Arlo Technologies, Inc. (ARLO) Q2 2020 Earnings Call Transcript

Arlo Technologies, Inc. (ARLO 2.45%)
Q2 2020 Earnings Call
Aug 05, 2020, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. [Operator instructions] I would now like to turn the conference over to Erik Bylin. Please go ahead, sir.

Erik Bylin -- Investor Relations

Thank you, operator. Good afternoon, and welcome to Arlo Technologies second quarter of 2020 financial results conference call. Joining us from the company are Mr. Matthew McRae, CEO; and Mr.

Gordon Mattingly, CFO. Format of the call will start with an introduction and commentary on the business provided by Matt, followed by a review of the financials for the second quarter, along with guidance provided by Gordon. We'll then have time for any questions. If you have not received a copy of today's press 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 expected revenue, gross margins, operating margins, tax rates, expenses, future cash outlook, our partnership with Verisure, continued product and service differentiation, future business outlook, and the impact of the COVID-19 pandemic on our business and operations. 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 the most recent annual report on Form 10-K and quarterly report on Form 10-Q.

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 mentioned on this call. A reconciliation of the non-GAAP to 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.

Matt McRae -- Chief Executive Officer

Thank you, Erik, and thank you, everyone, for joining us today on Arlo's second-quarter 2020 earnings call. In today's call, Gordon and I will walk you through the major elements, including financial results for the quarter, paid account growth, new products, and a partner announcement. For the second quarter, we reported $66.6 million in revenue, well above the upper end of our guidance. Our non-GAAP operating expenses came in at $31.3 million, down $900,000 sequentially and down more than $6.6 million year over year.

This is substantially better than our goal of $33 million to $34 million in operating expenses that we set when we restructured last year. Importantly, through diligent spend and working capital management, we maintained our substantial cash, cash equivalents, and short-term investments balance above $200 million. Arlo again set records this quarter for both registered accounts and paid account growth. Arlo ended the quarter with approximately 298,000 paid accounts, which is up more than 59% year over year.

The in-quarter growth of 43,000 new paid accounts was also a record and up an impressive 72% sequentially. This performance resulted in our fourth consecutive quarter of record services revenue at $17 million, which was up 53% year over year. At the heart of this success is the transition to our new business model, which features a 90-day trial of Arlo Smart, our industry-leading cloud storage and AI-powered computer vision service. Once the free trial of Arlo Smart expires, we are seeing a 50% subscription attach rate, which is 10 times higher than the attach rate of our old business model.

This transition to our new business model has clearly created an inflection point for Arlo. We expect further subscription momentum as our legacy products phase-out of the channel and retail sales shift to new business model lineup between now and the end of the year. In our final step to phase out products with our old business model, Arlo recently launched the Essential Spotlight security camera, which completes our lineup of new products and addresses the fast-growing $100 price segment. This latest addition to our award-winning smart home security ecosystem offers a wide array of features, including high definition video, two-way audio, integrated spotlight, color night vision, and six months of battery life.

Essential can also connect directly to a Wi-Fi network without the optional smart hub, providing users greater flexibility. The Essential Spotlight camera is now available for sale on Arlo.com and at our major retail partners with very positive early user and press reviews. Last quarter, we announced the full channel availability of the Arlo Pro 3 floodlight camera. The first wire-free, battery-operated integrated floodlight camera in the market.

With floodlight camera comprising up to 20% of the overall connected camera category, this product represents a significant opportunity for Arlo to capture share in a rapidly growing market. Garnering a 4.8 rating at Best Buy, the Pro 3 floodlight has been very well received with many positive reviews, including three Editors' Choice Awards from Digital Trends, PC Magazine, and CNET, which called it the best floodlight they have ever tested. Now, turning to our business-to-business channel and software-as-a-service, Arlo SmartCloud offering. Our partnership with Verisure is proceeding as planned, with all-in quarter milestones achieved.

And as mentioned last quarter, we are targeting wide rollout and accelerating growth in 2021. In July, we announced an agreement with Securitas Security Services USA, our first U.S. SmartCloud SaaS customer. Securitas will integrate Arlo SmartCloud and our award-winning cameras into their platform for centralized remote monitoring of their commercial assets.

In addition, our SmartCloud AI-enabled security cameras, including the Arlo Pro 3 and Arlo Go, will be used to make Securitas' remote guarding services even more efficient for their commercial clients. At a time when numerous buildings and assets are being left unmonitored due to COVID-19, SmartCloud enables Securitas to monitor and take action on any potential incidents. We are excited to continue expanding our routes to market and to assist Securitas in delivering peace of mind to their customers. In summary, Arlo delivered strong results in Q2, launched a competitively priced camera into the fastest-growing price segment, announced a new SaaS partner, and achieved the inflection point in our subscription business that will continue to accelerate through the balance of the year.

These results were achieved despite the pandemic, creating challenges on both the supply chain side and go-to-market side of the business. Our employees showed an exemplary commitment to Arlo that helped us overcome these challenges and outperform our expectations for the quarter. I am extraordinarily proud of our execution, the results for the quarter, and the foundation that our team has built for future success. And now, I would like to introduce Gordon Mattingly, who recently took over as chief financial officer for Arlo, and also welcome him to his first call.

Gordon will provide more insight into our financial performance, operational details, and outlook for Q3.

Gordon Mattingly -- Chief Financial Officer

Thank you, Matt. Let me start by saying that I'm extremely excited to serve the company in my new role, and I look forward to working with you all in the future. I'm pleased to share that the Arlo team delivered an excellent quarter, with revenue coming in $6.6 million above the high end of guidance, while significantly reducing America's retail channel inventory from 14.5 weeks at the end of Q1 to seven weeks at the end of Q2. We're also very pleased with the acceleration in our paid account growth and what that can do for the business over time.

In addition, our restructuring activities and expense management continue to deliver results. We came in well below our previously communicated target of $33 million to $34 million in non-GAAP operating expenses in Q2. These achievements demonstrate our team's continued strength of execution across our business. And now, on to the financials.

As Matt highlighted, we achieved $66.6 million of revenue, above the upper end of our guidance, up 1.8% sequentially and down 20.3% year over year. Product revenue for Q2 2020 was $49.6 million, which is down 31.5% compared to last year and down 2.2% sequentially. The year-over-year performance was mainly driven by COVID-19 effects on our sales channel operations. The sequential performance reflected an uptick in sell-through, which was offset by destocking in our major retail channels.

Our service revenue for Q2 2020 was $17 million, which is up 52.7% over last year and up 15.6% sequentially. The main driver of our excellent service revenue growth is our paid account growth under our new business model, where we continue to see very strong conversion to a paid subscription of Arlo Smart after the free trial ends. Our service revenue also includes $2.3 million of NRE services we are providing for Verisure, along with associated costs as compared with $0.9 million in the first quarter of 2020 and zero a year ago. During the second quarter, we shipped approximately 516,000 devices, of which approximately 511,000 were cameras.

From this point on, my discussion points will focus on non-GAAP numbers. The reconciliation from GAAP to non-GAAP is detailed in our earnings release, which was distributed earlier today. Our non-GAAP gross profit for the second quarter of 2020 was $6.4 million, which resulted in a non-GAAP gross margin of 9.6%, an improvement of 2.2 percentage points sequentially. This compares to $10.5 million in the year-ago comparable period and $4.8 million in the prior quarter.

Product gross margin has been challenged in the first half of the year due to incremental costs incurred in our transition from products under the legacy business model to products under the new business model. As we increasingly move to shipping products under the new business model, we expect product gross margin for the remainder of 2020 to return to roughly what they averaged in 2019. Our service gross margin was 41.5%, up from 36.8% in the first quarter of 2020. As previously mentioned, our service gross margin is burdened by the cost of the free Arlo Smart trials under the new business model, as well as the cost of servicing the free basic service under the old business model.

As we have seen in the past two quarters, continued improvement in the paid subscription attach rate will expand service gross margin. Also, as mentioned, our service revenue includes $2.3 million of NRE services we are providing to Verisure. In Q2, operating expenses benefited from our restructuring late last year and our continued expense management efforts. Total non-GAAP operating expenses were $31.3 million, down 17.3% year over year and down 2.9% sequentially.

In the third quarter, we expect to shift our marketing efforts to drive online awareness, bringing them more in line with the prevailing buying patterns and reflecting the growth we are seeing in our online store; Arlo.com. Given that, we expect sales and marketing expenses to rise in Q3. While the balance of our opex components should remain flat, we expect that this will result in operating expenses, ending up in the original target range in Q3. Our total non-GAAP R&D expense for the second quarter was $12.5 million, down $1.1 million compared to the prior quarter.

The sequential reduction in R&D expense came both from lower spending and an increase in the time spent by our R&D team on the Verisure NRE, which is classified on the cost of service. Our headcount at the end of Q2 were 355 employees compared to 356 in the prior quarter. As a reminder, during the early stages of Verisure, operating the European commercial business, we agreed to provide them with transition services which includes training time with Arlo employees, systems costs, as well as some outside service costs. We have included these costs in our normal operating expenses.

The reimbursement from Verisure is included in other income and was approximately $1 million during Q2. Our non-GAAP tax expense for the second quarter of 2020 is $181,000. For the second quarter of 2020, we posted a non-GAAP net loss per diluted share of $0.31, better than the high end of our guidance. We ended the quarter with $205.5 million in cash, cash equivalents, and short-term investments, down $1.1 million sequentially, with working capital improvements more or less offsetting the operating loss.

We were pleased with the results of our working capital management during Q2, which was helped by the growth in paid subscriptions in our online store. In particular, we significantly improved our DSO, which came in at 63 days, down from 83 days sequentially. We expect DSO to increase in subsequent quarters in 2020 based on business and customer mix while continuing to show year-on-year improvements. Now, turning to our outlook.

As previously mentioned, given the uncertainty presented by COVID-19, we have withdrawn our guidance for the full year, but we will provide guidance for the third quarter based on what we know today. Our Q3 guidance takes into consideration what we know about end-user demand, our retail channels, and our supply chain, as well as the inherent uncertainties presented by COVID-19. We expect third-quarter revenue to be in the range of $85 million to $95 million. We expect our GAAP net loss for diluted share to come in between $0.32 and $0.41 per share and our non-GAAP loss and diluted share to come in between $0.24 and $0.33 per share.

We'd also like to update our commentary on our cash position. We believe that considering a range of outcomes for the COVID-19 pandemic and its effect on our supply chain and retail and distribution channels, we will still end this year with between $125 million and $150 million in cash, cash equivalents and short-term investments without tapping into our credit facility but will more likely land at the upper end of this range. We will continue to monitor our performance during 2020 and closely manage our operations to preserve our cash. And we can now open the call to questions.

Questions & Answers:

Operator

Certainly. [Operator instructions] Your first question comes from Jeffrey Rand. Please go ahead, sir.

Jeffrey Rand -- Harris Williams -- Analyst

Hi. Congratulations on a nice quarter and the growth in the services business. Can you talk a little bit about the traction so far, the Arlo Essential Camera? And do you think these customers will eventually have a lower attach, subscription attach rate as they may be more cost-sensitive than someone buying a more expensive camera?

Matt McRae -- Chief Executive Officer

Yes. So the Essential Camera, as you know, has just entered the market. We've got a few weeks of sales under our belt, and I think we're very happy with what we're seeing so far. It's early to comment on what the subscription attach rate may be on this product versus others.

But I can tell you we have not seen any significant variability on the attach rate by price point on all of the products we've had in the market today; including when we promote them down to lower price points. So that's the data we have going in. But so far, I think we're happy with how Essential has actually executed in the channel.

Jeffrey Rand -- Harris Williams -- Analyst

Great. And can you talk a little more about the Securitas opportunity and how this can support growth in both your product and services business going forward?

Matt McRae -- Chief Executive Officer

Yeah, absolutely. We're excited about the Securitas deal for several reasons. One, obviously, it's the first substantial SmartCloud SaaS deal we have here in the United States, so that's exciting from a channel-diversification perspective. Two, obviously, the product and service are going to go together with Securitas, just like we've done with our Verisure deal.

So we expect the attach rate of the service to be basically one-to-one on that deal as they deploy. They're deploying it as part of a service that they call Remote Guarding Go, and it's going to be deployed out to target customers like clients that are industrial, HOAs, small, medium enterprises. So it, in itself, even their customers are a diversification of channel and opportunity for us for Arlo Smart. Then as I just said, we're excited because this SaaS deal actually involves not only our traditional Wi-Fi products.

But it's also going to be deploying our Arlo Go product. So for those who are not familiar with that product, that is a product that uses cellular connectivity where you can place the product where there's no power because it's battery-operated but also where there's no networking or broadband capability. So they're going to be using our full platform of products attached to service going into a diversified channel mix. So we're excited to see what this does over time.

Jeffrey Rand -- Harris Williams -- Analyst

Great. Thank you so much.

Matt McRae -- Chief Executive Officer

You're welcome.

Operator

And your next question comes from Adam Tindle. Go ahead, sir.

Adam Tindle -- Raymond James -- Analyst

OK. Thanks. Good afternoon. Matt, I just wanted to maybe start on an update on the state of the industry and competitive environment.

We had noticed that ASPs for the category were trending up. Do you think that's a function of pricing getting more rational? Is it consumers moving up to more premium product versus commodity after maybe experimenting with it and getting more serious about the purchase? Just what you're seeing in that and how that should correlate to product gross margin.

Matt McRae -- Chief Executive Officer

Yeah. So we have seen definitely, especially if you look historically, as you know, ASPs were coming down quite aggressively. If you look back, especially a couple of years. That has definitely stabilized.

And I think a part of that is we've hit some natural price points; both as an industry but also Arlo and the essential launch is an example of designing a product for a price point, which will help gross margin over time. You know, one of the things that's dragged down our gross margin, and we've discussed it on previous calls, was having to promote old product. So now that we've designed product and completed the refresh of our core product lines at those trigger price points, we expect, as Gordon mentioned in the commentary, to see that go up over time. But I think also, as people are looking at this product category, it is a product category of peace of mind, of safety.

And people generally want quality, not only as the hardware itself but a trustworthy service that's actually backing up that hardware to provide the peace of mind that people are asking for. So I think those are all coming into play of why we're not seeing the ASP declines we had seen historically over the last couple of quarters.

Adam Tindle -- Raymond James -- Analyst

Got it. That's helpful. And then secondly, just on subscriptions. You talk about a 50% attach rate when expiring.

As we think moving forward, is there a way for us to perhaps quantify that opportunity as the year progresses? I think you're guiding to some pretty healthy overall total revenue sequential growth. I mean, how should we judge this inflection point? You're now adding over 40,000 subs a quarter. And does it just kind of stabilize at that level? Does it hit another step function increase? Just any way to corral our expectations on that. Thanks.

Matt McRae -- Chief Executive Officer

Yes. I think the best guidance is some of the information we included in the investor deck. And the reason I say that is we're at this very complex moment in this transition where we have legacy business model, products in the field selling through, we have new business model products selling through. We have the original ultra that had a 12-month trial.

We've got products with 90-day trials. So the transition that we think will be substantially through as we exit this year is going to be relatively complex for the next couple of quarters. I think one of the biggest drivers of that from a modeling perspective will be the sales, meaning the point of sale, POS, sales through at the channel, mix of legacy to new products, right? And we've included a chart in our investor deck that shows the forecast, the actuals for Q1 and Q2, and the forecast for Q3 and Q4 going forward. And that should help provide some guidance.

We wanted to provide additional information, especially in this kind of complex state that we're in. And then obviously, as we get into next year, you would see us predominantly, almost completely, on the new business model, obviously. And the modeling will get a lot easier as you look at POS and how that trickles down 90 days later to sign-ups and conversion.

Adam Tindle -- Raymond James -- Analyst

Yes. I'm certainly looking forward to that point. Thanks and congrats on the results.

Matt McRae -- Chief Executive Officer

Thank you very much.

Operator

Next question comes from Hamed Khorsand. Go ahead, sir.

Hamed Khorsand -- BWS Financial -- Analyst

Hey. Just first off, I wanted to ask you about what's happening on the competitive front. We're seeing that -- obviously, you got Securitas here in the U.S., and then one of your competitors just this week had another win. Is it going to be a disadvantage to you if your competitors have a lot more cash, and they're using cash as a way to get market share?

Matt McRae -- Chief Executive Officer

Well, I think what's happening is that the whole space is heating up and being validated, I think, by some of the activity you're seeing on the deal side, right? One of the trends we're seeing is security is definitely becoming smart security or smart home security. And of course, Arlo is the leader in the space, especially from a technology perspective, is obviously working on several deals. The Verisure deal was obviously our flagship deal that we expect to start contributing more to our results next year as these take a while to actually get integrated. But I think you're going to see the whole area continue to grow, and you'll see additional partnerships.

But at the base level, what most of these potential partners and the partners we've already signed are looking for is adding video and smart video, meaning computer vision services into their mix and moving from security to actual smart security, which solves a couple of things. One, it creates a much better user experience for the end user, but it also provides what's called video verification for events to reduce false alarms and make sure that emergency responders can respond faster, especially when it's verified. So I think that trend is going to continue as we go forward. And I think you're just seeing a lot of activity in the space over the next 12 to 18 months.

Hamed Khorsand -- BWS Financial -- Analyst

So where does that put Arlo as far as being able to get more market share with the service providers?

Matt McRae -- Chief Executive Officer

Yeah. I think we're in a great position for that, frankly, because we do have, obviously, the best-in-class hardware. And we also have the widest portfolio of hardware from both a battery-operated, like our floodlight, which is the first world first battery-operated, integrated floodlight. Now, that we've launched our video doorbell.

We've got that full ecosystem of product, and obviously, on the back end, we've got the best computer vision service in the marketplace. But I'll tell you, from a positioning perspective, I think there's a couple of other things that are important. One is our position on privacy, we have taken a very strong stance with our privacy pledge that we don't collect data for surprising purposes to the end user. We don't sell data.

So we've taken a very strict view on us, how we protect that data, and what we do and do not collect. And that's great from a partnership perspective. That makes us look very different than some of the other big players in the space. And then, two, we're agnostic from an ecosystem perspective.

So if you sign up with some of these other partners out there, you may be stuck with one voice solution or one interoperability capability. Arlo provides obviously compatibility with Apple Siri and HomeKit, Google Voice, Amazon Alexa, Samsung SmartThings, even IFTTT, and so we have the broadest capabilities. So you're not locking your customers into a single solution. And what we found, and we find this through our survey data but also talking to our customers, most homes are a multi-voice household, meaning they may have a Google Home device in the kitchen, and they have an iPhone in their pocket, and they expect all of that to work in a seamless way.

And Arlo is one of the only providers in the world to do that. That makes us a better partner in the space, so I think we're well-positioned. And we'll have more information as we go forward.

Hamed Khorsand -- BWS Financial -- Analyst

And my last question was, what are you guys doing as far as your webpage traffic goes and converting that to sales? And is that going to cannibalize any of your retail partners?

Matt McRae -- Chief Executive Officer

Yeah. You know, Arlo.com, as you know, we launched in roughly -- really launched in Q3 of last year, and we are seeing -- we were already seeing nice growth quarter over quarter, but obviously, the pandemic accelerated that even further. We have seen all of that sales has been completely incremental to channel, so it's a different customer. We're addressing a different customer.

I think it opens up the possibility for us to do different kinds of bundles and potential business models direct to the consumer. So it's a very exciting growth path for us, and it's been wholly incremental. You'll see us continue to invest in that. It's one of Gordon's commentary.

We believe some of our marketing dollars will drop below the line, and you'll see that in opex in future quarters. And part of that is us investing in our direct channel a little bit more to continue to drive success on Arlo.com.

Hamed Khorsand -- BWS Financial -- Analyst

OK. Thank you.

Operator

And your last question comes from Jeff Osborne. Please go ahead, sir.

Jeff Osborne -- Cowen and Company -- Analyst

Good afternoon. Most of the questions were answered, but I just wanted to understand with Prime Day being in the fourth quarter now instead of the third quarter traditionally, what the ramifications are of that?

Matt McRae -- Chief Executive Officer

Yeah. I don't know exactly, to be honest. So we're looking at the modeling of Q4 from a POS perspective. What's interesting is shipments are more predictable than PLS at that point, right, because we know we'll ship in Q3 still for Prime Day.

But on the POS side, when you look at the normal seasonality year over year, it's obviously going to be different. We've been working really closely with the retailers, which includes, obviously, Amazon but also the other retailers that have significant promotional activity, including Black Friday and Cyber Monday, in that quarter and their reactions to where Prime Day is falling and everything else. So I think we have a good handle on what the planning is. A lot of it will obviously depend on what the operational footprint is going to look like for the individual partners depending on how the pandemic progresses.

But I think from a shipment perspective, seasonality will look a little bit more normal than maybe the seasonality on POS because of the difference.

Jeff Osborne -- Cowen and Company -- Analyst

Because of the early October date, you mean, as opposed to being later.

Matt McRae -- Chief Executive Officer

Yeah. Well, from a Prime Day -- having Prime Day land in Q4 versus in Q3 will change the kind of the POS time versus shipments. If it's in early Q4, a lot of those shipments will happen in Q3, anyways.

Jeff Osborne -- Cowen and Company -- Analyst

Makes sense. And then how do we think about the approach you took to the recent quarter 2Q about formulating the guidance? And can you just describe where the upside was relative to your initial expectations? I didn't hear that on the call, I apologize if you went through it. And then are there any lessons learned about the formulation of guidance as it relates to Q3 and potentially Q4 in the future?

Gordon Mattingly -- Chief Financial Officer

Yeah. Hey, Jeff. It's Gordon here. I think it's fair to say that, obviously, the degree of uncertainty that we are facing when we went out and actually chose the guide for Q2 was pretty significant.

In terms of the beat, I would say it was just mainly sell-through-driven beat. So it was just driven by end-user demand being more than what we expected but take into account the degree of conservatism and caution that we had in our guidance, just based on the level of uncertainty. Obviously, the situation, as you know, is still pretty uncertain. And we've certainly referenced that with the guide for Q3.

Obviously, we're not guiding Q4 at this stage, and we continue to monitor the situation pretty closely. But the beat in Q2 was just really driven by end-user demand exceeding our expectations.

Jeff Osborne -- Cowen and Company -- Analyst

And what I was trying to get at, Gordon, across all channels, there wasn't one particular outlet that was doing better than others?

Gordon Mattingly -- Chief Financial Officer

It was generally across all channels. We've generated for all channels.

Jeff Osborne -- Cowen and Company -- Analyst

Got it. And my last two questions. One is, can you just remind us what normal weeks of inventory are? You said 7% improvement from 14.5%, obviously. But where would you like that to be or maybe your content there? And then also, you made reference to hitting the milestones for Verisure, but could you just pick the top one or two that you hit, so we can get a better appreciation of what's been accomplished in the quarter?

Gordon Mattingly -- Chief Financial Officer

Yes. I'll take the first one. I'll let Matt speak to the second one. So in terms of weeks to start asking what the norm is, it's pretty interesting at the moment because it probably isn't really a norm.

But what we've seen is our retail partners, focusing on a couple of things. Firstly, they're managing their own cash and inventory very tightly as they should. Secondly, we've seen quite a shift in the mix of their business. Obviously, prior to COVID-19, you're probably talking about an 80-20 in-store, online mix, and that relationship almost went to the inverse at certain times in recent weeks.

It's probably back to roughly 50-50 now. But certainly, I don't think we're going to see a return to kind of normal inventory levels of roughly 12-ish weeks. I don't think that's going to happen anytime soon. What I would say from a channel-inventory perspective for us, just heading into Q3.

Obviously, essential channel fill will give us a small amount of benefit in Q3, but we certainly don't expect the weeks of stock to head back to what used to be the 12 to 14 weeks level for retail.

Matt McRae -- Chief Executive Officer

And then to answer your Verisure question, the second part of your question, most of our milestones in quarter with them as we're doing the integration, preparing for more of the execution next year, have to do with software integration, hardware development timelines, and things that we're doing to prepare both companies to go-to-market with a more integrated solution. So we have very specific milestones on every quarter that we mark to make sure that we're making the right progress. And that's also how we make sure that we can account for the NRE and close that out on each quarter. And so those are all progressing well.

All of our description about the deal and how we think it's going to contribute to Arlo, especially year two through five if you remember previous commentary, is all still tracking perfectly. So we're excited about that as we continue to work with Verisure.

Jeff Osborne -- Cowen and Company -- Analyst

It's great to hear. That's all I have. Thank you.

Matt McRae -- Chief Executive Officer

Thank you.

Gordon Mattingly -- Chief Financial Officer

Thank you.

Operator

And there are no further questions at this time. I will now turn the call over to Matt McRae for closing comments.

Matt McRae -- Chief Executive Officer

Yes. Thank you, operator. That concludes today's call. I want to thank everybody for joining Arlo on our Q2 2020 earnings call.

Operator

[Operator signoff]

Duration: 38 minutes

Call participants:

Erik Bylin -- Investor Relations

Matt McRae -- Chief Executive Officer

Gordon Mattingly -- Chief Financial Officer

Jeffrey Rand -- Harris Williams -- Analyst

Adam Tindle -- Raymond James -- Analyst

Hamed Khorsand -- BWS Financial -- Analyst

Jeff Osborne -- Cowen and Company -- Analyst

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