falsedesktopARLO2020-09-27000173694620000047{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "Large Accelerated filer\t☐\tAccelerated filer\t☒\nNon-Accelerated filer\t☐\tSmaller reporting company\t☒\n\t\tEmerging growth company\t☒\nIf an emerging growth company indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.\t\t\t☐\n", "q10k_tbl_1": "PART I: FINANCIAL INFORMATION\t\t\n\t\tPage No.\nItem 1.\tFinancial Statements\t3\n\tUnaudited Condensed Consolidated Balance Sheets\t3\n\tUnaudited Condensed Consolidated Statements of Operations\t4\n\tUnaudited Condensed Consolidated Statements of Comprehensive Income (Loss)\t5\n\tUnaudited Condensed Consolidated Statements of Stockholders' Equity\t6\n\tUnaudited Condensed Consolidated Statements of Cash Flows\t8\n\tNotes to Unaudited Condensed Consolidated Financial Statements\t9\nItem 2.\tManagement's Discussion and Analysis of Financial Condition and Results of Operations\t38\nItem 3.\tQuantitative and Qualitative Disclosures About Market Risk\t50\nItem 4.\tControls and Procedures\t50\nPART II: OTHER INFORMATION\t\t\nItem 1.\tLegal Proceedings\t51\nItem 1A.\tRisk Factors\t51\nItem 6.\tExhibits\t86\nSignatures\t\t87\n", "q10k_tbl_2": "\tAs of\t\n\tSeptember 27 2020\tDecember 31 2019\n\t(In thousands except share and per share data)\t\nASSETS\t\t\nCurrent assets:\t\t\nCash and cash equivalents\t173619\t236680\nShort-term investments (amortized cost of $19992 and $19967)\t19992\t19990\nAccounts receivable (net of allowance for credit losses of $509 and $609)\t56431\t127317\nInventories\t69038\t68624\nPrepaid expenses and other current assets\t10317\t16958\nTotal current assets\t329397\t469569\nProperty and equipment net\t16832\t21352\nOperating lease right-of-use assets net\t25031\t31300\nIntangibles net\t238\t1306\nGoodwill\t11038\t11038\nRestricted cash\t4147\t4139\nOther non-current assets\t2216\t4008\nTotal assets\t388899\t542712\nLIABILITIES AND STOCKHOLDERS' EQUITY\t\t\nCurrent liabilities:\t\t\nAccounts payable\t74727\t111650\nDeferred revenue\t30567\t50362\nAccrued liabilities\t106027\t127400\nIncome tax payable\t431\t4489\nTotal current liabilities\t211752\t293901\nNon-current deferred revenue\t7963\t15736\nNon-current operating lease liabilities\t26024\t29001\nNon-current income taxes payable\t92\t92\nOther non-current liabilities\t1261\t606\nTotal liabilities\t247092\t339336\nCommitments and contingencies (Note 10)\t\t\nStockholders' Equity:\t\t\nPreferred stock: $0.001 par value; 50000000 shares authorized; none issued or outstanding\t0\t0\nCommon stock: $0.001 par value; 500000000 shares authorized; shares issued and outstanding: 79026508 at September 27 2020 and 75785952 at December 31 2019\t79\t76\nAdditional paid-in capital\t359297\t334821\nAccumulated other comprehensive income\t(9)\t(2)\nAccumulated deficit\t(217560)\t(131519)\nTotal stockholders' equity\t141807\t203376\nTotal liabilities and stockholders' equity\t388899\t542712\n", "q10k_tbl_3": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 27 2020\tSeptember 29 2019\tSeptember 27 2020\tSeptember 29 2019\n\t(In thousands except per share data)\t\t\t\nRevenue:\t\t\t\t\nProducts\t91271\t94306\t191597\t213359\nServices\t18965\t11810\t50721\t34235\nTotal revenue\t110236\t106116\t242318\t247594\nCost of revenue:\t\t\t\t\nProducts\t79107\t88755\t182481\t206878\nServices\t9720\t6858\t28986\t18618\nTotal cost of revenue\t88827\t95613\t211467\t225496\nGross profit\t21409\t10503\t30851\t22098\nOperating expenses:\t\t\t\t\nResearch and development\t15436\t16701\t44871\t52456\nSales and marketing\t12720\t13657\t35471\t42389\nGeneral and administrative\t11137\t11062\t39758\t32512\nSeparation expense\t77\t137\t238\t1760\nGain on sale of business\t0\t0\t(292)\t0\nTotal operating expenses\t39370\t41557\t120046\t129117\nLoss from operations\t(17961)\t(31054)\t(89195)\t(107019)\nInterest income\t74\t596\t760\t2170\nOther income net\t543\t154\t2837\t138\nLoss before income taxes\t(17344)\t(30304)\t(85598)\t(104711)\nProvision for income taxes\t115\t286\t443\t855\nNet loss\t(17459)\t(30590)\t(86041)\t(105566)\nNet loss per share:\t\t\t\t\nBasic\t(0.22)\t(0.41)\t(1.11)\t(1.41)\nDiluted\t(0.22)\t(0.41)\t(1.11)\t(1.41)\nWeighted average shares used to compute net loss per share:\t\t\t\t\nBasic\t78662\t75337\t77705\t74831\nDiluted\t78662\t75337\t77705\t74831\n", "q10k_tbl_4": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 27 2020\tSeptember 29 2019\tSeptember 27 2020\tSeptember 29 2019\n\t(In thousands)\t\t\t\nNet loss\t(17459)\t(30590)\t(86041)\t(105566)\nOther comprehensive income (loss) before tax:\t\t\t\t\nUnrealized gain (loss) on derivative instruments\t(9)\t22\t16\t0\nUnrealized gain (loss) on available-for-sale securities\t(14)\t(27)\t(23)\t46\nTotal other comprehensive income (loss) before tax\t(23)\t(5)\t(7)\t46\nTax benefit (provision) related to derivative instruments\t0\t0\t0\t0\nTotal other comprehensive income (loss) net of tax\t(23)\t(5)\t(7)\t46\nComprehensive loss\t(17482)\t(30595)\t(86048)\t(105520)\n", "q10k_tbl_5": "\tCommon Stock\t\t\t\t\t\n\tShares\tAmount\tAdditional Paid-In Capital\tAccumulated Other Comprehensive Income (Loss)\tAccumulated Deficit\tTotal\n\t(In thousands)\t\t\t\t\nBalance as of June 28 2020\t78089\t78\t351913\t14\t(200101)\t151904\nNet loss\t0\t0\t0\t0\t(17459)\t(17459)\nStock-based compensation expense\t0\t0\t6083\t0\t0\t6083\nSettlement of liability classified RSUs\t0\t0\t1589\t0\t0\t1589\nIssuance of common stock under stock-based compensation plans\t859\t1\t24\t0\t0\t25\nIssuance of common stock under Employee Stock Purchase Plan\t378\t0\t1171\t0\t0\t1171\nRestricted stock unit withholdings\t(299)\t0\t(1483)\t0\t0\t(1483)\nChange in unrealized gains and losses on available-for-sale securities net of tax\t0\t0\t0\t(14)\t0\t(14)\nChange in unrealized gains and losses on derivatives net of tax\t0\t0\t0\t(9)\t0\t(9)\nBalance as of September 27 2020\t79027\t79\t359297\t(9)\t(217560)\t141807\n\tCommon Stock\t\t\t\t\t\n\tShares\tAmount\tAdditional Paid-In Capital\tAccumulated Other Comprehensive Income (Loss)\tAccumulated Deficit\tTotal\n\t(In thousands)\t\t\t\t\nBalance as of June 30 2019\t74869\t75\t323648\t51\t(120544)\t203230\nNet loss\t0\t0\t0\t0\t(30590)\t(30590)\nStock-based compensation expense\t0\t0\t5219\t0\t0\t5219\nIssuance of common stock under stock-based compensation plans\t88\t0\t0\t0\t0\t0\nIssuance of common stock under Employee Stock Purchase Plan\t767\t1\t1824\t0\t0\t1825\nRestricted stock unit withholdings\t(18)\t0\t(73)\t0\t0\t(73)\nChange in unrealized gains and losses on available-for-sale securities net of tax\t0\t0\t0\t(27)\t0\t(27)\nChange in unrealized gains and losses on derivatives net of tax\t0\t0\t0\t22\t0\t22\nBalance as of September 29 2019\t75706\t76\t330618\t46\t(151134)\t179606\n", "q10k_tbl_6": "\tCommon Stock\t\t\t\t\t\n\tShares\tAmount\tAdditional Paid-In Capital\tAccumulated Other Comprehensive Income (Loss)\tAccumulated Deficit\tTotal\n\t(In thousands)\t\t\t\t\nBalance as of December 31 2019\t75786\t76\t334821\t(2)\t(131519)\t203376\nNet loss\t0\t0\t0\t0\t(86041)\t(86041)\nStock-based compensation expense\t0\t0\t21840\t0\t0\t21840\nSettlement of liability classified RSUs\t0\t0\t4219\t0\t0\t4219\nIssuance of common stock under stock-based compensation plans\t3384\t3\t24\t0\t0\t27\nIssuance of common stock under Employee Stock Purchase Plan\t1110\t1\t3024\t0\t0\t3025\nRestricted stock unit withholdings\t(1253)\t(1)\t(4631)\t0\t0\t(4632)\nChange in unrealized gains and losses on available-for-sale securities net of tax\t0\t0\t0\t(23)\t0\t(23)\nChange in unrealized gains and losses on derivatives net of tax\t0\t0\t0\t16\t0\t16\nBalance as of September 27 2020\t79027\t79\t359297\t(9)\t(217560)\t141807\n\tCommon Stock\t\t\t\t\t\n\tShares\tAmount\tAdditional Paid-In Capital\tAccumulated Other Comprehensive Income (Loss)\tAccumulated Deficit\tTotal\n\t(In thousands)\t\t\t\t\nBalance as of December 31 2018\t74247\t74\t315277\t0\t(45849)\t269502\nCumulative-effect adjustment from adoption of ASC 842 net of tax\t0\t0\t0\t0\t281\t281\nNet loss\t0\t0\t0\t0\t(105566)\t(105566)\nStock-based compensation expense\t0\t0\t15261\t0\t0\t15261\nIssuance of common stock under stock-based compensation plans\t1041\t1\t11\t0\t0\t12\nIssuance of common stock under Employee Stock Purchase Plan\t767\t1\t1824\t0\t0\t1825\nRestricted stock unit withholdings\t(349)\t0\t(1755)\t0\t0\t(1755)\nChange in unrealized gains and losses on available-for-sale securities net of tax\t0\t0\t0\t46\t0\t46\nChange in unrealized gains and losses on derivatives net of tax\t0\t0\t0\t0\t0\t0\nBalance as of September 29 2019\t75706\t76\t330618\t46\t(151134)\t179606\n", "q10k_tbl_7": "\tNine Months Ended\t\n\tSeptember 27 2020\tSeptember 29 2019\n\t(In thousands)\t\nCash flows from operating activities:\t\t\nNet loss\t(86041)\t(105566)\nAdjustments to reconcile net loss to net cash used in operating activities:\t\t\nDepreciation and amortization\t8024\t7757\nLoss on disposal of fixed assets\t19\t0\nPremium amortization (discount accretion) on investments net\t60\t(391)\nStock-based compensation expense\t26338\t15261\nAllowance for (release of) credit losses and inventory reserves\t1322\t(3232)\nGain on sale of business\t(292)\t0\nDeferred income taxes\t63\t(109)\nChanges in assets and liabilities:\t\t\nAccounts receivable net\t70985\t65920\nInventories\t(1838)\t54335\nPrepaid expenses and other assets\t8369\t(1729)\nAccounts payable\t(37554)\t(24381)\nDeferred revenue\t(27569)\t(1996)\nAccrued and other liabilities\t(21203)\t(48584)\nNet cash used in operating activities\t(59317)\t(42715)\nCash flows from investing activities:\t\t\nPurchases of property and equipment\t(2070)\t(5023)\nPurchases of short-term investments\t(45085)\t(29768)\nProceeds from maturities of short-term investments\t45000\t40000\nNet cash provided by (used in) investing activities\t(2155)\t5209\nCash flows from financing activities:\t\t\nProceeds related to employee benefit plans\t3051\t1837\nRestricted stock unit withholdings\t(4632)\t(1755)\nNet cash provided by (used in) financing activities\t(1581)\t82\nNet decrease in cash and cash equivalents and restricted cash\t(63053)\t(37424)\nCash and cash equivalents and restricted cash at beginning of period\t240819\t155424\nCash and cash equivalents and restricted cash at end of period\t177766\t118000\nNon-cash investing and financing activities:\t\t\nPurchases of property and equipment included in accounts payable and accrued liabilities\t1470\t1578\nDe-recognition of build-to-suit assets and liabilities\t0\t(21610)\n", "q10k_tbl_8": "\t1 year\t2 years\tGreater than 2 years\tTotal\n\t(In thousands)\t\t\t\nPerformance obligations\t50987\t6766\t1517\t59270\n", "q10k_tbl_9": "\tAs of\t\n\tSeptember 27 2020\tDecember 31 2019\n\t(In thousands)\t\nCash and cash equivalents\t173619\t236680\nRestricted cash\t4147\t4139\nTotal as presented on the unaudited condensed consolidated statements of cash flows\t177766\t240819\n", "q10k_tbl_10": "\tAs of\t\n\tSeptember 29 2019\tDecember 31 2018\n\t(In thousands)\t\nCash and cash equivalents\t113870\t151290\nRestricted cash\t4130\t4134\nTotal as presented on the unaudited condensed consolidated statements of cash flows\t118000\t155424\n", "q10k_tbl_11": "\tAs of September 27 2020\t\t\t\tAs of December 31 2019\t\t\t\n\tCost\tUnrealized Gains\tUnrealized Losses\tEstimated Fair Value\tCost\tUnrealized Gains\tUnrealized Losses\tEstimated Fair Value\n\t(In thousands)\t\t\t\t\t\t\t\nU.S. treasuries\t19992\t0\t0\t19992\t19967\t23\t0\t19990\n", "q10k_tbl_12": "\tAs of\t\n\tSeptember 27 2020\tDecember 31 2019\n\t(In thousands)\t\nGross accounts receivable\t56940\t127926\nAllowance for credit losses\t(509)\t(609)\nTotal accounts receivable net\t56431\t127317\n", "q10k_tbl_13": "\tThree Months Ended\tNine Months Ended\n\tSeptember 27 2020\tSeptember 27 2020\n\t(In thousands)\t\nBalance at the beginning of the period\t810\t609\nProvision for (recovery of) expected credit losses\t(301)\t(100)\nAmounts written off charged against the allowance\t0\t0\nBalance at the end of the period\t509\t509\n", "q10k_tbl_14": "\tAs of\t\n\tSeptember 27 2020\tDecember 31 2019\n\t(In thousands)\t\nMachinery and equipment\t14699\t13402\nSoftware\t12657\t11945\nComputer equipment\t4094\t4047\nFurniture and fixtures\t4045\t4075\nLeasehold improvements\t8023\t8087\nTotal property and equipment gross\t43518\t41556\nAccumulated depreciation and amortization\t(26686)\t(20204)\nTotal property and equipment net\t16832\t21352\n", "q10k_tbl_15": "\tAs of September 27 2020\t\t\tAs of December 31 2019\t\t\n\tGross\tAccumulated Amortization\tNet\tGross\tAccumulated Amortization\tNet\n\t(In thousands)\t\t\t\t\t\nTechnology\t9800\t(9571)\t229\t9800\t(8540)\t1260\nOther\t500\t(491)\t9\t500\t(454)\t46\nTotal intangibles net\t10300\t(10062)\t238\t10300\t(8994)\t1306\n", "q10k_tbl_16": "\tAs of\t\n\tSeptember 27 2020\tDecember 31 2019\n\t(In thousands)\t\nNon-current deferred income taxes\t1255\t1318\nDeposits\t122\t764\nOther\t839\t1926\nTotal other non-current assets\t2216\t4008\n", "q10k_tbl_17": "\tAs of\t\n\tSeptember 27 2020\tDecember 31 2019\n\t(In thousands)\t\nSales and marketing\t37767\t53974\nSales returns\t25193\t28817\nAccrued employee compensation\t9751\t11795\nCurrent operating lease liabilities\t4376\t3912\nWarranty obligation\t2568\t3169\nFreight\t2675\t2690\nOther\t23697\t23043\nTotal accrued liabilities\t106027\t127400\n", "q10k_tbl_18": "\tAs of September 27 2020\t\t\tAs of December 31 2019\t\t\n\tTotal\tQuoted market prices in active markets (Level 1)\tSignificant other observable inputs (Level 2)\tTotal\tQuoted market prices in active markets (Level 1)\tSignificant other observable inputs (Level 2)\n\t(In thousands)\t\t\t\t\t\nAssets:\t\t\t\t\t\t\nCash equivalents: money-market funds (<90 days)\t1933\t1933\t0\t31472\t31472\t0\nAvailable-for-sale securities: U.S. treasuries (1)\t19992\t19992\t0\t19990\t19990\t0\nForeign currency forward contracts (2)\t110\t0\t110\t27\t0\t27\nTotal assets measured at fair value\t22035\t21925\t110\t51489\t51462\t27\nLiabilities:\t\t\t\t\t\t\nForeign currency forward contracts (3)\t5\t0\t5\t375\t0\t375\nTotal liabilities measured at fair value\t5\t0\t5\t375\t0\t375\n", "q10k_tbl_19": "Derivative Assets\tBalance Sheet Location\tSeptember 27 2020\tDecember 31 2019\tBalance Sheet Location\tSeptember 27 2020\tDecember 31 2019\n\t\t(In thousands)\t\t\t(In thousands)\t\nDerivative assets not designated as hedging instruments\tPrepaid expenses and other current assets\t108\t27\tAccrued liabilities\t5\t347\nDerivative assets designated as hedging instruments\tPrepaid expenses and other current assets\t2\t0\tAccrued liabilities\t0\t28\nTotal\t\t110\t27\t\t5\t375\n", "q10k_tbl_20": "As of September 27 2020\t\t\t\t\t\t\t\tGross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets\t\t\t\t\n\tGross Amounts of Recognized Assets\t\tGross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets\t\tNet Amounts Of Assets Presented in the Unaudited Condensed Consolidated Balance Sheets\t\tFinancial Instruments\t\tCash Collateral Pledged\t\tNet Amount\n\t\t(In thousands)\t\t\t\t\t\t\t\t\t\t\nHSBC\t\t29\t\t0\t\t29\t\t(5)\t\t0\t\t24\nWells Fargo Bank\t\t81\t\t0\t\t81\t\t0\t\t0\t\t81\nTotal\t\t110\t\t0\t\t110\t\t(5)\t\t0\t\t105\n", "q10k_tbl_21": "As of December 31 2019\t\t\t\t\t\t\t\tGross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets\t\t\t\t\n\tGross Amounts of Recognized Assets\t\tGross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets\t\tNet Amounts Of Assets Presented in the Unaudited Condensed Consolidated Balance Sheets\t\tFinancial Instruments\t\tCash Collateral Pledged\t\tNet Amount\n\t\t(In thousands)\t\t\t\t\t\t\t\t\t\t\nHSBC\t\t6\t\t0\t\t6\t\t(6)\t\t0\t\t0\nWells Fargo Bank\t\t21\t\t0\t\t21\t\t(21)\t\t0\t\t0\nTotal\t\t27\t\t0\t\t27\t\t(27)\t\t0\t\t0\n", "q10k_tbl_22": "As of December 31 2019\t\t\t\t\t\t\t\tGross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets\t\t\t\t\n\tGross Amounts of Recognized Liabilities\t\tGross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets\t\tNet Amounts Of Liabilities Presented in the Unaudited Condensed Consolidated Balance Sheets\t\tFinancial Instruments\t\tCash Collateral Pledged\t\tNet Amount\n\t\t(In thousands)\t\t\t\t\t\t\t\t\t\t\nHSBC\t\t83\t\t0\t\t83\t\t(6)\t\t0\t\t77\nWells Fargo Bank\t\t292\t\t0\t\t292\t\t(21)\t\t0\t\t271\nTotal\t\t375\t\t0\t\t375\t\t(27)\t\t0\t\t348\n", "q10k_tbl_23": "\tThree Months Ended September 27 2020\t\t\t\t\n\tLocation and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges\t\t\t\t\n\tRevenue\tCost of revenue\tResearch and development\tSales and marketing\tGeneral and administrative\n\t(In thousands)\t\t\t\t\nStatements of operations\t110236\t88827\t15436\t12720\t11137\nGains (losses) on cash flow hedge\t(37)\t0\t5\t2\t0\n", "q10k_tbl_24": "\tNine Months Ended September 27 2020\t\t\t\t\n\tLocation and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges\t\t\t\t\n\tRevenue\tCost of revenue\tResearch and development\tSales and marketing\tGeneral and administrative\n\t(In thousands)\t\t\t\t\nStatements of operations\t242318\t211467\t44871\t35471\t39758\nGains (losses) on cash flow hedge\t(14)\t0\t5\t3\t0\n", "q10k_tbl_25": "\tThree Months Ended September 29 2019\t\t\t\t\n\tLocation and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges\t\t\t\t\n\tRevenue\tCost of revenue\tResearch and development\tSales and marketing\tGeneral and administrative\n\t(In thousands)\t\t\t\t\nStatements of operations\t106116\t95613\t16701\t13657\t11062\nGains (losses) on cash flow hedge\t86\t0\t(3)\t(3)\t(2)\n", "q10k_tbl_26": "\tNine Months Ended September 29 2019\t\t\t\t\n\tLocation and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges\t\t\t\t\n\tRevenue\tCost of revenue\tResearch and development\tSales and marketing\tGeneral and administrative\n\t(In thousands)\t\t\t\t\nStatements of operations\t247594\t225496\t52456\t42389\t32512\nGains (losses) on cash flow hedge\t333\t(2)\t(24)\t(38)\t(11)\n", "q10k_tbl_27": "Derivatives Not Designated as Hedging Instruments\t\tLocation of Gains (Losses) Recognized in Income on Derivative\t\tThree Months Ended\t\t\t\tNine Months Ended\t\n\tSeptember 27 2020\t\tSeptember 29 2019\t\tSeptember 27 2020\t\tSeptember 29 2019\n\t\t\t\t(In thousands)\t\t\t\t\t\nForeign currency forward contracts\t\tOther income (expense) net\t\t(108)\t\t665\t\t553\t521\n", "q10k_tbl_28": "\tUnrealized gains (losses) on available-for-sale securities\tUnrealized gains (losses) on derivatives\tEstimated tax benefit (provision)\tTotal\n\t(In thousands)\t\t\t\nBalance as of June 28 2020\t14\t0\t0\t14\nOther comprehensive income (loss) before reclassifications\t(14)\t(39)\t0\t(53)\nLess: Amount reclassified from accumulated other comprehensive income (loss)\t0\t(30)\t0\t(30)\nNet current period other comprehensive income (loss)\t(14)\t(9)\t0\t(23)\nBalance as of September 27 2020\t0\t(9)\t0\t(9)\n\tUnrealized gains (losses) on available-for-sale securities\tUnrealized gains (losses) on derivatives\tEstimated tax benefit (provision)\tTotal\n\t(In thousands)\t\t\t\nBalance as of December 31 2019\t23\t(25)\t0\t(2)\nOther comprehensive income (loss) before reclassifications\t(23)\t10\t0\t(13)\nLess: Amount reclassified from accumulated other comprehensive income (loss)\t0\t(6)\t0\t(6)\nNet current period other comprehensive income (loss)\t(23)\t16\t0\t(7)\nBalance as of September 27 2020\t0\t(9)\t0\t(9)\n", "q10k_tbl_29": "\tUnrealized gains (losses) on available-for-sale securities\tUnrealized gains (losses) on derivatives\tEstimated tax benefit (provision)\tTotal\n\t(In thousands)\t\t\t\nBalance as of June 30 2019\t72\t(22)\t1\t51\nOther comprehensive income (loss) before reclassifications\t(27)\t100\t0\t73\nLess: Amount reclassified from accumulated other comprehensive income (loss)\t0\t78\t0\t78\nNet current period other comprehensive income (loss)\t(27)\t22\t0\t(5)\nBalance as of September 29 2019\t45\t0\t1\t46\n\tUnrealized gains (losses) on available-for-sale securities\tUnrealized gains (losses) on derivatives\tEstimated tax benefit (provision)\tTotal\n\t(In thousands)\t\t\t\nBalance as of December 31 2018\t(2)\t2\t0\t0\nOther comprehensive income (loss) before reclassifications\t47\t256\t1\t304\nLess: Amount reclassified from accumulated other comprehensive income (loss)\t0\t258\t0\t258\nNet current period other comprehensive income (loss)\t47\t(2)\t1\t46\nBalance as of September 29 2019\t45\t0\t1\t46\n", "q10k_tbl_30": "\t\tThree Months Ended\t\t\t\t\t\t\t\t\n\t\tSeptember 27 2020\t\t\t\tSeptember 29 2019\t\t\t\t\n\tGains (Losses) Recognized in OCI - Effective Portion\t\tGains (Losses) Reclassified from OCI to Income - Effective Portion\t\tGains (Losses) Recognized in OCI - Effective Portion\t\tGains (Losses) Reclassified from OCI to Income - Effective Portion\t\tAffected Line Item in the Statements of Operations\n\t\t(In thousands)\t\t\t\t\t\t\t\t\nGains (losses) on cash flow hedge:\t\t\t\t\t\t\t\t\t\t\nForeign currency contracts\t\t(39)\t\t(37)\t\t100\t\t86\t\tRevenue\nForeign currency contracts\t\t0\t\t0\t\t0\t\t0\t\tCost of revenue\nForeign currency contracts\t\t0\t\t5\t\t0\t\t(3)\t\tResearch and development\nForeign currency contracts\t\t0\t\t2\t\t0\t\t(3)\t\tSales and marketing\nForeign currency contracts\t\t0\t\t0\t\t0\t\t(2)\t\tGeneral and administrative\n\t\t(39)\t\t(30)\t\t100\t\t78\t\tTotal *\n\t\tNine Months Ended\t\t\t\t\t\t\t\t\n\t\tSeptember 27 2020\t\t\t\tSeptember 29 2019\t\t\t\t\n\tGains (Losses) Recognized in OCI - Effective Portion\t\tGains (Losses) Reclassified from OCI to Income - Effective Portion\t\tGains (Losses) Recognized in OCI - Effective Portion\t\tGains (Losses) Reclassified from OCI to Income - Effective Portion\t\tAffected Line Item in the Statements of Operations\n\t\t(In thousands)\t\t\t\t\t\t\t\t\nGains (losses) on cash flow hedge:\t\t\t\t\t\t\t\t\t\t\nForeign currency contracts\t\t10\t\t(14)\t\t257\t\t333\t\tRevenue\nForeign currency contracts\t\t0\t\t0\t\t0\t\t(2)\t\tCost of revenue\nForeign currency contracts\t\t0\t\t5\t\t0\t\t(24)\t\tResearch and development\nForeign currency contracts\t\t0\t\t3\t\t0\t\t(38)\t\tSales and marketing\nForeign currency contracts\t\t0\t\t0\t\t0\t\t(11)\t\tGeneral and administrative\n\t\t10\t\t(6)\t\t257\t\t258\t\tTotal *\n", "q10k_tbl_31": "\t\tThree Months Ended\t\tNine Months Ended\t\n\tStatements of Operations Location\tSeptember 27 2020\tSeptember 29 2019\tSeptember 27 2020\tSeptember 29 2019\n\t\t\t(In thousands)\t\t\nOperating lease cost (1)\tGeneral and administrative\t1728\t1726\t5319\t5068\n", "q10k_tbl_32": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 27 2020\tSeptember 29 2019\tSeptember 27 2020\tSeptember 29 2019\n\t(in thousands)\t\t\t\nCash paid for amounts included in the measurement of lease liabilities\t\t\t\t\nOperating cash flows from operating leases\t1493\t1470\t4452\t2882\nRight-of-use assets obtained in exchange for lease liabilities\t\t\t\t\nOperating leases\t0\t439\t461\t22172\n", "q10k_tbl_33": "2020 (Remaining three months)\t1505\n2021\t5893\n2022\t5735\n2023\t4946\n2024\t4449\nThereafter\t14672\nTotal lease payments\t37200\nLess: interest (1)\t(6800)\nTotal\t30400\nAccrued liabilities\t4376\nNon-current operating lease liabilities\t26024\nTotal\t30400\n", "q10k_tbl_34": "2020\t5660\n2021\t5735\n2022\t5589\n2023\t4908\n2024\t4450\nThereafter\t14669\nTotal lease payments\t41011\nLess: interest (1)\t(8098)\nTotal\t32913\nAccrued liabilities\t3912\nNon-current operating lease liabilities\t29001\nTotal\t32913\n", "q10k_tbl_35": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 27 2020\tSeptember 29 2019\tSeptember 27 2020\tSeptember 29 2019\n\t(In thousands)\t\t\t\nBalance at the beginning of the period\t3023\t3232\t3169\t3712\nProvision for warranty obligation made during the period\t0\t364\t0\t292\nSettlements made during the period\t(455)\t(193)\t(601)\t(601)\nBalance at the end of the period\t2568\t3403\t2568\t3403\n", "q10k_tbl_36": "\tNumber of Shares\n\t(In thousands)\nShares available for grant as of December 31 2019\t2630\nAdditional authorized shares\t3031\nGranted (1)\t(7331)\nForfeited / cancelled (2)\t3345\nShares traded for taxes\t1252\nShares available for grant as of September 27 2020\t2927\n", "q10k_tbl_37": "\tNumber of shares\tWeighted Average Exercise Price Per Share\n\t(In thousands)\t(In dollars)\nOutstanding as of December 31 2019 (1)\t6040\t11.56\nGranted\t0\t0\nExercised\t(4)\t5.65\nForfeited / cancelled (2)\t(2234)\t14.95\nOutstanding as of September 27 2020\t3802\t9.58\nVested and expected to vest as of September 27 2020\t3802\t9.58\nExercisable Options as of September 27 2020 (3)\t3268\t8.88\n", "q10k_tbl_38": "\tNumber of shares\tWeighted Average Exercise Price Per Share\n\t(In thousands)\t(In dollars)\nOutstanding as of December 31 2019\t205\t25.94\nExercised\t(139)\t22.69\nForfeited / cancelled\t(47)\t36.73\nExpired\t0\t0\nOutstanding as of September 27 2020\t19\t22.95\nVested and expected to vest as of September 27 2020\t19\t22.95\nExercisable Options as of September 27 2020 (1)\t13\t20.39\n", "q10k_tbl_39": "\tNumber of shares\tWeighted Average Grant Date Fair Value Per Share\n\t(In thousands)\t(In dollars)\nOutstanding as of December 31 2019 (1)\t7851\t6.50\nGranted (2)\t7331\t3.01\nVested (3)\t(3380)\t6.29\nForfeited (4)\t(1111)\t4.66\nOutstanding as of September 27 2020\t10691\t4.37\n", "q10k_tbl_40": "\tNumber of shares\tWeighted Average Grant Date Fair Value Per Share\n\t(In thousands)\t(In dollars)\nOutstanding as of December 31 2019\t278\t36.14\nVested (1)\t(116)\t34.86\nForfeited\t(21)\t36.27\nOutstanding as of September 27 2020\t141\t37.18\n", "q10k_tbl_41": "\tThree Months Ended\t\t\t\tNine Months Ended\t\t\t\n\tSeptember 27 2020\tSeptember 29 2019\tSeptember 27 2020\tSeptember 29 2019\tSeptember 27 2020\tSeptember 29 2019\tSeptember 27 2020\tSeptember 29 2019\n\tStock Options\t\tESPP\t\tStock Options\t\tESPP\t\nExpected life (in years)\tNA\tNA\t0.5\t0.5\tNA\t6.3\t0.5\t0.5\nRisk-free interest rate\tNA\tNA\t0.86%\t2.49%\tNA\t2.28%\t1.47%\t2.49%\nExpected volatility\tNA\tNA\t99.6%\t97.6%\tNA\t73.0%\t85.7%\t97.6%\nDividend yield\t0\t0\t0\t0\t0\t0\t0\t0\n", "q10k_tbl_42": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 27 2020\tSeptember 29 2019\tSeptember 27 2020\tSeptember 29 2019\nExpected life\tN/A\t3.0\t3.0\t3.0\nRisk-free interest rate\tN/A\t1.52%\t0.24%\t1.52%\nExpected volatility\tN/A\t65.1%\t69.3%\t65.1%\nDividend yield\tN/A\t0\t0\t0\nStock Beta\tN/A\t0.30\t0.48\t0.30\n", "q10k_tbl_43": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 27 2020\tSeptember 29 2019\tSeptember 27 2020\tSeptember 29 2019\n\t(In thousands)\t\t\t\nCost of revenue\t942\t467\t2007\t1286\nResearch and development\t2870\t1569\t6259\t4501\nSales and marketing\t1160\t791\t2895\t2722\nGeneral and administrative\t4029\t2392\t15177\t6752\nTotal stock-based compensation\t9001\t5219\t26338\t15261\n", "q10k_tbl_44": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 27 2020\tSeptember 29 2019\tSeptember 27 2020\tSeptember 29 2019\n\t(In thousands except per share data)\t\t\t\nNumerator:\t\t\t\t\nNet loss\t(17459)\t(30590)\t(86041)\t(105566)\nDenominator:\t\t\t\t\nWeighted average common shares - basic\t78662\t75337\t77705\t74831\nPotentially dilutive common share equivalent\t0\t0\t0\t0\nWeighted average common shares - dilutive\t78662\t75337\t77705\t74831\nBasic net loss per share\t(0.22)\t(0.41)\t(1.11)\t(1.41)\nDiluted net loss per share\t(0.22)\t(0.41)\t(1.11)\t(1.41)\nAnti-dilutive employee stock-based awards excluded\t5958\t10287\t7526\t10114\n", "q10k_tbl_45": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 27 2020\tSeptember 29 2019\tSeptember 27 2020\tSeptember 29 2019\n\t(In thousands)\t\t\t\nAmericas\t\t\t\t\nUnited States (\"U.S.\")\t73826\t81441\t166273\t184733\nAmericas (excluding U.S.)\t2035\t4121\t10717\t9759\nEMEA\t28010\t13002\t46846\t37370\nAPAC\t6365\t7552\t18482\t15732\nTotal revenue\t110236\t106116\t242318\t247594\n", "q10k_tbl_46": "\tAs of\t\n\tSeptember 27 2020\tDecember 31 2019\n\t(In thousands)\t\nUnited States (\"U.S.\")\t13097\t17100\nAmericas (excluding U.S.)\t691\t904\nEMEA\t250\t316\nChina\t2095\t2089\nAPAC (excluding China)\t699\t943\nTotal property and equipment net\t16832\t21352\n", "q10k_tbl_47": "\tThree Months Ended\t\t\tNine Months Ended\t\t\n\tSeptember 27 2020\t% Change\tSeptember 29 2019\tSeptember 27 2020\t% Change\tSeptember 29 2019\n\t(In thousands except percentage data)\t\t\t\t\t\nCumulative registered accounts\t4774\t29.3%\t3691\t4774\t29.3%\t3691\nCumulative paid accounts\t356\t68.7%\t211\t356\t68.7%\t211\nDevices shipped for the period\t978\t(14.1)%\t1138\t2136\t(21.4)%\t2718\n", "q10k_tbl_48": "\tThree Months Ended\t\t\t\tNine Months Ended\t\t\t\n\tSeptember 27 2020\t\tSeptember 29 2019\t\tSeptember 27 2020\t\tSeptember 29 2019\t\n\t(In thousands except percentage data)\t\t\t\t\t\t\t\nRevenue:\t\t\t\t\t\t\t\t\nProducts\t91271\t82.8%\t94306\t88.9%\t191597\t79.1%\t213359\t86.2%\nServices\t18965\t17.2%\t11810\t11.1%\t50721\t20.9%\t34235\t13.8%\nTotal revenue\t110236\t100.0%\t106116\t100.0%\t242318\t100.0%\t247594\t100.0%\nCost of revenue:\t\t\t\t\t\t\t\t\nProducts\t79107\t71.9%\t88755\t83.6%\t182481\t75.3%\t206878\t83.6%\nServices\t9720\t8.8%\t6858\t6.5%\t28986\t12.0%\t18618\t7.5%\nTotal cost of revenue\t88827\t80.6%\t95613\t90.1%\t211467\t87.3%\t225496\t91.1%\nGross profit\t21409\t19.4%\t10503\t9.9%\t30851\t12.7%\t22098\t8.9%\nOperating expenses:\t\t\t\t\t\t\t\t\nResearch and development\t15436\t14.0%\t16701\t15.7%\t44871\t18.5%\t52456\t21.2%\nSales and marketing\t12720\t11.5%\t13657\t12.9%\t35471\t14.6%\t42389\t17.1%\nGeneral and administrative\t11137\t10.1%\t11062\t10.4%\t39758\t16.4%\t32512\t13.1%\nSeparation expense\t77\t0.1%\t137\t0.1%\t238\t0.1%\t1760\t0.7%\nGain on sale of business\t0\t0\t0\t0\t(292)\t-%\t0\t0\nTotal operating expenses\t39370\t35.7%\t41557\t39.2%\t120046\t49.5%\t129117\t52.1%\nLoss from operations\t(17961)\t(16.3)%\t(31054)\t(29.3)%\t(89195)\t(36.8)%\t(107019)\t(43.2)%\nInterest income\t74\t0.1%\t596\t0.6%\t760\t0.3%\t2170\t0.9%\nOther income (expense) net\t543\t0.5%\t154\t0.1%\t2837\t1.3%\t138\t0.1%\nLoss before income taxes\t(17344)\t(15.7)%\t(30304)\t(28.6)%\t(85598)\t(35.3)%\t(104711)\t(42.3)%\nProvision for income taxes\t115\t0.1%\t286\t0.3%\t443\t0.2%\t855\t0.2%\nNet loss\t(17459)\t(15.8)%\t(30590)\t(28.8)%\t(86041)\t(35.5)%\t(105566)\t(42.6)%\n", "q10k_tbl_49": "\tThree Months Ended\t\t\tNine Months Ended\t\t\n\tSeptember 27 2020\t% Change\tSeptember 29 2019\tSeptember 27 2020\t% Change\tSeptember 29 2019\n\t(In thousands except percentage data)\t\t\t\t\t\nAmericas\t75861\t(11.3)%\t85562\t176990\t(9.0)%\t194492\nPercentage of revenue\t68.8%\t\t80.6%\t73.0%\t\t78.6%\nEMEA\t28010\t115.4%\t13002\t46846\t25.4%\t37370\nPercentage of revenue\t25.4%\t\t12.3%\t19.3%\t\t15.1%\nAPAC\t6365\t(15.7)%\t7552\t18482\t17.5%\t15732\nPercentage of revenue\t5.8%\t\t7.1%\t7.6%\t\t6.4%\nTotal revenue\t110236\t3.9%\t106116\t242318\t(2.1)%\t247594\n", "q10k_tbl_50": "\tThree Months Ended\t\t\tNine Months Ended\t\t\n\tSeptember 27 2020\t% Change\tSeptember 29 2019\tSeptember 27 2020\t% Change\tSeptember 29 2019\n\t(In thousands except percentage data)\t\t\t\t\t\nCost of revenue:\t\t\t\t\t\t\nProducts\t79107\t(10.9)%\t88755\t182481\t(11.8)%\t206878\nServices\t9720\t41.7%\t6858\t28986\t55.7%\t18618\nTotal cost of revenue\t88827\t(7.1)%\t95613\t211467\t(6.2)%\t225496\n", "q10k_tbl_51": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 27 2020\tSeptember 29 2019\tSeptember 27 2020\tSeptember 29 2019\n\t(In thousands except percentage data)\t\t\t\nGross profit:\t\t\t\t\nProducts\t12164\t5551\t9116\t6481\nServices\t9245\t4952\t21735\t15617\nTotal gross profit\t21409\t10503\t30851\t22098\nGross profit percentage:\t\t\t\t\nProducts\t13.3%\t5.9%\t4.8%\t3.0%\nServices\t48.7%\t41.9%\t42.9%\t45.6%\nTotal gross profit percentage\t19.4%\t9.9%\t12.7%\t8.9%\n", "q10k_tbl_52": "\tThree Months Ended\t\t\tNine Months Ended\t\t\n\tSeptember 27 2020\t% Change\tSeptember 29 2019\tSeptember 27 2020\t% Change\tSeptember 29 2019\n\t(In thousands except percentage data)\t\t\t\t\t\nResearch and development expense\t15436\t(7.6)%\t16701\t44871\t(14.5)%\t52456\n", "q10k_tbl_53": "\tThree Months Ended\t\t\tNine Months Ended\t\t\n\tSeptember 27 2020\t% Change\tSeptember 29 2019\tSeptember 27 2020\t% Change\tSeptember 29 2019\n\t(In thousands except percentage data)\t\t\t\t\t\nSales and marketing expense\t12720\t(6.9)%\t13657\t35471\t(16.3)%\t42389\n", "q10k_tbl_54": "\tThree Months Ended\t\t\tNine Months Ended\t\t\n\tSeptember 27 2020\t% Change\tSeptember 29 2019\tSeptember 27 2020\t% Change\tSeptember 29 2019\n\t(In thousands except percentage data)\t\t\t\t\t\nGeneral and administrative expense\t11137\t0.7%\t11062\t39758\t22.3%\t32512\n", "q10k_tbl_55": "\tThree Months Ended\t\t\tNine Months Ended\t\t\n\tSeptember 27 2020\t% Change\tSeptember 29 2019\tSeptember 27 2020\t% Change\tSeptember 29 2019\n\t(In thousands except percentage data)\t\t\t\t\t\nSeparation expense\t77\t(43.8)%\t137\t238\t(86.5)%\t1760\n", "q10k_tbl_56": "\tThree Months Ended\t\t\tNine Months Ended\t\t\n\tSeptember 27 2020\t% Change\tSeptember 29 2019\tSeptember 27 2020\t% Change\tSeptember 29 2019\n\t(In thousands except percentage data)\t\t\t\t\t\nGain on sale of business\t0\t**\t0\t(292)\t**\t0\n", "q10k_tbl_57": "\tThree Months Ended\t\t\tNine Months Ended\t\t\n\tSeptember 27 2020\t% Change\tSeptember 29 2019\tSeptember 27 2020\t% Change\tSeptember 29 2019\n\t(In thousands except percentage data)\t\t\t\t\t\nInterest income\t74\t**\t596\t760\t**\t2170\nOther income (expense) net\t543\t**\t154\t2837\t**\t138\n", "q10k_tbl_58": "\tThree Months Ended\t\t\tNine Months Ended\t\t\n\tSeptember 27 2020\t% Change\tSeptember 29 2019\tSeptember 27 2020\t% Change\tSeptember 29 2019\n\t(In thousands except percentage data)\t\t\t\t\t\nProvision for income taxes\t115\t(59.8)%\t286\t443\t(48.2)%\t855\nEffective tax rate\t(0.7)%\t\t(0.9)%\t(0.5)%\t\t(0.8)%\n", "q10k_tbl_59": "\tNine Months Ended\t\n\tSeptember 27 2020\tSeptember 29 2019\n\t(In thousands)\t\nNet cash used in operating activities\t(59317)\t(42715)\nNet cash used in investing activities\t(2155)\t5209\nNet cash used in financing activities\t(1581)\t82\nNet cash decrease\t(63053)\t(37424)\n", "q10k_tbl_60": "\t\tIncorporated by Reference\t\t\t\nExhibit Number\tExhibit Description\tForm\tDate\tNumber\tFiled Herewith\n3.1\tAmended and Restated Certificate of Incorporation of Arlo Technologies Inc.\t8-K\t8/7/2018\t3.1\t\n3.2\tAmended and Restated Bylaws of Arlo Technologies Inc.\t8-K\t8/7/2018\t3.2\t\n4.1\tCommon Stock Certificate of Arlo Technologies Inc.\tS-1/A\t7/23/2018\t4.1\t\n31.1\tRule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer\t\t\t\tX\n31.2\tRule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer\t\t\t\tX\n32.1#\tSection 1350 Certification of Principal Executive Officer\t\t\t\tX\n32.2#\tSection 1350 Certification of Principal Financial Officer\t\t\t\tX\n101.INS\tInline 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.\t\t\t\tX\n101.SCH\tInline XBRL Taxonomy Extension Schema Document\t\t\t\tX\n101.CAL\tInline XBRL Taxonomy Extension Calculation Linkbase Document\t\t\t\tX\n101.DEF\tInline XBRL Taxonomy Extension Definition Linkbase Document\t\t\t\tX\n101.LAB\tInline XBRL Taxonomy Extension Label Linkbase Document\t\t\t\tX\n101.PRE\tInline XBRL Taxonomy Extension Presentation Linkbase Document\t\t\t\tX\n104\t104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)\t\t\t\tX\n#\tThis 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.\t\t\t\t\n"}{"bs": "q10k_tbl_2", "is": "q10k_tbl_3", "cf": "q10k_tbl_7"}None
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 2020
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-38618
ARLO TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
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)
(408) 890-3900
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share
ARLO
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesx No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer
☐
Accelerated filer
☒
Non-Accelerated filer
☐
Smaller reporting company
☒
Emerging growth company
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐Nox
The number of outstanding shares of the registrant’s Common Stock, $0.001 par value, was 79,037,169 as of October 23, 2020.
Short-term investments (amortized cost of $19,992 and $19,967)
19,992
19,990
Accounts receivable (net of allowance for credit losses of $509 and $609)
56,431
127,317
Inventories
69,038
68,624
Prepaid expenses and other current assets
10,317
16,958
Total current assets
329,397
469,569
Property and equipment, net
16,832
21,352
Operating lease right-of-use assets, net
25,031
31,300
Intangibles, net
238
1,306
Goodwill
11,038
11,038
Restricted cash
4,147
4,139
Other non-current assets
2,216
4,008
Total assets
$
388,899
$
542,712
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
74,727
$
111,650
Deferred revenue
30,567
50,362
Accrued liabilities
106,027
127,400
Income tax payable
431
4,489
Total current liabilities
211,752
293,901
Non-current deferred revenue
7,963
15,736
Non-current operating lease liabilities
26,024
29,001
Non-current income taxes payable
92
92
Other non-current liabilities
1,261
606
Total liabilities
247,092
339,336
Commitments and contingencies (Note 10)
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: 79,026,508 at September 27, 2020 and 75,785,952 at December 31, 2019
79
76
Additional paid-in capital
359,297
334,821
Accumulated other comprehensive income
(9)
(2)
Accumulated deficit
(217,560)
(131,519)
Total stockholders’ equity
141,807
203,376
Total liabilities and stockholders’ equity
$
388,899
$
542,712
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The Company and Basis of Presentation
The Company
Arlo Technologies, Inc ("the Company") combines an intelligent cloud infrastructure and mobile app with a variety of smart connected devices that transform the way people experience the connected lifestyle. The Company'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. The Company conducts business across three geographic regions - Americas; Europe, Middle-East and Africa (“EMEA”); and Asia Pacific (“APAC”) and primarily generates revenue by selling devices through retail channels, wholesale distribution, wireless carrier channels, security channels, Arlo online store and paid subscription services.
The Company has dual corporate headquarters located in San Jose, California and Carlsbad, California and also maintains offices to provide sales and customer support at various global locations.
Basis of Presentation
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All periods presented have been accounted for in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”).
These unaudited condensed consolidated financial statements should be read in conjunction with the notes to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. 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.
Reclassification
Certain reclassifications have been made to the prior year’s condensed consolidated statements of cash flows to conform to the current year’s presentation. The reclassifications had no effect on the net cash used (provided by) in operating activities, investing activities or financing activities on the prior year’s statement of cash flows.
Fiscal periods
The Company’s fiscal year begins on January 1 of the year stated and ends on December 31 of the same year. The Company reports its results on a fiscal quarter basis rather than on a calendar quarter basis. 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.
Use of estimates
The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. 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 nine months ended September 27,
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or any future period.
Note 2. Significant Accounting Policies and Recent Accounting Pronouncements
The Company’s significant accounting policies are disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. There have been no significant changes during the nine months ended September 27, 2020, other than the accounting policies discussed below and the recent accounting pronouncements adopted and discussed below under Accounting Pronouncements Recently Adopted.
Trade accounts receivable
The Company is exposed to credit losses primarily through sales of products and services. The Company's allowance for current estimated credit losses for trade accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables. Due to the short-term nature of such receivables, the estimated amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default.
The Company’s monitoring activities include timely and regular account reconciliations, dispute resolution, payment confirmation, review of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. The Company considered the current and expected future economic and market conditions surrounding the novel coronavirus ("COVID-19") pandemic and determined that the estimate of credit losses was not significantly impacted. Although the Company has historically not experienced significant credit losses, it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of trade receivables.
Recent accounting pronouncements
Emerging Growth Company Status
As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies, unless the Company otherwise irrevocably elects not to avail itself of this exemption. The Company did not make such an irrevocable election and has not delayed the adoption of any applicable accounting standards.
Accounting Pronouncements Recently Adopted
ASU 2016-13 - Measurement of Credit Losses on Financial Instruments
In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments” (Topic 326), which replaces the incurred-loss impairment methodology and requires immediate recognition of estimated credit losses expected to occur for most financial assets, including trade receivables. Credit losses on available-for-sale debt securities with unrealized losses will be recognized as allowances for credit losses, limited to the amount by which fair value is below amortized cost. The Company adopted Topic 326 on January 1, 2020, using a modified retrospective transition method, which requires a cumulative-effect adjustment, if any, to the opening balance of retained earnings to be recognized on the date of adoption with prior periods not restated. The cumulative-effect adjustment recorded on January 1, 2020 is immaterial.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" ("ASU 2019-12"), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for the Company beginning January 1, 2022 (or January 1, 2021 should the Company cease to be classified as an EGC), with early adoption permitted. The Company early adopted ASU 2019-12 in the first quarter of 2020. The impact of the adoption of ASU 2019-12 on the Company's financial statements is immaterial.
Accounting Pronouncements Not Yet Effective
In March 2020, the FASB issued ASU 2020-04, "Facilitation of the Effects of Reference Rate Reform on Financial Reporting". The accounting standards update is intended to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. This guidance may be applied prospectively through December 31, 2022. The Company is currently evaluating the impact this guidance may have on its financial statements and related disclosures.
With the exception of the new standards discussed above, there have been no other new accounting pronouncements that have significance, or potential significance, to the Company’s financial position, results of operations, or cash flows.
Note 3. Deferred Revenue
Deferred Revenue
Deferred revenue consists of advance payments and deferred revenue, where the Company has unsatisfied performance obligations. Deferred revenue consists of prepaid services and customer billings in advance of revenues being recognized from the Company's subscription contracts. Advance payments include prepayments for products and Non-Recurring Engineering ("NRE") services under the Supply Agreement with Verisure S.à.r.l. (“Verisure”). Refer to Note 4, Disposal of Business, for a complete discussion of Verisure transaction.
Transaction Price Allocated to the Remaining Performance Obligations
Remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and partially unsatisfied performance obligations consist of contract liabilities, in-transit orders with destination terms, and non-cancellable backlog. Non-cancellable backlog includes goods and services for which customer purchase orders have been accepted and that are scheduled or in the process of being scheduled for shipment.
The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 27, 2020:
1 year
2 years
Greater than 2 years
Total
(In thousands)
Performance obligations
$
50,987
$
6,766
$
1,517
$
59,270
The performance obligation classified as greater than one year pertains to revenue deferral from prepaid services.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 27, 2020 and September 29, 2019, $33.5 million and $32.6 million of revenue was deferred due to unsatisfied performance obligations, primarily relating to over time service revenue, and $46.9 million and $34.6 million of revenue was recognized for the satisfaction of performance obligations over time, respectively. $21.2 million and $22.1 million of this recognized revenue 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.
Disaggregation of Revenue
The Company conducts business across three geographic regions: Americas, EMEA, and APAC. Sales and usage-based taxes are excluded from revenue. Refer to Note 14, Segment and Geographic Information, for revenue by geography.
Note 4. Disposal of Business
On November 4, 2019, the Company and Verisure concurrently entered into an Asset Purchase Agreement (the “Purchase Agreement”) and Supply Agreement (the “Supply Agreement” and together with the Purchase Agreement, the “Verisure Agreements”). The Verisure Agreements created a strategic partnership that leverages both the Company and Verisure’s capabilities to create incremental scale to address the ever-growing demand for residential and commercial security. The strategic partnership combines the Company’s innovative connected cameras and cloud services platform with Verisure’s professionally monitored security solutions to provide a new level of smart security for European customers. The Purchase Agreement provided that, upon the terms and subject to the conditions set forth in the Purchase Agreement, the Company transferred, sold and assigned to Verisure certain assets (the "Assets") related to the Company’s commercial operations in Europe (the "Business") to Verisure for $50.0 million in cash plus additional cash for certain inventory. The Purchase Agreement contained customary representations and warranties regarding Verisure, the Business and the Assets, indemnification provisions, termination rights and other customary provisions. Further, the Company has agreed not to engage in any business that competes with the Business for a period of three years.
The transaction closed on December 30, 2019 pursuant to which the Company received $52.7 million including working capital adjustments, which resulted in a pretax gain of $54.9 million in the fourth fiscal quarter of 2019. In the first fiscal quarter of 2020, the Company recorded an additional gain of $292 thousand that was recorded in Gain on sale of business in the Company's unaudited condensed consolidated statements of operations as a result of the final working capital adjustment.
The assets and liabilities sold and assigned to Verisure were determined to have met the criteria to be classified as held for sale as of November 4, 2019, the execution date of the Purchase Agreement. The transaction contemplated by the Purchase Agreement did not meet the criteria for discontinued operations as the Company is expected to have continued involvement in Europe through manufacturing and shipping of products to the region through sales to Verisure as part of the Supply Agreement and therefore no significant change in revenue from the region is expected; it was determined the transaction did not represent a strategic shift. The Company also assessed whether a loss needed to be recorded upon initial classification of the assets and liabilities as held for sale to adjust its carrying amount to the fair value less cost to sell. As the carrying amount of the assets and liabilities was lower than fair value less cost to sell, no adjustment was necessary. As of the closing date of December 30, 2019, the Company concluded that no impairment existed for the assets and no adjustment was necessary for the liabilities. Further, the Company reassessed the fair value and cost to sell, and noted that they had not changed since the initial classification of the assets and liabilities as held for sale. Given such, no loss adjustment was necessary.
The Supply Agreement provides that Verisure is the exclusive distributor of the Company's products in Europe for all channels, and will non-exclusively distribute the Company's products through its direct channels globally for an initial term of five years. During the five-year period commencing January 1, 2020, Verisure has an aggregate minimum
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
purchase commitment of $500.0 million, which includes annual minimum commitments. On December 30, 2019, Verisure prepaid the Company $20.0 million for product purchases in fiscal 2020 and will prepay $40.0 million on the first anniversary of the closing of the Purchase Agreement for product purchases in fiscal 2021.
The Supply Agreement also includes certain NRE services to be delivered to Verisure, including developing certain custom products specified by Verisure in exchange for an aggregate of $10.0 million, payable in installments upon meeting certain development milestones. In the second fiscal quarter of 2020, an additional $3.5 million was added to the contract price as a result of a modification to Verisure's specification for the Outdoor Custom Camera. As of September 27, 2020, Verisure has paid $5.0 million for this NRE service. For the three and nine months ended September 27, 2020, the Company recognized service revenue of $2.3 million and $5.5 million, respectively, for this NRE service.
As part of the Purchase Agreement, the Company also entered into a Transition Services Agreement with Verisure (“Verisure TSA”) to assist Verisure with the transition of the Company’s European commercial operations. These transition services primarily include IT support for 12 months, and other services for three to six months, including sales and marketing, operations and supply chain, finance, legal, and human resources which may be extended as mutually agreed upon by the parties. As compensation for these transition services, the Company will be reimbursed by Verisure based on actual direct costs plus allocation of overhead. For the three and nine months ended September 27, 2020, the Company charged Verisure $0.9 million and $3.0 million, respectively, for Verisure TSA services which were recorded as Other income, given such services are not related to the primary business in which the Company operates. The related Verisure TSA expenses in the same amount were recognized as incurred and reported under their natural expense classification.
Note 5. Balance Sheet Components
Cash and Cash Equivalents and Restricted cash
The Company maintains certain cash balances restricted as to withdrawal or use. The restricted cash is comprised primarily of cash used as a collateral for a letter of credit associated with the Company’s lease agreement for its headquarters in San Jose, California. The Company deposits restricted cash with high credit quality financial institutions. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the balance sheets that sum to the total of the same amounts shown on the statements of cash flows:
As of
September 27, 2020
December 31, 2019
(In thousands)
Cash and cash equivalents
$
173,619
$
236,680
Restricted cash
4,147
4,139
Total as presented on the unaudited condensed consolidated statements of cash flows
$
177,766
$
240,819
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
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Available-for-sale short-term investments
As of September 27, 2020
As of December 31, 2019
Cost
Unrealized Gains
Unrealized Losses
Estimated Fair Value
Cost
Unrealized Gains
Unrealized Losses
Estimated Fair Value
(In thousands)
U.S. treasuries
$
19,992
$
—
$
—
$
19,992
$
19,967
$
23
$
—
$
19,990
The Company’s short-term investments are classified as available-for-sale and consist of government securities with an original maturity or remaining maturity at the time of purchase of greater than three months and no more than 12 months. Accordingly, none of the available-for-sale securities have unrealized losses greater than 12 months. The Company did not recognize any allowance for credit losses related to available for sale short-term investment for the three and nine months ended September 27, 2020.
Accounts receivable, net
As of
September 27, 2020
December 31, 2019
(In thousands)
Gross accounts receivable
$
56,940
$
127,926
Allowance for credit losses
(509)
(609)
Total accounts receivable, net
$
56,431
$
127,317
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
Nine Months Ended
September 27, 2020
September 27, 2020
(In thousands)
Balance at the beginning of the period
$
810
$
609
Provision for (recovery of) expected credit losses
(301)
(100)
Amounts written off charged against the allowance
—
—
Balance at the end of the period
$
509
$
509
Inventories
Inventories consist of finished goods which are valued at the lower of cost or net realizable value, with cost being determined using the first-in, first-out method as of September 27, 2020.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Property and equipment, net
The components of property and equipment are as follows:
As of
September 27, 2020
December 31, 2019
(In thousands)
Machinery and equipment
$
14,699
$
13,402
Software
12,657
11,945
Computer equipment
4,094
4,047
Furniture and fixtures
4,045
4,075
Leasehold improvements
8,023
8,087
Total property and equipment, gross
43,518
41,556
Accumulated depreciation and amortization
(26,686)
(20,204)
Total property and equipment, net
$
16,832
$
21,352
Depreciation and amortization expense pertaining to property and equipment was $2.2 million and $7.0 million for the three and nine months ended September 27, 2020, respectively, and $2.4 million and $6.6 million for the three and nine months ended September 29, 2019, respectively.
Intangibles, net
As of September 27, 2020
As of December 31, 2019
Gross
Accumulated Amortization
Net
Gross
Accumulated Amortization
Net
(In thousands)
Technology
$
9,800
$
(9,571)
$
229
$
9,800
$
(8,540)
$
1,260
Other
500
(491)
9
500
(454)
46
Total intangibles, net
$
10,300
$
(10,062)
$
238
$
10,300
$
(8,994)
$
1,306
As of September 27, 2020, the remaining weighted-average estimated useful life of intangibles was 0.2 years. Amortization of intangibles was $0.4 million and $1.1 million for the three and nine months ended September 27, 2020, respectively, and $0.4 million and $1.2 million for the three and nine months ended September 29, 2019, respectively. There was no impairment recorded for the three and nine months ended September 27, 2020 and September 29, 2019.
As of September 27, 2020, estimated amortization expense related to finite-lived intangibles for the remaining year was $0.2 million.
Goodwill
There was no change in the carrying amount of goodwill during the nine months ended September 27, 2020 and the goodwill as of December 31, 2019 and September 27, 2020 was $11.0 million.
Goodwill Impairment
The Company performs an annual assessment of goodwill at the reporting unit level on the first day of the fourth fiscal quarter and during interim periods if there are triggering events to reassess goodwill. The Company operates as one operating and reportable segment.
In the first fiscal quarter 2020, the uncertainty brought about by the COVID-19 pandemic adversely impacted the Company's stock price. The resulting impact to the Company’s market capitalization is a qualitative factor to consider when evaluating whether events or changes in circumstances indicate that it is more likely than not that a
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
potential goodwill impairment exists. The Company concluded that the decline in the price of its common stock as a result of the COVID-19 impact was an indicator that the Company’s goodwill might be impaired. As a result, in the first fiscal quarter of 2020, the Company performed a quantitative assessment using the discounted cash flow model ("DCF model") as of March 29, 2020. The Company estimated the fair value of the business using the DCF model, as management believes forecasted operating cash flows are the best indicator of current fair value. The assumptions used in the DCF model include weighted-average cost of capital, projected revenue based on projected revenue growth rate, projected operating expenses, income taxes as well as capital expenditures and change in working capital. Estimating the fair value of the business was a subjective process involving the use of estimates and judgments, particularly related to future cash flows, which are inherently uncertain. Based on the results of the quantitative assessment using the DCF model, as of March 29, 2020, the respective fair value was substantially in excess of the carrying amount by $94.1 million, or