What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-08 compared with 2024-05-09 · 84 added, 81 removed, 476 unchanged (26% of the section changed)

36 unchanged sentences

shares issued and outstanding:

97,202,042 at March 31, 2024 and 95,380,281 at December 31, 2023

98,326,212 at June 30, 2024 and 95,380,281 at December 31, 2023

Additional paid-in capital 487,644 470,322

6 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three Months Ended

2024 April 2,

Three Months Ended Six Months Ended

2023 June 30,

(In thousands, except per share data)

15 unchanged sentences

Interest income, net 1,495 835 2,881 1,561

Other loss, net

( 25 ) ( 39 )

Other income (loss), net ( 18 ) 52 ( 43 ) 13

Loss before income taxes

11 unchanged sentences

Other comprehensive income (loss), net of tax

( 89 ) 131 ( 129 ) 259

Total comprehensive loss

3 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three Months Ended

2024 April 2,

Three Months Ended Six Months Ended

2023 June 30,

(In thousands)

11 unchanged sentences

Issuance of common stock under stock-based compensation plans 113 2,986 683 2,986

Issuance of common stock under Employee Stock Purchase Plan 1,692 1,617 1,692 1,617

Restricted stock unit withholdings ( 8,125 ) ( 11,866 ) ( 22,479 ) ( 16,559 )

13 unchanged sentences

Issuance of common stock under stock-based compensation plans 1,563 3,976 4,784 7,141

Issuance of common stock under Employee Stock Purchase Plan 233 460 233 460

Restricted stock unit withholdings ( 672 ) ( 1,567 ) ( 2,071 ) ( 2,834 )

3 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

2024 April 2,

Six Months Ended

(In thousands)

59 unchanged sentences

These unaudited condensed consolidated financial statements should be read in conjunction with the notes to the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on February 29, 2024.

The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S.

The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S.

In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for fair statement of the unaudited condensed consolidated financial statements for interim periods.

3 unchanged sentences

Under the fiscal quarter basis, each of the first three fiscal quarters ends on the Sunday closest to the calendar quarter end, with the fourth quarter ending on December 31.

Reclassification

Certain prior periods amounts have been reclassified to conform to the current period’s presentation.

None of these reclassifications had a material impact to the unaudited condensed consolidated financial statements.

ARLO TECHNOLOGIES, INC.

4 unchanged sentences

Management bases its estimates on various assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Actual results could differ materially from those estimates and operating results for the three months ended March 31, 2024 and are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or any future period.

Actual results could differ materially from those estimates and operating results for the three and six months ended June 30, 2024 and are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or any future period.

Significant Accounting Policies and Recent Accounting Pronouncements

Our significant accounting policies are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

There have been no significant changes to such policies during the three months ended March 31, 2024.

There have been no significant changes to such policies during the six months ended June 30, 2024.

Accounting Pronouncements Recently Adopted

There were no accounting pronouncements adopted during the three months ended March 31, 2024.

There were no accounting pronouncements adopted during the six months ended June 30, 2024.

Accounting Pronouncements Not Yet Effective

18 unchanged sentences

Performance Obligations

The total estimated service revenue expected to be recognized in the future related to performance obligations that are unsatisfied and partially unsatisfied was $ 23.5 million as of March 31, 2024 and $ 18.8 million as of December 31, 2023, substantially related to a performance obligation classified as less than one year .

For the three months ended March 31, 2024 and April 2, 2023, $ 52.7 million and $ 41.2 million of revenue was deferred due to unsatisfied performance obligations, primarily relating to over time service revenue, and $ 49.2 million and $ 38.4 million of revenue was recognized for the satisfaction of performance obligations over time, respectively.

Approximately $ 12.1 million and $ 8.4 million of this recognized revenue was included in the contract liability balance at the beginning of the periods.

The total estimated service revenue expected to be recognized in the future related to performance obligations that are unsatisfied and partially unsatisfied was $ 25.9 million as of June 30, 2024 and $ 18.8 million as of December 31, 2023, substantially related to a performance obligation classified as less than one year .

For the six months ended June 30, 2024 and July 2, 2023, $ 106.7 million and $ 87.6 million of revenue, respectively, was deferred due to unsatisfied performance obligations, primarily relating to over time service revenue, and $ 101.1 million and $ 81.4 million of revenue, respectively, was recognized for the satisfaction of performance obligations over time.

Approximately $ 15.2 million and $ 9.8 million of this recognized revenue, respectively, was included in the contract liability balance at the beginning of the periods.

There were no significant changes in estimates during the period that would affect the contract balances.

During the five-year period that commenced on January 1, 2020, Verisure Sàrl (“Verisure”) has an aggregate purchase commitment of $ 500.0 million.

As of March 31, 2024, the entire purchase commitment has been fulfilled.

As of June 30, 2024, the entire purchase commitment has been fulfilled.

Based on the Supply Agreement with Verisure, a purchase obligation is not deemed to exist until we receive and accept Verisure’s purchase order.

As of March 31, 2024, we had a backlog of $ 44.5 million which represents performance obligations that will be recognized as revenue once fulfilled, which is expected to occur over the next six months .

On April 25, 2024, Verisure notified us that it is exercising its right under the Supply Agreement to extend the term for another five years (through November 2029) under the same terms but without minimum purchase obligations.

As of June 30, 2024, we had a backlog of $ 46.0 million which represents performance obligations that will be recognized as revenue once fulfilled, which is expected to occur over the next six months .

On April 25, 2024, Verisure notified us that it was exercising its right under the Supply Agreement to extend the term for another five years (through November 2029) under the same terms but without minimum purchase obligations.

Disaggregation of Revenue

2 unchanged sentences

The following table presents revenue disaggregated by geographic region.

Three Months Ended

2024 April 2,

Three Months Ended Six Months Ended

2023 June 30,

(In thousands)

3 unchanged sentences

Total $ 127,447 $ 115,076 $ 251,647 $ 226,080

As of March 31, 2024 and December 31, 2023, one customer accounted for 69.9 %, and three customers accounted for 37.1 %, 15.2 %, and 10.2 % of the total accounts receivable, net, respectively.

As of June 30, 2024 and December 31, 2023, two customers accounted for 63.8 % and 10.4 %, and three customers accounted for 37.1 %, 15.2 %, and 10.2 % of the total accounts receivable, net, respectively.

No other customers accounted for 10% or greater of the total accounts receivable, net.

For the three months ended March 31, 2024 and April 2, 2023, one customer accounted for 49.4 % and 43.7 %, respectively.

For the three months ended June 30, 2024 and July 2, 2023, one customer accounted for 44.6 % and 26.9 % of the total revenue, respectively.

For the six months ended June 30, 2024 and July 2, 2023, one customer accounted for 47.0 % and 35.1 % of the total revenue, respectively.

No other customers accounted for 10% or greater of the total revenue.

3 unchanged sentences

Short-Term Investments

As of March 31, 2024 As of December 31, 2023

As of June 30, 2024 As of December 31, 2023

Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value

8 unchanged sentences

The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected.

Three Months Ended

2024 April 2,

Three Months Ended Six Months Ended

2023 June 30,

(In thousands)

Balance at the beginning of the period $ 218 $ 329 $ 333 $ 423

Provision for (release of) expected credit losses ( 115 ) ( 94 )

Release of expected credit losses

( 76 ) ( 7 ) ( 191 ) ( 101 )

Balance at the end of the period $ 142 $ 322 $ 142 $ 322

15 unchanged sentences

_________________________

(1) $ 0.8 million and $ 1.0 million property and equipment, net, was included in the sublease arrangement for the San Jose office building as of March 31, 2024 and December 31, 2023, respectively.

Depreciation expense pertaining to property and equipment was $ 0.9 million and $ 1.1 million for the three months ended March 31, 2024 and April 2, 2023, respectively.

We have determined that no event occurred or circumstances changed during the three months ended March 31, 2024 that would more likely than not reduce the fair value of goodwill below the carrying amount.

No goodwill impairment was recognized in the three months ended March 31, 2024 and April 2, 2023.

(1) $ 0.7 million and $ 1.0 million of property and equipment, net, was included in the sublease arrangement for the San Jose office building as of June 30, 2024 and December 31, 2023, respectively.

Depreciation expense pertaining to property and equipment was $ 0.8 million and $ 1.7 million for the three and six months ended June 30, 2024, respectively, and $ 1.2 million and $ 2.4 million for the three and six months ended July 2, 2023, respectively.

We have determined that no event occurred or circumstances changed during the six months ended June 30, 2024 that would more likely than not reduce the fair value of goodwill below the carrying amount.

No goodwill impairment was recognized in the six months ended June 30, 2024 and July 2, 2023.

Accrued Liabilities

3 unchanged sentences

Sales returns

11,558 17,058

Compensation 15,627 13,278

20 unchanged sentences

Our investments in cash equivalents and available-for-sale securities are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets.

As of March 31, 2024 and December 31, 2023, assets and liabilities measured as Level 2 fair value were not material and there were no Level 3 fair value assets or liabilities measured on a recurring basis.

As of June 30, 2024 and December 31, 2023, assets and liabilities measured as Level 2 fair value were not material and there were no Level 3 fair value assets or liabilities measured on a recurring basis.

ARLO TECHNOLOGIES, INC.

3 unchanged sentences

This restructuring includes the reduction of headcount as well as the abandonment of certain lease contracts and the cancellation of contractual services arrangements with certain suppliers.

As of March 31, 2024, we have substantially incurred all costs pertaining to restructuring activities, with related cash outflows extending until the fourth quarter of 2024.

As of June 30, 2024, we have substantially incurred all costs pertaining to restructuring activities, with related cash outflows extending until the fourth quarter of 2024.

The restructuring liabilities are included in accrued liabilities in our unaudited condensed consolidated balance sheets.

14 unchanged sentences

Cash payments ( 640 ) ( 525 ) ( 115 ) —

Non-cash and other adjustments — — — —

Balance as of March 31, 2024

$ 296 $ 48 $ 248 $ —

Restructuring charges 914 914 — —

Cash payments ( 569 ) ( 477 ) ( 92 ) —

Balance as of June 30, 2024

$ 641 $ 485 $ 156 $ —

Total costs incurred inception to date $ 3,917 $ 2,760 $ 1,108 $ 49

9 unchanged sentences

The proceeds of the borrowings under the Credit Facility may be used for working capital and general corporate purposes.

Based on certain terms and conditions including eligible accounts receivable as of March 31, 2024, we had unused borrowing capacity of $ 4.2 million.

Based on certain terms and conditions including eligible accounts receivable as of June 30, 2024, we had unused borrowing capacity of $ 6.2 million.

Our obligations under the Credit Agreement are secured by substantially all of our domestic working capital assets, including accounts receivable, cash and cash equivalents, inventory, and other assets to the extent related to such working capital assets.

4 unchanged sentences

The Credit Agreement also contains financial covenants that require us to, if the Financial Covenant Trigger Period (as defined in the Credit Agreement) is in effect, maintain a fixed charge coverage ratio, tested quarterly on a trailing twelve month basis, of at least 1.00 to 1.00 at any time.

As of March 31, 2024, we were in compliance with all the covenants of the Credit Agreement.

As of June 30, 2024, we were in compliance with all the covenants of the Credit Agreement.

If an event of default under the Credit Agreement occurs, then the Lender may cease making advances under the Credit Agreement and declare any outstanding obligations under the Credit Agreement to be immediately due and payable.

In addition, if we file a bankruptcy petition, a bankruptcy petition is filed against us and is not dismissed or stayed within thirty days or we make a general assignment for the benefit of creditors, then any outstanding obligations under the Credit Agreement will automatically and without notice or demand become immediately due and payable.

No amounts had been drawn under the Credit Facility as of March 31, 2024.

No amounts had been drawn under the Credit Facility as of June 30, 2024.

ARLO TECHNOLOGIES, INC.

5 unchanged sentences

The terms of certain leases provide for rental payments on a graduated scale.

Gross lease expense was $ 1.5 million for each of the three months ended March 31, 2024 and April 2, 2023.

We recorded sublease income as reduction of lease expense, in the amount of $ 0.5 million for each of the three months ended March 31, 2024 and April 2, 2023.

Gross lease expense was $ 1.3 million and $ 2.8 million for the three and six months ended June 30, 2024, respectively, and $ 1.5 million and $ 3.0 million for the three and six months ended July 2, 2023, respectively.

We recorded sublease income as reduction of lease expense, in the amount of $ 0.5 million and $ 1.0 million for the three and six months ended June 30, 2024 and July 2, 2023, respectively.

Supplemental cash flow information related to operating leases is as follows:

Three Months Ended

2024 April 2,

Six Months Ended

(In thousands)

7 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The future minimum undiscounted lease payments under operating leases and future non-cancelable rent payments from our subtenants for each of the next five years and thereafter as of March 31, 2024 are as follows:

Operating Lease Payments Sublease Payments Net

(In thousands)

2024 (Remaining nine months)

2024 (Remaining six months)

$ 2,616 $ ( 1,065 ) $ 1,551

12 unchanged sentences

In connection with the lease agreement for our office space located in San Jose, California, we executed a letter of credit with the landlord as the beneficiary.

As of March 31, 2024, we had $ 3.6 million of unused letters of credit outstanding, of which $ 3.1 million pertains to the lease arrangement in San Jose, California.

As of June 30, 2024, we had $ 3.6 million of unused letters of credit outstanding, of which $ 3.1 million pertains to the lease arrangement in San Jose, California.

Purchase Obligations

2 unchanged sentences

Orders are non-cancelable within 30 days prior to the expected shipment date.

As of March 31, 2024, we had $ 40.0 million in non-cancelable purchase commitments with suppliers which is expected to be paid over the next twelve months .

As of March 31, 2024, an additional $ 29.4 million of purchase orders beyond contractual termination periods have been issued to supply chain partners in anticipation of demand requirements.

As of June 30, 2024, we had $ 51.7 million in non-cancelable purchase commitments with suppliers which is expected to be paid over the next twelve months .

As of June 30, 2024, an additional $ 33.3 million of purchase orders beyond contractual termination periods have been issued to supply chain partners in anticipation of demand requirements.

Consequently, we may incur expenses for the materials and components, such as chipsets already purchased by the supplier to fulfill our orders if the purchase order is cancelled.

4 unchanged sentences

Changes in warranty obligations, which are included in accrued liabilities in the unaudited condensed consolidated balance sheets, are as follows:

Three Months Ended

2024 April 2,

Three Months Ended Six Months Ended

2023 June 30,

(In thousands)

Balance at the beginning of the period $ 1,265 $ 1,119 $ 1,193 $ 1,174

Provision for warranty obligations 143 15

Provision for (release of) warranty obligations

( 134 ) 40 9 55

Settlements ( 75 ) ( 66 ) ( 146 ) ( 136 )

14 unchanged sentences

The maximum potential amount of future payments we could be required to make under these indemnification agreements is, in many cases, unlimited.

As of March 31, 2024 and December 31, 2023, we have not incurred any material costs as a result of such indemnifications and we are not currently aware of any indemnification claims.

As of June 30, 2024 and December 31, 2023, we have not incurred any material costs as a result of such indemnifications and we are not currently aware of any indemnification claims.

ARLO TECHNOLOGIES, INC.

3 unchanged sentences

We also grant performance-based and market-based restricted stock units (“PSUs”) to our executive officers periodically.

Award vesting periods for the 2018 Plan are generally three to four years .

As of March 31, 2024, approximately 3.8 million shares were available for future grants.

Award vesting periods for the 2018 Plan are generally three to five years .

As of June 30, 2024, approximately 3.8 million shares were available for future grants.

Options may be granted for periods of up to 10 years or such shorter term as may be provided in the agreement and at prices no less than 100 % of the fair market value of Arlo’s common stock on the date of grant.

Options granted under the 2018 Plan generally vest over four years , the first tranche at the end of 12 months and the remaining shares underlying the option vesting monthly over the remaining three years .

On January 19, 2024, we registered an aggregate of up to 4,759,901 shares of common stock on a Registration Statement on Form S-8, including 3,807,921 shares issuable pursuant to the 2018 Plan that were automatically added to the shares authorized for issuance under the 2018 Plan and 951,980 shares issuable pursuant to the Employee Stock Purchase Plan (“ESPP”) that were automatically added to the shares authorized for issuance on January 1, 2024, both pursuant to an “evergreen” provision contained in the respective plans.

The following table sets forth the available shares for grants as of March 31, 2024:

On January 19, 2024, we registered an aggregate of up to 4,759,901 shares of common stock on a Registration Statement on Form S-8, including 3,807,921 shares issuable pursuant to the 2018 Plan that were automatically added to the shares authorized for issuance and 951,980 shares issuable pursuant to the Employee Stock Purchase Plan (“ESPP”) that were automatically added to the shares authorized for issuance on January 1, 2024, both pursuant to an “evergreen” provision contained in the respective plans.

The following table sets forth the available shares for grants as of June 30, 2024:

Number of Shares

5 unchanged sentences

Shares traded for taxes 2,071

Shares available for grants as of March 31, 2024

Shares available for grants as of June 30, 2024

Employee Stock Purchase Plan

We sponsor the ESPP to eligible employees.

As of March 31, 2024, 2.8 million shares were available for issuance under the ESPP.

Under our ESPP, employees purchased 233 thousand shares and 460 thousand shares during the six months ended June 30, 2024 and July 2, 2023, respectively.

As of June 30, 2024, 2.5 million shares were available for issuance under the ESPP.

Option Activity

We granted no options during the three months ended March 31, 2024.

Stock option activity during the three months ended March 31, 2024 was as follows:

We did not grant options during the six months ended June 30, 2024.

Stock option activity during the six months ended June 30, 2024 was as follows:

Number of Shares Weighted Average Exercise Price Per Share

6 unchanged sentences

Expired — $ —

Outstanding as of March 31, 2024

Outstanding as of June 30, 2024

1,010 $ 12.86

Vested and exercisable as of March 31, 2024

Vested and exercisable as of June 30, 2024

1,010 $ 12.86

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

RSU activity, excluding PSU activity, during the three months ended March 31, 2024 was as follows:

RSU activity, excluding PSU activity, during the six months ended June 30, 2024 was as follows:

Number of Shares Weighted Average Grant Date Fair Value Per Share

4 unchanged sentences

Forfeited ( 764 ) $ 6.92

Outstanding as of March 31, 2024

Outstanding as of June 30, 2024

Our executive officers and other senior employees have been granted performance-based awards with vesting occurring at the end of a three or five-year period if performance conditions or market conditions are met.

1 unchanged sentence

At the end of each reporting period, we evaluate the probability of achieving the performance or market conditions and record the related stock-based compensation expense based on the achievement over the service period.

PSU activity during the three months ended March 31, 2024 was as follows:

PSU activity during the six months ended June 30, 2024 was as follows:

Number of Shares Weighted Average Grant Date Fair Value Per Share

4 unchanged sentences

Forfeited ( 67 ) $ 6.63

Outstanding as of March 31, 2024

Outstanding as of June 30, 2024

Stock-Based Compensation Expense

The following table sets forth the stock-based compensation expense included in our unaudited condensed consolidated statements of comprehensive loss:

Three Months Ended

2024 April 2,

Three Months Ended Six Months Ended

2023 June 30,

(In thousands)

6 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As of March 31, 2024, all outstanding options were fully vested;

As of June 30, 2024, all outstanding options were fully vested;

therefore, there was no unrecognized compensation cost related to stock options.

Approximately $ 83.3 million of unrecognized compensation cost related to unvested RSUs and PSUs is expected to be recognized over a weighted-average period of 1.5 years as of March 31, 2024.

During the three months ended March 31, 2024 and April 2, 2023, we settled executive and employee bonuses by granting and issuing restricted stock units (non-cash financing activities) that vested immediately amounting to $ 6.9 million and $ 6.7 million, respectively.

The provision for income taxes for the three months ended March 31, 2024 was $ 0.4 million or an effective tax rate of ( 4.3 )%.

The provision for income taxes for the three months ended April 2, 2023 was $ 0.8 million or an effective tax rate of ( 5.9 )%.

During the three months ended March 31, 2024 and April 2, 2023, we sustained U.S.

Approximately $ 68.2 million of unrecognized compensation cost related to unvested RSUs and PSUs is expected to be recognized over a weighted-average period of 1.1 years as of June 30, 2024.

During the six months ended June 30, 2024 and July 2, 2023, we settled executive and employee bonuses by granting and issuing restricted stock units (non-cash financing activities) that vested immediately amounting to $ 6.9 million and $ 6.7 million, respectively.

The provision for income taxes for the three and six months ended June 30, 2024 was $ 0.2 million and $ 0.6 million, respectively, or an effective tax rate of ( 2.1 )% and ( 3.1 )%, respectively.

The provision for income taxes for the three and six months ended July 2, 2023 was $ 0.2 million and $ 1.0 million, respectively, or an effective tax rate of ( 3.1 )% and ( 4.9 )%, respectively.

During the three and six months ended June 30, 2024 and July 2, 2023, we sustained U.S.

Consistent with the prior year periods, we maintained a valuation allowance against our U.S.

federal and state deferred tax assets and did not record a tax benefit on these deferred tax assets since it is more likely than not that these deferred tax assets will not be realized.

Provision for income taxes decreased for the three months ended March 31, 2024, compared to the prior year period, primarily due to (i) foreign-derived intangible income (“FDII”) and higher Section 174 amortization in the U.S.

Provision for income taxes for the three and six months ended June 30, 2024, compared to the prior year periods changed primarily due to (i) foreign-derived intangible income (“FDII”) and higher Section 174 amortization in the U.S.

and (ii) the utilization of R&D credit in Ireland to partially offset its tax liability.

Net Loss Per Share

Three Months Ended

2024 April 2,

Three Months Ended Six Months Ended

2023 June 30,

(In thousands, except per share data)

15 unchanged sentences

For comparative purposes, amounts in prior period have been recast.

Three Months Ended

2024 April 2,

Three Months Ended Six Months Ended

2023 June 30,

(In thousands)

14 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements