Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is listed and traded on the New York Stock Exchange (“NYSE”) under the symbol “ARLO”.
Holders of Common Stock
On February 19, 2021, we had 8 stockholders of record of our common stock. The number of record holders is based upon the actual number of holders registered on our books at such date and does not include holders of shares in “street names” or persons, partnerships, associations, corporations or other entities identified in security position listings maintained by depository trust companies.
Dividends
We have not historically declared or paid cash dividends on our common stock. We do not anticipate paying cash dividends in the foreseeable future.
Sales of Unregistered Securities and Issuer Purchases of Equity Securities
For the year ended December 31, 2020, we did not sell any unregistered securities.
Stock Performance Graph
Notwithstanding any statement to the contrary in any of our previous or future filings with the SEC, the following information relating to the price performance of our common stock shall not be deemed “filed” with the SEC or “soliciting material” under the Exchange Act and shall not be incorporated by reference into any such filings.
The following graph shows a comparison from August 3, 2018 through December 31, 2020 of cumulative total return for our common stock, the NYSE Composite Index, the Standard and Poor’s 600 Information Technology Index, (“S&P 600 Information Technology Index”) and the Standard and Poor’s Small Cap 600 Index (“S&P Small Cap 600 Index”). The measurement points in the graph below are August 3, 2018 (the first trading day of our common stock on the NYSE) and the last trading day of each fiscal quarter through the fiscal year ended December 31, 2020. The graph assumes that $100 was invested in Arlo common stock at the closing price of $22.10 on August 3, 2018 and in the NYSE Composite Index, the S&P 600 Information Technology Index, and the S&P Small Cap 600 Index on August 3, 2018, and assumes reinvestment of any dividends. The stock price performance shown in the following graph is not intended to forecast or be indicative of possible future stock price performance.
50
Table of Contents
51
Table of Contents
Item 6. Selected Financial Data
The following selected consolidated financial data are qualified in their entirety, and should be read in conjunction with the consolidated financial statements and related notes thereto, and “ Management's Discussion and Analysis of Financial Condition and Results of Operations ” in Item 7 of Part II of this Annual Report on Form 10-K.
The consolidated statements of operations data for each of the years ended December 31, 2020, 2019, and 2018 and the consolidated balance sheets data as of December 31, 2020 and 2019 are derived from our audited consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10‑K. The consolidated statements of income data for the years ended December 31, 2017 and 2016 and the consolidated balance sheets data as of December 31, 2018, 2017 and 2016 are derived from our audited consolidated financial statements, except as otherwise noted, that are not included in this Annual Report on Form 10-K. Historical results are not necessarily indicative of results to be expected for future periods.
The full years of 2016 and 2017 and first quarter and second quarter of 2018, are based on carve-out financials and reflect the transactions which are directly attributable to Arlo and certain allocated costs, whereas third quarter and fourth quarter of 2018 and fiscal years of 2019 and 2020 are based on our actual results for the periods as a standalone public company.
Consolidated Statements of Operations Data
Year Ended December 31,
2020 2019 2018 2017 2016
(In thousands, except per share data)
Revenue (1)
$ 357,154 $ 370,007 $ 464,918 $ 370,658 $ 184,604
Cost of revenue (2)
301,765 334,203 372,843 279,424 146,570
Gross profit 55,389 35,804 92,075 91,234 38,034
Operating expenses:
Research and development (2)
60,137 69,384 58,794 34,683 24,438
Sales and marketing (2)
49,064 56,985 52,593 34,340 18,455
General and administrative (2)
51,096 47,624 28,209 15,096 8,289
Separation expense 248 1,913 27,252 1,384 —
Gain on sale of business (3)
(292) (54,881) — — —
Total operating expenses 160,253 121,025 166,848 85,503 51,182
Income (loss) from operations (104,864) (85,221) (74,773) 5,731 (13,148)
Interest income 802 2,737 1,239 — —
Other income (expense), net 3,436 913 (1,177) 1,946 (512)
Income (loss) before income taxes (100,626) (81,571) (74,711) 7,677 (13,660)
Provision for income taxes 625 4,380 772 1,128 83
Net income (loss) $ (101,251) $ (85,951) $ (75,483) $ 6,549 $ (13,743)
Net income (loss) per share:
Basic (4)
$ (1.30) $ (1.14) $ (1.12) $ 0.11 $ (0.22)
Diluted (4)
$ (1.30) $ (1.14) $ (1.12) $ 0.11 $ (0.22)
_________________________
(1) On January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606) (“ASC 606”) and applied this guidance to those contracts which were not completed at the date of adoption using the modified retrospective method. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods (“ASC 605”). The Company recognized the cumulative effect of initially applying ASC 606 as an adjustment to the opening balance of Net parent investment.
52
Table of Contents
(2) Stock-based compensation expense was allocated as follows:
Year Ended December 31,
2020 2019 2018 2017 2016
Total Total Direct Indirect Total Direct Indirect Total Direct Indirect Total
(In thousands)
Cost of revenue $ 2,961 $ 2,013 $ 608 $ 583 $ 1,191 $ 102 $ 599 $ 701 $ 61 $ 266 $ 327
Research and development 9,055 6,868 3,078 396 3,474 1,959 455 2,414 1,349 195 1,544
Sales and marketing 4,106 3,859 1,992 969 2,961 390 866 1,256 110 407 517
General and administrative 19,125 10,154 3,153 2,100 5,253 — 2,547 2,547 — 1,216 1,216
Total $ 35,247 $ 22,894 $ 8,831 $ 4,048 $ 12,879 $ 2,451 $ 4,467 $ 6,918 $ 1,520 $ 2,084 $ 3,604
(3) Relates to the sale of our commercial operations in Europe in the fourth quarter of 2019. Refer to Note 4, Disposal of Business , in the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for a complete discussion of this disposal.
(4) Information regarding calculation of per share data is described in Note 14, Net Income (Loss) Per Share , in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
Consolidated Balance Sheets Data:
As of December 31,
2020 2019 2018 2017 2016
(In thousands)
Cash, cash equivalents and short-term investments (1)
$ 206,124 $ 256,670 $ 201,027 $ 108 $ 220
Working capital $ 119,202 $ 175,668 $ 233,484 $ 112,878 $ 54,967
Total assets (2)
$ 413,968 $ 542,712 $ 595,946 $ 269,820 $ 158,581
Deferred revenue (current and non-current) $ 69,705 $ 66,098 $ 49,991 $ 47,404 $ 23,393
Non-current operating lease liabilities (2)
$ 25,029 $ 29,001 $ — $ — $ —
Non-current financing lease obligation (3)
$ — $ — $ 19,978 $ — $ —
Total liabilities $ 280,201 $ 339,336 $ 326,444 $ 144,401 $ 85,407
Stockholders’ equity $ 133,767 $ 203,376 $ 269,502 $ 125,419 $ 73,174
_________________________
(1) In fiscal year 2018, reflects $70.9 million in cash contributed by NETGEAR prior to the completion of the IPO in 2018, and the net proceeds of $173.4 million raised from the IPO, net of the portion of the offering cost paid by Arlo, which portion was $1.4 million. Our total offering cost is $4.6 million, of which $3.2 million was paid by NETGEAR. In fiscal year 2019, reflects $75.2 million from Verisure related to sale of the Company's commercial operations in Europe, an advance payment for product purchases, and NRE services under the Supply Agreement.
(2) On January 1, 2019, the Company adopted ASU 2016-12, "Leases" (Topic 842) and applied this guidance utilizing the modified retrospective transition method through a cumulative-effect adjustment at the beginning of the first fiscal quarter of 2019. Refer to Note 11, Commitments and Contingencies in the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for further information about our leases.
(3) The Company was deemed to be the accounting owner of its build-to-suit lease arrangement for its San Jose corporate headquarters and the construction was in progress at adoption date. As such, the Company reevaluated its build-to-suit lease arrangement under ASU 2016-02 to ascertain whether it meets the criteria as the accounting owner of the build-to-suit lease arrangement through control of the underlying leased asset. The Company concluded that it did not have control over the underlying leased asset. As a result, the Company de-recognized the build to suit asset and liability as of January 1, 2019.
53
Table of Contents