10-Q 1 arlo-20221002.htm 10-Q arlo-20221002
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 (Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 2022
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) 
Delaware38-4061754
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
2200 Faraday Ave., Suite #150
Carlsbad,California92008
(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 shareARLONew 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.    Yes  x   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).     Yes  x    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 definition 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    No  x

The number of outstanding shares of the registrant’s Common Stock, $0.001 par value, was 88,471,856 as of November 4, 2022.

1

ARLO TECHNOLOGIES, INC.

TABLE OF CONTENTS
 
2

PART I: FINANCIAL INFORMATION

Item 1.Financial Statements

ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
As of
October 2,
2022
December 31,
2021
(In thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents$80,773 $175,749 
Short-term investments44,499  
Accounts receivable, net82,707 79,564 
Inventories73,243 38,390 
Prepaid expenses and other current assets9,871 9,919 
Total current assets291,093 303,622 
Property and equipment, net6,588 9,595 
Operating lease right-of-use assets, net14,161 14,814 
Goodwill11,038 11,038 
Restricted cash4,128 4,107 
Other non-current assets4,208 4,314 
Total assets$331,216 $347,490 
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable$107,103 $84,098 
Deferred revenue11,893 29,442 
Accrued liabilities92,117 97,389 
Total current liabilities211,113 210,929 
Non-current operating lease liabilities20,239 21,470 
Other non-current liabilities2,543 2,439 
Total liabilities233,895 234,838 
Commitments and contingencies (Note 7)
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: 88,410,113 at October 2, 2022 and 84,453,212 at December 31, 2021
88 84 
Additional paid-in capital420,727 401,367 
Accumulated other comprehensive income (loss)(224) 
Accumulated deficit(323,270)(288,799)
Total stockholders’ equity97,321 112,652 
Total liabilities and stockholders’ equity$331,216 $347,490 




The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3

ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
 Three Months EndedNine Months Ended
October 2,
2022
October 3,
2021
October 2,
2022
October 3,
2021
(In thousands, except per share data)
Revenue:
Products$92,720 $84,152 $273,736 $217,224 
Services35,437 26,997 98,151 75,052 
Total revenue128,157 111,149 371,887 292,276 
Cost of revenue:
Products79,386 75,682 233,992 184,858 
Services12,021 11,124 33,830 31,099 
Total cost of revenue91,407 86,806 267,822 215,957 
Gross profit36,750 24,343 104,065 76,319 
Operating expenses:
Research and development16,471 14,377 50,252 45,419 
Sales and marketing22,193 12,779 49,867 36,445 
General and administrative12,253 12,119 38,023 36,905 
Impairment charges   9,116 
Separation expense273 683 377 1,342 
Total operating expenses51,190 39,958 138,519 129,227 
Loss from operations(14,440)(15,615)(34,454)(52,908)
Interest income (expense), net290 (1)414 26 
Other income, net19 599 314 4,170 
Loss before income taxes(14,131)(15,017)(33,726)(48,712)
Provision for income taxes304 181 745 525 
Net loss$(14,435)$(15,198)$(34,471)$(49,237)
Net loss per share:
Basic$(0.16)$(0.18)$(0.40)$(0.60)
Diluted$(0.16)$(0.18)$(0.40)$(0.60)
Weighted average shares used to compute net loss per share:
Basic88,124 83,809 86,677 82,191 
Diluted88,124 83,809 86,677 82,191 
Comprehensive loss:
Net loss$(14,435)$(15,198)$(34,471)$(49,237)
Other comprehensive income (loss), net of tax(56)11 (224)8 
Total comprehensive loss$(14,491)$(15,187)$(34,695)$(49,229)


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 Three Months EndedNine Months Ended
October 2,
2022
October 3,
2021
October 2,
2022
October 3,
2021
(In thousands)
Total stockholders' equity, beginning balances$102,401 $114,785 $112,652 $133,767 
Common stock:
Beginning balances$88 $83 $84 $79 
Issuance of common stock under stock-based compensation plans1 2 6 8 
Restricted stock unit withholdings(1)(1)(2)(3)
Ending balances$88 $84 $88 $84 
Additional paid-in capital:
Beginning balances$411,316 $381,511 $401,367 $366,455 
Stock-based compensation expense9,953 6,688 25,228 18,134 
Settlement of liability classified RSUs3,669 8,525 8,731 15,087 
Issuance of common stock under stock-based compensation plans  1,419 4,433 
Issuance of common stock under Employee Stock Purchase Plan 1,265 1,746 2,962 
Restricted stock unit withholdings(4,211)(3,853)(17,764)(12,935)
Ending balances$420,727 $394,136 $420,727 $394,136 
Accumulated deficit:
Beginning balances$(308,835)$(266,809)$(288,799)$(232,770)
Net loss(14,435)(15,198)(34,471)(49,237)
Ending balances$(323,270)$(282,007)$(323,270)$(282,007)
Accumulated other comprehensive income (loss):
Beginning balances$(168)$ $ $3 
Other comprehensive income (loss), net of tax(56)11 (224)8 
Ending balances$(224)$11 $(224)$11 
Total stockholders' equity, ending balances$97,321 $112,224 $97,321 $112,224 
Common stock shares:
Beginning balances87,530 82,917 84,453 79,336 
Issuance of common stock under stock-based compensation plans1,464 1,723 5,885 6,321 
Issuance of common stock under Employee Stock Purchase Plan 249 304 602 
Restricted stock unit withholdings(584)(622)(2,232)(1,992)
Ending balances88,410 84,267 88,410 84,267 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

ARLO TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months Ended
October 2,
2022
October 3,
2021
(In thousands)
Cash flows from operating activities:
Net loss$(34,471)$(49,237)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense31,787 27,548 
Impairment charges 9,116 
Depreciation and amortization3,653 4,546 
Allowance for credit losses and inventory reserves(211)(2,530)
Deferred income taxes259 (284)
Others39 54 
Changes in assets and liabilities:
Accounts receivable, net (3,171)7,712 
Inventories(34,613)27,274 
Prepaid expenses and other assets (105)(5,166)
Accounts payable 23,229 (27)
Deferred revenue(18,544)(28,019)
Accrued and other liabilities(2,635)(23,643)
Net cash used in operating activities(34,783)(32,656)
Cash flows from investing activities:
Purchases of property and equipment (815)(1,938)
Purchases of short-term investments(69,305) 
Proceeds from maturities of short-term investments24,542 20,000 
Net cash provided by (used in) investing activities(45,578)18,062 
Cash flows from financing activities:
Proceeds related to employee benefit plans3,172 7,403 
Restricted stock unit withholdings(17,766)(12,938)
Net cash used in financing activities(14,594)(5,535)
Net decrease in cash and cash equivalents and restricted cash
(94,955)(20,129)
Cash and cash equivalents and restricted cash, at beginning of period
179,856 190,291 
Cash and cash equivalents and restricted cash, at end of period
$84,901 $170,162 
Non-cash investing activities:
Purchases of property and equipment included in accounts payable and accrued liabilities$209 $423 







The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6


ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 1.    The Company and Basis of Presentation

The Company

Arlo Technologies, Inc. ("Arlo" or 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 deep expertise in product design, wireless connectivity, cloud infrastructure and cutting-edge AI capabilities focuses on delivering a seamless, smart home experience for Arlo users that is easy to setup and interact with every day. 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—(i) the Americas; (ii) Europe, Middle-East and Africa (“EMEA”); and (iii) Asia Pacific (“APAC”)—and primarily generates revenue by selling devices through retail channels, wholesale distribution, wireless carrier channels, security solution providers, and Arlo's direct to consumer store and paid subscription services.

The Company's corporate headquarters is located in Carlsbad, California with other satellite offices across North America and various other 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, 2021. 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.

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.

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.

7



ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 October 2, 2022 and are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or any future period.

Note 2.    Significant Accounting Policies and Recent Accounting Pronouncements

The Company’s significant accounting policies are disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021. There have been no significant changes during the nine months ended October 2, 2022.

Recent accounting pronouncements

Emerging Growth Company Status

As an emerging growth company (“EGC”), the Company may, under the Jumpstart Our Business Startups Act, 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

In 2022, the Company adopted Accounting Standards Update ("ASU") 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU 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"). The adoption of this guidance did not have a material impact on the Company's financial statements and related disclosures.

Accounting Pronouncements Not Yet Effective

The Company has considered all recent accounting pronouncements issued, but not yet effective, and does not expect any to have a material effect on its financial statements and related disclosures.


Note 3.    Deferred Revenue

Deferred Revenue

Deferred revenue consists of advance payments and customer billings in advance of revenue recognition from subscription contracts where the Company has unsatisfied performance obligations. Advance payments include prepayments for Non-Recurring Engineering ("NRE") services under the Supply Agreement with Verisure S.à.r.l. (“Verisure”).

8



ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 October 2, 2022:
1 year2 yearsGreater than 2 yearsTotal
(In thousands)
Performance obligations$18,957 $331 $19 $19,307 

The performance obligation classified as greater than one year pertains to revenue deferral from prepaid services.

For the nine months ended October 2, 2022 and October 3, 2021, $82.5 million and $64.2 million of revenue was deferred due to unsatisfied performance obligations, primarily relating to over time service revenue, and $101.2 million and $70.3 million of revenue was recognized for the satisfaction of performance obligations over time, respectively. Approximately $13.6 million and $19.9 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: the Americas, EMEA, and APAC. Sales and usage-based taxes are excluded from revenue. Refer to Note 11, Segment and Geographic Information, for revenue by geography.

Note 4.    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 collateral for a letter of credit associated with the Company’s lease agreement 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
October 2,
2022
December 31,
2021
(In thousands)
Cash and cash equivalents$80,773 $175,749 
Restricted cash4,128 4,107 
Total as presented on the unaudited condensed consolidated statements of cash flows$84,901 $179,856 
9



ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of
October 3,
2021
December 31,
2020
(In thousands)
Cash and cash equivalents$166,057 $186,127 
Restricted cash4,105 4,164 
Total as presented on the unaudited condensed consolidated statements of cash flows$170,162 $190,291 

Available-for-sale short-term investments

As of October 2, 2022As of December 31, 2021
 CostUnrealized GainsUnrealized LossesEstimated Fair ValueCostUnrealized GainsUnrealized LossesEstimated Fair Value
(In thousands)
U.S. treasuries$44,765 $ $(266)$44,499 $ $ $ $ 

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 twelve months. Accordingly, none of the available-for-sale securities have unrealized losses greater than twelve months. The Company did not recognize any allowance for credit losses related to available for sale short-term investments for the three months ended October 2, 2022.

Accounts receivable, net
As of
October 2,
2022
December 31,
2021
(In thousands)
Gross accounts receivable$83,071 $79,901 
Allowance for credit losses(364)(337)
Total accounts receivable, net$82,707 $79,564 

    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 EndedNine Months Ended
October 2,
2022
October 3,
2021
October 2,
2022
October 3,
2021
(In thousands)
Balance at the beginning of the period$405 $536 $337 $519 
Provision for (release of) expected credit losses(41)(210)27 (193)
Balance at the end of the period$364 $326 $364 $326 

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 October 2, 2022.

10



ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Property and equipment, net

The components of property and equipment are as follows:
As of
October 2,
2022
December 31,
2021
(In thousands)
Machinery and equipment$12,537 $13,302 
Software13,765 13,928 
Computer equipment4,093 4,062 
Furniture and fixtures2,567 2,404 
Leasehold improvements
5,030 4,922 
Total property and equipment, gross37,992 38,618 
Accumulated depreciation and amortization(31,404)(29,023)
Total property and equipment, net (1)
$6,588 $9,595 
_________________________
(1)    $1.8 million and $2.4 million property and equipment, net, respectively, was included in the sublease arrangement for the San Jose office building as of October 2, 2022 and December 31, 2021.

Depreciation and amortization expense pertaining to property and equipment was $1.1 million and $3.7 million for the three and nine months ended October 2, 2022, respectively, and $1.4 million and $4.5 million for the three and nine months ended October 3, 2021, respectively.

Long-lived Assets and Right-of-use Assets Impairment

During the second quarter of 2021, the Company evaluated its real estate lease portfolio in light of the COVID-19 pandemic and the changing nature of office space use by its workforce. This evaluation included the decision to sublease its office space in San Jose, California. This change in the circumstances for the San Jose office space use led management to test the recoverability of the carrying amount of the asset group related to the sublease. At May 25, 2021, the carrying amount of the asset group exceeds the Company's anticipated undiscounted value of the sublease income over the sublease term. Accordingly, the Company reviewed certain of its right-of-use assets and other lease related assets including leasehold improvements, furniture, fixtures and equipment under the sublease asset group for impairment in accordance with Accounting Standards Codification ("ASC") 360 "Property, Plant, and Equipment".

As a result of the evaluation, the Company recorded an impairment charge of $9.1 million, which includes $6.8 million associated with the right-of-use assets and $2.3 million associated with other lease related property and equipment assets, during the second quarter of 2021.The assets indicated as impaired were written down to fair value as calculated using a discounted cash flow method (income approach). The fair value of the asset group was determined by utilizing projected cash flows from the sublease, discounted by a risk-adjusted discount rate that reflects the level of risk associated with receiving future cash flows. The inputs utilized in the analyses were classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement". Refer to Note 5, Fair Value Measurements for additional information about the fair value measured on a non-recurring basis and Note 7, Commitments and Contingencies, for further information about the sublease.

Goodwill

There was no change in the carrying amount of goodwill during the nine months ended October 2, 2022. The goodwill as of October 2, 2022 and December 31, 2021 was $11.0 million.

11



ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.

The Company determined that no events occurred or circumstances changed during the nine months ended October 2, 2022 that would more likely than not reduce the fair value of the Company below its carrying amount. If there is a significant decline in the Company’s stock price based on market conditions and deterioration of the business, the Company may have to record a charge to its earnings for the goodwill impairment of up to $11.0 million.

Other non-current assets
As of
October 2,
2022
December 31,
2021
(In thousands)
Net deferred tax assets$1,306 $1,565 
Sublease793 1,471 
Other2,109 1,278 
Total other non-current assets$4,208 $4,314 

Accrued liabilities
As of
October 2,
2022
December 31,
2021
(In thousands)
Sales and marketing$35,988 $31,417 
Sales returns
15,678 19,960 
Accrued employee compensation12,111 12,367 
Current operating lease liabilities 4,507 4,609 
Freight2,332 8,086 
Warranty obligation 1,121 1,330 
Other20,380 19,620 
Total accrued liabilities$92,117 $97,389 

12



ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 5.    Fair Value Measurements

Fair Value Measurements - Recurring Basis

The following table summarizes assets measured at fair value on a recurring basis:
As of
October 2,
2022
December 31,
2021
(In thousands)
Cash equivalents: money-market funds (<90 days)
$7,405 $21,935 
Cash equivalents: U.S. treasuries (<90 days)
20,113  
Available-for-sale securities: U.S. treasuries (1)
44,499  
Total$72,017 $21,935 
_________________________
(1)Included in short-term investments on the Company’s unaudited condensed consolidated balance sheets.

The Company’s 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 October 2, 2022 and December 31, 2021, 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.

Fair Value Measurements - Nonrecurring Basis

The Company measures the fair value of certain assets on a nonrecurring basis when events or changes in circumstances indicate that the carrying amount the asset may not be recoverable. For the three and nine months ended October 2, 2022, the Company had no assets or liabilities measured on a nonrecurring basis.

During the second quarter of 2021, in connection with the long-lived assets impairment analysis, certain lease related property and equipment assets and right-of-use assets were measured and written down to fair value on a nonrecurring basis as a result of impairment. The fair value measurements were determined using a discounted cash flow method with unobservable inputs and were classified within Level 3 of the fair value hierarchy. The fair value of the asset group was calculated by utilizing projected cash flows from the sublease, discounted by a market derived discount rate at 8.0%. Refer to Note 4, Balance Sheet Components, for further information about the impairment of the right-of-use assets and long-lived assets.

Note 6.    Revolving Credit Facility

On October 27, 2021, the Company entered into a Loan and Security Agreement (the “Credit Agreement”) with Bank of America, N.A., a national banking association, as lender (the “Lender”).

The Credit Agreement provides for a three-year revolving credit facility (the “Credit Facility”) that matures on October 27, 2024. Borrowings under the Credit Facility are limited to the lesser of (x) $40.0 million, and (y) an amount equal to the borrowing base. The borrowing base will be the sum of (i) 90% of investment grade eligible receivables and (ii) 85% of non-investment grade eligible accounts, less applicable reserves established by the Lender. The Credit Agreement also includes a $5.0 million sublimit for the issuance by the Lender of letters of credit. In addition, the Credit Agreement includes an uncommitted accordion feature that allows the Company to request, from time to time, that the Lender increase the aggregate revolving loan commitments by up to an additional $25.0 million in the aggregate, subject to the satisfaction of certain conditions, including obtaining the Lender’s agreement to participate in each increase. The proceeds of the borrowings under the Credit Facility may be used for working capital and general corporate purposes.

13



ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The obligations of the Company under the Credit Agreement are secured by substantially all of its domestic working capital assets, including accounts receivable, cash and cash equivalents, inventory, and other assets to the extent related to such working capital assets.

At the Company’s option, borrowings under the Credit Agreement will bear interest at a floating rate equal to: (i) the Bloomberg Short-Term Bank Yield Index rate plus the applicable rate of 2.0% to 2.5% determined based on the average daily availability for the prior fiscal quarter, or (ii) the base rate plus the applicable rate of 1.0% to 1.5% based on the average daily availability for the prior fiscal quarter. Among other fees, the Company is required to pay a monthly unused fee of 0.2% per annum on the amount by which the Lender’s aggregate commitment under the Credit Facility exceeds the average daily revolver usage during such month.

The Credit Agreement contains events of default, representations and warranties, and affirmative and negative covenants customary for credit facilities of this type. The Credit Agreement also contains financial covenants that require the Company to (a) until the Company achieves a fixed charge coverage ratio of at least 1.00 to 1.00 for two consecutive quarters, maintain minimum liquidity of not less than $20.0 million at all times and (b) thereafter, 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 October 2, 2022, the Company is 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 the Company files a bankruptcy petition, a bankruptcy petition is filed against the Company and is not dismissed or stayed within thirty days, or the Company makes 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 October 2, 2022.

Note 7.     Commitments and Contingencies

Operating Leases

The Company primarily leases office space, with various expiration dates through June 2029. Some of the leases include options to extend such leases for up to five years, and some include options to terminate such leases within one year. The terms of certain leases provide for rental payments on a graduated scale. The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, accrued liabilities, and non-current operating lease liabilities in the unaudited condensed consolidated balance sheets. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense for fixed lease payments are recognized in the unaudited condensed consolidated statements of operations on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred. Gross lease expense was $1.8 million and $1.7 million for the three months ended October 2, 2022 and October 3, 2021, respectively, and $5.4 million and $5.3 million for the nine months ended October 2, 2022 and October 3, 2021, respectively. The lease expense was recorded within Cost of revenue, Research and development, Sales and marketing, and General and administrative expense in the unaudited condensed consolidated statements of operations. Short-term leases and variable lease costs were included in the lease expense and they were immaterial. The Company recorded sublease income as reduction of lease expense, in the amount of $0.5 million and $1.5 million for the three and nine months ended October 2, 2022.

14



ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Supplemental cash flow information related to operating leases for the nine months ended October 2, 2022 and October 3, 2021 was as follows:
October 2, 2022October 3, 2021
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities
    Operating cash flows from operating leases$5,208 $4,939 
Right-of-use assets obtained in exchange for lease liabilities
    Operating leases$2,670 $1,429 

Weighted average remaining lease term and weighted average discount rate related to operating leases were as follows:
As of
October 2, 2022December 31, 2021
Weighted average remaining lease term5.1 years6.1 years
Weighted average discount rate5.71 %5.77 %

The Company's future minimum undiscounted lease payments under operating leases and future non-cancelable rent payments from its subtenants for each of the next five years and thereafter as of October 2, 2022 were as follows:

Operating Lease PaymentsSublease PaymentsNet
(In thousands)
2022 (Remaining three months)$1,166 $(502)$664 
20236,050 (1,891)4,159 
20245,433 (1,947)3,486 
20253,753 (2,006)1,747 
20263,872 (2,066)1,806 
Thereafter8,794 (5,942)2,852 
Total future lease payments29,068 $(14,354)$14,714 
Less: interest(4,322)
Present value of future minimum lease payments$24,746 
Accrued liabilities$4,507 
Non-current operating lease liabilities20,239 
Total lease liabilities$24,746 


Letters of Credit

In connection with the lease agreement for the office space located in San Jose, California, the Company executed a letter of credit with the landlord as the beneficiary. As of October 2, 2022, the Company had approximately $3.6 million of unused letters of credit outstanding, of which $3.1 million pertains to the lease arrangement in San Jose, California.

15



ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Purchase Obligations

The Company has entered into various inventory-related purchase agreements with suppliers. Generally, under these agreements, 50% of orders are cancelable by giving notice 46 to 60 days prior to the expected shipment date and 25% of orders are cancelable by giving notice 31 to 45 days prior to the expected shipment date. Orders are non-cancelable within 30 days prior to the expected shipment date. As of October 2, 2022, the Company had approximately $42.5 million in non-cancelable purchase commitments with suppliers.

As of October 2, 2022, a further $37.7 million of purchase orders beyond contractual termination periods have been issued to supply chain partners in anticipation of demand requirements. Consequently, the Company may incur expenses for materials and components, such as chipsets purchased by the supplier to fulfill the purchase order if the purchase order is cancelled. Expenses incurred in respect of cancelled purchase orders has historically not been significant relative to the original order value.

Warranty Obligations

Changes in the Company’s warranty liability, which is included in Accrued liabilities in the unaudited condensed consolidated balance sheets, were as follows:

 Three Months EndedNine Months Ended
 October 2,
2022
October 3,
2021
October 2,
2022
October 3,
2021
(In thousands)
Balance at the beginning of the period$1,285 $1,805 $1,330 $2,451 
Provision for (release of) warranty obligation(88)(53)25 (438)
Settlements(76)(107)(234)(368)
Balance at the end of the period$1,121 $1,645 $1,121 $1,645 

Litigation and Other Legal Matters

Securities Class Action Lawsuits and Derivative Suit

The Company is involved in disputes, litigation, and other legal actions, including, but not limited to, the matters described below. In all cases, at each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. In such cases, the Company accrues for the amount or, if a range, the Company accrues the low end of the range, only if there is not a better estimate than any other amount within the range, as a component of legal expense within litigation reserves, net. The Company monitors developments in these legal matters that could affect the estimate the Company had previously accrued. In relation to such matters, the Company currently believes that there are no existing claims or proceedings that are likely to have a material adverse effect on its financial position within the next 12 months, or the outcome of these matters is currently not determinable. There are many uncertainties associated with any litigation, and these actions or other third-party claims against the Company may cause the Company to incur costly litigation and/or substantial settlement charges. In addition, the resolution of any intellectual property litigation may require the Company to make royalty payments, which could have an adverse effect in future periods. If any of those events were to occur, the Company's business, financial condition, results of operations, and cash flows could be adversely affected. The actual liability in any such matters may be materially different from the Company's estimates, which could result in the need to adjust the liability and record additional expenses.

16



ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On March 2, 2022, the Company filed its Form 10-K for the year ended December 31, 2021 which disclosed the status of certain securities class action lawsuits. In summary, on December 11, 2018, purported stockholders of Arlo Technologies, Inc. filed six putative securities class action complaints in the Superior Court of California, County of Santa Clara (the "State Action"), and one complaint in the U.S. District Court for the Northern District of California (the "Federal Action") against the Company and certain of its executives and directors. The plaintiffs in the State Action allege that the Company failed to adequately disclose quality control problems and adverse sales trends ahead of the Company's initial public offering (the "IPO"), violating the Securities Act of 1933, as amended (the "Securities Act"). The complaint seeks unspecified monetary damages and other relief on behalf of investors who purchased Company common stock issued pursuant and/or traceable to the IPO. In the Federal Action, the court appointed a shareholder named Matis Nayman as lead plaintiff. Lead plaintiff alleged violations of the Securities Act and the Securities Exchange Act of 1934, as amended, based on alleged materially false and misleading statements about the Company’s sales trends and products. In the amended complaint, lead plaintiff sought to represent a class of persons who purchased or otherwise acquired the Company’s common stock (i) during the period between August 3, 2018 through December 3, 2018 and/or (ii) pursuant to or traceable to the IPO. Lead plaintiff sought class certification, an award of unspecified damages, an award of costs and expenses, including attorneys’ fees, and other further relief as the court may deem just and proper.

On August 6, 2019, defendants filed a motion to dismiss. The federal court granted that motion, and lead plaintiff filed an amended complaint. On June 12, 2020, lead plaintiff filed an unopposed motion for preliminary approval of a class action settlement for $1.25 million, which was also the amount that the Company had accrued for loss contingency. In October 2020, the Company made a $1.25 million payment to an escrow account administered by the court and plaintiff’s counsel (the “Settlement Fund”). The Settlement Fund was deemed to be in the custody of the court and remained subject to the jurisdiction of the court until such time as the Settlement Fund was distributed pursuant to the settlement agreement and/or further order of the court.

On February 5, 2021, lead plaintiff filed a motion for final approval of the settlement. In advance of the final approval hearing, three of the named plaintiffs in the State Action requested exclusion from the settlement. The court held a final approval hearing on March 11, 2021, and, on March 25, 2021, entered an order and final judgment approving the settlement and, among other things, dismissed with prejudice all claims of lead plaintiff and the Settlement Class (as defined in the settlement agreement). The Federal Action is now closed.

In the State Action, on May 5, 2021, the court held a status conference and instructed plaintiffs Perros, Patel, and Pham (“Plaintiffs”), who were the only Arlo stockholders to opt out of the federal settlement, to file an amended complaint by June 4, 2021. Plaintiffs filed their amended complaint, asserting their individual Securities Act claims, but also purporting to represent a new class of Arlo stockholders who purchased Arlo shares between December 3, 2018 and February 22, 2019. On June 21, 2021, the Arlo defendants filed a motion to dismiss the State Action (for forum non conveniens) based on the federal forum provision in Arlo’s certificate of incorporation. Plaintiffs opposed on July 28, 2021, and the Arlo defendants replied on August 13, 2021. On September 9, 2021, the court issued an order granting the Arlo defendants’ forum non conveniens motion, and on September 17, 2021, the court issued a final judgment dismissing the State Action in its entirety. On November 16, 2021, Plaintiffs filed a Notice of Appeal. The appeal is pending before the California Court of Appeal, Sixth Appellate District. Plaintiffs-Appellants filed their opening brief on May 20, 2022. Defendants-Respondents filed their responding brief on August 18, 2022, and Plaintiffs-Appellants filed their reply brief on September 7, 2022. The court has not yet set a date for oral argument.

Leonard R. Pinto v. Arlo Technologies, Inc., et al.

In addition to the State Action and the Federal Action, a purported stockholder named Leonard Pinto filed a tagalong derivative action on June 13, 2019 in the U.S. District Court for the Northern District of California, captioned Pinto v. Arlo Technologies, Inc. et al., No. 19-CV-03354 (the “Derivative Action”). The Derivative Action is brought on behalf of the Company against the majority of the Company’s current directors. The complaint is based on the same alleged misconduct as the securities class actions but asserts claims for breach of fiduciary duty, waste of corporate
17



ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
assets, and violation of the Securities Exchange Act of 1934, as amended. On August 20, 2019, the court stayed the Derivative Action in deference to the Federal Action. On April 8, 2021, because it had granted final approval of the settlement in the Federal Action, the court lifted the stay in the Derivative Action and asked the parties to file a joint status report by April 22, 2021. In their status report, the parties stipulated to a schedule for plaintiff to file an amended complaint and for the parties to brief a motion to dismiss. Plaintiff filed his amended complaint on May 24, 2021. Defendants moved to dismiss the amended complaint on July 9, 2021. On August 23, 2021, plaintiff filed a second amended complaint. Defendants moved to dismiss the second amended complaint on December 17, 2021. Plaintiff filed his opposition on January 31, 2022, and defendants filed their reply on March 2, 2022. On July 28, 2022, the Court heard defendants’ motion to dismiss. At the hearing, the Court informed the parties that it was inclined to grant defendants’ motion to dismiss for lack of jurisdiction, and the Court’s corresponding written order dismissing the case followed on August 8, 2022.

Skybell Technologies, Inc. v. Arlo Technologies, Inc.

On December 18, 2020, Skybell Technologies, Inc., SB IP Holdings, LLC, and Eyetalk365, LLC (collectively, “Skybell”) filed a Section 337 complaint against the Company, Vivint Smart Home, Inc. and SimpliSafe, Inc. (collectively “Respondents”) at the U.S. International Trade Commission (“ITC”). The action alleges that the Company’s cameras and video doorbell cameras infringe certain patents (the Asserted Patents").

On September 15, 2021, the Administrative Law Judge (“ALJ”) hearing the case at the ITC issued an Initial Determination (“ID”) ruling that all the Asserted Patents are invalid.

Skybell appealed the ID by submitting its Petition for Review to the ITC on September 27, 2021, and the Respondents submitted their Response to the Petition to Review on October 4, 2021. On November 10, 2021, The ITC affirmed the ALJ’s ruling and did not grant any review of the ID, meaning that there is no trial on the ITC docket since there are no valid patents remaining, and the case is concluded at the ITC level. On January 9, 2022, Skybell filed its Notice of Appeal to the Federal Circuit to appeal the ITC’s rulings invalidating the Asserted Patents. On June 23, 2022, Skybell and the Respondents stipulated to the dismissal of the Skybell’s appeal, and on June 27, 2022, the Federal Circuit correspondingly dismissed the appeal. There was no material financial impact to the Company resulting from this litigation matter.

Indemnification Agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to customers, distributors, resellers, vendors, lessors, business partners, and other parties with respect to certain matters including, but not limited to, losses arising from breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and certain of its executive officers that require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. As of October 2, 2022 and December 31, 2021, the Company has not incurred any material costs as a result of such indemnifications and is not currently aware of any indemnification claims.



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ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 8.     Employee Benefit Plans

The Company grants options and restricted stock units ("RSUs") under the 2018 Equity Incentive Plan (the “2018 Plan”), under which awards may be granted to all employees. The Company also grants performance-based and market-based restricted stock units ("PSUs") to its executive officers periodically. Award vesting periods for the 2018 Plan are generally three to four years. As of October 2, 2022, approximately 3.9 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 applicable option agreement and at prices no less than 100% of the fair market value of the Company’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.

During the three months ended October 2, 2022 and October 3, 2021, the Compensation Committee of the Board of Directors (the “Committee”) of the unanimously approved amendments to the 2018 Plan to, among other things, reserve an additional 3,000,000 shares and 1,500,000 shares, respectively, of the Company’s common stock to be used exclusively for grants of awards to individuals who were not previously employees or non-employee directors of the Company (or following a bona fide period of non-employment with the Company), as an inducement material to the individual’s entry into employment with the Company within the meaning of Rule 303A.08 of the New York Stock Exchange (the “NYSE”) Listed Company Manual (“Rule 303A.08”). The 2018 Plan was amended by the Committee without stockholder approval pursuant to Rule 303A.08.

On January 21, 2022, the Company registered an aggregate of up to 4,222,270 shares of common stock on Registration Statement on Form S-8, including 3,377,816 shares issuable pursuant to the Company's 2018 Plan that were automatically added to the shares authorized for issuance under the 2018 Plan on January 1, 2022 pursuant to an “evergreen” provision and 844,454 shares issuable pursuant to the Employee Stock Purchase Plan (the "ESPP") that were automatically added to the shares authorized for issuance on January 1, 2022 pursuant to an “evergreen” provision contained in the ESPP.

The following table sets forth the available shares for grant under the 2018 Plan as of October 2, 2022:

 Number of Shares
(In thousands)
Shares available for grant as of December 31, 2021
2,509 
Additional authorized shares6,378 
Granted(9,573)
Forfeited / cancelled2,395 
Shares traded for taxes2,232 
Shares available for grant as of October 2, 2022
3,941 

Employee Stock Purchase Plan

The Company sponsors the ESPP, pursuant to which eligible employees may contribute up to 15% of compensation, subject to certain income limits, to purchase shares of common stock. The terms of the plan include a look-back feature that enables employees to purchase stock semi-annually at a price equal to 85% of the lesser of the fair market value at the beginning of the offering period or the purchase date. The duration of each offering period is generally six months. As of October 2, 2022, 1,855,548 shares were available for issuance under the ESPP.

Option Activity

Stock option activity during the nine months ended October 2, 2022 was as follows:
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ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Number of sharesWeighted Average Exercise Price Per Share
(In thousands)(In dollars)
Outstanding as of December 31, 2021
2,574 $10.55 
Granted  $ 
Exercised(209)$6.81 
Forfeited / cancelled(3)$16.00 
Expired(231)$15.75 
Outstanding as of October 2, 20222,131 $10.35 
Vested and expected to vest as of October 2, 20222,131 $10.35 
Exercisable Options as of October 2, 20222,131 $10.35 

RSU Activity

RSU activity, excluding PSU activity, during the nine months ended October 2, 2022 was as follows:

 Number of sharesWeighted Average Grant Date Fair Value Per Share
(In thousands)(In dollars)
Outstanding as of December 31, 2021
10,080 $5.73 
Granted6,627 $7.29 
Vested(5,065)$6.34 
Forfeited (1,779)$5.96 
Outstanding as of October 2, 20229,863 $6.43 

PSU Activity

During the three months ended October 2, 2022 and October 3, 2021, the Company's executive officers were 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. The number of units earned and eligible to vest are determined based on the achievement of various performance conditions or market conditions, including the cumulative paid accounts targets, the Company's stock price, cash balances at reporting period, and the recipients' continued service with the Company. At the end of each reporting period, the Company evaluates the probability of achieving these performance conditions and records the related stock-based compensation expense recognized over the expected performance achievement period when the achievement becomes probable.

PSU activity during the nine months ended October 2, 2022 was as follows:

Number of SharesWeighted Average Grant Date Fair Value Per Share
(In thousands)(In dollars)
Outstanding as of December 31, 2021
2,106 $5.39 
Granted 2,952 $6.52 
Vested (612)$4.22 
Forfeited (386)$7.18 
Outstanding as of October 2, 2022
4,060 $6.22 
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ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stock-Based Compensation Expense

The following table sets forth the stock-based compensation expense included in the Company’s unaudited condensed consolidated statements of operations during the periods indicated:

 Three Months EndedNine Months Ended
October 2, 2022October 3, 2021October 2, 2022October 3, 2021
(In thousands)
Cost of revenue$1,365 $787 $3,610 $2,951 
Research and development2,679 2,086 8,602 8,474 
Sales and marketing1,389 1,119 4,559 3,947 
General and administrative4,520 3,607 15,016 12,176 
Total stock-based compensation$9,953 $7,599 $31,787 $27,548 
    
The Company recognizes this compensation expense generally on a straight-line basis over the requisite service period of the award. For PSUs, stock-based compensation expense is recognized over the expected performance achievement period when the achievement becomes probable.

As of October 2, 2022, there was no unrecognized compensation cost related to stock options. Approximately $82.7 million of unrecognized compensation cost related to unvested RSUs and PSUs is expected to be recognized over a weighted-average period of 2.5 years.

Note 9.     Income Taxes

The provision for income taxes for the three and nine months ended October 2, 2022 was $0.3 million and $0.7 million, or an effective tax rate of (2.2)% and (2.2)%, respectively. The provision for income taxes for the three and nine months ended October 3, 2021 was $0.2 million and $0.5 million, or an effective tax rate of (1.2)% and (1.1)%, respectively. During the three and nine months ended October 2, 2022, the Company sustained U.S. book losses. Consistent with the prior year, the Company maintained a valuation allowance against its 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. The Company's provision for income taxes was primarily attributable to income taxes on foreign earnings. The provision for income taxes for the three and nine months ended October 2, 2022 was slightly higher than the same periods in the prior year primarily due to an increase in foreign earnings.

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ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 10.     Net Loss Per Share

Basic net loss per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period. Potentially dilutive common shares, such as common shares issuable upon exercise of stock options and vesting of restricted stock awards are typically reflected in the computation of diluted net loss per share by application of the treasury stock method. For certain periods presented, due to the net losses reported, these potentially dilutive securities were excluded from the computation of diluted net loss per share, since their effect would be anti-dilutive.

Net loss per share for the three and nine months ended October 2, 2022 and October 3, 2021 were as follows:

Three Months EndedNine Months Ended
October 2, 2022October 3, 2021October 2, 2022October 3, 2021
(In thousands, except per share data)
Numerator:
Net loss$(14,435)$(15,198)$(34,471)$(49,237)
Denominator:
Weighted average common shares - basic88,124 83,809 86,677 82,191 
Potentially dilutive common share equivalent    
Weighted average common shares - dilutive88,124 83,809 86,677 82,191 
Basic net loss per share$(0.16)$(0.18)$(0.40)$(0.60)
Diluted net loss per share$(0.16)$(0.18)$(0.40)$(0.60)
Anti-dilutive employee stock-based awards, excluded8,400 5,980 2,610 4,826 

Note 11.     Segment and Geographic Information

Segment Information

The Company operates as one operating and reportable segment. The Company has identified its Chief Executive Officer ("CEO") as the Chief Operating Decision Maker (“CODM”). The CODM reviews financial information presented on a combined basis for purposes of allocating resources and evaluating financial performance.

Geographic Information

The Company conducts business across three geographic regions: the Americas, EMEA and APAC. Revenue consists of gross product shipments and service revenue, less allowances for estimated sales returns, price protection, end-user customer rebates and other channel sales incentives deemed to be a reduction of revenue per the authoritative guidance. For reporting purposes, revenue by geography is generally based upon the ship-to location of the customer for device sales and device location for service sales.

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ARLO TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table shows revenue by geography for the periods indicated:

 Three Months EndedNine Months Ended
 October 2,
2022
October 3,
2021
October 2,
2022
October 3,
2021
(In thousands)
United States (“U.S.”)$71,040 $74,511 $199,851