Founder, BWS Financial Inc

Hamed Khorsand

Founder

Independent Stock Specific Research

BWS Financial Inc

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Equity Bottom-Up

<ul>
<li>ARLO reported another quarter of net subscriber adds above expectations and putting the Company on a faster pace to achieve 3 million paying subscribers</li>
<li>At the end of the June quarter, ARLO had annualized recurring revenue of approximately $200 million even though hardware revenue has remained at levels not seen in two years</li>
<li>The recurring revenue model gave ARLO the ability to generate free cash flow in the Q2. This inflection point should solidify ARLO’s valuation on a recurring revenue basis</li>
</ul>


ARLO reported another quarter of net subscriber adds above expectations and putting the Company on a faster pace to achieve 3 million paying subscribers
At the end of the June quarter, ARLO had annualized recurring revenue of approximately $200 million even though hardware revenue has remained at levels not seen in two years
The recurring revenue model gave ARLO the ability to generate free cash flow in the Q2. This inflection point should solidify ARLO’s valuation on a recurring revenue basis


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Thematic (Sector/Industry)

<ul><li>Energy- Rotation to Laggards or Something More Brewing?</li><li>The worst S&amp;P 500 sector so far in 2023 has been energy which is down almost 8% getting trounced by the technology and communication services sectors.</li><li>Inflation readings have benefited so far by energy “staying in the box” in 2023 versus the wild price spikes to $5/gallon gasoline and above which occurred last spring.</li></ul>

Energy- Rotation to Laggards or Something More Brewing?The worst S&amp;P 500 sector so far in 2023 has been energy which is down almost 8% getting trounced by the technology and communication services sectors.Inflation readings have benefited so far by energy “staying in the box” in 2023 versus the wild price spikes to $5/gallon gasoline and above which occurred last spring.

<ul>
<li>ARLO reported a non-GAAP profit in the first quarter of 2023 after the Company implemented a price increase on its subscription plan</li>
<li>ARLO added 182 thousand paid subscribers in the quarter and ended the first quarter with more than 2 million paying subscribers</li>
<li>Service revenue has allowed for greater operating leverage with gross margin expected to rise further in future quarter with the growth in service revenue</li>
</ul>


ARLO reported a non-GAAP profit in the first quarter of 2023 after the Company implemented a price increase on its subscription plan
ARLO added 182 thousand paid subscribers in the quarter and ended the first quarter with more than 2 million paying subscribers
Service revenue has allowed for greater operating leverage with gross margin expected to rise further in future quarter with the growth in service revenue


ARLO: Recurring Revenue Growth, PT to $11

<ul>
<li>ARLO initiated a new marketing strategy based on price and it seems consumers have responded well in an otherwise tough market backdrop.</li>
<li>The sell through led to ARLO growing the number of paid subscribers more than we were expecting, and on pace to surpass 2 million paid subscribers in first quarter 2023</li>
<li>The revenue achieved in the fourth quarter was approximately $3 million higher than the top end of the guidance range ARLO had previously provided</li>
</ul>


ARLO initiated a new marketing strategy based on price and it seems consumers have responded well in an otherwise tough market backdrop.
The sell through led to ARLO growing the number of paid subscribers more than we were expecting, and on pace to surpass 2 million paid subscribers in first quarter 2023
The revenue achieved in the fourth quarter was approximately $3 million higher than the top end of the guidance range ARLO had previously provided


<ul>
<li>ARLO spent the fourth quarter adjusting to a tough consumer environment with deep discounts to clear out channel inventory. </li>
<li>ARLO had already provided quarterly revenue guidance taking into consideration the discounting and promotions that would run during the quarter.</li>
<li>Paying subscriber count rising remains the value proposition in owning shares of ARLO. Quarterly adds closer to what ARLO has been achieving would be a positive for the stock. </li>
</ul>


ARLO spent the fourth quarter adjusting to a tough consumer environment with deep discounts to clear out channel inventory. 
ARLO had already provided quarterly revenue guidance taking into consideration the discounting and promotions that would run during the quarter.
Paying subscriber count rising remains the value proposition in owning shares of ARLO. Quarterly adds closer to what ARLO has been achieving would be a positive for the stock. 


United States

Arlo Technologies, Inc. provides software solutions. The Company offers cloud-based platform with a variety of connected devices such as security cameras. Arlo Technologies serves customers in the United States.

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Arlo Technologies Inc (ARLO US)

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