
|
—
|
|
|
33,793
|
|
|
—
|
|
|
—
|
|
|
33,793
|
|
||||||
Conversion of Net parent investment into common stock
|
62,500
|
|
|
62
|
|
|
139,645
|
|
|
(139,645
|
)
|
|
—
|
|
|
—
|
|
|
62
|
|
||||||
Stock-based compensation expense funded by NETGEAR
|
—
|
|
|
—
|
|
|
—
|
|
|
858
|
|
|
—
|
|
|
—
|
|
|
858
|
|
||||||
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
|
|
|
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, 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
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(105,566
|
)
|
|
(105,566
|
)
|
||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
15,261
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,261
|
|
||||||
Issuance of common stock under stock-based compensation plans
|
1,041
|
|
|
1
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
||||||
Issuance of common stock under Employee Stock Purchase Plan
|
767
|
|
|
1
|
|
|
1,824
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,825
|
|
||||||
Restricted stock unit withholdings
|
(349
|
)
|
|
—
|
|
|
(1,755
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,755
|
)
|
||||||
Change in unrealized gains and losses on available-for-sale securities, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46
|
|
|
—
|
|
|
46
|
|
||||||
Change in unrealized gains and losses on derivatives, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Balance as of September 29, 2019
|
75,706
|
|
|
$
|
76
|
|
|
$
|
330,618
|
|
|
$
|
—
|
|
|
$
|
46
|
|
|
$
|
(151,134
|
)
|
|
$
|
179,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
|
|
||||||||||||||||||||||||||
ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
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, 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, net of offering costs
|
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 29,
2019 |
|
September 30,
2018 |
||||
|
(In thousands)
|
||||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(105,566
|
)
|
|
$
|
(36,410
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
10,950
|
|
|
3,406
|
|
||
Premium amortization / discount accretion on investments, net
|
(391
|
)
|
|
(3
|
)
|
||
Stock-based compensation expense
|
15,261
|
|
|
5,336
|
|
||
Deferred income taxes
|
(109
|
)
|
|
(438
|
)
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
|
66,348
|
|
|
(69,724
|
)
|
||
Inventories
|
50,675
|
|
|
(50,009
|
)
|
||
Prepaid expenses and other assets
|
(1,729
|
)
|
|
(17,319
|
)
|
||
Accounts payable
|
(24,381
|
)
|
|
53,717
|
|
||
Deferred revenue
|
(1,996
|
)
|
|
7,169
|
|
||
Accrued and other liabilities
|
(51,777
|
)
|
|
57,966
|
|
||
Net cash used in operating activities
|
(42,715
|
)
|
|
(46,309
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(5,023
|
)
|
|
(10,854
|
)
|
||
Purchases of short-term investments
|
(29,768
|
)
|
|
(39,774
|
)
|
||
Proceeds from maturities of short-term investments
|
40,000
|
|
|
—
|
|
||
Net cash provided (cash used) by investing activities
|
5,209
|
|
|
(50,628
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from initial public offering, net of offering costs
|
—
|
|
|
173,395
|
|
||
Proceeds related to employee benefit plans
|
1,837
|
|
|
—
|
|
||
Restricted stock unit withholdings
|
(1,755
|
)
|
|
—
|
|
||
Net investment from parent
|
—
|
|
|
71,507
|
|
||
Net cash provided by financing activities
|
82
|
|
|
244,902
|
|
||
Net increase (decrease) in cash and cash equivalents and restricted cash
|
(37,424
|
)
|
|
147,965
|
|
||
Cash and cash equivalents and restricted cash, at beginning of period
|
155,424
|
|
|
108
|
|
||
Cash and cash equivalents and restricted cash, at end of period
|
$
|
118,000
|
|
|
$
|
148,073
|
|
|
|
|
|
||||
Non-cash investing and financing activities:
|
|
|
|
||||
Purchases of property and equipment included in accounts payable and accrued liabilities
|
$
|
1,578
|
|
|
$
|
5,279
|
|
De-recognition of build-to-suit assets and liabilities
|
$
|
(21,610
|
)
|
|
$
|
—
|
|
Estimated fair value of a facility under build-to-suit lease
|
$
|
—
|
|
|
$
|
21,858
|
|
Note 1.
|
The Company and Basis of Presentation
|
Note 2.
|
Significant Accounting Policies and Recent Accounting Pronouncements
|
Note 3.
|
Balance Sheet Components
|
|
As of
|
||||||
|
September 29,
2019 |
|
December 31,
2018 |
||||
|
(In thousands)
|
||||||
Cash and cash equivalents
|
$
|
113,870
|
|
|
$
|
151,290
|
|
Restricted cash
|
4,130
|
|
|
4,134
|
|
||
Total as presented on the unaudited condensed consolidated statements of cash flows
|
$
|
118,000
|
|
|
$
|
155,424
|
|
|
As of September 29, 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
|
$
|
39,897
|
|
|
$
|
44
|
|
|
$
|
—
|
|
|
$
|
39,941
|
|
|
$
|
49,739
|
|
|
$
|
2
|
|
|
$
|
(4
|
)
|
|
$
|
49,737
|
|
|
As of
|
||||||
|
September 29,
2019 |
|
December 31,
2018 |
||||
|
(In thousands)
|
||||||
Gross accounts receivable
|
$
|
100,253
|
|
|
$
|
166,172
|
|
Allowance for doubtful accounts
|
(555
|
)
|
|
(127
|
)
|
||
Total accounts receivable, net
|
$
|
99,698
|
|
|
$
|
166,045
|
|
|
As of
|
||||||
|
September 29,
2019 |
|
December 31,
2018 |
||||
|
(In thousands)
|
||||||
Machinery and equipment
|
$
|
13,289
|
|
|
$
|
11,415
|
|
Software
|
11,941
|
|
|
10,624
|
|
||
Computer equipment
|
4,042
|
|
|
4,342
|
|
||
Furniture and fixtures
|
3,795
|
|
|
2,698
|
|
||
Leasehold improvements
|
8,836
|
|
|
3,007
|
|
||
Construction in progress (1)
|
—
|
|
|
28,357
|
|
||
Total property and equipment, gross
|
41,903
|
|
|
60,443
|
|
||
Accumulated depreciation and amortization
|
(17,687
|
)
|
|
(11,015
|
)
|
||
Total property and equipment, net
|
$
|
24,216
|
|
|
$
|
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 of progress. Refer to Note 8, Commitments and Contingencies, for further details.
|
|
As of September 29, 2019
|
|
As of December 31, 2018
|
||||||||||||||||||||
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Technology
|
$
|
9,800
|
|
|
$
|
(8,196
|
)
|
|
$
|
1,604
|
|
|
$
|
9,800
|
|
|
$
|
(7,165
|
)
|
|
$
|
2,635
|
|
Other
|
500
|
|
|
(425
|
)
|
|
75
|
|
|
800
|
|
|
(612
|
)
|
|
188
|
|
||||||
Total intangibles, net
|
$
|
10,300
|
|
|
$
|
(8,621
|
)
|
|
$
|
1,679
|
|
|
$
|
10,600
|
|
|
$
|
(7,777
|
)
|
|
$
|
2,823
|
|
2019 (remaining three months)
|
$
|
373
|
|
2020
|
1,306
|
|
|
Total estimated amortization expense
|
$
|
1,679
|
|
As of December 31, 2018
|
$
|
15,638
|
|
As of September 29, 2019
|
$
|
15,638
|
|
|
As of
|
||||||
|
September 29,
2019 |
|
December 31, 2018
|
||||
|
(In thousands)
|
||||||
Non-current deferred income taxes
|
$
|
1,218
|
|
|
$
|
1,108
|
|
Deposits
|
3,644
|
|
|
4,084
|
|
||
Other
|
748
|
|
|
3,257
|
|
||
Total other non-current assets
|
$
|
5,610
|
|
|
$
|
8,449
|
|
|
As of
|
||||||
|
September 29,
2019 |
|
December 31,
2018 |
||||
|
(In thousands)
|
||||||
Sales and marketing
|
$
|
44,399
|
|
|
$
|
75,863
|
|
Sales returns
|
29,351
|
|
|
49,247
|
|
||
Accrued employee compensation
|
6,707
|
|
|
11,897
|
|
||
Current operating lease liabilities
|
3,814
|
|
|
—
|
|
||
Warranty obligation
|
3,403
|
|
|
3,712
|
|
||
Freight
|
2,159
|
|
|
3,913
|
|
||
Current financing lease obligation
|
—
|
|
|
1,632
|
|
||
Other
|
20,238
|
|
|
25,772
|
|
||
Total accrued liabilities
|
$
|
110,071
|
|
|
$
|
172,036
|
|
Note 4.
|
Fair Value Measurements
|
|
As of September 29, 2019
|
|
As of December 31, 2018
|
||||||||||||||||||||
|
Total
|
|
Quoted market
prices in active
markets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
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)
|
$
|
11,176
|
|
|
$
|
11,176
|
|
|
$
|
—
|
|
|
$
|
438
|
|
|
$
|
438
|
|
|
$
|
—
|
|
Available-for-sale securities: U.S. treasuries (1)
|
39,941
|
|
|
39,941
|
|
|
—
|
|
|
49,737
|
|
|
49,737
|
|
|
—
|
|
||||||
Foreign currency forward contracts (2)
|
343
|
|
|
—
|
|
|
343
|
|
|
322
|
|
|
—
|
|
|
322
|
|
||||||
Total assets measured at fair value
|
$
|
51,460
|
|
|
$
|
51,117
|
|
|
$
|
343
|
|
|
$
|
50,497
|
|
|
$
|
50,175
|
|
|
$
|
322
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign currency forward contracts (3)
|
$
|
56
|
|
|
$
|
—
|
|
|
$
|
56
|
|
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
71
|
|
Total liabilities measured at fair value
|
$
|
56
|
|
|
$
|
—
|
|
|
$
|
56
|
|
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
71
|
|
(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 5.
|
Derivative Financial Instruments
|
Derivative Assets
|
|
Balance Sheet
Location
|
|
September 29, 2019
|
|
December 31, 2018
|
|
Balance Sheet
Location
|
|
September 29, 2019
|
|
December 31, 2018
|
||||||||
|
|
|
|
(In thousands)
|
|
|
|
(In thousands)
|
||||||||||||
Derivative assets not designated as hedging instruments
|
|
Prepaid expenses and other current assets
|
|
$
|
336
|
|
|
$
|
293
|
|
|
Accrued liabilities
|
|
$
|
46
|
|
|
$
|
46
|
|
Derivative assets designated as hedging instruments
|
|
Prepaid expenses and other current assets
|
|
7
|
|
|
29
|
|
|
Accrued liabilities
|
|
10
|
|
|
25
|
|
||||
Total
|
|
|
|
$
|
343
|
|
|
$
|
322
|
|
|
|
|
$
|
56
|
|
|
$
|
71
|
|
As of September 29, 2019
|
|
|
|
|
|
|
|
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
|
|
$
|
329
|
|
|
$
|
—
|
|
|
$
|
329
|
|
|
$
|
(54
|
)
|
|
$
|
—
|
|
|
$
|
275
|
|
Wells Fargo Bank
|
|
14
|
|
|
—
|
|
|
14
|
|
|
(2
|
)
|
|
—
|
|
|
12
|
|
||||||
Total
|
|
$
|
343
|
|
|
$
|
—
|
|
|
$
|
343
|
|
|
$
|
(56
|
)
|
|
$
|
—
|
|
|
$
|
287
|
|
As of December 31, 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
|
|
$
|
100
|
|
|
$
|
—
|
|
|
$
|
100
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
100
|
|
Wells Fargo Bank
|
|
222
|
|
|
—
|
|
|
222
|
|
|
(68
|
)
|
|
—
|
|
|
154
|
|
||||||
Total
|
|
$
|
322
|
|
|
$
|
—
|
|
|
$
|
322
|
|
|
$
|
(68
|
)
|
|
$
|
—
|
|
|
$
|
254
|
|
As of September 29, 2019
|
|
|
|
|
|
|
|
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
|
|
$
|
54
|
|
|
$
|
—
|
|
|
$
|
54
|
|
|
$
|
(54
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Wells Fargo Bank
|
|
2
|
|
|
—
|
|
|
2
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
$
|
56
|
|
|
$
|
—
|
|
|
$
|
56
|
|
|
$
|
(56
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
As of December 31, 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)
|
||||||||||||||||||||||
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
|
||||||||||||||||||
|
|
Revenue
|
|
Cost of revenue
|
|
Research and development
|
|
Sales and marketing
|
|
General and administrative
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Statements of operations
|
|
$
|
106,116
|
|
|
$
|
95,613
|
|
|
$
|
16,701
|
|
|
$
|
13,657
|
|
|
$
|
11,062
|
|
Gains (losses) on cash flow hedge
|
|
$
|
86
|
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
(3
|
)
|
|
$
|
(2
|
)
|
|
|
Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges
|
||||||||||||||||||
|
|
Revenue
|
|
Cost of revenue
|
|
Research and development
|
|
Sales and marketing
|
|
General and administrative
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Statements of operations
|
|
$
|
247,594
|
|
|
$
|
225,496
|
|
|
$
|
52,456
|
|
|
$
|
42,389
|
|
|
$
|
32,512
|
|
Gains (losses) on cash flow hedge
|
|
$
|
333
|
|
|
$
|
(2
|
)
|
|
$
|
(24
|
)
|
|
$
|
(38
|
)
|
|
$
|
(11
|
)
|
Derivatives Not Designated as Hedging Instruments
|
|
Location of Gains (Losses)
Recognized in Income on Derivative
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 29, 2019
|
|
September 30, 2018
|
|
September 29, 2019
|
|
September 30, 2018
|
|||||||||||
|
|
|
|
(In thousands)
|
|
|
|
|
||||||||||
Foreign currency forward contracts
|
|
Other income (expense), net
|
|
$
|
665
|
|
|
$
|
(57
|
)
|
|
$
|
521
|
|
|
$
|
(57
|
)
|
Note 6.
|
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 June 30, 2019
|
$
|
72
|
|
|
$
|
(22
|
)
|
|
$
|
1
|
|
|
$
|
51
|
|
Other comprehensive income (loss) before reclassifications
|
(27
|
)
|
|
100
|
|
|
|
|
73
|
|
|||||
Less: Amount reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
78
|
|
|
—
|
|
|
78
|
|
||||
Net current period other comprehensive income (loss)
|
(27
|
)
|
|
22
|
|
|
—
|
|
|
(5
|
)
|
||||
Balance as of September 29, 2019
|
$
|
45
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
46
|
|
|
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, 2018
|
$
|
(2
|
)
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other comprehensive income (loss) before reclassifications
|
47
|
|
|
256
|
|
|
1
|
|
|
304
|
|
||||
Less: Amount reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
258
|
|
|
—
|
|
|
258
|
|
||||
Net current period other comprehensive income (loss)
|
47
|
|
|
(2
|
)
|
|
1
|
|
|
46
|
|
||||
Balance as of September 29, 2019
|
$
|
45
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
46
|
|
|
|
Three Months Ended
September 29, 2019
|
|
Nine Months Ended
September 29, 2019
|
|
|
||||||||||||
|
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
|
|
$
|
100
|
|
|
$
|
86
|
|
|
$
|
257
|
|
|
$
|
333
|
|
|
Revenue
|
Foreign currency contracts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
Cost of revenue
|
||||
Foreign currency contracts
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(24
|
)
|
|
Research and development
|
||||
Foreign currency contracts
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(38
|
)
|
|
Sales and marketing
|
||||
Foreign currency contracts
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(11
|
)
|
|
General and administrative
|
||||
|
|
$
|
100
|
|
|
$
|
78
|
|
|
$
|
257
|
|
|
$
|
258
|
|
|
Total *
|
|
|
1 year
|
|
2 years
|
|
Greater than 2 years
|
|
Total
|
||||||||
|
|
(In thousands)
|
||||||||||||||
Performance obligations
|
|
$
|
58,575
|
|
|
$
|
15,770
|
|
|
$
|
5,209
|
|
|
$
|
79,554
|
|
Note 8.
|
Commitments and Contingencies
|
|
|
Statements of Operations Location
|
|
Three Months Ended September 29, 2019
|
|
Nine Months Ended September 29, 2019
|
||||
|
|
|
|
(In thousands)
|
||||||
Operating lease cost (1)
|
|
General and administrative
|
|
$
|
1,726
|
|
|
$
|
5,068
|
|
(1)
|
Included short-term leases and variable lease costs which were immaterial.
|
Leases
|
|
Balance Sheet Location
|
|
September 29, 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
|
|
32,008
|
|
|
14,400
|
|
|
—
|
|
|||
Operating leases (2)
|
|
Accrued liabilities
|
|
—
|
|
|
(107
|
)
|
|
107
|
|
|||
Operating leases (2)
|
|
Accrued liabilities
|
|
3,814
|
|
|
2,356
|
|
|
—
|
|
|||
Operating leases (2)
|
|
Non-current deferred rent
|
|
—
|
|
|
(1,141
|
)
|
|
1,141
|
|
|||
Operating leases (2)
|
|
Non-current operating lease liabilities
|
|
30,484
|
|
|
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 unaudited condensed 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.
|
|
|
Three Months Ended
September 29, 2019
|
|
Nine Months Ended
September 29, 2019
|
||||
|
|
(in thousands)
|
||||||
Cash paid for amounts included in the measurement of lease liabilities
|
|
|
|
|
||||
Operating cash flows from operating leases
|
|
$
|
1,470
|
|
|
$
|
2,882
|
|
Right-of-use assets obtained in exchange for lease liabilities
|
|
|
|
|
||||
Operating leases
|
|
$
|
439
|
|
|
$
|
22,172
|
|
Weighted average remaining lease term
|
|
5.9 years
|
|
Weighted average discount rate
|
|
5.67
|
%
|
2019 (Remaining three months)
|
$
|
1,170
|
|
2020
|
5,950
|
|
|
2021
|
5,789
|
|
|
2022
|
5,645
|
|
|
2023
|
4,968
|
|
|
Thereafter
|
19,488
|
|
|
Total lease payments
|
43,010
|
|
|
Less: interest (1)
|
(8,712
|
)
|
|
Total
|
$
|
34,298
|
|
|
|
||
Accrued liabilities
|
$
|
3,814
|
|
Non-current operating lease liabilities
|
30,484
|
|
|
Total
|
$
|
34,298
|
|
(1)
|
Calculated using the Company’s incremental borrowing rate on a collateralized basis plus LIBOR rate that closely matches contractual term of most leases.
|
|
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.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 29,
2019 |
|
September 30,
2018 |
|
September 29,
2019 |
|
September 30,
2018 |
||||||||
|
(In thousands)
|
||||||||||||||
Balance at the beginning of the period
|
$
|
3,232
|
|
|
$
|
3,487
|
|
|
$
|
3,712
|
|
|
$
|
31,756
|
|
Reclassified to sales returns upon adoption of ASC 606 (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
(28,713
|
)
|
||||
Provision for warranty obligation made during the period
|
364
|
|
|
344
|
|
|
292
|
|
|
1,166
|
|
||||
Settlements made during the period
|
(193
|
)
|
|
(213
|
)
|
|
(601
|
)
|
|
(591
|
)
|
||||
Balance at the end of the period
|
$
|
3,403
|
|
|
$
|
3,618
|
|
|
$
|
3,403
|
|
|
$
|
3,618
|
|
(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.
|
Note 9.
|
Employee Benefit Plans
|
|
Number of Shares
|
|
|
(In thousands)
|
|
Shares available for grant as of December 31, 2018 (1)
|
3,969
|
|
Additional authorized shares
|
2,970
|
|
Granted (3)
|
(6,303
|
)
|
Forfeited / cancelled (2)
|
1,464
|
|
Expired
|
1
|
|
Shares traded for taxes
|
349
|
|
Shares available for grant as of September 29, 2019
|
2,450
|
|
(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). As of September 29, 2019, it had not yet been determined the extent to which (if at all) the performance-based vesting criteria had been satisfied except for Tranche 4 Performance Option. Therefore, this line item includes all such performance-based IPO Options granted during the year ended December 31, 2018, reported at the maximum possible number of shares that may ultimately be issuable if all applicable performance-based criteria are achieved at their maximum levels and all applicable service-based criteria are fully satisfied. Tranche 4 Performance Option’s measurement period was completed and none of the shares vested.
|
(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.
|
(3)
|
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 ending December 31, 2019 is achieved. 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.
|
|
Number of shares
|
|
Weighted Average Exercise Price Per Share
|
|||
|
(In thousands)
|
|
(In dollars)
|
|||
Outstanding as of December 31, 2018 (1)
|
7,209
|
|
|
$
|
12.08
|
|
Granted
|
10
|
|
|
$
|
3.90
|
|
Exercised
|
(4
|
)
|
|
$
|
3.03
|
|
Forfeited / cancelled (2)
|
(938
|
)
|
|
$
|
15.88
|
|
Expired
|
(159
|
)
|
|
$
|
12.00
|
|
Outstanding as of September 29, 2019
|
6,118
|
|
|
$
|
11.49
|
|
(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.
|
|
Number of shares
|
|
Weighted Average Exercise Price Per Share
|
|||
|
(In thousands)
|
|
(In dollars)
|
|||
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 September 29, 2019
|
205
|
|
|
$
|
25.94
|
|
|
Number of shares
|
|
Weighted Average Grant Date Fair Value Per Share
|
|||
|
(In thousands)
|
|
(In dollars)
|
|||
Outstanding as of December 31, 2018
|
3,141
|
|
|
$
|
12.22
|
|
Granted (3)
|
6,293
|
|
|
$
|
4.83
|
|
Vested
|
(1,033
|
)
|
|
$
|
11.30
|
|
Forfeited
|
(368
|
)
|
|
$
|
8.55
|
|
Outstanding as of September 29, 2019
|
8,033
|
|
|
$
|
6.71
|
|
(3)
|
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 ending December 31, 2019 is achieved.
|
|
Number of shares
|
|
Weighted Average Grant Date Fair Value Per Share
|
|||
|
(In thousands)
|
|
(In dollars)
|
|||
Outstanding as of December 31, 2018
|
522
|
|
|
$
|
34.89
|
|
Vested
|
(155
|
)
|
|
$
|
32.44
|
|
Forfeited
|
(40
|
)
|
|
$
|
36.47
|
|
Outstanding as of September 29, 2019
|
327
|
|
|
$
|
35.85
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|||||||||||||||||||
|
Stock Options
|
|
ESPP
|
|
Stock Options
|
|
ESPP
|
|||||||||||||||
|
September 29,
2019 |
|
September 30,
2018 |
|
September 29,
2019 |
|
September 30,
2018 |
|
September 29,
2019 |
|
September 30,
2018 |
|
September 29, 2019
|
|
September 30,
2018 |
|||||||
Expected life (in years)
|
NA
|
|
|
4.4
|
|
|
0.5
|
|
|
NA
|
|
6.3
|
|
|
4.4
|
|
|
0.5
|
|
|
0.5
|
|
Risk-free interest rate
|
NA
|
|
|
2.79
|
%
|
|
2.49
|
%
|
|
NA
|
|
2.28
|
%
|
|
2.32
|
%
|
|
2.49
|
%
|
|
1.81
|
%
|
Expected volatility
|
NA
|
|
|
33.5
|
%
|
|
97.6
|
%
|
|
NA
|
|
73.0
|
%
|
|
30.9
|
%
|
|
97.6
|
%
|
|
37.1
|
%
|
Dividend yield
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||
|
September 29,
2019 |
|
September 30,
2018 |
|
September 29,
2019 |
|
September 30,
2018 |
||
Expected life
|
3.0
|
|
|
N/A
|
|
3.0
|
|
|
N/A
|
Risk-free interest rate
|
1.52
|
%
|
|
N/A
|
|
1.52
|
%
|
|
N/A
|
Expected volatility
|
65.1
|
%
|
|
N/A
|
|
65.1
|
%
|
|
N/A
|
Dividend yield
|
—
|
|
|
N/A
|
|
—
|
|
|
N/A
|
Stock Beta
|
0.30
|
|
|
N/A
|
|
0.30
|
|
|
N/A
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||||||||||
|
September 29, 2019
|
|
September 30, 2018
|
|
September 29, 2019
|
|
September 30, 2018
|
||||||||||||||||||||||||
|
Total
|
|
Direct
|
|
Indirect
|
|
Total
|
|
Total
|
|
Direct
|
|
Indirect
|
|
Total
|
||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||
Cost of revenue
|
$
|
467
|
|
|
$
|
236
|
|
|
$
|
—
|
|
|
$
|
236
|
|
|
$
|
1,286
|
|
|
$
|
336
|
|
|
$
|
583
|
|
|
$
|
919
|
|
Research and development
|
1,569
|
|
|
872
|
|
|
—
|
|
|
872
|
|
|
4,501
|
|
|
2,186
|
|
|
396
|
|
|
2,582
|
|
||||||||
Sales and marketing
|
791
|
|
|
754
|
|
|
—
|
|
|
754
|
|
|
2,722
|
|
|
1,239
|
|
|
969
|
|
|
2,208
|
|
||||||||
General and administrative
|
2,392
|
|
|
1,575
|
|
|
—
|
|
|
1,575
|
|
|
6,752
|
|
|
1,575
|
|
|
2,100
|
|
|
3,675
|
|
||||||||
Total stock-based compensation
|
$
|
5,219
|
|
|
$
|
3,437
|
|
|
$
|
—
|
|
|
$
|
3,437
|
|
|
$
|
15,261
|
|
|
$
|
5,336
|
|
|
$
|
4,048
|
|
|
$
|
9,384
|
|
Note 10.
|
Income Taxes
|
Note 11.
|
Net Income (Loss) Per Share
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 29, 2019
|
|
September 30, 2018
|
|
September 29, 2019
|
|
September 30, 2018
|
||||||||
|
(In thousands, except per share data)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net loss
|
$
|
(30,590
|
)
|
|
$
|
(13,225
|
)
|
|
$
|
(105,566
|
)
|
|
$
|
(36,410
|
)
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares - basic
|
75,337
|
|
|
69,600
|
|
|
74,831
|
|
|
64,867
|
|
||||
Potentially dilutive common share equivalent
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Weighted average common shares - dilutive
|
75,337
|
|
|
69,600
|
|
|
74,831
|
|
|
64,867
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Basic net loss per share
|
$
|
(0.41
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(1.41
|
)
|
|
$
|
(0.56
|
)
|
Diluted net loss per share
|
$
|
(0.41
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(1.41
|
)
|
|
$
|
(0.56
|
)
|
|
|
|
|
|
|
|
|
||||||||
Anti-dilutive employee stock-based awards, excluded
|
10,287
|
|
|
1,929
|
|
|
10,114
|
|
|
643
|
|
Note 12.
|
Segment and Geographic Information
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 29,
2019 |
|
September 30,
2018 |
|
September 29,
2019 |
|
September 30,
2018 |
||||||||
|
(In thousands)
|
||||||||||||||
United States (“U.S.”)
|
$
|
81,441
|
|
|
$
|
108,236
|
|
|
$
|
184,733
|
|
|
$
|
263,798
|
|
Americas (excluding U.S.)
|
4,121
|
|
|
4,613
|
|
|
9,759
|
|
|
10,455
|
|
||||
EMEA
|
13,002
|
|
|
11,760
|
|
|
37,370
|
|
|
50,416
|
|
||||
APAC
|
7,552
|
|
|
6,565
|
|
|
15,732
|
|
|
18,091
|
|
||||
Total revenue
|
$
|
106,116
|
|
|
$
|
131,174
|
|
|
$
|
247,594
|
|
|
$
|
342,760
|
|
|
As of
|
||||||
|
September 29,
2019 |
|
December 31,
2018 |
||||
|
(In thousands)
|
||||||
United States (“U.S.”)
|
$
|
18,970
|
|
|
$
|
45,053
|
|
Americas (excluding U.S.)
|
1,123
|
|
|
218
|
|
||
EMEA
|
545
|
|
|
567
|
|
||
China
|
2,555
|
|
|
3,040
|
|
||
APAC (excluding China)
|
1,023
|
|
|
550
|
|
||
Total property and equipment, net
|
$
|
24,216
|
|
|
$
|
49,428
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||
|
September 29, 2019
|
|
% Change
|
|
September 30, 2018
|
|
September 29, 2019
|
|
% Change
|
|
September 30, 2018
|
||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
Cumulative registered users
|
3,691
|
|
|
47.8
|
%
|
|
2,498
|
|
|
3,691
|
|
|
47.8
|
%
|
|
2,498
|
|
Paid subscribers
|
211
|
|
|
68.8
|
%
|
|
125
|
|
|
211
|
|
|
68.8
|
%
|
|
125
|
|
Devices shipped
|
1,138
|
|
|
(19.9
|
)%
|
|
1,421
|
|
|
2,718
|
|
|
(20.1
|
)%
|
|
3,402
|
|
Service revenue
|
11,810
|
|
|
20.2
|
%
|
|
9,827
|
|
|
34,235
|
|
|
26.4
|
%
|
|
27,082
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||||||
|
September 29,
2019 |
|
September 30,
2018 |
|
September 29,
2019 |
|
September 30,
2018 |
||||||||||||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Products
|
$
|
94,306
|
|
|
88.9
|
%
|
|
$
|
121,347
|
|
|
92.5
|
%
|
|
$
|
213,359
|
|
|
86.2
|
%
|
|
$
|
315,678
|
|
|
92.1
|
%
|
Services
|
11,810
|
|
|
11.1
|
%
|
|
9,827
|
|
|
7.5
|
%
|
|
34,235
|
|
|
13.8
|
%
|
|
27,082
|
|
|
7.9
|
%
|
||||
Total revenue
|
106,116
|
|
|
100.0
|
%
|
|
131,174
|
|
|
100.0
|
%
|
|
247,594
|
|
|
100.0
|
%
|
|
342,760
|
|
|
100.0
|
%
|
||||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Products
|
88,755
|
|
|
83.7
|
%
|
|
96,754
|
|
|
73.8
|
%
|
|
206,878
|
|
|
83.6
|
%
|
|
241,808
|
|
|
70.5
|
%
|
||||
Services
|
6,858
|
|
|
6.5
|
%
|
|
4,673
|
|
|
3.6
|
%
|
|
18,618
|
|
|
7.5
|
%
|
|
13,858
|
|
|
4.0
|
%
|
||||
Total cost of revenue
|
95,613
|
|
|
90.1
|
%
|
|
101,427
|
|
|
77.3
|
%
|
|
225,496
|
|
|
91.1
|
%
|
|
255,666
|
|
|
74.6
|
%
|
||||
Gross profit
|
10,503
|
|
|
9.9
|
%
|
|
29,747
|
|
|
22.7
|
%
|
|
22,098
|
|
|
8.9
|
%
|
|
87,094
|
|
|
25.4
|
%
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Research and development
|
16,701
|
|
|
15.7
|
%
|
|
16,100
|
|
|
12.3
|
%
|
|
52,456
|
|
|
21.2
|
%
|
|
41,929
|
|
|
12.2
|
%
|
||||
Sales and marketing
|
13,657
|
|
|
12.8
|
%
|
|
12,843
|
|
|
9.8
|
%
|
|
42,389
|
|
|
17.1
|
%
|
|
37,123
|
|
|
10.8
|
%
|
||||
General and administrative
|
11,062
|
|
|
10.4
|
%
|
|
8,357
|
|
|
6.4
|
%
|
|
32,512
|
|
|
13.1
|
%
|
|
19,553
|
|
|
5.7
|
%
|
||||
Separation expense
|
137
|
|
|
0.1
|
%
|
|
5,823
|
|
|
4.4
|
%
|
|
1,760
|
|
|
0.7
|
%
|
|
23,649
|
|
|
6.9
|
%
|
||||
Total operating expenses
|
41,557
|
|
|
39.2
|
%
|
|
43,123
|
|
|
32.9
|
%
|
|
129,117
|
|
|
52.1
|
%
|
|
122,254
|
|
|
35.7
|
%
|
||||
Loss from operations
|
(31,054
|
)
|
|
(29.3
|
)%
|
|
(13,376
|
)
|
|
(10.2
|
)%
|
|
(107,019
|
)
|
|
(43.2
|
)%
|
|
(35,160
|
)
|
|
(10.3
|
)%
|
||||
Interest income
|
596
|
|
|
0.6
|
%
|
|
503
|
|
|
0.4
|
%
|
|
2,170
|
|
|
0.9
|
%
|
|
503
|
|
|
0.1
|
%
|
||||
Other income (expense), net
|
154
|
|
|
0.1
|
%
|
|
(129
|
)
|
|
(0.1
|
)%
|
|
138
|
|
|
0.1
|
%
|
|
(923
|
)
|
|
(0.3
|
)%
|
||||
Loss before income taxes
|
(30,304
|
)
|
|
(28.6
|
)%
|
|
(13,002
|
)
|
|
(9.9
|
)%
|
|
(104,711
|
)
|
|
(42.3
|
)%
|
|
(35,580
|
)
|
|
(10.4
|
)%
|
||||
Provision for income taxes
|
286
|
|
|
0.3
|
%
|
|
223
|
|
|
0.2
|
%
|
|
855
|
|
|
0.3
|
%
|
|
830
|
|
|
0.2
|
%
|
||||
Net loss
|
$
|
(30,590
|
)
|
|
(28.8
|
)%
|
|
$
|
(13,225
|
)
|
|
(10.1
|
)%
|
|
$
|
(105,566
|
)
|
|
(42.6
|
)%
|
|
$
|
(36,410
|
)
|
|
(10.6
|
)%
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
|
September 29,
2019 |
|
% Change
|
|
September 30,
2018 |
|
September 29,
2019 |
|
% Change
|
|
September 30,
2018 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Americas
|
$
|
85,562
|
|
|
(24.2
|
)%
|
|
$
|
112,849
|
|
|
$
|
194,492
|
|
|
(29.1
|
)%
|
|
$
|
274,253
|
|
Percentage of revenue
|
80.6
|
%
|
|
|
|
86.0
|
%
|
|
78.6
|
%
|
|
|
|
80.0
|
%
|
||||||
EMEA
|
13,002
|
|
|
10.6
|
%
|
|
11,760
|
|
|
37,370
|
|
|
(25.9
|
)%
|
|
50,416
|
|
||||
Percentage of revenue
|
12.3
|
%
|
|
|
|
9.0
|
%
|
|
15.1
|
%
|
|
|
|
14.7
|
%
|
||||||
APAC
|
7,552
|
|
|
15.0
|
%
|
|
6,565
|
|
|
15,732
|
|
|
(13.0
|
)%
|
|
18,091
|
|
||||
Percentage of revenue
|
7.1
|
%
|
|
|
|
5.0
|
%
|
|
6.4
|
%
|
|
|
|
5.3
|
%
|
||||||
Total revenue
|
$
|
106,116
|
|
|
(19.1
|
)%
|
|
$
|
131,174
|
|
|
$
|
247,594
|
|
|
(27.8
|
)%
|
|
$
|
342,760
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
|
September 29,
2019 |
|
% Change
|
|
September 30,
2018 |
|
September 29,
2019 |
|
% Change
|
|
September 30,
2018 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Products
|
$
|
88,755
|
|
|
(8.3
|
)%
|
|
$
|
96,754
|
|
|
$
|
206,878
|
|
|
(14.4
|
)%
|
|
$
|
241,808
|
|
Services
|
6,858
|
|
|
46.8
|
%
|
|
4,673
|
|
|
18,618
|
|
|
34.3
|
%
|
|
13,858
|
|
||||
Total cost of revenue
|
$
|
95,613
|
|
|
(5.7
|
)%
|
|
$
|
101,427
|
|
|
$
|
225,496
|
|
|
(11.8
|
)%
|
|
$
|
255,666
|
|
Gross margin
|
9.9
|
%
|
|
|
|
22.7
|
%
|
|
8.9
|
%
|
|
|
|
25.4
|
%
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
|
September 29,
2019 |
|
% Change
|
|
September 30,
2018 |
|
September 29,
2019 |
|
% Change
|
|
September 30,
2018 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Research and development expense
|
$
|
16,701
|
|
|
3.7
|
%
|
|
$
|
16,100
|
|
|
$
|
52,456
|
|
|
25.1
|
%
|
|
$
|
41,929
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
|
September 29,
2019 |
|
% Change
|
|
September 30,
2018 |
|
September 29,
2019 |
|
% Change
|
|
September 30,
2018 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Separation expense
|
$
|
137
|
|
|
(97.6
|
)%
|
|
$
|
5,823
|
|
|
$
|
1,760
|
|
|
(92.6
|
)%
|
|
$
|
23,649
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 29,
2019 |
|
% Change
|
|
September 30,
2018 |
|
September 29,
2019 |
|
% Change
|
|
September 30,
2018 |
||||
|
(In thousands, except percentage data)
|
||||||||||||||
Interest income
|
596
|
|
|
**
|
|
503
|
|
|
2,170
|
|
|
**
|
|
503
|
|
Other income (expense), net
|
154
|
|
|
**
|
|
(129
|
)
|
|
138
|
|
|
**
|
|
(923
|
)
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
|
September 29,
2019 |
|
% Change
|
|
September 30,
2018 |
|
September 29,
2019 |
|
% Change
|
|
September 30,
2018 |
||||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||||||
Provision for income taxes
|
$
|
286
|
|
|
28.3
|
%
|
|
$
|
223
|
|
|
$
|
855
|
|
|
3.0
|
%
|
|
$
|
830
|
|
Effective tax rate
|
(0.9
|
)%
|
|
|
|
(1.7
|
)%
|
|
(0.8
|
)%
|
|
|
|
(2.3
|
)%
|
|
Nine Months Ended
|
||||||
|
September 29,
2019 |
|
September 30,
2018 |
||||
|
(In thousands)
|
||||||
Net cash used in operating activities
|
$
|
(42,715
|
)
|
|
$
|
(46,309
|
)
|
Net cash provided by (used in) investing activities
|
5,209
|
|
|
(50,628
|
)
|
||
Net cash provided by financing activities
|
82
|
|
|
244,902
|
|
||
Net cash increase (decrease)
|
$
|
(37,424
|
)
|
|
$
|
147,965
|
|
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;
|
•
|
delays in the introduction of new products by us or market acceptance of these products;
|
•
|
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;
|
•
|
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;
|
•
|
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 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 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
|
|
|
||
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
101.INS
|
|
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
|
|
|
|
|
|
|
X
|
101.SCH
|
|
Inline XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
X
|
101.CAL
|
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
X
|
101.DEF
|
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
X
|
101.LAB
|
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
X
|
101.PRE
|
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
X
|
104
|
|
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
|
|
|
|
|
|
|
|
X
|
#
|
|
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.
|
||||||||
*
|
|
Indicates management contract or compensatory plan or arrangement.
|
|
|
|
|
|
|
|
|
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 |
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