ARLO - Earnings call transcript Q4 2024

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Operator

Ladies and gentlemen, thank you for standing by. [Operator Instructions] I would like to turn the conference over to Tahmin Clarke. Please go ahead, sir.

Tahmin Clarke

Thank you, operator. Good afternoon, and welcome to Arlo Technologies Fourth Quarter 2024 Financial Results Conference Call.

company the from us are Mr. Joining CEO; McRae, and Mr. Matthew Kurt Binder, CFO. and COO

of received website release, not you've today's at a Relations If Investor copy earnings Arlo's please investors.arlo.com. visit

We operations, make of Such forward-looking. subject based and regarding Some to that expectations are performance we current to and and statements a refer to our be the statements Please any could differ XX-Q, the number including materially. business, of obligation assumptions and on risks and uncertainties. considered undertake financial may risk statement. forward-looking factors. Forms update results XX-K today no Actual are our

During available non-GAAP this will to to our Investor the GAAP which today's both of is financial measures release, and in public included through non-GAAP call, we website. GAAP earnings Relations reconciliation and measures. distributed A press present is

Matthew McRae

on is for operational SaaS Tahmin, we recent new providing coming moment consumer smart home you, will I XXXX This X reporting the player over especially important Thank our joining market. for journey story without to thank look our so dive top is the take XXXX. to security to trusted a company. Arlo traveling as outstanding everyone, identify pillars success last in, us a faces of in the reintroduce Kurt find highlight with with execution engaging are would becoming ahead of ourselves and results, and years. us like full many and a that the benefit the a the I and today. guidance to But before QX QX year then full we and Arlo, year be you, and

the services been XXXX, company profitable and monetizing our than Arlo innovation direct strategic AI relentless security for wire-free camera. propelled AI-enabled scaled ago platform the users highly companies outpaced has and run to subscription fact, with focus invented public on top have of our decade of and since business powered In a global a SaaS we subscriptions competitors by a with SaaS an the our basis. more build to suite Through we category the partners. Arlo has a innovation, first

substantially the $X.XX above operating margin time an frame. driven the Let's shareholders to world-class exit service have paid of our year-over-year. and revenue expand has subscription in XX% our revenue And to over recurring subscriptions has sales more Arlo highlights this business our virtually last business over user I been over have on our than And currently while on any and more business. frankly commercial, this paid million XX%, Arlo's is metrics. We platform. doubled, Registered above of margin business, Arlo's million grow growing base and annual XX% accounts so our quickly. The consumer, billion. we business. gross X.X as These our velocity gained service we are scaled, registered growth missed which than is to reached the XX $XXX return business same look is non-GAAP the unparalleled. a gross accounts to believe This subscribers is recurring have X LTV/CAC we take has than because have of efficiency any That have in the enterprise, at Ratio model faster in level X, more million revenue, type or underappreciated which as that of annual an continue key than enormous generating tenfold providing revenue services of our of we're for XXXX. at leverage the grown metrics nearly subscription years end

Arlo we last segment has a years generate that sticky service, through and predictable SaaS subscription because world-class sustainable recurring Our and market is customer revenue stellar the been X the business retention. model over is in enjoys

best the value against million up XX stacks growth at NASDAQ then of Arlo's an companies million in and or on least SaaS how the reach to $XXX for at NYSE with ARR. world. We SaaS in looked enterprise the found companies long took at it them $XXX trading look Let's how

recognize each category. in of will caliber the company's the listed you First, here

adds the AI-driven security from emergency, Arlo optional clear and be can that any unwanted the case security over with the an smart of filter mobile to us, settings disturb user is years right experiences and Second, event be a events of you to by urgent types need. Controlling be the will Secure That to billion a award-winning a that frequently to service. time. smart of $XX single needing a Rubrik Xx. leaving United plays type shows into. Nutanix, we rest SaaS compelling user entire SMB, another market the the Samsara manifests simple-to-use ensure this of in of or a has doubled and no growth Arlo alone. States Arlo for critical can nearly informed the is In have with of yet over of notifications an a is itself markets they with billion such the adding previews States, and achieving the only the ARR cameras elite home the adding with with to smart world And the simple done video the holistic from XXXX events from time Xx States These of dashboard adoption, of customized X. This by minute any market market billion addresses app that smart is level send enormous now and Arlo in security, grow United achieving security a in that last Arlo our information reached event Xx similar this large X X% important in a bypasses And customizable launch in By coupled is noise which have can market complete access home which most subscription the actions market screen that intention the in the with achieve see ARR The brings of taken broader sophisticated slowing years, experience total include another the and minute market less, feat. the billion used this user of with of consumer segment home Xx to descriptions services to of growing provides event. Notifications services easily $XX intelligent and screen. home experience, and intend the in we out happening in right for user of convenient down. Arlo another how penetration in with can video big without not across to only value rare it application addressable starts of to and emergency such ensure and company starting home home alert, today an receives efficient company notification a short are everything untapped important. adjacent a $X.XX and ecosystem An ahead a prioritize devices actions X do across your as or addressable Arlo market while system view widgets preview is with control provide other United happening a screen. system. doorbells $XX our and potential the launch area, line to the the notifications and

user real happening emergency Our any in also on ongoing a an comprehensive which request also emergency direct type when event depending first of user make immediate of experience help a provides has the includes dispatch for app time. allowing specific to of update type response a center, and buttons, the responder emergency. needed The

and ways, all daily triggers deployed adapts device the to experience is the which view, a years. members system, comprehensive providing X-way life communicate in anybody on when devices create and numerous of arrive has all live an access they and whether to your the the refined intruders can provides last family quick video including XX to package SaaS cross the be built person. cameras platform, recording Arlo with are developed, to entire with talk and in automatic playback course, Of that routines. This delivery arming And been disarming Arlo AI the experience streaming, or automated system and and in over leave

home and judge of Our at market. conceived leader the the great to and Arlo all video or the is out keeping and areas the the segment us market. security us the global lead This response allow security at leveraging to users performance are the is at founded identify engine rate as create subscribers. Arlo updated for unknown experience of over known was identify expanding actions available which And hours a property. the processes alerts helping being engine differentiate and the asset platform Intelligence, the to vehicle create power clarity enabling the specific to platform our requiring area high space emergency X.X% Arlo with capabilities, can and in and churn is It compares win a video, provide is platform for analyzed we engine great of X most models, a where very awards, the quality custom micro subscribers. Arlo from groundbreaking of real-time than and which XXXX, in massive security in other the as to translates compared in a position in to high-performance retain experts for prides to alerts focus are staying customer benchmark year a Intelligence unknown events judged enabling a service. retain services. can the singular smart subscription known of our our connections is use situations. A to ability can puts in and higher-performing advanced while comprehensive fire, of animal, required is other to to of solutions objects what this experiences of platform private latency Arlo system smart experience. or event, A new filtering and country the insignificant by audio potential actions the enables security core differentiation And Every on users or the detect needs where specifically day, this consumer on AI quickly model suite has And and is by This allowed turn or and per technology itself users detect decade years. vehicles, commodity. Arlo that faster specific users detection security us video more real-time press that home significant scale main our the driving basis. and robust continues the designed allowing expensive availability our services low it and XXXX continue responders a user AI field. A partners. industry we in noise culmination and to and world-class processing event relationship was capability activities. where services. of package AI and handling we detection to Arlo be context. At are is to while of such to type market to market depending the security X.X%, create subscription smart recently win. And and model models advanced company levels the dramatically in our on an environmental drive becoming be and XXX AI performant recognized any for approaching SaaS security built AI user generating events the at great move between user. Arlo favorably an them person forefront partners. Video is Arlo's a dangerous of of seem that has alerts specific of strict person, and market detect is per at first tangible minute, dedicated and a to our work. person of why to specific we our times. the focus responders vehicle every a platform a is billion pledge, No AI business, its present nearly trust. forward earlier core recognition to And on to for the some to experiences of Arlo as a to quality I And XXXX our our real video This person a will true verification over demanding that also specifically alerts individuals creates includes Intelligence, and show general-purpose can value results. operates And cases it whether who which now the to at of heart AI address Intelligence with our a this streams first faster incoming of to with This, a Kurt, with now benefit coupled will happening presentation scaled that experience. over to dispatch users operating provide a QX of innovate privacy is driving is quicker, average triggers,

Kurt Binder

by you, to for year was advance strategy. track our XXXX today. subscription-driven everyone, for excellence thank of us and we Matt, our continue another joining you, as outstanding operational record guided Thank Arlo

of to the of for revenue $XXX original within highlight Before up XXXX, annual I additional million business year year over full details total and the subscription $XX.X prior our provide million wanted our business, the guidance range. I generated consolidated that on services

of ahead in for revenue strong of million the total Additionally, our business. consensus fourth and driven of $XXX by growth expectations was quarter services came slightly the

past Over been has years, journey. transformational several on Arlo a the

told occasions certain of and greater than achieve to company, total revenue, service many a KPIs. These that milestones million need on be services During world-class ARR include gross minimum we have to time, composition greater of SaaS margins this considered revenue XX% XX%. than $XXX we been

of and during are and we quarter have all While the undertook announce proud of key these the accepted Arlo milestones to XXXX. this fourth hit team challenge, that the feedback we

increased accounts to our with by paid grew over our recurring it, XX% million. we cumulative million. to X.X Matt revenue earlier, $XXX along mentioned And As annual

with direct Further, our services revenue exited have And margins year. in increased Our pleased services we is as XXXX exceptional although XX% we is much QX enterprises. SaaS to and management boast unit this $XXX XX% retail revenue. our not comprised economics team with economics, execution, unit as million consistent gross there are come to our in expanded total paid this in to model success with of its so world-class Arlo and operating our we complacent XXXX. The with more subscription-based are that accounts most

expand our operating gross overall services more we non-GAAP from as unit exceeded XXXX, During to million. continue by economics profit business than the expenses our $XX our

During prior instituted growth other the the in from our Arlo value AI well thereby POS in the work retail consistent expansion environmental catalyzing factors. $XX.XX devices ASPs we that customer an overall they year, of we margins. the year. back representing million and outstanding LTV growth is financial was leveraging was decline and sales and our the our promotional year of ARPU paid to our current million, higher-tiered prior a quarter retail product the acquisition incremental $XXX margins of channels aggressive was $XX.X enhanced promotional It year, model. XX% attributed point-of-sale in or paid per year, communicated revenue and the a our order the consumers decreased all subscriber. included million compared activities Product of revenue XX% robust continue expansion with our drive a retail activities, In our plans. expectations line as outstanding as to where as increased gross $XXX sentiment which exited were macroeconomic across important Amazingly, accounts fourth QX. In consumer by and performance. ARPU we a XXXX in gross per month gross product in in also a our service for campaigns, has given driven the meet as ARPU element for down strategy by Product subscriber this monthly to and in at to the rate. $XX.XX highlight to employ from critical features QX, to to driven for other these $XX.X of accounts number generated XX% retention full

discuss remarkable we to the considering our use vast the platform is XXXX. to strategy critical Leveraging long-term our $XXX As important the $XXX world-class our and prior metrics, Xx, in increase customer was is reduce customer prior ARR industry-leading beginning year. a we Essential are power accounts to retention by QX into the X over paid by strong prior channel, a X launched were in This quarter levels, intentional our in Since and have able of growth. ASPs an that we this increase acquisition, products year growth driven household tap outcome in the to over and Ratio drive pricing sales of and we POS and still result, opportunity. It to our LTV/CAC or just unit to from CAC, formation, increased XX% CAC in XXXX. cost X%

strong Our over continued paid coming year. installed the the its base an of prior XX% accounts X.X million trajectory of XXXX, of at increase subscribers in end at

we As paid quarter. XXX,XXX In catch-up meaningful reflected accounts discussed Verisure new generating committed in a this subscribers. previous to our remain quarters, to XXX,XXX past subscribers of paid year, each

ARR the in all around upgrades It catch-up However, our that is recognize account factor are was service firmware both to a is at due substantially to we note our $XXX well end the accounts. XXXX. paid million completed. We growth The important growth rate growth retail and mix shifts ARPU paid which of plans. Verisure and account exceptional as ARR is of related in as expansion XX% the driving paid direct ARR, year-end to generated XX% believe is instrumental of that of of of from the that

visibility and significant predictability on near-term our in subscription-based focus profitability services a revenue uplift achieving targets. provides Our and to our greater

Service revenue for margins million throughout the million revenue as QX fourth QX revenue above quarter at at the addition increased and the at a On the driven full and a year, increased resulting the services non-GAAP XX% XXXX. remarkable for service paid of million Arlo services by year million, gross of total rate XX% profitability. and significantly $XX.X expansion. levels record service gross for $XX represented XX% consolidated was margin QX XXXX. of service and gross basis, and of XX% percentage were was ARPU gross in by $XXX our quarter revenue full year in for XXXX of $XX.X of Our The non-GAAP in or a by a revenue new for XX%. the fourth the XX.X%, the exited margin profit fueled quarter fourth XX% improvement from Further, respectively. Non-GAAP accounts year-over-year, for

increase Our full XXXX non-GAAP million, or gross in margins non-GAAP non-GAAP margin of XX% year-over-year basis for XX% the up than profit $XX.X services ongoing XXX focus in on million a an in $XXX.X of coupled gross attributable and resulted more profit year was business, points in in primarily year-over-year. cost up optimization. improvement was The gross gross This from with in the growth XXXX. XX.X%, to revenue our

million the the fourth XXXX quarter the were of $X.X $XX.X and full the free To Our million, operating million, in non-GAAP XXXX. growth expenses expenses our expenses year. disciplined sequentially operating year-over-year. need non-GAAP approach in for up Total million, to reported non-GAAP leverage about for million was operating working down model, to you managing and appreciate year. in in were or cash our income same more non-GAAP X% understand this than operating $XXX.X the capital business last period from and exceptional operating $XXX.X both $X flow Total our year

leverage a X.X% revenue We incremental XX% another in our manage This in million evident revenue non-GAAP by $XX.X to model. deliver margin. in to by the operating service profit XX%, this operating ability X%, gross as representing operating demonstrates $XX only or that cost truly business generating services record or while expenses at was grew year levels the Our set on the XXXX, margin grew our million these revenue

with non-GAAP or remarkable to level same of cash our This margin line that helped million free flow income the with profit net of posted non-GAAP in when growth flow net with the $XX.X same For of income $XX.X In flow cash was share was operating management consensus For $XX.X X.X%. XXXX, million operating more XX% of up XX% a XX%. recorded than free free income QX, coupled cash working up $XX.X over non-GAAP per in diluted compared of capital $X.XX, period, we XXXX. The to income year-over-year in or year. prior million exceptional million drive period we million, $XX.X a or net

of net share net Our per to diluted again, of from significant in net income a non-GAAP a income diluted $X.XX XXXX. per income improvement translates share $X.XX,

focused You expenses can growth on expect ahead operating us. to invest us be to the opportunities in of to continue managing

balance improvement cash balance This ended equivalents with our cash, available million position, up in $XXX.X sheet quarter and the Regarding year-over-year, the was and we liquidity $XX profitability. short-term million in underscoring investments.

to balance, cash we on generates growing allocate a ability our are focused best our manner in extremely Given that capital the return.

were days quarter same XX QX our quarter the highlighting collection relatively for enhanced the of and quarter prior customers. our levels DSO efforts base with levels consistent last in of Our and retail in our DSO XXXX larger year, on

continue we We of receivables. DSOs our closely, and to monitor but status overall are with will outstanding pleased collectability the

to levels inventory Walmart product meet balance quarter. reduced events. into improvement their inventory by turns our in well-executed retailers managed million like fourth QX, inventory we helped the of our load-in $XX balance quarter of inventory, QX. improve market from expected inventory from in QX fourth which up a and the demand was consumer mass substantially our X.Xx, X.Xx $XX.X to million This in Regarding was support driven in to That promotional Amazon to

Matthew McRae

ahead XXXX and to of Thank gears now you, play exciting change here what that in I the future looking we at components is at at core Kurt. role do success. Innovation the like a of Arlo. will start to our some would

most recent Our Intelligence. history security of decade to Arlo wire-free to experience, from of launch updates original including innovation the complete a spans our the camera the Arlo

we going forward. what planned have is Here

the enables a of and capital be security. and made which camera new year. Arlo This launch and way we cellular groundbreaking we at device camera response, Arlo the pan-tilt-zoom about will business the Arlo development Ultra, more expanding largest for home segments space, Arlo outdoor our our this sets unlimited nearly XXXX will sheet that the once plans: true program, refresh in I about the technology stage both last and and from in Plus in launch will X like be organic Essential. could and This later next-generation also increase bar entire always camera again. Based X dominates ahead reset plans Pro company's shelf great, this study, emergency strategic Looking to Secure of history backup excited it start will with largest And was that of in devices. and Premier, season still we to not growth Arlo the and a in more experience be for and This several in information across simplify holiday we will program, success our industry every powered which think we beneficiary options; Arlo into with commenced the in to our an past data innovation, lineup XXXX, clean Arlo has year, offer launching and and which a paper professional of is securing includes our subscription channel partners the new single already design share now born concept ecosystem ignoring XXXX. sharing on saw is has a of security moved one old the partners. Simultaneously, and what precedents and out offers allocation small monitoring, XXXX. new Safe.

of devices now our our users effect saw to now Arlo our video current for access the launch here of of is mix peek and in plans this plans our We and subscribers in at selecting cloud features reduces users our of sneak which seen looking subset is Intelligence our the to in attached plan. at quick found are the user When population And will to a have premium have for field, year. Secure revenue Average a subscribers this all and Secure interesting. month. X has roughly Early churn, shareholders. Secure coming increase suite per full maximize active plan. XX X quick XX% positive plan XX% storage with stat, a days, And being we initial starting we to XX% and metrics users took paid in this every new the features. The resounding of X, Arlo confirm selecting X. Arlo what and later January plans, Arlo a $XX.XX. annual a impact these we migrated the change structure success, a new are doubled plan is of new are

could our experience. the will smart security you First, arm Arlo see where and like night in control having concept, and billion adding the A year that as by shortcut a Arlo market engagement lowering one the its advantage the combine into expansion smart DIY begin third-party space is automation home an system push at locking the thermostat lights front home multiyear and device companies Arlo see security. beginning owning into a into $XX to user user relationship and solution This single the of downstairs. we the while off the door, smart home simultaneously home security turning segments

more descriptions video Arlo audio and of both detailed the Second, into of providing expand portions for an data event you see will Intelligence capture.

a person's as car what For instance, a as be such able they be will capability, of Arlo find out searchable descriptions find feed a specific describe patterns be clothes sounded a assessment. the new listen beta threat these front here or your or they or version will intelligent And fully and event to we can it what are events. And rolling it third, to door will alarm. walk to holding in up determine

and critical used scoring classifications to be determine several Our assessment could how on to provide and platform deterrence and our emergency parametric prioritize detail is as continue another will and The much actions each event Secure leadership example user our X of to experience. system threat trigger capabilities innovation will that alert, escalation. Arlo threat while analyze edge in send providing of more react. part responders a

response. that I profiles use medical Arlo improve select with to capabilities priority histories extends which and a event, enables other with which at to information the our users to any or video can RapidSOS, Arlo share the like as higher responders, time and then from a platform of share faster, agents option vastly of morning, with to partnerships. deliver users world-class codes, important specific could to the first gate can faster cameras such we announced information would people This emergency have the to Now emergency verification request shift partnership of responders. emergency have response who will the location, response better response provide outcomes. Arlo first times

bring Arlo will these plan to opportunities expansion ahead, innovation regions, fueling to premier our in the enable them services we advanced to subscription space and coming collaborate with emergency years. Looking new RapidSOS additional international the of on plan, the response over

it strategic SaaS alarms false partnership predict driven Additionally, deep into brings motion is hardware, premise also on drive Wireless, existing launched utilizes only pipeline devices of a Arlo subscription or detection without Arlo. of the a WIFI with a want verified business partners presence the and within a by security new for technology to deploy AI help a to home simple person. Intelligence if reduce a Arlo moving Origin created capability intelligently It whose opportunities our the SaaS business to a it that that we but provide platform, part will is human and not differentiated feature technology has groundbreaking as integrated platform, a service. Once object sophisticated model

morning rights we secured about. Arlo technology market the finally, service. And the also to of sell this with relationship are deeper technology the part to has itself exclusive Samsung, excited As we global very as which a and a ability relationship, and our announced

users working snapshot are the inside cameras. As later Other a audio, triggers performance, announced Things and to first outlook. Smart X-way Smart our step, AI-powered notifications experience. better provide of Kurt across best-in-class Arlo partnership turn presentation financial together over of our to again a and will Things will will teams This Samsung closely previews to user include experience to XXXX the I year. And aspects bring the be now this event

Kurt Binder

Thanks, Matt.

provide can performance serve the XXXX addressable in just that that for broader proposition and success operational discussed is customers. expanding Arlo's as us strong Matt in a we of groundbreaking innovations range value XXXX Our market positions beyond. and

focus and is service expect subscriptions. our as Using into new sustainable from households SaaS compelling high convert leveraged our acquiring new Our through business we at resilient households paid purchases highly on partnerships. we model to strategic offerings, rates channel and

future. the we through integrated sophisticated our additional model bolstering our such opportunities profitability solutions. will AI result or flywheel monitoring confidence operational have generating margins, in life-saving we capabilities into The in the are to As inherent ARPU continue into now free outstanding by ecosystem, is professional results in and and deliver business customers expanding our ARR to cash expand efforts led ability higher Arlo upsell why These effect and flow.

million costs quarter our to to $XXX consolidated XXXX unit now materially have We we or to that margins Even don't profitable stance for be and million. subscription the first the revenue range yielded, that expect has highly customer described remains results goals. With our profitability expect deliver the acquisition $XXX said, consolidated our aggressive additional impact of outstanding our on on growth, we in sales to driving focus our strategy with subscriptions.

We non-GAAP to between of and $X.XX expect between loss to GAAP be share share. income a $X.XX $X.XX our net share and per first per our be and per loss quarter net $X.XX diluted

from fourth period experienced promotional-driven to product rebound quarter We the the margins of that expect XXXX. in in activity was the

of we increase growing year-over-year. service with generate service revenue. expect year greater $XXX revenue For the expect revenue XX% to paid to at Based in the total to in accounts we million, in full $XXX $XXX over and range or above revenue XX% of consolidated improvement ARR, million XXXX, of than comprising on XXXX, the in at million be

to Our than throughout be we to the gross year. subscriptions margin greater continue service drive as XX% to will margin expansion expect our approach non-GAAP

expect discipline per management factor in be will share, as important expanding more than profitability of midpoint year-over-year growth the we our per the non-GAAP cost share an of income to and XX% $X.XX at our be between $X.XX Our range. net representing guidance diluted

in even expect world-class the that We pricing. is proving several customer metrics product in SaaS model, withstanding investment emphasizing a operating Arlo all leverage hundred margins consolidated Again, be basis gross our business. will up through acquisition the again points,

large, sheet so strengthen paid the program, our include balance of such establishes introduction investments which the capital continue technology into have investments as expand investment we poised Secure inorganic organic as because have external of calls, potential X to enhance the On or we milestones renew our have untapped of smart in a prioritize foundation adjacent that robust With shareholders. enhancing our we capital investments well customer company's strong We is X. and either the security our outcomes for return program. markets. profitability addressable time. The platform to Arlo investments, candidates far position of respect allocation Our made over solid the dimensions capital as in dividends, discussed expand relatively organic to yielding and space to and positive and previous allocation inorganic space for security to the market innovation experience achieving smart

only cautious our We that path have goals. we accelerates inorganic around investments our remained execute to achieving and will long-range a transaction

shareholders. on share a that to Finally, we to program return have repurchase enables us our embarked capital

repurchasing $XX.XX shares million. at During an proceeds of totaling the executed with period, we average price $X.X

our to repurchasing continue shares, our which given believe profitability opportunistic be will growth we profile. undervalued are and at We still

Matthew McRae

Kurt. you, Thank

you As guidance, massive be our at XXXX is tell going can from a year Arlo. to

We to all at SaaS perform continuing extremely across the well are level and peers. executing highest

are at at Our us us XXx. feel true value these ARR GitLab, of of we recognized highlighted the XX a growth achieving of earlier only multiple does top of XX%. revenue club, my And our smaller that Yet trade peer to group a rate XX decided to service growth companies been X Klaviyo, and multiple are Semrush. guidance that companies. puts In Xx supports and becomes squarely our being compare? reduces at of X.Xx. We a earlier and only revenue, companies further revenue by if near much this companies take Monday.com then are it achieving down market. a And X companies, valued puts comment revenue which the less LifeXXX, of only are XXXX set on peer Arlo multiple look take cohort. valued than you that our Rule look the in status, How SaaS a set the companies at based group to a we above That against nearly currently in smaller we and fact, has not yet that Rule companies those select

back been You have can see why stock. buying we

that plan. million XXXX you achieve those of the long-range remember and have likely than will For operating all journey targets been with us, X by metrics ambitious accounts, before we Those is our we paid It in million were that targets on will margin. set X to out some the this achieve more in these of ARR clear end XXXX. XX% $XXX year, original

out technology operational incredible for next achieve our those Arlo Arlo in beat the year will XXXX. over targets So the reset come current reading set up substantially through in the accounts, remain is of it to to these lie it was value and business to we shareholder million that original than that likely creation. to Past is and excellence as paid maximize in begin the is target, and correct put to years. doubled incremental absolutely XX ARR growth audacious long-range doubled our to or innovation, us. Refocusing while endeavor investments ahead. And more targets an given rate development front clear last over and opportunities decision year $XXX fruition goals operating to current the those X margin XX% million partner targets and

technologies AI tangible is you providing clear, continue to X, to a in Secure X further pushes The have our specifically and given which of value peek impact Arlo at lead platform the Some small Arlo highlights. and innovation. sneak year's will we much launch of last in category Arlo on real-world Intelligence Arlo Secure users.

and service a partners company. SaaS with to Expect we offering. This opportunities base to us our camera the the and and available. Today, in revenue, retailers growing is is opportunities history, work and have the provide more shows extremely hard team, for more year power to additional strategy, you up of immediately growth and of the market. looking touching well-defined I and subscription several for execution largest to incremental additional our and the our targeting secure a transformation several for And towards with the the clarity pushing vision company plan million with call you in announced of technological shows and share nearly shelf continue launches new partnerships of expand everyone represents ARR company and the cycle $XXX full small is Arlo outlook questions. XX segments security it annual us capabilities, in the an of now which refresh at that traded of innovations and camera Origin some RapidSOS Arlo the compound puts guidance Arlo. And years into market. XX% means households. of outstanding device or culmination throughout in open Our growth strategic These of list across of holiday smart Coupled the goals. focused power Thank routes come will rate, elite service will operating growth. publicly the of revenue at product in XXXX produce are our companies year-over-year nearly world this Rule positioned our every The largest an year. The we result differentiation Arlo to additional diversify AI with

Operator

is James. the Tindle question First from Raymond Instructions] of with [Operator Adam line

Adam Tindle

XXXX. I the on additional Congrats appreciate call. details the on

And a As QX, services I were level mid-teens. that $XXX to closer you outlook to the XX% finished, or to I I look that, above if you think about ask year-over-year is very at strong XXXX, a scale. In I despite outlook. or side, where XXXX, similar it's growth of revenue compare Kurt, wanted just about your higher million plus for particularly on at obviously growth

for buckets that an that there's underpin $XXX just XX days. wanted of XXXX? talked bit imagine little from I And target of What to in past that's I sort the there a we Matt ask in the it's price services saw that about. some what acceleration are what million So lift about.

of confidence you could some outlook? a little that decompose bit in give more kind that just us to of If

Kurt Binder

Yes, in Adam, revenue. the question. for great a for Certainly, services thanks with XXXX so million much outlook the plus $XXX

expansion. several we've a One, lot ARPU talking about factor a it's been So of obviously, aspects.

we fact increasing. year This year, at pricing year. exiting we to the past highlighted see do we the started that So XX% $XX.XX the grew $XX.XX, that the

is to sell-through the to we X. The Secure increasing. form of growth. is subscriber ensure we in that Arlo activity can subscriber especially ton our of We will That and there, incentivize a going number detail. the households favor. ensure other be Matt year. lot will volume to that's touched continue finally, expect continue, believe, course, that the doing we So shift accelerant or great throughout think our additional also a number of We're mix on also there of in partnerships, an a of thing back strategic big our work And opportunity. we a going drive to runway base which then, on things point-of-sale a provide And in in it. that's factor to, some There's these of

a and we feel big there So the from XXXX well it's us just on factors, delivering what XXXX. of bode results and able combination we've a like to accomplish been for

Adam Tindle

I because in I $XX.XX to said subscribers that. going think, that in services that maybe ARPU to for you have comments And the caught platform. on up bump Matt, you transition just is new clarify think your to the in a I to,

to would for there clarification that are are of existing a Or transition? And going through to always have is SaaS, potentially transition? us all is of the we're way Just Obviously, how a sense be when metrics, in give making you mitigating percent we strong subs? guys thinking subscribers worried what of the had kind be, this that from churn that like very any transition. you go consumer but churn about secondly, about of

do how percent and you what of So churn? manage subs

Matthew McRae

question. great Yes,

Secure last So do, QX we it always And into going QX Arlo we're data-driven. started -- we from very as in launch our year.

Arlo what launched operating exactly look plan plans to at were were our annual that was, consumer Secure they and watched behavior we with onboarded started all place. we what going after what after, XXXX the they we X, knowledge selecting features and for in that So of

our what us actually full a simpler so from stepping up shift. basic kind a of and seen actually a away and you'll remember plan remove to And call, from moved plan actually what and we quarter's wanting mix last it you've the because AI make lot on is actually and saw, of just this do for users pay

and did put plans plan reduced plan, rid So plan on an full on we what got unlimited our we Cam of the single we basically the suite AI just now and cam services actually and basic the actually by. is of

plans So witnessing around that but that then building also behavior just simplification, is people seeing made. we we the are and consumer the mix change QX up the in

for up through new all was plans been on most older the February, change we've this month, to who of to plans migrating signing of plans, And made new the the basically over of the January these mapping Now were people on our then X. existing course equivalent plan users on them course February.

day that our like was on So X to that did we probably just should be on this. have And ago renewal really actual by date be weekend. their -- they transition this going depends what by years done

everybody Arlo of were were in will be paid on again, So all based the end plans. data of developed And -- be seeing subscribers February, those Secure the on our will we new by X. the

increase choices X running Secure seen a use some opportunities is you we've One we're for year. far I some things there's see jump like say transition, to do in time As to us. on a Arlo and focused to we Two, we churn in-app in plans it little bit well. as for and churn, down see working the the a conversion this actually are well, customer as how a yes, as will retention. Any these actually couple position of you'll payments very quickly. very data things that you moderate churn and then of make

will and takes. puts some So there be

we've might the to or we'll X.X% X land expectation deploying is while churn done slight years that last a Our there range X increase in in the temporarily, like of service. be back that X.X% of over

Adam Tindle

inventory But launch healthy history at device noticed in right. All we'll very, also but our product I more you lot that I've one retail next the about talked one. got is levels. a side, maybe up. last channel it. And your coming conference largest more, on very week. the just Matt, discuss I know Got in company U.S.

since the think XXXX. I lowest

notable So I could launches wonder might this very maybe and think little a growth timing learned I is be would I one. And the the do compare confused. what channel. for just a you've of differently prior since digits. prior backing big you product Kurt, if such or because expectations launch question clean you what something I and into from versus wonder ahead this launches, launch they're a a revenue some down double bit for here if there's XXXX, was

we've be big that a the case why a launch? year in So would got where

Matthew McRae

Yes.

perspective, prepared from said touch a in ship. I we So camera the every product and launch will remarks, basically like this

which is the at our least volume of then step X of which that know, So which our Essential is Series, think kind mid-tier Ultra, lineup, as people of or and a entire lot in you product the up mover, X.X hasn't been to Pro updated years.

So every be single lineup will updated.

number of an going a you're pricing, different So actually that steps the key experiencing the it's meaning gives us into the assortment, areas, reset we're grow actually price to ability instance, doing see that that's through in reset One, kind But what fast SKUs, -- things. are it's smaller the to some tapping couple segmentation. of And to segments of of of going the Essential. growth. inside also for

new also But buy experiences new we driving that's start it's to and user use as as through time important cameras really well. see different So consumers models year-over-year. slightly that period

in not these but we're of trying actually our also remarks, the existing retailers some we're what able to to expansion prepared of share. It's seeing And without there is in capture additional not you existing this be the incremental popular what giving share is like it products. exactly replacing us creating are large going just is I'm about only see seeing, type But you're do shipping. products. mentioned you launch, can So be excitement I because very to shelf

the of will the And be so most of that year. towards end launch

into So in unit will that moving will and the A the front curt. be QX. just growth and kind that talking a land growth little of of of bit new the products lot

will X on first quarters product. the be the existing So

Kurt Binder

a assortment. a on response Yes. that QX this We some $XX where Arlo broad has Matt mentioned, pretty saw of able that played not to consistent active sure in segments your be the be out bit product In revenue, will very just question, And price XXXX in. basis to historically, we the our around And do are Adam, very market as this going that and to and overall portfolio. part segmentation was make want we that we was price a entire to the a in share across on below big are there. targeting

you expect the cost ultimately can in and we've profitable. of chain. which probably promotional And BOM is supply working ASPs thing year, at to a the we've XXXX. in activity of half looking us overall But our that XX% been ultimately, between that throughout incorporated closely help play with our range somewhere XX% downs, be will price and particular, in assumptions, aggressive in So also great the second declines revenue in continuation

launch. more this household business. ultimately, it really fuel really services And to that about excited formation think well we we're into our generate and greater So will subscribers our ability dovetail to

Operator

Next of Lake Street Stephan with question is from Jacob the line Capital.

Jacob Stephan

costs actually on I just on essentially Congrats want kind outlook doubling acquisition here. LTV results customer year-over-year, and the of to strong has touch but grown.

the So we through a XXXX? comfortable can trend this is to as X:X, expect How kind level? of we this look

Matthew McRae

Yes.

and analysts obviously, we over think with X:X, is talking world-class. in anything everybody, So

you want that class. look of consumer be other kind you is X:X service where customers be to you'll see world companies, enterprise if or So to at stats or a

well still we're above that. So

investors you we've look, high. know, and had past, too X:X as fact, In say, we've talked the in is come

potential in and the customer the You're of company. underinvesting acquisition growth

we're and call X.X time. over targeting X.X X So between, I would say it, to somewhere maybe

at then and just see will back we're X in captures doing the household is now. if capture like fluctuate saw really driving that that deeper mentioned. down, comfortable right subscription and QX. Ultimately, the share, in what up like business optimizing is shelf But then you'll think formation quarter-to-quarter is will our Kurt business, in we're just especially the you rebound dig to look which I it it we QX, because you

and down. So move we'll on up that keep and eye an it

we I in I a we were agree actually the underinvesting when were that think bit. business X:X,

move level. I where will it household and we of probably maximizing appropriate as are think And we're up and that kind down generating future revenue. now formation an again, is service

Jacob Stephan

QX the was rebound of either the maybe talking And dollar in sense. here, amount? just makes about product in rebound outlook referenced we that kind from in percentage XX% what of terms margin That or negative in Yes. the a are

Kurt Binder

Yes.

quarter. quarter. it to in So There I'll to appropriate the going on aggressive because XX-plus I'm was a quantify the not a that that that to was services. was say good very to decision number garnish of meet consumer promotional But obviously, be on, we are considering felt gross the it what position with is we opportunistic QX where and after we're they a going for go factors very and percent QX demand. Obviously, exited a margins

so well. service very And business perform continues that to

the mean, We best. it probably will play at quarter in we'll year range, at I the be that rebound. QX, by positive unfolds. but think may neutral look we As would positive And I expect I it to be as that

Jacob Stephan

one And one me Okay. here. last just for

the that guys inclusive that's a that Or of testing? ad Is you include New subs at step-up. any central platform nice not that? -- that does the from contribution $XX ARPU, been have

Matthew McRae

No, in platform. test. still from include it ad the That's not does anything

that call. the more on think update bit I to of next us could investors you expect a

So of just made what you're January. is structure price that really in plans a there the change the the impact new seeing we of

reading talked data about through we January made earlier. first in the that's change So the that after we

ad It's only not So plans we including the about. like that on platform. subscription the other it's talked any revenue things

Operator

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

Hamed Khorsand

you about took were competitive I have lot market promotions. to environment sounds you here? aggressive talking here you are the Or you Could it? just you with. like share you mean do you're a very Do being here? think maintaining more talk It about

Matthew McRae

a at beginning Yes. than landscape anticipated I I'd deeper the the QX the lot. and pricing changed probably the we in say promotion It's slightly players. the say had of same would competitive hasn't was year.

If and gave deeper I'll that up, investors tell we we formation, last we little a you, and mentioned week, holiday share a a And heads going we're go you that drive share gained a significant and QX. lower got remember, were to the recovered QX, quarter bit try of did. From which some I household step share. during in perspective, think, we kind in

So actually quarter. share the when were we had retailers, points we our some our of some during pricing gained price at lowest with the of key the we and testing

question on back your competitive change It a in just the promotional QX was was dynamics. maybe happening we of elasticity. certain the in I see is already promotional, the deeper in we're that price we seeing what in But investors. some So and quarter seeing just why that we obviously we we're not summer and QX. back hit price a the the step household coming high lot is scale. into the at very see answer one and unique there rebound that level, And click it's points, saw When is growth to communicated if can formation. QX that's

thought. out played as it So exactly we

Hamed Khorsand

timing actually to as the bought as as subscription? customers paid change units a any then And who the Okay. far to would these convert when

Matthew McRae

those of XX-day on we our I think, of a will year. trial, XX-day XX it's mixed. trial, a Historically, was X free When No, move that very about ago, almost would saw months X customers back and then most into to QX. go we last months you to be we or it similar to which if years, products about, what all had XX delay

You'll and a little a QX in then little free bit in more December because it's trial. shorter a see bit

to saw similar what dynamic you it be will So last year. a

Operator

with comes Your line Scott of ROTH Capital. the from next Searle question

Scott Searle

those about pricing increases but the effect follow kind be have Very -- to look price on Great think get job subscriptions it? And but guys. a to I that clarification. come exciting on The I apologize the of XXXX. look go gone basis, on that you've it's talking about Quick subscription basis will will will of just who outlook, for number, the average on net increase into of just annual range this monthly a renewals. there number wanted up year. to be are the subscriptions, but I growth. to itself, math, in clarify the for I'm is way at the what kind then of question, back terms they impact additions a target napkin quarterly you're when Is up the for as rolling increase to wondering or price the ARPU of at the mid-teens a -- given blend of kind

the to overall. XX% it's increase So think that I'm price Is about to to XX%, get about it? assuming way

Matthew McRae

Yes.

correct -- is know me monthly. think general, through in point. I up yes. touched that the But we're done. The migration a doing and you honestly for I the is on let we mean that's won't migration totally until back February

Annuals up. You're annuals there. when come click over those XXX% right would

right, our those still vast whatever some but of and actually especially you're our of year a the is historic day which transfer month on through would So that plans, plans, minority the annual, they're renewal.

pricing hit and January system our the subscribers and signing we be of just structures new coming monthly migrated planned clear, on February, So customers. Arlo up. all into for to X, all In so the very new

turn year. also customers is if February, customers in their throughout happening. over Some And obviously renewal will over of other that's then annual moved plan those the annual when

to So the way it. We about that's yearâ€¦ correct ended a think

Scott Searle

ARPU? On

Matthew McRae

we change. Yes, and $XX around the year ARPU on ended

it the or was $XX. new $XX.XX subscribers $XX. over to going We're I think on seeing

that's a great indicator. So

plans and afterwards. which But this talking expansion about and both plans on see we're up would middle. ARR that of will of I an blend they It service will in actually going growth into somewhere give wait the to is And over ARPU we get obviously through to you probably the some so the see number will And in land you're lead the migrations a until what a of the year. which revenue. end you more year, again,

Scott Searle

going that comes retail retail them. space how through from from due to are one the revenue vendors base. one partners. your evolution Got and more otherwise. retail stealing you. that They follow-on Very I'm actually sales of your buy is at Or due kind helpful. certain or is curious of key customer And Matt, within then just shelf online that you realization mentioned to your Is partner activity? promotional that a

Matthew McRae

great question. Yes, it's a

the It's your October part in drawing seeing Arlo company a product So into less store September, they're our but of it's success shelf, holiday. in the customers I this we're time frame of also about, on launch the coming but because latter think, case, the more that's expanded that about the talking is comment. the also in assortment physical store about, for this

positioned assortment shelf the actually expansion. they stores of much an the So the made X. selection for earlier the they a and shelf actually products. saw, when expanded do and they They early at them last and to they how in double year. decided They like We portfolio they second looked of slots half all normally of performed commitment do our commitment than what with we nearly our the year like the their because over or their

Scott Searle

on I'm any sounds Got partnership. specifically little I the I could if on horizon, you. And it ramp model wondering about sure longer-term strategic if of a commentary I'm if couple heard on that Premium like things. elaborate a could call. starting insurance then to not the And the bit. up then, you is

come it's be in in there those sounds like that us? on both It future. Any more now. for thoughts to the right might I beta think not-too-distant

Matthew McRae

on this I those our the through, platform in and will make I of said the you know strategic the you talked over will in come general, call, about. morning. on I I the interest the see amount and and of last and of then could and comments specifics general last this some one also week touch some you accounts Yes. that agreements activity we announced some tell them of partnerships

announcement, that's the in ability The to without additional a is, of see going the interest. to generated what characterize to the and Origin Samsung, tremendous AI meaning amount additional and has announcement later hardware a with that year using motion things to in actually You lead Samsung. with home detect

at Arlo the using additional inbound high. platform interest is amount And an of in for all-time so the services

X. way meeting it's from in talking insurance companies roll X providers go-to-market. so actually it's starting as insurance with to accelerating. Again, an as they really with and gone But one move technology and are or to I engaging multiple general, engage a slow They with the assess say, to We don't vertical, is in out. fast from that now, things would many

we'll So more success I X but high. And again, us, you're some I are hope opportunities by seeing in is and front Arlo an the think, -- of within about months, Secure is some the next that all-time the X additional that be activity there. talk able specifically of from to

in and including what portfolio some the RapidSOS that of done, have platform mentioned we're next-generation not with technology I prepared platform, to like we're shared well. have, start as expect soon, announcements interest and our and Some now them going would the already sharing that I but we of to Origin remarks, year, product expansion this some the we and doing additional only drive

long-range we think, may next, think be and, So Kurt seeing more fact, growth accounts a plan. traditional I about incremental still come right I going the And to are year that over in We're XX ago More proven from let's the of looking mentioned that. months. we retailers. the over thought our call it, over strategic

Scott Searle

And that high I other Arlo to at expansion the new product look you're of the of AI whether to platform and some helpful. lastly, more Very portfolio of otherwise. conceptual guess, very about it's could, I talking the incorporate technologies, level, with I if presence, sensing a from, the start home into a within and opportunities, maybe I think, other

As see moving and going back we in ARPUs picking to is direction marketplace? will we up? start beyond, within pressure other look continue that assume to it we're into of the pricing Or to just the 'XX safe because

Matthew McRae

over at yes, is grow be early tell this question. I'll think Yes. you expectation Great I the to that should stage ARPUs that, continue What time.

markets. What come I company Some over our maybe and going some confidence will now strong. very that into to higher you tell in our the we and platform ever the in the the from would should to of expect of some plan additional plan next-generation may customers. come operational some -- I of long-range we've you feel company, in the adjacent moving that 'XX execution our than additional can But from a very, leverage tell business additional this is and optimizations team, start a functionality will roll excellence, that the got cycle, into is 'XX we're you our existing is in there seeing us things out of we as foundation is

and to of more opportunities. we're these about so going will some exploring this markets comfortable and of back to into assume those that new some those your new some by us of then you on and markets next via talk question, And maybe likely opportunities. talking 'XX, into I should those that think be time you start horizon ever than ARPU see some I see adjacent execute half But of expansion think Arlo year. yes, could markets going in of 'XX and you'll And the kind the year adjacent

Operator

Thank conference you for your question. This call. concludes today's

disconnect now lines. You your may

Arlo (ARLO) 27 Feb 252024 Q4 Earnings call transcript