Arlo Reports Second Quarter 2024 Results

CARLSBAD, Calif.--(BUSINESS WIRE)--Arlo Technologies, Inc. (NYSE: ARLO), a leading smart home security company, today reported financial results for the second quarter ended June 30, 2024.

"Arlo's service business continues its strong growth path, recently surpassing 4 million paid accounts and 76% non-GAAP gross margin, while reaching nearly 50% of the company's total revenue. This outstanding performance drove non-GAAP net income per share of $0.19 and free cash flow to over $25 million for the first half of the year; an increase of 177% in non-GAAP net income over the first half of 2023," said Matthew McRae, Chief Executive Officer of Arlo Technologies. "Arlo is well set up for the holiday season across our channels and is seeing an increased level of engagement from strategic partners, positioning us well to meet or exceed our long-range plan targets that we rolled out earlier this year."

Financial and Business Highlights

• Q2 total revenue of $127.4 million, an increase of 10.8% year over year.

• Record Q2 service revenue of $60.3 million, an increase of 19.7% year over year.

• Q2 GAAP services gross margin of 75.8% and non-GAAP services gross margin of 76.4%.

• GAAP gross profit of $46.9 million, an increase of 11.9% year over year; non-GAAP gross profit of $48.3 million, an increase of 12.4% year over year.

• GAAP gross margin of 36.8%; non-GAAP gross margin of 37.9%.

• GAAP net loss per share of $(0.12); non-GAAP net income per share of $0.10 for the three months ended June 30, 2024, and GAAP net loss per share of $(0.22); non-GAAP net income per share of $0.19 for the six months ended June 30, 2024.

• Cumulative paid accounts increased to 3.98 million, growing 73.9% year over year; surpassed 4.0 million subscribers in July 2024.

• Ended the quarter with ARR⁽¹⁾ of $235.0 million, growing 21.4% year over year.

• Ended with cash and cash equivalents and short-term investments of $144.0 million, up $20.3 million year over year.

• Announced a strategic partnership with Allstate in July 2024 offering protection plans to Arlo customers' security devices purchases.

	Three Months Ended												Six Months Ended
	June 30, 2024				March 31, 2024				July 2, 2023				June 30, 2024				July 2, 2023
	(In thousands, except percentage and per share data)
Revenue	$	127,447			$	124,200			$	115,076			$	251,647			$	226,080
GAAP Gross Margin		36.8	%			38.1	%			36.4	%			37.4	%			34.1	%
Non-GAAP Gross Margin (3)		37.9	%			39.4	%			37.3	%			38.6	%			35.0	%
GAAP Net Loss per Share - Basic and Diluted	$	(0.12	)		$	(0.10	)		$	(0.08	)		$	(0.22	)		$	(0.24	)
Non-GAAP Net Income per Share - Basic and Diluted (3)	$	0.10			$	0.09			$	0.06			$	0.19			$	0.07

(1)		In the first fiscal quarter of 2024, we changed the methodology on paid service revenue recognition from a mid-month convention to a daily recognition model which recognizes paid service revenue based on the number of service days within the fiscal reporting period, commencing on the start date of the subscription and continuing over the term of the arrangement. Accordingly, the methodology used to calculate ARR was also changed as of March 31, 2024 and is now calculated by taking the average daily paid service revenue of the last calendar month in the fiscal quarter, multiplied by 365 days. We believe the daily recognition model aligns with our customers' subscription period and service usage and allows for a more precise measurement of paid service revenue relative to the former methodology of a mid-month convention, which was based on paid service revenue for the last calendar month in the fiscal quarter, multiplied by 12 months. This change in calculation methodology has no material impact on our financial statements or any previously reported ARR numbers.
(2)		FCF is calculated as net cash provided by operating activities less capital expenditures. FCF margin is the FCF divided by revenue.
(3)		Reconciliation of financial measures computed on a GAAP basis to the most directly comparable financial measures computed on a non-GAAP basis is provided at the end of this press release.

Third Quarter 2024 Business Outlook ⁽⁴⁾

A reconciliation of our business outlook on a GAAP and non-GAAP basis is provided in the following table:

	Three Months Ended September 29, 2024
	Revenue		Net Income (Loss) per Diluted Share
	(In millions, except per share data)
GAAP	$132 - $142		$(0.07) - $(0.01)
Estimated adjustment for stock-based compensation and other expense	-		0.15
Non-GAAP	$132 - $142		$0.08 - $0.14

(4)

Business outlook does not include estimates for any currently unknown income and expense items which, by their nature, could arise late in a quarter, including: litigation reserves, net; impairment charges; discrete tax benefits or detriments relating to tax windfalls or shortfalls from equity awards; and any additional impacts relating to the implementation of U.S. tax reform. New material income and expense items such as these could have a significant effect on our guidance and future results.

Investor Conference Call / Webcast Details

Arlo will review the second quarter 2024 results and discuss management's expectations for the third quarter 2024 today, Thursday, August 8, 2024 at 5:00 p.m. ET (2:00 p.m. PT). To view the accompanying presentation, a live webcast of the conference call will be available on Arlo's Investor Relations website at https://investor.arlo.com. The toll-free dial-in number for the live audio call is [phone]. The international dial-in number for the live audio call is [phone]. The conference ID for the call is 838472. A replay of the call will be available via the web at https://investor.arlo.com.

About Arlo Technologies, Inc.

Arlo is an award-winning, industry leader that is transforming the ways in which people can protect everything that matters to them with advanced home, business, and personal security solutions. Arlo's deep expertise in AI- and CV-powered analytics, cloud services, user experience and product design, and innovative wireless and RF connectivity enables the delivery of a seamless, smart security experience for Arlo users that is easy to set up and interact with every day. Arlo's cloud-based platform provides users with visibility, insight and a powerful means to help protect and connect in real-time with the people and things that matter most, from any location with a Wi-Fi or a cellular connection. To date, Arlo has launched several categories of award-winning connected devices, software and services. These include wire-free, smart Wi-Fi and LTE-enabled security cameras, video doorbells, floodlights, security system, and Arlo's subscription services: Arlo Secure, and Arlo Safe.

With a mission to bring users peace of mind, Arlo is as passionate about protecting user privacy as it is about safeguarding homes and families. Arlo is committed to implementing industry standards for data protection designed to keep users' personal information private and in their control. Arlo does not monetize personal data, provides enhanced controls for user data, supports privacy legislation, keeps user data safely secure, and puts security at the forefront of company culture.

© 2024 Arlo Technologies, Inc., Arlo and the Arlo logo are trademarks and/or registered trademarks of Arlo Technologies, Inc. and/or certain of its affiliates in the United States and/or other countries. Other brand and product names are for identification purposes only and may be trademarks or registered trademarks of their respective holder(s). The information contained herein is subject to change without notice. Arlo shall not be liable for technical or editorial errors or omissions contained herein. All rights reserved.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 for Arlo Technologies, Inc.:

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. The words "anticipate," "expect," "believe," "will," "may," "should," "estimate," "project," "outlook," "forecast" or other similar words are used to identify such forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. The forward-looking statements represent our expectations or beliefs concerning future events based on information available at the time such statements were made and include statements regarding our potential future business, operating performance and financial condition, including descriptions of our expected revenue and profitability (and related timing), GAAP and non-GAAP gross margins, operating margins, tax rates, expenses, cash outlook, free cash flow and free cash flow margins; strategic objectives and initiatives; the recurring revenue business model; expectations regarding market expansion and future growth, including with respect to our long-range plan targets; and others. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: future demand for our products may be lower than anticipated, including due to inflation, fluctuating consumer confidence, banking failures and rising interest rates; we may be unsuccessful in developing and expanding our sales and marketing capabilities; we may not be able to increase sales of our paid subscription services; consumers may choose not to adopt our new product offerings or adopt competing products; product performance may be adversely affected by real world operating conditions; we may be unsuccessful or experience delays in manufacturing and distributing our new and existing products; and we may fail to manage costs and cost saving initiatives, the cost of developing new products and manufacturing and distribution of our existing offerings. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Further information on potential risk factors that could affect our business are detailed in our periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled "Risk Factors" in the most recently filed Annual Report and Quarterly Report filed with the Securities and Exchange Commission (the "SEC") and subsequent filings with the SEC. Given these circumstances, you should not place undue reliance on these forward-looking statements. We undertake no obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Non-GAAP Financial Information:

To supplement our unaudited selected financial data presented on a basis consistent with U.S. Generally Accepted Accounting Principles ("GAAP"), we disclose certain non-GAAP financial measures that exclude certain charges, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development, non-GAAP sales and marketing, non-GAAP general and administrative, non-GAAP total operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP other income (expenses), net, non-GAAP provision for income taxes, non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share. These supplemental measures exclude adjustments for stock-based compensation expense, restructuring charges, separation expense, amortization of development of software cost, litigation reserves, net, and the related tax effects. In addition, we use free cash flow as non-GAAP measure when assessing the sources of liquidity, capital resources, and quality of earnings. We believe that free cash flow (usage) is helpful in understanding our capital requirements and provides an additional means to reflect the cash flow trends in our business. These non-GAAP measures are not in accordance with, or an alternative for GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance.

In calculating non-GAAP financial measures, we exclude certain items to facilitate a review of the comparability of our operating performance on a period-to-period basis because such items are not, in our view, related to our ongoing operational performance. We use non-GAAP measures to evaluate the operating performance of our business, for comparison with forecasts and strategic plans, and for benchmarking performance externally against competitors. In addition, management's incentive compensation is determined using certain non-GAAP measures. Since we find these measures to be useful, we believe that investors benefit from seeing results "through the eyes" of management in addition to seeing GAAP results. We believe that these non-GAAP measures, when read in conjunction with our GAAP measures, provide useful information to investors by offering:

• the ability to make more meaningful period-to-period comparisons of our on-going operating results;
• the ability to better identify trends in our underlying business and perform related trend analyses;
• a better understanding of how management plans and measures our underlying business; and
• an easier way to compare our operating results against analyst financial models and operating results of competitors that supplement their GAAP results with non-GAAP financial measures.

The following are explanations of the adjustments that we incorporate into non-GAAP measures, as well as the reasons for excluding them in the reconciliations of these non-GAAP financial measures:

Stock-based compensation expense consists of non-cash charges for the estimated fair value of stock options, performance-based stock options, restricted stock units (RSU), performance-based restricted stock units, shares under the employee stock purchase plan granted to employees and employees' annual bonus in RSU form. We believe that the exclusion of these charges provides for more accurate comparisons of our operating results to peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, we believe it is useful to investors to understand the specific impact stock-based compensation expense has on our operating results.

Other non-GAAP items are the result of either unique or unplanned events, including, when applicable: restructuring charges, impairment charges, separation expense, amortization of development of software cost, litigation reserves, net and employee retention credit. It is difficult to predict the occurrence or estimate the amount or timing of these items in advance. Although these events are reflected in our GAAP financial statements, these unique transactions may limit the comparability of our on-going operations with prior and future periods. The amounts result from events that often arise from unforeseen circumstances, which often occur outside of the ordinary course of continuing operations. Therefore, the amounts do not accurately reflect the underlying performance of our continuing business operations for the period in which they are incurred.

Source: Arlo-F

ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
	As of
	June 30, 2024				December 31, 2023
	(In thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	62,928			$	56,522
Short-term investments		81,077				79,974
Accounts receivable, net		61,746				65,360
Inventories		45,227				38,408
Prepaid expenses and other current assets		12,253				10,271
Total current assets		263,231				250,535
Property and equipment, net		3,771				4,761
Operating lease right-of-use assets, net		10,242				11,450
Goodwill		11,038				11,038
Restricted cash		3,624				4,131
Other non-current assets		3,900				3,623
Total assets	$	295,806			$	285,538
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	74,084			$	55,201
Deferred revenue		23,505				18,041
Accrued liabilities		80,024				88,209
Total current liabilities		177,613				161,451
Non-current operating lease liabilities		15,399				17,021
Other non-current liabilities		3,526				3,790
Total liabilities		196,538				182,262
Commitments and contingencies
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: 98,326,212 at June 30, 2024 and 95,380,281 at December 31, 2023		98				95
Additional paid-in capital		487,644				470,322
Accumulated other comprehensive income		191				320
Accumulated deficit		(388,665	)			(367,461	)
Total stockholders' equity		99,268				103,276
Total liabilities and stockholders' equity	$	295,806			$	285,538

ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
	Three Months Ended												Six Months Ended
	June 30, 2024				March 31, 2024				July 2, 2023				June 30, 2024				July 2, 2023
	(In thousands, except percentage and per share data)
Revenue:
Products	$	67,186			$	67,493			$	64,749			$	134,679			$	131,809
Services		60,261				56,707				50,327				116,968				94,271
Total revenue		127,447				124,200				115,076				251,647				226,080
Cost of revenue:
Products		66,036				63,224				60,446				129,260				124,487
Services		14,557				13,596				12,772				28,153				24,518
Total cost of revenue		80,593				76,820				73,218				157,413				149,005
Gross profit		46,854				47,380				41,858				94,234				77,075
Gross margin		36.8	%			38.1	%			36.4	%			37.4	%			34.1	%
Operating expenses:
Research and development		19,561				20,793				17,618				40,354				35,368
Sales and marketing		17,698				17,370				16,921				35,068				32,274
General and administrative		21,430				19,348				15,007				40,778				30,629
Others		966				479				341				1,445				973
Total operating expenses		59,655				57,990				49,887				117,645				99,244
Loss from operations		(12,801	)			(10,610	)			(8,029	)			(23,411	)			(22,169	)
Operating margin		(10.0	)%			(8.5	)%			(7.0	)%			(9.3	)%			(9.8	)%
Interest income, net		1,495				1,386				835				2,881				1,561
Other income (loss), net		(18	)			(25	)			52				(43	)			13
Loss before income taxes		(11,324	)			(9,249	)			(7,142	)			(20,573	)			(20,595	)
Provision for income taxes		236				395				221				631				1,013
Net loss	$	(11,560	)		$	(9,644	)		$	(7,363	)		$	(21,204	)		$	(21,608	)
Net loss per share - basic and diluted	$	(0.12	)		$	(0.10	)		$	(0.08	)		$	(0.22	)		$	(0.24	)
Weighted average shares used to compute net loss per share - basic and diluted		97,843				96,264				92,337				97,051				90,984

ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	Six Months Ended
	June 30, 2024				July 2, 2023
	(In thousands)
Cash flows from operating activities:
Net loss	$	(21,204	)		$	(21,608	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation expense		39,470				27,564
Depreciation and amortization		1,684				2,353
Allowance for credit losses and non-cash changes to reserves		(225	)			613
Deferred income taxes		(5	)			243
Others		(1,615	)			(567	)
Changes in assets and liabilities:
Accounts receivable		3,805				8,734
Inventories		(6,785	)			6,411
Prepaid expenses and other assets		(2,254	)			(5,624	)
Accounts payable		18,785				9,836
Deferred revenue		5,582				6,198
Accrued and other liabilities		(10,970	)			(11,245	)
Net cash provided by operating activities		26,268				22,908
Cash flows from investing activities:
Purchases of property and equipment		(651	)			(1,954	)
Purchases of short-term investments		(111,519	)			(61,152	)
Proceeds from maturities of short-term investments		111,902				29,956
Net cash used in investing activities		(268	)			(33,150	)
Cash flows from financing activities:
Proceeds related to employee benefit plans		2,380				4,611
Restricted stock unit withholdings		(22,481	)			(16,562	)
Net cash used in financing activities		(20,101	)			(11,951	)
Net increase (decrease) in cash, cash equivalents and restricted cash		5,899				(22,193	)
Cash, cash equivalents and restricted cash, at beginning of period		60,653				88,179
Cash, cash equivalents and restricted cash, at end of period	$	66,552			$	65,986
Non-cash investing activities:
Purchases of property and equipment included in accounts payable and accrued liabilities	$	233			$	433

ARLO TECHNOLOGIES, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
UNAUDITED STATEMENT OF OPERATIONS DATA:
	Three Months Ended												Six Months Ended
	June 30, 2024				March 31, 2024				July 2, 2023				June 30, 2024				July 2, 2023
	(In thousands, except percentage data)
GAAP gross profit:
Products	$	1,150			$	4,269			$	4,303			$	5,419			$	7,322
Services		45,704				43,111				37,555				88,815				69,753
Total GAAP gross profit		46,854				47,380				41,858				94,234				77,075
GAAP gross margin:
Products		1.7	%			6.3	%			6.6	%			4.0	%			5.6	%
Services		75.8	%			76.0	%			74.6	%			75.9	%			74.0	%
Total GAAP gross margin		36.8	%			38.1	%			36.4	%			37.4	%			34.1	%
Stock-based compensation expense - Products		1,127				1,114				848				2,241				1,760
Stock-based compensation expense - Services		165				257				119				422				68
Amortization of development of software cost - Services		151				151				151				302				302
Non-GAAP gross profit:
Products		2,277				5,383				5,151				7,660				9,082
Services		46,020				43,519				37,825				89,539				70,123
Total Non-GAAP gross profit	$	48,297			$	48,902			$	42,976			$	97,199			$	79,205
Non-GAAP gross margin:
Products		3.4	%			8.0	%			8.0	%			5.7	%			6.9	%
Services		76.4	%			76.7	%			75.2	%			76.6	%			74.4	%
Total Non-GAAP gross margin		37.9	%			39.4	%			37.3	%			38.6	%			35.0	%
GAAP research and development	$	19,561			$	20,793			$	17,618			$	40,354			$	35,368
Stock-based compensation expense		(4,778	)			(4,904	)			(3,311	)			(9,682	)			(7,222	)
Non-GAAP research and development	$	14,783			$	15,889			$	14,307			$	30,672			$	28,146
Percentage of revenue		11.6	%			12.8	%			12.4	%			12.2	%			12.4	%
GAAP sales and marketing	$	17,698			$	17,370			$	16,921			$	35,068			$	32,274
Stock-based compensation expense		(2,176	)			(2,240	)			(1,670	)			(4,416	)			(3,392	)
Non-GAAP sales and marketing	$	15,522			$	15,130			$	15,251			$	30,652			$	28,882
Percentage of revenue		12.2	%			12.2	%			13.3	%			12.2	%			12.8	%
GAAP general and administrative	$	21,430			$	19,348			$	15,007			$	40,778			$	30,629
Stock-based compensation expense		(12,674	)			(10,035	)			(7,025	)			(22,709	)			(15,122	)
Non-GAAP general and administrative	$	8,756			$	9,313			$	7,982			$	18,069			$	15,507
Percentage of revenue		6.9	%			7.5	%			6.9	%			7.2	%			6.9	%

ARLO TECHNOLOGIES, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)
UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED):
	Three Months Ended												Six Months Ended
	June 30, 2024				March 31, 2024				July 2, 2023				June 30, 2024				July 2, 2023
	(In thousands, except percentage data)
GAAP total operating expenses	$	59,655			$	57,990			$	49,887			$	117,645			$	99,244
Stock-based compensation expense		(19,628	)			(17,179	)			(12,006	)			(36,807	)			(25,736	)
Others		(966	)			(479	)			(341	)			(1,445	)			(973	)
Non-GAAP total operating expenses	$	39,061			$	40,332			$	37,540			$	79,393			$	72,535
GAAP operating loss	$	(12,801	)		$	(10,610	)		$	(8,029	)		$	(23,411	)		$	(22,169	)
GAAP operating margin		(10.0	)%			(8.5	)%			(7.0	)%			(9.3	)%			(9.8	)%
Stock-based compensation expense		20,920				18,550				12,973				39,470				27,564
Others		1,117				630				492				1,747				1,275
Non-GAAP operating income	$	9,236			$	8,570			$	5,436			$	17,806			$	6,670
Non-GAAP operating margin		7.2	%			6.9	%			4.7	%			7.1	%			3.0	%
GAAP provision for income taxes	$	236			$	395			$	221			$	631			$	1,013
GAAP income tax rate		(2.1	)%			(4.3	)%			(3.1	)%			(3.1	)%			(4.9	)%
Non-GAAP provision for income taxes	$	236			$	395			$	221			$	631			$	1,013
Non-GAAP income tax rate		2.2	%			4.0	%			3.5	%			3.1	%			12.3	%

ARLO TECHNOLOGIES, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)
UNAUDITED STATEMENT OF OPERATIONS DATA (CONTINUED):
	Three Months Ended												Six Months Ended
	June 30, 2024				March 31, 2024				July 2, 2023				June 30, 2024				July 2, 2023
	(In thousands, except percentage and per share data)
GAAP net loss	$	(11,560	)		$	(9,644	)		$	(7,363	)		$	(21,204	)		$	(21,608	)
Stock-based compensation expense		20,920				18,550				12,973				39,470				27,564
Others		1,117				630				492				1,747				1,275
Non-GAAP net income	$	10,477			$	9,536			$	6,102			$	20,013			$	7,231
GAAP net loss per share - basic	$	(0.12	)		$	(0.10	)		$	(0.08	)		$	(0.22	)		$	(0.24	)
Stock-based compensation expense		0.21				0.18				0.14				0.39				0.30
Others		0.01				0.01				-				0.02				0.01
Non-GAAP net income per share - diluted	$	0.10			$	0.09			$	0.06			$	0.19			$	0.07
Shares used in computing GAAP net loss - basic		97,843				96,264				92,337				97,051				90,984
Shares used in computing non-GAAP net income - diluted		106,127				103,803				99,187				105,441				96,800
Free cash flow:
Net cash provided by operating activities	$	6,463			$	19,806			$	12,578			$	26,268			$	22,908
Less: Purchases of property and equipment		(295	)			(356	)			(1,031	)			(651	)			(1,954	)
Free cash flow (1)	$	6,168			$	19,450			$	11,547			$	25,617			$	20,954
Free cash flow margin (1)		4.8	%			15.7	%			10.0	%			10.2	%			9.3	%

(1)		Free cash flow is calculated as net cash provided by operating activities less capital expenditures. Free cash flow margin is the free cash flow divided by revenue.

ARLO TECHNOLOGIES, INC.
UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION
	As of and for the three months ended
	June 30, 2024				March 31, 2024				December 31, 2023				October 1, 2023				July 2, 2023
	(In thousands, except headcount and per share data)
Cash, cash equivalents and short-term investments	$	144,005			$	142,863			$	136,496			$	126,049			$	123,675
Accounts receivable, net	$	61,746			$	56,496			$	65,360			$	70,313			$	57,327
Days sales outstanding		44				41				44				49				45
Inventories	$	45,227			$	44,676			$	38,408			$	53,496			$	39,429
Inventory turns		5.8				5.7				7.6				5.5				6.1
Weeks of channel inventory:
U.S. retail channel		14.8				12.9				11.1				10.9				9.7
U.S. distribution channel		12.5				11.4				20.5				7.4				9.3
APAC distribution channel		3.9				6.4				3.9				7.2				7.7
Deferred revenue (current and non-current)	$	23,695			$	21,540			$	18,114			$	17,706			$	17,702
Cumulative registered accounts (1)		9,987				9,173				8,652				8,193				7,860
Cumulative paid accounts (2)		3,980				3,235				2,813				2,486				2,289
Annual recurring revenue (ARR) (3)	$	234,981			$	226,968			$	210,078			$	199,993			$	193,633
Headcount		362				373				363				353				345
Non-GAAP diluted shares		106,127				103,803				101,938				102,116				99,187

(1)		We define our registered accounts at the end of a particular period as the number of unique registered accounts on the Arlo platform as of the end of such period. The number of registered accounts does not necessarily reflect the number of end-users on the Arlo platform as one registered account may be used by multiple end-users to monitor the devices attached to that household.
(2)		Paid accounts are defined as any account worldwide where a subscription to a paid service is being collected (either by us or by our customers or channel partners, including Verisure).
(3)		In the first fiscal quarter of 2024, we changed the methodology on paid service revenue recognition from a mid-month convention to a daily recognition model which recognizes paid service revenue based on the number of service days within the fiscal reporting period, commencing on the start date of the subscription and continuing over the term of the arrangement. Accordingly, the methodology used to calculate ARR was also changed as of March 31, 2024 and is now calculated by taking the average daily paid service revenue of the last calendar month in the fiscal quarter, multiplied by 365 days. We believe the daily recognition model aligns with our customers' subscription period and service usage and allows for a more precise measurement of paid service revenue relative to the former methodology of a mid-month convention, which was based on paid service revenue for the last calendar month in the fiscal quarter, multiplied by 12 months. This change in calculation methodology has no material impact on our financial statements or any previously reported ARR numbers.

REVENUE BY GEOGRAPHY
	Three Months Ended															Six Months Ended
	June 30, 2024					March 31, 2024					July 2, 2023					June 30, 2024					July 2, 2023
	(In thousands, except percentage data)
Americas	$	65,294	51.2	%		$	57,169	46.0	%		$	78,136	67.9	%		$	122,463	48.7	%		$	134,768	59.6	%
EMEA		56,827	44.6	%			61,380	49.4	%			30,958	26.9	%			118,207	47.0	%			79,430	35.1	%
APAC		5,326	4.2	%			5,651	4.6	%			5,982	5.2	%			10,977	4.3	%			11,882	5.3	%
Total	$	127,447	100.0	%		$	124,200	100.0	%		$	115,076	100.0	%		$	251,647	100.0	%		$	226,080	100.0	%

Contacts

Arlo Investor Relations
Tahmin Clarke
[e-mail]