Cover
Cover - shares | 9 Months Ended | |
Oct. 03, 2021 | Nov. 05, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Oct. 3, 2021 | |
Document Transition Report | false | |
Entity File Number | 001-38618 | |
Entity Registrant Name | ARLO TECHNOLOGIES, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 38-4061754 | |
Entity Address, Address Line One | 2200 Faraday Ave., | |
Entity Address, Address Line Two | Suite #150 | |
Entity Address, City or Town | Carlsbad, | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 92008 | |
City Area Code | 408 | |
Local Phone Number | 890-3900 | |
Title of 12(b) Security | Common Stock, par value $0.001 per share | |
Trading Symbol | ARLO | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding (in shares) | 84,299,407 | |
Entity Central Index Key | 0001736946 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
Unaudited Condensed Consolidate
Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Oct. 03, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 166,057 | $ 186,127 |
Short-term investments (amortized cost of $— and $19,996) | 0 | 19,997 |
Accounts receivable (net of allowance for credit losses of $326 and $519) | 70,124 | 77,643 |
Inventories | 39,769 | 64,705 |
Prepaid expenses and other current assets | 12,147 | 8,076 |
Total current assets | 288,097 | 356,548 |
Property and equipment, net | 10,681 | 15,821 |
Operating lease right-of-use assets, net | 15,619 | 23,998 |
Goodwill | 11,038 | 11,038 |
Restricted cash | 4,105 | 4,164 |
Other non-current assets | 3,786 | 2,399 |
Total assets | 333,326 | 413,968 |
Current liabilities: | ||
Accounts payable | 61,660 | 62,171 |
Deferred revenue | 39,513 | 53,142 |
Accrued liabilities | 93,444 | 121,766 |
Income tax payable | 106 | 267 |
Total current liabilities | 194,723 | 237,346 |
Non-current deferred revenue | 2,173 | 16,563 |
Non-current operating lease liabilities | 22,611 | 25,029 |
Non-current income taxes payable | 114 | 104 |
Other non-current liabilities | 1,481 | 1,159 |
Total liabilities | 221,102 | 280,201 |
Commitments and contingencies (Note 9) | ||
Stockholders’ Equity: | ||
Preferred stock: $0.001 par value; 50,000,000 shares authorized; none issued or outstanding | 0 | 0 |
Common stock: $0.001 par value; 500,000,000 shares authorized; shares issued and outstanding: 84,266,833 at October 3, 2021 and 79,336,242 at December 31, 2020 | 84 | 79 |
Additional paid-in capital | 394,136 | 366,455 |
Accumulated other comprehensive income | 11 | 3 |
Accumulated deficit | (282,007) | (232,770) |
Total stockholders’ equity | 112,224 | 133,767 |
Total liabilities and stockholders’ equity | $ 333,326 | $ 413,968 |
Unaudited Condensed Consolida_2
Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Oct. 03, 2021 | Dec. 31, 2020 |
Accounts receivable, allowance for credit losses | $ (326) | $ (519) |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized (in shares) | 50,000,000 | 50,000,000 |
Preferred stock, issued (in shares) | 0 | 0 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, issued (in shares) | 84,266,833 | 79,336,242 |
Common stock, outstanding (in shares) | 84,266,833 | 79,336,242 |
U.S. treasuries | ||
Short-term investments, amortized cost | $ 0 | $ 19,996 |
Unaudited Condensed Consolida_3
Unaudited Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 03, 2021 | Sep. 27, 2020 | Oct. 03, 2021 | Sep. 27, 2020 | |
Total revenue | $ 111,149 | $ 110,236 | $ 292,276 | $ 242,318 |
Total cost of revenue | 86,806 | 88,827 | 215,957 | 211,467 |
Gross profit | 24,343 | 21,409 | 76,319 | 30,851 |
Operating expenses: | ||||
Research and development | 14,377 | 15,436 | 45,419 | 44,871 |
Sales and marketing | 12,779 | 12,720 | 36,445 | 35,471 |
General and administrative | 12,119 | 11,137 | 36,905 | 39,758 |
Impairment charges | 0 | 0 | 9,116 | 0 |
Separation expense | 683 | 77 | 1,342 | 238 |
Gain on sale of business | 0 | 0 | 0 | (292) |
Total operating expenses | 39,958 | 39,370 | 129,227 | 120,046 |
Loss from operations | (15,615) | (17,961) | (52,908) | (89,195) |
Interest income (expense), net | (1) | 74 | 26 | 760 |
Other income (expense), net | 599 | 543 | 4,170 | 2,837 |
Loss before income taxes | (15,017) | (17,344) | (48,712) | (85,598) |
Provision for income taxes | 181 | 115 | 525 | 443 |
Net loss | $ (15,198) | $ (17,459) | $ (49,237) | $ (86,041) |
Net loss per share: | ||||
Basic (in dollars per share) | $ (0.18) | $ (0.22) | $ (0.60) | $ (1.11) |
Diluted (in dollars per share) | $ (0.18) | $ (0.22) | $ (0.60) | $ (1.11) |
Weighted average shares used to compute net loss per share: | ||||
Basic (in shares) | 83,809 | 78,662 | 82,191 | 77,705 |
Diluted (in shares) | 83,809 | 78,662 | 82,191 | 77,705 |
Products | ||||
Total revenue | $ 84,152 | $ 91,271 | $ 217,224 | $ 191,597 |
Total cost of revenue | 75,682 | 79,107 | 184,858 | 182,481 |
Services | ||||
Total revenue | 26,997 | 18,965 | 75,052 | 50,721 |
Total cost of revenue | $ 11,124 | $ 9,720 | $ 31,099 | $ 28,986 |
Unaudited Condensed Consolida_4
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 03, 2021 | Sep. 27, 2020 | Oct. 03, 2021 | Sep. 27, 2020 | |
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (15,198) | $ (17,459) | $ (49,237) | $ (86,041) |
Other comprehensive income (loss), before tax: | ||||
Unrealized gain (loss) on derivative instruments | 12 | (9) | 10 | 16 |
Unrealized gain (loss) on available-for-sale securities | 0 | (14) | (1) | (23) |
Total other comprehensive income (loss), before tax | 12 | (23) | 9 | (7) |
Tax benefit (provision) related to derivative instruments | (1) | 0 | (1) | 0 |
Total other comprehensive income (loss), net of tax | 11 | (23) | 8 | (7) |
Comprehensive loss | $ (15,187) | $ (17,482) | $ (49,229) | $ (86,048) |
Unaudited Condensed Consolida_5
Unaudited Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit |
Beginning balance (in shares) at Dec. 31, 2019 | 75,786,000 | ||||
Beginning balance at Dec. 31, 2019 | $ 203,376 | $ 76 | $ 334,821 | $ (2) | $ (131,519) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net loss | (86,041) | (86,041) | |||
Stock-based compensation expense | 21,840 | 21,840 | |||
Settlement of liability classified RSUs | 4,219 | 4,219 | |||
Issuance of common stock under stock-based compensation plans (in shares) | 3,384,000 | ||||
Issuance of common stock under stock-based compensation plans | 27 | $ 3 | 24 | ||
Issuance of common stock under Employee Stock Purchase Plan (in shares) | 1,110,000 | ||||
Issuance of common stock under Employee Stock Purchase Plan | 3,025 | $ 1 | 3,024 | ||
Restricted stock unit withholdings (in shares) | (1,253,000) | ||||
Restricted stock unit withholdings | (4,632) | $ (1) | (4,631) | ||
Change in unrealized gains and losses on available-for-sale securities, net of tax | (23) | (23) | |||
Change in unrealized gains and losses on derivatives, net of tax | 16 | 16 | |||
Ending balance (in shares) at Sep. 27, 2020 | 79,027,000 | ||||
Ending balance at Sep. 27, 2020 | 141,807 | $ 79 | 359,297 | (9) | (217,560) |
Beginning balance (in shares) at Jun. 28, 2020 | 78,089,000 | ||||
Beginning balance at Jun. 28, 2020 | 151,904 | $ 78 | 351,913 | 14 | (200,101) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net loss | (17,459) | (17,459) | |||
Stock-based compensation expense | 6,083 | 6,083 | |||
Settlement of liability classified RSUs | 1,589 | 1,589 | |||
Issuance of common stock under stock-based compensation plans (in shares) | 859,000 | ||||
Issuance of common stock under stock-based compensation plans | 25 | $ 1 | 24 | ||
Issuance of common stock under Employee Stock Purchase Plan (in shares) | 378,000 | ||||
Issuance of common stock under Employee Stock Purchase Plan | 1,171 | $ 0 | 1,171 | ||
Restricted stock unit withholdings (in shares) | (299,000) | ||||
Restricted stock unit withholdings | (1,483) | (1,483) | |||
Change in unrealized gains and losses on available-for-sale securities, net of tax | (14) | (14) | |||
Change in unrealized gains and losses on derivatives, net of tax | (9) | (9) | |||
Ending balance (in shares) at Sep. 27, 2020 | 79,027,000 | ||||
Ending balance at Sep. 27, 2020 | $ 141,807 | $ 79 | 359,297 | (9) | (217,560) |
Beginning balance (in shares) at Dec. 31, 2020 | 79,336,242 | 79,336,000 | |||
Beginning balance at Dec. 31, 2020 | $ 133,767 | $ 79 | 366,455 | 3 | (232,770) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net loss | (49,237) | (49,237) | |||
Stock-based compensation expense | 18,134 | 18,134 | |||
Settlement of liability classified RSUs | 15,087 | 15,087 | |||
Issuance of common stock under stock-based compensation plans (in shares) | 6,321,000 | ||||
Issuance of common stock under stock-based compensation plans | 4,441 | $ 8 | 4,433 | ||
Issuance of common stock under Employee Stock Purchase Plan (in shares) | 602,000 | ||||
Issuance of common stock under Employee Stock Purchase Plan | 2,962 | 2,962 | |||
Restricted stock unit withholdings (in shares) | (1,992,000) | ||||
Restricted stock unit withholdings | (12,938) | $ (3) | (12,935) | ||
Change in unrealized gains and losses on available-for-sale securities, net of tax | (1) | (1) | |||
Change in unrealized gains and losses on derivatives, net of tax | $ 9 | 9 | |||
Ending balance (in shares) at Oct. 03, 2021 | 84,266,833 | 84,267,000 | |||
Ending balance at Oct. 03, 2021 | $ 112,224 | $ 84 | 394,136 | 11 | (282,007) |
Beginning balance (in shares) at Jun. 27, 2021 | 82,917,000 | ||||
Beginning balance at Jun. 27, 2021 | 114,785 | $ 83 | 381,511 | 0 | (266,809) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net loss | (15,198) | (15,198) | |||
Stock-based compensation expense | 6,688 | 6,688 | |||
Settlement of liability classified RSUs | 8,525 | 8,525 | |||
Issuance of common stock under stock-based compensation plans (in shares) | 1,723,000 | ||||
Issuance of common stock under stock-based compensation plans | 2 | $ 2 | |||
Issuance of common stock under Employee Stock Purchase Plan (in shares) | 249,000 | ||||
Issuance of common stock under Employee Stock Purchase Plan | 1,265 | 1,265 | |||
Restricted stock unit withholdings (in shares) | (622,000) | ||||
Restricted stock unit withholdings | (3,854) | $ (1) | (3,853) | ||
Change in unrealized gains and losses on derivatives, net of tax | $ 11 | 11 | |||
Ending balance (in shares) at Oct. 03, 2021 | 84,266,833 | 84,267,000 | |||
Ending balance at Oct. 03, 2021 | $ 112,224 | $ 84 | $ 394,136 | $ 11 | $ (282,007) |
Unaudited Condensed Consolida_6
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Oct. 03, 2021 | Sep. 27, 2020 | |
Cash flows from operating activities: | ||
Net loss | $ (49,237) | $ (86,041) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Stock-based compensation expense | 27,548 | 26,338 |
Impairment charges | 9,116 | 0 |
Depreciation and amortization | 4,546 | 8,024 |
Allowance for credit losses and inventory reserves | (2,530) | 1,322 |
Deferred income taxes | (284) | 63 |
Loss on disposal of property and equipment | 57 | 19 |
Premium amortization (discount accretion) on investments, net | (3) | 60 |
Gain on sale of business | 0 | (292) |
Changes in assets and liabilities: | ||
Accounts receivable, net | 7,712 | 70,985 |
Inventories | 27,274 | (1,838) |
Prepaid expenses and other assets | (5,166) | 8,369 |
Accounts payable | (27) | (37,554) |
Deferred revenue | (28,019) | (27,569) |
Accrued and other liabilities | (23,643) | (21,203) |
Net cash used in operating activities | (32,656) | (59,317) |
Cash flows from investing activities: | ||
Purchases of property and equipment | (1,938) | (2,070) |
Purchases of short-term investments | 0 | (45,085) |
Proceeds from maturities of short-term investments | 20,000 | 45,000 |
Net cash provided by (used in) investing activities | 18,062 | (2,155) |
Cash flows from financing activities: | ||
Proceeds related to employee benefit plans | 7,403 | 3,051 |
Restricted stock unit withholdings | (12,938) | (4,632) |
Net cash used in financing activities | (5,535) | (1,581) |
Net decrease in cash and cash equivalents and restricted cash | (20,129) | (63,053) |
Cash and cash equivalents and restricted cash, at beginning of period | 190,291 | 240,819 |
Cash and cash equivalents and restricted cash, at end of period | 170,162 | 177,766 |
Non-cash investing and financing activities: | ||
Purchases of property and equipment included in accounts payable and accrued liabilities | $ 423 | $ 1,470 |
The Company and Basis of Presen
The Company and Basis of Presentation | 9 Months Ended |
Oct. 03, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
The Company and Basis of Presentation | The Company and Basis of Presentation The Company Arlo Technologies, Inc. ("Arlo" or the "Company") combines an intelligent cloud infrastructure and mobile app with a variety of smart connected devices that transform the way people experience the connected lifestyle. The Company's deep expertise in product design, wireless connectivity, cloud infrastructure and cutting-edge AI capabilities focuses on delivering a seamless, smart home experience for Arlo users that is easy to setup and interact with every day. The Company's cloud-based platform provides users with visibility, insight and a powerful means to help protect and connect in real-time with the people and things that matter most, from any location with a Wi-Fi or a cellular connection. The Company conducts business across three geographic regions - Americas; Europe, Middle-East and Africa (“EMEA”); and Asia Pacific (“APAC”), and primarily generates revenue by selling devices through retail channels, wholesale distribution, wireless carrier channels, security solution providers, and Arlo's direct to consumer store and paid subscription services. The Company's corporate headquarters is located in Carlsbad, California with other satellite offices across North America and various global locations. Basis of Presentation The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All periods presented have been accounted for in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”). These unaudited condensed consolidated financial statements should be read in conjunction with the notes to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for fair statement of the unaudited condensed consolidated financial statements for interim periods. Fiscal periods The Company’s fiscal year begins on January 1 of the year stated and ends on December 31 of the same year. The Company reports its results on a fiscal quarter basis rather than on a calendar quarter basis. Under the fiscal quarter basis, each of the first three fiscal quarters ends on the Sunday closest to the calendar quarter end, with the fourth quarter ending on December 31. Use of estimates |
Significant Accounting Policies
Significant Accounting Policies and Recent Accounting Pronouncements | 9 Months Ended |
Oct. 03, 2021 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies and Recent Accounting Pronouncements | Significant Accounting Policies and Recent Accounting Pronouncements The Company’s significant accounting policies are disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. There have been no significant changes during the nine months ended October 3, 2021. Recent accounting pronouncements Emerging Growth Company Status As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies, unless the Company otherwise irrevocably elects not to avail itself of this exemption. The Company did not make such an irrevocable election and has not delayed the adoption of any applicable accounting standards. Accounting Pronouncements Recently Adopted There were no accounting pronouncements adopted during the nine months ended October 3, 2021. Accounting Pronouncements Not Yet Effective In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU is intended to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. This guidance is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact this guidance may have on its financial statements and related disclosures. |
Deferred Revenue
Deferred Revenue | 9 Months Ended |
Oct. 03, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Deferred Revenue | Deferred Revenue Deferred Revenue Deferred revenue consists of advance payments and deferred revenue, where the Company has unsatisfied performance obligations. Deferred revenue consists of prepaid services and customer billings in advance of revenues being recognized from the Company's subscription contracts. Advance payments include prepayments for products and Non-Recurring Engineering ("NRE") services under the Supply Agreement with Verisure S.à.r.l. (“Verisure”). Transaction Price Allocated to the Remaining Performance Obligations Remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and partially unsatisfied performance obligations consist of contract liabilities, in-transit orders with destination terms, and non-cancellable backlog. Non-cancellable backlog includes goods and services for which customer purchase orders have been accepted and that are scheduled or in the process of being scheduled for shipment. The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of October 3, 2021: 1 year 2 years Greater than 2 years Total (In thousands) Performance obligations $ 49,410 $ 1,933 $ 382 $ 51,725 The performance obligation classified as greater than one year pertains to revenue deferral from prepaid services. For the nine months ended October 3, 2021 and September 27, 2020, $64.2 million and $33.5 million of revenue was deferred due to unsatisfied performance obligations, primarily relating to over time service revenue, and $70.3 million and $46.9 million of revenue was recognized for the satisfaction of performance obligations over time, respectively. $19.9 million and $21.2 million of this recognized revenue was included in the contract liability balance at the beginning of the period. There were no significant changes in estimates during the period that would affect the contract balances. Disaggregation of Revenue The Company conducts business across three geographic regions: Americas, EMEA, and APAC. Sales and usage-based taxes are excluded from revenue. Refer to Note 13, Segment and Geographic Information |
Balance Sheet Components
Balance Sheet Components | 9 Months Ended |
Oct. 03, 2021 | |
Balance Sheet Related Disclosures [Abstract] | |
Balance Sheet Components | Balance Sheet Components Cash and Cash Equivalents and Restricted cash The Company maintains certain cash balances restricted as to withdrawal or use. The restricted cash is comprised primarily of cash used as collateral for a letter of credit associated with the Company’s lease agreement for its office space in San Jose, California. The Company deposits restricted cash with high credit quality financial institutions. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the balance sheets that sum to the total of the same amounts shown on the statements of cash flows: As of October 3, December 31, (In thousands) Cash and cash equivalents $ 166,057 $ 186,127 Restricted cash 4,105 4,164 Total as presented on the unaudited condensed consolidated statements of cash flows $ 170,162 $ 190,291 As of September 27, December 31, (In thousands) Cash and cash equivalents $ 173,619 $ 236,680 Restricted cash 4,147 4,139 Total as presented on the unaudited condensed consolidated statements of cash flows $ 177,766 $ 240,819 Available-for-sale short-term investments As of October 3, 2021 As of December 31, 2020 Cost Unrealized Gains Unrealized Losses Estimated Fair Value Cost Unrealized Gains Unrealized Losses Estimated Fair Value (In thousands) U.S. treasuries $ — $ — $ — $ — $ 19,996 $ 1 $ — $ 19,997 The Company’s short-term investments are classified as available-for-sale and consist of government securities with an original maturity or remaining maturity at the time of purchase of greater than three months and no more than twelve months. Accordingly, none of the available-for-sale securities have unrealized losses greater than twelve months. The Company did not recognize any allowance for credit losses related to available for sale short-term investment for the three and nine months ended October 3, 2021. Accounts receivable, net As of October 3, December 31, (In thousands) Gross accounts receivable $ 70,450 $ 78,162 Allowance for credit losses (326) (519) Total accounts receivable, net $ 70,124 $ 77,643 The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected. Three Months Ended Nine Months Ended October 3, September 27, October 3, September 27, (In thousands) Balance at the beginning of the period $ 536 $ 810 $ 519 $ 609 Adoption of ASU 2016-13, cumulative-effect adjustment to retained earnings — — — — Provision for (release of) expected credit losses (210) (301) (193) (100) Amounts recovered due to collection — — — — Balance at the end of the period $ 326 $ 509 $ 326 $ 509 Inventories Inventories consist of finished goods which are valued at the lower of cost or net realizable value, with cost being determined using the first-in, first-out method as of October 3, 2021. Property and equipment, net The components of property and equipment are as follows: As of October 3, December 31, (In thousands) Machinery and equipment $ 13,400 $ 14,397 Software 13,821 13,192 Computer equipment 4,092 4,083 Furniture and fixtures 2,376 4,048 Leasehold improvements 4,912 8,023 Total property and equipment, gross 38,601 43,743 Accumulated depreciation and amortization (27,920) (27,922) Total property and equipment, net (1) $ 10,681 $ 15,821 _________________________ (1) $2.5 million property and equipment, net was included in the sublease arrangement for the San Jose office building as of October 3, 2021. No property and equipment, net was included in the sublease arrangement for the San Jose office building as of December 31, 2020 as the sublease agreement became effective in the third quarter of 2021. Depreciation and amortization expense pertaining to property and equipment was $1.4 million and $4.5 million for the three and nine months ended October 3, 2021, respectively, and $2.2 million and $7.0 million for the three and nine months ended September 27, 2020, respectively. Long-lived Assets and Right-of-use Assets Impairment During the second quarter of 2021, the Company evaluated its real estate lease portfolio in light of the COVID-19 pandemic and the changing nature of office space use by its workforce. This evaluation included the decision to sublease its office space in San Jose, California. This change in the use of the San Jose office space led management to test the recoverability of the carrying amount of the asset group related to the sublease. On May 25, 2021, the carrying amount of the asset group exceeded the Company's anticipated undiscounted value of the sublease income over the sublease term. Accordingly, the Company reviewed certain of its right-of-use assets and other lease related assets including leasehold improvements, furniture, fixtures and equipment under the sublease asset group for impairment in accordance with Accounting Standards Codification ("ASC") 360 "Property, Plant, and Equipment". As a result of the evaluation, the Company recorded an impairment charge of $9.1 million, which included $6.8 million associated with the right-of-use assets and $2.3 million associated with other lease related property and equipment assets, in the second quarter of 2021. The assets found to be impaired were written down to their fair value calculated using a discounted cash flow method (income approach). The fair value of the asset group was determined by utilizing projected cash flows from the sublease, discounted by a risk-adjusted discount rate that reflects the level of risk associated with receiving future cash flows. The inputs utilized in the analyses were classified as Level 3 inputs within the fair value hierarchy as defined in ASC 820, "Fair Value Measurement". Refer to Note 5, Fair Value Measurements for additional information about the fair value measured on a non-recurring basis and Note 9, Commitments and Contingencies , for further information about the sublease. Goodwill There was no change in the carrying amount of goodwill during the nine months ended October 3, 2021. The goodwill as of December 31, 2020 and October 3, 2021 was $11.0 million. Goodwill Impairment The Company performs an annual assessment of goodwill at the reporting unit level on the first day of the fourth fiscal quarter and during interim periods if there are triggering events to reassess goodwill. The Company operates as one operating and reportable segment. The Company determined that no events occurred or circumstances changed during the three months ended October 3, 2021 that would more likely than not reduce the fair value of the Company below its carrying amount. If there is a significant decline in the Company’s stock price based on market conditions and deterioration of the Company’s business, the Company may have to record a charge to its earnings for the goodwill impairment of up to $11.0 million. Other non-current assets As of October 3, December 31, (In thousands) Non-current deferred income taxes $ 1,551 $ 1,269 Sublease initial direct cost 1,012 — Deposits 122 122 Other 1,101 1,008 Total other non-current assets $ 3,786 $ 2,399 Accrued liabilities As of October 3, December 31, (In thousands) Sales and marketing $ 32,216 $ 38,577 Sales returns 19,259 37,689 Accrued employee compensation 9,101 15,089 Current operating lease liabilities 4,411 4,400 Freight 5,736 3,558 Warranty obligation 1,645 2,451 Other 21,076 20,002 Total accrued liabilities $ 93,444 $ 121,766 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Oct. 03, 2021 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements Fair Value Measurements - Recurring Basis The following table summarizes assets and liabilities measured at fair value on a recurring basis as of October 3, 2021 and December 31, 2020: As of October 3, 2021 As of December 31, 2020 Total Quoted market Significant Total Quoted market Significant (In thousands) Assets: Cash equivalents: money-market funds (<90 days) $ 21,933 $ 21,933 $ — $ 1,934 $ 1,934 $ — Available-for-sale securities: U.S. treasuries (1) — — — 19,997 19,997 — Foreign currency forward contracts (2) 90 — 90 24 — 24 Total assets measured at fair value $ 22,023 $ 21,933 $ 90 $ 21,955 $ 21,931 $ 24 Liabilities: Foreign currency forward contracts (3) $ 8 $ — $ 8 $ 199 $ — $ 199 Total liabilities measured at fair value $ 8 $ — $ 8 $ 199 $ — $ 199 _________________________ (1) Included in Short-term investments on the Company’s unaudited condensed consolidated balance sheets. (2) Included in Prepaid expenses and other current assets on the Company’s unaudited condensed consolidated balance sheets. (3) Included in Accrued liabilities on the Company’s unaudited condensed consolidated balance sheets. The Company’s investments in cash equivalents and available-for-sale securities are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. The Company enters into foreign currency forward contracts with only those counterparties that have long-term credit ratings of A-/A3 or higher. The Company’s foreign currency forward contracts are classified within Level 2 of the fair value hierarchy as they are valued using pricing models that take into account the contract terms as well as currency rates and counterparty credit rates. The Company verifies the reasonableness of these pricing models using observable market data for related inputs into such models. Additionally, the Company includes an adjustment for non-performance risk in the recognized measure of fair value of derivative instruments. As of October 3, 2021 and December 31, 2020, the adjustment for non-performance risk did not have a material impact on the fair value of the Company’s foreign currency forward contracts. The carrying value of non-financial assets and liabilities measured at fair value in the financial statements on a recurring basis, including accounts receivable and accounts payable, approximate fair value due to their short maturities. As of October 3, 2021 and December 31, 2020, the Company has no Level 3 fair value assets or liabilities measured on a recurring basis. Fair Value Measurements - Nonrecurring Basis The Company measures the fair value of certain assets on a nonrecurring basis when events or changes in circumstances indicate that the carrying amount the asset may not be recoverable. In the second quarter of 2021, in connection with the long-lived assets impairment analysis, certain lease related property and equipment assets and right-of-use asset were measured and written down to fair value on a nonrecurring basis as a result of impairment. The fair value measurements were determined using a discounted cash flow method with unobservable inputs and were classified within Level 3 of the fair value hierarchy. The fair value of the asset group was calculated by utilizing projected cash flows from the sublease, discounted by a market derived discount rate of 8.0%. As of May 25, 2021, the date of measurement, the fair value of the right-of-use asset and other lease related property and equipment assets were $8.1 million and $2.8 million, respectively. The Company recorded an impairment charge of $9.1 million on the assets measured at fair value on a non-recurring basis, which includes $6.8 million associated with the right-of-use assets and $2.3 million associated with other lease related property and equipment assets, in the second quarter of 2021. Refer to Note 4, Balance Sheet Components , for further information about the impairment of the right-of-use asset and long-lived assets. |
Derivative Financial Instrument
Derivative Financial Instruments | 9 Months Ended |
Oct. 03, 2021 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Financial Instruments | Derivative Financial Instruments The Company’s subsidiaries have had, and will continue to have material future cash flows, including revenue and expenses, which are denominated in currencies other than the Company’s functional currency. The Company and all its subsidiaries designate the U.S. dollar as the functional currency. Changes in exchange rates between the Company’s functional currency and other currencies in which the Company transacts business will cause fluctuations in cash flow expectations and cash flow realized or settled. Accordingly, the Company uses derivatives to mitigate its business exposure to foreign exchange risk. The Company enters into foreign currency forward contracts in Australian dollars and Canadian dollars to manage its exposure to foreign exchange risk related to expected future cash flows on certain forecasted revenue, costs of revenue, operating expenses and existing assets and liabilities. T he Company’s foreign currency forward contracts do not contain any credit risk-related contingent features. The Company is exposed to credit losses in the event of nonperformance by the counter-parties of its forward contracts. The Company enters into derivative contracts with high-quality financial institutions and limits the amount of credit exposure to any one counter-party. In addition, the derivative contracts typically mature in less than six months and the Company continuously evaluates the credit standing of its counter-party financial institutions. The counter-parties to these arrangements are large highly rated financial institutions and the Company does not consider non-performance a material risk. The Company may choose not to hedge certain foreign exchange exposures for a variety of reasons, including, but not limited to, materiality, accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange rates. The Company’s accounting policies for these instruments are based on whether the instruments are designated as hedge or non-hedge instruments in accordance with the authoritative guidance for derivatives and hedging. The Company records all derivatives on the balance sheets at fair value. Cash flow hedge gains and losses are recorded in other comprehensive income (“OCI”) until the hedged item is recognized in earnings. Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings in Other income (expense), net in the unaudited condensed consolidated statements of operations. Fair value of derivative instruments The fair values of the Company’s derivative instruments and the line items on the unaudited condensed consolidated balance sheets to which they were recorded as of October 3, 2021 and December 31, 2020 are summarized as follows: Derivative Assets Balance Sheet October 3, 2021 December 31, 2020 Balance Sheet October 3, 2021 December 31, 2020 (In thousands) (In thousands) Derivative assets not designated as hedging instruments Prepaid expenses and other current assets $ 80 $ 22 Accrued liabilities $ 7 $ 199 Derivative assets designated as hedging instruments Prepaid expenses and other current assets 10 2 Accrued liabilities 1 — Total $ 90 $ 24 $ 8 $ 199 Refer to Note 5, Fair Value Measurements, for detailed disclosures regarding fair value measurements in accordance with the authoritative guidance for fair value measurements and disclosures. Gross amounts offsetting of derivative instruments The Company has entered into master netting arrangements which allow net settlements under certain conditions. Although netting is permitted, it is currently the Company’s policy and practice to record all derivative assets and liabilities on a gross basis in the unaudited condensed consolidated balance sheets. The following tables set forth the offsetting of derivative assets as of October 3, 2021 and December 31, 2020: As of October 3, 2021 Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets Gross Amounts of Recognized Assets Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets Net Amounts Of Assets Presented in the Unaudited Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount (In thousands) HSBC $ 90 $ — $ 90 $ (8) $ — $ 82 December 31, 2020 Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets Gross Amounts of Recognized Assets Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets Net Amounts Of Assets Presented in the Unaudited Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount (In thousands) Wells Fargo Bank $ 24 $ — $ 24 $ (24) $ — $ — The following table sets forth the offsetting of derivative liabilities as of October 3, 2021 and December 31, 2020: As of October 3, 2021 Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets Net Amounts Of Liabilities Presented in the Unaudited Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount (In thousands) HSBC $ 8 $ — $ 8 $ (8) $ — $ — December 31, 2020 Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets Net Amounts Of Liabilities Presented in the Unaudited Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount (In thousands) Wells Fargo Bank $ 199 $ — $ 199 $ (24) $ — $ 175 Cash flow hedges The Company typically hedges portions of its anticipated foreign currency exposure which generally are less than six months. The Company entered into two forward contracts related to its cash flow hedging program in the third quarter of 2021 with an average size of $1.8 million related to its cash flow hedging program. The effects of the Company's cash flow hedges on the unaudited condensed consolidated statements of operations for the three and nine months ended October 3, 2021 are summarized as follows: Three Months Ended October 3, 2021 Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges Revenue Cost of revenue Research and development Sales and marketing General and administrative (In thousands) Statements of operations $ 111,149 $ 86,806 $ 14,377 $ 12,779 $ 12,119 Gains (losses) on cash flow hedge $ 122 $ (1) $ — $ (10) $ (1) Nine Months Ended October 3, 2021 Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges Revenue Cost of revenue Research and development Sales and marketing General and administrative (In thousands) Statements of operations 292,276 215,957 45,419 36,445 36,905 Gains (losses) on cash flow hedge $ 122 $ (1) $ — $ (8) $ (1) The effects of the Company’s cash flow hedges on the unaudited condensed consolidated statements of operations for the three and nine months ended September 27, 2020 are summarized as follows: Three Months Ended September 27, 2020 Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges Revenue Cost of revenue Research and development Sales and marketing General and administrative (In thousands) Statements of operations $ 110,236 $ 88,827 $ 15,436 $ 12,720 $ 11,137 Gains (losses) on cash flow hedge (37) — 5 2 — Nine Months Ended September 27, 2020 Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges Revenue Cost of revenue Research and development Sales and marketing General and administrative (In thousands) Statements of operations $ 242,318 $ 211,467 $ 44,871 $ 35,471 $ 39,758 Gains (losses) on cash flow hedge (14) — 5 3 — The Company expects to reclassify to earnings all of the amounts recorded in AOCI (as defined below) associated with its cash flow hedges over the next twelve months. For information on the unrealized gains or losses on derivatives reclassified out of AOCI into the unaudited condensed consolidated statements of operations, refer to Note 7, Accumulated Other Comprehensive Income (Loss). Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur within the designated hedge period or if not recognized within 60 days following the end of the hedge period. The Company did not recognize any material net gains or losses related to the loss of hedge designation as there were no discontinued cash flow hedges during the nine months ended October 3, 2021 and September 27, 2020. Non-designated hedges The Company adjusts its non-designated hedges monthly and enters into about six non-designated derivatives per quarter with an average size of $2.6 million. The hedges range typically from one Derivatives Not Designated as Hedging Instruments Location of Gains (Losses) Three Months Ended Nine Months Ended October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020 (In thousands) Foreign currency forward contracts Other income (expense), net $ 46 $ (108) $ (38) $ 553 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | 9 Months Ended |
Oct. 03, 2021 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Income (Loss) | Accumulated Other Comprehensive Income (Loss) The following table sets forth the changes in accumulated other comprehensive income (loss) (“AOCI”) by component for the three and nine months ended October 3, 2021 and September 27, 2020. Unrealized gains (losses) on available-for-sale securities Unrealized gains (losses) on derivatives Estimated tax benefit (provision) Total (In thousands) Balance as of June 27, 2021 $ — $ — $ — $ — Other comprehensive income (loss) before reclassifications — 122 (1) 121 Less: Amount reclassified from accumulated other comprehensive income (loss) — 110 — 110 Net current period other comprehensive income (loss) — 12 (1) 11 Balance as of October 3, 2021 $ — $ 12 $ (1) $ 11 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, 2020 $ 1 $ 2 $ — $ 3 Other comprehensive income (loss) before reclassifications (1) 122 (1) 120 Less: Amount reclassified from accumulated other comprehensive income (loss) — 112 — 112 Net current period other comprehensive income (loss) (1) 10 (1) 8 Balance as of October 3, 2021 $ — $ 12 $ (1) $ 11 Unrealized gains (losses) on available-for-sale securities Unrealized gains (losses) on derivatives Estimated tax benefit (provision) Total (In thousands) Balance as of June 28, 2020 $ 14 $ — $ — $ 14 Other comprehensive income (loss) before reclassifications (14) (39) — (53) Less: Amount reclassified from accumulated other comprehensive income (loss) — (30) — (30) Net current period other comprehensive income (loss) (14) (9) — (23) Balance as of September 27, 2020 $ — $ (9) $ — $ (9) 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, 2019 $ 23 $ (25) $ — $ (2) Other comprehensive income (loss) before reclassifications (23) 10 — (13) Less: Amount reclassified from accumulated other comprehensive income (loss) — (6) — (6) Net current period other comprehensive income (loss) (23) 16 — (7) Balance as of September 27, 2020 $ — $ (9) $ — $ (9) The following tables provide details about significant amounts reclassified out of each component of AOCI for the three and nine months ended October 3, 2021 and September 27, 2020: Three Months Ended October 3, 2021 September 27, 2020 Gains (Losses) Recognized in OCI - Effective Portion Gains (Losses) Reclassified from OCI to Income - Effective Portion 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 $ 122 $ 122 $ (39) $ (37) Revenue Foreign currency contracts — (1) — — Cost of revenue Foreign currency contracts — — — 5 Research and development Foreign currency contracts — (10) — 2 Sales and marketing Foreign currency contracts — (1) — — General and administrative $ 122 $ 110 $ (39) $ (30) Total * Nine Months Ended October 3, 2021 September 27, 2020 Gains (Losses) Recognized in OCI - Effective Portion Gains (Losses) Reclassified from OCI to Income - Effective Portion 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 $ 122 $ 122 $ 10 $ (14) Revenue Foreign currency contracts — (1) — — Cost of revenue Foreign currency contracts — — — 5 Research and development Foreign currency contracts — (8) — 3 Sales and marketing Foreign currency contracts — (1) — — General and administrative $ 122 $ 112 $ 10 $ (6) Total * _________________________ |
Debt
Debt | 9 Months Ended |
Oct. 03, 2021 | |
Debt Disclosure [Abstract] | |
Debt | Debt Revolving Credit Facility On November 5, 2019, the Company entered into a Business Financing Agreement (the “Credit Agreement”) with Western Alliance Bank, an Arizona corporation, as lender (the “Lender”). The Credit Agreement provides for a two-year revolving credit facility (the “Credit Facility”) that matures on November 5, 2021 and that may, by its terms, be extended by mutual written agreement between the Company and the Lender. Borrowings under the Credit Facility are limited to the lesser of (x) $40.0 million, and (y) an amount equal to the borrowing base. The borrowing base will be 60% of the Company’s eligible receivables and eligible accounts receivable, less such reserves as the Lender may deem proper and necessary from time to time. The Lender is not required to make any advance under the Credit Facility during the period beginning on January 1st and continuing through June 30th, except for advances made against eligible receivables first invoiced between July 1 and December 31, 2019. The Credit Agreement also includes sublimits for the issuance by the Lender of letters of credit, credit card indebtedness and foreign exchange forward contract. Repayment of the borrowings under the Credit Facility are due upon collection of the eligible receivables. The proceeds of the borrowings under the Credit Facility may be used for working capital and general corporate purposes. The obligations of the Company under the Credit Agreement are secured by substantially all of the Company’s domestic personal property, excluding intellectual property assets and more than 65% of the shares of voting capital stock of any of the Company’s foreign subsidiaries. Borrowings under the Credit Agreement generally bear interest at floating rates based upon the prime rate plus two and one-quarter percentage points (2.25%), plus an additional five percentage points (5%) during any period that an event of default has occurred and is continuing. Among other fees, the Company is required to pay an annual facility fee equal to 0.25% of the limit under the Credit Facility due upon entry into the Credit Agreement and on each anniversary thereof. The annual facility fee is capitalized and being amortized as interest expense over a 12-month period. The Company incurred debt issuance costs for the Credit Agreement, which are recorded in prepaid expenses and other current assets in the Company's unaudited condensed consolidated balance sheets and are being amortized as interest expense over the contractual term of the Credit Agreement. The Credit Agreement contains customary events of default and other restrictions, including a financial covenant that requires the Company to maintain $20.0 million of domestic cash and certain restrictions on the Company’s ability to incur additional indebtedness, consolidate or merge, enter into acquisitions, pay any dividend or distribution on the Company’s capital stock, redeem, retire or purchase shares of the Company’s capital stock, make investments or pledge or transfer assets, in each case subject to limited exceptions. If an event of default under the Credit Agreement occurs, then the Lender may cease making advances under the Credit Agreement and declare any outstanding obligations under the Credit Agreement to be immediately due and payable. In addition, if the Company files a bankruptcy petition, a bankruptcy petition is filed against the Company and is not dismissed or stayed within forty-five days, or the Company makes a general assignment for the benefit of creditors, then any outstanding obligations under the Credit Agreement will automatically and without notice or demand become immediately due and payable. As of October 3, 2021, the Company is in compliance with all the covenants of the Credit Agreement. No amounts had been drawn under the Credit Facility as of October 3, 2021. The Credit Agreement was terminated on October 27, 2021. On the same day, the Company entered into a Loan and Security Agreement with Bank of America, N.A. for a $40 million three-year revolving credit facility. Refer to Note 14. Subsequent Event for further information about the terms and structure of the credit facility. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Oct. 03, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Operating Leases The Company primarily leases office space, with various expiration dates through June 2029. Some of the leases include options to extend such leases for up to five years, and some include options to terminate such leases within one year. The terms of certain of the Company's leases provide for rental payments on a graduated scale. The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, accrued liabilities Supplemental cash flow information related to operating leases for the nine months ended October 3, 2021 and September 27, 2020 was as follows: October 3, 2021 September 27, 2020 (in thousands) Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 4,939 $ 4,452 Right-of-use assets obtained in exchange for lease liabilities Operating leases $ 1,429 $ 461 Weighted average remaining lease term and weighted average discount rate related to operating leases as of October 3, 2021 were as follows: Weighted average remaining lease term 6.5 years Weighted average discount rate 6.3 % The Company's future minimum undiscounted lease payments under operating leases and future non-cancelable rent payments from its subtenants for each of the next five years and thereafter as of October 3, 2021 were as follows: Operating Lease Payments Sublease Payments Net (In thousands) 2021 (Remaining three months) $ 1,088 $ — $ 1,088 2022 6,270 (1,673) 4,597 2023 5,491 (1,891) 3,600 2024 4,881 (1,947) 2,934 2025 3,179 (2,006) 1,173 Thereafter 11,489 (8,008) 3,481 Total future lease payments 32,398 $ (15,525) $ 16,873 Less: interest (1) (5,376) Present value of future minimum lease payments $ 27,022 Accrued liabilities $ 4,411 Non-current operating lease liabilities 22,611 Total lease liabilities $ 27,022 ________________________ (1) Leases that commenced before November 5, 2019 were calculated using the Company’s incremental borrowing rate on a collateralized basis plus LIBOR rate that closely matches contractual term of most leases. Leases that commenced after November 5, 2019 were calculated using the Company's borrowing rate defined in the Credit Agreement with Western Alliance Bank. During the second quarter of 2021, the Company reviewed certain of its right-of-use assets and other lease related assets in conjunction with the evaluation of its real estate lease portfolio and recorded an impairment charge of $9.1 million, which included $6.8 million associated with the right-of-use asset and $2.3 million associated with other lease related property and equipment assets, in the second quarter of 2021. Subsequent to the impairment, lease expense for the lease payments related to the impaired right-of-use asset is no longer recognized on a straight-line basis. The associated lease liability is amortized using the same effective interest method as before the impairment charge. The impaired right-of-use asset, however, is subsequently amortized on a straight-line basis. Refer to Note 4, Balance Sheet Components , for further information about the impairment of the right-of-use asset and long-lived assets. On June 29, 2021, the sublease agreement dated May 25, 2021 (the "Sublease"), by and between the Company and Vocera Communications, Inc. (“Subtenant”) became effective whereby the Company agreed to sublease to Subtenant all of the approximately 78,000 rentable square feet of office space located at 3030 Orchard Parkway in San Jose, California. The Company’s decision to enter into the Sublease is a continuance of its evaluation of its real estate lease portfolio in light of the COVID-19 pandemic and its impact on the changing nature of office space use by its workforce. The initial term of the Sublease will commence on February 1, 2022, and will expire on June 30, 2029, unless earlier terminated in accordance with the Sublease. The Subtenant will pay to the Company an escalating base rent over the life of the Sublease of approximately $167,000 to $206,000 per month. In addition, the Subtenant will pay its pro rata portion of property expenses and operating expenses for the Subleased Premises. The Company classifies the Sublease as an operating lease. The accounting of the Sublease commenced on October 1, 2021. Sublease income is recognized over the term of the sublease on a straight-line basis and is recorded as a reduction of rental expense. Letters of Credit In connection with the lease agreement for the office space located in San Jose, California, the Company executed a letter of credit with the landlord as the beneficiary. As of October 3, 2021, the Company had approximately $3.6 million of unused letters of credit outstanding, of which $3.1 million pertains to the lease arrangement in San Jose, California. Purchase Obligations The Company has entered into various inventory-related purchase agreements with suppliers. Generally, under these agreements, 50% of orders are cancelable by giving notice 46 to 60 days prior to the expected shipment date and 25% of orders are cancelable by giving notice 31 to 45 days prior to the expected shipment date. Orders are non-cancelable within 30 days prior to the expected shipment date. As of October 3, 2021, the Company had approximately $40.3 million in non-cancelable purchase commitments with suppliers. As a result of the COVID-19 pandemic, the Company has experienced an elongation of the time from order placement to production primarily due to component shortages and supply chain disruptions. In order to reduce manufacturing lead-times and to ensure an adequate supply of inventories, the Company has worked with its suppliers to place longer lead-time purchase orders to ensure availability of components and materials from its supply chain. Under this circumstance, the Company may be obligated to purchase long lead-time component inventory procured in accordance with its forecasts. The Company may become liable for non-cancellable material components, such as chipsets purchased by the supplier to meet its purchase order, even if it is subsequently cancelled. The Company establishes a loss liability for all products it does not expect to sell for which it has committed purchases from suppliers. As of October 3, 2021, the loss liability from committed purchases was $0.7 million. From time to time the Company’s suppliers procure unique complex components on the Company’s behalf. If these components do not meet specified technical criteria or are defective, the Company should not be obligated to purchase the materials. Warranty Obligations Changes in the Company’s warranty liability, which is included in Accrued liabilities in the unaudited condensed consolidated balance sheets, were as follows: Three Months Ended Nine Months Ended October 3, September 27, October 3, September 27, (In thousands) Balance at the beginning of the period $ 1,805 $ 3,023 $ 2,451 $ 3,169 Provision for (release of) warranty obligation made during the period (53) — (438) — Settlements made during the period (107) (455) (368) (601) Balance at the end of the period $ 1,645 $ 2,568 $ 1,645 $ 2,568 Litigation and Other Legal Matters Securities Class Action Lawsuits and Derivative Suit The Company is involved in disputes, litigation, and other legal actions, including, but not limited to, the matters described below. In all cases, at each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. In such cases, the Company accrues for the amount, or if a range, the Company accrues the low end of the range, only if there is not a better estimate than any other amount within the range, as a component of legal expense within litigation reserves, net. The Company monitors developments in these legal matters that could affect the estimate the Company had previously accrued. In relation to such matters, the Company currently believes that there are no existing claims or proceedings that are likely to have a material adverse effect on its financial position within the next 12 months, or the outcome of these matters is currently not determinable. There are many uncertainties associated with any litigation, and these actions or other third-party claims against the Company may cause the Company to incur costly litigation and/or substantial settlement charges. In addition, the resolution of any intellectual property litigation may require the Company to make royalty payments, which could have an adverse effect in future periods. If any of those events were to occur, the Company's business, financial condition, results of operations, and cash flows could be adversely affected. The actual liability in any such matters may be materially different from the Company's estimates, which could result in the need to adjust the liability and record additional expenses. Beginning on December 11, 2018, purported stockholders of Arlo Technologies, Inc. filed six putative securities class action complaints in the Superior Court of California, County of Santa Clara, and one complaint in the U.S. District Court for the Northern District of California against the Company and certain of its executives and directors. Some of these actions also name as defendants the underwriters in the Company’s initial public offering ("IPO") and NETGEAR, Inc. ("NETGEAR"). The actions pending in state court are Aversa v. Arlo Technologies, Inc., et al. , No. 18CV339231, filed Dec. 11, 2018; Pham v. Arlo Technologies, Inc. et al. , No. 19CV340741, filed January 9, 2019; Patel v. Arlo Technologies, Inc. , No. 19CV340758, filed January 10, 2019; Perros v. NetGear, Inc. , No. 19CV342071, filed February 1, 2019; Vardanian v. Arlo Technologies, Inc. , No. 19CV342318, filed February 8, 2019; and Hill v. Arlo Technologies, Inc. et al. , No. 19CV343033, filed February 22, 2019. On April 26, 2019, the state court consolidated these actions as In re Arlo Technologies, Inc. Shareholder Litigation , No. 18CV339231 (the “State Action"). The action in federal court is Wong v. Arlo Technologies, Inc. et al. , No. 19-CV-00372 (the “Federal Action”). The plaintiffs in the State Action filed a consolidated complaint on May 1, 2019. The plaintiffs allege that the Company failed to adequately disclose quality control problems and adverse sales trends ahead of its IPO, violating the Securities Act of 1933, as amended (the "Securities Act"). The complaint seeks unspecified monetary damages and other relief on behalf of investors who purchased Company common stock issued pursuant and/or traceable to the IPO. On June 21, 2019, the court stayed the State Action pending resolution of the Federal Action, given the substantial overlap between the claims. In the Federal Action, the court appointed a shareholder named Matis Nayman as lead plaintiff. On June 7, 2019, plaintiff filed an amended complaint. Lead Plaintiff alleges violations of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, based on alleged materially false and misleading statements about the Company’s sales trends and products. In the amended complaint, lead plaintiff sought to represent a class of persons who purchased or otherwise acquired the Company’s common stock (i) during the period between August 3, 2018 through December 3, 2018 and/or (ii) pursuant to or traceable to the IPO. Lead plaintiff seeks class certification, an award of unspecified damages, an award of costs and expenses, including attorneys’ fees, and other further relief as the court may deem just and proper. On August 6, 2019, defendants filed a motion to dismiss. The federal court granted that motion, and lead plaintiff filed a second amended complaint. On June 12, 2020, lead plaintiff filed an unopposed motion for preliminary approval of a class action settlement for $1.25 million, which was also the amount that the Company had accrued for loss contingency. On September 24, 2020, the federal court entered an order preliminarily approving the settlement. On February 5, 2021, lead plaintiff filed a motion for final approval of the settlement. In October 2020, the Company made a $1.25 million payment an escrow account administered by the court and plaintiff’s counsel (the “Settlement Fund”). The Settlement Fund shall be deemed to be in the custody of the court and shall remain subject to the jurisdiction of the court until such time as the Settlement Fund is distributed pursuant to the settlement agreement and/or further order of the court. On February 5, 2021, lead plaintiff filed a motion for final approval of the settlement. In advance of the final approval hearing, three of the named plaintiffs in the State Action requested exclusion from the settlement. The court held a final approval hearing on March 11, 2021, and, on March 25, 2021, entered an order and final judgment approving the settlement and, among other things, dismissing with prejudice all claims of lead plaintiff and the Settlement Class (as defined in the settlement agreement). On April 19, 2021, the Court issued an amended order and corrected judgment to include defendant NETGEAR, who had been inadvertently omitted from the prior order and final judgment. The Federal Action is now closed. In the State Action, on May 5, 2021, the court held a status conference. At that conference, the state court instructed plaintiffs Perros, Patel, and Pham (“Plaintiffs”), who were the only Arlo stockholders to opt out of the federal settlement, to file an amended complaint by June 4, 2021. Plaintiffs filed their second amended complaint on June 4, 2021, asserting their individual Securities Act claims, but also purporting to represent a new class of Arlo stockholders who purchased Arlo shares between December 3, 2018 and February 22, 2019 and fell outside the Settlement Class (as defined in the federal settlement). On June 21, 2021, the Arlo defendants filed a motion to dismiss the State Action (for forum non conveniens) based on the federal forum provision in Arlo’s certificate of incorporation. Plaintiffs opposed on July 28, 2021, and the Arlo defendants replied on August 13, 2021. On July 6, 2021, defendants filed multiple demurrers to the second amended complaint. Plaintiffs oppositions are due on August 12, 2021, and defendants’ replies are due on August 27, 2021. On September 9, 2021, the court issued an order granting the Arlo defendants’ forum non conveniens motion. On September 17, 2021, the court issued a final judgment dismissing the State Action in its entirety. Leonard R. Pinto v. Arlo Technologies, Inc., et al. In addition to the State Action and the Federal Action, a purported stockholder named Leonard Pinto filed a tagalong derivative action on June 13, 2019 in the U.S. District Court for the Northern District of California, captioned Pinto v. Arlo Technologies, Inc. et al. , No. 19-CV-03354 (the “Derivative Action”). The Derivative Action is brought on behalf of the Company against the majority of the Company’s current directors. The complaint is based on the same alleged misconduct as the securities class actions but asserts claims for breach of fiduciary duty, waste of corporate assets, and violation of the Securities Exchange Act of 1934, as amended. On August 20, 2019, the court stayed the Derivative Action in deference to the Federal Action. On April 8, 2021, because it had granted final approval of the settlement in the Federal Action, the court lifted the stay in the Derivative Action and asked the parties to file a joint status report by April 22, 2021. In their status report, the parties stipulated to a schedule for plaintiff to file an amended complaint and for the parties to brief a motion to dismiss. Plaintiff filed his amended complaint on May 24, 2021. Defendants moved to dismiss the amended complaint on July 9, 2021. On August 23, 2021, plaintiff filed a second amended complaint. Defendants’ motion to dismiss the second amended complaint is due on December 17, 2021. Plaintiff’s opposition is due January 31, 2022, and defendants’ reply is due on March 2, 2022. Skybell Technologies, Inc. v. Arlo Technologies, Inc. On December 18, 2020, Skybell Technologies, Inc., SB IP Holdings, LLC, and Eyetalk365, LLC (collectively, “Complainants” or “Skybell”) filed a Section 337 complaint against the Company, Vivint Smart Home, Inc. (“Vivint”), and SimpliSafe, Inc. (“SimpliSafe”) (collectively “Respondents”) at the U.S. International Trade Commission (“ITC”). The action alleges that the Company’s cameras and video doorbell cameras infringe seven patents: 10,097,796 (“the ’796 patent”), 10,200,660 (“the ’660 patent”), 10,523,906 (“the ’906 patent”), 10,097,797 (“the ’797 patent”), 9,485,478 (“the ’478 patent”), 10,674,120 (“the ’120 patent”), and 9,432,638 (“the ’638 patent”) (collectively, “the Asserted Patents”) in violation of Section 337 of the Tariff Act of 1930. The Asserted Patents are all from the same family and generally directed to detecting a person at a camera and communicating video and audio from the camera to a cell phone along with various other features. The case was instituted on January 25, 2021 as Investigation No. 337-TA-1242. On September 15, 2021, the Administrative Law Judge (“ALJ”) hearing the case at the ITC issued an Initial Determination (“ID”) ruling that all the Asserted Patents are invalid. The ALJ agreed with Respondents’ contention that there was an impermissible break in priority chains of the applications of the Asserted Patents during their prosecution – meaning that certain of Skybell’s prior issued patents fully anticipated or invalidated all the Asserted Patents. Therefore, the ALJ ruled that there can be no patent infringement or violation of Section 337 of the Tariff Act of 1930 by the Respondents. Skybell appealed the ID by submitting its Petition for Review to the ITC on September 27, 2021, and the Respondents submitted their Response to the Petition to Review on October 4, 2021. The ITC will decide to grant review of the ID in whole, in part, or not at all, and if any review of the ID is granted then a briefing and oral argument schedule will be designated by the ITC. As of October 3, 2021, the Company is unable to predict the outcome of this matter, and, at this time, cannot reasonably estimate the possible loss or range of loss with respect to the legal proceeding discussed herein. Indemnification of Directors and Officers The Company, as permitted under Delaware law and in accordance with its bylaws, has agreed to indemnify its officers and directors for certain events or occurrences, subject to certain conditions, while the officer or director is or was serving at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum amount of potential future indemnification is unlimited; however, the Company has a director and officer insurance policy that will enable it to recover a portion of any future amounts paid. As a result of its insurance policy coverage, the Company believes the fair value of each indemnification agreement will be minimal. The Company had no liabilities recorded for these agreements as of October 3, 2021 and December 31, 2020. Indemnifications Prior to the completion of the IPO, the Company historically participated in NETGEAR’s sales agreements. In its sales agreements, NETGEAR typically agrees to indemnify its direct customers, distributors and resellers (the “Indemnified Parties”) for any expenses or liability resulting from claimed infringements by NETGEAR’s products of patents, trademarks or copyrights of third parties that are asserted against the Indemnified Parties, subject to customary carve-outs. The terms of these indemnification agreements are generally perpetual after execution of the agreement. The maximum amount of potential future indemnification is generally unlimited. From time to time, the Company receives requests for indemnity and may choose to assume the defense of such litigation asserted against the Indemnified Parties. The Company had no liabilities recorded for these agreements as of October 3, 2021 and December 31, 2020. In connection with the separation of Arlo from NETGEAR (the "Separation"), and after July 1, 2018, certain sales agreements were transferred to the Company, and the Company has replaced certain shared contracts, which include similar indemnification terms. In addition, pursuant to the master separation agreement and certain other agreements entered into with NETGEAR in connection with the Separation and the IPO, NETGEAR has agreed to indemnify the Company for certain liabilities. The master separation agreement provides for cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of its business with the Company and financial responsibility for the obligations and liabilities of NETGEAR’s business with NETGEAR. Under the intellectual property rights cross-license agreement entered into between the Company and NETGEAR, each party, in its capacity as a licensee, indemnifies the other party, in its capacity as a licensor, and its directors, officers, agents, successors and subsidiaries against any losses suffered by such indemnified party as a result of the indemnifying party’s practice of the intellectual property licensed to such indemnifying party under the intellectual property rights cross-license agreement. Also, under the tax matters agreement entered into between the Company and NETGEAR, each party is liable for, and indemnifies the other party and its subsidiaries from and against any liability for, taxes that are allocated to the indemnifying party under the tax matters agreement. In addition, the Company has agreed in the tax matters agreement that each party will generally be responsible for any taxes and related amounts imposed on it or NETGEAR as a result of the failure of the special stock dividend (the “Distribution”) by NETGEAR to NETGEAR stockholders of the 62,500,000 shares of Arlo common stock owned by NETGEAR that was made on December 31, 2018, together with certain related transactions, to qualify as a transaction that is generally tax-free, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) and certain other relevant provisions of the Internal Revenue Code (the "Code"), to the extent that the failure to so qualify is attributable to actions, events or transactions relating to such party’s respective stock, assets or business, or a breach of the relevant representations or covenants made by that party in the tax matters agreement. The transition services agreement generally provides that the applicable service recipient indemnifies the applicable service provider for liabilities that such service provider incurs arising from the provision of services other than liabilities arising from such service provider’s gross negligence, bad faith or willful misconduct or material breach of the transition services agreement, and that the applicable service provider indemnifies the applicable service recipient for liabilities that such service recipient incurs arising from such service provider’s gross negligence, bad faith or willful misconduct or material breach of the transition services agreement. Pursuant to the registration rights agreement, the Company has agreed to indemnify NETGEAR and its subsidiaries that hold registrable securities (and their directors, officers, agents and, if applicable, each other person who controls such holder under Section 15 of the Securities Act) registering shares pursuant to the registration rights agreement against certain losses, expenses and liabilities under the Securities Act, common law or otherwise. NETGEAR and its subsidiaries that hold registrable securities similarly indemnify the Company but such indemnification will be limited to an amount equal to the net proceeds received by such holder under the sale of registrable securities giving rise to the indemnification obligation. Change in Control and Severance Agreements The Company has entered into change in control and severance agreements with certain of its executive officers (the “Severance Agreements”). Pursuant to the Severance Agreements, upon a termination without cause or resignation with good reason, the individual would be entitled to (1) cash severance equal to (a) the individual’s annual base salary and an additional amount equal to his or her target annual bonus (for the Chief Executive Officer) or (b) the individual’s annual base salary (for other executive officers), (2) 12 months of health benefits continuation, and (3) accelerated vesting of any unvested time-based equity awards that would have vested during the 12 months following the termination date. Upon a termination without cause or resignation with good reason that occurs during the one month prior to or 12 months following a change in control, the individual would be entitled to (1) (a) cash severance equal to a multiple (2 times for the Chief Executive Officer and 1 times for other executive officers) of the sum of the individual’s annual base salary and target annual bonus, (2) a number of months of health benefits continuation (24 months for the Chief Executive Officer and 12 months for other executive officers) and (3) vesting of all outstanding, unvested equity awards (for the Chief Executive Officer) and the vesting of all outstanding, unvested time-based equity awards (for other executive officers). Severance will be conditioned upon the execution and non-revocation of a release of claims. The Company had no liabilities recorded for these agreements as of October 3, 2021. Environmental Regulation The Company is required to comply and is currently in compliance with the European Union (“EU”) and other Directives on the Restrictions of the use of Certain Hazardous Substances in Electrical and Electronic Equipment (“RoHS”), Waste Electrical and Electronic Equipment (“WEEE”) requirements, Energy Using Product (“EuP”) requirements, the REACH Regulation, Packaging Directive and the Battery Directive. The Company is subject to various federal, state, local, and foreign environmental laws and regulations, including those governing the use, discharge, and disposal of hazardous substances in the ordinary course of its manufacturing process. The Company believes that its current manufacturing and other operations comply in all material respects with applicable environmental laws and regulations; however, it is possible that future environmental legislation |
Employee Benefit Plans
Employee Benefit Plans | 9 Months Ended |
Oct. 03, 2021 | |
Employee Benefit and Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Employee Benefit Plans | Employee Benefit Plans The Company grants options and restricted stock units ("RSUs") under the 2018 Equity Incentive Plan (the “2018 Plan”), under which awards may be granted to all employees. Award vesting periods for this plan are generally three On July 28, 2021, the Compensation Committee of the Board of Directors (the “Committee”) of the unanimously approved an amendment to the 2018 Plan to, among other things, reserve an additional 1,500,000 shares of the Company’s common stock to be used exclusively for grants of awards to individuals who were not previously employees or non-employee directors of the Company (or following a bona fide period of non-employment with the Company), as an inducement material to the individual’s entry into employment with the Company within the meaning of Rule 303A.08 of the New York Stock Exchange (the “NYSE”) Listed Company Manual (“Rule 303A.08”). The 2018 Plan was amended by the Committee without stockholder approval pursuant to Rule 303A.08. The following table sets forth the available shares for grant under the 2018 Plan as of October 3, 2021 and December 31, 2020: Number of Shares (In thousands) Shares available for grant as of December 31, 2020 3,113 Additional authorized shares 4,673 Granted (1) (7,097) Forfeited / cancelled 731 Shares traded for taxes 1,993 Shares available for grant as of October 3, 2021 3,413 _________________________ (1) Includes 0.8 million shares consisting of time-based RSUs (50% of the grant), performance RSUs ("PSUs") (25% of the grant) and market-based performance RSUs ("MPSUs") (25% of the grant) granted to the Company's named executive officers ("NEOs") in the first quarter of 2021 . Also includes 0.8 million shares granted to the Company's CEO in the third quarter of 2021, with the award designed to reward both continued service and the creation of shareholder value. Additionally, the Company sponsors an Employee Stock Purchase Plan (“ESPP”), pursuant to which eligible employees may contribute up to 15% of compensation, subject to certain income limits, to purchase shares of the Company’s common stock. The terms of the plan include a look-back feature that enables employees to purchase stock semi-annually at a price equal to 85% of the lesser of the fair market value at the beginning of the offering period or the purchase date. The duration of each offering period is generally six months. As of October 3, 2021, 1,315,080 shares were available for issuance under the ESPP. On March 3, 2021, the Company registered an aggregate of up to 3,966,472 shares of the Company’s common stock on Registration Statement on Form S-8, including 3,173,178 shares issuable pursuant to the Company's 2018 Plan that were automatically added to the shares authorized for issuance under the 2018 Plan on January 1, 2021 pursuant to an “evergreen” provision contained in the 2018 Plan and 793,294 shares issuable pursuant to the ESPP that were automatically added to the shares authorized for issuance under the ESPP on January 1, 2021 pursuant to an “evergreen” provision contained in the ESPP. Option Activity Arlo’s stock option activity during the nine months ended October 3, 2021 was as follows: Number of shares Weighted Average Exercise Price Per Share (In thousands) (In dollars) Outstanding as of December 31, 2020 3,434 $ 9.72 Granted — $ — Exercised (655) $ 6.77 Forfeited / cancelled (29) $ 7.13 Outstanding as of October 3, 2021 2,750 $ 10.45 Vested and expected to vest as of October 3, 2021 2,750 $ 10.45 Exercisable Options as of October 3, 2021 2,593 $ 10.17 NETGEAR’s stock option activity for Arlo employees during the nine months ended October 3, 2021 was as follows: Number of shares Weighted Average Exercise Price Per Share (In thousands) (In dollars) Outstanding as of December 31, 2020 16 $ 22.49 Exercised (4) $ 27.15 Forfeited / cancelled — $ — Expired — $ — Outstanding as of October 3, 2021 12 $ 20.76 Vested and expected to vest as of October 3, 2021 12 $ 20.76 Exercisable Options as of October 3, 2021 12 $ 20.76 RSU Activity Arlo’s RSU activity during the nine months ended October 3, 2021 was as follows: Number of shares Weighted Average Grant Date Fair Value Per Share (In thousands) (In dollars) Outstanding as of December 31, 2020 10,563 $ 4.33 Granted (1) 7,097 $ 7.21 Vested (5,665) $ 5.50 Forfeited (702) $ 5.12 Outstanding as of October 3, 2021 11,293 $ 5.50 (1) Includes 0.8 million shares consisting of RSUs (50% of the grant), PSUs (25% of the grant) and MPSUs (25% of the grant) granted to the NEOs in the first quarter of 2021. The RSUs will vest in four equal annual installments during the period that begins on the RSU grant date. The PSUs will vest in four equal annual installments during the period that begins on the PSU grant date based on the extent to which a cash balance milestone as of December 31, 2021 is achieved. The maximum number of shares that NEOs can earn is 120% of the target number of the PSUs. The minimum number of shares that NEOs can earn is 75% of the target number of the PSUs. As of October 3, 2021, 100% of the outstanding PSUs are expected to vest. The MPSUs will vest at the end of the four-year period that begins on the MPSU grant date based on performance of the Company's common stock relative to the Benchmark during the four-year period from the grant date. A positive 3.3x or negative 2.5x multiplier will be applied to the total shareholder returns (“TSR”), such that the number of shares vested will increase by 3.3% or decrease by 2.5% of the target numbers, for each 1% of positive or negative TSR relative to the Benchmark. In the event the Company's common stock performance is below negative 30% relative to the Benchmark, no shares will be vested. In no event will the number of shares vested exceed 200% of the target for that tranche. As of October 3, 2021, 26.84% of the outstanding MPSUs are expected to vest. Includes 0.7 million immediately vested shares granted to non-executive employees for semi-annual bonus and executives for annual bonus in RSU form. Also includes 0.8 million shares granted to the Company's CEO in the third quarter of 2021, with vesting subject to satisfaction of both a service condition and a market condition. The service condition will be satisfied over four years in substantially equal quarterly installments. The market condition will be satisfied in five equal tranches based on the Company's achievement of certain average daily closing prices per share of the Company's common stock, as reported on the NYSE, for any 30 consecutive trading days on or prior to July 28, 2025 (the "Performance Period End Date"), with the first tranche achieved at $7.57 per share, with the second tranche achieved at $8.69 per share, with the third tranche achieved at $9.97 per share, with the fourth tranche achieved at $11.44 per share and with the fifth tranche achieved at $13.20 per share. To the extent that the market condition is not satisfied prior to the Performance Period End Date, the award expires or cancels. NETGEAR’s RSU activity for Arlo employees during the nine months ended October 3, 2021 was as follows: Number of shares Weighted Average Grant Date Fair Value Per Share (In thousands) (In dollars) Outstanding as of December 31, 2020 127 $ 37.81 Vested (70) $ 36.95 Forfeited (4) $ 38.60 Outstanding as of October 3, 2021 53 $ 38.89 The Company determined the fair value of the shares offered under the ESPP using the Black-Scholes option pricing model as of the grant date. The following table sets forth the weighted average assumptions used to estimate the fair value of purchase rights granted under Arlo’s ESPP for the three and nine months ended October 3, 2021 and September 27, 2020. Three Months Ended Nine Months Ended ESPP ESPP October 3, September 27, October 3, September 27, Expected life (in years) NA 0.5 0.5 0.5 Risk-free interest rate NA 0.86 % 0.06 % 1.47 % Expected volatility NA 99.6 % 87.0 % 85.7 % Dividend yield NA — — — The Company determined the fair value of the RSUs and PSUs using the closing price of the Company's common stock as of the grant date. For PSUs, stock-based compensation expense of performance milestone is recognized over the expected performance achievement period when the achievement becomes probable. The Company utilized a Monte Carlo pricing model customized to the specific provisions of the 2018 Plan to value the MPSUs awards on the grant date. The fair value of the MPSUs granted in the third quarter of 2021 (the 0.8 million shares granted to the Company's CEO), in the first quarter of 2021 and in the second quarter of 2020 were $5.21, $11.77 and $4.11 per share, respectively. The weighted average assumptions used in this model to estimate fair value at the grant date are as follows: Three Months Ended Nine Months Ended October 3, September 27, October 3, September 27, Expected life 4.0 N/A 4.0 3.0 Risk-free interest rate 0.55 % N/A 0.38 % 0.24 % Expected volatility 67.9 % N/A 69.5 % 69.3 % Dividend yield — N/A — — Stock Beta NA N/A 0.45 0.48 Stock-Based Compensation Expense The Company's employees have historically participated in NETGEAR's various stock-based plans, which are described below and represent the portion of NETGEAR's stock-based plans in which Company employees participated. The Company's unaudited condensed consolidated statements of operations reflect compensation expense for these stock-based plans associated with the portion of NETGEAR's plans in which Company employees participated. The stock-based compensation expense for Company employees consist of Company RSUs, PSUs, MPSUs and stock options and NETGEAR RSUs and stock options granted to Company employees, employees' annual bonus in RSU form and the purchase rights under Company ESPP. The following table sets forth the stock-based compensation expense included in the Company’s unaudited condensed consolidated statements of operations during the periods indicated: Three Months Ended Nine Months Ended October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020 (In thousands) Cost of revenue $ 787 $ 942 $ 2,950 $ 2,007 Research and development 2,086 2,870 8,474 6,259 Sales and marketing 1,119 1,160 3,948 2,895 General and administrative 3,607 4,029 12,176 15,177 Total stock-based compensation $ 7,599 $ 9,001 $ 27,548 $ 26,338 The Company recognizes this compensation expense generally on a straight-line basis over the requisite service period of the award. As of October 3, 2021, $0.8 million of unrecognized compensation cost related to Arlo’s stock options was expected to be recognized over a weighted-average period of 0.8 years. $46.8 million of unrecognized compensation cost related to unvested Arlo’s RSUs, PSUs and MPSUs was expected to be recognized over a weighted-average period of 2.2 years. |
Income Taxes
Income Taxes | 9 Months Ended |
Oct. 03, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income TaxesThe provision for income taxes for the three and nine months ended October 3, 2021 was $0.2 million, or an effective tax rate of (1.2)%, and $0.5 million, or an effective tax rate of (1.1)%, respectively. The provision for income taxes for the three and nine months ended September 27, 2020 was $0.1 million, or an effective tax rate of (0.7)%, and $0.4 million, or an effective tax rate of (0.5)%, respectively. During the three and nine months ended October 3, 2021, the Company sustained lower U.S. book losses than the same periods in the prior year. Consistent with the prior year, the Company maintained a valuation allowance against its U.S. federal and state deferred tax assets and did not record a tax benefit on these deferred tax assets since it is more likely than not that these deferred tax assets will not be realized. The Company's provision for income taxes was primarily attributable to income taxes on foreign earnings. The increase in provision for income taxes for the three and nine months ended October 3, 2021, compared to the prior year periods, was primarily due to higher foreign earnings in fiscal 2021. |
Net Income (Loss) Per Share
Net Income (Loss) Per Share | 9 Months Ended |
Oct. 03, 2021 | |
Earnings Per Share [Abstract] | |
Net Income (Loss) Per Share | Net Income (Loss) Per Share Basic net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period. Potentially dilutive common shares, such as common shares issuable upon exercise of stock options and vesting of restricted stock awards are typically reflected in the computation of diluted net income (loss) per share by application of the treasury stock method. For certain periods presented, due to the net losses reported, these potentially dilutive securities were excluded from the computation of diluted net loss per share, since their effect would be anti-dilutive. Net loss per share for the three and nine months ended October 3, 2021 and September 27, 2020 were as follows: Three Months Ended Nine Months Ended October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020 (In thousands, except per share data) Numerator: Net loss $ (15,198) $ (17,459) $ (49,237) $ (86,041) Denominator: Weighted average common shares - basic 83,809 78,662 82,191 77,705 Potentially dilutive common share equivalent — — — — Weighted average common shares - dilutive 83,809 78,662 82,191 77,705 Basic net loss per share $ (0.18) $ (0.22) $ (0.60) $ (1.11) Diluted net loss per share $ (0.18) $ (0.22) $ (0.60) $ (1.11) Anti-dilutive employee stock-based awards, excluded 5,980 5,958 4,826 7,526 |
Segment and Geographic Informat
Segment and Geographic Information | 9 Months Ended |
Oct. 03, 2021 | |
Segment Reporting [Abstract] | |
Segment and Geographic Information | Segment and Geographic Information Segment Information The Company operates as one operating and reportable segment. The Company has identified its Chief Executive Officer ("CEO") as the Chief Operating Decision Maker (“CODM”). The CODM reviews financial information presented on a combined basis for purposes of allocating resources and evaluating financial performance. Geographic Information The Company conducts business across three geographic regions: Americas, EMEA and APAC. Revenue consists of gross product shipments and service revenue, less allowances for estimated sales returns, price protection, end-user customer rebates and other channel sales incentives deemed to be a reduction of revenue per the authoritative guidance for revenue recognition, net changes in deferred revenue, and gains or losses from hedging. For reporting purposes, revenue by geography is generally based upon the ship-to location of the customer for device sales and device location for service sales. The following table shows revenue by geography for the periods indicated: Three Months Ended Nine Months Ended October 3, September 27, October 3, September 27, (In thousands) United States (“U.S.”) $ 72,269 $ 74,016 $ 188,306 $ 172,176 Americas (excluding U.S.) 2,242 1,845 2,522 4,854 EMEA 30,931 28,010 80,623 46,531 APAC 5,707 6,365 20,825 18,757 Total revenue $ 111,149 $ 110,236 $ 292,276 $ 242,318 The Company’s Property and equipment, net are located in the following geographic locations: As of October 3, December 31, (In thousands) United States (“U.S.”) $ 8,162 $ 12,644 Americas (excluding U.S.) 490 629 EMEA 287 234 China 1,462 1,821 APAC (excluding China) 280 493 Total property and equipment, net $ 10,681 $ 15,821 |
Subsequent Event
Subsequent Event | 9 Months Ended |
Oct. 03, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Event | Subsequent Event On October 27, 2021, the Company entered into a Loan and Security Agreement (the “Credit Agreement”) with Bank of America, N.A., a national banking association, as lender (the “Lender”). The Credit Agreement provides for a three-year revolving credit facility (the “Credit Facility”) that matures on October 27, 2024. Borrowings under the Credit Facility are limited to the lesser of (x) $40.0 million, and (y) an amount equal to the borrowing base. The borrowing base will be the sum of (i) 90% of investment grade eligible receivables and (ii) 85% of non-investment grade eligible accounts, less applicable reserves established by the Lender. The Credit Agreement also includes a $5.0 million sublimit for the issuance by the Lender of letters of credit. In addition, the Credit Agreement includes an uncommitted accordion feature that allows the Company to from time to time request that the Lender increase the aggregate revolving loan commitments by up to an additional $25.0 million in the aggregate, subject to the satisfaction of certain conditions, including obtaining the Lender’s agreement to participate in each increase. The proceeds of the borrowings under the Credit Facility may be used for working capital and general corporate purposes. The obligations of the Company under the Credit Agreement are secured by substantially all of the Company’s domestic working capital assets, including accounts receivable, cash and cash equivalents, inventory, and other assets of the Company to the extent related to such working capital assets. At the Company’s option, borrowings under the Credit Agreement will bear interest at a floating rate equal to: (i) the Bloomberg Short-Term Bank Yield Index rate plus the applicable rate of 2.0% to 2.5% determined based on the Company’s average daily availability for the prior fiscal quarter, or (ii) the base rate plus the applicable rate of 1.0% to 1.5% based on the Company’s average daily availability for the prior fiscal quarter. Among other fees, the Company is required to pay a monthly unused fee of 0.2% per annum on the amount by which the Lender’s aggregate commitment under the Credit Facility exceeds the average daily revolver usage during such month. The Credit Agreement contains events of default, representations and warranties, and affirmative and negative covenants customary for credit facilities of this type. The Credit Agreement also contains financial covenants that require the Company to (a) until the Company achieves a fixed charge coverage ratio of at least 1.00 to 1.00 for two consecutive quarters, maintain minimum liquidity of not less than $20.0 million at all times and (b) thereafter, maintain a fixed charge coverage ratio, tested quarterly on a trailing twelve month basis, of at least 1.00 to 1.00 at any time a Financial Covenant Trigger Period (as defined in the Credit Agreement) is in effect. If an event of default under the Credit Agreement occurs, then the Lender may cease making advances under the Credit Agreement and declare any outstanding obligations under the Credit Agreement to be immediately due and payable. In addition, if the Company files a bankruptcy petition, a bankruptcy petition is filed against the Company and is not dismissed or stayed within thirty days, or the Company makes a general assignment for the benefit of creditors, then any outstanding obligations under the Credit Agreement will automatically and without notice or demand become immediately due and payable. No amounts had been drawn under the Credit Facility as of November 10, 2021. |
Significant Accounting Polici_2
Significant Accounting Policies and Recent Accounting Pronouncements (Policies) | 9 Months Ended |
Oct. 03, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All periods presented have been accounted for in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”). |
Fiscal Periods | Fiscal periods The Company’s fiscal year begins on January 1 of the year stated and ends on December 31 of the same year. The Company reports its results on a fiscal quarter basis rather than on a calendar quarter basis. Under the fiscal quarter basis, each of the first three fiscal quarters ends on the Sunday closest to the calendar quarter end, with the fourth quarter ending on December 31. |
Use of Estimates | Use of estimates The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Management bases its estimates on various assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates and operating results for the nine months ended October 3, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any future period. |
Recent Accounting Pronouncements | Recent accounting pronouncements Emerging Growth Company Status As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies, unless the Company otherwise irrevocably elects not to avail itself of this exemption. The Company did not make such an irrevocable election and has not delayed the adoption of any applicable accounting standards. Accounting Pronouncements Recently Adopted There were no accounting pronouncements adopted during the nine months ended October 3, 2021. Accounting Pronouncements Not Yet Effective In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU is intended to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. This guidance is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact this guidance may have on its financial statements and related disclosures. |
Fair Value Measurements | The Company’s investments in cash equivalents and available-for-sale securities are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. The Company enters into foreign currency forward contracts with only those counterparties that have long-term credit ratings of A-/A3 or higher. The Company’s foreign currency forward contracts are classified within Level 2 of the fair value hierarchy as they are valued using pricing models that take into account the contract terms as well as currency rates and counterparty credit rates. The Company verifies the reasonableness of these pricing models using observable market data for related inputs into such models. Additionally, the Company includes an adjustment for non-performance risk in the recognized measure of fair value of derivative instruments. As of October 3, 2021 and December 31, 2020, the adjustment for non-performance risk did not have a material impact on the fair value of the Company’s foreign currency forward contracts. The carrying value of non-financial assets and liabilities measured at fair value in the financial statements on a recurring basis, including accounts receivable and accounts payable, approximate fair value due to their short maturities. |
Deferred Revenue (Tables)
Deferred Revenue (Tables) | 9 Months Ended |
Oct. 03, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Remaining Performance Obligations | The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of October 3, 2021: 1 year 2 years Greater than 2 years Total (In thousands) Performance obligations $ 49,410 $ 1,933 $ 382 $ 51,725 |
Balance Sheet Components (Table
Balance Sheet Components (Tables) | 9 Months Ended |
Oct. 03, 2021 | |
Balance Sheet Related Disclosures [Abstract] | |
Schedule of Cash and Cash Equivalents | The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the balance sheets that sum to the total of the same amounts shown on the statements of cash flows: As of October 3, December 31, (In thousands) Cash and cash equivalents $ 166,057 $ 186,127 Restricted cash 4,105 4,164 Total as presented on the unaudited condensed consolidated statements of cash flows $ 170,162 $ 190,291 As of September 27, December 31, (In thousands) Cash and cash equivalents $ 173,619 $ 236,680 Restricted cash 4,147 4,139 Total as presented on the unaudited condensed consolidated statements of cash flows $ 177,766 $ 240,819 |
Schedule of Restricted Cash | The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the balance sheets that sum to the total of the same amounts shown on the statements of cash flows: As of October 3, December 31, (In thousands) Cash and cash equivalents $ 166,057 $ 186,127 Restricted cash 4,105 4,164 Total as presented on the unaudited condensed consolidated statements of cash flows $ 170,162 $ 190,291 As of September 27, December 31, (In thousands) Cash and cash equivalents $ 173,619 $ 236,680 Restricted cash 4,147 4,139 Total as presented on the unaudited condensed consolidated statements of cash flows $ 177,766 $ 240,819 |
Schedule of Available-for-Sale Short-Term Investments | Available-for-sale short-term investments As of October 3, 2021 As of December 31, 2020 Cost Unrealized Gains Unrealized Losses Estimated Fair Value Cost Unrealized Gains Unrealized Losses Estimated Fair Value (In thousands) U.S. treasuries $ — $ — $ — $ — $ 19,996 $ 1 $ — $ 19,997 |
Schedule of Accounts Receivable, Net | Accounts receivable, net As of October 3, December 31, (In thousands) Gross accounts receivable $ 70,450 $ 78,162 Allowance for credit losses (326) (519) Total accounts receivable, net $ 70,124 $ 77,643 |
Summary of Allowance for Credit Losses, Accounts Receivable | The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected. Three Months Ended Nine Months Ended October 3, September 27, October 3, September 27, (In thousands) Balance at the beginning of the period $ 536 $ 810 $ 519 $ 609 Adoption of ASU 2016-13, cumulative-effect adjustment to retained earnings — — — — Provision for (release of) expected credit losses (210) (301) (193) (100) Amounts recovered due to collection — — — — Balance at the end of the period $ 326 $ 509 $ 326 $ 509 |
Schedule of Property and Equipment, Net | Property and equipment, net The components of property and equipment are as follows: As of October 3, December 31, (In thousands) Machinery and equipment $ 13,400 $ 14,397 Software 13,821 13,192 Computer equipment 4,092 4,083 Furniture and fixtures 2,376 4,048 Leasehold improvements 4,912 8,023 Total property and equipment, gross 38,601 43,743 Accumulated depreciation and amortization (27,920) (27,922) Total property and equipment, net (1) $ 10,681 $ 15,821 _________________________ (1) $2.5 million property and equipment, net was included in the sublease arrangement for the San Jose office building as of October 3, 2021. No property and equipment, net was included in the sublease arrangement for the San Jose office building as of December 31, 2020 as the sublease agreement became effective in the third quarter of 2021. |
Schedule of Other Non-Current Assets | Other non-current assets As of October 3, December 31, (In thousands) Non-current deferred income taxes $ 1,551 $ 1,269 Sublease initial direct cost 1,012 — Deposits 122 122 Other 1,101 1,008 Total other non-current assets $ 3,786 $ 2,399 |
Schedule of Accrued Liabilities | Accrued liabilities As of October 3, December 31, (In thousands) Sales and marketing $ 32,216 $ 38,577 Sales returns 19,259 37,689 Accrued employee compensation 9,101 15,089 Current operating lease liabilities 4,411 4,400 Freight 5,736 3,558 Warranty obligation 1,645 2,451 Other 21,076 20,002 Total accrued liabilities $ 93,444 $ 121,766 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Oct. 03, 2021 | |
Fair Value Disclosures [Abstract] | |
Summary of Fair Value, Assets and Liabilities Measured on Recurring Basis | The following table summarizes assets and liabilities measured at fair value on a recurring basis as of October 3, 2021 and December 31, 2020: As of October 3, 2021 As of December 31, 2020 Total Quoted market Significant Total Quoted market Significant (In thousands) Assets: Cash equivalents: money-market funds (<90 days) $ 21,933 $ 21,933 $ — $ 1,934 $ 1,934 $ — Available-for-sale securities: U.S. treasuries (1) — — — 19,997 19,997 — Foreign currency forward contracts (2) 90 — 90 24 — 24 Total assets measured at fair value $ 22,023 $ 21,933 $ 90 $ 21,955 $ 21,931 $ 24 Liabilities: Foreign currency forward contracts (3) $ 8 $ — $ 8 $ 199 $ — $ 199 Total liabilities measured at fair value $ 8 $ — $ 8 $ 199 $ — $ 199 _________________________ (1) Included in Short-term investments on the Company’s unaudited condensed consolidated balance sheets. (2) Included in Prepaid expenses and other current assets on the Company’s unaudited condensed consolidated balance sheets. (3) Included in Accrued liabilities on the Company’s unaudited condensed consolidated balance sheets. |
Derivative Financial Instrume_2
Derivative Financial Instruments (Tables) | 9 Months Ended |
Oct. 03, 2021 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Fair Values of the Company's Derivative Instruments and the Line Items on the Consolidated Balance Sheets | The fair values of the Company’s derivative instruments and the line items on the unaudited condensed consolidated balance sheets to which they were recorded as of October 3, 2021 and December 31, 2020 are summarized as follows: Derivative Assets Balance Sheet October 3, 2021 December 31, 2020 Balance Sheet October 3, 2021 December 31, 2020 (In thousands) (In thousands) Derivative assets not designated as hedging instruments Prepaid expenses and other current assets $ 80 $ 22 Accrued liabilities $ 7 $ 199 Derivative assets designated as hedging instruments Prepaid expenses and other current assets 10 2 Accrued liabilities 1 — Total $ 90 $ 24 $ 8 $ 199 |
Schedule of Offsetting of Derivative Assets | The following tables set forth the offsetting of derivative assets as of October 3, 2021 and December 31, 2020: As of October 3, 2021 Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets Gross Amounts of Recognized Assets Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets Net Amounts Of Assets Presented in the Unaudited Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount (In thousands) HSBC $ 90 $ — $ 90 $ (8) $ — $ 82 December 31, 2020 Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets Gross Amounts of Recognized Assets Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets Net Amounts Of Assets Presented in the Unaudited Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount (In thousands) Wells Fargo Bank $ 24 $ — $ 24 $ (24) $ — $ — |
Schedule of Offsetting of Derivative Liabilities | The following table sets forth the offsetting of derivative liabilities as of October 3, 2021 and December 31, 2020: As of October 3, 2021 Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets Net Amounts Of Liabilities Presented in the Unaudited Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount (In thousands) HSBC $ 8 $ — $ 8 $ (8) $ — $ — December 31, 2020 Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets Net Amounts Of Liabilities Presented in the Unaudited Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Pledged Net Amount (In thousands) Wells Fargo Bank $ 199 $ — $ 199 $ (24) $ — $ 175 |
Schedule of Locations of Gains or Losses Recognized in Income | The effects of the Company's cash flow hedges on the unaudited condensed consolidated statements of operations for the three and nine months ended October 3, 2021 are summarized as follows: Three Months Ended October 3, 2021 Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges Revenue Cost of revenue Research and development Sales and marketing General and administrative (In thousands) Statements of operations $ 111,149 $ 86,806 $ 14,377 $ 12,779 $ 12,119 Gains (losses) on cash flow hedge $ 122 $ (1) $ — $ (10) $ (1) Nine Months Ended October 3, 2021 Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges Revenue Cost of revenue Research and development Sales and marketing General and administrative (In thousands) Statements of operations 292,276 215,957 45,419 36,445 36,905 Gains (losses) on cash flow hedge $ 122 $ (1) $ — $ (8) $ (1) The effects of the Company’s cash flow hedges on the unaudited condensed consolidated statements of operations for the three and nine months ended September 27, 2020 are summarized as follows: Three Months Ended September 27, 2020 Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges Revenue Cost of revenue Research and development Sales and marketing General and administrative (In thousands) Statements of operations $ 110,236 $ 88,827 $ 15,436 $ 12,720 $ 11,137 Gains (losses) on cash flow hedge (37) — 5 2 — Nine Months Ended September 27, 2020 Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges Revenue Cost of revenue Research and development Sales and marketing General and administrative (In thousands) Statements of operations $ 242,318 $ 211,467 $ 44,871 $ 35,471 $ 39,758 Gains (losses) on cash flow hedge (14) — 5 3 — |
Schedule of Derivatives not Designated as Hedging Instruments | The effects of the Company’s non-designated hedge included in Other income (expense), net on the unaudited condensed consolidated statements of operations for the three and nine months ended October 3, 2021 and September 27, 2020 were as follows: Derivatives Not Designated as Hedging Instruments Location of Gains (Losses) Three Months Ended Nine Months Ended October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020 (In thousands) Foreign currency forward contracts Other income (expense), net $ 46 $ (108) $ (38) $ 553 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (Loss) (Tables) | 9 Months Ended |
Oct. 03, 2021 | |
Equity [Abstract] | |
Schedule of Accumulated Other Comprehensive Income (Loss) | The following table sets forth the changes in accumulated other comprehensive income (loss) (“AOCI”) by component for the three and nine months ended October 3, 2021 and September 27, 2020. Unrealized gains (losses) on available-for-sale securities Unrealized gains (losses) on derivatives Estimated tax benefit (provision) Total (In thousands) Balance as of June 27, 2021 $ — $ — $ — $ — Other comprehensive income (loss) before reclassifications — 122 (1) 121 Less: Amount reclassified from accumulated other comprehensive income (loss) — 110 — 110 Net current period other comprehensive income (loss) — 12 (1) 11 Balance as of October 3, 2021 $ — $ 12 $ (1) $ 11 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, 2020 $ 1 $ 2 $ — $ 3 Other comprehensive income (loss) before reclassifications (1) 122 (1) 120 Less: Amount reclassified from accumulated other comprehensive income (loss) — 112 — 112 Net current period other comprehensive income (loss) (1) 10 (1) 8 Balance as of October 3, 2021 $ — $ 12 $ (1) $ 11 Unrealized gains (losses) on available-for-sale securities Unrealized gains (losses) on derivatives Estimated tax benefit (provision) Total (In thousands) Balance as of June 28, 2020 $ 14 $ — $ — $ 14 Other comprehensive income (loss) before reclassifications (14) (39) — (53) Less: Amount reclassified from accumulated other comprehensive income (loss) — (30) — (30) Net current period other comprehensive income (loss) (14) (9) — (23) Balance as of September 27, 2020 $ — $ (9) $ — $ (9) 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, 2019 $ 23 $ (25) $ — $ (2) Other comprehensive income (loss) before reclassifications (23) 10 — (13) Less: Amount reclassified from accumulated other comprehensive income (loss) — (6) — (6) Net current period other comprehensive income (loss) (23) 16 — (7) Balance as of September 27, 2020 $ — $ (9) $ — $ (9) |
Schedule of Reclassification out of Accumulated Other Comprehensive Income (Loss) | The following tables provide details about significant amounts reclassified out of each component of AOCI for the three and nine months ended October 3, 2021 and September 27, 2020: Three Months Ended October 3, 2021 September 27, 2020 Gains (Losses) Recognized in OCI - Effective Portion Gains (Losses) Reclassified from OCI to Income - Effective Portion 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 $ 122 $ 122 $ (39) $ (37) Revenue Foreign currency contracts — (1) — — Cost of revenue Foreign currency contracts — — — 5 Research and development Foreign currency contracts — (10) — 2 Sales and marketing Foreign currency contracts — (1) — — General and administrative $ 122 $ 110 $ (39) $ (30) Total * Nine Months Ended October 3, 2021 September 27, 2020 Gains (Losses) Recognized in OCI - Effective Portion Gains (Losses) Reclassified from OCI to Income - Effective Portion 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 $ 122 $ 122 $ 10 $ (14) Revenue Foreign currency contracts — (1) — — Cost of revenue Foreign currency contracts — — — 5 Research and development Foreign currency contracts — (8) — 3 Sales and marketing Foreign currency contracts — (1) — — General and administrative $ 122 $ 112 $ 10 $ (6) Total * _________________________ |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Oct. 03, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Effect on Financial Statements | Supplemental cash flow information related to operating leases for the nine months ended October 3, 2021 and September 27, 2020 was as follows: October 3, 2021 September 27, 2020 (in thousands) Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 4,939 $ 4,452 Right-of-use assets obtained in exchange for lease liabilities Operating leases $ 1,429 $ 461 Weighted average remaining lease term and weighted average discount rate related to operating leases as of October 3, 2021 were as follows: Weighted average remaining lease term 6.5 years Weighted average discount rate 6.3 % |
Summary of Operating Lease Maturity | The Company's future minimum undiscounted lease payments under operating leases and future non-cancelable rent payments from its subtenants for each of the next five years and thereafter as of October 3, 2021 were as follows: Operating Lease Payments Sublease Payments Net (In thousands) 2021 (Remaining three months) $ 1,088 $ — $ 1,088 2022 6,270 (1,673) 4,597 2023 5,491 (1,891) 3,600 2024 4,881 (1,947) 2,934 2025 3,179 (2,006) 1,173 Thereafter 11,489 (8,008) 3,481 Total future lease payments 32,398 $ (15,525) $ 16,873 Less: interest (1) (5,376) Present value of future minimum lease payments $ 27,022 Accrued liabilities $ 4,411 Non-current operating lease liabilities 22,611 Total lease liabilities $ 27,022 ________________________ |
Schedule of Changes in Warranty Obligation | Changes in the Company’s warranty liability, which is included in Accrued liabilities in the unaudited condensed consolidated balance sheets, were as follows: Three Months Ended Nine Months Ended October 3, September 27, October 3, September 27, (In thousands) Balance at the beginning of the period $ 1,805 $ 3,023 $ 2,451 $ 3,169 Provision for (release of) warranty obligation made during the period (53) — (438) — Settlements made during the period (107) (455) (368) (601) Balance at the end of the period $ 1,645 $ 2,568 $ 1,645 $ 2,568 |
Employee Benefit Plans (Tables)
Employee Benefit Plans (Tables) | 9 Months Ended |
Oct. 03, 2021 | |
Employee Benefit and Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Schedule of Shares Available for Grant | The following table sets forth the available shares for grant under the 2018 Plan as of October 3, 2021 and December 31, 2020: Number of Shares (In thousands) Shares available for grant as of December 31, 2020 3,113 Additional authorized shares 4,673 Granted (1) (7,097) Forfeited / cancelled 731 Shares traded for taxes 1,993 Shares available for grant as of October 3, 2021 3,413 _________________________ (1) Includes 0.8 million shares consisting of time-based RSUs (50% of the grant), performance RSUs ("PSUs") (25% of the grant) and market-based performance RSUs ("MPSUs") (25% of the grant) granted to the Company's named executive officers ("NEOs") in the first quarter of 2021 . Also includes 0.8 million shares granted to the Company's CEO in the third quarter of 2021, with the award designed to reward both continued service and the creation of shareholder value. |
Schedule of Stock Option Activity | Arlo’s stock option activity during the nine months ended October 3, 2021 was as follows: Number of shares Weighted Average Exercise Price Per Share (In thousands) (In dollars) Outstanding as of December 31, 2020 3,434 $ 9.72 Granted — $ — Exercised (655) $ 6.77 Forfeited / cancelled (29) $ 7.13 Outstanding as of October 3, 2021 2,750 $ 10.45 Vested and expected to vest as of October 3, 2021 2,750 $ 10.45 Exercisable Options as of October 3, 2021 2,593 $ 10.17 NETGEAR’s stock option activity for Arlo employees during the nine months ended October 3, 2021 was as follows: Number of shares Weighted Average Exercise Price Per Share (In thousands) (In dollars) Outstanding as of December 31, 2020 16 $ 22.49 Exercised (4) $ 27.15 Forfeited / cancelled — $ — Expired — $ — Outstanding as of October 3, 2021 12 $ 20.76 Vested and expected to vest as of October 3, 2021 12 $ 20.76 Exercisable Options as of October 3, 2021 12 $ 20.76 |
Schedule of RSU Activity | Arlo’s RSU activity during the nine months ended October 3, 2021 was as follows: Number of shares Weighted Average Grant Date Fair Value Per Share (In thousands) (In dollars) Outstanding as of December 31, 2020 10,563 $ 4.33 Granted (1) 7,097 $ 7.21 Vested (5,665) $ 5.50 Forfeited (702) $ 5.12 Outstanding as of October 3, 2021 11,293 $ 5.50 (1) Includes 0.8 million shares consisting of RSUs (50% of the grant), PSUs (25% of the grant) and MPSUs (25% of the grant) granted to the NEOs in the first quarter of 2021. The RSUs will vest in four equal annual installments during the period that begins on the RSU grant date. The PSUs will vest in four equal annual installments during the period that begins on the PSU grant date based on the extent to which a cash balance milestone as of December 31, 2021 is achieved. The maximum number of shares that NEOs can earn is 120% of the target number of the PSUs. The minimum number of shares that NEOs can earn is 75% of the target number of the PSUs. As of October 3, 2021, 100% of the outstanding PSUs are expected to vest. The MPSUs will vest at the end of the four-year period that begins on the MPSU grant date based on performance of the Company's common stock relative to the Benchmark during the four-year period from the grant date. A positive 3.3x or negative 2.5x multiplier will be applied to the total shareholder returns (“TSR”), such that the number of shares vested will increase by 3.3% or decrease by 2.5% of the target numbers, for each 1% of positive or negative TSR relative to the Benchmark. In the event the Company's common stock performance is below negative 30% relative to the Benchmark, no shares will be vested. In no event will the number of shares vested exceed 200% of the target for that tranche. As of October 3, 2021, 26.84% of the outstanding MPSUs are expected to vest. Includes 0.7 million immediately vested shares granted to non-executive employees for semi-annual bonus and executives for annual bonus in RSU form. Also includes 0.8 million shares granted to the Company's CEO in the third quarter of 2021, with vesting subject to satisfaction of both a service condition and a market condition. The service condition will be satisfied over four years in substantially equal quarterly installments. The market condition will be satisfied in five equal tranches based on the Company's achievement of certain average daily closing prices per share of the Company's common stock, as reported on the NYSE, for any 30 consecutive trading days on or prior to July 28, 2025 (the "Performance Period End Date"), with the first tranche achieved at $7.57 per share, with the second tranche achieved at $8.69 per share, with the third tranche achieved at $9.97 per share, with the fourth tranche achieved at $11.44 per share and with the fifth tranche achieved at $13.20 per share. To the extent that the market condition is not satisfied prior to the Performance Period End Date, the award expires or cancels. NETGEAR’s RSU activity for Arlo employees during the nine months ended October 3, 2021 was as follows: Number of shares Weighted Average Grant Date Fair Value Per Share (In thousands) (In dollars) Outstanding as of December 31, 2020 127 $ 37.81 Vested (70) $ 36.95 Forfeited (4) $ 38.60 Outstanding as of October 3, 2021 53 $ 38.89 |
Schedule of Weighted Average Assumptions | The following table sets forth the weighted average assumptions used to estimate the fair value of purchase rights granted under Arlo’s ESPP for the three and nine months ended October 3, 2021 and September 27, 2020. Three Months Ended Nine Months Ended ESPP ESPP October 3, September 27, October 3, September 27, Expected life (in years) NA 0.5 0.5 0.5 Risk-free interest rate NA 0.86 % 0.06 % 1.47 % Expected volatility NA 99.6 % 87.0 % 85.7 % Dividend yield NA — — — Three Months Ended Nine Months Ended October 3, September 27, October 3, September 27, Expected life 4.0 N/A 4.0 3.0 Risk-free interest rate 0.55 % N/A 0.38 % 0.24 % Expected volatility 67.9 % N/A 69.5 % 69.3 % Dividend yield — N/A — — Stock Beta NA N/A 0.45 0.48 |
Schedule of Total Stock-Based Compensation Expense Resulting from Stock Options, Restricted Stock Awards, and the Employee Stock Purchase Plan | The following table sets forth the stock-based compensation expense included in the Company’s unaudited condensed consolidated statements of operations during the periods indicated: Three Months Ended Nine Months Ended October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020 (In thousands) Cost of revenue $ 787 $ 942 $ 2,950 $ 2,007 Research and development 2,086 2,870 8,474 6,259 Sales and marketing 1,119 1,160 3,948 2,895 General and administrative 3,607 4,029 12,176 15,177 Total stock-based compensation $ 7,599 $ 9,001 $ 27,548 $ 26,338 |
Net Income (Loss) Per Share (Ta
Net Income (Loss) Per Share (Tables) | 9 Months Ended |
Oct. 03, 2021 | |
Earnings Per Share [Abstract] | |
Schedule of Net Loss Per Share | Net loss per share for the three and nine months ended October 3, 2021 and September 27, 2020 were as follows: Three Months Ended Nine Months Ended October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020 (In thousands, except per share data) Numerator: Net loss $ (15,198) $ (17,459) $ (49,237) $ (86,041) Denominator: Weighted average common shares - basic 83,809 78,662 82,191 77,705 Potentially dilutive common share equivalent — — — — Weighted average common shares - dilutive 83,809 78,662 82,191 77,705 Basic net loss per share $ (0.18) $ (0.22) $ (0.60) $ (1.11) Diluted net loss per share $ (0.18) $ (0.22) $ (0.60) $ (1.11) Anti-dilutive employee stock-based awards, excluded 5,980 5,958 4,826 7,526 |
Segment and Geographic Inform_2
Segment and Geographic Information (Tables) | 9 Months Ended |
Oct. 03, 2021 | |
Segment Reporting [Abstract] | |
Schedule of Revenue by Geography | The following table shows revenue by geography for the periods indicated: Three Months Ended Nine Months Ended October 3, September 27, October 3, September 27, (In thousands) United States (“U.S.”) $ 72,269 $ 74,016 $ 188,306 $ 172,176 Americas (excluding U.S.) 2,242 1,845 2,522 4,854 EMEA 30,931 28,010 80,623 46,531 APAC 5,707 6,365 20,825 18,757 Total revenue $ 111,149 $ 110,236 $ 292,276 $ 242,318 |
Schedule of Property and Equipment, Net by Geography | The Company’s Property and equipment, net are located in the following geographic locations: As of October 3, December 31, (In thousands) United States (“U.S.”) $ 8,162 $ 12,644 Americas (excluding U.S.) 490 629 EMEA 287 234 China 1,462 1,821 APAC (excluding China) 280 493 Total property and equipment, net $ 10,681 $ 15,821 |
The Company and Basis of Pres_2
The Company and Basis of Presentation - Narrative (Details) | 9 Months Ended |
Oct. 03, 2021region | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of geographic regions in which the company conducts business | 3 |
Deferred Revenue - Schedule of
Deferred Revenue - Schedule of Remaining Performance Obligations (Details) $ in Thousands | Oct. 03, 2021USD ($) |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligations | $ 51,725 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-10-04 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligations | $ 49,410 |
Remaining performance obligations, expected timing of satisfaction | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-03 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligations | $ 1,933 |
Remaining performance obligations, expected timing of satisfaction | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-10-02 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Performance obligations | $ 382 |
Remaining performance obligations, expected timing of satisfaction |
Deferred Revenue - Narrative (D
Deferred Revenue - Narrative (Details) $ in Millions | 9 Months Ended | |
Oct. 03, 2021USD ($)region | Sep. 27, 2020USD ($) | |
Revenue from Contract with Customer [Abstract] | ||
Revenue deferred due to unsatisfied performance obligations | $ 64.2 | $ 33.5 |
Revenue recognized | 70.3 | 46.9 |
Recognized revenue that was included in contract liability balance at beginning of period | $ 19.9 | $ 21.2 |
Number of geographic regions in which the company conducts business | region | 3 |
Balance Sheet Components - Sche
Balance Sheet Components - Schedule of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands | Oct. 03, 2021 | Dec. 31, 2020 | Sep. 27, 2020 | Dec. 31, 2019 |
Balance Sheet Related Disclosures [Abstract] | ||||
Cash and cash equivalents | $ 166,057 | $ 186,127 | $ 173,619 | $ 236,680 |
Restricted cash | 4,105 | 4,164 | 4,147 | 4,139 |
Total as presented on the unaudited condensed consolidated statements of cash flows | $ 170,162 | $ 190,291 | $ 177,766 | $ 240,819 |
Balance Sheet Components - Sc_2
Balance Sheet Components - Schedule of Available-for-Sale Short-Term Investments (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Oct. 03, 2021 | Dec. 31, 2020 | |
Debt Securities, Available-For-Sale [Line Items] | ||
Estimated Fair Value | $ 0 | $ 19,997 |
U.S. treasuries | ||
Debt Securities, Available-For-Sale [Line Items] | ||
Cost | 0 | 19,996 |
Unrealized Gains | 0 | 1 |
Unrealized Losses | 0 | 0 |
Estimated Fair Value | $ 0 | $ 19,997 |
Balance Sheet Components - Sc_3
Balance Sheet Components - Schedule of Accounts Receivable, Net (Details) - USD ($) $ in Thousands | Oct. 03, 2021 | Jun. 27, 2021 | Dec. 31, 2020 | Sep. 27, 2020 | Jun. 28, 2020 | Dec. 31, 2019 |
Balance Sheet Related Disclosures [Abstract] | ||||||
Gross accounts receivable | $ 70,450 | $ 78,162 | ||||
Allowance for credit losses | (326) | $ (536) | (519) | $ (509) | $ (810) | $ (609) |
Total accounts receivable, net | $ 70,124 | $ 77,643 |
Balance Sheet Components - Allo
Balance Sheet Components - Allowance For Credit Losses, Accounts Receivable (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 03, 2021 | Sep. 27, 2020 | Oct. 03, 2021 | Sep. 27, 2020 | |
Accounts Receivable, Allowance for Credit Loss [Roll Forward] | ||||
Balance at the beginning of the period | $ 536 | $ 810 | $ 519 | $ 609 |
Adoption of ASU 2016-13, cumulative-effect adjustment to retained earnings | 0 | 0 | 0 | 0 |
Provision for (release of) expected credit losses | (210) | (301) | (193) | (100) |
Amounts recovered due to collection | 0 | 0 | 0 | 0 |
Balance at the end of the period | $ 326 | $ 509 | $ 326 | $ 509 |
Balance Sheet Components - Sc_4
Balance Sheet Components - Schedule of Property and Equipment, Net (Details) - USD ($) | Oct. 03, 2021 | Dec. 31, 2020 |
Property, Plant and Equipment [Line Items] | ||
Total property and equipment, gross | $ 38,601,000 | $ 43,743,000 |
Accumulated depreciation and amortization | (27,920,000) | (27,922,000) |
Total property and equipment, net | 10,681,000 | 15,821,000 |
Property, plant, and equipment, lessor asset under operating lease, net | 2,500,000 | 0 |
Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment, gross | 13,400,000 | 14,397,000 |
Software | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment, gross | 13,821,000 | 13,192,000 |
Computer equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment, gross | 4,092,000 | 4,083,000 |
Furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment, gross | 2,376,000 | 4,048,000 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment, gross | $ 4,912,000 | $ 8,023,000 |
Balance Sheet Components - Prop
Balance Sheet Components - Property and Equipment, Other Information (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Oct. 03, 2021 | Sep. 27, 2020 | Oct. 03, 2021 | Sep. 27, 2020 | |
Balance Sheet Related Disclosures [Abstract] | ||||
Depreciation expense | $ 1.4 | $ 2.2 | $ 4.5 | $ 7 |
Balance Sheet Components - Long
Balance Sheet Components - Long-lived Assets and Right-of-use Assets Impairment (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 03, 2021 | Sep. 27, 2020 | Oct. 03, 2021 | Sep. 27, 2020 | |
Offsetting [Abstract] | ||||
Impairment charges | $ 0 | $ 0 | $ 9,116 | $ 0 |
Balance Sheet Components - Good
Balance Sheet Components - Goodwill (Details) - USD ($) | 9 Months Ended | |
Oct. 03, 2021 | Dec. 31, 2020 | |
Balance Sheet Related Disclosures [Abstract] | ||
Increase (decrease) in goodwill | $ 0 | |
Goodwill | $ 11,038,000 | $ 11,038,000 |
Balance Sheet Components - Go_2
Balance Sheet Components - Goodwill Impairment Narrative (Details) | 3 Months Ended | 9 Months Ended |
Oct. 03, 2021USD ($) | Oct. 03, 2021USD ($)segment | |
Balance Sheet Related Disclosures [Abstract] | ||
Number of operating segments | segment | 1 | |
Number of reportable segments | segment | 1 | |
Goodwill impairment | $ | $ 0 | |
Potential goodwill impairment (up to) | $ | $ 11,000,000 | $ 11,000,000 |
Balance Sheet Components - Sc_5
Balance Sheet Components - Schedule of Other Non-Current Assets (Details) - USD ($) $ in Thousands | Oct. 03, 2021 | Dec. 31, 2020 |
Balance Sheet Related Disclosures [Abstract] | ||
Non-current deferred income taxes | $ 1,551 | $ 1,269 |
Sublease initial direct cost | 1,012 | 0 |
Deposits | 122 | 122 |
Other | 1,101 | 1,008 |
Total other non-current assets | $ 3,786 | $ 2,399 |
Balance Sheet Components - Sc_6
Balance Sheet Components - Schedule of Accrued Liabilities (Details) - USD ($) $ in Thousands | Oct. 03, 2021 | Dec. 31, 2020 |
Balance Sheet Related Disclosures [Abstract] | ||
Sales and marketing | $ 32,216 | $ 38,577 |
Sales returns | 19,259 | 37,689 |
Accrued employee compensation | 9,101 | 15,089 |
Current operating lease liabilities | 4,411 | 4,400 |
Freight | 5,736 | 3,558 |
Warranty obligation | 1,645 | 2,451 |
Other | 21,076 | 20,002 |
Total accrued liabilities | $ 93,444 | $ 121,766 |
Fair Value Measurements - Summa
Fair Value Measurements - Summary of Valuation of Company's Financial Instruments by Various Levels (Details) - Fair value, measurements, recurring - USD ($) $ in Thousands | Oct. 03, 2021 | Dec. 31, 2020 |
Assets: | ||
Cash equivalents: money-market funds | $ 21,933 | $ 1,934 |
Available-for-sale securities: U.S. treasuries | 0 | 19,997 |
Foreign currency forward contracts | 90 | 24 |
Total assets measured at fair value | 22,023 | 21,955 |
Liabilities: | ||
Foreign currency forward contracts | 8 | 199 |
Total liabilities measured at fair value | 8 | 199 |
Quoted market prices in active markets (Level 1) | ||
Assets: | ||
Cash equivalents: money-market funds | 21,933 | 1,934 |
Available-for-sale securities: U.S. treasuries | 0 | 19,997 |
Foreign currency forward contracts | 0 | 0 |
Total assets measured at fair value | 21,933 | 21,931 |
Liabilities: | ||
Foreign currency forward contracts | 0 | 0 |
Total liabilities measured at fair value | 0 | 0 |
Significant other observable inputs (Level 2) | ||
Assets: | ||
Cash equivalents: money-market funds | 0 | 0 |
Available-for-sale securities: U.S. treasuries | 0 | 0 |
Foreign currency forward contracts | 90 | 24 |
Total assets measured at fair value | 90 | 24 |
Liabilities: | ||
Foreign currency forward contracts | 8 | 199 |
Total liabilities measured at fair value | $ 8 | $ 199 |
Fair Value Measurements - Narra
Fair Value Measurements - Narrative (Details) | 3 Months Ended | 9 Months Ended | |||||
Oct. 03, 2021USD ($) | Jun. 27, 2021USD ($) | Sep. 27, 2020USD ($) | Oct. 03, 2021USD ($) | Sep. 27, 2020USD ($) | May 25, 2021USD ($) | Dec. 31, 2020USD ($) | |
Fair Value, Option, Quantitative Disclosures [Line Items] | |||||||
Impairment charges | $ 0 | $ 0 | $ 9,116,000 | $ 0 | |||
Fair value, measurements, recurring | |||||||
Fair Value, Option, Quantitative Disclosures [Line Items] | |||||||
Liabilities measured at fair value | 8,000 | 8,000 | $ 199,000 | ||||
Assets measured at fair value | $ 22,023,000 | $ 22,023,000 | 21,955,000 | ||||
Fair Value, Inputs, Level 3 | |||||||
Fair Value, Option, Quantitative Disclosures [Line Items] | |||||||
Impairment charges | $ 9,100,000 | ||||||
Impairment related to right-of-use assets | 6,800,000 | ||||||
Impairment of other lease related property and equipment assets | $ 2,300,000 | ||||||
Fair Value, Inputs, Level 3 | Measurement Input, Discount Rate | |||||||
Fair Value, Option, Quantitative Disclosures [Line Items] | |||||||
Market derived discount rate | 0.080 | 0.080 | |||||
Fair Value, Inputs, Level 3 | Fair value, measurements, recurring | |||||||
Fair Value, Option, Quantitative Disclosures [Line Items] | |||||||
Liabilities measured at fair value | $ 0 | $ 0 | 0 | ||||
Assets measured at fair value | $ 0 | $ 0 | $ 0 | ||||
Fair Value, Inputs, Level 3 | Fair Value, Nonrecurring | |||||||
Fair Value, Option, Quantitative Disclosures [Line Items] | |||||||
Fair value of right-of-use asset | $ 8,100,000 | ||||||
Fair value of lease related property and equipment assets | $ 2,800,000 |
Derivative Financial Instrume_3
Derivative Financial Instruments - Schedule of Fair Values of the Company's Derivative Instruments and the Line Items on the Consolidated Balance Sheets (Details) - USD ($) $ in Thousands | Oct. 03, 2021 | Dec. 31, 2020 |
Derivatives, Fair Value [Line Items] | ||
Gross amounts of recognized assets | $ 90 | $ 24 |
Gross amounts of recognized liabilities | 8 | 199 |
Prepaid expenses and other current assets | Derivative assets not designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Gross amounts of recognized assets | 80 | 22 |
Prepaid expenses and other current assets | Derivative assets designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Gross amounts of recognized assets | 10 | 2 |
Accrued liabilities | Derivative assets not designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Gross amounts of recognized liabilities | 7 | 199 |
Accrued liabilities | Derivative assets designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Gross amounts of recognized liabilities | $ 1 | $ 0 |
Derivative Financial Instrume_4
Derivative Financial Instruments - Schedule of Offsetting of Derivative Assets (Details) - USD ($) $ in Thousands | Oct. 03, 2021 | Dec. 31, 2020 |
Offsetting of Derivative Assets [Line Items] | ||
Gross Amounts of Recognized Assets | $ 90 | $ 24 |
HSBC | ||
Offsetting of Derivative Assets [Line Items] | ||
Gross Amounts of Recognized Assets | 90 | |
Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets | 0 | |
Net Amounts Of Assets Presented in the Unaudited Condensed Consolidated Balance Sheets | 90 | |
Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets: Financial Instruments | (8) | |
Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets: Cash Collateral Pledged | 0 | |
Net Amount | $ 82 | |
Wells Fargo Bank | ||
Offsetting of Derivative Assets [Line Items] | ||
Gross Amounts of Recognized Assets | 24 | |
Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets | 0 | |
Net Amounts Of Assets Presented in the Unaudited Condensed Consolidated Balance Sheets | 24 | |
Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets: Financial Instruments | (24) | |
Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets: Cash Collateral Pledged | 0 | |
Net Amount | $ 0 |
Derivative Financial Instrume_5
Derivative Financial Instruments - Schedule of Offsetting of Derivative Liabilities (Details) - USD ($) $ in Thousands | Oct. 03, 2021 | Dec. 31, 2020 |
Offsetting of Derivative Liabilities [Line Items] | ||
Gross Amounts of Recognized Liabilities | $ 8 | $ 199 |
HSBC | ||
Offsetting of Derivative Liabilities [Line Items] | ||
Gross Amounts of Recognized Liabilities | 8 | |
Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets | 0 | |
Net Amounts Of Liabilities Presented in the Unaudited Condensed Consolidated Balance Sheets | 8 | |
Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets: Financial Instruments | (8) | |
Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets: Cash Collateral Pledged | 0 | |
Net Amount | $ 0 | |
Wells Fargo Bank | ||
Offsetting of Derivative Liabilities [Line Items] | ||
Gross Amounts of Recognized Liabilities | 199 | |
Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets | 0 | |
Net Amounts Of Liabilities Presented in the Unaudited Condensed Consolidated Balance Sheets | 199 | |
Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets: Financial Instruments | (24) | |
Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets: Cash Collateral Pledged | 0 | |
Net Amount | $ 175 |
Derivative Financial Instrume_6
Derivative Financial Instruments - Narrative (Details) - Foreign currency contracts $ in Millions | 9 Months Ended |
Oct. 03, 2021USD ($)derivative_instrument | |
Designated as Hedging Instrument | |
Derivative [Line Items] | |
Term of derivative contracts | 6 months |
Derivatives Not Designated as Hedging Instruments | |
Derivative [Line Items] | |
Number of derivatives entered into | derivative_instrument | 6 |
Average size of derivative contracts | $ | $ 2.6 |
Derivatives Not Designated as Hedging Instruments | Minimum | |
Derivative [Line Items] | |
Term of derivative contracts | 1 month |
Derivatives Not Designated as Hedging Instruments | Maximum | |
Derivative [Line Items] | |
Term of derivative contracts | 3 months |
Cash Flow Hedges | |
Derivative [Line Items] | |
Number of derivatives entered into | derivative_instrument | 2 |
Average size of derivative contracts | $ | $ 1.8 |
Derivative Financial Instrume_7
Derivative Financial Instruments - Schedule of Location and Amount of Gains or Losses Recognized in Income on Cash Flow Hedges (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 03, 2021 | Sep. 27, 2020 | Oct. 03, 2021 | Sep. 27, 2020 | |
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Total revenue | $ 111,149 | $ 110,236 | $ 292,276 | $ 242,318 |
Total cost of revenue | 86,806 | 88,827 | 215,957 | 211,467 |
Research and development | 14,377 | 15,436 | 45,419 | 44,871 |
Sales and marketing | 12,779 | 12,720 | 36,445 | 35,471 |
General and administrative | 12,119 | 11,137 | 36,905 | 39,758 |
Foreign currency contracts | Gains (losses) on cash flow hedge | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Total revenue | 122 | (39) | 122 | 10 |
Total cost of revenue | 0 | 0 | 0 | 0 |
Research and development | 0 | 0 | 0 | 0 |
Sales and marketing | 0 | 0 | 0 | 0 |
General and administrative | 0 | 0 | 0 | 0 |
Foreign currency contracts | Gains (losses) on cash flow hedge | Gains (Losses) Reclassified from OCI to Income - Effective Portion | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Total revenue | 122 | (37) | 122 | (14) |
Total cost of revenue | (1) | 0 | (1) | 0 |
Research and development | 0 | 5 | 0 | 5 |
Sales and marketing | (10) | 2 | (8) | 3 |
General and administrative | $ (1) | $ 0 | $ (1) | $ 0 |
Derivative Financial Instrume_8
Derivative Financial Instruments - Schedule of Derivatives not Designated as Hedging Instruments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 03, 2021 | Sep. 27, 2020 | Oct. 03, 2021 | Sep. 27, 2020 | |
Other income (expense), net | Foreign currency contracts | Derivatives Not Designated as Hedging Instruments | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gains (losses) on cash flow hedge | $ 46 | $ (108) | $ (38) | $ 553 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (Loss) - Schedule of AOCI (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 03, 2021 | Sep. 27, 2020 | Oct. 03, 2021 | Sep. 27, 2020 | |
AOCI, before tax | ||||
Beginning balance | $ 114,785 | $ 151,904 | $ 133,767 | $ 203,376 |
Ending balance | 112,224 | 141,807 | 112,224 | 141,807 |
Estimated tax benefit (provision) | ||||
Beginning balance, tax | 0 | 0 | 0 | 0 |
Other comprehensive income (loss) before reclassifications, tax | (1) | 0 | (1) | 0 |
Less: Amount reclassified from accumulated other comprehensive income (loss), tax | 0 | 0 | 0 | 0 |
Net current period other comprehensive income (loss), tax | (1) | 0 | (1) | 0 |
Ending balance, tax | (1) | 0 | (1) | 0 |
Total | ||||
Beginning balance | 114,785 | 151,904 | 133,767 | 203,376 |
Other comprehensive income (loss) before reclassifications | 121 | (53) | 120 | (13) |
Less: Amount reclassified from accumulated other comprehensive income (loss) | 110 | (30) | 112 | (6) |
Net current period other comprehensive income (loss) | 11 | (23) | 8 | (7) |
Ending balance | 112,224 | 141,807 | 112,224 | 141,807 |
Unrealized gains (losses) on available-for-sale securities | ||||
AOCI, before tax | ||||
Beginning balance | 0 | 14 | 1 | 23 |
Other comprehensive income (loss) before reclassifications | 0 | (14) | (1) | (23) |
Less: Amount reclassified from accumulated other comprehensive income (loss) | 0 | 0 | 0 | 0 |
Net current period other comprehensive income (loss) | 0 | (14) | (1) | (23) |
Ending balance | 0 | 0 | 0 | 0 |
Total | ||||
Beginning balance | 0 | 14 | 1 | 23 |
Ending balance | 0 | 0 | 0 | 0 |
Unrealized gains (losses) on derivatives | ||||
AOCI, before tax | ||||
Beginning balance | 0 | 0 | 2 | (25) |
Other comprehensive income (loss) before reclassifications | 122 | (39) | 122 | 10 |
Less: Amount reclassified from accumulated other comprehensive income (loss) | 110 | (30) | 112 | (6) |
Net current period other comprehensive income (loss) | 12 | (9) | 10 | 16 |
Ending balance | 12 | (9) | 12 | (9) |
Total | ||||
Beginning balance | 0 | 0 | 2 | (25) |
Ending balance | 12 | (9) | 12 | (9) |
Total | ||||
AOCI, before tax | ||||
Beginning balance | 0 | 14 | 3 | (2) |
Ending balance | 11 | (9) | 11 | (9) |
Total | ||||
Beginning balance | 0 | 14 | 3 | (2) |
Ending balance | $ 11 | $ (9) | $ 11 | $ (9) |
Accumulated Other Comprehensi_4
Accumulated Other Comprehensive Income (Loss) - Reclassifications out of AOCI (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 03, 2021 | Sep. 27, 2020 | Oct. 03, 2021 | Sep. 27, 2020 | |
Reclassification Out of Accumulated Other Comprehensive Income [Line Items] | ||||
Revenue | $ 111,149 | $ 110,236 | $ 292,276 | $ 242,318 |
Cost of revenue | 86,806 | 88,827 | 215,957 | 211,467 |
Research and development | 14,377 | 15,436 | 45,419 | 44,871 |
Sales and marketing | 12,779 | 12,720 | 36,445 | 35,471 |
General and administrative | 12,119 | 11,137 | 36,905 | 39,758 |
Foreign currency contracts | ||||
Reclassification Out of Accumulated Other Comprehensive Income [Line Items] | ||||
Total before tax | 122 | (39) | 122 | 10 |
Gains (losses) on cash flow hedge | ||||
Reclassification Out of Accumulated Other Comprehensive Income [Line Items] | ||||
Total before tax | 110 | (30) | 112 | (6) |
Gains (losses) on cash flow hedge | Foreign currency contracts | ||||
Reclassification Out of Accumulated Other Comprehensive Income [Line Items] | ||||
Revenue | 122 | (39) | 122 | 10 |
Cost of revenue | 0 | 0 | 0 | 0 |
Research and development | 0 | 0 | 0 | 0 |
Sales and marketing | 0 | 0 | 0 | 0 |
General and administrative | 0 | 0 | 0 | 0 |
Gains (Losses) Reclassified from OCI to Income - Effective Portion | Foreign currency contracts | ||||
Reclassification Out of Accumulated Other Comprehensive Income [Line Items] | ||||
Total before tax | 110 | (30) | 112 | (6) |
Gains (Losses) Reclassified from OCI to Income - Effective Portion | Gains (losses) on cash flow hedge | Foreign currency contracts | ||||
Reclassification Out of Accumulated Other Comprehensive Income [Line Items] | ||||
Revenue | 122 | (37) | 122 | (14) |
Cost of revenue | (1) | 0 | (1) | 0 |
Research and development | 0 | 5 | 0 | 5 |
Sales and marketing | (10) | 2 | (8) | 3 |
General and administrative | $ (1) | $ 0 | $ (1) | $ 0 |
Debt (Details)
Debt (Details) - USD ($) | Oct. 27, 2021 | Nov. 05, 2019 | Nov. 10, 2021 | Oct. 03, 2021 |
Short-term Debt [Line Items] | ||||
Domestic cash to be maintained by financial covenant | $ 20,000,000 | |||
Revolving Credit Facility | Credit Agreement | Line of Credit | ||||
Short-term Debt [Line Items] | ||||
Debt term | 2 years | |||
Maximum borrowing capacity | $ 40,000,000 | |||
Borrowing base multiplier percentage | 60.00% | |||
Minimum amount of foreign subsidiaries voting interest not secured percentage | 65.00% | |||
Additional interest in event of default percentage | 5.00% | |||
Annual facility fee percentage | 0.25% | |||
Outstanding borrowing under the credit facility | $ 0 | |||
Revolving Credit Facility | Credit Agreement | Line of Credit | Prime Rate | ||||
Short-term Debt [Line Items] | ||||
Basis spread on variable rate | 2.25% | |||
Revolving Credit Facility | Loan And Security Agreement | Line of Credit | Bank of America NA | Subsequent Event | ||||
Short-term Debt [Line Items] | ||||
Debt term | 3 years | |||
Maximum borrowing capacity | $ 40,000,000 | |||
Outstanding borrowing under the credit facility | $ 0 |
Commitments and Contingencies -
Commitments and Contingencies - Narrative (Details) shares in Thousands, ft² in Thousands | Jun. 12, 2020USD ($) | Dec. 31, 2018shares | Dec. 11, 2018claim | Oct. 31, 2020USD ($) | Oct. 03, 2021USD ($) | Sep. 27, 2020USD ($) | Oct. 03, 2021USD ($) | Sep. 27, 2020USD ($) | May 25, 2021ft² | Dec. 31, 2020USD ($) |
Loss Contingencies [Line Items] | ||||||||||
Option to extend lease period (up to) | 5 years | |||||||||
Option to terminate lease period | 1 year | |||||||||
Operating lease, liability statement of financial position | Accrued liabilities | Accrued liabilities | ||||||||
Operating lease, expense | $ 1,700,000 | $ 1,700,000 | $ 5,300,000 | $ 5,300,000 | ||||||
Impairment charges | 0 | $ 0 | $ 9,116,000 | $ 0 | ||||||
Rentable area of property | ft² | 78 | |||||||||
Number of days for non-cancellation of purchase obligations prior to expected shipment date | 30 days | |||||||||
Non-cancelable purchase commitments with suppliers | 40,300,000 | $ 40,300,000 | ||||||||
Number of complaints | claim | 6 | |||||||||
Liabilities recorded for director and officer indemnification agreements | 0 | 0 | $ 0 | |||||||
Liabilities recorded for customers, distributors, and resellers indemnification agreements | 0 | $ 0 | $ 0 | |||||||
Severance agreement, termination without cause or resignation with good reason, period of health benefits continuation | 12 months | |||||||||
Severance agreement, termination without cause or resignation with good reason, accelerated vesting, period of awards would have vested following termination date | 12 months | |||||||||
Liabilities for executive's employment agreements | $ 0 | $ 0 | ||||||||
Chief Executive Officer | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Severance agreement, termination without cause or resignation with good reason, cash severance multiple | 2 | 2 | ||||||||
Severance agreement, termination without cause or resignation with good reason, during one month prior to or 12 months following change in control, period of health benefits continuation | 24 months | |||||||||
Executive Officer | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Severance agreement, termination without cause or resignation with good reason, cash severance multiple | 1 | 1 | ||||||||
Severance agreement, termination without cause or resignation with good reason, during one month prior to or 12 months following change in control, period of health benefits continuation | 12 months | |||||||||
Special Stock Dividend Distribution | NETGEAR | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Number of shares issued in the transaction (in shares) | shares | 62,500 | |||||||||
Federal Action | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Litigation class action settlement amount | $ 1,250,000 | |||||||||
Payments for legal settlements | $ 1,250,000 | |||||||||
Loss on Long-term Purchase Commitment | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Loss liability from committed purchases | $ 700,000 | $ 700,000 | ||||||||
Minimum | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Monthly base rent on sublease | 167,000 | 167,000 | ||||||||
Maximum | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Monthly base rent on sublease | $ 206,000 | $ 206,000 | ||||||||
46 to 60 Days | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Percentage of cancelable orders | 50.00% | 50.00% | ||||||||
46 to 60 Days | Minimum | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Required notice period prior to expected shipment date | 46 days | |||||||||
46 to 60 Days | Maximum | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Required notice period prior to expected shipment date | 60 days | |||||||||
31 to 45 Days | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Percentage of cancelable orders | 25.00% | 25.00% | ||||||||
31 to 45 Days | Minimum | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Required notice period prior to expected shipment date | 31 days | |||||||||
31 to 45 Days | Maximum | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Required notice period prior to expected shipment date | 45 days | |||||||||
Letter of Credit | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Unused letters of credit outstanding | $ 3,600,000 | $ 3,600,000 | ||||||||
Letter of Credit | Build-to-suit lease | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Unused letters of credit outstanding | $ 3,100,000 | $ 3,100,000 |
Commitments and Contingencies_2
Commitments and Contingencies - Schedule of Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Oct. 03, 2021 | Sep. 27, 2020 | |
Cash paid for amounts included in the measurement of lease liabilities | ||
Operating cash flows from operating leases | $ 4,939 | $ 4,452 |
Right-of-use assets obtained in exchange for lease liabilities | ||
Operating leases | $ 1,429 | $ 461 |
Commitments and Contingencies_3
Commitments and Contingencies - Summary of Weighted Averages Related to Operating Leases (Details) | Oct. 03, 2021 |
Commitments and Contingencies Disclosure [Abstract] | |
Weighted average remaining lease term | 6 years 6 months |
Weighted average discount rate | 6.30% |
Commitments and Contingencies_4
Commitments and Contingencies - Summary of Operating Lease Maturity (Details) - USD ($) $ in Thousands | Oct. 03, 2021 | Dec. 31, 2020 |
Operating Lease Payments | ||
2021 (Remaining three months) | $ 1,088 | |
2022 | 6,270 | |
2023 | 5,491 | |
2024 | 4,881 | |
2025 | 3,179 | |
Thereafter | 11,489 | |
Total future lease payments | 32,398 | |
Less: interest | (5,376) | |
Present value of future minimum lease payments | 27,022 | |
Accrued liabilities | 4,411 | $ 4,400 |
Non-current operating lease liabilities | 22,611 | $ 25,029 |
Sublease Payments | ||
2021 (Remaining three months) | 0 | |
2022 | (1,673) | |
2023 | (1,891) | |
2024 | (1,947) | |
2025 | (2,006) | |
Thereafter | (8,008) | |
Total future lease payments | (15,525) | |
Net | ||
2021 (Remaining three months) | 1,088 | |
2022 | 4,597 | |
2023 | 3,600 | |
2024 | 2,934 | |
2025 | 1,173 | |
Thereafter | 3,481 | |
Total future lease payments | $ 16,873 |
Commitments and Contingencies_5
Commitments and Contingencies - Schedule of Changes in Warranty Obligation (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 03, 2021 | Sep. 27, 2020 | Oct. 03, 2021 | Sep. 27, 2020 | |
Movement in Standard Product Warranty Accrual [Roll Forward] | ||||
Balance at the beginning of the period | $ 1,805 | $ 3,023 | $ 2,451 | $ 3,169 |
Provision for (release of) warranty obligation made during the period | (53) | 0 | (438) | 0 |
Settlements made during the period | (107) | (455) | (368) | (601) |
Balance at the end of the period | $ 1,645 | $ 2,568 | $ 1,645 | $ 2,568 |
Employee Benefit Plans - Narrat
Employee Benefit Plans - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | Jul. 28, 2021 | Oct. 03, 2021 | Mar. 28, 2021 | Jun. 28, 2020 | Oct. 03, 2021 | Mar. 03, 2021 | Dec. 31, 2020 |
Stock Options | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Total unrecognized compensation | $ 800 | $ 800 | |||||
Weighted-average period of recognition of stock based compensation | 9 months 18 days | ||||||
Stock Options | NETGEAR | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Total unrecognized compensation | 0 | $ 0 | |||||
ESPP | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of shares reserved (in shares) | 3,966,472 | ||||||
RSUs, PSUs and MPSUs | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Total unrecognized compensation | 46,800 | $ 46,800 | |||||
Weighted-average period of recognition of stock based compensation | 2 years 2 months 12 days | ||||||
RSUs | NETGEAR | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Total unrecognized compensation | $ 800 | $ 800 | |||||
Weighted-average period of recognition of stock based compensation | 4 months 24 days | ||||||
2018 Plan | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of additional shares reserve (in shares) | 4,673,000 | ||||||
Reserved stock for issuance, common stock (in shares) | 3,413,000 | 3,413,000 | 3,113,000 | ||||
Number of shares reserved (in shares) | 3,173,178 | ||||||
2018 Plan | Stock Options | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Options granted, vesting term | 4 years | ||||||
Award expiration period | 10 years | ||||||
Purchase price of common stock, percent of market price (no less than) | 100.00% | ||||||
2018 Plan | Stock Options | Tranche One | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Options granted, vesting term | 12 months | ||||||
2018 Plan | Stock Options | Tranche Two | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Options granted, vesting term | 3 years | ||||||
2018 Plan | MPSUs | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Fair value MPSUs granted (in dollars per share) | $ 5.21 | $ 11.77 | $ 4.11 | ||||
2018 Equity Incentive Plan | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of additional shares reserve (in shares) | 1,500,000 | ||||||
ESPP | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of shares reserved (in shares) | 793,294 | ||||||
ESPP | ESPP | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Maximum percentage of compensation contributed by employees | 15.00% | 15.00% | |||||
Percentage of stock price purchased at offering date | 85.00% | ||||||
Offering period | 6 months | ||||||
Reserved stock for issuance, common stock (in shares) | 1,315,080 | 1,315,080 | |||||
Minimum | 2018 Plan | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Options granted, vesting term | 3 years | ||||||
Maximum | 2018 Plan | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Options granted, vesting term | 4 years |
Employee Benefit Plans - Summar
Employee Benefit Plans - Summary of Available Shares for Future Grants (Details) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | |
Oct. 03, 2021 | Mar. 28, 2021 | Oct. 03, 2021 | |
RSUs | Arlo | |||
Number of Shares | |||
Granted (in shares) | 7,097 | ||
RSUs | Executive Officer | Arlo | |||
Number of Shares | |||
Award granted, percentage | 50.00% | ||
PSUs | Executive Officer | Arlo | |||
Number of Shares | |||
Award granted, percentage | 25.00% | ||
MPSUs | Executive Officer | Arlo | |||
Number of Shares | |||
Award granted, percentage | 25.00% | ||
2018 Plan | |||
Number of Shares | |||
Beginning balance (in shares) | 3,113 | 3,113 | |
Additional authorized shares (in shares) | 4,673 | ||
Granted (in shares) | (7,097) | ||
Forfeited/cancelled (in shares) | 731 | ||
Shares traded for taxes (in shares) | 1,993 | ||
Ending balance (in shares) | 3,413 | 3,413 | |
2018 Plan | RSU, PSU, MPSU | Executive Officer | Arlo | |||
Number of Shares | |||
Granted (in shares) | 800 | ||
2018 Plan | MPSUs | |||
Number of Shares | |||
Grants in period (in shares) | 800 |
Employee Benefit Plans - Schedu
Employee Benefit Plans - Schedule of Stock Option Activity (Details) - Stock Options shares in Thousands | 9 Months Ended |
Oct. 03, 2021$ / sharesshares | |
Number of shares | |
Beginning balance (in shares) | shares | 3,434 |
Granted (in shares) | shares | 0 |
Exercised (in shares) | shares | (655) |
Forfeited / cancelled (in shares) | shares | (29) |
Ending balance (in shares) | shares | 2,750 |
Number of shares, Vested and expected to vest (in shares) | shares | 2,750 |
Number of shares, Exercisable options (in shares) | shares | 2,593 |
Weighted Average Exercise Price Per Share | |
Beginning balance (in dollars per share) | $ / shares | $ 9.72 |
Granted (in dollars per share) | $ / shares | 0 |
Exercised (in dollars per share) | $ / shares | 6.77 |
Forfeited / cancelled (in dollars per share) | $ / shares | 7.13 |
Ending balance (in dollars per share) | $ / shares | 10.45 |
Weighted average exercise price, Vested and expected to vest (in dollars per share) | $ / shares | 10.45 |
Weighted average exercise price, Exercisable Options (in dollars per share) | $ / shares | $ 10.17 |
NETGEAR | |
Number of shares | |
Beginning balance (in shares) | shares | 16 |
Exercised (in shares) | shares | (4) |
Forfeited / cancelled (in shares) | shares | 0 |
Expired (in shares) | shares | 0 |
Ending balance (in shares) | shares | 12 |
Number of shares, Vested and expected to vest (in shares) | shares | 12 |
Number of shares, Exercisable options (in shares) | shares | 12 |
Weighted Average Exercise Price Per Share | |
Beginning balance (in dollars per share) | $ / shares | $ 22.49 |
Exercised (in dollars per share) | $ / shares | 27.15 |
Forfeited / cancelled (in dollars per share) | $ / shares | 0 |
Expired (in dollars per share) | $ / shares | 0 |
Ending balance (in dollars per share) | $ / shares | 20.76 |
Weighted average exercise price, Vested and expected to vest (in dollars per share) | $ / shares | 20.76 |
Weighted average exercise price, Exercisable Options (in dollars per share) | $ / shares | $ 20.76 |
Employee Benefit Plans - Sche_2
Employee Benefit Plans - Schedule of RSU Activity (Details) shares in Thousands | Jul. 28, 2021$ / shares | Oct. 03, 2021$ / sharesshares | Mar. 28, 2021$ / sharesshares | Oct. 03, 2021installment$ / sharesshares |
2018 Plan | Maximum | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Vesting period | 4 years | |||
2018 Plan | Minimum | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Vesting period | 3 years | |||
Arlo | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Vesting period | 4 years | |||
Arlo | Maximum | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Threshold | 200.00% | 200.00% | ||
RSUs | Executive Officer | 2018 Plan | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Number of annual vesting installments | installment | 4 | |||
RSUs | Arlo | ||||
Number of shares | ||||
Beginning balance (in shares) | 10,563 | 10,563 | ||
Granted (in shares) | 7,097 | |||
Vested (in shares) | (5,665) | |||
Forfeited (in shares) | (702) | |||
Ending balance (in shares) | 11,293 | 11,293 | ||
Weighted Average Grant Date Fair Value Per Share | ||||
Beginning Balance (in dollars per share) | $ / shares | $ 4.33 | $ 4.33 | ||
Granted (in dollars per share) | $ / shares | 7.21 | |||
Vested (in dollars per share) | $ / shares | 5.50 | |||
Forfeited (in dollars per share) | $ / shares | 5.12 | |||
Ending Balance (in dollars per share) | $ / shares | $ 5.50 | $ 5.50 | ||
Granted (in shares) | 7,097 | |||
RSUs | Arlo | Executive Officer | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Award granted, percentage | 50.00% | |||
RSUs | NETGEAR | ||||
Number of shares | ||||
Beginning balance (in shares) | 127 | 127 | ||
Vested (in shares) | (70) | |||
Forfeited (in shares) | (4) | |||
Ending balance (in shares) | 53 | 53 | ||
Weighted Average Grant Date Fair Value Per Share | ||||
Beginning Balance (in dollars per share) | $ / shares | $ 37.81 | $ 37.81 | ||
Vested (in dollars per share) | $ / shares | 36.95 | |||
Forfeited (in dollars per share) | $ / shares | 38.60 | |||
Ending Balance (in dollars per share) | $ / shares | $ 38.89 | $ 38.89 | ||
RSU, PSU, MPSU | Arlo | Executive Officer | 2018 Plan | ||||
Number of shares | ||||
Granted (in shares) | 800 | |||
Weighted Average Grant Date Fair Value Per Share | ||||
Granted (in shares) | 800 | |||
PSUs | Maximum | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Number of shares that can be earned of targeted award | 120.00% | |||
PSUs | Minimum | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Number of shares that can be earned of targeted award | 75.00% | |||
PSUs | Executive Officer | 2018 Plan | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Number of annual vesting installments | installment | 4 | |||
PSUs | Arlo | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Threshold | 100.00% | 100.00% | ||
PSUs | Arlo | Executive Officer | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Award granted, percentage | 25.00% | |||
MPSUs | 2018 Plan | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Grants in period (in shares) | 800 | |||
MPSUs | Arlo | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Threshold | 30.00% | 30.00% | ||
Vesting period | 4 years | |||
Positive movement of benchmark (multiplier) | 3.3 | 3.3 | ||
Negative movement of benchmark (multiplier) | 2.5 | 2.5 | ||
Positive movement of benchmark percentage | 3.30% | 3.30% | ||
Negative movement of benchmark percentage | 2.50% | 2.50% | ||
Movement of benchmark, increment percentage | 1.00% | 1.00% | ||
MPSUs | Arlo | Maximum | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Threshold | 26.84% | 26.84% | ||
MPSUs | Arlo | Executive Officer | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Award granted, percentage | 25.00% | |||
Bonus RSU | 2018 Plan | ||||
Number of shares | ||||
Granted (in shares) | 700 | |||
Weighted Average Grant Date Fair Value Per Share | ||||
Granted (in shares) | 700 | |||
Performance Stock Unit | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Service period | 4 years | |||
Average closing price period date range | 30 days | |||
Performance Stock Unit | Tranche One | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Average daily closing prices per share (in dollars per share ) | $ / shares | $ 7.57 | |||
Performance Stock Unit | Tranche Two | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Average daily closing prices per share (in dollars per share ) | $ / shares | 8.69 | |||
Performance Stock Unit | Tranche Three | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Average daily closing prices per share (in dollars per share ) | $ / shares | 9.97 | |||
Performance Stock Unit | Tranche Four | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Average daily closing prices per share (in dollars per share ) | $ / shares | 11.44 | |||
Performance Stock Unit | Tranche Five | ||||
Weighted Average Grant Date Fair Value Per Share | ||||
Average daily closing prices per share (in dollars per share ) | $ / shares | $ 13.20 |
Employee Benefit Plans - Sche_3
Employee Benefit Plans - Schedule of Valuation and Expense Information (Details) | 3 Months Ended | 9 Months Ended | ||
Oct. 03, 2021 | Sep. 27, 2020 | Oct. 03, 2021 | Sep. 27, 2020 | |
ESPP | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Expected life (in years) | 6 months | 6 months | 6 months | |
Risk-free interest rate | 0.86% | 0.06% | 1.47% | |
Expected volatility | 99.60% | 87.00% | 85.70% | |
Dividend yield | 0.00% | 0.00% | 0.00% | |
MPSUs | 2018 Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Expected life (in years) | 4 years | 4 years | 3 years | |
Risk-free interest rate | 0.55% | 0.38% | 0.24% | |
Expected volatility | 67.90% | 69.50% | 69.30% | |
Dividend yield | 0.00% | 0.00% | 0.00% | |
Stock Beta | 0.45 | 0.48 |
Employee Benefit Plans - Sche_4
Employee Benefit Plans - Schedule of Total Stock-Based Compensation Expense Resulting from Stock Options, Restricted Stock Awards, and the Employee Stock Purchase Plan (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 03, 2021 | Sep. 27, 2020 | Oct. 03, 2021 | Sep. 27, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation | $ 7,599 | $ 9,001 | $ 27,548 | $ 26,338 |
Cost of revenue | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation | 787 | 942 | 2,950 | 2,007 |
Research and development | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation | 2,086 | 2,870 | 8,474 | 6,259 |
Sales and marketing | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation | 1,119 | 1,160 | 3,948 | 2,895 |
General and administrative | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation | $ 3,607 | $ 4,029 | $ 12,176 | $ 15,177 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 03, 2021 | Sep. 27, 2020 | Oct. 03, 2021 | Sep. 27, 2020 | |
Income Tax Disclosure [Abstract] | ||||
Provision for income taxes | $ 181 | $ 115 | $ 525 | $ 443 |
Effective tax rate | (1.20%) | (0.70%) | (1.10%) | (0.50%) |
Net Income (Loss) Per Share - S
Net Income (Loss) Per Share - Schedule of Net Loss Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 03, 2021 | Sep. 27, 2020 | Oct. 03, 2021 | Sep. 27, 2020 | |
Numerator: | ||||
Net loss | $ (15,198) | $ (17,459) | $ (49,237) | $ (86,041) |
Denominator: | ||||
Weighted average common shares - basic (in shares) | 83,809 | 78,662 | 82,191 | 77,705 |
Potentially dilutive common share equivalent (in shares) | 0 | 0 | 0 | 0 |
Weighted average common shares - dilutive (in shares) | 83,809 | 78,662 | 82,191 | 77,705 |
Basic net loss per share (in dollars per share) | $ (0.18) | $ (0.22) | $ (0.60) | $ (1.11) |
Diluted net loss per share (in dollars per share) | $ (0.18) | $ (0.22) | $ (0.60) | $ (1.11) |
Anti-dilutive employee stock-based awards, excluded (in shares) | 5,980 | 5,958 | 4,826 | 7,526 |
Segment and Geographic Inform_3
Segment and Geographic Information - Narrative (Details) | 9 Months Ended |
Oct. 03, 2021segmentregion | |
Segment Reporting [Abstract] | |
Number of reportable segments | 1 |
Number of operating segments | 1 |
Number of geographic regions in which the company conducts business | region | 3 |
Segment and Geographic Inform_4
Segment and Geographic Information - Schedule of Net Revenue by Geographic Areas (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 03, 2021 | Sep. 27, 2020 | Oct. 03, 2021 | Sep. 27, 2020 | |
Segment Reporting Information [Line Items] | ||||
Total revenue | $ 111,149 | $ 110,236 | $ 292,276 | $ 242,318 |
United States (“U.S.”) | ||||
Segment Reporting Information [Line Items] | ||||
Total revenue | 72,269 | 74,016 | 188,306 | 172,176 |
Americas (excluding U.S.) | ||||
Segment Reporting Information [Line Items] | ||||
Total revenue | 2,242 | 1,845 | 2,522 | 4,854 |
EMEA | ||||
Segment Reporting Information [Line Items] | ||||
Total revenue | 30,931 | 28,010 | 80,623 | 46,531 |
APAC | ||||
Segment Reporting Information [Line Items] | ||||
Total revenue | $ 5,707 | $ 6,365 | $ 20,825 | $ 18,757 |
Segment and Geographic Inform_5
Segment and Geographic Information - Schedule of Long-Lived Asset by Geographic Areas (Details) - USD ($) $ in Thousands | Oct. 03, 2021 | Dec. 31, 2020 |
Long-Lived Assets [Line Items] | ||
Total property and equipment, net | $ 10,681 | $ 15,821 |
United States (“U.S.”) | ||
Long-Lived Assets [Line Items] | ||
Total property and equipment, net | 8,162 | 12,644 |
Americas (excluding U.S.) | ||
Long-Lived Assets [Line Items] | ||
Total property and equipment, net | 490 | 629 |
EMEA | ||
Long-Lived Assets [Line Items] | ||
Total property and equipment, net | 287 | 234 |
China | ||
Long-Lived Assets [Line Items] | ||
Total property and equipment, net | 1,462 | 1,821 |
APAC (excluding China) | ||
Long-Lived Assets [Line Items] | ||
Total property and equipment, net | $ 280 | $ 493 |
Subsequent Event (Details)
Subsequent Event (Details) - Subsequent Event - Loan And Security Agreement - Bank of America NA - Line of Credit - USD ($) | Oct. 27, 2021 | Nov. 10, 2021 |
Bloomberg Short-Term Bank Yield Index | Minimum | ||
Subsequent Event [Line Items] | ||
Basis spread on variable rate | 2.00% | |
Bloomberg Short-Term Bank Yield Index | Maximum | ||
Subsequent Event [Line Items] | ||
Basis spread on variable rate | 2.50% | |
Base Rate | Minimum | ||
Subsequent Event [Line Items] | ||
Basis spread on variable rate | 1.00% | |
Base Rate | Maximum | ||
Subsequent Event [Line Items] | ||
Basis spread on variable rate | 1.50% | |
Revolving Credit Facility | ||
Subsequent Event [Line Items] | ||
Debt term | 3 years | |
Maximum borrowing capacity | $ 40,000,000 | |
Investment grade multiplier percent | 90.00% | |
Non investment grade multiplier percent | 85.00% | |
Accordion feature, increase limit | $ 25,000,000 | |
Unused capacity, commitment fee percentage | 0.20% | |
Fixed charge coverage ratio minimum | 100.00% | |
Fixed charge coverage ratio twelve month basis minimum | 100.00% | |
Debt instrument, covenant, minimum liquidity not less than | $ 20,000,000 | |
Outstanding borrowing under the credit facility | $ 0 | |
Letter of Credit | ||
Subsequent Event [Line Items] | ||
Maximum borrowing capacity | $ 5,000,000 |