Arlo Technologies, Inc.

Ladies and gentlemen, thank you for standing by. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. At that time, if you have a question, you will need to press star 1 on your push-button phone. I would now like to turn the conference over to Tom Endkark. Please go ahead, sir.

Thank you, Operator. Good afternoon and welcome to Arlo Technologies' first quarter 2025 financial results conference call. Joining us from the company are Mr. Matthew McCrae, CEO, and Mr. Kirk 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 descriptions of our revenue, gross margins, operating margins, earnings per share, expenses, cash outlook, free cash flow, free cash flow margin, guidance for the second quarter of 2025, the long-range plan targets, the rate and timing of our paid subscriber growth, the transition to a services-first business model, 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, the effect of our brand awareness campaign on 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 conditions. 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 most recent 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 obligation 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 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, Tom, and thank you, everyone, for joining us today on Arlo's first quarter 2025 earnings call. In Q1, Arlo added 298,000 subscribers in the quarter and ended Q1 with 4.9 million paid accounts, which is a 51% increase year over year. Average revenue per user, or ARPU, rose to a record $13.48, propelled by the continued success of Arlo Secure 5 and our new service plans. This resulted in subscriptions and services revenue of $69 million for the quarter, and our annual recurring revenue grew to $276 million, both up over 20% year over year and new records for Arlo. This acceleration of Arlo's subscription and services business is the clear driver for our outstanding Q1 financial results. Our non-GAAP services gross margin of 83% is up 600 basis points from last year and contributed to our record free cash flow of $28 million and earnings per share of 15 cents, which is also a record for our low. And we expect this strength in our subscriptions and services business will continue in Q2 and throughout 2025. We expect strong growth in subscribers and additional ARPU expansion as the benefits of our new Arlo Secure 5 plans penetrate our user base and read through in our results. In fact, for the first five weeks of Q2, we have not seen any drop off in demand across our channels and have already hit a key service milestone. Today, we announced we surpassed 5 million subscribers, which is ahead of our 2025 forecast and more than two years early compared to our original long range plan. This is a significant milestone for the company and shows the incredible pace of growth for our subscriptions and services business as we execute towards our new long-range plan of 10 million subscribers. And we don't believe the current tariff environment will slow down this strong start to the year. First, it is important to remember that Arlo is a subscriptions and services company at its core. Less than 25% of our total revenue comes from hardware devices we import into the United States. so there would be minimal impact to our consolidated gross margins. Said another way, the majority of our revenue and nearly all of our profit is not directly impacted by the announced tariffs. Second, we assume Arlo will be operating under the 10% blanket tariff regime for the duration of Q2, and given Arlo's subscriptions and services strategy, I view it as a small increase in our customer acquisition costs that we will execute and optimize around to continue our growth of subscribers that generate a lifetime value of nearly $700. We don't have any plans to increase prices at this time and are beginning to see competitors struggle, which may provide incremental opportunities to capture share. And while the second half of the year remains uncertain, we have modeled the effective tariff rate at or near the current 10% rate. And based on this, we are confident in reaffirming our full year guidance. We still expect our 2025 results will make us a rule of 40 company. And Arlo will exit the year with more than $300 million in ARR. This places Arlo in a small, elite, and shrinking class of public SaaS companies with this level of performance. These are unprecedented times, which could produce additional macroeconomic impacts, but my goal with the preceding commentary is to continue Arlo's tradition of transparent and open communication. Given our track record of success, disciplined execution, and strategic agility, I believe the current conditions and volatility favors Arlo and may present the company with new opportunities for growth. As a reminder, Arlo is planning its largest product launch in company history for the 2025 holiday season, with over 100 new SKUs launching into our channel. These new products will substantially extend our technology differentiation and achieve a 20 to 35% cost reduction, which puts us in a great position to not only mitigate any tariff impact, but also win incremental opportunities to capture share in Q4 and 2026. On the last call, I gave a sneak peek of our plans for Arlo Secure 6, which includes exciting new Arlo intelligence features that substantially expand the capabilities and user experience of our subscription service. Given the success of our development program, some of these advanced features will be rolled out this month, including advanced AI and audio event descriptions, fire detection, events searching across our expanded 60 days of storage, and new AI audio detection, such as glass break, screaming, gunshots, and barking dogs. In addition, Arlo will be rolling out phase one of our advertising strategy this quarter, which will be focused on using our ad platform to promote Arlo service subscription tiers and device upgrades. Early testing has shown this is a powerful tool to extend the long-term value of our users and increase conversion to subscriptions. We believe these launches continue our momentum and set Arlo up for a successful second half of 2025. Arlo is executing extremely well and delivering strong growth across our key metrics as we put the pieces in place for continued success throughout the year. And now, I'll turn it over to Kurt for a more detailed review of our Q1 results.