管理層發言
Ladies and gentlemen, thank you for standing by. I would now like to turn the conference over to Tahmin Clarke. Please go ahead, sir.
Thank you, operator. Good afternoon, and welcome to Arlo Technologies First Quarter 2026 Financial Results Conference Call. Joining us from the company are Mr. Matthew McRae, CEO; and Mr. Kurt Binder, COO and CFO. If you have not received a copy of today's release, please visit Arlo's Investor Relations website at investor.arlo.com. Before we begin the formal remarks, we advise you that today's conference call contains forward-looking statements. Forward-looking statements include statements regarding our potential future business, operating results and financial condition, including description of our revenue, gross margins, operating margins, earnings per share, expenses, cash outlook, free cash flow and free cash flow margin, ARR, Rule of 40 and other KPIs, guidance for the first quarter of 2026, the long-range plan targets, the rate and timing of paid subscriber growth, the commercial launch and momentum of new products and services, the timing and impact of tariffs, strategic objectives and initiatives, market expansion and future growth, partnerships with various market leaders and strategic collaborators, continued new product and service differentiation and the impact of general macroeconomic conditions on our business, operating results and financial condition. Actual results or trends could differ materially from those contemplated by these forward-looking statements. For more information, please refer to the risk factors discussed in Arlo's periodic filings with the SEC, including our annual report on Form 10-K and our quarterly report on Form 10-Q filed earlier today. Any forward-looking statements that we make on this call are based on assumptions as of today, and Arlo undertakes no obligations to update these statements as a result of new information or future events. In addition, several non-GAAP financial measures will be discussed on this call. A reconciliation of the GAAP to non-GAAP financial measures can be found in today's press release on our Investor Relations website. At this time, I would now like to turn the call over to Matt.
Thank you, Tahmin, and thank you, everyone, for joining us today on Arlo's First Quarter 2026 Earnings Call. During the exhaustive earnings process, the repetition of superlatives probably ring hollow, but I hope that you can see by any measure, Arlo truly had a spectacular quarter built on strong execution across our entire business and across all our key metrics. Both revenue and EPS were records, underscoring the strength of our results and came in well above the top end of our guidance range for the quarter. In fact, total revenue was up 26% year-over-year and hit $150 million, while non-GAAP EPS came in at an incredible $0.28 per share, which was up 86% year-over-year. Diving into the details, Arlo added 318,000 paid accounts in the period, well above our target range of 190,000 to 230,000 and driven by net additions in our retail and direct channel, coupled with continued strength by our partner, Verisure. This performance catapulted us past 6 million paid accounts substantially earlier than expected. Growth in paid accounts, coupled with ARPU increasing to $15.60 brought Arlo's annual recurring revenue up to $357 million, up an outstanding 29% year-over-year. This, in turn, propelled our consolidated non-GAAP gross margin by 460 basis points year-over-year to reach the 50% threshold. For those seeking score, our performance resulted in a Rule of 40 metric for our services business of 49, which puts us in a truly elite class of public companies with this level of profitable growth. However, what really separates Arlo from the pure SaaS companies is the unbreakable link to our customers created by our hardware devices. This connection means we can't be disintermediated by a third-party solution as our customers have invested in devices that are linked to our cloud for services and support. Arlo is not only growing faster than most SaaS companies, but we also have the benefit of customer lock-in through our world-class hardware. This best-of-both-worlds scenario that is in place irrespective of distribution channel is a unique differentiator. Arlo's management team and Board still believe the value that we have created is not reflected in the market, which is why our Board authorized the recent $50 million stock buyback program. Our flagship partnership engagements are progressing well with both ADT and Samsung commercial launches likely occurring in the near-term. And our integration with Comcast is under active development and progressing as expected to have a material impact in 2027. As I mentioned on the last call, it is clear to me that Arlo has become the preferred partner in the security segment, and I expect more strategic partnership announcements before the end of the year. And finally, in addition to achieving the 6 million paid account milestone, Arlo also announced the acquisition of Aloe Care, a company focused on bringing truly innovative solutions to the age-in-place and home care market. This is a massive $23 billion market that will grow more than tenfold over the next decade to reach a TAM of nearly $300 billion by 2034. It is also a fragmented market, characterized by antiquated offerings and a lack of true innovation that desperately requires a better solution for families wanting better outcomes. Aloe Care brings a broad spectrum of hardware, services and an exciting road map of AI-enabled features such as fall prediction instead of just fall detection. And while this is a small acquisition, it is a focused bet on a huge market with class-leading technology and a world-class team, but also a bet that will unlock new opportunities as we drive towards our long-range plan. We will share more information as we integrate Aloe Care, develop additional go-to-market opportunities and build out a plan for growth heading into 2027. I would like to welcome the Aloe Care team to Arlo. Our vision and mission are completely aligned, and we are so excited to make a truly positive impact together. And now I'll turn it over to Kurt for a more detailed review of our Q1 results and our financial outlook.
Thank you, Matt, and thank you, everyone, for joining us today. First, let me provide a detailed review of the key operational and financial results of the business, and then I will share an overview of our outlook for the second quarter. Our strong momentum from last year continued into 2026 with the shift to services revenue continuing to drive our profitability metrics, including adjusted EBITDA and free cash flow. This shift has accelerated as a result of our outstanding operating leverage inherent within our proven business model. In the first quarter, we were able to generate record subscriptions and services revenue of $90 million, up 31% year-over-year and accounting for 60% of total revenues. The growth was driven by strong expansion in our subscriber base, coupled with continued improvement in ARPU trends as well as the inclusion of nonrecurring revenue approximating $5 million received from a strategic partner. Our subscriber base grew 23% year-over-year as we secured 318,000 new paid accounts in Q1. Our positive subscriber growth was supported by our outstanding customer retention efforts, especially focused on our retail business. Our ARPU in the quarter was $15.60, up 16% over the same period last year, driven by ongoing adoption of our AI-enabled service plan offerings. We continue to benefit from upgrades to higher service plans, coupled with new subscribers selecting our premium rate plans. The improvement in ARPU drove strong growth of our ARR to $357 million, up 29% year-over-year. Total revenue for the period came in at $150.4 million, a record and up 26% from the prior year. This was driven primarily by growth in subscriptions and services revenue, coupled with increased product revenue resulting from the strong demand of our strategic partners. This level of total revenue growth is a testament to the strength of our services revenue trajectory as well as the diversification of our go-to-market strategy. Product revenue was $60.3 million, up from $50.2 million compared to the same period last year. This is driven by strong growth in international business as well as our intentional decision to be less promotional on specific SKUs that have a lower service conversion rate. Leveraging this approach did not come at the expense of unit volume as we were still able to drive higher POS volume in our retail channels by almost 10%. From this point on, my discussion will focus on non-GAAP numbers. The reconciliation from GAAP to non-GAAP figures is detailed in our earnings release, which was distributed earlier today. Our non-GAAP subscriptions and services gross margin was 85.4%, a new record and up 230 basis points year-over-year. Product margins also improved, up 340 basis points when compared to the same period last year, resulting from higher mix of purchases from strategic partners and a reduction in the overall bill of material costs for devices sold to our retail partners. Notably, the team delivered this strong result against a headwind of a 430 basis point impact from tariffs, which were not in place when we reported last year. With the improvement in both services and product gross margins, we were able to surpass the 50% consolidated non-GAAP gross margin level, delivering a growth of 460 basis points year-over-year. Consolidated gross margins at this level represent a new record and underscore the continuing uplift in profitability we are experiencing. Total non-GAAP operating expenses for the first quarter were $45.2 million, up 18% from $38.3 million in the same period last year. The year-over-year increase is driven by investments in R&D, including headcount as well as general operational expenses that result from the growth in our subscription business, such as higher credit card fees and increased professional services. During the quarter, adjusted EBITDA was $30.4 million, up a tremendous 85% year-over-year and represented adjusted EBITDA margin of 20%. Even in an investment year requiring integration of large-scale strategic partners onto our platform, we are still generating outstanding margins. Profitability at this level translated into net income per diluted share of $0.28. Regarding our balance sheet and liquidity position, we ended the quarter with $167.5 million in available cash, cash equivalents and short-term investments. This balance is up $14.4 million compared to the same period last year, even considering the recent launch of various capital allocation initiatives. It is remarkable that our cash balance remains constant over the past 2 quarters, while we experienced outflows of $44 million in cash used for recent inorganic investments and our share repurchase program, offset by inflows of about $19 million from the return of capital on the sale of a strategic investment, all in Q1. As you're aware, we made a $12.5 million investment in Origin Wireless last year, a strategic partner, which was recently acquired by ADT. During the period, we generated $25.4 million in free cash flow or a free cash flow margin of almost 17%. Our Q1 accounts receivable balance was $52 million at quarter end, with DSOs at 31 days, down from 34 days last year as we continue to drive more subscribers to annual service offerings. Our Q1 inventory balance was $44 million, up from $35 million last year. Inventory turns were approximately 6x, a modest decline from 6.3x last year as we look to optimize our inventory levels in an effort to reduce our shipping costs, especially air freight. Now turning to our outlook. We expect the strong operational momentum in our business to continue into the second quarter as subscriptions and services revenue will continue to grow and product revenue should remain solid as a result of the demand coming from our strategic partners. Considering these factors, we are expecting total revenue in the second quarter to be in the range of $145 million to $155 million with the continued investment to integrate our strategic partners and support our recent inorganic investments such as Aloe Care. We expect our non-GAAP net income per diluted share in the second quarter to be in the range of $0.17 to $0.23. Additionally, we remain confident that we will achieve the full year 2026 financial outlook, which we provided last quarter on subscriptions and services revenue as well as total revenue and EPS. And now I'll open up the call for questions.
分析師問答
And your first question comes from Jacob Stephan with Lake Street Capital Markets.
Nice quarter. Maybe just first, I wanted to touch on the Aloe Care acquisition. You guys have talked about this in the past, age-in-place being a kind of strategic market you'd like to get into. But maybe what specifically about Aloe was attractive for you guys?
Yes. There are really two layers. First, we talked in the prepared remarks about the size of the market, and over the next 10 years it's expected to grow tenfold. Second, when we look at Aloe Care in particular, it comes down to the team and the innovation. I've known Evan, the CEO, for three or four years and have been educating myself about the market and what Aloe Care is doing. We think they are a phenomenal team dedicated to providing innovative solutions rather than repeating what’s been done before. On innovation, Aloe Care is not just off-the-shelf hardware wrapped in monitoring services. They are driving real transformation, for example using AI chat and calling to influence behavior and conduct check-ins with seniors instead of only focusing on fall detection. They are also working on AI models for fall prediction, which is where I believe this segment will be transformed over the next three to five years. That’s why we decided now is the time to invest: it’s a small bet on a huge market with a team that has demonstrated technology and innovation leadership. Arlo brings the scale and the ability to drive routes to market, so we are extremely excited. To give a glimpse at the market: 87% of adults over 65 want to stay in their homes, but 90% of those homes aren’t set up with the right technology or services to be safe. From a cost perspective, about 30% of seniors fall annually and the average cost of a fall is $20,000. Being able not only to detect and reduce the cost of these incidents but to predict them ahead of time is truly transformative. The portion of the market related to falls is about $80 billion a year. So again, it’s a huge market expected to grow dramatically, and the team and technology are very exciting to us. Coupling that with our ability to scale, our back-end platform, and our routes to market should come together nicely as we move toward 2027.
Got it. Very helpful. Maybe just next, I'll talk on the ADT partnership a little bit. Can you kind of give us a little bit more insight on the overall rollout there? I mean it feels like it's been six months since you first started testing. But curious what the update is there.
Yes. They started testing earlier this year, as you mentioned. In their earnings call they said it will be branded ADT Blue and see it as a major area of focus for growth. As I said in my prepared remarks, the launch is likely imminent and coming very soon. I think they are making the final preparations to bring it to market. We expect it to scale through this year, so you may see them launch in a couple of channels and then add more channels as they progress, learn, and roll out marketing through the year, leading to a first full year of deployment in 2027. All the work is done, they're putting the final touches on it as they discussed on their earnings call, and we're excited to see it enter the marketplace.
Got it. And just last one for me. I saw you guys have bought back some stock this quarter. Just curious how you think about M&A versus buybacks versus maybe internal investment throughout the remainder of the year?
Yes. You're referring to the three pillars of our capital allocation plan. We've been making organic investments, which was evident in the large product launch near the end of last year. We'll benefit from those refreshed products throughout this year, and you'll see additional SKUs in key areas this year as we set up for a major product and technology launch next year. Arlo Secure 7 will come out this year and we're already working on it, with Arlo Secure 8 planned for next year. So internal investment is increasing, and now that Aloe Care is part of the company, it will also require internal investment as we prepare for 2027. Going to the core of your question about balancing buybacks with acquisitions, we look at both on a valuation basis. What's the upside potential? Where is the technology going and what is that worth over the long run? When we buy our own stock, we view it as an acquisition. As we mentioned in the prepared remarks, we believe the stock is still undervalued relative to our performance, so you'll likely see us continue to buy stock as part of the $50 million stock buyback. It has served us extremely well. We're performing very well relative to the market and our peers, so we see buybacks as a great return on capital and a way to return money to shareholders. We'll consider acquisitions, especially ones like Aloe Care that are tangential or an adjacency, where we can make a smaller bet in a large market to open up additional opportunity and growth, or we could make a larger, more core acquisition as we see continued market consolidation. Organic internal investment will continue to grow because we see significant market potential. We will do stock buybacks when we believe the stock is undervalued, and we will place strategic bets in the acquisition market. We'll keep an eye out for additional opportunities over the next 12 to 18 months.
Your next question comes from the line of Scott Searle with ROTH Capital.
Great job on the quarter. Maybe just to start, a couple of quick clarifications. Kurt, I think you said that there was a $5 million nonrecurring fee. I just want to clarify if that was the case and if that's in software and services. Also, European numbers were really big this quarter. Historically, in the past, sometimes we've had some big prebuys with Verisure and otherwise on the product front. I'm wondering if that was this case again. And maybe an idea of what you're seeing on the retail front, kind of the retail mix there. There are a lot of changing dynamics with what's going on with the FCC and exclusion list as well as maybe some of the bigger guys getting less shelf space. So I'm wondering if you could give us a quick update on that front.
Yes, Scott, thanks. I'll unpack that. First, I want to say how pleased and excited we were about the overall trajectory of our business. You pointed out the growth in our services business, which was remarkable this quarter, and our product revenue growth was also very strong, which fed through to our overall profitability. We did have a one-time item, a $5 million license fee from one of our strategic partners related to our technologies. As we've done in the past, and as we've highlighted with items like our NRE-type services, we want to make sure you are aware of one-time items that may be in our revenue. That $5 million license fee is included in our services revenue, but if you were to pull it out, the growth metrics we've highlighted—whether the absolute dollar growth in services revenue, our overall service gross margin percentage, or our EBITDA growth and EBITDA margin—would all remain in roughly the same ballpark. So there is no meaningful change to the overall trajectory of our business. You highlighted Verisure. It was a very strong quarter for Verisure. As we've discussed in the past regarding their destocking and stocking trends, we often see some destocking in the third and fourth quarters, followed by restocking in subsequent quarters to meet demand. That's what happened this quarter; Q1 was strong for Verisure, which underscores the strength of that relationship. We will continue to work with them to optimize our supply chain and meet demand in the EMEA market. Overall, we're very pleased with how the business is trending. We believe the impact of our strategic partners, together with the robust nature of our retail business, is coming through, and it shows we can perform well in a market that may be a bit uncertain because we are executing extremely well. So thanks, Scott.
And since you already hit on ADT, Matt, maybe could you extrapolate a little bit on Samsung in terms of how that relationship is evolving and what kind of form it's going to take and how we should think about that monetization?
Yes. So Samsung provided a lot of public description of what the service was at CES, so I can talk about what the user experience will be. And it's really a safety services widget and application button that is going to go across their devices. We'll start on mobile phones and tablets, but you're likely to see it progress even across appliances and things where you can walk up, touch a button and have immediate access to emergency services. And so they showed that at CES, they've done with it and got a great response. Again, I can't give you too much detail of when exactly it will roll out, except to say that, like I said before, it's imminent. So all the testing is done, and it's out in the field being tested now. And you're likely to see that roll out relatively soon, and there will be a small subscription component across that. It's exciting for us for a couple of reasons. One is, it's the first partnership deal that we've done where what's being rolled out by a partner is purely service and software, right? There's not a hardware component coming from Arlo as a portion of this. So that's exciting. Two, from an Arlo perspective, it's exciting to see the progression of the SmartThings platform from Samsung continue to kind of broaden out. And we believe that some of these platforms are going to gain share and relevance in the market as we see standards like Matter continue to roll out across multiple channels. And Samsung is a very strong supporter of the Matter alliance and the standard being rolled out. And then you can see that if you look at some of their announcements recently. And what we believe is that, that will open up additional opportunities for Arlo to partner with Samsung inside of SmartThings and potentially across other areas of the business. So we've done a lot of interop and make sure that the SmartThings experience with Arlo products is top tier, and we did some of that last year. What you'll see very, very soon is a first small subscription service being rolled out by Samsung, co-branded, by the way, so it will say Samsung powered by Arlo. So we're excited about that. But we think this area is going to be an area of growth, not only in the market segment, but also within Samsung, and we're excited to explore additional opportunities with them over time.
Got you. And lastly, if I could. A lot of exciting things going on, particularly as we start to ramp into '27, which it sounds like Comcast will be more commercial at that point in time, maybe age-in-place, it has some form of commercial services, but you've also got other strategic building in the pipeline. I'm wondering if you could flush that out a little bit, maybe give us an idea in terms of some of the comparative magnitude. When I look at what you've done in the past couple of quarters with ADT and Comcast, that adds almost 40 million homes in terms of your addressable market to go after. So I don't know if there's some color in terms of the pipeline, how that's building, the magnitude of the customers to give us some idea about where we're going in '26 and '27.
Yes. That's a great question. As I mentioned on the previous call, we find ourselves as a company and as a team in the enviable position of seeing a great trajectory in 2026 and already building a strong trajectory in 2027. For the first time I can really say that a lot of what we've announced and built will provide performance not only this year but next year as well. Our product roadmap is very exciting heading into 2027, and some of the things we're doing across multiple channels are promising for 2027. Over the last six months we announced three partnerships: ADT, Samsung and Comcast. ADT and Samsung will launch relatively soon, ramp through the second half of the year, and have a full-year impact next year. Comcast’s integration will progress through most of this year and will likely launch sometime in the first half of next year and start to impact 2027 as well. From a magnitude perspective, Samsung is hard to predict but exciting — this will roll out to hundreds of millions of devices over time, so the total addressable market is huge. Comcast and ADT together address roughly 40 million households in the United States alone. In particular, Comcast, with about 31 million broadband households, has the opportunity from a service revenue perspective over time to be as material and impactful as Verisure. The other partnerships can also grow to be very material, though adoption with Samsung is more uncertain, but it has very high potential. I also hinted on the call that you should expect us to announce one or two small-to-medium or medium-to-large partners over the next 12 to 18 months. So there is a pipeline beyond what we've already announced that will lead to additional work in 2027 with revenue potentially in the second half of 2027 and into 2028. We feel really good about 2026 given the strong start and the quarter results we just reported, and we already feel good about the trajectory into 2027. The pipeline will add strength to 2027 and 2028. With market consolidation happening, we believe we’re well-positioned to perform strongly and be rewarded for our market position and the solutions we bring.
Your next question comes from the line of Anthony Stoss with Craig-Hallum Capital Group. After the results we just put up, we're already feeling good about the trajectory going into 2027. There's a pipeline that will add strength to 2027 and even 2028. So, like I said, we're feeling really good about the performance and where we're headed. With market consolidation happening generally, we think we're in a very good position to perform well and be rewarded for our place in the market segment and the solutions we bring to the market.
This is Rian on for Tony Stoss. I'm curious with just the amount of partnerships that you guys have announced in the past year or so and which will continue to expand, I guess. But how are you guys looking at the business customers like enterprise customers versus general consumer plans, maybe how you expect those to grow over the next year or two with the partnerships and without?
Yes. If you're talking about small business and other market segments, we did mention on the last call that we are starting to explore the small business market. Today, we remain very consumer-focused across all our channels, including partnerships. Our partnership with ADT is primarily targeting additional consumer households. The same is true with Comcast; Comcast has 31 million broadband households, and we're initially going after those consumer broadband households from a go-to-market perspective. That said, we've started to look at building out a technology stack and developing solutions for the small business space. I think we can formalize that more sometime in 2027. It's another market segment with a potential market size of tens of billions of dollars, and it is very fragmented. I don't think true commercial enterprise solution providers will successfully go downmarket. It's much more likely that a company like Arlo, with a strong technology stack, inexpensive hardware, easy setup, and robust service offerings, will be successful moving upmarket into very small businesses and eventually medium-sized businesses. You'll see us run some tests and pilots this year with the idea of possibly adding that to our portfolio in 2027. I also think the go-to-market approach there will likely rely heavily on partnering with several companies to address that market, because fragmentation isn't only competitive — it's also in go-to-market channels. There are tens of thousands of resellers and integrators, so a partner who already has routes to market or is addressing that market can be an efficient way to leverage Arlo technology and start addressing it effectively.
Got it. Super helpful. And then as my follow-up, I think you guys talked about it last quarter. Memory is a pretty small percentage of your guys' BOM cost, and you use kind of lower-level DRAM, maybe not as much of the constrained stuff in your products. I'm just wondering if there's been any change on that front or if there's any visibility that's kind of changed since last quarter on the memory side?
No, Rian. As you mentioned, and as we discussed last quarter, memory is about 6% to 8% of our total BOM, so it's not a huge part of the BOM. The cost of memory has absolutely gone up. Based on our records right now, the first half is probably up about 160%. In the second half there will be a continued increase in memory costs. The great thing is we have a fantastic supply chain team that has deep relationships across the entire supply chain. They've been leveraging those relationships. We are working with sophisticated ODMs that do a lot of advanced purchasing. Right now, we feel very good about the supply we have, not just for the first half but for the entire year, and we're really confident about that. We'll continue to work those relationships and negotiate price concessions throughout the year, and we'll manage BOM costs down as best we can. When we look at price or cost increases, we view them in terms of overall CAC or cost of customer acquisition. In this instance, although it's a bit unusual in the market, from our standpoint it's a modest increase in overall CAC. If we continue with our strategy and keep seeing the results we've shown this past quarter and over the last several quarters, I think we're on a good path forward. There is no major disruption, and we're managing the situation very well.
Your next question comes from the line of Joseph Besecker with Besecker Asset Management.
Great quarter — keep it up. You mentioned tariffs briefly. Do you anticipate receiving tariff relief? How do you view tariffs? I have a follow-up to that.
Yes. Great. And great to meet you, Joe. So similar to the conversation I was just having with Rian on the overall cost of memory, we kind of look at the tariff cost of the tariff increase as also a portion of our overall CAC, and we've been able to manage that particularly well last year and into this year. It's pretty remarkable. When you look at our product gross margin on a non-GAAP basis for this quarter, it was actually at a negative 2.8%. But if you pull out tariffs, we were actually at 1.5% positive gross margin on our overall products. So we think that's a good place to be because if we're managing it to that, what we said, low single-digit negative margin, that puts it in a real nice place for managing it as a CAC cost of customer acquisition, and we'll continue to do that. You are correct. We did actually place our claims shortly after the tariff relief portal was open. We're still in the process of evaluating whether or not we'll be eligible for claims. There's a lot of uncertainty around the processing and ultimately the timing of those. So just know that we are in the queue. We're managing the tariff relief process very carefully, and we'll provide more information as it becomes available to us over the next several months or quarters.
Thank you. And there are no further questions at this time. This concludes today's conference call. You may now disconnect.