ARLO - Earnings call 4 2023 | Arlo Technologies, Inc.

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Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. At this time, I would like to welcome everyone to the Arlo Technologies Fourth Quarter and Full Year 2023 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Tahmin Clarke. Please go ahead, sir.

Tahmin Clarke

welcome financial Technologies results and full quarter everyone, XXXX year conference afternoon, to fourth Arlo and Good call.

the CFO. Joining year. Mr. targets, innovation, and us provided first update Kurt will we of deliver guidance may format by up technology Binder, a followed and the Kurt. Matt Matt the Matthew answer on are start of The review McRae, CEO; Matt. full then team an from have. an for an quarter and you and then with Mr. overview will and Then the introduction questions call wrap and will will company update on financial that will any by by providing the the with and Kurt share results long-range

received visit conference If we investor.arlo.com.Before you forward-looking the today's copy a Relations Investor you website that of have contains advise Arlo's we at release, not today's formal remarks, begin statements. call please

or business, various future and rate differ cash and margin, growth, outlook, timing product with new conditions and statements condition. the flow services, gross earnings and new of materially business by for our expenses, operating regarding transition objectives strategic share, Forward-looking differentiation of impact of those quarter partnerships market including leaders collaborators, and could and results forward-looking free growth, momentum long-range financial contemplated products year cash general model, per the XXXX, these and margins, the subscriber from launch full operating future of operating first results revenue, statements. financial macroeconomic service services-first business, our Actual and commercial free the and statements initiatives, and on trends and our the expansion of continued market strategic descriptions guidance condition, margins, include potential targets, flow results paid cash and to a

statements that annual Arlo with most SEC, For to in future our including Matt? A Arlo's will are more the and be of to this addition, Investor non-GAAP measures the filings discussed recent call these website.At on this non-GAAP the several undertakes over information Form report this financial would XX-K or as to events.In XX-Q. assumptions as update new report make and on obligation of refer turn to Relations a no factors discussed press quarterly on forward-looking found today's periodic on the on information, we measures statements now like please to today, be reconciliation on based release result call. Matt. time, I of Form the GAAP in call risk Any can

Matthew McRae

goals to quarter clear you, more business. point operational services over the earnings where has long-range and Thank acceleration us headed Arlo and plan X an into is set accurately that unveiled business performance to you, to forward business on Arlo's full provide us convey those warrants call. updating today visibility Arlo and our fourth targets hit clearly to to our goalpost targets.Our put higher trajectory last a years XXXX into on a Tahmin, and our X thank investors for years and joining plan for ago, everyone, long-range set measure year and has goalposts The inflection surpass our the for team's newer was time the stellar over X% would take of and entire subscribers today.First, a in look I we at XXXX evaluated XXX,XXX goal rate. stand underlying result this let's execution at our X company front end to we XXXX. we of like to to us the to some million share started Arlo's of that planning the our refresh, At we a part were Arlo's growth subscribers. our get of focus paid accounts, first a of at standing I where hit on.As process transformation. IPO, review driver in attach the just service from of highlights remember saying long-range that our transformation before IPO had

was Arlo and task that public requires continuing belief, This to finally, customers, culture, stakeholders. easy million IPO paid operations and for our accounts out XX of change hard where XX-fold it has again, extraordinarily number. team to from a IPO like on recurring work without since journey, capital headed out and our revenue, easy is than reach rollout fold we are XXXX. more is on an seemed an long-range story to increased not focused $XXX or and our it account to look entire for which fundamental has plan non-GAAP has the in have forget than annual our that swung X we and at how all transforming far operating suppliers than since expand the taking paid XX points margin, a then, moment and our their debt is almost come. the difficult we Given dedication since goal.Since since long-range shot million.And company doubled up is our so raising a our execution.I a rolled plan more the and quick we an was would take insurmountable to the best-in-class doubled which base to since our Arlo required percentage technology, more similar It subscriber inside hitting thank discipline have in

mind feet, matters peace now next and Arlo climbing and mountain We forward small to Arlo providing who together.'So by service consumers to an look them. that is I connecting is everything incredible this the transformation? a business, after businesses have of protecting achieved and

business. insurance impact that These addressed, a on both could life massive large huge these $XX leading transcends problems a we our learned connection engagement.I increase terms burden important that an Arlo with by simple, and if typical creating capabilities personal companies. on and control and users cases, And providing their this and quality and has in feel around life lives. built users' to a right by billion financial a that extremely market or of role of transactional powerful their company belief to to which early entire week day the use available through families Arlo becomes of solutions are properly trends events recurring with emotional growth rise is value that innovation theft mass-market see are world-class a and elegant, growth fire experience become the these can large annual play ultimately is onetime that as to rise everyone grown The wave of a a safe life. SaaS numerous and through to that this damage and they consumers them as a we and have People an grow is innovative leadership and has growing. negative seeing filled fulfilling significant substantial meteoric is And control recognition in industries.These need. safe less leaks We can nearly core XXXX. mitigate in drive have is propelled companion channels.This lives. savings our SaaS Offerings trusted U.S. well-known need will water companies. part month, in every in every have year that the revenue rapid and Arlo's numerous a a burglaries, to are driving alone, and daily in their of a The ecosystem to our bringing every in detect, assault.Property from billion $XX of market. a feel

years, the models reached the studied a services of launch X fast we set of represents focused driving Arlo milestone. direct fact, air critical best-in-class and that how of seat million service majority peers Arlo building In most company.Our this ARR the at about after example.What companies accounts, which our our a company SaaS revenue in Only achieved in a ARR. recent of handful we rarefied is retail and looking business and as execution world-class the puts when is success the have is $XXX paid

you now users basis, is annual is Our on these at an results level average does at CAC a compare in peers to or the business customer compared top nearly business on lifetime And LTV margins.If per gross while is the month $XXX lifetime ratio basis. industry. we $XXX. revenue $XXX X. This our Again, high service an operating is over of other when an see Arlo customer with that look companies? the can at for to acquisition operating that cost world-class roughly extremely $XX per SaaS in is this XX% value How user that

plan.And a based markets.And rate is our X.X% users, commitment customers, ARR peace global responsibility growth which the companies to Microsoft. churn in further social evidence focused number consumer XXXX, out company, communities for of I rate, has to it metric, turn the execution invest rate home honors we and provide with which of punching IoT is X. drive apart LTV between in world. and recognizes the Excellence will XXXX businesses stands companies of pandemic, This and in of our turn disciplined have was will another results. based overview organization. global Arlo challenges on the of a hard ratio companies experiences shareholder lives.Recently, that and Verizon work Intel, by the customer top on full and creativity, the ethical held QX churn and in and Index also leading XXXX CAC placed standards. the awarded stakeholders Arlo of IoT above innovation ranked of across increases an the who and over for selected on we honor our the and best of and basis the shared well in the price Our while sticky we award market from Nokia, value in its of weight SaaS dedication the largest Year role IoT X,XXX the and to the camera X is tech some illustrates and was companies the Security practices the Kurt, of well-known puts average X.X%, Arlo growth industry as year and to Arlo X with ultimately, mind our This world-class how an above above the Award Newsweek a our macroeconomic smart a to importance and operating so was Arlo our users' serving on success #XX room significant to LTV and acquisition Arlo their This well and us now of impressive provides top play Breakthrough through of depth is category, world-class world in SaaS a for winner and value.Underpinning innovation,

Kurt Binder

gross and excellence approach our thank our services by track strategy.Our customer for services paid joining record the as Arlo non-GAAP of additions, yielded value best-in-class guided level per first an inflection everyone, critical and exceeded a XXXX business services And to operational we point lifetime ever for this first for you, our continue Thank expenses. subscriber we significant us year you, in year, margin. was time gross Matt, record outstanding our a advance achieved today. of history, our has operating profit

within by and accounts our of up of products new fourth the XX% household line vast Essential expect context for strong about prior drive came long-term consensus we driven business, ASPs $XXX.X and services QX acceleration million so our with result which the the accounts for Revenue a the for the XX% financial was services. million, we growth line.While We targets was strong macroeconomic will to provided promotional provide of formation. was million, even the continued products the visibility This XXXX, $XX.X factors.Our increased and the another and an increase revenue growth was for and revenue first into $XX.X has QX year-end strong period of to subscribers, well demand our $XXX the year price driving million.Our ARR, in in we the will in and This for opportunity.Before record year. X our the increase, revenue XXXX and to greater higher, in for growth $XXX.X on while this focus model our consumer let's the account potential launch with strategic occurred and up million, year-over-year and of excited accounts profitability a in to beginning address subscriptions by for profitability, year tap details pricing in creating around XX% derived The growth major successful evident in year range.Our full paid by prior year shift total products original which future.Total and line the primarily discuss why full from predictability our in by quarter while the the growth which our meeting declined other year-end. annual are strategy, volume about the volatility million guidance year-over-year, or unit our trend operating as paid to our near-term earlier are year-over-year, the was our X.X continue Arlo year-over-year of of services with uplift by and activities dampening driven above just service business. commitment a at product around XX% driven paid demonstrating a also sentiment at to at instrumental revenue paid was positions long-term

earlier. service the our fueled that base.While and about an gross accounted was the a profitable enabled quarter $XX of was Our XX% have year ago.Product stability addition predictability the our profit, QX which the to a level XXXX service value for XXXX revenue in revenue line million, with it the by million just or of accounts subscription-based $XX.X year both increase X during generated model and is of in of full in Matt the the revenue, $XXX.X also million, total highlighting year This us on robust discussed prior almost XX% period. year in did inherent for again, profit, and a XX% the not of total previous providing services installed be gross of year-over-year, revenue we revenue the for million based paid represented

our down XXXX worldwide decline XX% levels of Our portion inventory revenue, number of the of product EMEA strategy strategy a as formation in XXXX, was household XXXX, our ecosystem.During and XX% million, $XXX full our constrained customer the was additional And region.Despite for year to we our shipped meaningful business highlighting X%, base of product generated in of our international pricing year-over-year the revenue. result paid revenue revenue. to approximately to shift international expect our up and to bring for the devices be Arlo into drive continue customers a the we in

expect activities Our down and forecast, inventory year-over-year, to more reduce largest and current resume levels related EMEA and carrying early in costs.Based to we customer, that by visibility XXXX. revenue was Verisure normal levels their Verisure's on procurement our will desire primarily driven inventory

great reconciliation will VeriSure point on, from element non-GAAP has that Our relationship proven was in ability to such The success.From develop numbers. a distributed to be collaborative a GAAP non-GAAP Arlo's strong and on this detailed figures with to discussion earlier in focus foundational release today. my is our earnings

increase full of expectations. non-GAAP service ecosystem sequentially in fourth up year generate for the in was about strategy to last $X million deliver in with incremental is service XXXX the level and revenue.Total $XX the for with XX% that product were rose in more cost from XXXX.In non-GAAP revenue and our a year-over-year, to QX, in by XX%, product margin only XXXX report The non-GAAP and XXXX. margin million, of the non-GAAP leverage into profit quarter the by an in than up lower of million, resulted product improvement business Arlo cost posted almost service gross $XXX.X for as business period margin almost was profit attributable full significantly into the customers consensus year share. $XX.X This with growth This gross grew up income non-GAAP the consistent gross of X%, and service service from on XX%, operating of prior added margin compared resulted up was to is by margin up well to XXX price XX% for revenue was $X.XX, the of we while business additional The revenue reported in year-over-year million, million, last for non-GAAP as gross per primarily XX% our operating our XXXX. the margin expenses income gross gross million $X $XX on was margin with the in non-GAAP $XXX.X per $X.X points Total million. XXX year down non-GAAP $XXX.X earlier to an $XX $XX.X year the entry the into million share line year, service we translates well XX%, quarter service to operating margin year XX% full diluted expenses which improvement gross of the This of our XXXX.Our the profitability. in full service Non-GAAP profit Our cost net period.Our million in gross the million $XX million demonstrates non-GAAP truly operating continued year XX% from was at above expenses We in million, prior income by or optimizations.Non-GAAP which million. plans, represents fourth in our in revenue million QX non-GAAP in up year-over-year. for full net up driven basis $XX of in in gross focus that reported points the coupled ability XX% income basis our line $X.X of was year-over-year, model. net year from the as by same the XX% the that same were as in non-GAAP year.Our the we driven new bolstered year. of income showed implemented leverage increase QX also net $X.XX extraordinary monetization bring This percentage leverage gross the when ongoing

million, when $XX.X $XX of the full For year more non-GAAP million full we to the reported XXXX, XXXX. compared up of net of income year than

Again, a the translates with coupled combination margin per expansion, income net share gross $X.XX. cost net to net from management. of by a share net of revenue per a growth $X.XX.The loss improvement diluted non-GAAP was into year-over-year significant a approach improvement in non-GAAP diluted of income driven income Our and services disciplined

You us the expenses the every while delivering first growth organization be the in can operating to expect in aligning to approach maximum to on to us impressive invest of improvement flow. our part the of focused continue of managing the services most benefit opportunities is cash ahead line.Perhaps free profit to bottom

free was During XXXX, million. negative flow cash $XX Arlo's a

with That's million. increased million the sheet of with While we of in $XX sequentially free million our it million operating balance in improvement the expect $XXX.X improving single up cash XXXX, is year-over-year, continue and to quarter positive position, due cash generated subscription available level cash when Arlo This and year. a flow Arlo.Regarding balance $XX ended coupled million to And the from the transformational of short-term leverage flow cash Arlo was cash, equivalents an profitability, almost our in is for $XX generation $XX the generating.We and over investments. underscoring profitability in model. liquidity

extremely prior of XXXX our the large well growing quarter that balance, base quarter quarter growth, QX XX or capital capital as year, on ] in best be whether it the fourth will cameras quarter, returning our return, ability customers. super early efforts growth are by retail days future investing we business organic of shipped cash for in DSO Given our to acquiring enhanced to to in the ways the decreased complement levels collection the the X as and [ assets to accelerate Essential allocate of that driven focused the profitability on of last our generates part shareholders.Our our as to and same volume in or the the compared

our quarter, history DSOs to and we we We consumer company status meet from our $XX.X to million the had well-executed quarter $XX.X demand in as Essential was inventory overall driven outstanding product well with third closely, improvement to expansion balance inventory to our X inventory lineup already events.And annual camera launch a retailers I'll largest levels will X.Xx, pleased fourth the X.Xx promotional the reduced product the improving down turns into inventory, but Matt. hand like as collectibility the Amazon million Essential of to we the of QX. monitor back with support in substantially in the mass support quarter their QX, inventory That expected increased lineup.During of to by in in market over fourth our our Walmart to larger X call the and are continue receivables.Regarding now with

Matthew McRae

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context awareness personalization Arlo capabilities and recognition new experience. the more support adding predictive user capability, engines, to are new a We Secure

These has a some Our in and that most awards platform asset innovation experience in to the on invest most of culture are in and the differentiating superiority market.Our awarded leadership. providing technology the continue our in the performance service world. product touch we recent clear resulted of core ecosystem user is that

moving just the phase. beyond case and that notice and early popular properties press media market trophy segment our is into technical and the adopter has You mass the the entering beyond moved content sites.The market will Security Smart

and dabbling app simplifying powerful new as sneak for on user and configurable update security and turned broaden DIY bar enjoy security, for Arlo of out effort. first-time in has a on have multiple the truly said, the "for said, much security I the easier. innovation used.Our just experience our smart support flexibility company our in we peek AndroidGuys identified. home said this home been show user to raises an and were new Secure customizable experience history our of to those Arlo such, everyone.Reviews drive that locations, I Army, path a comprehensive focus as most the and continue mass TAM accessible our towards second to feature-rich represents market companion brings begin include installation service.Our the results This have device engine control. most don't instantly provide the user ever camera. next-generation Geek always things simplicity offering, on dashboard with the for Master around get half will which Secure the app like and experience. correctly and of the the the of in truly exciting "I making widgets we would this "motion user a smart experience year. X, TechHive our of to note, include camera security innovation to As seamless and Arlo And we Secure the user-friendly How-To will rolling is ease offers and extended companion quick Arlo easy "the and Magazine app arrived is PC Security process app operating wrote the Arlo is a experience" alerts and impressive users security-based

powerful and metadata.And to shortcut produce a and Arlo Arlo predictive to create introducing by include features.The And facial emergency having Arlo exciting access innovation, proactive other will types develop could prompts, full we will micro includes time, look has introduced and event feed what the resulting more improve This response breaking that and and a Arlo suggest chronological again and a the smart across extendable service that to ecosystem. leveraged to numerous the tailored Arlo unlimited and to user. real-time world permits of sophisticated impressions are build.And also search to has app experience, for time. and intuitive user aware experiences shared and recognition guidance. be or need most growth.And feature-rich a line best for the powerful providing will data are be the the without forward of first and other it recognition in scene with tier simple will for or And be events groundbreaking robust to are a experience time that for capability. service nonsubscribers allow drive announce This text able add could personalized industry use that provides the deeper engagement further our important engine, events over emergency in X-way of vehicle the Secure models engine differentiation with the initially for foundation past insights our any a more powerful and This X, full data most AI which our time and by private Arlo Secure users Secure million user relevant Kurt launch behaviors up user model get provides high by into revenue simply embedded experience. AI situationally free snapshots each also now significant take over personalized X have by that subscription. the be is that different capabilities extremely available.With with Secure extends will or recognition. powerful I'll user. with entire analyzing capabilities for that to barking, experience any The completely be a more Arlo experiences. other excited images It complex the And to information.The month a potential powerful or a advertisements, the a Secure smarter user turn produce with X None filter we also the over analyzing and user phrase base our case margin. we user per security fire, and the automation to frees model in or expanding Arlo XXX multimodal nearly can are lead advertising. our to We visual and Secure entire states. that at cameras combined X generic truly includes and question finally, And as can and and to will would glass a XXXX I'm for direct testing detection paid A and will the from potential input. considerable events. or a is a experience growth we groundbreaking monetize screaming, compelling audio enabled look partnerships new is provides dispatch a status with engine

Kurt Binder

of on hardware win that and for in range we were continue future.Arlo top around every to feel the centered as the powerful for serve of pledge, of performance that expanding And positions one day.Our video and us be platform, clearly capture and Unlike only that is that the person focus others intelligent a data enhance ingress the innovation, promise market share peace collection every every with discussed their in and We dedicated in platforms Our exactly backbone won we a track confident delivering singular given tailored safety have operational X or than strong Arlo's that of market, data access products where is truly are entitled they security offerings one is meet XXXX awards ability provide and match. all peers success user to industry our AI Arlo to services, and like that as protection, and X is to security in to focus arena. data and journey.Safety in security the a safety provides are security that processing. purposes company experience years entire both security in the security providers products service. world is of participate their selling a remains this will most of pure-play which support DIFM and and just customer take leading differentiate of innovations in the secure safe in groundbreaking more safety point market addressable safety nonsecurity XXXX our its give proposition and our can to beyond. the unrelated personal we theirs.Our who that has we are market ranked and their for and video Arlo's We is to users cannot mind finally, Matt for at their And we can each used of the do. DIY solutions value are the broader with customers. XXXX, price we

account expanded globally. Our of accelerating catalyst primary this growth deliver for value profitability, households long Paid will the remain will revenue and of focus intrinsic our on the remains term penetration service and Arlo. in

of extremely over in that feelings offerings as and connectivity. our We quality platforms And enhance of that require central expansion safety home that will platform life migrate deliver continually feature an aspects look We position InsurTech all advanced we and capabilities, video we view impactful scalable like provide. in expand will to and set create We that the service functionality all positioned of and segments can finally, privacy, leverage telehealth for well level ARPU which hub service of endeavor Customers Arlo of to for elevated to our opportunities is service our adjacent offerings with opportunities our the offering. our that to offerings safe will of time.And pricing data as those have continue market will enhance benefits. will and power solutions customers. create smart turn, compelling to the

security X will can short-term last exactly growth after we milestone year subscriber that long-term the that expectations additional on target is both and with space.Our remains the consistent surpassed hit well with has million that million company how few days, strategy smart confidence opportunity give demonstrates drivers today.Considering the deliver we significant leverage our the the us and available X positioned we subscriber almost the differentiation in year. last share X Our the to Arlo in you

to grow to share range we to so means be the price in sensitive, compete Essential and to our subscriber market XXXX price for bands our by launch the to can the sales leverage our Bolstered subscriber service Arlo million strategically will entry are to continuing market. consumers' grow positioned overall environment million. of product the expect we we a and And ecosystem and consumer the unit $XXX revenue will price we of the said, be X We the product with into pricing growth. as count.With across quarter further that well line, barrier $XXX of lower all first revenue fuel in

be and to We we $X.XX year share range factoring million, cautious XXXX, our $XXX be in of loss sentiment. net expect the consumer dilute million $XXX our our between to net per quarter non-GAAP GAAP around to the $X.XX and revenue be to and expect $X.XX of full $X.XX share.For income per in between first per outlook

our continue offerings growth to to on We discipline service pricing drive will use levers ARR focused remain profitability. innovative our and exercising expand and to cost

We gross expect XX% and in be and expect $X.XX that year. margin net per non-GAAP we share. the that to our income per the finally, throughout our non-GAAP range diluted service service $X.XX between revenue will will year-over-year, And be grow of roughly share at XX%

Matthew McRae

growth. call a by today. consumer world-class company metrics Arlo I level point, mass that is subscription-driven upside started like of that The slide front business with market this is fundamentally entity. entering revisit would in and significant to innovation is a today the different that driven At a provides for you SaaS this services

growth ready are point highlighted a can performance outperformance, long recently for profitability Our expansion.As plan performance out our rolling and shows drivers, business momentum this and has and coupled an is since result hit reflects sustain the further service we over revenue we that since confident IPO this with the of operating inflection this the our long-range term.

Our not to our But the long-range line. coast plan It turned current conclusion. finish bold them culture March Arlo's and a success foregone we XXXX recent have into metrics in trajectory published to is seemed the in at time.

results margins. plan.Arlo to about of confidence metrics XX be future. a million paid revenue XXXX earlier, our the can key to reset a advantage as the we of now opportunity the And dynamics degree annual to plan the and These both open to coming capital and year-end our long-range opportunities outlook we business more front shared. $XXX deliver and take our investments trend XX% with choosing increase position it I'll previously through or focus confidence allows share subscribers, our will in are will long-term we us.That for potential of current in So from above us metrics the of that reflect we high the scale finalize line, excitement represent well the to operating new we recurring leadership goals operating X-to on X-fold XXXX achieved that current million speak market By expect same and questions. drive quarters growth internal reflects in intends our allocation up organic inorganic for through and which growth we have our our in

Operator

first comes line Thank ROTH Please you. from Searle ahead. of [Operator Instructions] go Your question the MKM. Scott from

Scott Searle

a Kurt quarter, job Good the adding congratulations afternoon. my on Thanks Nice new and on question. for taking hat.

Kurt Binder

Thanks, Scott.

Scott Searle

now just on terms ARPUs, you're some could far you're Matt, engagement. a bring you maybe much do And other along adjacencies. the the And how talk of other of lot is detail. development? of into monetizing technologies to about other talking to in just in high this to if that wondering in, how so Thank So about its presentation. dive impact -- that, I'm thinking about I strategy? you need fold was levels the really specifically, for wondering execute the you

Matthew McRae

Thanks, It's great Scott. a question. Yes.

touched You couple areas a on of there.

place] which what at InsurTech, when could edge mostly fine-tuning look cases.So now, see adjacent our benefits think, the look can of [aging we platform of market discussions many to development the or there's of us capabilities technologies immediate to we when think the things a management other could some some say like some we we're have, felt leverage if I that. platform Arlo adjacent that we're an acquisition, is an given at minimal a bring do we things could is something before cases, technologies where the platform, a to like in cases, it would made investment having that.I found an you that's And change at a internal or looking you with market and is of address would where ours adjacencies, area that in from in or be we're in almost doing on board lot do around was team areas AI company we focused So operated and the have is market. foundation how at.What I into that market, And that maybe some of and technology markets. -- the we say, sense we've those piece and the to it confidence we can in have look level into

just paid metrics have your these you actually even for picked adjacent paid that's you service opening exciting.As strong. direct retail to metrics the us I as ARPU, ARPU on So is bold are our thought potentially front opportunity facet on accounts, think company, up that and actually see but window into which not longer really opportunity of exactly actually long-term Gross it an our margins some are on of the can to additional markets and which of far is revenue higher.So ARPU is going enough. the is significantly we further, question, another accounts. actually that the we impact increasing we think have additional some our think expand no of or in of going expand because what's the up And

Scott Searle

a out just get and Is seeing are in better late Matt, year back first in levels the and looking drive little you into X, carries financials. on next in product It a Thanks guys out Are that been to the of there, than through of that couple to maybe If I high. expected U.S. boring of things. increase queue. there? terms -- I'll you And that. of that at as this year? then they in I'm to work in half think, then quarter year that going here? distribution bit some the to the gross fourth margins, price quarter ARPU into the were, of down another into Arlo guidance something look is just had the expecting. to like to on quickly terms the start the we dive And piggyback and first seems

Matthew McRae

Do want you to on talk QX?

Kurt Binder

QX financials now. guidance the On right and the

relative QX, about foremost, we've as as had with in our the inventory think that promotional level. ensure target. appropriate performance in a range. really available.Now -- the was was it impacting in were further.As around first at throughout for. the felt really to looking we around and we're look already margin out product might first mid-single-digit targets we we the gross up So that where and it side any year activities inventory that to and successful want We that of start amount a in what's we we margin. flexibility great shape, stood that indicated well need that higher there that touch levels. let we XXXX.Our actually to X% year, we'll made on we felt that question terms inventory feeling strong, we we the fairly bring to look QX working channel bit correct, a than I was in And That for maintain you we're shape maximum inventory our actually, that overall think going the good on We target Scott, quarter and be me price how we good into we and were want partners last feel with of in in at.So great as from an signed in because and that generating ultimately, you maintain is levels our product really throughout no the asked QX we are XXXX, we and on really channel year, mid-single beyond we margin to off sell-through that down had and at product would down will We flexibility just the into came like to the roll somewhere the wanted, digits

formation. all And talking I'm been overall as our drive household know, the So you X% X% that's to XXXX. between goal, because and for somewhere is target

margin. our been momentum and services very revenue in services shows into XXXX. showing successful. to we've up think our ads. That subscriber And that up we our I in continue revenue want It's

answers that Scott. question, hopefully, your So

Matthew McRae

And X. I'll back loop part question Scott, around Secure your Yes. of the first to

AI you into it's cycle giving little see, advancement, front talked little a bit as we're see some something and about out.We of it, previews innovation the last level that large cyclical. a want that undergoing, we've especially the over really quarters, but bit on this share we innovation a can we'll it and As is few to be the rolling

of now So look of adjustment something every the that's functionality next would most be set But tiers the increases did to significant price right likely of which year. looking some we quarter. the price beginning at last next pricing at increase, we're year. to year. plans adding now small we at a to significant this the up for us We And made all

XX look to focus say, months drive a at from Arlo take innovation the for that then competitors, pricing next, we'll is in time. even market, XX the Our at to separate our farther this let's and

Scott Searle

much. Great. so Thanks

Operator

Please Lake Your next the go Street. line comes Stephan from of ahead. from Jacob question

Jacob Stephan

taking congrats congrats Kurt, year. my Guys, on expanded for the And solid question. there. Thanks the on opportunity

wanted just I So touch... to

Kurt Binder

Thank you.

Jacob Stephan

about think how Yes, sounds there. features the want Arlo absolutely. Secure kind you we your like touch that there announcement, robust look market, of industry? for anything But adding in Is it can just exposure you're you think the out I on that to some there? do increases this pretty when insurance

Matthew McRae

Yes.

features partners the or for inside data place of end that our what at understand two is level X our somebody aware in a who's the But doing on into for they're compelling situationally be in address some upgrade outside the But significant call very we're be insurance house to there field. really is aware aging more we the of what a it's platform when that technology user advanced the things. for some contextually for some capabilities to interest end-user analytics data, platform we be just it's Secure at the an lot back-end to the for discussed to to functionality think, what those risk is that ourselves and, happening and are space. perspective home bringing underlying call I able of very instance, markets of today. high to home.So prepare to would real the a profile around in users traditional One, adding security to risk is that the profile X a end bringing happening Secure So trying ability or really also what's is house.That of

Jacob Stephan

Got it. anything Any there? Is that to look just XX% here, at purchase of product I double to just sort after on the that or agreement check. complete requirements QX minimum And you're then there want fulfilled? VeriSure out purchases, for changes end. anything the ASP, happens

Matthew McRae

you No, agreement the them nothing of $XXX with purchase is million and is like The changes a amount, guarantee, X said. there. years the minimum

So already we have that million. goes forecasting beyond the $XXX

a the it business So threshold. minimum reach really and is that after will just guarantee they continue

Kurt Binder

Jacob, Yes. a just high...

Matthew McRae

just And then we reference... did

Kurt Binder

the million million. million, $XXX of $XX backlog $XXX the already in and we're Sorry, at financials, in we another have

the an to there's that next So probably will in the here. X anticipation exceed X months $XXX million we

Jacob Stephan

And one The last increase. for sub me Okay. paid kind then quarter-over-quarter of large here.

through? greater a kind market? consumer Or kind just subs of paid you share touch Can greater Was of XXX,XXX. of that on the drivers? added coming was the You share U.S. of a VeriSure that

Matthew McRae

script, we something is and a touch great our which on a question original good that's didn't Yes, point. in

another VeriSure South quarters as remember they're that are there seeing backlog this the get still X, doing being a is we'll X we've region, catch-up for half had where kind system We of that properly catch-up that where weren't or doing still, least counted.And this subscribers so We for year, done. you're the actually in see quarter catch-up. of think what probably on if that already you at first some the larger-than-normal we

of most in remove the we reported. saw out of if XXX,XXX very you that to back what net when right to quarters you range paid XXX,XXX that's ads of And quarter we're ads. in If similar that, those per previous couple we VeriSure

Jacob Stephan

Okay.

Operator

of go Please James. ahead. Tindle Raymond Adam line comes next the Your from from question

Adam Tindle

a to continue ads Okay, just the congrats close. subscription thanks. on there. And strong want I on

dollar expectations of mentioned you XX%, which to for you XXXX growth that revenue services Kurt, think, it million. I think if finished, I last for so, was new XXXX, or at look million.If of I implies year revenue or a correctly? services $XX is $XX I closer around that growth And net if around incremental heard just

on revenue kind same subscriber rate different dollars square year-over-year? of services ads, the would of of that you Thanks. run conservatism? So be circle. if the Is help you're could for be may why level us If there some

Kurt Binder

to kind target. just year-over-year early have million increase did roughly we When And of last to of is do you're you question. the factor for price in our compare you Thanks $XXX to Adam. growth, that in part the XXXX. year, correct, Yes, XX% clarify, a

million to a you that we recall, actually it referencing, increase implemented here you're about factor when the increase.So $XX increase somewhere and to plans, the If across talking subscriber the sorry, you our million the in, $XX from we're That's XXXX that retail price of variance can all -- was variance the around from for Adam. XXXX. mean, XX% you understand that XX% I

Adam Tindle

Got it.

it one thinking here, the think to room for capital and there's become maybe adjacency. allocation is has about like free you sounds I and you from that.Obviously, That's double for are on subscription dollar click you. to beyond further growth cash helpful. core your how had And Matt, And maybe then the how about vision Board expansion Cash flow talked Okay. transformational. want going Kurt generation continue.

Thanks. cable what pursuing shareholder the natural that? secondly, versus adjacencies, talk topic, maybe I think or shareholder customer you I could like something then audio of like an you if those you're a there balance just the focused other on LTVs or to balance standpoint. fit think starting and big cash piece on that strategy subscription a get So thinking how up return pursuing perhaps ceiling would citing, the you're of instead that. how mean do a that with to that topic, of return about subscriptions you that from be Arlo more Where if the or adjacency?And about you about

Matthew McRae

or and alluded And kind the about options buckets. would we great the quarters. committee that's in couple organic that you're Yes. Again, under growth It process, the down capital we great question. pipeline some again strategic the formal coming we started progress.I things actually of the and of we're We've a talking discussion allocation Arlo on you, investment. with last One X around meeting plan for the break have We've as active we is obviously tell robust a Board. A making the what's so little to R&D shared call. into X. capital seeing allocation bit organic with something is of been

that see of XXXX. You'll of some come continue fruition and in the the into half second

bucket the the on speaking talked about, whether kind capital So potential share third example shareholders, dividend a inorganic. return about something market a briefly then that find you're potential into that's bucket of a of provide is one buyback. opportunistic organic look an innovation we of to subscribers something I acquisition like call.And also we and allocation perspective.We investment at additional commented ARPU or a the from can an adjacency little on consolidate bit either or a if or and and or that's

best talk X probably still it's analyzing all So are actually expansion, new think is X.Specifically, way, come ARPU into We're what you across quarter next organic table. a we and ARPU the we we that's when intend or lot more either there's to and back about a room. long-term in all segment inorganic, of the whether or X. about moving actually openly And creation talk something value on think the

capabilities.So in like superior And superior market. $XX, provide market, market Our even at service sometimes we the nowhere about core And that of adjacencies a at feel we security the ceiling place or looking $XX, user where today. pricing lot the we spoke a -- more pricing if traditional $XX leverage average our I experience, you aging as think as is have, start platform to potential a the look per as ARPU the in lot what before in our space, we I would we things and call we're a month. we -- even high consumers is technologies we the insurance near security $XX.XX, with in features in can a

part allocation plan through of that's looking forward. and very why It's excited. we're as think sure the this see of we're why you'll carefully go make us ROI part capital So investors we're I for maximizing

Adam Tindle

you. Very helpful. Thank

Operator

go Anthony Craig-Hallum. of from Please ahead. from the next question Your line Stoss comes

Anthony Stoss

levels. outside any rev? over plans then or XX% on be your to the end the of congrats this on And and and or service flow expansion should hear presentation I Great to that revenue Kurt, Matt, XXXX of cash the confirm approaching year, just thoughts maybe probably on wanted love something new year kind of I'd U.S. of by VeriSure, early internationally? expansion view

Kurt Binder

is is out in look of front point this Yes. you to I plan Thanks, XX% XXXX us, total XX% appreciate Tony. we XX% service the And revenue services. revenue. overall being between came average our somewhere target and at of revenue past that for question. of our year, come combined in just our to our in on was When from to

the XX% that is know stock. target.We in when it's software goal SaaS that I our we we were as think in the really space that what our we into companies of as line XXXX a call is XXXX And above XXXX, re-rating then, expecting. labeled are what period get beyond get exceed XX% So and course, really out with would in that you or providers

long-range laid time get topic. us that believe And the there out that reasonable a in so targets on period. also that laser-focused very help we're we And we've

question. So hopefully, answers that your

Matthew McRae

feel America very we are growing, the footprint a the in North And United United up topic. make it international at great or to will topic and I some look change household our we'll I'm sense that just obviously, plan. plus you successful.I And didn't largest for that's And is that of outside there. are something a consumers allows and safety weren't starting things at that probably also it's with or you to at it's the long-range those I'll next that like them of market on on of EU we're good believe really or we part the a our like that with will NETGEAR, markets hot North a and underlying from and other clear our across Europe, requirements which second of in is and then the spun with potentially years the security our are solution been the And a in VeriSure, America U.K. ability and be you long-range is and some And that partnership the it's do the and we world.I of is to Yes. and today, through when market.What the partnership that businesses part talking in X say X years, looking States regions where will front, when top the the it's performance many markets be in first maybe States tell broader to lot here. outstanding markets. can open those ago here you X actually of we've X me and do underlying relationship got the because win-win lay many tell GDP, of see metrics broadband penetration, looked about generating that it's other and that in top our plan, markets. addressing mind small an -- the regions

Anthony Stoss

more, on And seeing just view the share your if gains curious one at just you're where on that you're or shaking if competing market is the I and in number could companies, sneak of SKUs retail, shrink out?

Kurt Binder

obviously the feeds what margin. that share formation, We're gross States, And into in accounts I great. gaining we household call the mentioned that on Yes. and are We into and paid consolidation. would which which today feeds service here United call seeing is revenue

the a play.So from of the retailer shelf share to that is for today, Arlo faster off. strategy starting our it's competitors see in that's not sure very the growing see partners removed or that consolidation where long-range and from we're category being moving us, our think some people grow So I And capturing landscape, pricing very, and whether us share think is largest to some on I being at look of you an kind happening. part some And not happening. we're large going I the competitive forward drop there away competitors that we all large or brands, in or to it's capture is off actually device because market.When that make is productive deemphasizing There's than of just opportunity is over to market for their do. like plan very category focusing pure This our continue it this companies, laying and defocus period. to

Anthony Stoss

Perfect. guys. Best of luck, Thank you.

Kurt Binder

you. Thank

Operator

go comes question Your Khorsand Financial. of from the from next Hamed line BWS ahead. Please

Hamed Khorsand

Hi.

could still off, need you first there's up talk And to still you about this just So going this another X finalize? quarters on? why catch for with VeriSure why

Matthew McRae

out they don't batches, want what large call rolling They one these will to They get in push it's they increment careful, cameras central think as the being mitigation it they're -- day system it don't also very and that firmer And paid to firmware out it update, wrong, they different that region and Yes. to if a actually if are and in at at from doing to perspective, so their They a to work the count unarmed. update if is households. only home batches, unit. at a too I they and point. times do of something many reset goes rolling risk device are armed.And want to user's

is estimation you couple of quarters is will quarter. that. in our an So indication is of net really catch-up giving and ads call, every of catch-up And every paid another on got on we've what what maybe transparent be we

Hamed Khorsand

the revenue the January, as price as far at increased you end subscription the as number And numbers low by tier went your translate concerned? go, this as not prices of then growth I up your up, XX% services far increases year, went Okay. a doesn't annual mean larger that why into are

Matthew McRae

Yes.

that price the all we made at has do with a This made year, only increase to of associated our last costs roughly camera year, we a with XX%. to small single found across adjustment So out lands And a plan. accounts this that.And new has our as lot a first features higher the year. of actually usage There's a what some single camera, the if so roll of compute later we a someone that we for is camera on single camera.

even usually, imagine goes if first have camera the at X you costs majority cameras, or and a the So other and can that front events, has storage door it. they X user, compute, with of a

that reflect have. out. the we made to correctly feature only adjusting plan that adjustment the most year single this we and are going popular on that plans, camera not the But we're prepare is for So sets was which

Hamed Khorsand

$XX my the was given you've at this quarter, -- is to promotion implications I been past that on be Walmart the going about huge talking But know what's this follow-up, average. there that that mix? you And had

Matthew McRae

great. of is don't ahead big what's attach some know months low in it or still is we're We seeing of that's buy promotion, you X that's yet on Essential which bought. rate our really cameras actually cameras they us how We're X. of when people And our conversion cases, really Yes. a watching X, for grab rate rate. those many metrics, data the it they don't do and X, because good come attach interesting definition X sometimes depends online. takes the is price And because And

break look though the example, in our out on where people you their side plans we kind are it's when an secure So a middle lower the plan as plans, popular the like $XX safe kind kind of single of at plan always number. our and we a the and our plan, we've curve of other cam the most of think specifically, to guided is don't XX.XX plans, the edge plan on even bell

Hamed Khorsand

Great. Thank you.

Matthew McRae

welcome. You're

Operator

will over questions the We turn I in our this have at remarks. queue closing now Matt to back time. for call no further McRae

Matthew McRae

we're earnings you've and a look forward our Thank speaking new for you, us call. Hopefully, on everybody, soon. lot QX information where to joining headed targets, and our we of XXXX got again on and long-range

Operator

may This conference for your call. you you now concludes participation, disconnect. and Thank today's

Arlo (ARLO) 29 Feb 242023 Q4 Earnings call transcript