November 6, 2025 Investor Presentation ©2025 – ALL RIGHTS RESERVED SAFE HARBOR DISCLOSURE This presentation 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. ...

Core Insights - Arlo Technologies has shown a slowdown in demand with an annualized revenue growth of 3.6% over the last two years, which is below its five-year trend [1] - The company reported a compounded annual growth rate of 6.9% in sales over the past five years, indicating slightly better demand than the average in the business services sector [2] - Arlo Technologies generated $509.6 million in revenue over the past 12 months, positioning it as a smaller player in the business services space, which can limit its competitive advantages [3] Financial Performance - In Q3 CY2025, Arlo Technologies reported revenue of $139.5 million, reflecting a year-on-year growth of 1.4%, which exceeded Wall Street's estimates by 0.6% [6][7] - The company’s annual recurring revenue (ARR) reached $323 million, marking a 34% year-on-year increase, with a non-GAAP subscriptions and services gross margin of over 85% [5] - Adjusted EPS for Q3 was $0.16, surpassing analysts' expectations by 8%, and the company anticipates a revenue of approximately $136 million for the next quarter [6][19] Profitability Metrics - Arlo Technologies achieved a breakeven operating margin in Q3, which improved by 4.1 percentage points year-on-year, indicating enhanced operational efficiency [14] - The company has struggled with an average operating margin of negative 7.3% over the last five years, but it has seen a 13.5 percentage point increase in operating margin over this period [12][13] - EPS has transitioned from negative to positive over the last five years, with a remarkable 120% compounded annual growth rate in EPS over the last two years, indicating improved profitability per share [15][16] Future Outlook - Analysts project an 11.9% year-on-year increase in sales for the next quarter and an overall revenue growth of 8.3% over the next 12 months, suggesting optimism regarding the company’s newer products and services [7][8] - The company’s guidance for full-year EPS is expected to grow by 25.6% over the next 12 months, reflecting positive sentiment from Wall Street [18]

Revenue Growth - Annual recurring revenue (ARR) reached $323 million, representing a year-over-year growth of 33.8%[1] - Subscriptions and services revenue hit a record of approximately $80 million, increasing by 29.2% year over year, accounting for 57.3% of total revenues[4] - Total revenue for the three months ended September 28, 2025, was $139.5 million, a 7.3% increase from $129.4 million in the previous quarter[25] - Subscription and services revenue reached $79.9 million, up 2.2% from $78.2 million in the previous quarter, while product revenue increased by 16.3% to $59.6 million[25] - For the nine months ended September 28, 2025, total revenue was $388,000,000, a slight decrease from $389,314,000 in the same period last year[38] Profitability Metrics - Record GAAP subscriptions and services gross margin of 84.5%, and non-GAAP subscriptions and services gross margin of 85.1%, up 780 and 770 basis points year over year, respectively[4] - Adjusted EBITDA was $17.1 million, reflecting a year-over-year increase of 50.3%, with an adjusted EBITDA margin of 12.2%[4] - GAAP earnings per share (EPS) reached a record of $0.07, while non-GAAP EPS was $0.16[4] - Net income for the three months ended September 28, 2025, was $6.9 million, compared to a net income of $3.1 million in the previous quarter[25] - Free cash flow for the three months ended September 28, 2025, was $14,984,000, compared to $5,855,000 in the prior quarter, representing a significant increase of 155.5%[31] Cash and Investments - The company ended the quarter with cash and cash equivalents and short-term investments totaling $165.5 million, an increase of $19.0 million year over year[4] - Cash and cash equivalents increased to $86.0 million as of September 28, 2025, from $82.0 million at the end of the previous quarter[23] - The company reported a net cash provided by operating activities of $59.0 million for the nine months ended September 28, 2025, compared to $44.6 million for the same period last year[27] Customer Growth - Cumulative paid accounts grew to 5.4 million, marking a 27.4% increase year over year[4] - Cumulative registered accounts increased to 11,792 as of September 28, 2025, compared to 11,237 in the previous quarter, reflecting a growth of 4.9%[34] - Cumulative paid accounts rose to 5,396 as of September 28, 2025, from 5,115 in the previous quarter, indicating an increase of 5.5%[35] Regional Revenue Breakdown - Revenue from the Americas was $83,831,000, accounting for 60.1% of total revenue, up from 53.2% in the same quarter last year[38] - EMEA revenue reached $49,602,000, making up 35.5% of total revenue, compared to 33.5% in the previous year[38] - APAC revenue was $6,096,000, representing 4.4% of total revenue, slightly up from 4.2% in the same quarter last year[38] - The Americas region showed significant growth with a nine-month revenue of $235,830,000, up from $195,766,000, increasing its share from 50.3% to 60.8%[38] - EMEA's nine-month revenue was $135,817,000, which is a decrease from $175,980,000, reducing its share from 45.2% to 35.0%[38] Future Outlook - The company expects fourth quarter 2025 revenue to be between $131 million and $141 million, with non-GAAP net income per share projected between $0.13 and $0.19[6] - The comprehensive launch of the refreshed product portfolio and the Arlo Secure 6 AI-driven security platform is anticipated to drive additional subscriptions and services revenue growth heading into 2026[3] - The company continues to focus on expanding its market presence, particularly in the Americas, which has shown the most robust growth[38] - Future outlook indicates a strategic emphasis on enhancing product offerings and technological advancements to drive revenue growth[38]

Core Insights - Arlo Technologies has transitioned to a Software as a Service (SaaS) model, which has positively impacted its profitability and growth trajectory [1] - The company is experiencing strong Annual Recurring Revenue (ARR) growth and an increasing number of subscribers [1] - The Service segment has become the largest segment for Arlo, indicating a shift in its business focus [1]

Arlo (NYSE:ARLO) FY Conference Summary Company Overview - Arlo is a spin-off from Netgear, originally focused on hardware in the DIY security space, now transitioning into a services business [4][5] - The company has achieved significant growth in Annual Recurring Revenue (ARR) and subscriber base [3][4] Key Metrics - Current ARR stands at $316 million, reflecting a 34% increase year-over-year [3][4] - The company has surpassed 5 million paid subscribers, with a target of reaching 10 million by 2030 [4][5] - Operating margin has improved to 13%, with a goal to exceed 25% [5] Growth Strategy - 60% of new subscribers are expected to come from strategic accounts (B2B2C), while 40% will come from traditional retail channels [6][7] - The company plans to double its ARR to $700 million, with potential to achieve this by 2028 or 2029 [4][5] Product Development - Arlo is currently undergoing a major product refresh, launching approximately 110 new SKUs [11][12] - The product cycle is typically two years, with annual updates for services [11][13] - New AI capabilities have been integrated into the Arlo Secure service, enhancing user experience and driving ARPU growth [13][39] Pricing Power and Revenue Growth - ARPU has increased from around $8-$9 to over $15, a 50% rise with no significant impact on churn [39][40] - The company has successfully implemented price increases of 25%-30% without affecting customer retention [38][39] - Service revenue has a gross margin of 85%, up from 60% in previous years [47] Market Position and Competition - Arlo differentiates itself through a robust hardware portfolio and a strong AI service platform [24][30] - The company is well-positioned in the B2B2C market, with strategic partnerships that enhance its competitive advantage [23][24] - Competitors like Google and Amazon are de-emphasizing their security offerings, providing Arlo with an opportunity to capture market share [24][25] Customer Retention and Acquisition - Monthly churn rate is approximately 1%, which is favorable compared to competitors with longer contracts [49][50] - The company has a high attach rate for services post-free trial, indicating strong customer satisfaction [42][52] - LTV/CAC ratio is over 3, indicating effective customer acquisition and retention strategies [53] Conclusion - Arlo is on a strong growth trajectory with a clear strategy to expand its subscriber base and revenue through product innovation, strategic partnerships, and effective pricing strategies [4][5][6]

Core Viewpoint - Arlo Technologies Inc. is recognized as one of the best small-cap stocks to buy, with a reiterated Buy rating and a price target of $24 from Lake Street [1][3]. Product Development - Arlo Technologies has launched a new lineup of smart home security solutions featuring advanced AI-powered systems, enhancing user protection options [2][3]. - The new models range from Essential to Pro and Ultra Series, offering high-level security features, including informative alerts and easy-to-install DIY cameras [2]. Market Position - The company has over 5 million subscribers globally, and the new product lineup is seen as a significant driver for market leadership in security services [4]. - Analysts estimate an average price target of $22 for Arlo Technologies, indicating a potential upside of approximately 21.35% from current levels [4]. Company Overview - Arlo Technologies provides cloud-based platform services, focusing on advanced security solutions for homes, businesses, and personal use through products like Arlo Essential Cameras and Doorbells [5].

Core Viewpoint - Arlo Technologies, Inc. has launched a comprehensive new lineup of smart home security cameras, enhancing home protection with advanced features powered by Arlo Intelligence, including new pan tilt models for 360-degree coverage [1][4][10] Product Offerings - The new lineup includes models from the Essential, Pro, and Ultra Series, featuring up to 4K HDR resolution and various capabilities tailored for both indoor and outdoor use [1][10] - The Arlo Essential Pan Tilt cameras provide 360° pan and 180° tilt, allowing users to monitor wide spaces effectively with automatic motion tracking [7][8] - Arlo Secure subscription service starts at $7.99 per month, offering personalized alerts and 24/7 emergency response for enhanced home security [5][19] Advanced Features - Arlo Secure includes AI-powered features such as Person & Vehicle Recognition, Fire Detection, and Advanced Audio Detection, enhancing the overall security experience [6] - The cameras are designed for easy installation and provide dual-band Wi-Fi support for better connectivity [8][9] - The weather-resistant design of the cameras ensures functionality in various environmental conditions, including low light, with integrated spotlight features [9][12] Market Position - Arlo has over 5 million subscribers globally, positioning itself as a trusted provider of smart home security solutions [4] - The company emphasizes user privacy and data protection, aligning with industry standards to safeguard personal information [15]

Group 1 - The stock market is currently experiencing a top-heavy trend during the Q2 earnings season, with investors favoring large-cap stocks like Microsoft while smaller and mid-cap stocks are being overlooked [1] - Gary Alexander, an analyst with extensive experience in technology and startups, has been contributing insights on industry trends since 2017 and is recognized in various publications [1]

Core Insights - Arlo Technologies reported quarterly earnings of $0.17 per share, exceeding the Zacks Consensus Estimate of $0.16 per share, and showing an increase from $0.10 per share a year ago, resulting in an earnings surprise of +6.25% [1] - The company achieved revenues of $129.41 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 5.17% and showing a year-over-year increase from $127.45 million [2] - Arlo Technologies has outperformed the S&P 500, with shares increasing by approximately 43.9% since the beginning of the year compared to the S&P 500's gain of 7.9% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.16 on revenues of $135.22 million, and for the current fiscal year, it is $0.63 on revenues of $519.54 million [7] - The estimate revisions trend for Arlo Technologies was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Internet - Software industry, to which Arlo Technologies belongs, is currently ranked in the top 28% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $129 million, up year over year and sequentially by over $10 million [5][15] - Service revenue reached $78 million, a 30% increase year over year, now comprising more than 60% of total revenue [5][15] - Non-GAAP earnings per share increased to $0.17, up 70% year over year, while GAAP earnings per share turned to a profit of $0.03 from a loss of $0.12 a year ago [5][6] - Annual recurring revenue (ARR) hit $316 million, up 34% year over year, with adjusted EBITDA rising to $18 million, an 82% increase [6][15] - Non-GAAP subscriptions and services gross margin reached a record 85%, up 850 basis points year over year [19][22] Business Line Data and Key Metrics Changes - The subscriptions and services business continues to drive growth, with camera unit sales up 30% year over year [6][15] - Retail ARPU rose to $15, a 12% sequential increase and 26% year over year [14] - The subscriber base grew to 5.1 million paid accounts, a 29% increase year over year, with 218,000 new paid additions in Q2 [14][15] Market Data and Key Metrics Changes - International revenue contribution declined to approximately $50 million, or 39% of total revenue, down from $64 million, or 50% in the prior year [18] - The EMEA region, particularly through Verisure, remains a primary driver of international revenue [18] Company Strategy and Development Direction - The company is executing its largest product release in history with over 100 new SKUs launching in the fall [9][10] - A strategic partnership with ADT was signed, expected to provide material upside to subscriptions and services revenue starting in 2026 [10][12] - The company aims to achieve a new long-range plan of 10 million paid accounts and $700 million in ARR, with a focus on subscription and services growth [12][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position despite macroeconomic volatility and external headwinds [10][24] - The company anticipates strong Q3 performance and has reaffirmed full-year guidance, expecting service revenue to exceed $310 million [11][25] - Management highlighted the ability to absorb tariff impacts as a small increase in customer acquisition cost, maintaining focus on subscription growth [10][58] Other Important Information - The company reported record free cash flow of $34 million during the first half of the year, representing a free cash flow margin of almost 14% [22] - Inventory levels were optimized in preparation for the product launch, with inventory turns increasing to 7.7 times [23] Q&A Session Summary Question: Can you elaborate on the ADT partnership? - The partnership with ADT involves devices and service revenue, with a unique structure that differs from previous agreements [28][29] Question: How will the new product launches impact holiday season sales? - The company expects aggressive pricing and a 20% to 30% camera unit growth year over year for Q3 and Q4, which will drive service revenue [36][37] Question: What channels are contributing to subscriber growth? - Subscriber growth is attributed to strong performance across various retail channels, including Amazon, Best Buy, and Walmart [44] Question: How should we think about product gross margins going forward? - Product gross margins are expected to be impacted by tariffs but can be offset by reduced costs and increased sales volume [48][49] Question: What is the outlook for churn rates? - Churn rates are currently around 1%, with operational improvements contributing to better retention [83]