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Arlo Technologies Inc. - ARLO

Arlo Technologies Inc. - ARLO

Quick Q2 2024 update

Martin Svanda
Aug 09, 2024
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Arlo Technologies Inc. - ARLO
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My comments could be much lengthier like they were last quarter, where I almost hit the max length for sending out a Substack email, but I am going to limit my comments this time around to 3 main points for thought.

But first, a quick story. Back in early July when ARLO announced that they had surpassed 4M cumulative paid accounts, I had a conversation with a former account about what this could mean for the quarter. Based on what would ordinarily be fairly logical assumptions, ARLO was slated to simply crush the estimates out there, as any rational person would assume. At the end of March they had 3.235M cumulative paid accounts, and now they had 4M (announced July 9th), meaning during the quarter they added somewhere around 700K paid accounts (actual number is 745K), a number almost double what they added in Q1 and more than triple what they announced a year ago. They keep telling us that each subscriber is worth something over $11 a month in revenues, multiply that by 1.5 (to get an average for the quarter), and times 350K accounts (average subs increase for the quarter) and you get $5.8M in incremental subscriber revenues while all the estimates out there are only looking for like $3M. Next quarter naturally gets the full effect of those subscriber adds, making this a slam-dunk beat and raise quarter, right?

Well, that’s what the masses apparently thought, since the stock was up $3 on the news. My paid subscribers, however, who read over my lengthy diatribe back in May, knew that the $11 number is only for paid US subscribers, and not for their subscriber base as a whole. The vast majority of subscriber gains over the last year or more have come from their partner Verisure SARL in the Euro-zone, and partners like that pass along much smaller subscription revenues than those in the USA. Verisure also had some issues with their subscriber count during a multi-quarter software update, making the numbers even trickier.

So the bottom line to the conversation was, that if there was anybody out there thinking that this was going to be some sort of a breakthrough quarter where their home security cameras suddenly decided to catch on with the general public, then investors were going to be sadly disappointed.

Which leads me to my 3 quick(ish) takeaways from today’s Q2 announcement.

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