Matthew McRae
Arlo TechnologiesAbout Matthew McRae
Matthew McRae, 51, has served as Arlo’s Chief Executive Officer since February 2018 and as a director since August 2018; he holds a B.S. in Computer Science Engineering from the University of Pennsylvania and a B.S. in Marketing & Entrepreneurship from The Wharton School . Under his tenure, Arlo’s transformation to a SaaS model delivered strong KPIs: non-GAAP operating income rose 51.7% to $37.9M in 2024, paid subscribers grew 63.5% to 4.6M, ARR increased 22.5% to $257.3M, and TSR rose 219% from Dec 30, 2022 to Dec 31, 2024, outpacing the S&P 600 IT and Russell 2000 .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| NETGEAR, Inc. | SVP Strategy | 2017–2018 | — |
| Vizio Inc. | Chief Technology Officer | 2010–2017 | — |
| Vizio Inc. | VP & GM, Advanced Products Group | 2008–2010 | — |
| Fabrik (now HGST, Inc.) | VP Marketing & Business Development | 2007–2008 | — |
| Cisco Systems Inc. | Senior Director, Worldwide Business Development | 2001–2007 | — |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| Origin Wireless | Director | Current | Technology company board service |
| Violux, Inc. | Director | Prior | — |
| Dedicated Hosting Services, Inc. | Director | Prior | — |
| UC Irvine Institute for Innovation | Board | Prior | — |
| Chapman Univ. Leatherby Center for Entrepreneurship & Business Ethics | Board | Prior | — |
Fixed Compensation
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Base Salary ($) | $790,000 | $790,000 | $790,000 |
| Target Bonus (% of Salary) | 100% | 100% | 100% |
| Actual Bonus Paid ($) | $790,000 | $2,553,000 | $560,900 (paid as fully vested RSUs in Feb 2025) |
Performance Compensation
Annual Cash/RSU Bonus Plan (2024)
| Metric | Weighting | Target | Actual | Payout | Vesting |
|---|---|---|---|---|---|
| Non-GAAP Operating Income | 80% | Not disclosed (competitive sensitivity) | Achieved partially | 71% of target | Paid as fully vested RSUs (Feb 2025) |
| Product Return Reduction | 10% | Not disclosed | Achieved partially | 71% of target | RSUs (Feb 2025) |
| Subscriber Retention/Churn Improvement | 10% | Not disclosed | Achieved partially | 71% of target | RSUs (Feb 2025) |
Equity Awards (PSUs) – 2024 Grants and Retention Program
| Award Type | Grant Date | Shares/Units | Performance Metrics | Vesting Mechanics |
|---|---|---|---|---|
| CPS PSUs (Annual 2024) | Feb 1, 2024 | 866,471 target; tranche example: 288,823 achieved | Cumulative Paid Subscribers (3.813M, 4.813M, 5.813M) and blended 60% service gross margin | Three installments upon each CPS/margin threshold; performance period through Sept 30, 2027 |
| CPS PSUs (Retention Tranches) | May 10, 2024; Nov 8, 2024 | 500,000; 1,000,000 | CPS thresholds of 4M and 5M with 60% blended margin | Vests upon CPS/margin achievement within 5-year period (Sep 2022–Sep 2027) |
| Substitute PSUs (Converted Final Retention Cash) | Nov 8, 2024 | 178,094 | 5M CPS + 60% margin; ARR ≥ $300M; continuous service to the later of Oct 1, 2025 or metric achievement, by Sep 30, 2027 | Vests only after all four conditions are met |
Notes:
- First CPS milestone (3.813M) achieved in July 2024; McRae vested 288,823 PSUs .
- For 2024, Arlo granted 100% performance-based equity awards to NEOs (no time-only RSUs as annual grants) .
Equity Ownership & Alignment
| Ownership Item | Detail |
|---|---|
| Beneficial Ownership (Direct) | 2,401,338 shares |
| Underlying Equity Awards Beneficially Owned | 548,541 shares |
| Total Beneficial Ownership | 2,949,879 shares; 2.8% of outstanding |
| Options | 39,993 options at $10.09, expiring Oct 19, 2027 |
| Stock Ownership Guidelines | CEO must hold 6x base pay in eligible shares; compliance required by end of 2027 (or five years after becoming covered) |
| Hedging/Pledging | Prohibited for executives and directors under Insider Trading Policy |
| Late Section 16 Filing | One late Form 4 for McRae filed Apr 18, 2024 |
Outstanding equity exposure and potential supply:
- As of Dec 31, 2024, McRae held multiple unearned PSUs tied to CPS/margin, including 577,648 CPS PSUs (2024 annual), 1,000,000 CPS PSUs (Retention), and 178,094 Substitute PSUs; market values referenced at $11.19 close price .
Employment Terms
| Term | Change-in-Control (CiC) | Non-CiC Involuntary Termination |
|---|---|---|
| Cash Severance | 2x base salary + 2x target bonus (lump sum) | 1x base salary + target bonus (for CEO) |
| Health Benefits | 24 months COBRA premium payments | 12 months COBRA premium payments |
| Equity Vesting | Accelerated vesting of all outstanding unvested time-based awards and PSUs (TSR PSUs vest to extent goals achieved as of CiC) | Accelerated vesting of equity awards scheduled to vest in next 12 months |
| Retention/CPS PSUs Treatment | Remaining rights convert to time-based, vest quarterly post-CiC; if qualifying termination during remainder, accelerate in full | |
| Excise Tax Gross-Ups | None; best-net cutback applies | |
| CEO Illustrative Value (Dec 31, 2024 price $11.19) | Total benefit: $39,009,033 under CiC termination; $26,936,008 under non-CiC termination |
Clawback:
- SEC/NYSE-compliant clawback adopted Oct 2023; applies to incentive comp received on/after Oct 2, 2023 (irrespective of misconduct); prior policy applies to earlier awards in cases of misconduct .
Board Governance
- McRae is a management director (not independent) and holds no committee assignments; Arlo’s Chair is independent and all committees are composed entirely of independent directors . All directors attended at least 75% of Board and applicable committee meetings in 2024 . The Board separates Chair and CEO roles to reinforce oversight independence .
Director Compensation (McRae)
- Non-employee director compensation policy does not apply to employee-directors; cash retainers and annual RSU grants described in the policy are for non-employee directors only .
Compensation Committee Analysis
- Committee members: Carter-Miller (Chair), Faison, Aggarwal, Summers; all independent . Independent consultant Pay Governance engaged; no conflicts identified; peer group used to benchmark compensation (e.g., ALRM, FIVN, VZIO, PD, CALX, etc.) . Following a low 41% 2024 say-on-pay outcome, the committee implemented significant changes: 100% PSUs for 2024–2025 annual equity, eliminated duplicative metrics, added ARR and margin conditions to the final retention tranche (converted to PSUs), and affirmed no off-cycle retention awards going forward .
Performance & Track Record
| Measure | 2022 | 2023 | 2024 |
|---|---|---|---|
| Non-GAAP Operating Income ($000s) | (6,064) | 24,957 | 37,865 |
| Cumulative Paid Subscribers (000s) | 1,862 | 2,813 | 4,599 |
| ARR ($000s) | 137,764 | 210,078 | 257,332 |
| TSR (Value of $100) | $45.06 | $122.21 | $143.65 |
Additional business highlights (2024):
- Total revenue $510.9M; service revenue $243.0M (48% of total); non-GAAP service gross margin 78.1%; Q4 services gross margin record 82%; cash & ST investments $151.5M; FCF $48.6M with 9.5% margin .
Risk Indicators & Red Flags
- 2024 say-on-pay approval at ~41% prompted program changes; prior retention awards raised investor concerns on duplicative metrics and perceived quantum . CiC benefits are large in dollar terms, creating potential acquisition-related payout optics . Hedging/pledging banned, mitigating alignment risks; one late Form 4 for McRae in 2024 .
Equity Ownership & Alignment Details
| Category | Count | Market Value Basis |
|---|---|---|
| Unvested Time-based RSUs (examples) | 68,682 (2021 grant), 92,203 (2022), 328,125 (2023) | Valued at $11.19/share for table reporting |
| Unearned PSUs (examples) | 274,728 TSR PSUs (2021), 142,050 CEO PSUs (2021), 138,303 TSR PSUs (2022), 577,648 CPS PSUs (2024 annual), 1,000,000 CPS PSUs (Nov 2024), 178,094 Substitute PSUs (Nov 2024) | Valued at $11.19/share for table reporting |
Employment Contracts, Severance, and Change-of-Control Economics
- Employment letters govern salary and target bonus; severance reviewed periodically vs market; no tax gross-ups; broader benefits consistent with employees, including 401(k) matching up to $4,000 in 2024 . CiC and non-CiC severance/vesting terms summarized above; retention/CPS PSUs convert/accelerate under CiC conditions .
Board Service History and Dual-Role Implications
- Board tenure since 2018; no committee roles; not independent . Governance mitigants include independent Chair, fully independent committees, majority voting policy, and robust stock ownership guidelines (CEO 6x base pay) . Separation of Chair and CEO is cited to strengthen objective evaluation and oversight .
Investment Implications
- Pay-for-performance alignment has strengthened: annual equity shifted to 100% PSUs; metrics expanded to include ARR and margin, reducing duplication and emphasizing subscription economics—supportive for long-term TSR if targets are met . Significant unearned PSUs tied to CPS/ARR/margin present potential future share supply upon vesting; monitor milestone cadence (e.g., 5M CPS, ARR ≥ $300M, margin thresholds) for timing of vesting-related selling pressure . CiC economics are sizable, creating a material overhang in M&A scenarios; however, no tax gross-ups and clawback policy reduce governance risk . Skin-in-the-game appears meaningful (2.8% ownership); hedging/pledging prohibitions and ownership guidelines further reinforce alignment, though explicit compliance status is not disclosed—track annual reviews through 2027 .