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)
|
Title of each class
|
|
Name of each exchange on which registered
|
Common Stock, par value $0.001
|
|
New York Stock Exchange
|
Item
|
PART I
|
Page
|
Item 1.
|
||
Item 1A.
|
||
Item 1B.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
PART II
|
||
Item 5.
|
||
Item 6.
|
||
Item 7.
|
||
Item 7A.
|
||
Item 8.
|
||
Item 9.
|
||
Item 9A.
|
||
Item 9B.
|
||
PART III
|
||
Item 10.
|
||
Item 11.
|
||
Item 12.
|
||
Item 13.
|
||
Item 14.
|
||
PART IV
|
||
Item 15.
|
||
Item 16.
|
||
|
Item 1.
|
Business
|
Name
|
Age
|
Position(s)
|
Matthew McRae
|
45
|
Chief Executive Officer and Director
|
Christine M. Gorjanc
|
62
|
Chief Financial Officer
|
Patrick J. Collins III
|
47
|
Senior Vice President of Products
|
Brian Busse
|
50
|
General Counsel and Corporate Secretary
|
Item 1A.
|
Risk Factors
|
•
|
changes in the pricing policies of, or the introduction of new products by, us or our competitors;
|
•
|
delays in the introduction of new products by us or market acceptance of these products;
|
•
|
introductions of new technologies and changes in consumer preferences that result in either unanticipated or unexpectedly rapid product category shifts;
|
•
|
slow or negative growth in the connected lifestyle, home electronics, and related technology markets;
|
•
|
seasonal shifts in end-market demand for our products;
|
•
|
unanticipated decreases or delays in purchases of our products by our significant retailers, distributors, and other channel partners;
|
•
|
component supply constraints from our vendors;
|
•
|
unanticipated increases in costs, including air freight, associated with shipping and delivery of our products;
|
•
|
the inability to maintain stable operations by our suppliers and other parties with whom we have commercial relationships;
|
•
|
discovery of security vulnerabilities in our products, services or systems, leading to negative publicity, decreased demand, or potential liability;
|
•
|
foreign currency exchange rate fluctuations in the jurisdictions where we transact sales and expenditures in local currency;
|
•
|
excess levels of inventory and low turns;
|
•
|
changes in or consolidation of our sales channels and wholesale distributor relationships or failure to manage our sales channel inventory and warehousing requirements;
|
•
|
delay or failure to fulfill orders for our products on a timely basis;
|
•
|
delay or failure of our retailers, distributors, and other channel partners to purchase at their historic volumes or at the volumes that they or we forecast;
|
•
|
changes in tax rates or adverse changes in tax laws that expose us to additional income tax liabilities;
|
•
|
changes in U.S. and international tax policy, including changes that adversely affect customs, tax or duty rates (such as the tariffs on products imported from China enacted by the Trump administration), as well as income tax legislation and regulations that affect the countries where we conduct business;
|
•
|
operational disruptions, such as transportation delays or failure of our order processing system, particularly if they occur at the end of a fiscal quarter;
|
•
|
disruptions or delays related to our financial and enterprise resource planning systems;
|
•
|
our inability to accurately forecast product demand, resulting in increased inventory exposure;
|
•
|
allowance for doubtful accounts exposure with our existing retailers, distributors and other channel partners and new retailers, distributors and other channel partners, particularly as we expand into new international markets;
|
•
|
geopolitical disruption, including sudden changes in immigration policies, leading to disruption in our workforce or delay or even stoppage of our operations in manufacturing, transportation, technical support, and research and development;
|
•
|
terms of our contracts with channel partners or suppliers that cause us to incur additional expenses or assume additional liabilities;
|
•
|
an increase in price protection claims, redemptions of marketing rebates, product warranty and stock rotation returns or allowance for doubtful accounts;
|
•
|
litigation involving alleged patent infringement;
|
•
|
epidemic or widespread product failure, or unanticipated safety issues, in one or more of our products;
|
•
|
failure to effectively manage our third-party customer support partners, which may result in customer complaints and/or harm to the Arlo brand;
|
•
|
our inability to monitor and ensure compliance with our code of ethics, our anti-corruption compliance program, and domestic and international anti-corruption laws and regulations, whether in relation to our employees or with our suppliers or retailers, distributors, or other channel partners;
|
•
|
labor unrest at facilities managed by our third-party manufacturers;
|
•
|
workplace or human rights violations in certain countries in which our third-party manufacturers or suppliers operate, which may affect the Arlo brand and negatively affect our products’ acceptance by consumers;
|
•
|
unanticipated shifts or declines in profit by geographical region that would adversely impact our tax rate;
|
•
|
failure to implement and maintain the appropriate internal controls over financial reporting, which may result in restatements of our financial statements; and
|
•
|
any changes in accounting rules.
|
•
|
loss of or delay in revenue and loss of market share;
|
•
|
negative publicity and damage to our reputation and brand;
|
•
|
a decline in the average selling price of our products and services;
|
•
|
adverse reactions in our sales channels, such as reduced shelf space, reduced online product visibility, or loss of sales channels; and
|
•
|
increased levels of product returns.
|
•
|
our channel partner agreements generally do not require minimum purchases;
|
•
|
our retailers, distributors, and other channel partners can stop purchasing and stop marketing our products at any time; and
|
•
|
our channel partner agreements generally are not exclusive.
|
•
|
actual or anticipated fluctuations in our results of operations or our competitors’ operating results;
|
•
|
actual or anticipated changes in the growth rate of the connected lifestyle market, our growth rate or our competitors’ growth rates;
|
•
|
delays in the introduction of new products by us or market acceptance of these products;
|
•
|
conditions in the financial markets in general or changes in general economic conditions;
|
•
|
changes in governmental regulation, including taxation and tariff policies;
|
•
|
interest rate or currency exchange rate fluctuations;
|
•
|
our ability to forecast or report accurate financial results; and
|
•
|
changes in stock market analyst recommendations regarding our common stock, other comparable companies, or our industry generally.
|
•
|
unexpected increases in manufacturing and repair costs;
|
•
|
inability to control the quality and reliability of finished products;
|
•
|
inability to control delivery schedules;
|
•
|
potential liability for expenses incurred by third-party manufacturers in reliance on our forecasts that later prove to be inaccurate;
|
•
|
potential lack of adequate capacity to manufacture all or a part of the products we require; and
|
•
|
potential labor unrest affecting the ability of the third-party manufacturers to produce our products.
|
•
|
exchange rate fluctuations;
|
•
|
political and economic instability, international terrorism, and anti-American sentiment, particularly in emerging markets;
|
•
|
potential for violations of anti-corruption laws and regulations, such as those related to bribery and fraud;
|
•
|
preference for locally branded products, and laws and business practices favoring local competition;
|
•
|
potential consequences of, and uncertainty related to, the “Brexit” process in the United Kingdom, which could lead to additional expense and complexity in doing business there;
|
•
|
increased difficulty in managing inventory;
|
•
|
delayed revenue recognition;
|
•
|
less effective protection of intellectual property;
|
•
|
stringent consumer protection and product compliance regulations, including but not limited to General Data Protection Regulation in the European Union, European competition law, the Restriction of Hazardous Substances directive, the Waste Electrical and Electronic Equipment directive and the European Ecodesign directive, that are costly to comply with and may vary from country to country;
|
•
|
difficulties and costs of staffing and managing foreign operations;
|
•
|
business difficulties, including potential bankruptcy or liquidation, of any of our worldwide third-party logistics providers; and
|
•
|
changes in local tax and customs duty laws or changes in the enforcement, application, or interpretation of such laws.
|
•
|
changes in tax laws or the regulatory environment;
|
•
|
changes in accounting and tax standards or practices;
|
•
|
changes in the composition of operating income by tax jurisdiction; and
|
•
|
our operating results before taxes.
|
•
|
the failure of securities analysts to cover our common stock or changes in financial estimates by analysts;
|
•
|
the inability to meet the financial estimates of securities analysts who follow our common stock or changes in earnings estimates by analysts;
|
•
|
strategic actions by us or our competitors;
|
•
|
announcements by us or our competitors of significant contracts, acquisitions, joint marketing relationships, joint ventures or capital commitments;
|
•
|
our quarterly or annual earnings, or those of other companies in our industry;
|
•
|
actual or anticipated fluctuations in our operating results and those of our competitors;
|
•
|
general economic and stock market conditions;
|
•
|
the public reaction to our press releases, our other public announcements and our filings with the SEC;
|
•
|
risks related to our business and our industry, including those discussed above;
|
•
|
changes in conditions or trends in our industry, markets or customers;
|
•
|
the trading volume of our common stock;
|
•
|
future sales of our common stock or other securities; and
|
•
|
investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives.
|
•
|
the inability of our stockholders to call a special meeting;
|
•
|
the inability of our stockholders to act without a meeting of stockholders;
|
•
|
rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings;
|
•
|
the right of our board of directors to issue preferred stock without stockholder approval;
|
•
|
the division of our board of directors into three classes of directors, with each class serving a staggered three-year term, and this classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult;
|
•
|
a provision that stockholders may only remove directors with cause while the board of directors is classified; and
|
•
|
the ability of our directors, and not stockholders, to fill vacancies on our board of directors.
|
Item 1B.
|
Unresolved Staff Comments
|
Item 2.
|
Properties
|
Item 3.
|
Legal Proceedings
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
Item 6.
|
Selected Financial Data
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(In thousands, except per share data)
|
||||||||||
Revenue
(1)
|
$
|
464,918
|
|
|
$
|
370,658
|
|
|
$
|
184,604
|
|
Cost of revenue
(2)
|
372,843
|
|
|
279,424
|
|
|
146,570
|
|
|||
Gross profit
|
92,075
|
|
|
91,234
|
|
|
38,034
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Research and development
(2)
|
58,794
|
|
|
34,683
|
|
|
24,438
|
|
|||
Sales and marketing
(2)
|
52,593
|
|
|
34,340
|
|
|
18,455
|
|
|||
General and administrative
(2)
|
28,209
|
|
|
15,096
|
|
|
8,289
|
|
|||
Separation expense
|
27,252
|
|
|
1,384
|
|
|
—
|
|
|||
Total operating expenses
|
166,848
|
|
|
85,503
|
|
|
51,182
|
|
|||
Income (loss) from operations
|
(74,773
|
)
|
|
5,731
|
|
|
(13,148
|
)
|
|||
Interest income
|
1,239
|
|
|
—
|
|
|
—
|
|
|||
Other income (expense), net
|
(1,177
|
)
|
|
1,946
|
|
|
(512
|
)
|
|||
Income (loss) before income taxes
|
(74,711
|
)
|
|
7,677
|
|
|
(13,660
|
)
|
|||
Provision for income taxes
|
772
|
|
|
1,128
|
|
|
83
|
|
|||
Net income (loss)
|
$
|
(75,483
|
)
|
|
$
|
6,549
|
|
|
$
|
(13,743
|
)
|
Net income (loss) per share:
|
|
|
|
|
|
||||||
Basic
(3)
|
$
|
(1.12
|
)
|
|
$
|
0.10
|
|
|
$
|
(0.22
|
)
|
Diluted
(3)
|
$
|
(1.12
|
)
|
|
$
|
0.10
|
|
|
$
|
(0.22
|
)
|
(1)
|
On January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606) (“ASC 606”) and applied this guidance to those contracts which were not completed at the date of adoption using the modified retrospective method. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods (“ASC 605”). The Company recognized the cumulative effect of initially applying ASC 606 as an adjustment to the opening balance of Net parent investment.
|
(2)
|
Stock-based compensation expense was allocated as follows:
|
|
Year Ended December 31,
|
||||||||||||||||||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||||||||||||||||||||||||||
|
Direct
|
|
Indirect
|
|
Total
|
|
Direct
|
|
Indirect
|
|
Total
|
|
Direct
|
|
Indirect
|
|
Total
|
||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||||||
Cost of revenue
|
$
|
608
|
|
|
$
|
583
|
|
|
$
|
1,191
|
|
|
$
|
102
|
|
|
$
|
599
|
|
|
$
|
701
|
|
|
$
|
61
|
|
|
$
|
266
|
|
|
$
|
327
|
|
Research and development
|
3,078
|
|
|
396
|
|
|
3,474
|
|
|
1,959
|
|
|
455
|
|
|
2,414
|
|
|
1,349
|
|
|
195
|
|
|
1,544
|
|
|||||||||
Sales and marketing
|
1,992
|
|
|
969
|
|
|
2,961
|
|
|
390
|
|
|
866
|
|
|
1,256
|
|
|
110
|
|
|
407
|
|
|
517
|
|
|||||||||
General and administrative
|
3,153
|
|
|
2,100
|
|
|
5,253
|
|
|
—
|
|
|
2,547
|
|
|
2,547
|
|
|
—
|
|
|
1,216
|
|
|
1,216
|
|
|||||||||
Total
|
$
|
8,831
|
|
|
$
|
4,048
|
|
|
$
|
12,879
|
|
|
$
|
2,451
|
|
|
$
|
4,467
|
|
|
$
|
6,918
|
|
|
$
|
1,520
|
|
|
$
|
2,084
|
|
|
$
|
3,604
|
|
|
As of December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(In thousands)
|
||||||||||
Cash, cash equivalents and short-term investments
(1)
|
$
|
201,027
|
|
|
$
|
108
|
|
|
$
|
220
|
|
Working capital
|
$
|
233,484
|
|
|
$
|
112,878
|
|
|
$
|
54,967
|
|
Total assets
|
$
|
595,946
|
|
|
$
|
269,820
|
|
|
$
|
158,581
|
|
Deferred revenue (current and non-current)
|
$
|
49,991
|
|
|
$
|
47,404
|
|
|
$
|
23,393
|
|
Total liabilities
|
$
|
326,444
|
|
|
$
|
144,401
|
|
|
$
|
85,407
|
|
Stockholders’ equity
|
$
|
269,502
|
|
|
$
|
125,419
|
|
|
$
|
73,174
|
|
(1)
|
Reflects approximately $70.0 million in cash contributed by NETGEAR prior to the completion of the IPO, and the net proceeds of
$173.4 million
raised from the IPO, net of the portion of the offering cost paid by Arlo, which portion was $1.4 million. Our total offering cost is $4.6 million, of which $3.2 million was paid by NETGEAR.
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Year Ended December 31,
|
||||||||||||||||
|
2018
|
|
% Change
|
|
2017
|
|
% Change
|
|
2016
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
Cumulative registered users
|
2,850
|
|
|
70.7
|
%
|
|
1,670
|
|
|
143.1
|
%
|
|
687
|
|
|||
Paid subscribers
|
144
|
|
|
84.6
|
%
|
|
78
|
|
|
160.0
|
%
|
|
30
|
|
|||
Devices shipped
|
5,086
|
|
|
34.9
|
%
|
|
3,770
|
|
|
88.5
|
%
|
|
2,000
|
|
|||
Service revenue
|
$
|
37,805
|
|
|
30.0
|
%
|
|
$
|
29,077
|
|
|
138.7
|
%
|
|
$
|
12,182
|
|
|
Year Ended December 31,
|
|||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|||||||||||||||
|
(In thousands, except percentage data)
|
|||||||||||||||||||
Revenue
|
$
|
464,918
|
|
|
100.0
|
%
|
|
$
|
370,658
|
|
|
100.0
|
%
|
|
$
|
184,604
|
|
|
100.0
|
%
|
Cost of revenue
|
372,843
|
|
|
80.2
|
%
|
|
279,424
|
|
|
75.4
|
%
|
|
146,570
|
|
|
79.4
|
%
|
|||
Gross profit
|
92,075
|
|
|
19.8
|
%
|
|
91,234
|
|
|
24.6
|
%
|
|
38,034
|
|
|
20.6
|
%
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Research and development
|
58,794
|
|
|
12.6
|
%
|
|
34,683
|
|
|
9.4
|
%
|
|
24,438
|
|
|
13.2
|
%
|
|||
Sales and marketing
|
52,593
|
|
|
11.3
|
%
|
|
34,340
|
|
|
9.2
|
%
|
|
18,455
|
|
|
10.0
|
%
|
|||
General and administrative
|
28,209
|
|
|
6.1
|
%
|
|
15,096
|
|
|
4.1
|
%
|
|
8,289
|
|
|
4.5
|
%
|
|||
Separation expense
|
27,252
|
|
|
5.9
|
%
|
|
1,384
|
|
|
0.4
|
%
|
|
—
|
|
|
—
|
%
|
|||
Total operating expenses
|
166,848
|
|
|
35.9
|
%
|
|
85,503
|
|
|
23.1
|
%
|
|
51,182
|
|
|
27.7
|
%
|
|||
Income (loss) from operations
|
(74,773
|
)
|
|
(16.1
|
)%
|
|
5,731
|
|
|
1.5
|
%
|
|
(13,148
|
)
|
|
(7.1
|
)%
|
|||
Interest income
|
1,239
|
|
|
0.3
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|||
Other income (expense), net
|
(1,177
|
)
|
|
(0.3
|
)%
|
|
1,946
|
|
|
0.6
|
%
|
|
(512
|
)
|
|
(0.3
|
)%
|
|||
Income (loss) before income taxes
|
(74,711
|
)
|
|
(16.1
|
)%
|
|
7,677
|
|
|
2.1
|
%
|
|
(13,660
|
)
|
|
(7.4
|
)%
|
|||
Provision for income taxes
|
772
|
|
|
0.1
|
%
|
|
1,128
|
|
|
0.3
|
%
|
|
83
|
|
|
—
|
%
|
|||
Net income (loss)
|
$
|
(75,483
|
)
|
|
(16.2
|
)%
|
|
$
|
6,549
|
|
|
1.8
|
%
|
|
$
|
(13,743
|
)
|
|
(7.4
|
)%
|
|
Year Ended December 31,
|
||||||||||||||||
|
2018
|
|
% Change
|
|
2017
|
|
% Change
|
|
2016
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
Americas
|
$
|
376,805
|
|
|
28.7
|
%
|
|
$
|
292,671
|
|
|
97.5
|
%
|
|
$
|
148,164
|
|
Percentage of revenue
|
81.0
|
%
|
|
|
|
79.0
|
%
|
|
|
|
80.3
|
%
|
|||||
EMEA
|
$
|
65,462
|
|
|
11.3
|
%
|
|
$
|
58,795
|
|
|
114.1
|
%
|
|
$
|
27,457
|
|
Percentage of revenue
|
14.1
|
%
|
|
|
|
15.9
|
%
|
|
|
|
14.9
|
%
|
|||||
APAC
|
$
|
22,651
|
|
|
18.0
|
%
|
|
$
|
19,192
|
|
|
113.6
|
%
|
|
$
|
8,983
|
|
Percentage of revenue
|
4.9
|
%
|
|
|
|
5.1
|
%
|
|
|
|
4.8
|
%
|
|||||
Total revenue
|
$
|
464,918
|
|
|
25.4
|
%
|
|
$
|
370,658
|
|
|
100.8
|
%
|
|
$
|
184,604
|
|
|
Year Ended December 31,
|
||||||||||||||||
|
2018
|
|
% Change
|
|
2017
|
|
% Change
|
|
2016
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
Cost of revenue
|
$
|
372,843
|
|
|
33.4
|
%
|
|
$
|
279,424
|
|
|
90.6
|
%
|
|
$
|
146,570
|
|
Gross margin
|
19.8
|
%
|
|
|
|
24.6
|
%
|
|
|
|
20.6
|
%
|
|
Year Ended December 31,
|
||||||||||||||||
|
2018
|
|
% Change
|
|
2017
|
|
% Change
|
|
2016
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
Research and development expense
|
$
|
58,794
|
|
|
69.5
|
%
|
|
$
|
34,683
|
|
|
41.9
|
%
|
|
$
|
24,438
|
|
|
Year Ended December 31,
|
||||||||||||||||
|
2018
|
|
% Change
|
|
2017
|
|
% Change
|
|
2016
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
Sales and marketing expense
|
$
|
52,593
|
|
|
53.2
|
%
|
|
$
|
34,340
|
|
|
86.1
|
%
|
|
$
|
18,455
|
|
|
Year Ended December 31,
|
||||||||||||||||
|
2018
|
|
% Change
|
|
2017
|
|
% Change
|
|
2016
|
||||||||
|
(In thousands, except percentage data)
|
||||||||||||||||
General and administrative expense
|
$
|
28,209
|
|
|
86.9
|
%
|
|
$
|
15,096
|
|
|
82.1
|
%
|
|
$
|
8,289
|
|
|
Year Ended December 31,
|
||||||||||||||
|
2018
|
|
% Change
|
|
2017
|
|
% Change
|
|
2016
|
||||||
|
(In thousands, except percentage data)
|
||||||||||||||
Separation expense
|
$
|
27,252
|
|
|
**
|
|
$
|
1,384
|
|
|
**
|
|
$
|
—
|
|
|
Year Ended December 31,
|
|||||||||||
|
2018
|
|
% Change
|
|
2017
|
|
% Change
|
|
2016
|
|||
|
(In thousands, except percentage data)
|
|||||||||||
Interest income
|
1,239
|
|
|
**
|
|
—
|
|
|
**
|
|
—
|
|
Other income (expense), net
|
(1,177
|
)
|
|
**
|
|
1,946
|
|
|
**
|
|
(512
|
)
|
|
Year Ended December 31,
|
|||||||||||||||
|
2018
|
|
% Change
|
|
2017
|
|
% Change
|
|
2016
|
|||||||
|
(In thousands, except percentage data)
|
|||||||||||||||
Provision for income taxes
|
$
|
772
|
|
|
(31.6
|
)%
|
|
$
|
1,128
|
|
|
**
|
|
$
|
83
|
|
Effective tax rate
|
(1.0
|
)%
|
|
|
|
14.7
|
%
|
|
|
|
(0.6
|
)%
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(In thousands)
|
||||||||||
Net cash used in operating activities
|
$
|
(17,686
|
)
|
|
$
|
(38,985
|
)
|
|
$
|
(33,070
|
)
|
Net cash used in investing activities
|
(71,285
|
)
|
|
(4,315
|
)
|
|
(10,289
|
)
|
|||
Net cash provided by financing activities
|
244,287
|
|
|
43,188
|
|
|
43,579
|
|
|||
Net cash increase (decrease)
|
$
|
155,316
|
|
|
$
|
(112
|
)
|
|
$
|
220
|
|
|
Payments due by period
|
||||||||||||||||||
|
|
|
Less Than
|
|
1-3
|
|
3-5
|
|
More Than
|
||||||||||
|
Total
|
|
1 Year
|
|
Years
|
|
Years
|
|
5 Years
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Operating leases
|
$
|
16,521
|
|
|
$
|
3,373
|
|
|
$
|
6,219
|
|
|
$
|
4,890
|
|
|
$
|
2,039
|
|
Build-to-suit lease
|
29,339
|
|
|
1,261
|
|
|
5,272
|
|
|
5,593
|
|
|
17,213
|
|
|||||
Purchase obligations
|
36,779
|
|
|
36,779
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
$
|
82,639
|
|
|
$
|
41,413
|
|
|
$
|
11,491
|
|
|
$
|
10,483
|
|
|
$
|
19,252
|
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 8.
|
Financial Statements
and Supplementary Data
|
|
As of
|
||||||
|
December 31,
2018 |
|
December 31,
2017 |
||||
|
(In thousands)
|
||||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
151,290
|
|
|
$
|
108
|
|
Short-term investments
|
49,737
|
|
|
—
|
|
||
Accounts receivable, net
|
166,045
|
|
|
157,680
|
|
||
Inventories
|
124,791
|
|
|
82,952
|
|
||
Receivables from NETGEAR, net
|
12,184
|
|
|
—
|
|
||
Prepaid expenses and other current assets
|
11,427
|
|
|
3,018
|
|
||
Total current assets
|
515,474
|
|
|
243,758
|
|
||
Property and equipment, net
|
49,428
|
|
|
3,883
|
|
||
Intangibles, net
|
2,823
|
|
|
4,348
|
|
||
Goodwill
|
15,638
|
|
|
15,638
|
|
||
Restricted cash
|
4,134
|
|
|
—
|
|
||
Other non-current assets
|
8,449
|
|
|
2,193
|
|
||
Total assets
|
$
|
595,946
|
|
|
$
|
269,820
|
|
LIABILITIES AND STOCKHOLDERS
’
EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
82,542
|
|
|
$
|
20,711
|
|
Deferred revenue
|
26,678
|
|
|
34,072
|
|
||
Accrued liabilities
|
172,036
|
|
|
76,097
|
|
||
Income tax payable
|
734
|
|
|
—
|
|
||
Total current liabilities
|
281,990
|
|
|
130,880
|
|
||
Non-current deferred revenue
|
23,313
|
|
|
13,332
|
|
||
Non-current financing lease obligation
|
19,978
|
|
|
—
|
|
||
Non-current income taxes payable
|
22
|
|
|
189
|
|
||
Other non-current liabilities
|
1,141
|
|
|
—
|
|
||
Total liabilities
|
326,444
|
|
|
144,401
|
|
||
Commitments and contingencies (Note 12)
|
|
|
|
|
|
||
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: 74,247,250 as of December 31, 2018 and none as of December 31, 2017
|
74
|
|
|
—
|
|
||
Additional paid-in capital
|
315,277
|
|
|
—
|
|
||
Accumulated other comprehensive income (loss)
|
—
|
|
|
—
|
|
||
Net parent investment
|
—
|
|
|
125,419
|
|
||
Accumulated deficit
|
(45,849
|
)
|
|
—
|
|
||
Total stockholders’ equity
|
269,502
|
|
|
125,419
|
|
||
Total liabilities and stockholders’ equity
|
$
|
595,946
|
|
|
$
|
269,820
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(In thousands, except per share data)
|
||||||||||
Revenue
|
$
|
464,918
|
|
|
$
|
370,658
|
|
|
$
|
184,604
|
|
Cost of revenue
|
372,843
|
|
|
279,424
|
|
|
146,570
|
|
|||
Gross profit
|
92,075
|
|
|
91,234
|
|
|
38,034
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Research and development
|
58,794
|
|
|
34,683
|
|
|
24,438
|
|
|||
Sales and marketing
|
52,593
|
|
|
34,340
|
|
|
18,455
|
|
|||
General and administrative
|
28,209
|
|
|
15,096
|
|
|
8,289
|
|
|||
Separation expense
|
27,252
|
|
|
1,384
|
|
|
—
|
|
|||
Total operating expenses
|
166,848
|
|
|
85,503
|
|
|
51,182
|
|
|||
Income (loss) from operations
|
(74,773
|
)
|
|
5,731
|
|
|
(13,148
|
)
|
|||
Interest income
|
1,239
|
|
|
—
|
|
|
—
|
|
|||
Other income (expense), net
|
(1,177
|
)
|
|
1,946
|
|
|
(512
|
)
|
|||
Income (loss) before income taxes
|
(74,711
|
)
|
|
7,677
|
|
|
(13,660
|
)
|
|||
Provision for income taxes
|
772
|
|
|
1,128
|
|
|
83
|
|
|||
Net income (loss)
|
$
|
(75,483
|
)
|
|
$
|
6,549
|
|
|
$
|
(13,743
|
)
|
Net income (loss) per share:
|
|
|
|
|
|
||||||
Basic
|
$
|
(1.12
|
)
|
|
$
|
0.11
|
|
|
$
|
(0.22
|
)
|
Diluted
|
$
|
(1.12
|
)
|
|
$
|
0.11
|
|
|
$
|
(0.22
|
)
|
Weighted average shares used to compute net income (loss) per share:
|
|
|
|
|
|
||||||
Basic
|
67,231
|
|
|
62,250
|
|
|
62,250
|
|
|||
Diluted
|
67,231
|
|
|
62,250
|
|
|
62,250
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(In thousands)
|
||||||||||
Net income (loss)
|
$
|
(75,483
|
)
|
|
$
|
6,549
|
|
|
$
|
(13,743
|
)
|
Other comprehensive income (loss), before and after tax:
|
|
|
|
|
|
||||||
Unrealized gain on derivative instruments
|
2
|
|
|
—
|
|
|
—
|
|
|||
Unrealized loss on available-for-sale securities
|
(2
|
)
|
|
—
|
|
|
—
|
|
|||
Comprehensive income (loss)
|
$
|
(75,483
|
)
|
|
$
|
6,549
|
|
|
$
|
(13,743
|
)
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Shares
|
|
Amount
|
|
Additional Paid-In Capital
|
|
Net Parent Investment
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Accumulated Deficit
|
|
Total
|
|||||||||||||
|
(In thousands)
|
|||||||||||||||||||||||||
Balance as of December 31, 2015
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
41,533
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
41,533
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,743
|
)
|
|
—
|
|
|
—
|
|
|
(13,743
|
)
|
||||||
Net transfer from Parent
|
—
|
|
|
—
|
|
|
—
|
|
|
43,864
|
|
|
—
|
|
|
—
|
|
|
43,864
|
|
||||||
Stock-based compensation expense funded by Parent
|
—
|
|
|
—
|
|
|
—
|
|
|
1,520
|
|
|
—
|
|
|
—
|
|
|
1,520
|
|
||||||
Balance as of December 31, 2016
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
73,174
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
73,174
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
6,549
|
|
|
—
|
|
|
—
|
|
|
6,549
|
|
||||||
Net transfer from Parent
|
—
|
|
|
—
|
|
|
—
|
|
|
43,245
|
|
|
—
|
|
|
—
|
|
|
43,245
|
|
||||||
Stock-based compensation expense funded by Parent
|
—
|
|
|
—
|
|
|
—
|
|
|
2,451
|
|
|
—
|
|
|
—
|
|
|
2,451
|
|
||||||
Balance as of December 31, 2017
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
125,419
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
125,419
|
|
Cumulative impact from adoption of ASC 606, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,061
|
)
|
|
—
|
|
|
—
|
|
|
(3,061
|
)
|
||||||
Net loss, prior to the completion of the Contribution
|
—
|
|
|
—
|
|
|
—
|
|
|
(29,634
|
)
|
|
—
|
|
|
—
|
|
|
(29,634
|
)
|
||||||
Net loss, after the completion of the Contribution
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45,849
|
)
|
|
(45,849
|
)
|
||||||
Issuance of common stock from initial public offering
|
11,747
|
|
|
12
|
|
|
174,725
|
|
|
|
|
—
|
|
|
—
|
|
|
174,737
|
|
|||||||
Initial public offering costs paid by the Company
|
|
|
|
|
(1,404
|
)
|
|
|
|
|
|
|
|
(1,404
|
)
|
|||||||||||
Initial public offering costs paid by Parent
|
|
|
|
|
(3,148
|
)
|
|
|
|
|
|
|
|
(3,148
|
)
|
|||||||||||
Net transfer from Parent
|
—
|
|
|
—
|
|
|
—
|
|
|
43,549
|
|
|
—
|
|
|
—
|
|
|
43,549
|
|
||||||
Conversion of Net parent investment into common stock
|
62,500
|
|
|
62
|
|
|
139,030
|
|
|
(139,030
|
)
|
|
—
|
|
|
—
|
|
|
62
|
|
||||||
Stock-based compensation expense funded by Parent
|
—
|
|
|
—
|
|
|
—
|
|
|
2,757
|
|
|
—
|
|
|
—
|
|
|
2,757
|
|
||||||
Stock-based compensation expense post-initial public offering
|
—
|
|
|
—
|
|
|
6,074
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,074
|
|
||||||
Change in unrealized gains and losses on available-for-sale securities, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
||||||
Change in unrealized gains and losses on derivatives, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||||
Balance as of December 31, 2018
|
74,247
|
|
|
$
|
74
|
|
|
$
|
315,277
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(45,849
|
)
|
|
$
|
269,502
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(In thousands)
|
||||||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
(75,483
|
)
|
|
$
|
6,549
|
|
|
$
|
(13,743
|
)
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
5,307
|
|
|
3,740
|
|
|
2,128
|
|
|||
Stock-based compensation
|
8,831
|
|
|
2,451
|
|
|
1,520
|
|
|||
Deferred income taxes
|
(1,108
|
)
|
|
(388
|
)
|
|
(665
|
)
|
|||
Premium amortization/discount accretion on investments, net
|
(120
|
)
|
|
—
|
|
|
—
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable, net
|
(118,651
|
)
|
|
(75,838
|
)
|
|
(46,338
|
)
|
|||
Receivables from NETGEAR, net
|
(10,274
|
)
|
|
—
|
|
|
—
|
|
|||
Inventories
|
(42,322
|
)
|
|
(35,235
|
)
|
|
(22,095
|
)
|
|||
Prepaid expenses and other assets
|
(6,318
|
)
|
|
62
|
|
|
(2,526
|
)
|
|||
Accounts payable
|
87,307
|
|
|
(350
|
)
|
|
11,509
|
|
|||
Deferred revenue
|
11,253
|
|
|
24,011
|
|
|
14,176
|
|
|||
Accrued liabilities
|
123,214
|
|
|
35,990
|
|
|
22,859
|
|
|||
Income taxes payable
|
678
|
|
|
23
|
|
|
105
|
|
|||
Net cash used in operating activities
|
(17,686
|
)
|
|
(38,985
|
)
|
|
(33,070
|
)
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Purchases of property and equipment
|
(21,666
|
)
|
|
(3,578
|
)
|
|
(1,482
|
)
|
|||
Purchases of short-term investments
|
(54,619
|
)
|
|
—
|
|
|
—
|
|
|||
Proceeds from maturities of short-term investments
|
5,000
|
|
|
—
|
|
|
—
|
|
|||
Payments made in connection with business acquisition, net of cash acquired
|
—
|
|
|
(737
|
)
|
|
(8,807
|
)
|
|||
Net cash used in investing activities
|
(71,285
|
)
|
|
(4,315
|
)
|
|
(10,289
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Proceeds from initial public offering, net of offering costs
|
173,395
|
|
|
—
|
|
|
—
|
|
|||
Net investment from parent
|
70,892
|
|
|
43,188
|
|
|
43,579
|
|
|||
Net cash provided by financing activities
|
244,287
|
|
|
43,188
|
|
|
43,579
|
|
|||
Net increase (decrease) in cash and cash equivalents and restricted cash
|
155,316
|
|
|
(112
|
)
|
|
220
|
|
|||
Cash and cash equivalents and restricted cash, at beginning of period
|
108
|
|
|
220
|
|
|
—
|
|
|||
Cash and cash equivalents and restricted cash, at end of period
|
$
|
155,424
|
|
|
$
|
108
|
|
|
$
|
220
|
|
|
|
|
|
|
|
||||||
Non-cash investing and financing activities:
|
|
|
|
|
|
||||||
Purchases and transfers of property and equipment
|
$
|
16,003
|
|
|
$
|
81
|
|
|
$
|
500
|
|
Estimated fair value of a facility under build-to-suit lease
including tenant improvements
|
$
|
28,357
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Supplemental cash flow information:
|
|
|
|
|
|
||||||
Cash paid for income taxes
|
$
|
89
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Note 1.
|
The Company and Basis of Presentation
|
Note 2.
|
Summary of Significant Accounting Policies
|
|
As of
|
||||||
|
December 31,
2018 |
|
December 31,
2017 |
||||
|
(In thousands)
|
||||||
Cash and cash equivalents
|
$
|
151,290
|
|
|
$
|
108
|
|
Restricted cash
|
4,134
|
|
|
—
|
|
||
Total as presented on the consolidated statements of cash flows
|
$
|
155,424
|
|
|
$
|
108
|
|
Asset Category:
|
|
Range of Useful Lives
|
Computer equipment
|
|
2 years
|
Furniture and fixtures
|
|
5 years
|
Software
|
|
2-5 years
|
Machinery and equipment
|
|
2-3 years
|
Leasehold improvements
|
|
Shorter of remaining lease term or 5 years
|
Note 3.
|
Revenue Recognition
|
|
As of
|
|
Adjustments
|
|
As of
|
||||||
|
December 31,
2017 |
|
|
January 1,
2018 |
|||||||
|
(In thousands)
|
||||||||||
Assets:
|
|
|
|
|
|
||||||
Accounts receivable, net
|
$
|
157,680
|
|
|
$
|
827
|
|
|
$
|
158,507
|
|
Inventories
|
$
|
82,952
|
|
|
$
|
(377
|
)
|
|
$
|
82,575
|
|
Other non-current assets
|
$
|
2,193
|
|
|
$
|
244
|
|
|
$
|
2,437
|
|
Liabilities:
|
|
|
|
|
|
||||||
Accounts payable
|
$
|
20,711
|
|
|
$
|
(48
|
)
|
|
$
|
20,663
|
|
Deferred revenue
|
$
|
34,072
|
|
|
$
|
(9,326
|
)
|
|
$
|
24,746
|
|
Accrued liabilities
|
$
|
76,097
|
|
|
$
|
13,370
|
|
|
$
|
89,467
|
|
Non-current deferred revenue
|
$
|
13,332
|
|
|
$
|
(241
|
)
|
|
$
|
13,091
|
|
Equity:
|
|
|
|
|
|
||||||
Net parent investment
|
$
|
125,419
|
|
|
$
|
(3,061
|
)
|
|
$
|
122,358
|
|
|
As reported
|
|
Adjustments
|
|
Balance without adoption of ASC 606
|
||||||
|
(In thousands)
|
||||||||||
Assets
|
|
|
|
|
|
||||||
Accounts receivable, net
|
$
|
166,045
|
|
|
$
|
(16,123
|
)
|
|
$
|
149,922
|
|
Inventories
|
$
|
124,791
|
|
|
$
|
115
|
|
|
$
|
124,906
|
|
Other non-current assets
|
$
|
8,449
|
|
|
$
|
—
|
|
|
$
|
8,449
|
|
Liabilities:
|
|
|
|
|
|
||||||
Accounts payable
|
$
|
82,542
|
|
|
$
|
(227
|
)
|
|
$
|
82,315
|
|
Deferred revenue
|
$
|
26,678
|
|
|
$
|
976
|
|
|
$
|
27,654
|
|
Accrued liabilities
|
$
|
172,036
|
|
|
$
|
(29,627
|
)
|
|
$
|
142,409
|
|
Non-current deferred revenue
|
$
|
23,313
|
|
|
$
|
3,176
|
|
|
$
|
26,489
|
|
Stockholders
’
Equity:
|
|
|
|
|
|
||||||
Accumulated deficit
|
$
|
(45,849
|
)
|
|
$
|
9,694
|
|
|
$
|
(36,155
|
)
|
|
As reported
|
|
Adjustments
|
|
Balance without adoption of ASC 606
|
||||||
|
(In thousands)
|
||||||||||
Revenue
|
$
|
464,918
|
|
|
$
|
6,958
|
|
|
$
|
471,876
|
|
Cost of revenue
|
$
|
372,843
|
|
|
$
|
262
|
|
|
$
|
373,105
|
|
Gross profit
|
$
|
92,075
|
|
|
$
|
6,696
|
|
|
$
|
98,771
|
|
Provision for income taxes
|
$
|
772
|
|
|
$
|
63
|
|
|
$
|
835
|
|
Net loss
|
$
|
(75,483
|
)
|
|
$
|
6,633
|
|
|
$
|
(68,850
|
)
|
|
|
1 year
|
|
2 years
|
|
Greater than 2 years
|
|
Total
|
||||||||
|
|
(In thousands)
|
||||||||||||||
Performance obligations
|
|
$
|
47,024
|
|
|
$
|
15,412
|
|
|
$
|
8,323
|
|
|
$
|
70,759
|
|
|
Balance Sheet Location
|
|
December 31, 2018
|
|
January 1, 2018
(1)
|
|
$ change
|
|
% change
|
|||||||
|
|
|
(In thousands)
|
|
|
|||||||||||
Accounts receivable, net
|
Accounts receivable, net
|
|
$
|
166,045
|
|
|
$
|
158,507
|
|
|
$
|
7,538
|
|
|
4.8
|
%
|
Contract liabilities - current
|
Deferred revenue
|
|
$
|
26,678
|
|
|
$
|
24,746
|
|
|
$
|
1,932
|
|
|
7.8
|
%
|
Contract liabilities - non-current
|
Non-current deferred revenue
|
|
$
|
23,313
|
|
|
$
|
13,091
|
|
|
$
|
10,222
|
|
|
78.1
|
%
|
(1)
|
Includes the adjustments made to those contracts which were not completed at the date of ASC 606 adoption using the modified retrospective method.
|
Note 4.
|
Business Acquisition
|
Cash and cash equivalents
|
$
|
8
|
|
Accounts receivable
|
11
|
|
|
Prepaid expenses and other current assets
|
130
|
|
|
Property and equipment
|
83
|
|
|
Intangibles
|
6,000
|
|
|
Goodwill
|
3,742
|
|
|
Accounts payable
|
(40
|
)
|
|
Accrued liabilities
|
(74
|
)
|
|
Deferred tax liabilities
|
(308
|
)
|
|
Total purchase price
|
$
|
9,552
|
|
|
Year Ended December 31, 2016
|
||
Revenue
|
$
|
184,744
|
|
Net loss
|
(18,258
|
)
|
Note 5.
|
Balance Sheet Components
|
|
As of December 31, 2018
|
||||||||||||||
|
Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Estimated Fair Value
|
||||||||
|
(In thousands)
|
||||||||||||||
U.S. treasuries
|
$
|
49,739
|
|
|
$
|
2
|
|
|
$
|
(4
|
)
|
|
$
|
49,737
|
|
|
As of
|
||||||
|
December 31,
2018 |
|
December 31,
2017 |
||||
|
(In thousands)
|
||||||
Gross accounts receivable
|
$
|
166,172
|
|
|
$
|
164,157
|
|
Allowance for doubtful accounts
|
(127
|
)
|
|
(207
|
)
|
||
Allowance for sales returns
(1)
|
—
|
|
|
(5,868
|
)
|
||
Allowance for price protection
(1)
|
—
|
|
|
(402
|
)
|
||
Total allowances
|
(127
|
)
|
|
(6,477
|
)
|
||
Total accounts receivable, net
|
$
|
166,045
|
|
|
$
|
157,680
|
|
|
As of
|
||||||
|
December 31,
2018 |
|
December 31,
2017 |
||||
|
(In thousands)
|
||||||
Machinery and equipment
|
$
|
11,415
|
|
|
$
|
6,067
|
|
Software
|
10,624
|
|
|
180
|
|
||
Computer equipment
|
4,342
|
|
|
50
|
|
||
Leasehold improvements
|
3,007
|
|
|
530
|
|
||
Furniture and fixtures
|
2,698
|
|
|
443
|
|
||
Construction in progress
(1)
|
28,357
|
|
|
—
|
|
||
Total property and equipment, gross
|
60,443
|
|
|
7,270
|
|
||
Accumulated depreciation
|
(11,015
|
)
|
|
(3,387
|
)
|
||
Total property and equipment, net
|
$
|
49,428
|
|
|
$
|
3,883
|
|
(1)
|
The Company has a build-to-suit lease arrangement for its headquarters lease in San Jose, California. Refer to Note 12,
Commitments and Contingencies
, for details of this lease. The construction is expected to be completed in March 2019.
|
|
As of December 31, 2018
|
|
As of December 31, 2017
|
||||||||||||||||||||
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Technology
|
$
|
9,800
|
|
|
$
|
(7,165
|
)
|
|
$
|
2,635
|
|
|
$
|
9,800
|
|
|
$
|
(5,790
|
)
|
|
$
|
4,010
|
|
Trademarks and trade names
|
1,400
|
|
|
(1,400
|
)
|
|
—
|
|
|
1,400
|
|
|
(1,400
|
)
|
|
—
|
|
||||||
Other
|
800
|
|
|
(612
|
)
|
|
188
|
|
|
800
|
|
|
(462
|
)
|
|
338
|
|
||||||
Total intangibles, net
|
$
|
12,000
|
|
|
$
|
(9,177
|
)
|
|
$
|
2,823
|
|
|
$
|
12,000
|
|
|
$
|
(7,652
|
)
|
|
$
|
4,348
|
|
2019
|
$
|
1,517
|
|
2020
|
1,306
|
|
|
Total estimated amortization expense
|
$
|
2,823
|
|
As of December 31, 2016
|
$
|
15,638
|
|
As of December 31, 2017
|
$
|
15,638
|
|
As of December 31, 2018
|
$
|
15,638
|
|
|
As of
|
||||||
|
December 31,
2018 |
|
December 31, 2017
|
||||
|
(In thousands)
|
||||||
Non-current deferred income taxes
|
$
|
1,108
|
|
|
$
|
865
|
|
Deposits
|
4,084
|
|
|
—
|
|
||
Other
|
3,257
|
|
|
1,328
|
|
||
Total other non-current assets
|
$
|
8,449
|
|
|
$
|
2,193
|
|
|
As of
|
||||||
|
December 31,
2018 |
|
December 31,
2017 |
||||
|
(In thousands)
|
||||||
Sales and marketing
|
$
|
75,863
|
|
|
31,613
|
|
|
Sales returns
|
49,247
|
|
|
—
|
|
||
Warranty obligation
|
3,712
|
|
|
31,756
|
|
||
Accrued employee compensation
|
11,897
|
|
|
3,184
|
|
||
Freight
|
3,913
|
|
|
3,862
|
|
||
Current financing lease obligation
|
1,632
|
|
|
—
|
|
||
Other
|
25,772
|
|
|
5,682
|
|
||
Total accrued liabilities
|
$
|
172,036
|
|
|
$
|
76,097
|
|
Note 6.
|
Fair Value Measurements
|
|
As of December 31, 2018
|
||||||||||
|
Total
|
|
Quoted market
prices in active
markets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
||||||
|
(In thousands)
|
||||||||||
Assets:
|
|
|
|
|
|
||||||
Cash equivalents: U.S. treasuries (<90 days)
|
$
|
438
|
|
|
$
|
438
|
|
|
$
|
—
|
|
Available-for-sale securities: U.S. treasuries
(1)
|
49,737
|
|
|
49,737
|
|
|
—
|
|
|||
Foreign currency forward contracts
(2)
|
322
|
|
|
—
|
|
|
322
|
|
|||
Total assets measured at fair value
|
$
|
50,497
|
|
|
$
|
50,175
|
|
|
$
|
322
|
|
Liabilities:
|
|
|
|
|
|
||||||
Foreign currency forward contracts
(3)
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
71
|
|
Total liabilities measured at fair value
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
71
|
|
(1)
|
Included in Short-term investments on the Company’s consolidated balance sheets.
|
(2)
|
Included in Prepaid expenses and other current assets on the Company’s consolidated balance sheets.
|
(3)
|
Included in Accrued liabilities on the Company’s consolidated balance sheets.
|
Note 7.
|
Derivative Financial Instruments
|
Derivative Assets
|
|
Balance Sheet
Location
|
|
December 31, 2018
|
|
|
Balance Sheet
Location
|
|
December 31, 2018
|
|
||
|
|
|
|
(In thousands)
|
|
|
|
(In thousands)
|
||||
Derivative assets not designated as hedging instruments
|
|
Prepaid expenses and other current assets
|
|
$
|
293
|
|
|
Other accrued liabilities
|
|
$
|
46
|
|
Derivative assets designated as hedging instruments
|
|
Prepaid expenses and other current assets
|
|
29
|
|
|
Other accrued liabilities
|
|
25
|
|
||
Total
|
|
|
|
$
|
322
|
|
|
|
|
$
|
71
|
|
As of December 31, 2018
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheets
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Assets
|
|
Gross Amounts Offset in the Consolidated Balance Sheets
|
|
Net Amounts Of Assets Presented in the Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Pledged
|
|
Net Amount
|
|||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
HSBC
|
|
$
|
100
|
|
|
$
|
—
|
|
|
$
|
100
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
100
|
|
Wells Fargo Bank
|
|
222
|
|
|
—
|
|
|
222
|
|
|
(68
|
)
|
|
—
|
|
|
154
|
|
||||||
Total
|
|
$
|
322
|
|
|
$
|
—
|
|
|
$
|
322
|
|
|
$
|
(68
|
)
|
|
$
|
—
|
|
|
$
|
254
|
|
As of December 31, 2018
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheets
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Liabilities
|
|
Gross Amounts Offset in the Consolidated Balance Sheets
|
|
Net Amounts Of Liabilities Presented in the Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Pledged
|
|
Net Amount
|
|||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
JP Morgan
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
Wells Fargo Bank
|
|
68
|
|
|
—
|
|
|
68
|
|
|
(68
|
)
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
71
|
|
|
$
|
(68
|
)
|
|
$
|
—
|
|
|
$
|
3
|
|
|
|
Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges
|
||||||||||||||||||
Year Ended December 31, 2018
|
|
Revenue
|
|
Cost of revenue
|
|
Research and development
|
|
Sales and marketing
|
|
General and administrative
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Statements of operations
|
|
$
|
464,918
|
|
|
$
|
372,843
|
|
|
$
|
58,794
|
|
|
$
|
52,593
|
|
|
$
|
28,209
|
|
Gains (losses) on cash flow hedge
|
|
$
|
315
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
(28
|
)
|
|
$
|
(11
|
)
|
Derivatives Not Designated as
Hedging Instruments
|
|
Location of Gains (Losses)
Recognized in Income on Derivative
|
|
December 31, 2018
|
||
|
|
|
|
(In thousands)
|
||
Foreign currency forward contracts
|
|
Other income (expense), net
|
|
$
|
589
|
|
Note 8.
|
Accumulated Other Comprehensive Income (Loss)
|
|
Unrealized gains (losses) on available-for-sale securities
|
|
Unrealized gains (losses) on derivatives
|
|
Estimated tax benefit (provision)
|
|
Total
|
||||||||
|
(In thousands)
|
||||||||||||||
Balance as of December 31, 2017
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other comprehensive income (loss) before reclassifications
|
(2
|
)
|
|
276
|
|
|
—
|
|
|
274
|
|
||||
Less: Amount reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
274
|
|
|
—
|
|
|
274
|
|
||||
Net current period other comprehensive income (loss)
|
(2
|
)
|
|
2
|
|
|
—
|
|
|
—
|
|
||||
Balance as of December 31, 2018
|
$
|
(2
|
)
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Gains (Losses) Recognized in OCI - Effective Portion
|
|
Gains (Losses) Reclassified from OCI to Income - Effective Portion
|
|
Affected Line Item in the Statements of Operations
|
||||
|
|
(In thousands)
|
|
|
||||||
Gains (losses) on cash flow hedge:
|
|
|
|
|
|
|
||||
Foreign currency contracts
|
|
$
|
276
|
|
|
$
|
315
|
|
|
Revenue
|
Foreign currency contracts
|
|
—
|
|
|
—
|
|
|
Cost of revenue
|
||
Foreign currency contracts
|
|
—
|
|
|
(2
|
)
|
|
Research and development
|
||
Foreign currency contracts
|
|
—
|
|
|
(28
|
)
|
|
Sales and marketing
|
||
Foreign currency contracts
|
|
—
|
|
|
(11
|
)
|
|
General and administrative
|
||
|
|
$
|
276
|
|
|
$
|
274
|
|
|
Total *
|
Note 9.
|
Other Income (Expense), Net
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(In thousands)
|
||||||||||
Foreign currency transaction gain (loss), net
|
$
|
(1,819
|
)
|
|
$
|
1,946
|
|
|
$
|
(512
|
)
|
Foreign currency contract gain
|
589
|
|
|
—
|
|
|
—
|
|
|||
Other
|
53
|
|
|
—
|
|
|
—
|
|
|||
Total
|
$
|
(1,177
|
)
|
|
$
|
1,946
|
|
|
$
|
(512
|
)
|
Note 10.
|
Net Income (Loss) Per Share
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(In thousands)
|
||||||||||
Numerator:
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
(75,483
|
)
|
|
$
|
6,549
|
|
|
$
|
(13,743
|
)
|
Denominator:
|
|
|
|
|
|
||||||
Weighted average common shares - basic
|
67,231
|
|
|
62,250
|
|
|
62,250
|
|
|||
Potentially dilutive common shares
|
—
|
|
|
—
|
|
|
—
|
|
|||
Stock option and RSU conversion
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|||
Weighted average common shares - dilutive
|
67,231
|
|
|
62,250
|
|
|
62,250
|
|
|||
|
|
|
|
|
|
||||||
Basic net income (loss) per share
|
$
|
(1.12
|
)
|
|
$
|
0.11
|
|
|
$
|
(0.22
|
)
|
Diluted net income (loss) per share
|
$
|
(1.12
|
)
|
|
$
|
0.11
|
|
|
$
|
(0.22
|
)
|
|
|
|
|
|
|
||||||
Anti-dilutive employee stock-based awards, excluded
|
1,109
|
|
|
—
|
|
|
—
|
|
(1)
|
On December 31, 2018,
6.8 million
of stock options and RSUs were added to the Company’s equity awards as issued and outstanding resulting from the adjustment of NETGEAR’s equity awards that were granted to both NETGEAR and Arlo employees and non-employee directors, a portion of which were converted as Arlo awards. The dilutive effect of these converted stock options and RSUs is reflected above per share by application of the treasury stock method and none are potentially dilutive.
|
Note 11.
|
Income Taxes
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(In thousands)
|
||||||||||
United States
|
$
|
(79,581
|
)
|
|
$
|
3,318
|
|
|
$
|
(15,432
|
)
|
International
|
4,870
|
|
|
4,359
|
|
|
1,772
|
|
|||
Total
|
$
|
(74,711
|
)
|
|
$
|
7,677
|
|
|
$
|
(13,660
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(In thousands)
|
||||||||||
Current:
|
|
|
|
|
|
||||||
U.S. Federal
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
16
|
|
|
260
|
|
|
22
|
|
|||
Foreign
|
1,425
|
|
|
1,255
|
|
|
727
|
|
|||
|
1,441
|
|
|
1,515
|
|
|
749
|
|
|||
Deferred:
|
|
|
|
|
|
||||||
U.S. Federal
|
—
|
|
|
(66
|
)
|
|
(129
|
)
|
|||
State
|
—
|
|
|
—
|
|
|
(180
|
)
|
|||
Foreign
|
(669
|
)
|
|
(321
|
)
|
|
(357
|
)
|
|||
|
(669
|
)
|
|
(387
|
)
|
|
(666
|
)
|
|||
Total
|
$
|
772
|
|
|
$
|
1,128
|
|
|
$
|
83
|
|
|
Year Ended December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(In thousands)
|
||||||
Deferred Tax Assets:
|
|
|
|
||||
Accruals and allowances
|
$
|
17,974
|
|
|
$
|
7,339
|
|
Net operating loss carryforwards
|
2,946
|
|
|
3,478
|
|
||
Stock-based compensation
|
1,927
|
|
|
931
|
|
||
Deferred rent
|
373
|
|
|
—
|
|
||
Deferred revenue
|
2,573
|
|
|
1,688
|
|
||
Tax credit carryforwards
|
—
|
|
|
3,504
|
|
||
Depreciation and amortization
|
567
|
|
|
—
|
|
||
Total deferred tax assets
|
26,360
|
|
|
16,940
|
|
||
Deferred Tax Liabilities:
|
|
|
|
||||
Depreciation and amortization
|
(775
|
)
|
|
(464
|
)
|
||
Total deferred tax liabilities
|
(775
|
)
|
|
(464
|
)
|
||
Valuation Allowance
|
(24,477
|
)
|
|
(15,611
|
)
|
||
Net deferred tax assets
|
$
|
1,108
|
|
|
$
|
865
|
|
|
Year Ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Tax at federal statutory rate
|
21.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State, net of federal benefit
|
5.9
|
%
|
|
(8.7
|
)%
|
|
2.1
|
%
|
Impact of international operations
|
0.4
|
%
|
|
(6.2
|
)%
|
|
9.3
|
%
|
Stock-based compensation
|
(0.1
|
)%
|
|
(5.0
|
)%
|
|
—
|
%
|
Tax credits
|
1.5
|
%
|
|
(6.8
|
)%
|
|
2.9
|
%
|
Valuation allowance
|
(27.0
|
)%
|
|
(105.1
|
)%
|
|
(51.4
|
)%
|
Impact of the Tax Act
|
—
|
%
|
|
115.6
|
%
|
|
—
|
%
|
Non-deductible transaction costs
|
(2.6
|
)%
|
|
—
|
%
|
|
—
|
%
|
Others
|
(0.1
|
)%
|
|
(4.1
|
)%
|
|
1.5
|
%
|
Provision for income taxes
|
(1.0
|
)%
|
|
14.7
|
%
|
|
(0.6
|
)%
|
|
Federal, State, and Foreign Tax
|
||
|
(In thousands)
|
||
Balance as of December 31, 2016
|
$
|
676
|
|
Additions based on tax positions related to the current year
|
361
|
|
|
Additions for tax positions of prior years
|
30
|
|
|
Reductions for tax positions of prior years
|
(45
|
)
|
|
Balance as of December 31, 2017
|
$
|
1,022
|
|
Additions based on tax positions related to the current year
|
338
|
|
|
Adjustments to Net parent investments
|
(1,338
|
)
|
|
Balance as of December 31, 2018
|
$
|
22
|
|
Note 12.
|
Commitments and Contingencies
|
2019
|
$
|
4,634
|
|
2020
|
5,813
|
|
|
2021
|
5,678
|
|
|
2022
|
5,580
|
|
|
2023
|
4,903
|
|
|
Thereafter
|
19,252
|
|
|
Total
|
$
|
45,860
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(In thousands)
|
||||||||||
Balance at the beginning of the period
|
$
|
31,756
|
|
|
$
|
15,949
|
|
|
$
|
6,490
|
|
Reclassified to sales returns upon adoption of ASC 606
(1)
|
(28,713
|
)
|
|
—
|
|
|
—
|
|
|||
Provision for warranty obligation made during the period
|
1,477
|
|
|
51,709
|
|
|
22,912
|
|
|||
Settlements made during the period
|
(808
|
)
|
|
(35,902
|
)
|
|
(13,453
|
)
|
|||
Balance at the end of the period
|
$
|
3,712
|
|
|
$
|
31,756
|
|
|
$
|
15,949
|
|
Note 13.
|
Employee Benefit Plans
|
|
Number of Shares
|
|
|
(In thousands)
|
|
Shares reserved as of August 2, 2018
|
7,500
|
|
Granted at IPO
(1)
|
(3,403
|
)
|
Granted during the period
|
(137
|
)
|
Additional authorized shares in the Distribution
|
6,823
|
|
Converted in the Distribution
(2)
|
(6,823
|
)
|
Cancelled
|
9
|
|
Shares available for grants as of December 31, 2018
|
3,969
|
|
(1)
|
Including Arlo IPO Options of
2.8 million
shares granted to the Company’s Named Executive Officers (“NEOs”) with performance-based vesting criteria (in addition to service-based vesting criteria for any of such IPO Options that are deemed to have been earned). As of
December 31, 2018
, it had not yet been determined the extent to which (if at all) the performance-based vesting criteria had been satisfied except for Tranche 4 Performance Option. Therefore, this line item includes all such performance-based IPO Options granted during the year ended
December 31, 2018
, reported at the maximum possible number of shares that may ultimately be issuable if all applicable performance-based criteria are achieved at their maximum levels and all applicable service-based criteria are fully satisfied. Tranche 4 Performance Option’s measurement period was completed and none of the shares were expected to vest. The Company recorded an adjustment of
$0.2 million
reducing the stock-based compensation expense during the fourth fiscal quarter of 2018 as a result of the final determination of the performance metrics.
|
(2)
|
On December 31, 2018, in connection with the Distribution, certain NETGEAR equity awards held by Arlo non-employee directors and employees and NETGEAR non-employee directors and employees were adjusted into equity awards with respect to Arlo common stock and NETGEAR common stock as described in more detail in the employee matters agreement.
|
Expected life (in years)
|
|
6.3
|
|
Risk-free interest rate
|
|
2.86
|
%
|
Expected volatility
|
|
40.0
|
%
|
Dividend yield
|
|
—
|
|
|
Number of Shares
|
|
Weighted Average Exercise Price Per Share
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
(3)
|
|||||
|
(In thousands)
|
|
(In dollars)
|
|
(In years)
|
|
(In thousands)
|
|||||
Outstanding as of August 2, 2018
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
Granted at IPO
(1)
|
3,343
|
|
|
$
|
16.00
|
|
|
|
|
|
||
Converted in the Distribution
(2)
|
3,866
|
|
|
$
|
8.69
|
|
|
|
|
|
||
Outstanding as of December 31, 2018
|
7,209
|
|
|
$
|
12.08
|
|
|
7.84
|
|
$
|
8,114
|
|
Vested and expected to vest as of December 31, 2018
|
7,209
|
|
|
$
|
12.08
|
|
|
7.84
|
|
$
|
8,114
|
|
Exercisable Options as of December 31, 2018
|
2,429
|
|
|
$
|
7.10
|
|
|
5.02
|
|
$
|
6,989
|
|
(1)
|
Including Arlo IPO Options of
2.8 million
shares granted to the Company’s NEOs with performance-based vesting criteria (in addition to service-based vesting criteria for any of such IPO Options that are deemed to have been earned). As of
December 31, 2018
, it had not yet been determined the extent to which (if at all) the performance-based vesting criteria had been satisfied except for Tranche 4 Performance Option. Therefore, this line item includes all such performance-based IPO Options granted during the year ended
December 31, 2018
, reported at the maximum possible number of shares that may ultimately be issuable if all applicable performance-based criteria are achieved at their maximum levels and all applicable service-based criteria are fully satisfied. Tranche 4 Performance Option’s measurement period was completed and none of the shares were expected to vest. The Company recorded an adjustment of
$0.2 million
reducing the stock-based compensation expense during the fourth fiscal quarter of 2018 as a result of the final determination of the performance metrics.
|
(2)
|
On December 31, 2018, in connection with the Distribution, certain NETGEAR equity awards held by Arlo non-employee directors and employees and NETGEAR non-employee directors and employees were adjusted into equity awards with respect to Arlo common stock and NETGEAR common stock as described in more detail in the employee matters agreement.
|
(3)
|
Representing the total pre-tax intrinsic values (the difference between the Company’s closing stock price on the last trading day of 2018 and the exercise price, multiplied by the number of shares underlying the in-the-money options) that would have been received by the option holders had all option holders exercised their options on
December 31, 2018
. This amount changes based on the fair market value of the Company’s stock.
|
|
Year Ended December 31, 2018
|
||
|
(In millions, except per share data)
|
||
Total intrinsic value of options exercised
|
$
|
—
|
|
Total fair value of options vested
|
$
|
—
|
|
Weighted-average grant date fair value per share of options granted
|
$
|
7.02
|
|
|
Options Outstanding
(1)
|
|
Options Exercisable
(1)
|
||||||||||||
Range of Exercise Prices
|
Shares
Outstanding
|
|
Weighted-
Average
Remaining
Contractual
Life
|
|
Weighted-
Average
Exercise
Price Per
Share
|
|
Shares
Exercisable
|
|
Weighted-
Average
Exercise
Price Per
Share
|
||||||
|
(In thousands)
|
|
(In years)
|
|
(In dollars)
|
|
(In thousands)
|
|
(In dollars)
|
||||||
$2.51 - $6.94
|
1,534
|
|
|
4.69
|
|
$
|
6.52
|
|
|
1,466
|
|
|
$
|
6.53
|
|
$6.96 - $8.76
|
1,566
|
|
|
6.55
|
|
$
|
8.18
|
|
|
951
|
|
|
$
|
7.95
|
|
$10.09 - $13.23
|
100
|
|
|
9.27
|
|
$
|
11.97
|
|
|
12
|
|
|
$
|
10.09
|
|
$14.39 - $14.39
|
666
|
|
|
9.07
|
|
$
|
14.39
|
|
|
—
|
|
|
$
|
—
|
|
$16.00 - $16.00
|
3,343
|
|
|
9.59
|
|
$
|
16.00
|
|
|
—
|
|
|
$
|
—
|
|
$2.51 - $16.00
|
7,209
|
|
|
7.84
|
|
$
|
12.08
|
|
|
2,429
|
|
|
$
|
7.10
|
|
(1)
|
Including and reflecting the adjustments on December 31, 2018, in connection with the Distribution from NETGEAR options.
|
|
Stock Options
|
|
ESPP
(1)
|
||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
||||||
Expected life (in years)
|
4.4
|
|
|
4.4
|
|
|
4.4
|
|
|
0.5
|
|
|
0.5
|
|
|
0.5
|
|
Risk-free interest rate
|
2.32
|
%
|
|
1.66
|
%
|
|
1.28
|
%
|
|
1.81
|
%
|
|
0.93
|
%
|
|
0.43
|
%
|
Expected volatility
|
30.9
|
%
|
|
31.6
|
%
|
|
35.4
|
%
|
|
37.1
|
%
|
|
29.7
|
%
|
|
38.3
|
%
|
Dividend yield
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(1)
|
Arlo employees have completed their participation into NETGEAR’s ESPP by the end of the second quarter of fiscal 2018. As of
December 31, 2018
,
no
shares had been purchased under the 2018 ESPP by Arlo employees, as the program was suspended until the completion of the Distribution.
|
|
Number of Shares
|
|
Weighted Average Exercise Price Per Share
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|||||
|
(In thousands)
|
|
(In dollars)
|
|
(In years)
|
|
(In thousands)
|
|||||
Outstanding as of December 31, 2017
|
78
|
|
|
$
|
35.56
|
|
|
|
|
|
||
Granted
|
60
|
|
|
$
|
70.15
|
|
|
|
|
|
||
Converted in the Distribution
(1)
|
283
|
|
|
$
|
26.53
|
|
|
|
|
|
||
Exercised
|
(11
|
)
|
|
$
|
20.30
|
|
|
|
|
|
||
Cancelled
|
(6
|
)
|
|
$
|
28.59
|
|
|
|
|
|
||
Cancelled in the Distribution
(1)
|
(276
|
)
|
|
$
|
45.11
|
|
|
|
|
|
||
Transferred
(2)
|
155
|
|
|
$
|
36.71
|
|
|
|
|
|
||
Outstanding as of December 31, 2018
|
283
|
|
|
$
|
26.53
|
|
|
6.82
|
|
$
|
7,219
|
|
Vested and expected to vest as of December 31, 2018
|
283
|
|
|
$
|
26.53
|
|
|
6.82
|
|
$
|
7,219
|
|
Exercisable Options as of December 31, 2018
|
152
|
|
|
$
|
21.27
|
|
|
5.36
|
|
$
|
4,684
|
|
(1)
|
On December 31, 2018, in connection with the Distribution, certain NETGEAR equity awards held by Arlo non-employee directors and employees and NETGEAR non-employee directors and employees were adjusted into equity awards with respect to Arlo common stock and NETGEAR common stock as described in more detail in the employee matters agreement.
|
(2)
|
Transferred options are attributable to employees that transferred from other NETGEAR’s divisions.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(In millions, except per share data)
|
||||||||||
Total intrinsic value of options exercised
|
$
|
0.6
|
|
|
$
|
0.5
|
|
|
$
|
0.8
|
|
Total fair value of options vested
|
$
|
1.1
|
|
|
$
|
0.2
|
|
|
$
|
0.2
|
|
Weighted-average grant date fair value per share of NETGEAR’s stock options granted to employees specifically identifiable to Arlo
|
$
|
20.63
|
|
|
$
|
12.25
|
|
|
$
|
12.28
|
|
Range of Exercise Prices
|
Number of Shares
|
|
Weighted Average Grant Date Fair Value Per Share
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|||||
|
(In thousands)
|
|
(In dollars)
|
|
(In years)
|
|
(In thousands)
|
|||||
Outstanding as of August 2, 2018
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
Granted
|
197
|
|
|
$
|
14.46
|
|
|
|
|
|
||
Converted in the Distribution
(1)
|
2,957
|
|
|
$
|
10.67
|
|
|
|
|
|
||
Vested
|
(4
|
)
|
|
$
|
10.44
|
|
|
|
|
|
|
|
Cancelled
|
(9
|
)
|
|
$
|
22.71
|
|
|
|
|
|
||
Outstanding as of December 31, 2018
|
3,141
|
|
|
$
|
12.22
|
|
|
1.44
|
|
$
|
31,349
|
|
(1)
|
On December 31, 2018, in connection with the Distribution, certain NETGEAR equity awards held by Arlo non-employee directors and employees and NETGEAR non-employee directors and employees were adjusted into equity awards with respect to Arlo common stock and NETGEAR common stock as described in more detail in the employee matters agreement.
|
|
Year Ended December 31, 2018
|
||
|
(In millions, except per share data)
|
||
Total intrinsic value of RSUs vested (the release date fair value)
|
$
|
0.04
|
|
Total fair value of RSUs vested (the grant date fair value)
|
$
|
0.04
|
|
weighted-average fair value of RSUs granted
|
$
|
14.46
|
|
|
Number of Shares
|
|
Weighted Average Grant Date Fair Value Per Share
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|||||
|
(In thousands)
|
|
(In dollars)
|
|
(In years)
|
|
(In thousands)
|
|||||
Outstanding as of December 31, 2017
|
132
|
|
|
$
|
45.54
|
|
|
|
|
|
||
Granted
|
339
|
|
|
$
|
67.24
|
|
|
|
|
|
||
Converted in the Distribution
(1)
|
521
|
|
|
$
|
30.91
|
|
|
|
|
|
||
Vested
|
(119
|
)
|
|
$
|
56.70
|
|
|
|
|
|
||
Cancelled
|
(7
|
)
|
|
$
|
59.85
|
|
|
|
|
|
||
Cancelled in the Distribution
(1)
|
(530
|
)
|
|
$
|
59.27
|
|
|
|
|
|
||
Transferred
(2)
|
185
|
|
|
$
|
43.60
|
|
|
|
|
|
||
Outstanding as of December 31, 2018
|
521
|
|
|
$
|
34.89
|
|
|
1.49
|
|
$
|
27,111
|
|
(1)
|
On December 31, 2018, in connection with the Distribution, certain NETGEAR equity awards held by Arlo non-employee directors and employees and NETGEAR non-employee directors and employees were adjusted into equity awards with respect to Arlo common stock and NETGEAR common stock as described in more detail in the employee matters agreement.
|
(2)
|
Transferred RSUs are attributable to employees that transferred from other NETGEAR’s divisions.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(In millions, except per share data)
|
||||||||||
Total intrinsic value of RSUs vested (the release date fair value)
|
$
|
6.9
|
|
|
$
|
2.7
|
|
|
$
|
1.4
|
|
Total fair value of RSUs vested (the grant date fair value)
|
$
|
5.0
|
|
|
$
|
2.0
|
|
|
$
|
1.0
|
|
weighted-average fair value of RSUs granted
|
$
|
67.24
|
|
|
$
|
52.89
|
|
|
$
|
41.92
|
|
|
Year Ended December 31,
|
||||||||||||||||||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||||||||||||||||||||||||||
|
Direct
(1)
|
|
Indirect
|
|
Total
|
|
Direct
|
|
Indirect
|
|
Total
|
|
Direct
|
|
Indirect
|
|
Total
|
||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||||||
Cost of revenue
|
$
|
608
|
|
|
$
|
583
|
|
|
$
|
1,191
|
|
|
$
|
102
|
|
|
$
|
599
|
|
|
$
|
701
|
|
|
$
|
61
|
|
|
$
|
266
|
|
|
$
|
327
|
|
Research and development
|
3,078
|
|
|
396
|
|
|
3,474
|
|
|
1,959
|
|
|
455
|
|
|
2,414
|
|
|
1,349
|
|
|
195
|
|
|
1,544
|
|
|||||||||
Sales and marketing
|
1,992
|
|
|
969
|
|
|
2,961
|
|
|
390
|
|
|
866
|
|
|
1,256
|
|
|
110
|
|
|
407
|
|
|
517
|
|
|||||||||
General and administrative
|
3,153
|
|
|
2,100
|
|
|
5,253
|
|
|
—
|
|
|
2,547
|
|
|
2,547
|
|
|
—
|
|
|
1,216
|
|
|
1,216
|
|
|||||||||
Total stock-based compensation
|
$
|
8,831
|
|
|
$
|
4,048
|
|
|
$
|
12,879
|
|
|
$
|
2,451
|
|
|
$
|
4,467
|
|
|
$
|
6,918
|
|
|
$
|
1,520
|
|
|
$
|
2,084
|
|
|
$
|
3,604
|
|
(1)
|
Reflecting expenses for those legacy NETGEAR stock-based plans that have converted to equivalent Arlo stock-based plans upon the spin-off transaction.
|
Note 14.
|
Segment and Geographic Information
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(In thousands)
|
||||||||||
United States (“U.S.”)
|
$
|
359,936
|
|
|
$
|
279,504
|
|
|
$
|
142,129
|
|
Americas (excluding U.S.)
|
16,869
|
|
|
13,167
|
|
|
6,035
|
|
|||
EMEA
|
65,462
|
|
|
58,795
|
|
|
27,457
|
|
|||
APAC
|
22,651
|
|
|
19,192
|
|
|
8,983
|
|
|||
Total revenue
|
$
|
464,918
|
|
|
$
|
370,658
|
|
|
$
|
184,604
|
|
|
As of
|
||||||
|
December 31,
2018 |
|
December 31,
2017 |
||||
|
(In thousands)
|
||||||
United States (“U.S.”)
|
$
|
45,053
|
|
|
$
|
2,053
|
|
Americas (excluding U.S.)
|
218
|
|
|
61
|
|
||
EMEA
|
567
|
|
|
1
|
|
||
China
|
3,040
|
|
|
1,702
|
|
||
APAC (excluding China)
|
550
|
|
|
66
|
|
||
Total property and equipment, net
|
$
|
49,428
|
|
|
$
|
3,883
|
|
Note 15.
|
Related Party Transactions
|
•
|
a transition services agreement with NETGEAR, governing NETGEAR’s provision of various services to the Company, and the Company’s provision of various services to NETGEAR, on a transitional basis (the “transition services agreement”). During the year ended
December 31, 2018
,
$6.3 million
transition services agreement-related costs were incurred, which included
$0.4 million
for research and development,
$1.6 million
for sales and marketing, and
$4.3 million
for general and administrative expense;
|
•
|
a tax matters agreement with NETGEAR that governs the respective rights, responsibilities and obligations of NETGEAR and Arlo after the completion of the IPO with respect to tax matters (including responsibility for taxes attributable to the Company and its subsidiaries, entitlement to refunds, allocation of tax attributes, preparation of tax returns, control of tax contests and other matters) (the “tax matters agreement”);
|
•
|
an employee matters agreement with NETGEAR that addresses employment, compensation and benefits matters, including the allocation and treatment of assets and liabilities relating to employees and compensation and benefit plans and programs in which the Company’s employees participate prior to the distribution, as well as other human resources, employment and employee benefit matters (the “employee matters agreement”);
|
•
|
an intellectual property rights cross-license agreement with NETGEAR, which governs the Company’s and NETGEAR’s rights, responsibilities and obligations to use NETGEAR and Arlo intellectual property, respectively (the “intellectual property rights cross-license agreement”); and
|
•
|
a registration rights agreement with NETGEAR, pursuant to which the Company granted NETGEAR and its affiliates certain registration rights with respect to Arlo’s common stock owned by them (the “registration rights agreement”).
|
Note 16.
|
Subsequent Events
|
|
December 31,
2018 |
|
September 30,
2018 |
|
July 1,
2018 |
|
April 1,
2018 |
||||||||
|
(In thousands, except per share amounts)
|
||||||||||||||
Revenue
(1)
|
$
|
122,158
|
|
|
$
|
131,174
|
|
|
$
|
110,948
|
|
|
$
|
100,638
|
|
Gross profit
|
$
|
4,981
|
|
|
$
|
29,747
|
|
|
$
|
28,294
|
|
|
$
|
29,053
|
|
Provision for (benefit from) income taxes
|
$
|
(58
|
)
|
|
$
|
223
|
|
|
$
|
288
|
|
|
$
|
319
|
|
Net loss
|
$
|
(39,073
|
)
|
|
$
|
(13,225
|
)
|
|
$
|
(17,822
|
)
|
|
$
|
(5,363
|
)
|
Net loss per share—basic
(2)
|
$
|
(0.53
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
(0.09
|
)
|
Net loss per share—diluted
(3)
|
$
|
(0.53
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
||||||||
|
December 31,
2017 |
|
October 1,
2017 |
|
July 2,
2017 |
|
April 2,
2017 |
||||||||
|
(In thousands, except per share amounts)
|
||||||||||||||
Revenue
(1)
|
$
|
124,774
|
|
|
$
|
104,887
|
|
|
$
|
79,194
|
|
|
$
|
61,803
|
|
Gross profit
|
$
|
29,817
|
|
|
$
|
28,352
|
|
|
$
|
16,712
|
|
|
$
|
16,353
|
|
Provision for income taxes
|
$
|
327
|
|
|
$
|
445
|
|
|
$
|
137
|
|
|
$
|
219
|
|
Net income (loss)
|
$
|
2,663
|
|
|
$
|
6,014
|
|
|
$
|
(2,152
|
)
|
|
$
|
24
|
|
Net income (loss) per share—basic
(2)
|
$
|
0.04
|
|
|
$
|
0.10
|
|
|
$
|
(0.03
|
)
|
|
$
|
—
|
|
Net income (loss) per share—diluted
(3)
|
$
|
0.04
|
|
|
$
|
0.10
|
|
|
$
|
(0.03
|
)
|
|
$
|
—
|
|
(1)
|
On January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606) (“ASC 606”) and applied this guidance to those contracts which were not completed at the date of adoption using the modified retrospective method. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods (“ASC 605”). The Company recognized the cumulative effect of initially applying ASC 606 as an adjustment to the opening balance of Net parent investment.
|
(2)
|
Net loss per share basic and diluted are computed independently for each quarters presented based on the weighted-average basic and fully diluted shares outstanding for each quarters. As a result, the sum of quarterly Net loss per share basic and diluted information may not equal annual Net loss per share basic and diluted.
|
(3)
|
On December 31, 2018,
6.8 million
of stock options and RSUs were added to the Company’s equity awards as issued and outstanding resulting from the adjustment of NETGEAR’s equity awards that were granted to both NETGEAR and Arlo employees and non-employee directors, a portion of which were converted as Arlo awards. The dilutive effect of these converted stock options and RSUs is reflected above per share by application of the treasury stock method and none are potentially dilutive.
|
Item 9.
|
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
Item 9B.
|
Other Information
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
Item 11.
|
Executive Compensation
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
Item 14.
|
Principal Accounting Fees and Services
|
Item 15.
|
Exhibits and Financial Statement Schedules
|
|
Page
|
Report of Independent Registered Public Accounting Firm
|
|
Consolidated Balance Sheets as of December 31, 2018 and 2017
|
|
Consolidated Statements of Operations for the three years ended December 31, 2018, 2017 and 2016
|
|
Consolidated Statements of Comprehensive Income for the three years ended December 31, 2018, 2017 and 2016
|
|
Consolidated Statements of Stockholders’ Equity for the three years ended December 31, 2018, 2017 and 2016
|
|
Consolidated Statements of Cash Flows for the three years ended December 31, 2018, 2017 and 2016
|
|
Notes to Consolidated Financial Statements
|
|
Quarterly Financial Data (unaudited)
|
|
Balance
as of the
beginning of year
|
|
Additions
|
|
Deductions
|
|
Balance
as of the end of year
|
||||||||
|
(In thousands)
|
||||||||||||||
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
||||||||
Year ended December 31, 2018
|
$
|
207
|
|
|
$
|
—
|
|
|
$
|
(80
|
)
|
|
$
|
127
|
|
Year ended December 31, 2017
|
$
|
206
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
207
|
|
Year ended December 31, 2016
|
$
|
206
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
206
|
|
Allowance for deferred tax assets:
|
|
|
|
|
|
|
|
||||||||
Year ended December 31, 2018
|
$
|
15,611
|
|
|
$
|
13,760
|
|
|
$
|
(4,894
|
)
|
|
$
|
24,477
|
|
Year ended December 31, 2017
|
$
|
22,155
|
|
|
$
|
10,896
|
|
|
$
|
(17,440
|
)
|
|
$
|
15,611
|
|
Year ended December 31, 2016
|
$
|
15,170
|
|
|
$
|
10,386
|
|
|
$
|
(3,401
|
)
|
|
$
|
22,155
|
|
|
|
|
|
Incorporated by Reference
|
|
|
||||
Exhibit Number
|
|
Exhibit Description
|
|
Form
|
|
Date
|
|
Number
|
|
Filed Herewith
|
|
|
8-K
|
|
8/7/2018
|
|
3.1
|
|
|
||
|
|
8-K
|
|
8/7/2018
|
|
3.2
|
|
|
||
|
|
S-1/A
|
|
7/23/2018
|
|
4.1
|
|
|
||
|
|
8-K
|
|
8/7/2018
|
|
10.1
|
|
|
||
|
|
8-K
|
|
8/7/2018
|
|
10.2
|
|
|
||
|
|
8-K
|
|
8/7/2018
|
|
10.3
|
|
|
||
|
|
8-K
|
|
8/7/2018
|
|
10.4
|
|
|
||
|
|
8-K
|
|
8/7/2018
|
|
10.5
|
|
|
||
|
|
8-K
|
|
8/7/2018
|
|
10.6
|
|
|
||
|
|
S-1
|
|
7/6/2018
|
|
10.7
|
|
|
||
10.8
*
|
|
|
8-K
|
|
8/7/2018
|
|
10.7
|
|
|
|
10.9
*
|
|
|
8-K
|
|
8/7/2018
|
|
10.8
|
|
|
|
10.10
*
|
|
|
8-K
|
|
8/7/2018
|
|
10.9
|
|
|
|
10.11
*
|
|
|
8-K
|
|
8/7/2018
|
|
10.10
|
|
|
|
10.12
*
|
|
|
8-K
|
|
8/7/2018
|
|
10.11
|
|
|
|
10.13
*
|
|
|
8-K
|
|
8/7/2018
|
|
10.12
|
|
|
|
10.14
*
|
|
|
|
|
|
|
|
|
X
|
|
10.15
*
|
|
|
8-K
|
|
8/7/2018
|
|
10.14
|
|
|
|
10.16
*
|
|
|
S-1/A
|
|
7/23/2018
|
|
10.16
|
|
|
|
10.17
*
|
|
|
10-Q
|
|
8/27/2018
|
|
10.17
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
X
|
||
101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
X
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
X
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
X
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
X
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
X
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
X
|
*
|
|
Indicates management contract or compensatory plan or arrangement.
|
|
|
|
|
|
|
|
|
Item 16.
|
Form 10-K Summary
|
ARLO TECHNOLOGIES, INC.
|
Registrant
|
|
|
|
/s/ MATTHEW MCRAE
|
Matthew McRae
|
Chief Executive Officer
|
(Principal Executive Officer)
|
|
|
|
/s/ CHRISTINE M. GORJANC
|
Christine M. Gorjanc
|
Chief Financial Officer
|
(Principal Financial and Accounting Officer)
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ MATTHEW MCRAE
|
|
Chief Executive Officer
|
|
February 22, 2019
|
Matthew McRae
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ CHRISTINE M. GORJANC
|
|
Chief Financial Officer
|
|
February 22, 2019
|
Christine M. Gorjanc
|
|
(Principal Financial and Accounting Officer)
|
|
|
|
|
|
|
|
/s/ PRASHANT AGGARWAL
|
|
Director
|
|
February 22, 2019
|
Prashant Aggarwal
|
|
|
|
|
|
|
|
|
|
/s/ JOCELYN E. CARTER-MILLER
|
|
Director
|
|
February 22, 2019
|
Jocelyn E. Carter-Miller
|
|
|
|
|
|
|
|
|
|
/s/ RALPH E. FAISON
|
|
Director
|
|
February 22, 2019
|
Ralph E. Faison
|
|
|
|
|
|
|
|
|
|
/s/ MICHAEL W. POPE
|
|
Director
|
|
February 22, 2019
|
Michael W. Pope
|
|
|
|
|
|
|
|
|
|
/s/ GRADY K. SUMMERS
|
|
Director
|
|
February 22, 2019
|
Grady K. Summers
|
|
|
|
|
Arlo Technologies, Inc.
|
Arlo Technologies Australia Pty Ltd
|
Arlo Technologies Canada Limited
|
Arlo France SAS
|
Arlo Germany GmbH
|
Arlo Hong Kong Limited
|
Arlo Asia Limited
|
Arlo Technologies International Ltd
|
Arlo Technologies B.V.
|
Arlo Sweden AB
|
Arlo Taiwan Co. Ltd
|
Arlo Technologies UK Limited
|
Arlo Italy Srl
|
Arlo India
|
Avaak, Inc.
|
Placemeter Inc.
|
Placemeter France SAS
|
1.
|
I have reviewed this Annual Report on Form 10-K of Arlo Technologies, Inc. (the “Registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
c.
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting;
|
5.
|
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
|
/s/ MATTHEW MCRAE
|
|
Matthew McRae
|
|
Chief Executive Officer
|
|
Arlo Technologies, Inc.
|
1.
|
I have reviewed this Annual Report on Form 10-K of Arlo Technologies, Inc. (the “Registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
c.
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting;
|
5.
|
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
|
/s/ CHRISTINE M. GORJANC
|
|
Christine M. Gorjanc
|
|
Chief Financial Officer
|
|
Arlo Technologies, Inc.
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
By:
|
|
/s/ MATTHEW MCRAE
|
|
|
Matthew McRae
|
|
|
Chief Executive Officer
|
|
|
Arlo Technologies, Inc.
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
By:
|
|
/s/ CHRISTINE M. GORJANC
|
|
|
Christine M. Gorjanc
|
|
|
Chief Financial Officer
|
|
|
Arlo Technologies, Inc.
|