Connected. Smart. Security - May 2021
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Connected. Smart. Security. May 2021 Copyright 2021, Arlo Technologies Inc. All Rights Reserved.
SAFE HARBOR DISCLOSURE
This presentation 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 the expectations or beliefs of Arlo Technologies, Inc. (the “Company” or “Arlo”) concerning future events based on information available at the
time such statements were made and include statements regarding: the future financial flexibility and ability to pursue long-term strategies; the Company’s future operating performance and financial
condition; expectations regarding the timing, distribution, sales momentum and market acceptance of recent and anticipated new product introductions that position the Company for growth; future
market growth; and expectations regarding seasonal changes in the Company’s business performance. These statements are based on management's current expectations and are subject to certain
risks and uncertainties, including the following: future demand for the Company's products may be lower than anticipated; consumers may choose not to adopt the Company's new product offerings or
adopt competing products; product performance may be adversely affected by real world operating conditions; the Company may be unsuccessful or experience delays in manufacturing and distributing
its new and existing products; telecommunications service providers may choose to slow their deployment of the Company's products or utilize competing products; the Company may be unable to
collect receivables as they become due; the Company may fail to manage costs, including the cost of developing new products and manufacturing and distribution of its existing offerings; the Company
may incur additional costs and charges associated with the transactions contemplated by the Verisure partnership; the Company may not receive the minimum commitment amounts from Verisure; the
COVID-19 pandemic could have an adverse impact on the Company's business, operations and the markets and communities in which the Company and its partners and customers operate; the
Company may fail to successfully continue to effect operating expense savings; changes in the level of Arlo's cash resources and the Company's planned usage of such resources; changes in the
Company's stock price and developments in the business that could increase the Company's cash needs; fluctuations in foreign exchange rates; the actions and financial health of the Company's
customers; the anticipated financial capacity under Arlo’s revolving credit line may not be available when expected, or at all; and the Company may not be able to carry out its restructuring plan. 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 the Company and its business are detailed in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2020 and other periodic filings with the Securities and Exchange Commission. Given these circumstances, you should not place undue reliance on these forward-
looking statements. The Company undertakes 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.
All product and company names herein are or may be trademarks of their respective owners.
Copyright 2021, Arlo Technologies Inc. All rights reserved. 2
ARLO AT-A-GLANCE
IPO August 2018, NYSE ARLO
Devices Shipped (cumulative) 19.8M
Registered Accounts (cumulative)(1) 5.28M
Paid Accounts (cumulative)(2) 549K
Employees 355
US Headquarters CA
Note: Devices shipped, registered accounts and paid accounts are measured cumulatively as of March 28, 2021.
(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 particular period, and includes accounts owned by Verisure S.a.r.l.. 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 people.
(2) Paid accounts worldwide measured as any account where a subscription to a paid service is being collected (either by the Company or by the Company’s customers or channel partners), plus paid service plans of a duration of more than 3 months bundled with products (such bundles being counted as a paid account after 90 days have elapsed from the date of registration). Paid accounts includes accounts transferred to
Verisure S.a.r.l..
VISION STATEMENT To bring peace of mind by connecting and protecting what people care about the most. MISSION STATEMENT We build trusted, lifelong customer relationships by creating innovative, smart security solutions that deliver an exceptional user experience.
SMARTER SECURITY. TRUSTED BY MILLIONS.
The Arlo difference
1 Superior Quality
▪ DIY wire-free design with best-in-class video / audio
performance
▪ Intuitive and powerful app experience
▪ Cross-compatible with Alexa, Google Home, Apple Home
Kit and more
2 Category Leadership in AI
• High precision, low latency AI-enabled computer vision
and audio analytics
• Personalized, relevant notifications that matter
• Actionable alerts enable users to react and get help faster
3 Commitment to Privacy
• We protect our community with the highest levels of
privacy and security.
• We don’t monetize personal data. Videos and data belong
solely to our users.
• We support privacy and cybersecurity best practices and
standards.
*During Arlo Smart Trial or as a subscriber to Arlo Smart Services
Copyright 2021, Arlo Technologies Inc. All rights reserved. 5
COMPREHENSIVE PRODUCT PORTFOLIO
Ultra Cameras Pro Cameras Essential Cameras Video Doorbells Video Floodlight
The highest performance smart A platform that balances The entry level platform proving Innovative video doorbells The world’s first battery
camera platform with 4K video performance and price with 1080p video recording, 130° featuring a 1:1 aspect ratio and operated floodlight with up to
recording, 180° field of view, advanced features such as 2K field of view, and 2-way audio in VoIP calling for superior 3,000 lumens brightness, 2K
dual-band WIFI, dual noise video recording, 160° field of a sealed design with several performance. Available in wired video recording, 160° field of
cancelling microphones, view, 2-way audio, integrated options including base, spotlight and battery-operated versions view, high quality 2-way audio,
integrated spotlight, color night spotlight, color night vision, and and the XL version with up to 12 and compatible with existing integrated siren, and included
vision and an advanced modular an advanced modular design. months of battery life. wiring, chimes. security mount.
design.
Copyright 2021, Arlo Technologies Inc. All rights reserved. 6
SUPERIOR USER EXPERIENCE
The Arlo user experience is a multi-platform solution that
empowers users to protect what they care about most. It is
simple, intuitive and yet provides powerful features such as AI
based computer vision, intelligent emergency call routing, and
extensive features to customize the experience to fit the
user’s needs.
Arlo is also broadly compatible with various ecosystems to
provide maximum flexibility with access to videos and events.
A R L O S M A R T F E AT U R E S
Enhanced 911 Rich Notifications Cloud Storage
Smart emergency call routing Actionable event snapshots 30 days of protected videos
Person Detection Vehicle Detection Activity Zones
AI detection for persons AI detection for vehicles Smart motion boundaries
Package Detection Animal Detection Alarm Detection
AI protection of deliveries AI protection of animals AI detection of Smoke/CO
alarms
Copyright 2021, Arlo Technologies Inc. All rights reserved. 7
ACCELERATING PAID ACCOUNT GROWTH
Net in quarter Paid Account additions, In Thousands +356%
YOY
114
New Business Model, with Arlo Smart Service
Legacy Business Model w/ New Business Model
Arlo Smart Service w/ Arlo Smart Service
Free 7-day cloud storage 90 days of Arlo Smart service
of triggered events with included with device
device purchase. purchase. Live view only after +316%
30-day trial of Arlo Smart. 90 days YOY
~5% conversion rate to ~50% conversion rate to 79
Arlo Smart subscription Arlo Smart subscription
after trial expires. after initial service expires.*
+141%
YOY
58
+72%
YOY
43
25 24 25
23
19 18 19
17
13 13
10 10
Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21
Legacy Business Model, Legacy Business Model, New Business Model,
no Arlo Smart Service with Arlo Smart Service with Arlo Smart Service
*Conversion rate observed since Q1 2020 for New Business Model products
Copyright 2021, Arlo Technologies Inc. All rights reserved. 8
ACCELERATING TOTAL PAID ACCOUNTS
Total Net Paid Accounts In Thousands
115% YoY Growth
549
Legacy Business Model w/ New Business Model
Arlo Smart Service w/ Arlo Smart Service
Free 7-day cloud storage 90 days of Arlo Smart service
of triggered events with included with device
device purchase. purchase. Live view only after
435
30-day trial of Arlo Smart. 90 days
~5% conversion rate to ~50% conversion rate to
Arlo Smart subscription Arlo Smart subscription
after trial expires. after initial service expires.* 356
298
255
230
211
187
162
144
125
102
92
78
61
48
Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21
Legacy Business Model, Legacy Business Model, New Business Model,
no Arlo Smart Service with Arlo Smart Service with Arlo Smart Service
*Conversion rate observed since Q1 2020 for New Business Model products
Copyright 2021, Arlo Technologies Inc. All rights reserved. 9
EXTENSIVE AWARDS & RECOGNITION
Arlo's Pro 3 Floodlight Camera Arlo Video Doorbell is the best The Arlo Pro 3 is like the Iron The Arlo Pro 3 is my new
is by far the best floodlight video doorbell you can buy. It Man of smart security, offering favorite outdoor home security
camera I've tested… There's a works with every smart home powerful technical capabilities in a camera. The Arlo Pro 3 has crisp
reason we've already given ecosystem you might have, and slick package that makes it largely live streaming, fast alerts and a
the Arlo Pro 3 and the Arlo Video its features rival that of every easy to unleash that power… wide range of advanced features
Doorbell Editors' Choice Awards. competitor. Plus, the unique Image quality is superb… Some that set it apart from other outdoor
The Pro 3 Floodlight Camera aspect ratio lets you see more of really useful smart features … security cameras. The Pro works
continues Arlo's trend of your porch, which is the most Arlo Pro 3 is a worthy T3 Awards with Alexa and Google Assistant…
innovating… I'm giving it a CNET important factor. 2020 winner for Best Smart The 2K streaming is stellar.
Editor’s Choice Award. - Nicholas Sutrich Security. - Megan Wollerton
- Megan Wollerton - Matthew Bolton
Copyright 2021, Arlo Technologies Inc. All rights reserved. 10ROBUST SERVICE PLATFORM
SmartCloud Snapshot
SmartCloud powering users in 100+ countries 850+ hours of video uploading per
minute
* more than YouTube
190+ million videos uploaded per day
* more than Instagram
2+ billion API calls per day
Arlo’s SmartCloud™ platform is a high-precision, low-latency tuned neural network and
22+ million smart notifications per day
scaled compute environment architected to provide unparalleled performance and
reliability. It uses the latest in modern practices in including self-scaling, self-healing
microservices, advanced fault tolerance, real-time analytics, embedded security and 15+ petabytes of cloud-based storage
24x7 monitoring to deliver competitive advantages for Arlo services and best-in-class
capabilities for our partners.
* Tubefliter 2019 and omnicoreagency.com, 2019
Copyright 2021, Arlo Technologies Inc. All rights reserved. 11EXTENSIVE & EXPANDING PATHS TO MARKET
Paths to Market
North America North America Europe APAC Direct
Channel Partnerships Omni-Channel Channel To Consumer
arlo.com
Strategic partnership
across all channels
including retail, e-
commerce, regional
partnerships, and
Verisure’s direct
security channels.
and more…. and more…. and more….
Copyright 2021, Arlo Technologies Inc. All rights reserved. 12NEW BUSINESS MODEL – DRIVE TO PROFITABILITY
In $’Millions
New Business Model Transition
New Business Model Drives Driving Toward Cash flow
+ Paid Service Growth Drives Expense Discipline
Paid Service Growth Break-even
Gross Profit Expansion
$82.6 +26% YoY
$65.4 $22.8 +55% YoY
$14.7
$32.2
$26.7 +456% YoY $29.7 -7.8% YoY $27.4
$13.2 +144% YoY
$59.8 +18% YoY
$50.7
$4.8 $13.5
$3.1 -88.7% YoY
$5.4
-$0.6
Q1'20 Q1'21 Q1'20 Q1'21 Q1'20 Q1'21 Q1'20 Q1'21
Revenue Non-GAAP Gross Profit* Non-GAAP Operating Expense* Non-GAAP Operating Loss*
Services
Product *The most directly comparable GAAP financial measures are presented in the GAAP to non-GAAP reconciliation in the Appendix
Copyright 2021, Arlo Technologies Inc. All rights reserved. 13EXPANDING GROSS MARGIN
Paid Account Growth + New Business Model Transition +
Cost Optimization = Service Gross Margin Expansion =
Service Gross Margin Expansion Overall Gross Margin Expansion
Transition to New Business Transition to New Business Model
Model in Process* Complete*
32.3%
58.9% 57.9%
48.8%
22.4%
41.5% 20.6%
36.8%
9.6%
7.4%
Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21
Service Gross Margin Total Non-GAAP Gross Margin**
* = On a sell-in basis
**The most directly comparable GAAP financial measures are presented in the GAAP to non-GAAP reconciliation in the Appendix
Copyright 2021, Arlo Technologies Inc. All rights reserved. 14ACCELERATING TOWARDS PROFITABILITY
In $’Millions
Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q1 20 Q1 21
-$3.1
-$27.4
-$43.0
-$67.3
-$81.9
-$98.1
-$100.6
-$109.1
-$120.1
Trailing 12 Month Non-GAAP Operating Loss Quarterly Non-GAAP Operating Loss
**The most directly comparable GAAP financial measures are presented in the GAAP to non-GAAP reconciliation in the Appendix
Copyright 2021, Arlo Technologies Inc. All rights reserved. 15FOCUSED CASH MANAGEMENT
In $’ Millions
$257
$207 $205 $206
$194
$180 $177
$154
$138
Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21
Cash, Cash Equivalents, Short-Term Investments ($0 Debt)
Copyright 2021, Arlo Technologies Inc. All rights reserved. 16FOCUSED CASH
INVESTMENT MANAGEMENT
HIGHLIGHTS
• AWARD-WINNING & COMPREHENSIVE SMART
SECURITY PRODUCT PORTFOLIO
• NEW BUSINESS MODEL DRIVING SIGNIFICANT
PAID ACCOUNT & RECURRING REVENUE GROWTH
• TECHNOLOGY FOUNDED ON INDUSTRY-LEADING
AI, TRUSTED BY MILLIONS
• EXTENSIVE AND EXPANDING ROUTES TO MARKET
• ARLO SMARTCLOUD™ PLATFORM DRIVING NEW
B2B GROWTH OPPORTUNITIES
• EXPANDING PRODUCT & SERVICE GROSS
MARGIN DRIVING PATH TO PROFITABILITY
Copyright 2021, Arlo Technologies Inc. All rights reserved. 17Appendix – GAAP to non-GAAP Reconciliations
Reconciliations of GAAP Measures to Non-GAAP Measures
Gross Profit, In Thousands, except percentage data
Three Months Ended
March 29, June 28, September 27, December 31, March 28,
2020 2020 2020 2020 2021
GAAP gross profit:
Products $ (1,465) $ (1,583) $ 12,164 $ 11,847 $ 12,604
Services 5,418 7,072 9,245 12,691 13,203
Total GAAP gross profit 3,953 5,489 21,409 24,538 25,807
GAAP gross margin:
Products (2.9)% (3.2)% 13.3 % 12.7 % 21.1 %
Services 36.8 % 41.5 % 48.8 % 58.9 % 57.9 %
Total GAAP gross margin 6.0 % 8.2 % 19.4 % 21.4 % 31.3 %
Stock-based compensation expense 503 562 942 955 874
Amortization of intangibles 356 357 356 237 —
Restructuring and other charges 23 — — — —
Non-GAAP gross profit:
Products (583) (664) 13,462 13,039 13,478
Services 5,418 7,072 9,245 12,691 13,203
Total Non-GAAP gross profit $ 4,835 $ 6,408 $ 22,707 $ 25,730 $ 26,681
Non-GAAP gross margin:
Products (1.2)% (1.3)% 14.7 % 14.0 % 22.6 %
Services 36.8 % 41.5 % 48.8 % 58.9 % 57.9 %
Total Non-GAAP gross margin 7.4 % 9.6 % 20.6 % 22.4 % 32.3 %
Copyright 2021, Arlo Technologies Inc. All rights reserved. 19Reconciliations of GAAP Measures to Non-GAAP Measures
OPEX, In Thousands
Three Months Ended
March 29, March 28,
2020 2021
GAAP total operating expenses $ 44,852 $ 37,279
Separation expense (79) (54)
Strategic initiative and transaction expenses (545) —
Stock-based compensation expense (12,270) (7,466)
Restructuring and other charges (21) —
Litigation reserves, net (7) (10)
Gain on sale of business 292 —
Non-GAAP total operating expenses $ 32,222 $ 29,749
Copyright 2021, Arlo Technologies Inc. All rights reserved. 20Reconciliations of GAAP Measures to Non-GAAP Measures
Operating Income (Loss), In Thousands, except percentage data
Three Months Ended
December 31, March 31, June 30, September 29, December 31, March 29, June 28, September 27, December 31, March 28,
2018 2019 2019 2019 2019 2020 2020 2020 2020 2021
GAAP operating income (loss) $ (39,613) $ (41,879) $ (34,086) $ (31,054) $ 21,798 $ (40,899) $ (30,335) $ (17,961) $ (15,669) $ (11,472)
GAAP operating margin (32.4)% (72.4)% (40.8)% (29.3)% 17.8 % (62.5)% (45.5)% (16.3)% (13.6)% (13.9)%
Separation expense 3,603 906 717 136 154 79 82 77 10 54
Strategic initiative and transaction expenses — — — 502 1,868 545 206 17 2 —
Stock-based compensation expense 3,495 4,653 5,389 5,219 7,633 12,773 4,564 9,001 8,909 8,340
Amortization of intangibles 382 381 382 381 373 356 357 356 237 —
Restructuring and other charges — — — — 631 44 — — — —
Litigation reserves, net — — 140 1,287 7 249 — — 10
Activist shareholder response costs — — 237 — — — — — — —
Gain on sale of business — — — — (54,881) (292) — — — —
Non-GAAP operating loss $ (32,133) $ (35,939) $ (27,361) $ (24,676) $ (21,137) $ (27,387) $ (24,877) $ (8,510) $ (6,511) $ (3,068)
Non-GAAP operating margin (26.3)% (62.1)% (32.7)% (23.3)% (17.3)% (41.8)% (37.3)% (7.7)% (5.7)% (3.7)%
Trailing 12 months Non-GAAP Operating Loss $ (120,109) $ (109,113) $ (100,561) $ (98,077) $ (81,911) $ (67,285) $ (42,966)
Copyright 2021, Arlo Technologies Inc. All rights reserved. 21You can also read
