Arlo Technologies, Inc. · NYSE:ARLO

Arlo Technologies — Q4 2021 Earnings Presentation

50 slides from Arlo Technologies's earnings presentation, Mar 1, 2022

Slide 1: Q4 2021 Earnings & Investor Briefing
Q4 2021 Earnings & Investor Briefing
Slide 2: Today's Agenda
Today’s Agenda - Q4 & FY’21 Earnings - Business Insights - Long Range Plan: Growth Drivers - FY’22 Guidance - Long Term Targets - Q&A Copyright 2022, Arlo Technologies Inc. All rights reserved.
Slide 3: Safe Harbor Disclosure
Safe Harbor Disclosure This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. The words “anticipate,” “expect,” “believe,” “will,” “may,” “should,” “estimate,” “project,” “outlook,” “forecast” or other similar words are
Slide 5: 2021 Goals and Results
2021 GOALS Increase services Achieve $400M Reach 1 Million Surpass $100M Non-GAAP End FY’21 with business to 50% of Revenue for Paid Accounts in Service Operating Profit >$120M in Cash, Non-GAAP FY’21 by today Revenue in Q3 or Q4 FY’21 Cash Equivalents Gross Margin Raised services Actual $435M Reach
Slide 6: Q4 Non-GAAP Financial Highlights
Q4 Q4 Non-GAAP Non-GAAP Financial Financial Highlights Highlights Q4 ‘20 Q3 ‘21 Q4 ‘21 Year on Year Revenue $114.8 $111.2 $142.9 +24% Gross Profit $25.7 $25.1 $32.7 +27% Gross Margin 22.4% 22.6% 22.9% +0.5% Paid Accounts 435K 877K 1,067K +145% ARR $46.6 $80.4 $90.1 +94% Service Gross Margin 58.9% 59
Slide 7: Arlo Secure is the most advanced security service available
Arlo Secure is the most advanced security service available… up to 65% of our customers subscribe within 6 months of purchase E m e rg e n c y R e s p o n s e 2 4 / 7 P r o M o n it o r in g S m a rt H o m e One-tap request for help Live security experts Advanced smart home support P e r s o n D e t
Slide 10: Q4 Non-GAAP Detail
Q4Non-GAAP Q4 Non-GAAPDetail Detail Q4 ‘20 Q3 ‘21 Q4 ‘21 Year on Year Revenue $114.8 $111.2 $142.9 +24.4% Services $21.6 $27.0 $28.5 +32.0% Product $93.3 $84.2 $114.4 +22.6% Gross Profit $25.7 $25.1 $32.7 +27.0% Services $12.7 $16.1 $18.0 41.7% Product $13.0 $ 9.1 $14.7 12.7% Gross Margin 22.4% 22.6
Slide 11: Q4 Non-GAAP Operating Results, Metrics
Non-GAAP Non-GAAPOperating OperatingResult, Result,Metrics Metrics Q4 ‘20 Q3 ‘21 Q4 ‘21 Year on Year Revenue $114.8 $111.2 $142.9 +24.4% Gross Profit $25.7 $25.1 $32.7 +27.0% Operating Expenses $32.2 $32.5 $29.2 -9.5% Operating Profit -$6.5 -$7.3 $3.5 --- Operating Margin -5.7% -6.6% 2.5% +8.2% EPS
Slide 12: Business Insights
arlo“ | Business Insights
Slide 13: Arlo is a service business with recurring customer relationships
Arlo is a service business with recurring customer relationships driving significant value at scale Copyright 2022, Arlo Technologies Inc. All rights reserved.
Slide 14: Arlo's core is a global services platform delivering AI and security
230+ million videos uploaded per day More than Youtube 1500+ hours 89+ million of video uploaded AI-based per minute smart notifications More than per day Youtube Arlo’s core is a global services platform delivering high performance AI and security capabilities at scale 4.8+ billion 32+ petabytes AP
Slide 15: Paid accounts reached 1 Million in Q4
+145% YOY Growth 1,067 After crossing 500,000 accounts in March, we doubled that number and 877 reached 1 Million Paid Accounts in Q4 695 549 435 356 298 255 230 211 187 162 144 125 92 102 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Total Net Paid
Slide 16: Rapid growth in paid accounts is driving ARR expansion
+94% YOY Rapid growth in our Paid Accounts +103% $90.1 YOY is driving meaningful expansion in +112% $80.4 our Annual Recurring Revenue YOY +108% $69.8 YOY $58.2 +84% YOY +69% YOY $46.6 +59% YOY $39.6 +32% YOY $32.9 $28.0 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Annual Recurring Revenue ($’ Mi
Slide 17: Paid account quarterly churn among the best vs consumer subscription peers
Our paid account quarterly churn is amongst the 5% best compared to consumer subscription peers 4.9% 4.8% New business model only 4% 4.1% 4.0% 3.5% 3% 3.3% 2.8% 2.5% 2.4% 2% 1% Data Sources Hulu & Netflix - Hubspot study “How Netflix Maintains Low Churn & High Customer Retention” Study. Spotify - Bl
Slide 18: Retail and direct paid accounts performance
Diving into retail and direct paid accounts(1) shows the outstanding performance of our services business $9.35 81% 1.2% Retail ARPU(2) Retail Gross Margin(3) Retail Monthly Churn(4) (1) Retail and direct paid accounts does not include those from B2B or strategic accounts (2) Average monthly revenue
Slide 19: Long Range Plan
arlo“ | Long Range Plan
Slide 20: Growth Drivers
Growth Drivers Accelerate annual recurring revenue Drive Brand Drive Brand Expand Product Invest In Routes Awareness Awareness Portfolio To Market Copyright 2022, Arlo Technologies Inc. All rights reserved.
Slide 22: Aided Awareness
The #1 reason people don’t purchase Arlo is they are not aware of Arlo Aided Awareness Copyright 2022, Arlo Technologies Inc. All rights reserved. United States aided awareness survey from Q3 2021
Slide 23: Non-GAAP Product Gross Profit and Sales & Marketing Expense
Non-GAAP Product $49.8 Gross Profit Non-GAAP Sales & $43.5 Marketing Expense $14.7 $13.5 $12.6 $11.7 $11.0 $10.8 $10.0 $9.1 Q1 Q2 Q3 Q4 FY'21 Numbers in $’Millions, except where stated. Copyright 2022, Arlo Technologies Inc. All rights reserved. The most directly comparable GAAP financial measures a
Slide 24: Net CAC and LTV
$0 $550 NET CAC* LTV ** * NET CAC for Q4 FY21 calculated at $0 since non-GAAP Product Gross Margin exceeds Non-GAAP Sales & Marketing. ** LTV calculated for Q4 FY21 as follows i) Q4 FY21 Recurring Paid Services Copyright 2022, Arlo Technologies Inc. All rights reserved. ARPU, multiplied by ii) Q4 FY
Slide 25: Awareness campaign funnel
Awareness Desire Intent Evaluation Arlo will execute our first awareness campaign to fill Purchase the funnel for new paid accounts Copyright 2022, Arlo Technologies Inc. All rights reserved.
Slide 26: Growth Drivers: Expand Product Portfolio
Growth Drivers Accelerate annual recurring revenue Drive Brand Product Expand Product Invest In Routes Awareness Expansion Portfolio To Market Copyright 2022, Arlo Technologies Inc. All rights reserved.
Slide 27: Expansion into new categories has driven product diversification
IP Cameras Expansion into new categories has driven product diversification and growth for Arlo 46% 36% Services, Doorbell, Floodlight, Other 22% 2019 2020 2021 Revenue Mix * Copyright 2022, Arlo Technologies Inc. All rights reserved. * Revenue mix by product category derived by applying gross shipm
Slide 28: Arlo Safe is a new application and service for personal safety
Arlo Safe™ is a new application and service ensuring personal and family safety while on the go Copyright 2022, Arlo Technologies Inc. All rights reserved.
Slide 29: Arlo Safe features
One Touch Emergency Help Family Safety & Check-Ins Crash Response Single tap for emergency response when in need or “Walk With Me” mode Locate family members, check-in, receive Automatic detection of crashes while holding the button until safe. Simple help status screens and direct notifications and
Slide 30: Arlo Secure is a professionally monitored security system
Arlo Secure™ is a professionally monitored security system with an innovative smart hub and ground-breaking multi-sensor Copyright 2022, Arlo Technologies Inc. All rights reserved.
Slide 32: Arlo Secure and Safe service plans
Secure Secure Plus Safe & Secure Pro • Unlimited video cloud storage for 30 days • Unlimited video cloud storage for 30 days • Interactive notifications with animated preview • Interactive notifications with animated preview Secure Plus • Object detection (person, package, vehicle, animal) • Object
Slide 33: Growth Drivers: Omni-Channel Investment
Growth Drivers Accelerate annual recurring revenue Drive Brand Expand Product Omni-Channel Invest In Routes Awareness Portfolio Investment To Market Copyright 2022, Arlo Technologies Inc. All rights reserved.
Slide 34: Rapid growth in DTC & Strategic Accounts drives revenue diversification
Other 84% 84% Strategic Accounts Rapid growth in DTC & Strategic 60% Accounts is driving meaningful 60% Direct to Consumer * revenue diversification and 43% 46% predictability Retail/E-comm 2019 2020 2021 Channel Mix Copyright 2022, Arlo Technologies Inc. All rights reserved. * Paid Service revenue
Slide 36: Investment in Arlo.com driving profitable transactions
Our investment in Arlo.com is driving highly profitable transactions and direct user engagement for Arlo Copyright 2022, Arlo Technologies Inc. All rights reserved.
Slide 37: Arlo SmartCloud platform enables SaaS and B2B Strategic Accounts
The Arlo SmartCloud™ platform enables SaaS and B2B Strategic Accounts that create GTM partnerships Copyright 2022, Arlo Technologies Inc. All rights reserved.
Slide 38: Calix partnership
Calix Launched Arlo Security Camera Solution in 2021 • Integrated with Calix Revenue EDGE platform for BSPs nationwide • Arlo Secure attached to 100% of deployments and as part of carrier billing • Access to households potentially underserved by traditional channels • 13 Calix BSPs signed up to date
Slide 39: Arlo Go 2 launched with Verizon
Arlo Go 2 Launched with Verizon • New LTE, WIFI, GPS enabled smart security camera • Optional carrier billing and monthly hardware financing • Joins other Arlo products sold by Verizon • Launched exclusively with Verizon in October 2021 Additional Arlo Go 2 Partners Launching in 2022 • AT&T, Bell Mo
Slide 40: Verisure purchase commitment progress
+250% YOY $53.6 After 2 years or 40% of the 5-year agreement, Verisure have taken 32% or $160M of their $500M product purchase commitment $30.9 $28.0 $24.6 $25.1 $15.3 $11.3 $7.3 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4 21 Revenue from Europe Copyright 2022, Arlo Technologies Inc. All rights res
Slide 41: Growth Drivers: Invest in Routes to Market
Growth Drivers Accelerate annual recurring revenue Drive Brand Expand Product Invest In Routes Awareness Portfolio To Market Copyright 2022, Arlo Technologies Inc. All rights reserved.
Slide 42: FY'22 Guidance & Long-Range Targets
FY’22 Guidance & Long-Range Targets
Slide 43: 2022 Q1 Guidance, Annual Guidance, Long Term Targets
2022 Q1 Guidance 2022 Annual Guidance Long Term Targets Revenue Revenue Paid Accounts $110m - $120m $490m - $510m > 5 Million Non-GAAP Earnings Per Share Non-GAAP Operating Margin Revenue -$0.06 - $0.00 -5% to -3% > $1 Billion ARR > $300 Million 2023 Commentary: Arlo anticipates doubling 2022 growth
Slide 44: Questions...
arlo“ | Questions...
Slide 45: Arlo
arlo“
Slide 46: Appendix
arlo“ | Appendix
Slide 47: Reconciliations of GAAP to Non-GAAP Measures: Gross Profit
Reconciliations of GAAP Measures to Non-GAAP Measures Gross Profit, In Thousands, except percentage data Three Months Ended Twelve Months Ended October 3, December 31, December 31, March 28, 2021 June 27, 2021 2021 2021 2021 GAAP gross profit: Products $ 12,604 $ 11,292 $ 8,470 $ 13,920 $ 46,286 Ser
Slide 48: Reconciliations of GAAP to Non-GAAP Measures: Sales and Marketing
Reconciliations of GAAP Measures to Non-GAAP Measures Sales and marketing, In $ Thousands Three Months Ended October 3, December 31, March 28, 2021 June 27, 2021 2021 2021 GAAP sales and marketing $ 11,207 $ 12,459 $ 12,779 $ 12,464 Stock-based compensation expense (1,190) (1,638) (1,119) (1,444) No
Slide 49: Reconciliations of GAAP to Non-GAAP Measures: Operating Income
Reconciliations of GAAP Measures to Non-GAAP Measures Operating Income (Loss), In $ Thousands, except percentage data Three Months Ended September December September December December June 30, 29, 31, March 29, June 28, 27, 31, March 28, October 3, 31, 2019 2019 2019 2020 2020 2020 2020 2021 June 27
Slide 50: Reconciliations of GAAP to Non-GAAP Measures: FY22 Operating Margin
Reconciliations of GAAP Measures to Non-GAAP Measures FY 2022 Operating Margin Year Ending December 31, 2022 Low High GAAP operating margin (14)% (11)% Stock-based compensation expense 9% 8% Separation expense — — Non-GAAP operating margin (5)% (3)% Copyright 2022, Arlo Technologies Inc. All rights

Arlo Technologies — Q4 2021 Earnings Presentation on 6ix

Arlo Technologies — Q4 2021 Earnings Presentation

Slide 1: Q4 2021 Earnings & Investor Briefing

Slide 2: Today's Agenda

Slide 3: Safe Harbor Disclosure

Slide 4: Q4 Business Review – Matt McRae, CEO

Slide 5: 2021 Goals and Results

Slide 6: Q4 Non-GAAP Financial Highlights

Slide 7: Arlo Secure is the most advanced security service available

Slide 8: Copyright 2022, Arlo Technologies Inc. All rights reserved.

Slide 9: Q4 Financial Review – Gordon Mattingly, CFO

Slide 10: Q4 Non-GAAP Detail

Slide 11: Q4 Non-GAAP Operating Results, Metrics

Slide 12: Business Insights

Slide 13: Arlo is a service business with recurring customer relationships

Slide 14: Arlo's core is a global services platform delivering AI and security

Slide 15: Paid accounts reached 1 Million in Q4

Slide 16: Rapid growth in paid accounts is driving ARR expansion

Slide 17: Paid account quarterly churn among the best vs consumer subscription peers

Slide 18: Retail and direct paid accounts performance

Slide 19: Long Range Plan

Slide 20: Growth Drivers

Slide 21: Our designs and innovations are recognized as best-in-class

Slide 22: Aided Awareness

Slide 23: Non-GAAP Product Gross Profit and Sales & Marketing Expense

Slide 24: Net CAC and LTV

Slide 25: Awareness campaign funnel

Slide 26: Growth Drivers: Expand Product Portfolio

Slide 27: Expansion into new categories has driven product diversification

Slide 28: Arlo Safe is a new application and service for personal safety

Slide 29: Arlo Safe features

Slide 30: Arlo Secure is a professionally monitored security system

Slide 31: Security System will support Matter

Slide 32: Arlo Secure and Safe service plans

Slide 33: Growth Drivers: Omni-Channel Investment

Slide 34: Rapid growth in DTC & Strategic Accounts drives revenue diversification

Slide 35: We reach customers through the largest consumer channels

Slide 36: Investment in Arlo.com driving profitable transactions

Slide 37: Arlo SmartCloud platform enables SaaS and B2B Strategic Accounts

Slide 38: Calix partnership

Slide 39: Arlo Go 2 launched with Verizon

Slide 40: Verisure purchase commitment progress

Slide 41: Growth Drivers: Invest in Routes to Market

Slide 42: FY'22 Guidance & Long-Range Targets

Slide 43: 2022 Q1 Guidance, Annual Guidance, Long Term Targets

Slide 44: Questions...

Slide 45: Arlo

Slide 46: Appendix

Slide 47: Reconciliations of GAAP to Non-GAAP Measures: Gross Profit

Slide 48: Reconciliations of GAAP to Non-GAAP Measures: Sales and Marketing

Slide 49: Reconciliations of GAAP to Non-GAAP Measures: Operating Income

Slide 50: Reconciliations of GAAP to Non-GAAP Measures: FY22 Operating Margin