The Company and Basis of Presentation	9 Months Ended
Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
The Company and Basis of Presentation	The Company and Basis of Presentation The Company Arlo Technologies, Inc. (“Arlo” or the “Company”) combines an intelligent cloud infrastructure and mobile app with a variety of smart connected devices that transform the way people experience the connected lifestyle. Its cloud-based platform creates a seamless, end-to-end connected lifestyle solution that provides users visibility, insight and a powerful means to help protect and connect with the people and things that matter most to them. Arlo enables users to monitor their environments and engage in real-time with their families and businesses from any location with a Wi-Fi or a cellular network internet connection. The Company conducts business across three geographic regions - Americas; Europe, Middle-East and Africa (“EMEA”); and Asia Pacific (“APAC”) - and primarily generates revenue by selling devices through retail channels, wholesale distribution and wireless carrier channels and paid subscription services through in-app purchases. On February 6, 2018, NETGEAR Inc. (“NETGEAR”) announced that its board of directors had unanimously approved the pursuit of a separation of its Arlo business from NETGEAR (the “Separation”) to be effected through an initial public offering (the “IPO”) of newly issued shares of the common stock of Arlo, then a wholly owned subsidiary of NETGEAR. Following a series of restructuring steps prior to the completion of the IPO of Arlo common stock, the Arlo business was transferred from NETGEAR to Arlo (collectively, the “Contribution”). On August 2, 2018, NETGEAR and Arlo announced the pricing of the IPO of 10,215,000 shares of Arlo’s common stock at a price to the public of $16.00 per share. On August 3, 2018, Arlo’s shares began trading on the New York Stock Exchange under the ticker symbol “ARLO.” On August 7, 2018, the Company completed its IPO of 11,747,250 shares of common stock (including 1,532,250 shares of common stock pursuant to the underwriters’ option to purchase additional shares, which was exercised in full on August 3, 2018), at $16.00 per share, before underwriting discounts and commissions and estimated offering costs. Cash proceeds from the IPO offering were $173.4 million, net of the portion of the offering cost paid by Arlo, which portion was $1.4 million. The total offering cost was $4.6 million, of which $3.2 million was paid by NETGEAR. Prior to the completion of the IPO, the Company was a wholly owned subsidiary of NETGEAR and upon the closing of the IPO (including the issuance of additional shares of common stock pursuant to the underwriters’ option to purchase additional shares, which was exercised in full) on August 7, 2018, NETGEAR owned approximately 84.2% of the shares of Arlo’s outstanding common stock. NETGEAR has informed the Company that it presently intends to distribute its holdings of Arlo common stock prior to the end of its first quarter of 2019 to NETGEAR’s stockholders in a manner generally intended to qualify as tax-free to NETGEAR stockholders for U.S. federal income tax purposes (the “Distribution”). The Distribution is subject to market, tax and legal considerations, final approval by NETGEAR’s board of directors, and other customary requirements, and NETGEAR may abandon or change the structure of the Distribution if it determines, in its sole discretion, that the Distribution is not in the best interest of NETGEAR or its stockholders. In addition, in connection with the Separation and IPO: •On August 2, 2018, the Company amended and restated its Certificate of Incorporation to change the authorized capital stock to 500,000,000 shares of common stock and 50,000,000 shares of preferred stock, all with a par value of $0.001 per share. •On August 2, 2018, the Company issued 62,499,000 shares of its common stock to the Company’s sole stockholder of record, NETGEAR (after which NETGEAR held 62,500,000 shares of common stock of the Company, which represented all of the then issued and outstanding common stock of the Company). This issuance is reflected in the share and per share amounts for all periods. •On August 1, 2018, the Company reserved 9,000,000 shares of the Company’s common stock for issuance under the Company’s 2018 Equity Incentive Plan (the “2018 Plan”) and the Company’s 2018 Employee Stock Purchase Plan (the “2018 ESPP”). •The Company appointed executive officers and other key roles effective upon the completion of the IPO on August 7, 2018. Effective as of August 2, 2018, the Company also entered into executive confirmatory letters and change in control severance agreements with each of its key executives as well as granted its initial option grants to the Company’s key executives. For further details regarding executive compensation, please refer to the Prospectus (as defined below) in the section titled “Executive Compensation.” Basis of Presentation The unaudited condensed combined financial statements of Arlo that cover periods ending or as of dates prior to the completion of the IPO have been derived and carved out from the consolidated financial statements and accounting records of NETGEAR as if Arlo had operated on a stand-alone basis within the periods presented. In connection with the Separation and IPO, certain assets and liabilities presented have been transferred to Arlo at carry-over (historical cost) basis. Balances contributed by NETGEAR on or before the completion of the IPO were based on the master separation agreement between the Company and NETGEAR and related documents governing the Contribution. NETGEAR’s initial net assets contributed was approximately $80.9 million excluding the Account receivables of $111.1 million and Accounts payable of $25.5 million balances as of July 1, 2018. In addition, NETGEAR contributed approximately $70.0 million in cash in the period leading up to the separation. The net adjustment to the Company’s historical records was reflected as a net investment from parent. Following the completion of the IPO, the unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All periods presented have been accounted for in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”). These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the audited combined financial statements and accompanying notes for the year ended December 31, 2017 included in the prospectus filed with the SEC on August 6, 2018 (the “Prospectus”) pursuant to Rule 424(b) under the Securities Act of 1933, as amended. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for fair statement of the unaudited condensed consolidated financial statements for interim periods. The Company has evaluated all subsequent events through the date the financial statements were issued. Cash Management Arlo was historically funded as part of NETGEAR’s treasury program. Cash and cash equivalents were primarily centrally managed through bank accounts legally owned by NETGEAR. Accordingly, prior to the completion of the IPO, Cash and cash equivalents held by NETGEAR at the corporate level were not attributable to Arlo for the periods presented. Only cash amounts legally owned by entities dedicated to the Arlo business are reflected in the unaudited condensed consolidated balance sheets. Following the completion of IPO, the Company has maintained a separate cash management and financing function for its operation. Transfers of cash, both to and from NETGEAR’s treasury program, are reflected as a component of Net parent investment in the unaudited condensed consolidated balance sheets and as a financing activity on the accompanying unaudited condensed consolidated statements of cash flows. Net Parent Investment As the functional departments that make up Arlo were not historically held by a single legal entity, total Net parent investment is shown in lieu of equity in the unaudited condensed consolidated financial statements. Balances between Arlo and NETGEAR that were not historically cash settled are included in Net parent investment as of the completion of the IPO on August 7, 2018. Balances between Arlo and NETGEAR that were historically cash settled are included in Prepaid expenses and other current assets and Accrued liabilities on the unaudited condensed consolidated balance sheets. Net parent investment represents NETGEAR’s interest in the recorded assets of Arlo and represents the cumulative investment by NETGEAR in Arlo through the dates presented, inclusive of operating results. Allocated Expenses The operating results of Arlo have historically been disclosed as a reportable segment within the consolidated financial statements of NETGEAR enabling identification of directly attributable transactional information, functional departments, and headcount. Through July 1, 2018, Revenue and Cost of revenue, with the exception of channel sales incentives, were derived from transactional information specific to Arlo products and services. Directly attributable operating expenses were derived from activities relating to Arlo functional departments and headcount. Arlo employees also historically participated in NETGEAR’s stock-based incentive plans, in the form of restricted stock units (“RSUs”), stock options, and purchase rights issued pursuant to NETGEAR’s employee stock purchase plan. Stock-based compensation expense has been either directly reported by or allocated to Arlo based on the awards and terms previously granted to NETGEAR’s employees. The unaudited condensed combined statements of operations of the Company as presented reflect the directly attributable transactional information specific to Arlo and certain additional allocated costs through July 1, 2018. The allocated costs for corporate functions included, but were not limited to, allocations of general corporate expenses from NETGEAR including expenses related to corporate services, such as executive management, information technology, legal, finance and accounting, human resources, tax, treasury, research and development, sales and marketing, shared facilities and other shared services. These costs were allocated based on revenue, headcount, or other measures the Company has determined as reasonable. Following July 1, 2018, the unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and accounts have been eliminated. Transactions between the Company and NETGEAR are included in these unaudited condensed consolidated financial statements for all periods presented. The amount of these allocations from NETGEAR reflected within operating expenses in the unaudited condensed consolidated statements of operations was $11.0 million for the three months ended October 1, 2017, which included $3.1 million for research and development, $3.6 million for sales and marketing, and $4.3 million for general and administrative expense. The amount of these allocations from NETGEAR was $30.6 million from January 1, 2018 to August 7, 2018, the date of the completion of the Company’s IPO, which included $9.4 million for research and development, $10.0 million for sales and marketing, and $11.2 million for general and administrative expense. Allocations amounted to $27.3 million for the nine months ended October 1, 2017, which included $8.1 million for research and development, $8.8 million for sales and marketing, and $10.4 million for general and administrative expense. The management of Arlo believes the assumptions underlying the unaudited condensed consolidated financial statements, including the assumptions regarding the allocated expenses, reasonably reflect the utilization of services provided, or the benefit received by Arlo through the completion of the IPO within the periods presented. Nevertheless, the unaudited condensed consolidated financial statements may not be indicative of Arlo’s future performance and do not necessarily reflect Arlo's results of operations, financial position, and cash flows had Arlo been a stand-alone company during the periods presented. Income Taxes During the periods presented in the unaudited condensed consolidated financial statements, the operations of Arlo are included in the consolidated U.S. federal, and certain state and local and foreign income tax returns filed by NETGEAR, where applicable. Income tax expense and other income tax related information contained in the unaudited condensed consolidated financial statements are presented on a separate return basis as if Arlo had filed its own tax returns. The income taxes of Arlo as presented in the unaudited condensed consolidated financial statements may not be indicative of the income tax liabilities that Arlo will incur in the future. Additionally, certain tax attributes such as net operating losses or credit carryforwards are presented on a separate return basis, and accordingly, may differ in the future. In jurisdictions where Arlo has been included in the tax returns filed by NETGEAR, any income tax receivables resulting from the related income tax provisions have been reflected in Net parent investment on the unaudited condensed consolidated balance sheets. Further, the unaudited condensed consolidated financial statements may not be indicative of Arlo’s liability for income taxes under the tax matters agreement entered into with NETGEAR in connection with the IPO, under which, for taxable periods (or portions thereof) beginning after July 2, 2018, Arlo is responsible for and has agreed to indemnify NETGEAR for (i) all income taxes imposed with respect to any consolidated, combined, or unitary tax return of NETGEAR or any of its subsidiaries that includes Arlo or any of its subsidiaries to the extent such taxes are attributable to Arlo or any of its subsidiaries, as determined under the tax matters agreement and (ii) all taxes imposed with respect to any of Arlo’s subsidiaries’ consolidated, combined, unitary, or separate tax returns. Fiscal periods The Company’s fiscal year begins on January 1 of the year stated and ends on December 31 of the same year. The Company reports its results on a fiscal quarter basis rather than on a calendar quarter basis. Under the fiscal quarter basis, each of the first three fiscal quarters ends on the Sunday closest to the calendar quarter end, with the fourth quarter ending on December 31. Use of estimates The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Management bases its estimates on various assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates and operating results for the nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ended December 31, 2018 or any future period.

The Company and Basis of Presentation

The Company

Arlo Technologies, Inc. (“Arlo” or the “Company”) combines an intelligent cloud infrastructure and mobile app with a variety of smart connected devices that transform the way people experience the connected lifestyle. Its cloud-based platform creates a seamless, end-to-end connected lifestyle solution that provides users visibility, insight and a powerful means to help protect and connect with the people and things that matter most to them. Arlo enables users to monitor their environments and engage in real-time with their families and businesses from any location with a Wi-Fi or a cellular network internet connection. The Company conducts business across three geographic regions - Americas; Europe, Middle-East and Africa (“EMEA”); and Asia Pacific (“APAC”) - and primarily generates revenue by selling devices through retail channels, wholesale distribution and wireless carrier channels and paid subscription services through in-app purchases.

On February 6, 2018, NETGEAR Inc. (“NETGEAR”) announced that its board of directors had unanimously approved the pursuit of a separation of its Arlo business from NETGEAR (the “Separation”) to be effected through an initial public offering (the “IPO”) of newly issued shares of the common stock of Arlo, then a wholly owned subsidiary of NETGEAR. Following a series of restructuring steps prior to the completion of the IPO of Arlo common stock, the Arlo business was transferred from NETGEAR to Arlo (collectively, the “Contribution”).

On August 2, 2018, NETGEAR and Arlo announced the pricing of the IPO of 10,215,000 shares of Arlo’s common stock at a price to the public of $16.00 per share. On August 3, 2018, Arlo’s shares began trading on the New York Stock Exchange under the ticker symbol “ARLO.” On August 7, 2018, the Company completed its IPO of 11,747,250 shares of common stock (including 1,532,250 shares of common stock pursuant to the underwriters’ option to purchase additional shares, which was exercised in full on August 3, 2018), at $16.00 per share, before underwriting discounts and commissions and estimated offering costs. Cash proceeds from the IPO offering were $173.4 million, net of the portion of the offering cost paid by Arlo, which portion was $1.4 million. The total offering cost was $4.6 million, of which $3.2 million was paid by NETGEAR.

Prior to the completion of the IPO, the Company was a wholly owned subsidiary of NETGEAR and upon the closing of the IPO (including the issuance of additional shares of common stock pursuant to the underwriters’ option to purchase additional shares, which was exercised in full) on August 7, 2018, NETGEAR owned approximately 84.2% of the shares of Arlo’s outstanding common stock. NETGEAR has informed the Company that it presently intends to distribute its holdings of Arlo common stock prior to the end of its first quarter of 2019 to NETGEAR’s stockholders in a manner generally intended to qualify as tax-free to NETGEAR stockholders for U.S. federal income tax purposes (the “Distribution”). The Distribution is subject to market, tax and legal considerations, final approval by NETGEAR’s board of directors, and other customary requirements, and NETGEAR may abandon or change the structure of the Distribution if it determines, in its sole discretion, that the Distribution is not in the best interest of NETGEAR or its stockholders.

In addition, in connection with the Separation and IPO:

•On August 2, 2018, the Company amended and restated its Certificate of Incorporation to change the authorized capital stock to 500,000,000 shares of common stock and 50,000,000 shares of preferred stock, all with a par value of $0.001 per share.

•On August 2, 2018, the Company issued 62,499,000 shares of its common stock to the Company’s sole stockholder of record, NETGEAR (after which NETGEAR held 62,500,000 shares of common stock of the Company, which represented all of the then issued and outstanding common stock of the Company). This issuance is reflected in the share and per share amounts for all periods.

•On August 1, 2018, the Company reserved 9,000,000 shares of the Company’s common stock for issuance under the Company’s 2018 Equity Incentive Plan (the “2018 Plan”) and the Company’s 2018 Employee Stock Purchase Plan (the “2018 ESPP”).

•The Company appointed executive officers and other key roles effective upon the completion of the IPO on August 7, 2018. Effective as of August 2, 2018, the Company also entered into executive confirmatory letters and change in control severance agreements with each of its key executives as well as granted its initial option grants to the Company’s key executives. For further details regarding executive compensation, please refer to the Prospectus (as defined below) in the section titled “Executive Compensation.”

Basis of Presentation

The unaudited condensed combined financial statements of Arlo that cover periods ending or as of dates prior to the completion of the IPO have been derived and carved out from the consolidated financial statements and accounting records of NETGEAR as if Arlo had operated on a stand-alone basis within the periods presented. In connection with the Separation and IPO, certain assets and liabilities presented have been transferred to Arlo at carry-over (historical cost) basis. Balances contributed by NETGEAR on or before the completion of the IPO were based on the master separation agreement between the Company and NETGEAR and related documents governing the Contribution. NETGEAR’s initial net assets contributed was approximately $80.9 million excluding the Account receivables of $111.1 million and Accounts payable of $25.5 million balances as of July 1, 2018. In addition, NETGEAR contributed approximately $70.0 million in cash in the period leading up to the separation. The net adjustment to the Company’s historical records was reflected as a net investment from parent. Following the completion of the IPO, the unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All periods presented have been accounted for in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”).

These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the audited combined financial statements and accompanying notes for the year ended December 31, 2017 included in the prospectus filed with the SEC on August 6, 2018 (the “Prospectus”) pursuant to Rule 424(b) under the Securities Act of 1933, as amended. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for fair statement of the unaudited condensed consolidated financial statements for interim periods. The Company has evaluated all subsequent events through the date the financial statements were issued.

Cash Management

Arlo was historically funded as part of NETGEAR’s treasury program. Cash and cash equivalents were primarily centrally managed through bank accounts legally owned by NETGEAR. Accordingly, prior to the completion of the IPO, Cash and cash equivalents held by NETGEAR at the corporate level were not attributable to Arlo for the periods presented. Only cash amounts legally owned by entities dedicated to the Arlo business are reflected in the unaudited condensed consolidated balance sheets. Following the completion of IPO, the Company has maintained a separate cash management and financing function for its operation. Transfers of cash, both to and from NETGEAR’s treasury program, are reflected as a component of Net parent investment in the unaudited condensed consolidated balance sheets and as a financing activity on the accompanying unaudited condensed consolidated statements of cash flows.

Net Parent Investment

As the functional departments that make up Arlo were not historically held by a single legal entity, total Net parent investment is shown in lieu of equity in the unaudited condensed consolidated financial statements. Balances between Arlo and NETGEAR that were not historically cash settled are included in Net parent investment as of the completion of the IPO on August 7, 2018. Balances between Arlo and NETGEAR that were historically cash settled are included in Prepaid expenses and other current assets and Accrued liabilities on the unaudited condensed consolidated balance sheets. Net parent investment represents NETGEAR’s interest in the recorded assets of Arlo and represents the cumulative investment by NETGEAR in Arlo through the dates presented, inclusive of operating results.

Allocated Expenses

The operating results of Arlo have historically been disclosed as a reportable segment within the consolidated financial statements of NETGEAR enabling identification of directly attributable transactional information, functional departments, and headcount. Through July 1, 2018, Revenue and Cost of revenue, with the exception of channel sales incentives, were derived from transactional information specific to Arlo products and services. Directly attributable operating expenses were derived from activities relating to Arlo functional departments and headcount. Arlo employees also historically participated in NETGEAR’s stock-based incentive plans, in the form of restricted stock units (“RSUs”), stock options, and purchase rights issued pursuant to NETGEAR’s employee stock purchase plan. Stock-based compensation expense has been either directly reported by or allocated to Arlo based on the awards and terms previously granted to NETGEAR’s employees.

The unaudited condensed combined statements of operations of the Company as presented reflect the directly attributable transactional information specific to Arlo and certain additional allocated costs through July 1, 2018. The allocated costs for corporate functions included, but were not limited to, allocations of general corporate expenses from NETGEAR including expenses related to corporate services, such as executive management, information technology, legal, finance and accounting, human resources, tax, treasury, research and development, sales and marketing, shared facilities and other shared services. These costs were allocated based on revenue, headcount, or other measures the Company has determined as reasonable. Following July 1, 2018, the unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and accounts have been eliminated. Transactions between the Company and NETGEAR are included in these unaudited condensed consolidated financial statements for all periods presented.

The amount of these allocations from NETGEAR reflected within operating expenses in the unaudited condensed consolidated statements of operations was $11.0 million for the three months ended October 1, 2017, which included $3.1 million for research and development, $3.6 million for sales and marketing, and $4.3 million for general and administrative expense. The amount of these allocations from NETGEAR was $30.6 million from January 1, 2018 to August 7, 2018, the date of the completion of the Company’s IPO, which included $9.4 million for research and development, $10.0 million for sales and marketing, and $11.2 million for general and administrative expense. Allocations amounted to $27.3 million for the nine months ended October 1, 2017, which included $8.1 million for research and development, $8.8 million for sales and marketing, and $10.4 million for general and administrative expense.

The management of Arlo believes the assumptions underlying the unaudited condensed consolidated financial statements, including the assumptions regarding the allocated expenses, reasonably reflect the utilization of services provided, or the benefit received by Arlo through the completion of the IPO within the periods presented. Nevertheless, the unaudited condensed consolidated financial statements may not be indicative of Arlo’s future performance and do not necessarily reflect Arlo's results of operations, financial position, and cash flows had Arlo been a stand-alone company during the periods presented.

Income Taxes

During the periods presented in the unaudited condensed consolidated financial statements, the operations of Arlo are included in the consolidated U.S. federal, and certain state and local and foreign income tax returns filed by NETGEAR, where applicable. Income tax expense and other income tax related information contained in the unaudited condensed consolidated financial statements are presented on a separate return basis as if Arlo had filed its own tax returns. The income taxes of Arlo as presented in the unaudited condensed consolidated financial statements may not be indicative of the income tax liabilities that Arlo will incur in the future. Additionally, certain tax attributes such as net operating losses or credit carryforwards are presented on a separate return basis, and accordingly, may differ in the future. In jurisdictions where Arlo has been included in the tax returns filed by NETGEAR, any income tax receivables resulting from the related income tax provisions have been reflected in Net parent investment on the unaudited condensed consolidated balance sheets. Further, the unaudited condensed consolidated financial statements may not be indicative of Arlo’s liability for income taxes under the tax matters agreement entered into with NETGEAR in connection with the IPO, under which, for taxable periods (or portions thereof) beginning after July 2, 2018, Arlo is responsible for and has agreed to indemnify NETGEAR for (i) all income taxes imposed with respect to any consolidated, combined, or unitary tax return of NETGEAR or any of its subsidiaries that includes Arlo or any of its subsidiaries to the extent such taxes are attributable to Arlo or any of its subsidiaries, as determined under the tax matters agreement and (ii) all taxes imposed with respect to any of Arlo’s subsidiaries’ consolidated, combined, unitary, or separate tax returns.

Fiscal periods

The Company’s fiscal year begins on January 1 of the year stated and ends on December 31 of the same year. The Company reports its results on a fiscal quarter basis rather than on a calendar quarter basis. Under the fiscal quarter basis, each of the first three fiscal quarters ends on the Sunday closest to the calendar quarter end, with the fourth quarter ending on December 31.

Use of estimates

The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Management bases its estimates on various assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates and operating results for the nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ended December 31, 2018 or any future period.