Arlo Shares Tumble 16% From Pandemic's 'Considerable Disruption' at Retail
Arlo withdrew full-year revenue guidance, with CEO Matt McRae citing “considerable disruption and uncertainty across its distribution channels” due to the coronavirus pandemic. “As channels return to a more normal operational footprint and inventory model, we expect this destocking to…
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reverse in future quarters” and shipments to improve, McRae said on the Q1 call Monday. The company is pinning hopes on a shift in its services business: Subscription conversion rates from the legacy business model were around 5%; early data for its new subscription model is about 50%. The company expects a “substantially lower churn rate,” said the executive. The jump in subscription attach rates will “transform the business as Arlo continues to end-of-life legacy products that include free storage and introduces new products that incorporate the new business model.” Q1 revenue grew 13% year on year to $65.5 million, said the company. Service revenue grew 31% to $14.7 million, paid account growth grew 57% and Arlo added 25,000 paid subscribers in the quarter. The company partnered with Kartchner Homes to integrate its video doorbell into homes built over the next 12 months, including a free three-month trial, said McRae. It introduced a wireless floodlight during the quarter with built-in 2K HDR video and two-way audio. Q2 revenue guidance is $50 million-$60 million; Q2 revenue in 2019 was $83.6 million. Shares closed down 16% to $2.31.