ARLO - Earnings call transcript Q1 2022

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Operator

Ladies and gentlemen, thank you for standing by. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. [Operator Instructions] I would now like to turn the conference over to Erik Bylin. Please go ahead, sir.

Erik Bylin

afternoon Financial to Results good Quarter Technologies’ operator, XXXX of Conference you, and Arlo welcome First Thank Call.

the the CFO. Joining Mr. us commentary quarter, by Gordon. format on Mattingly, Matt, provided introduction the first review Matthew are by will guidance, of The followed McRae, CEO; the along with for and second Mr. and the an provided call we Company the quarter by for start business Gordon with financials

any questions. for will time We then have

If received Investor press website not you please at release, today’s have of copy a arlo.com. visit Relations Arlo’s Investor

we advise call conference Before formal the begin remarks, you that Statements. Forward-Looking we today’s contains

and awareness and partnership pandemic from earnings campaign our of these could momentum Calix, those objectives supply guidance to financial on statements our descriptions commercial gross a impact service chain business, costs quarter COVID-XX of our materially future and the statements results the Actual operating regarding condition. operating results anticipate challenges, continued margins, rates, launch the and or business, revenue, second products differentiation, of transition and services, condition, initiatives, share, cash statements. expenses, new growth, Verisure potential and per transportation with effect on Forward-looking for future of growth, financial differ forward-looking expansion product tax new outlook, including and services-first and the results XXXX, strategic trends our model, and by include operating of market business future margins, contemplated

new Arlo to are on the refer make XX-Q. report with today information on or assumptions no periodic events. most please of Any as this update quarterly obligation quarterly risk Arlo’s report on statements undertakes filings XX-K and For discussed on SEC, a of to factors the based result statements Form Form we more future including forward-looking call in recent as these the information, and

the on reconciliation Matt. website. this to GAAP be can At be release call. found non-GAAP time, to In press now this to in Relations will of measures would addition, financial Investor measures over today’s like A call I discussed several non-GAAP our the turn on

Matthew McRae

Thank for on in XXXX record joining Arlo’s comments everyone of call. quarter will on our a first earnings thank focused going summary QX drivers My breaking you, Erik, us be our and and you today forward. results growth

more most recent Day presentation. For refer our plans, our detail on to please Investor

Service marked million in Our above and consecutive $XXX.X year-over-year, accounts to year-over-year reached continues quarter, year-over-year QX for record sequentially, up across XXth results and XXX,XXX and a XX% million, the quarter. the paid adding end XXX% Arlo increase an accounts of metrics. transformation produce the outperformed X% represents Total well paid that XX% $XX.X were expectations XX% year-over-year. which Total revenue up with up reached our guidance. top all of revenue

recurring a annualized $XXX ARR, XX% exiting by achieved growing million, revenue Our year-over-year. QX at significant million or landmark $XXX breaking through and

the additional and thirds we our exceptional chain As represents end Despite $XX.X by our a pandemic of highest our of at incredible revenue from of and profit costs of margin which hardware for ARR and ever of is posted the per from transformation roughly a results two non-GAAP driven profit subscribers. and recurring service of revenue become we the $X.XX low on focus services our highest first profit outperforming operating high our QX strategy, paid supply came EPS at our buyers our quarter These derive service fastest growing our the non-GAAP in disruptions, our non-GAAP where flow a guidance second the portion gross million annualized reminder, consecutive accounts. the share.

churn metrics, combined XXXX As an retail data. ARPU per month, when $X.XX an world of QX of to have with and domestic we capture translates per class LTV we on quarter, last shared user our the $XXX accounts based low

Looking is revenue long Investor growth, Day and most plan through that margin range value. primary expansion a that recent drive at focuses shareholder the our described as areas executing new to of ahead, business Arlo on three

best-in-class number services products and have generate buy First, they while not of significant products one our people reason the heard accolades, Arlo. because is don’t Arlo

We will household driving manner, a a invest begin on in in subscriptions. to brand new focused incremental and targeted awareness formation

and Second, markets. we to new address product portfolio our new segments are expanding

for We expect new And sensor Arlo cameras. our and and grow smart to continue full ecosystem provide third, launch QX, in drive to we functionality that family. ARPU. we an individual And Safe entire protection QX segments provide significant brings new of based routes or launch to innovative will in opportunities security personal our plan system to our broaden our Both of market. these subscriptions to new will security

example relationship, outsized Our driving in successful has this most to-date prominent of growth forward. been our going and has very Verisure been only looks promising which more Europe,

last with and are their which Calix into providers broadband up Calix partnership integrated to we service Arlo services also To-date broadband the platform to in country. ramp this providers year. around a in coming signed We are year excited XX formed service the

the double-digit performance, strategies business. provide execute with new will our who exhibit to like the paid to demonstrated operating and discipline realize to into margin, our growth insight details that, that the hand operational we million five and three for $XXX in would more accounts outlook targets over Gordon, of our second as we million work call ARR, quarter. same Arlo As to these we And I five-year and transformed will financial

Gordon Mattingly

high financial by strong results year-over-year Thank our our everyone exceeded and you, XX.X% above today. guidance. growing end you, expectations, QX revenue We the of our thank Matt. And that delivered for XXXX joining

Company and $XX.X profit to a record growing million. the sequentially, for While year-over-year gross non-GAAP

operating down to to Our strong financial performance tough profit. accounts. came non-GAAP year-over-year, our The on conditions on Revenue clearly levels sequentially. supply team business. moving are while by year-over-year improving ARR up only expectations $X.XXX exceeded benefiting operating revenue with quarter for successful posting consecutive demonstrates the result of now the $X.X services growth profitability sequential navigated record the again quarter underpinned diversification million record by Arlo and second of leading million our detail. quarter business model, revenue our our the execution paid financial $XXX.X at QX channel and These of and of in how first fiscal a XX.X% non-GAAP And continuing

fueling XX.X% service a QX, X.X% $XX.X and record Our for XXXX growth. revenue services sequentially first with was business our million, our up year-over-year model

XXXX our While revenue, profit. of delivered accounted XX.X% of our for non-GAAP service QX revenue it gross XX%

quarter million revenue was in XX.X% short, compared the year-over-year as down which and $XX.X revenue $X.X was XXXX. QX service very of Our up NRE with also with of associated million, Product we XXXX along costs, million providing in fourth for includes are sequentially. services XX.X% $X.X

very channel from up strength growth more Our year-over-year was normal growth bring inventory coupled in revenue to levels. Americas, where in to with short by Europe, in driven back pleased relationship product retail we retail continued our were

During devices, will approximately one in numbers. on first is The quarter, reconciliation point from we our non-GAAP non-GAAP today. all shipped my to were discussion GAAP which of distributed points release million this cameras. earlier focus on, From earnings detailed

a profit and $X.X incremental significantly QX XX.X% in to Non-GAAP up XXXX, a down in to was up XX.X% quarter $XX.X improvement growth XXXX the QX of increase up Non-GAAP of million, Total supply resulted a non-GAAP product from of air or percentage profit XX.X% and XX.X% in million, XX.X%, $X.X gross of an QX points XXXX, due growth expense, operating year-over-year up QX QX growth COVID-XX million from and million from $X.X million was, for and down up profit million margin $X.X XX.X%, services million an were improvement freight $X.X $X.X driven non-GAAP expense, sequentially or margin XX.X%, $X.X non-GAAP in up XX.X% XXXX, non-GAAP in X.X first million driven expenses XXXX gross service growth which Our freight from by XX.X% XX.X% an million improvement a was million margin and freight in million air came helped The offsetting air record from in cost improvement to mainly $X.X at million in growth and due profit sequentially, by in The included service expense. ARR, non-GAAP year-over-year. coupled on up products. product from chain non-GAAP than improvement in was with growth revenue, XX.X%, from more year-over-year in in sequentially higher of our reduction by in $XX.X related XXXX. $X.X $X.X challenges. optimization. year-on-year

lay R&D in for ahead of invest our we campaign. awareness groundwork As upcoming product introductions service our and new the and

million first quarter the for $X.X up at was expense $XX.X R&D million. sequentially non-GAAP total Our

employees, the headcount quarter. of Our QX to in compared end was prior at XXX the XXX

costs include our and As with of we training relationship, transition employees, all well a outside as as systems agreed which with costs. stages early Verisure service during reminder, a to them some provide the services,

during from We Verisure expenses. costs our income, was normal in $X.X operating reimbursement included other in have million QX. and these included The approximately

and X.X over reduction quarter product tax equivalents a revenue $X.X improvement flow expense compared to as lower guidance, down sequentially we $XX million $XX.X with and sequential purchases million. million, XX.X million year-over-year. for in sequentially $XXX.X in purchases. quarter driven ended XXXX line than prepaid In down turns QX, a product inventory share by accounts was $X.X non-GAAP XXXX $XX.X much our posted with $X.XX QX QX year non-GAAP We year-over-year. of quarter cash deferred X.X at in with Verisure and of diluted investments, line profit net Our ago. $X.XX, per reductions million The a the first million with and in cash, last at payable, a decrease the and was better of short-term

up and XX-days by the customer sequentially, Our driven from XX-days, DSO from a ago, with came increase XX-days at mix. year up

our to turning outlook. Now,

to to of $XXX We in $XXX million. expect range quarter second revenue million the be

diluted in and per per loss to net share. $X. come GAAP XX $X.XX our expect We share between

share per net Now between come $X.XX our diluted share. and loss non-GAAP per in $X.XX

investments. the $XXX continue prudently what with develop our In And cash awareness Our starting we question. quarter, in and performance March. to earnest in $XXX position. in guidance Analysts with $X.X and I third year previous with will end our monitor million we we preserve to our up campaign in of will our for cash guidance, messaging our million million of manage operations equivalents payment Day as expect line the approximately cash, we in short-term communicated line in it open and includes ahead content to And now,

Operator

the Raymond question with Catherine first comes Huntley from Your [Operator James. line Instructions] of

line open. Your is

Catherine Huntley

quarter. the think Hi how very financial Adam. of is are they supply impact increase and guys, congratulations And normalizing? a while maybe channel Catherine inventory you are is still could this And how speak globally? about can we why channel the talked we about great elevated Could weeks for seeing on tight? This inventory of ion you to

Gordon Mattingly

sure. Yes,

into let’s inventory, the typically, time parts. it Looking break at out the relevant

weeks of via XX just in retail. at America’s ended, level for over typically the normal would looking channel target stock to retail We So XX-weeks. XX a

towards just there. it in but we did target bit little much. frankly, we the a end the the to So And sell happy We are and get through. are is be stopped above and the quite denominator six-weeks range, not for calculation last actually of that quarter, by

looking inventory depressed a are end towards of and situation was you through that at due inventory. the to quarter sell a where slightly So filled the before was the of shortage

appreciate is have to think very we So AIPAC our pleased where a high distribution APAC level, little it need it are that if for And the has compared bit quite at side. to to on pretty context been. normal actually I part is APAC, is of inventory, Americas business. think the a that frankly, the we immaterial you retail But we distribution level. at relatively as it look need you quite Then

very perspective, $X it is from So not meaningful.

reflected small in in in but making APAC material. a is it not the destock already QX, and are is We guide, certainly that

pretty don’t So think all. well a perspective, we concerning I inventory from that challenge overall, see anything are positioned at I

Catherine Huntley

you your tail you per XX have this And we coming will end magnitude? out. in that changed discretionary so plan awareness million you and brand on this out be Thank so learnings much for Perfect. And you spending of What given the about have you quarter. how that had can about it call. has color. which laid you for about the previously the the timing think And last far are is investment, as the since What call? that approach spoke

Matthew McRae

Day Yes, an the about it Yes, are time but a a, we is committed it talked was is Analyst you to perspective, defined reminder, from just know, question. relatively also the small it spend perspective. stem a we still great so at a that and doing from amount

at that And from we next we the your So end those question. the the the adjust accounts, forward. year spend you like last months pay then company. the into where $XX six in ultimate just that million, the right, of be going that of year, to driving The you incremental in the articulated, shareholder are at know, of look LTV to is results and year, will fine, doing the metric going value determine want end

are committed in spend this disciplined kind of half. we and So to well the defined second

it, been of As planning we lot there a hasn’t have changes. been

for are media get now, the right are for spend, the that of only as of looking the results looking is looking since we be not which year. that, changes are some to to closer We Day. hasn’t we’ll changes into landscape. we in the there Gordon And the But executing been any forward but at that the QX as And Analyst end sharing in articulated. of going to spend,

Catherine Huntley

great work. It a the pleasure Great. always up keep and is

Matthew McRae

much. you Thank very

Gordon Mattingly

Thank you.

Operator

Khorsand comes question BWS the next with Hamed of Financial. Your line from

is line open. Your

Hamed Khorsand

I amount include Verisure the of you this know paid providers? that want anything partners service Hi. to saw the broadband XX just Does from or users your the the growth quarter. about

Gordon Mattingly

Yes, retail it Right. holiday is a season. across from those of but gains the are lot obviously

You trial. a know, we XX-day have free

the paid of comes the POS we that become to paid Those from accounts so, accounts in tend that period. or QX. holiday a And the lot see,

are the Verisure, as some paid say and know, one-to-one the seeing are have a the coming primary areas that, would custom you to we And the is account. of purchases on XX-day, from growth after that, from So, have a on holiday mix we coming seen some that is in I in the accounts. perspective. some obviously in of are growth post-trial revenue do results a with we camera starting And business direct you period. Verisure is the of mentioned that paid of two growth those you ramp seeing retail,

we from but in an before think active on call We now are XX really the that is starting are accounts. ramp, it longer providers to Calix I service paid that take least see share that perspective have will BSPs broadband or did Calix. onboarding the material through We at now

number that ramp. to continue expect We to

these into So a be I think lot take will from in Calix year, kind the of strategic following as to a while later the year, the contribution accounts, going ramp. of

Hamed Khorsand

the Is Verisure or lumpy? something every is contribution a it like be quarter, step-up from going to

Gordon Mattingly

some accounts Verisure think in right. sold business, we retail will some is to at bit least in little on retail because what A in lot QX at And consumer the steady, with we doesn’t we drive continue hardware accounts you paid steady we to time. direct especially effect that seasonality seasonality, channel. I launched the see little paid the business. we more business camera year paid it like that accounts beginning traditional It don’t be impact last QX. a about, ramp were Verisure see you of a think the normal will more will see to will bit direct growth custom we a over but is I a Verisure’s ramp while some from the seen promotional quarter-over-quarter, an from will a because point periods see talking which follow yet, of in have is normal really with huge as adhere would

Hamed Khorsand

you didn’t rate you conversion And in hear from hardware? still the Okay. say script, are but at XX% I this

Gordon Mattingly

Yes.

numbers really changed. So, haven’t those

many we post of right the and you trial which think have is rate, and signed the XX%, in talking One measure I of that that free people past. have initial free that how are expiring. is is conversion metrics two have up that XX-days really we which what - about what trial So shared a about, the in is

shared roughly to products different a activation, done in and we the we shared, later attached consistent from attach XX%. purchasers, everything. an analysis months we what that we hardware in time. and have service the are script, have almost at month that roughly those six channels what different across we cohort And as the then our uh, is two-thirds that days follow rate, what And of so So, that all XX%, call cohort first and six XXX count around are is that hardware populations as we well,

do still some that it as period. from additional we to XX% some rises people initial conversion that time have, are after signing So, over up XX%

Hamed Khorsand

thank you. great, Okay.

Gordon Mattingly

You are welcome.

Operator

Co. with the comes Your line & of next question from Jeff Cowan Osborne

open. Your line is

Jeffrey Osborne

management Good were I rationale chain A the heard of the then upside One other? the call. you afternoon was guys. I initial to wondering couple came those expectations. or sure I also of the us where if diagnose questions. on postmortem the source both of wasn’t was relative one retail upside if the could supply and in versus channel. sort quarter two from

Matthew McRae

Yes. a combination. is It

talked We get helped. into I of time we think the bit particular, not able that pretty the than also which And well. you guided. channel inventory expecting welcome we at visibility the guide time more a little something were as about it are the was supply earlier, conditional at we we nailed to to what get into we U.S. were able had in retail inventory, very definitely

So, those two time tied the really those but we largely at really to guarded it supply availability. was things, just

Hamed Khorsand

more in to how then lockdown aging, Asia the X does to to and of in go X management, industry anything what back China the have Southeast the does COVID in focused chain some components in ever China forth broadly? China weeks from battle packages? other with that shutdown pretty Gordon, the Just to changed last be supply and curious, made And

Matthew McRae

see a you there. the amount, have seen Vietnam large anyway., know we a we much border, manufactured, we easier. the Vietnam, LaTam. manufactured that We guide And are light into congestion say being the one have that That little to in in impact impact bit we components in definitely just do seen And an Well, stepped Shanghai, it challenge of Vietnam. obviously doesn’t make we additional component, that certainly been is Not we crossing actually has limited than other routes obviously you it alternative one I’d have that to reflected But and of as do the manufacture seen interesting into those from face. in the components lockdown. up haven’t get at is China is downside. looking

in so nice right some So in far, reductions the seeing rates, I freight are sea But rates. nice seeing on are reductions far. side, air freight say we we some

transit those the seeing actually of like are which pandemic transit down something example, We from come more kind down XX-days, of heights from XX-day those to who for U.S., time news. Vietnam, is times welcome to

of negative that So right it And heading China the a said the direction. slightly effect. in are you part lockdowns in yes, rightly having

Hamed Khorsand

Got felt question metrics growth the was past helpful years over three security what I DIY was and the you it. there. years? few market past share has over the the I in been deck. your some DIY, market had yet wondering, share a Just three market was showing report And last just chart the camera within helpful

Matthew McRae

general, going really promotional the we down goes timing, Yes. Company. say competitors. is like initially perspective, And timing, to we comparison, of things expected as seen a hardware an of emphasize reported the was And there it I that segments to holding by in some bringing from the others. started period. kind on market and price for but was back of propensity a that hard inside to we Haven’t our some in, and because apples-to-apples segments, the actually We share third-party to after channels the but not selling that the changing, studies recently. that both It the firstparty.com, last key are and In decline de strategy they big timing market segments, NPD decided subscriber based real the do of a a are the services actually purchase. start movements, up our service subscribers in customers, first present and two on over price though. that did that other in built some promotional they and see way When have first, lot in that market or also the of time high share, and are some hardware so. it moved to years to calculated really not is would just the we kind And channels, while, focus of a to deliver quite changed we by been promotional subscribe

So decline a initial time into kind the then couple share we and saw laid relatively last that over of of consistent periods.

big real movement. So I haven’t seen any

We haven’t in in movements behavior the from general seen a competitive else. anything of market lot

Hamed Khorsand

the had. appreciate all I thoughts. Thanks. That I is

Operator

Street Your comes Mark line the Lake question Capital. with of from Argento next

line open. is Your

Mark Argento

couple Good afternoon, quick ones. guys, of just a

be on the forward current that nicely or going First gross anticipate environment, beat do maintain you thoughts kind margins, level the are going our to given trend and of numbers any you there? to XX, estimates, able XX around

Matthew McRae

come Gordon in we given here, think gross look But stick benefit have separately, those QX. on we of proportion things. it. But where we see we product little the on in to place. guidance in guided nice I we even guidance QX. It From We see from QX down teens on benefit given product side did the a on side the On have things with of is service, the And ticking slightly think the teens I XX% between to it to where revenue. mid to would both the of from out. XX% and at mid are service service a Hey, was margin, mix Low Mark, little lower and were to QX where XX%, it still it panning low bit the is to in QX, that, at and breaking revenue, we and I Verisure mixed stick above stays already to in revenue, out we slightly just that. bit XX%. product have we

different That given the So QX. have you actual guidance saw what to we results in not vastly the to the is year.

Mark Argento

about full particular the channel you those to security through going additional relationship, XX Great. How as go ESPs It is by in And you do launch the that well? mentioned suite, channel Calix helpful. think products, if had products you then and distribution? are the

Matthew McRae

Yes, some like It a we households relationship. great one. I it that feel helping us past is mentioned the reach may a is the example. are a And tend country to that in probably have our Best have nearby that it know, we or I or underserved as of mean, the think not from positive as Calix Buy a be of more question. These is channels. areas rural very it, just you an smaller Costco

can so, on Arlo, a And I back. have back, a reasons say Calix the the we the is takes and why, the you what there’s done while, it of know, a integration ramp pretty deep in of one technical them lot integration is

layer the we a so kind And on of integration. that, been of at as done additional the that and on work initial a way is and to products the top great leverage look services

quarter, announce So signing cameras, at mentioned as last DSPs rolling that think different out. is And security are kind I to you are is And the did the know up. we rolling system. our we that are Investor talking what about that committed Calix we Day, of also

happen. And an needs integration because so will there’s that be that additional to longer,

you done have deeper not They’re integration typically kind but So partnerships relationship of they to about focused the term especially deploy we single after product. that committed a over a cameras in that focused the longer committed, great our with we is these is security to what on work. system, didn’t addition they are release cuts a some across time. And are on is them date yet, are platform and products, of

kind dividends over time. have of we they that the see going so. are so over And And or Calyx next with paid year to

Mark Argento

chain not confidence going one concern you terms issue supply get are of products but be the get this the any to an year, by, is availability other Great. And can security that still you in final what source of half just one, component you some one to and need? second that able out broadly,

Matthew McRae

Yes.

as a I freight, of think general of is did well. Gordon job down see level, part because that where So, a this we breaking kind great just in

delivery, perspective, freight into a mentioned, coming we seeing from transit And seeing that, improvement. time is in So cost but are as are us. time both we for actual and in Gordon

bring the And helping component board. still things Components, actually miss are I relatively you correct, later on Components the why helps because that It can up. transit different when that type. It and not shorter, purchasing us hit areas. the is is in when are component is happen is kind that that is means So which short. absolutely. are time side across actually of

We have a perspective forecasting a quite been the component from security while. system for level

have level almost the tend I weeks done system component component Day think our as to we Investor visibility. at of And that give a the take we we have forecasting mentioned one a on to XX that, of questions the well. our suppliers on lot security out

into and the are we this well. as have time QX that, forecasted supply at and to So confident the we product QX QX system in have need already got that we launch the

Mark Argento

guys. Thanks Great.

Matthew McRae

welcome. You are

Gordon Mattingly

you. Thank

Operator

And for we Matthew McRae further call no back closing turn the will to remarks. I have questions.

Matthew McRae

result them Thank you, take I listen a at QX. Arlo. the the operator. hard I to know to would such like for teams amazing moment a an of just thank all work to of for deliver in lot

are described our plan an was of long range the quarter outstanding absolutely new start. last beginning that we at QX We and

So thank joining team the you call everyone for thank to and you the today.

Operator

This conference Thank concludes joining. today’s call. for you

disconnect. now may You

Arlo (ARLO) 11 May 222022 Q1 Earnings call transcript