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SAN JOSE, Calif.--(BUSINESS WIRE)--Arlo Technologies, Inc. (NYSE: ARLO), a leading internet-connected security camera brand, today reported financial results for the third quarter ended September 27, 2020. Financial Highlights (1) The Arlo team delivered another strong quarter that exceeded our guidance in every measure. Paid account growth and strong performance from our European partner, Verisure, helped contribute to revenue coming in at $110.2 million for a growth rate of 65% sequentially and 4% year over year. We also made considerable progress on gross margins both product and service and maintained our operating discipline to improve our non-GAAP net loss by $16.3 million year over year, said Matthew McRae, Chief Executive Officer of Arlo Technologies. In our most prolific new product quarter ever, we added four new cameras to our line up and entered a large and fast-growing market with our wire-free video doorbell. All of these new products are on our new business model, a free, 90-day trial of Arlo Smart, and should add to our service revenue growth. Fueled by our robust innovation and new business model, the third quarter marks another example of the progress Arlo is making in the business. Three Months Ended Nine Months Ended September 27, 2020 June 28, 2020 September 29, 2019 September 27, 2020 September 29, 2019 (in thousands, except percentage and per share data) Revenue $ 110,236 $ 66,632 $ 106,116 $ 242,318 $ 247,594 GAAP Gross Margin 19.4 % 8.2 % 9.9 % 12.7 % 8.9 % Non-GAAP Gross Margin (1) 20.6 % 9.6 % 10.7 % 14.0 % 9.9 % GAAP Net Income (Loss) per Diluted Share $ (0.22 ) $ (0.38 ) $ (0.41 ) $ (1.11 ) $ (1.41 ) Non-GAAP Net Income (Loss) per Diluted Share (1) $ (0.10 ) $ (0.31 ) $ (0.32 ) $ (0.74 ) $ (1.15 ) _________________________ (1) Reconciliation of financial measures computed on a GAAP basis to financial measures computed on a non-GAAP basis are provided at the end of this press release. Business Highlights Fourth Quarter 2020 Business Outlook (2) A reconciliation of our business outlook on a GAAP and non-GAAP basis is provided in the following table: Three Months Ending December 31, 2020 Revenue Net Loss per Diluted Share (in millions, except per share data) GAAP $105.0 - $115.0 $(0.36) - $(0.26) Estimated adjustments for (1): Stock-based compensation expense 0.10 Tax effects of non-GAAP adjustments Non-GAAP $105.0 - $115.0 $(0.26) - $(0.16) _________________________ (1) Business outlook does not include estimates for any currently unknown income and expense items which, by their nature, could arise late in a quarter, including: litigation reserves, net; acquisition-related charges; impairment charges; discrete tax benefits or detriments relating to tax windfalls or shortfalls from equity awards; and any additional impacts relating to the implementation of U.S. tax reform. New material income and expense items such as these could have a significant effect on our guidance and future results. Investor Conference Call / Webcast Details Arlo will review the third quarter of 2020 results and discuss managements expectations for the fourth quarter of 2020 today, Thursday, November 5, 2020 at 5:00 p.m. ET (2:00 p.m. PT). The toll-free dial-in number for the live audio call is (866) 393-4306. The international dial-in number for the live audio call is (734) 385-2616. The conference ID for the call is 3079383. A live webcast of the conference call will be available on Arlos Investor Relations website at https://investor.arlo.com. A replay of the call will be available via the web at https://investor.arlo.com. About Arlo Technologies, Inc. Arlo (NYSE: ARLO) is the award-winning, industry leader that is transforming the way people experience the connected lifestyle. Arlos 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. Arlos 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. To date, Arlo has launched several categories of award-winning smart connected devices, including wire-free smart Wi-Fi and LTE-enabled cameras, video doorbells and floodlight cameras. With a mission to bring users peace of mind, Arlo is as passionate about protecting user privacy as it is about safeguarding homes and families. Arlo is committed to supporting industry standards for data protection designed to keep users personal information private and in their control. Arlo does not monetize personal data, provides enhanced controls for user data, supports privacy legislation, keeps user data safely secure, and puts security at the forefront of company culture. 2020 Arlo Technologies, Inc., Arlo and the Arlo logo are trademarks and/or registered trademarks of Arlo Technologies, Inc. and/or certain of its affiliates in the United States and/or other countries. Other brand and product names are for identification purposes only and may be trademarks or registered trademarks of their respective holder(s). The information contained herein is subject to change without notice. Arlo shall not be liable for technical or editorial errors or omissions contained herein. All rights reserved. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. The words anticipate, expect, believe, will, may, should, estimate, project, outlook, forecast or other similar words are used to identify such forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. The forward-looking statements represent Arlo Technologies, Inc.s expectations or beliefs concerning future events based on information available at the time such statements were made and include statements regarding: Arlos future operating performance and financial condition, expected revenue, GAAP and non-GAAP gross margins, operating margins, and tax expense; expectations regarding market expansion and future growth; plans to invest in product innovation; Arlo's future product offerings; and the quote from Arlo's Chief Executive Officer. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: future demand for the Company's products may be lower than anticipated; consumers may choose not to adopt the Company's new product offerings or adopt competing products; product performance may be adversely affected by real world operating conditions; the Company may be unsuccessful or experience delays in manufacturing and distributing its new and existing products; telecommunications service providers may choose to slow their deployment of the Company's products or utilize competing products; the Company may be unable to collect receivables as they become due; the Company may fail to manage costs, including the cost of developing new products and manufacturing and distribution of its existing offerings; the Company may incur additional costs and charges associated with the transactions contemplated by the Verisure partnership; the Company may not receive the minimum commitment amounts from Verisure; the COVID-19 pandemic could have an adverse impact on the Company's business, operations and the markets and communities in which Arlo and its partners and customers operate; the Company may fail to successfully continue to effect operating expense savings; changes in the level of Arlo's cash resources and the Company's planned usage of such resources; changes in the Company's stock price and developments in the business that could increase the Company's cash needs; fluctuations in foreign exchange rates; the actions and financial health of the Company's customers; the anticipated financial capacity under Arlo's revolving credit line may not be available when expected, or at all; and the Company may not be able to carry out its restructuring plan. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Further information on potential risk factors that could affect Arlo and its business are detailed in the Company's periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled Part II - Item 1A. Risk Factors, in the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2020, filed with the Securities and Exchange Commission on August 6, 2020 and other periodic filings with the Securities and Exchange Commission. Given these circumstances, you should not place undue reliance on these forward-looking statements. Arlo undertakes no obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Non-GAAP Financial Information: To supplement our unaudited selected financial data presented on a basis consistent with U.S. Generally Accepted Accounting Principles (GAAP), we disclose certain non-GAAP financial measures that exclude certain charges, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development, non-GAAP sales and marketing, non-GAAP general and administrative, non-GAAP total operating expenses, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP provision for income taxes, non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share. These supplemental measures exclude adjustments for separation expense, stock-based compensation expense, amortization of intangibles, activist shareholder response costs, restructuring and other charges, strategic initiative and transaction expenses, gain on sale of business, litigation reserves, and the related tax effects. These non-GAAP measures are not in accordance with or an alternative for GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance. In calculating non-GAAP financial measures, we exclude certain items to facilitate a review of the comparability of our operating performance on a period-to-period basis because such items are not, in our view, related to our ongoing operational performance. We use non-GAAP measures to evaluate the operating performance of our business, for comparison with forecasts and strategic plans, and for benchmarking performance externally against competitors. In addition, managements incentive compensation is determined using certain non-GAAP measures. Since we find these measures to be useful, we believe that investors benefit from seeing results through the eyes of management in addition to seeing GAAP results. We believe that these non-GAAP measures, when read in conjunction with our GAAP measures, provide useful information to investors by offering: the ability to make more meaningful period-to-period comparisons of our on-going operating results; the ability to better identify trends in our underlying business and perform related trend analyses; a better understanding of how management plans and measures our underlying business; and an easier way to compare our operating results against analyst financial models and operating results of competitors that supplement their GAAP results with non-GAAP financial measures. The following are explanations of the adjustments that we incorporate into non-GAAP measures, as well as the reasons for excluding them in the reconciliations of these non-GAAP financial measures: Separation expense consists of expenses that are related to the separation of our business from NETGEAR. These consist primarily of third-party consulting fees, legal fees, IT costs, employee bonuses for services related to the separation, and other one-time expenses incurred to complete the separation. We consider our operating results without these charges when evaluating our ongoing performance and forecasting our earnings trends, and therefore exclude such charges when presenting non-GAAP financial measures. We believe that the assessment of our operations excluding these costs is relevant to our assessment of internal operations and comparisons to the performance of our competitors. Stock-based compensation expense consists of non-cash charges for the estimated fair value of stock options, performance-based stock options, restricted stock units and shares under the employee stock purchase plan granted to employees. We believe that the exclusion of these charges provides for more accurate comparisons of our operating results to peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, we believe it is useful to investors to understand the specific impact stock-based compensation expense has on our operating results. Amortization of intangibles consists primarily of non-cash charges that can be impacted by, among other things, the timing and magnitude of acquisitions. We consider our operating results without these charges when evaluating our ongoing performance and forecasting our earnings trends, and therefore exclude such charges when presenting non-GAAP financial measures. We believe that the assessment of our operations excluding these costs is relevant to an assessment of our internal operations and comparisons to our prior and future periods and to the performance of our competitors. Activist shareholder response costs primarily consist of legal fees and third-party consulting costs incurred. We consider our operating results without these charges when evaluating our ongoing performance and forecasting our earnings trends, and therefore exclude such charges when presenting non-GAAP financial measures. We believe that the assessment of our operations excluding these costs is relevant to our assessment of internal operations and comparisons to the performance of our competitors. Strategic initiative and transaction expenses consist of legal fees associated with the strategic review of the Company and legal fees, accounting fees and other one-time costs incurred to complete the Verisure transaction. We consider our operating results without these charges when evaluating our ongoing performance and forecasting our earnings trends, and therefore exclude such charges when presenting non-GAAP financial measures. We believe that the assessment of our operations excluding these costs is relevant to our assessment of internal operations and comparisons to the performance of our competitors. Gain on sale of business represents gain from sale of the Company's commercial operations in Europe. We consider our operating results without this gain when evaluating our ongoing performance and forecasting our earnings trends, and therefore exclude such gain when presenting non-GAAP financial measures. We believe that the assessment of our operations excluding the gain is relevant to our assessment of internal operations and comparisons to the performance of our competitors. Other items are the result of either unique or unplanned events, including, when applicable: restructuring and other charges and litigation reserves, net. It is difficult to predict the occurrence or estimate the amount or timing of these items in advance. Although these events are reflected in our GAAP financial statements, these unique transactions may limit the comparability of our on-going operations with prior and future periods. The amounts result from events that often arise from unforeseen circumstances, which often occur outside of the ordinary course of continuing operations. Therefore, the amounts do not accurately reflect the underlying performance of our continuing business operations for the period in which they are incurred. Tax effects consist of the various above adjustments that we incorporate into non-GAAP measures in order to provide a more meaningful measure on non-GAAP net income. We also believe providing financial information with and without the income tax effects relating to our non-GAAP financial measures provides our management and users of the financial statements with better clarity regarding the on-going performance of our business. Source: Arlo-F ARLO TECHNOLOGIES, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS As of September 27, 2020 December 31, 2019 (in thousands) ASSETS Current assets: Cash and cash equivalents $ 173,619 $ 236,680 Short-term investments 19,992 19,990 Accounts receivable, net 56,431 127,317 Inventories 69,038 68,624 Prepaid expenses and other current assets 10,317 16,958 Total current assets 329,397 469,569 Property and equipment, net 16,832 21,352 Operating lease right-of-use assets, net 25,031 31,300 Intangibles, net 238 1,306 Goodwill 11,038 11,038 Restricted cash 4,147 4,139 Other non-current assets 2,216 4,008 Total assets $ 388,899 $ 542,712 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 74,727 $ 111,650 Deferred revenue 30,567 50,362 Accrued liabilities 106,027 127,400 Income tax payable 431 4,489 Total current liabilities 211,752 293,901 Non-current deferred revenue 7,963 15,736 Non-current operating lease liabilities 26,024 29,001 Non-current income taxes payable 92 92 Other non-current liabilities 1,261 606 Total liabilities 247,092 339,336 Stockholders Equity: Preferred stock: $0.001 par value; 50,000,000 shares authorized; none issued or outstanding Common stock: $0.001 par value; 500,000,000 shares authorized; shares issued and outstanding: 79,026,508 at September 27, 2020 and 75,785,952 at December 31, 2019 79 76 Additional paid-in capital 359,297 334,821 Accumulated other comprehensive income (9 ) (2 ) Accumulated deficit (217,560 ) (131,519 ) Total stockholders equity 141,807 203,376 Total liabilities and stockholders equity $ 388,899 $ 542,712 ARLO TECHNOLOGIES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Nine Months Ended September 27, 2020 June 28, 2020 September 29, 2019 September 27, 2020 September 29, 2019 (in thousands, except percentage and per share data) Revenue: Products $ 91,271 $ 49,603 $ 94,306 $ 191,597 $ 213,359 Services 18,965 17,029 11,810 50,721 34,235 Total revenue 110,236 66,632 106,116 242,318 247,594 Cost of revenue: Products 79,107 51,186 88,755 182,481 206,878 Services 9,720 9,957 6,858 28,986 18,618 Total cost of revenue 88,827 61,143 95,613 211,467 225,496 Gross profit 21,409 5,489 10,503 30,851 22,098 Gross margin 19.4 % 8.2 % 9.9 % 12.7 % 8.9 % Operating expenses: Research and development 15,436 14,192 16,701 44,871 52,456 Sales and marketing 12,720 11,713 13,657 35,471 42,389 General and administrative 11,137 9,837 11,062 39,758 32,512 Separation expense 77 82 137 238 1,760 Gain on sale of business (292 ) Total operating expenses 39,370 35,824 41,557 120,046 129,117 Loss from operations (17,961 ) (30,335 ) (31,054 ) (89,195 ) (107,019 ) Operating margin (16.3 )% (45.5 )% (29.3 )% (36.8 )% (43.2 )% Interest income 74 151 596 760 2,170 Other income, net 543 1,111 154 2,837 138 Loss before income taxes (17,344 ) (29,073 ) (30,304 ) (85,598 ) (104,711 ) Provision for income taxes 115 183 286 443 855 Net loss $ (17,459 ) $ (29,256 ) $ (30,590 ) $ (86,041 ) $ (105,566 ) Net loss per share: Basic $ (0.22 ) $ (0.38 ) $ (0.41 ) $ (1.11 ) $ (1.41 ) Diluted $ (0.22 ) $ (0.38 ) $ (0.41 ) $ (1.11 ) $ (1.41 ) Weighted average shares used to compute net loss per share: Basic 78,662 77,885 75,337 77,705 74,831 Diluted 78,662 77,885 75,337 77,705 74,831 ARLO TECHNOLOGIES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 27, 2020 September 29, 2019 (In thousands) Cash flows from operating activities: Net loss $ (86,041 ) $ (105,566 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 8,024 7,757 Loss on disposal of fixed assets 19 Stock-based compensation expense 26,338 15,261 Allowance for (release of) credit losses and inventory reserves 1,322 (3,232 ) Gain on sale of business (292 ) Deferred income taxes 63 (109 ) Premium amortization (discount accretion) on investments, net 60 (391 ) Changes in assets and liabilities: Accounts receivable, net 70,985 65,920 Inventories (1,838 ) 54,335 Prepaid expenses and other assets 8,369 (1,729 ) Accounts payable (37,554 ) (24,381 ) Deferred revenue (27,569 ) (1,996 ) Accrued and other liabilities (21,203 ) (48,584 ) Net cash used in operating activities (59,317 ) (42,715 ) Cash flows from investing activities: Purchases of property and equipment (2,070 ) (5,023 ) Purchases of short-term investments (45,085 ) (29,768 ) Maturities of short-term investments 45,000 40,000 Net cash provided by (used in) investing activities (2,155 ) 5,209 Cash flows from financing activities: Proceeds related to employee benefit plans 3,051 1,837 Restricted stock unit withholdings (4,632 ) (1,755 ) Net cash provided by (used in) financing activities (1,581 ) 82 Net decrease in cash and cash equivalents and restricted cash (63,053 ) (37,424 ) Cash and cash equivalents and restricted cash, at beginning of period 240,819 155,424 Cash and cash equivalents and restricted cash, at end of period $ 177,766 $ 118,000 Non-cash investing and financing activities: Purchases of property and equipment included in accounts payable and accrued liabilities $ 1,470 $ 1,578 De-recognition of build-to-suit assets and liabilities $ $ (21,610 ) ARLO TECHNOLOGIES, INC. RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES STATEMENT OF OPERATIONS DATA: Three Months Ended Nine Months Ended September 27, 2020 June 28, 2020 September 29, 2019 September 27, 2020 September 29, 2019 (in thousands, except percentage data) GAAP gross profit $ 21,409 $ 5,489 $ 10,503 $ 30,851 $ 22,098 GAAP gross margin 19.4 % 8.2 % 9.9 % 12.7 % 8.9 % Stock-based compensation expense 942 562 467 2,007 1,286 Amortization of intangibles 356 357 381 1,069 1,144 Restructuring and other charges 23 Non-GAAP gross profit $ 22,707 $ 6,408 $ 11,351 $ 33,950 $ 24,528 Non-GAAP gross margin 20.6 % 9.6 % 10.7 % 14.0 % 9.9 % GAAP research and development $ 15,436 $ 14,192 $ 16,701 $ 44,871 $ 52,456 Stock-based compensation expense (2,870 ) (1,729 ) (1,569 ) (6,259 ) (4,501 ) Non-GAAP research and development $ 12,566 $ 12,463 $ 15,132 $ 38,612 $ 47,955 GAAP sales and marketing $ 12,720 $ 11,713 $ 13,657 $ 35,471 $ 42,389 Stock-based compensation expense (1,160 ) (984 ) (791 ) (2,895 ) (2,722 ) Non-GAAP sales and marketing $ 11,560 $ 10,729 $ 12,866 $ 32,576 $ 39,667 GAAP general and administrative $ 11,137 $ 9,837 $ 11,062 $ 39,758 $ 32,512 Stock-based compensation expense (4,029 ) (1,289 ) (2,392 ) (15,177 ) (6,752 ) Restructuring and other charges (21 ) Strategic initiative and transaction expenses (17 ) (206 ) (502 ) (768 ) (502 ) Litigation reserves, net (249 ) (140 ) (256 ) (140 ) Non-GAAP general and administrative $ 7,091 $ 8,093 $ 8,028 $ 23,536 $ 25,118 GAAP total operating expenses $ 39,370 $ 35,824 $ 41,557 $ 120,046 $ 129,117 Separation expense (77 ) (82 ) (136 ) (238 ) (1,759 ) Strategic initiative and transaction expenses (17 ) (206 ) (502 ) (768 ) (502 ) Stock-based compensation expense (8,059 ) (4,002 ) (4,752 ) (24,331 ) (13,975 ) Restructuring and other charges (21 ) Litigation reserves, net (249 ) (140 ) (256 ) (140 ) Activist shareholder response costs (237 ) Gain on sale of business 292 Non-GAAP total operating expenses $ 31,217 $ 31,285 $ 36,027 $ 94,724 $ 112,504 ARLO TECHNOLOGIES, INC. RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED) STATEMENT OF OPERATIONS DATA (CONTINUED): Three Months Ended Nine Months Ended September 27, 2020 June 28, 2020 September 29, 2019 September 27, 2020 September 29, 2019 (in thousands, except percentage and per share data) GAAP operating loss $ (17,961 ) $ (30,335 ) $ (31,054 ) $ (89,195 ) $ (107,019 ) GAAP operating margin (16.3 )% (45.5 )% (29.3 )% (36.8 )% (43.2 )% Separation expense 77 82 136 238 1,759 Strategic initiative and transaction expenses 17 206 502 768 502 Stock-based compensation expense 9,001 4,564 5,219 26,338 15,261 Amortization of intangibles 356 357 381 1,069 1,144 Restructuring and other charges 44 Litigation reserves, net 249 140 256 140 Activist shareholder response costs 237 Gain on sale of business (292 ) Non-GAAP operating loss $ (8,510 ) $ (24,877 ) $ (24,676 ) $ (60,774 ) $ (87,976 ) Non-GAAP operating margin (7.7 )% (37.3 )% (23.3 )% (25.1 )% (35.5 )% GAAP provision for income taxes $ 115 $ 183 $ 286 $ 443 $ 855 GAAP income tax rate (0.7 )% (0.6 )% (0.9 )% (0.5 )% (0.8 )% Tax effects 2 (46 ) 31 96 Non-GAAP provision for income taxes $ 115 $ 181 $ 332 $ 412 $ 759 Non-GAAP income tax rate (1.5 )% (0.8 )% (1.4 )% (0.7 )% (0.9 )% GAAP net loss $ (17,459 ) $ (29,256 ) $ (30,590 ) $ (86,041 ) $ (105,566 ) Separation expense 77 82 136 238 1,759 Strategic initiative and transaction expenses 17 206 502 768 502 Stock-based compensation expense 9,001 4,564 5,219 26,338 15,261 Amortization of intangibles 356 357 381 1,069 1,144 Restructuring and other charges 44 Litigation reserves, net 249 140 256 140 Activist shareholder response costs 237 Gain on sale of business (292 ) Tax effects 2 (46 ) 31 96 Non-GAAP net loss $ (8,008 ) $ (23,796 ) $ (24,258 ) $ (57,589 ) $ (86,427 ) ARLO TECHNOLOGIES, INC. RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED) STATEMENT OF OPERATIONS DATA (CONTINUED): Three Months Ended Nine Months Ended September 27, 2020 June 28, 2020 September 29, 2019 September 27, 2020 September 29, 2019 (in thousands, except percentage and per share data) NET INCOME (LOSS) PER DILUTED SHARE: GAAP net income (loss) per diluted share $ (0.22 ) $ (0.38 ) $ (0.41 ) $ (1.11 ) $ (1.41 ) Separation expense 0.01 0.02 Strategic initiative and transaction expenses 0.01 0.01 0.01 Stock-based compensation expense 0.11 0.06 0.07 0.34 0.21 Amortization of intangibles 0.01 0.01 0.01 0.01 0.02 Restructuring and other charges Litigation reserves, net Gain on sale of business Tax effects 0.00 Non-GAAP net loss per diluted share $ (0.10 ) $ (0.31 ) $ (0.32 ) $ (0.74 ) $ (1.15 ) Shares used in computing GAAP net income (loss) per diluted share 78,662 77,885 75,337 77,705 74,831 Shares used in computing non-GAAP net income (loss) per diluted share 78,662 77,885 75,337 77,705 74,831 ARLO TECHNOLOGIES, INC. UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION Three Months Ended September 27, 2020 June 28, 2020 March 29, 2020 December 31, 2019 September 29, 2019 (in thousands, except headcount and per share data) Cash, cash equivalents and short-term investments $ 193,611 $ 205,454 $ 206,582 $ 256,670 $ 153,811 Cash, cash equivalents and short-term investments per diluted share $ 2.46 $ 2.64 $ 2.70 $ 3.37 $ 2.04 Accounts receivable, net $ 56,431 $ 46,466 $ 61,376 $ 127,317 $ 99,698 Days sales outstanding 47 63 83 97 85 Inventories $ 69,038 $ 65,814 $ 61,027 $ 68,624 $ 74,117 Inventory turns 4.6 3.1 3.4 5.9 4.8 Weeks of channel inventory: U.S. retail channel 8.4 6.6 13.7 6.3 13.3 U.S. distribution channel 8.6 8.4 20.3 8.0 3.3 APAC distribution channel 4.2 6.8 6.0 3.6 4.3 Deferred revenue (current and non-current) $ 38,530 $ 54,546 $ 59,848 $ 66,098 $ 47,995 Cumulative registered accounts (1) 4,774 4,518 4,245 4,015 3,691 Cumulative paid accounts (2) 356 298 255 230 211 Headcount 358 355 356 349 406 Non-GAAP diluted shares 78,662 77,885 76,560 76,090 75,337 _________________________ (1) We define our registered accounts at the end of a particular period as the number of unique registered accounts on the Arlo platform as of the end of such particular period, and includes accounts owned by Verisure S.a.r.l.. The number of registered accounts does not necessarily reflect the number of end-users on the Arlo platform, as one registered account may be used by multiple people. (2) Paid accounts worldwide measured as any account where a subscription to a paid service is being collected (either by the Company or by the Companys customers or channel partners), plus paid service plans of a duration of more than 3 months bundled with products (such bundles being counted as a paid account after 90 days have elapsed from the date of registration). Paid accounts includes accounts transferred to Verisure S.a.r.l.. REVENUE BY GEOGRAPHY Three Months Ended Nine Months Ended September 27, 2020 June 28, 2020 September 29, 2019 September 27, 2020 September 29, 2019 (in thousands, except percentage data) Americas $ 75,861 69 % $ 50,971 76 % $ 85,562 81 % $ 176,990 73 % $ 194,492 79 % EMEA 28,010 25 % 11,263 17 % 13,002 12 % 46,846 19 % 37,370 15 % APAC 6,365 6 % 4,398 7 % 7,552 7 % 18,482 8 % 15,732 6 % Total $ 110,236 100 % $ 66,632 100 % $ 106,116 100 % $ 242,318 100 % $ 247,594 100 %

Answer: Arlo Reports Third Quarter 2020 Results Exceeded Revenue and EPS Guidance 104% GAAP Gross Profit Growth Year Over Year 100% Non-GAAP Gross Profit Growth Year Over Year 61% Service Revenue Growth Year Over Year Cash, Cash Equivalents and Short-term Investments Balance of $193.6 million with No Debt