On February 6, 2018, the Company announced that its Board of Directors had unanimously approved the pursuit of a separation of its smart camera business “Arlo” from NETGEAR (the “Separation”) to be effected by way of initial public offering (“IPO”) and spin-off. On August 2, 2018, Arlo Technologies, Inc. (“Arlo”) and NETGEAR announced the pricing of Arlo's initial public offering (“IPO”) at a price to the public of $16.00 per share, subsequently listing on the New York Stock Exchange on August 3, 2018 under the symbol "ARLO". On August 7, Arlo completed the IPO and generated proceeds of approximately $170.2 million, net of offering costs, which Arlo used for its general corporate purposes. Upon completion of the IPO, Arlo common stock outstanding amounted to 74,247,000 shares, of which NETGEAR held 62,500,000 shares, representing approximately 84.2% of the outstanding shares of Arlo common stock. On December 31, 2018, NETGEAR completed the distribution of these 62,500,000 shares of common stock of Arlo (the “Distribution”). After the completion of the Distribution, NETGEAR no longer owns any shares of Arlo common stock. The Distribution took place by way of a pro rata common stock dividend to each NETGEAR stockholder of record on the record date of the Distribution, December 17, 2018, and NETGEAR stockholders received 1.980295 shares of Arlo common stock for every share of NETGEAR common stock held as of the record date.

Upon completion of the Distribution, the Company ceased to own a controlling financial interest in Arlo and Arlo's assets, liabilities, operating results and cash flows for all periods presented have been classified as discontinued operations within the Consolidated Financial Statements.

In connection with Arlo's Separation, the Company incurred Separation expense of $34.2 million since commencing in December 2017. Separation expense primarily consists of third-party advisory, consulting, legal and professional services, IT costs and employee bonuses directly related to the separation, as well as other items that are incremental and one-time in nature that are related to the separation. The majority of these costs are reflected in the Company's consolidated statement of operations as discontinued operations for all periods presented. In addition, in the third fiscal quarter of 2018, the Company contributed $70.0 million in cash to Arlo and provided for, among other things, the transfer from NETGEAR to Arlo of assets and the assumption by Arlo of liabilities comprising its business effected through a master separation agreement between NETGEAR and Arlo. The master separation

agreement governs the separation of Arlo's business from NETGEAR as well as various interim arrangements. In connection with these arrangements, during the third and fourth quarter of 2018, NETGEAR recorded a reduction to operating expenses of $6.3 million relating to the transition services, which are reflected in the Company's consolidated statement of operations as discontinued operations for the periods presented. Additionally, the Company entered into certain other agreements that provide a framework for the relationship between NETGEAR and Arlo after the separation, including a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property rights cross-license agreement, and a registration rights agreement.

The financial results of Arlo through the Distribution date are presented as loss from discontinued operations, net of tax, in the consolidated statements of operations. The following table presents financial results of Arlo:

	Year Ended
	December 31, 2018
	(In thousands)
Net revenue	$	464,649
Cost of net revenue		372,843
Gross profit		91,806
Operating expenses:
Research and development		48,696
Sales and marketing		39,713
General and administrative		17,762
Separation expense		31,583
Total operating expenses		137,754
Loss from operations of discontinued operations		(45,948	)
Interest income		1,239
Other income (expense), net		(41	)
Loss from discontinued operations before income taxes		(44,750	)
Benefit for income taxes		(9,095	)
Loss from discontinued operations, net of tax	$	(35,655	)