Arlo Reports First Quarter 2019 Results

Arlo Technologies, Inc. (NYSE: ARLO), the #1 network connected camera
brand ⁽¹⁾, today reported financial results for the first
quarter ended March 31, 2019.

First Quarter 2019 Financial Highlights

• Revenue of $57.9 million
• GAAP gross margin of 3.4%; non-GAAP gross margin of 4.7%.
• GAAP net loss per diluted share of $0.55, non-GAAP net loss per
  diluted share of $0.47.

“I am proud that our team achieved our operational and financial
objectives while continuing our innovation momentum. In Q1, we exceeded
guidance for all metrics, delivered 89% paid subscriber growth year over
year, and maintained our market leadership position. Importantly, we
have made strong progress with our channel and continue to expect an
upward trajectory in our revenue through the rest of the year,” said
Matthew McRae, Chief Executive Officer of Arlo Technologies. “In March,
Arlo completed the worldwide launch of Ultra, our newest flagship
camera, and it has been receiving excellent reviews since. We continue
to innovate to expand our addressable market and announced a video
integrated doorbell that will add to our already strong slate of
upcoming new product releases. While Arlo is committed to delivering the
innovation that has been our hallmark, in 2019 and beyond we are
committed to driving efficient and vigilant execution to improve our
path to profitability.”

Business Highlights

• Service revenue of $11.3 million for Q1’19, for growth of 37.3% year
  over year
• 89.1% year over year paid subscriber growth in Q1
• 62.1% year over year cumulative registered user growth in Q1
• Announced worldwide availability of the flagship Arlo Ultra camera
  system, the most advanced DIY monitoring solution launched to date.
  Arlo Ultra includes a one-year subscription to Arlo Smart Premier,
  Arlo’s AI and computer vision powered storage and detection service
• Announced all-new video doorbell with integrated high-resolution video
  and built-in two-way audio, an all-in-one unit for a unified video and
  audio smart entry solution
• Announced partnership with I-View Now to offer verified alarm
  monitoring services later this year for select Arlo security camera
  systems, leveraging I-View Now’s award-winning monitoring station
  video and signaling interface.

_________________________

⁽¹⁾ The NPD Group, Inc., U.S. Retail Tracking Service,
Security & Monitoring, Camera Technology: Decentralized IP Camera and
Centralized IP Camera, based on Dollars, Jan 2018-Dec 2018.

Second Quarter 2019 Business Outlook ⁽¹⁾

• Revenue of $75 million to $80 million
• GAAP gross margin between 9.0% and 12.0%, and non-GAAP gross margin
  between 10.0% and 13.0%
• GAAP net loss per diluted share of ($0.51) to ($0.55), and non-GAAP
  net loss per diluted share of ($0.40) to ($0.44)

A reconciliation of our business outlook on a GAAP and non-GAAP basis is
provided in the following table:

_________________________

⁽¹⁾ Business outlook does not include estimates for any
currently unknown income and expense items which, by their nature, could
arise late in a quarter, including: restructuring and other charges;
litigation reserves, net; acquisition-related charges; impairment
charges; discrete tax benefits or detriments relating to tax windfalls
or shortfalls from equity awards; and any additional impacts relating to
the implementation of U.S. tax reform. New material income and expense
items such as these could have a significant effect on our guidance and
future results.

Investor Conference Call / Webcast Details

Arlo will review the first quarter of 2019 results and discuss
management’s expectations for the second quarter of 2019 today, Tuesday,
April 30, 2019 at 5:00 p.m. ET (2:00 p.m. PT). The toll free dial-in
number for the live audio call is (866) 393-4306. The international
dial-in number for the live audio call is (734) 385-2616. The conference
ID for the call is 966379. A live webcast of the conference call will be
available on Arlo’s Investor Relations website at http://investor.arlo.com.
A replay of the call will be available via the web at http://investor.arlo.com.

About Arlo Technologies, Inc.

Arlo (NYSE: ARLO) is the award-winning, industry leader that is
transforming the way people experience the connected lifestyle. Arlo’s
deep expertise in product design, wireless connectivity, cloud
infrastructure and cutting-edge AI capabilities focuses on delivering a
seamless, smart home experience for Arlo users that is easy to setup and
interact with every day. Arlo’s cloud-based platform provides users with
visibility, insight and a powerful means to help protect and connect in
real-time with the people and things that matter most, from any location
with a Wi-Fi or a cellular connection. To date, Arlo has launched
several categories of award-winning smart connected devices, including
wire-free smart Wi-Fi and LTE-enabled cameras, advanced baby monitors
and smart security lights.

© 2019 Arlo Technologies, Inc., Arlo and the Arlo logo are trademarks
and/or registered trademarks of Arlo Technologies, Inc. and/or certain
of its affiliates in the United States and/or other countries. Other
brand and product names are for identification purposes only and may be
trademarks or registered trademarks of their respective holder(s). The
information contained herein is subject to change without notice. Arlo
shall not be liable for technical or editorial errors or omissions
contained herein. All rights reserved.

Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995:

This press release contains forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of 1995.
The words “anticipate,” “expect,” “believe,” “will,” “may,” “should,”
“estimate,” “project,” “outlook,” “forecast” or other similar words are
used to identify such forward-looking statements. However, the absence
of these words does not mean that the statements are not
forward-looking. The forward-looking statements represent Arlo
Technologies, Inc.’s expectations or beliefs concerning future events
based on information available at the time such statements were made and
include statements regarding: Arlo’s future operating performance and
financial condition, expected revenue, GAAP and non-GAAP gross margins,
operating margins, and tax expense; expectations regarding market
expansion and future growth; and plans to invest in product
innovation. These statements are based on management’s current
expectations and are subject to certain risks and uncertainties,
including the following: future demand for the Company’s products may be
lower than anticipated; consumers may choose not to adopt the Company’s
new product offerings or adopt competing products; product performance
may be adversely affected by real world operating conditions; the
Company may be unsuccessful or experience delays in manufacturing and
distributing its new and existing products; telecommunications service
providers may choose to slow their deployment of the Company’s products
or utilize competing products; the Company may be unable to collect
receivables as they become due; the Company may fail to manage costs,
including the cost of developing new products and manufacturing and
distribution of its existing offerings; the Company may fail to
successfully continue to effect operating expense savings; changes in
the level of Arlo’s cash resources and the Company’s planned usage of
such resources; changes in the Company’s stock price and developments in
the business that could increase the Company’s cash needs; fluctuations
in foreign exchange rates; and the actions and financial health of the
Company’s customers. Further, certain forward-looking statements are
based on assumptions as to future events that may not prove to be
accurate. Therefore, actual outcomes and results may differ materially
from what is expressed or forecast in such forward-looking statements.
Further information on potential risk factors that could affect Arlo and
its business are detailed in the Company’s periodic filings with the
Securities and Exchange Commission, including, but not limited to, those
risks and uncertainties listed in the section entitled “Part I – Item
1A. Risk Factors,” in the Company’s annual report on Form 10-K for the
fiscal year ended December 31, 2018, filed with the Securities and
Exchange Commission on February 22, 2019. Given these circumstances, you
should not place undue reliance on these forward-looking statements.
Arlo undertakes no obligation to release publicly any revisions to any
forward-looking statements contained herein to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

Non-GAAP Financial Information:

To supplement our unaudited selected financial data presented on a
basis consistent with Generally Accepted Accounting Principles (“GAAP”),
we disclose certain non-GAAP financial measures that exclude certain
charges, including non-GAAP gross profit, non-GAAP gross margin,
non-GAAP research and development, non-GAAP sales and marketing,
non-GAAP general and administrative, non-GAAP total operating expenses,
non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP
net income(loss) and non-GAAP net income (loss) per diluted share. These
supplemental measures exclude adjustments for separation expense,
stock-based compensation expense, amortization of intangibles
restructuring and other charges, litigation reserves, and the related
tax effects. These non-GAAP measures are not in accordance with or an
alternative for GAAP, and may be different from similarly-titled
non-GAAP measures used by other companies. We believe that these
non-GAAP measures have limitations in that they do not reflect all of
the amounts associated with our results of operations as determined in
accordance with GAAP and that these measures should only be used to
evaluate our results of operations in conjunction with the corresponding
GAAP measures. The presentation of this additional information is not
meant to be considered in isolation or as a substitute for the most
directly comparable GAAP measures. We compensate for the limitations of
non-GAAP financial measures by relying upon GAAP results to gain a
complete picture of our performance.

In calculating non-GAAP financial measures, we exclude certain items
to facilitate a review of the comparability of our operating performance
on a period-to-period basis because such items are not, in our view,
related to our ongoing operational performance. We use non-GAAP measures
to evaluate the operating performance of our business, for comparison
with forecasts and strategic plans, and for benchmarking performance
externally against competitors. In addition, management’s incentive
compensation is determined using certain non-GAAP measures. Since we
find these measures to be useful, we believe that investors benefit from
seeing results “through the eyes” of management in addition to seeing
GAAP results. We believe that these non-GAAP measures, when read in
conjunction with our GAAP measures, provide useful information to
investors by offering:

· the ability to make more meaningful period-to-period comparisons of
our on-going operating results;

· the ability to better identify trends in our underlying business
and perform related trend analyses;

· a better understanding of how management plans and measures our
underlying business; and

· an easier way to compare our operating results against analyst
financial models and operating results of competitors that supplement
their GAAP results with non-GAAP financial measures.

The following are explanations of the adjustments that we incorporate
into non-GAAP measures, as well as the reasons for excluding them in the
reconciliations of these non-GAAP financial measures:

Separation expense consists of expenses that are related to the
separation of our business from NETGEAR. These consist primarily of
third-party consulting fees, legal fees, IT costs, employee bonuses for
services related to the separation, and other one-time expenses incurred
to complete the separation. We consider our operating results without
these charges when evaluating our ongoing performance and forecasting
our earnings trends, and therefore exclude such charges when presenting
non-GAAP financial measures. We believe that the assessment of our
operations excluding these costs is relevant to our assessment of
internal operations and comparisons to the performance of our
competitors.

Stock-based compensation expense consists of non-cash charges for the
estimated fair value of stock options, performance-based stock options,
restricted stock units and shares under the employee stock purchase plan
granted to employees. We believe that the exclusion of these charges
provides for more accurate comparisons of our operating results to peer
companies due to the varying available valuation methodologies,
subjective assumptions and the variety of award types. In addition, we
believe it is useful to investors to understand the specific impact
stock-based compensation expense has on our operating results.

Amortization of intangibles consists primarily of non-cash charges
that can be impacted by, among other things, the timing and magnitude of
acquisitions. We consider our operating results without these charges
when evaluating our ongoing performance and forecasting our earnings
trends, and therefore exclude such charges when presenting non-GAAP
financial measures. We believe that the assessment of our operations
excluding these costs is relevant to an assessment of our internal
operations and comparisons to our prior and future periods and to the
performance of our competitors.

Activist shareholder response costs primarily consist of legal fees
and third-party consulting costs incurred. We consider our operating
results without these charges when evaluating our ongoing performance
and forecasting our earnings trends, and therefore exclude such charges
when presenting non-GAAP financial measures. We believe that the
assessment of our operations excluding these costs is relevant to our
assessment of internal operations and comparisons to the performance of
our competitors.

Other items are the result of either unique or unplanned events,
including, when applicable: restructuring and other charges and
litigation reserves, net. It is difficult to predict the occurrence or
estimate the amount or timing of these items in advance. Although these
events are reflected in our GAAP financial statements, these unique
transactions may limit the comparability of our on-going operations with
prior and future periods. The amounts result from events that often
arise from unforeseen circumstances, which often occur outside of the
ordinary course of continuing operations. Therefore, the amounts do not
accurately reflect the underlying performance of our continuing business
operations for the period in which they are incurred.

Tax effects consist of the various above adjustments that we
incorporate into non-GAAP measures in order to provide a more meaningful
measure on non-GAAP net income. We also believe providing financial
information with and without the income tax effects relating to our
non-GAAP financial measures provides our management and users of the
financial statements with better clarity regarding the on-going
performance of our business.

Source: Arlo-F

________________________

⁽¹⁾Subsequent to the Company filing a Current
Report on Form 8-K on February 5, 2019 announcing financial results for
the fourth quarter and full year ended December 31, 2018, the Company
has made certain adjustments that resulted in differences between the
financial statements contained in the Annual Report on Form 10-K from
the information furnished in the Press Release on February 5, 2019.

⁽²⁾First quarter of 2018 is based on carve-out
financials whereas financial periods after the third quarter of 2018 are
based on standalone financials. Further detail regarding carve-out
financials is contained in our SEC filings, including our previously
filed Form 10-K, Form S-1 and related public offering prospectus,
standalone financials represents our actual results for the period as a
standalone public company.

________________________

⁽¹⁾Subsequent to the Company filing a Current
Report on Form 8-K on February 5, 2019 announcing financial results for
the fourth quarter and full year ended December 31, 2018, the Company
has made certain adjustments that resulted in differences between the
financial statements contained in the Annual Report on Form 10-K from
the information furnished in the Press Release on February 5, 2019.

________________________

⁽¹⁾Subsequent to the Company filing a Current
Report on Form 8-K on February 5, 2019 announcing financial results for
the fourth quarter and full year ended December 31, 2018, the Company
has made certain adjustments that resulted in differences between the
financial statements contained in the Annual Report on Form 10-K from
the information furnished in the Press Release on February 5, 2019.

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