ARLO 10-K & 10-Q changes, risk factors and insider trading

If we are unable to obtain a sufficient supply of components, or if we experience any interruption in the supply of components, our product shipments could be reduced or delayed or our cost of obtaining these components may increase. In addition, sole suppliers of highly specialized components may provide, or have provided components that were either defective or did not meet the criteria required by us or our manufacturers, retailers, distributors, or other channel partners, resulting in delays, lost revenue opportunities, and potentially substantial write-offs.

If we lose the services of key personnel or are unable to attract new qualified personnel, we may not be able to execute our business strategy effectively.

Our future success depends in large part upon the continued services of our key technical, engineering, sales, marketing, finance, and senior management personnel.personnel and our ability to attract new qualified personnel, including in new markets we may enter. The competition for qualified personnel with significant experience in the design, development, manufacturing, marketing, and sales in the markets in which we operate is intense, both where our U.S. operations are based, including Silicon Valley, and in global markets in which we operate. This competition for labor has made it more challenging to locate candidates with the desired talents, particularly in emerging technologies. Our inability to attract qualified personnel, including hardware and software engineers and sales and marketing personnel, could delay the development and introduction of, and harm our ability to sell, our products and services. DecreasesIn addition, decreases in our stock price may negatively affect our efforts to attract and retain qualified personnel. Changes to U.S. immigration policies that restrict our ability to attract and retain technical personnel may negatively affect our research and development efforts. We will continue to replace key personnel, from within or looking outside, wherever we find the best candidates.

If we fail to continue to introduce or acquire new products or services that achieve broad market acceptance on a timely basis, or if our products or services are not adopted as expected, or if we fail to successfully manage the introduction of such products or services, we will not be able to compete effectively and we will be unable to increase or maintain revenue and gross margin.

In order to differentiate our products and services from our competitors’ products, we must continue to increase our focus and capital investment in research and development, including software development. We have committed a substantial amount of resources to the manufacture, development and sale of our Arlo Secure services and our wire-free smart Wi-Fi cameras, advanced baby monitors, and smart lights, and to introducing additional and improved models in these lines. In addition, we plan to continue to introduce new categories of smart security devices to the Arlo platform in the near future. If our existing products and services do not continue, or if our new products or services fail, to achieve widespread market acceptance, if existing customers do not subscribe to our paid subscription services such as Arlo Secure or Arlo Total Security, if those services do not achieve widespread market acceptance, or if we are unsuccessful in capitalizing on opportunities in the smart security market, as well as in the related market in the small business segment, our future growth may be slowed and our business, results of operations, and financial condition could be materially and adversely affected. Successfully predicting demand trends is difficult, and it is very difficult to predict the effect that introducing a new product or service will have on existing product or service sales. For example, customers may choose to forego purchasing existing products or services in advance of new or anticipated product and services launches, and we may experience higher returns from users of existing products or increases in credit issuances under our price protection policy. In addition, new or enhanced products or services may have varying selling prices and costs compared to legacy products and services, which could negatively impact our brand, gross margins and operating results. It is possible that Arlo may not be as successful with its new products and services, and as a result our future growth may be slowed and our business, results of operations and financial condition could be materially and adversely affected. Also, we may not be able to respond effectively to new product or service announcements by our competitors by quickly introducing competitive products and services.

WeAlthough we have recorded a net lossincome of $30.5$14.9 million for the year ended December 31, 2024, and2025, we have a history of losses and may continue to incur operating and net losses for the foreseeable future. As of December 31, 2024,2025, our accumulated deficit was $398.0$383.0 million. We had historically maintained a Loan and Security Agreement with Bank of America, N.A., which expired and automatically terminated on October 27, 2024. On November 14, 2024, we entered into a new credit agreement (the “Credit Agreement”) with HSBC Bank USA, National Association, as administrative agent, issuing bank, and lender. The Credit Agreement provides for a three-year revolving credit facility (the “Credit Facility”) of up to $45.0 million that matures on November 14, 2027, which also includes a $10.0 million sublimit for the issuance thereunder of letters of credit. As of December 31, 2024,2025, we had unused borrowing capacity of $45.0 million based on the terms and conditions of the Credit Agreement. In addition, the Credit Agreement includes an uncommitted accordion feature that allows us to, from time to time, request an increase to the aggregate revolving loan commitments by up to an additional $30.0 million in the aggregate, subject to the satisfaction of certain conditions. The proceeds of the borrowings under the Credit Facility may be used for working capital and general corporate purposes. Refer to Note 7,6, Revolving Credit Facility in the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for further details on the Credit Agreement.

We compete in a rapidly evolving and fiercely competitive market, and we expect competition to continue to be intense, including price competition. Our principal competitors include Amazon (Blink and Ring), Canary, D-Link, Eufy, Google (Nest), Canary, D-Link, Foxconn Corporation (Belkin), Night Owl, Samsung, SimpliSafe, Swann, TP Link, Eufy, and Wyze. Other competitors include numerous local vendors such as Netatmo, Logitech, Bosch, Instar, and Uniden. In addition, these local vendors may target markets outside of their local regions and may increasingly compete with us in other regions worldwide. Many of our existing and potential competitors have longer operating histories, greater brand recognition, and substantially greater financial, technical, sales, marketing, and other resources. These competitors may, among other things, undertake more extensive marketing campaigns, adopt more aggressive pricing policies, obtain more favorable pricing from suppliers and manufacturers, and exert more influence on sales channels than we can. In addition, certain competitors may have different business models, such as integrated manufacturing capabilities, that may allow them to achieve cost savings and to compete on the basis of price. Other competitors may have fewer resources, but may be more nimble in developing new or disruptive technology or in entering new markets.

We entered intohave an asset purchase agreement (the “Asset Purchase Agreement”) and supply agreement (the “Supply Agreement”) with Verisure Sàrl (“Verisure”) that gives Verisure exclusive marketing and distribution rights for our products in Europe as well as the ability to sell our products through their direct channel globally. We cannot provide assurance that the arrangement with Verisure will continue to be a successful collaboration.

Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties upon which we rely. These information security risks have significantly increased in recent years in part due to the proliferation of new technologies and the increased sophistication and activities of organized crime, hackers, terrorists, threat actors, “hacktivists,” personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors and other external parties. Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we,we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our products and services.

In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position. Additionally, sensitive information ofabout theour Companycompany or our customers could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or vendors’ use of generative AI technologies. Any sensitive information (including confidential, competitive, proprietary, or personal data) that we input into a third-party generative AI and machine learning (“AI/ML”) platform could be leaked or disclosed to others, including if sensitive information is used to train the third parties’ AI/ML model. Additionally, where an AI/ML model ingests personal data and makes connections using such data, those technologies may reveal other personal or sensitive information generated by the model. Moreover, AI/ML models may create flawed, incomplete, or inaccurate outputs, some of which may appear correct. This may happen if the inputs that the model relied on were inaccurate, incomplete or flawed (including if a bad actor “poisons” the AI/ML with bad inputs or logic), or if the logic of the AI/ML is flawed (a so-called “hallucination”). We may use AI/ML outputs to make certain decisions. Due to these potential inaccuracies or flaws, the model could be biased and could lead us to make decisions that could bias certain individuals (or classes of individuals), and adversely impact their rights, employment, and ability to obtain certain pricing, products, services, or benefits. For example, we use AI/ML in our products and services, and if such AI/ML-based outputs are deemed to be biased, we could face adverse consequences, including exposure to reputational and competitive harm, customer loss, and legal liability.

We sell a substantial portion of our products through traditional and online retailers, including Amazon, Best Buy Co., Inc.,Buy, Walmart, Inc.,Sam’s Club, Home Depot, Lowe’s and Costco Wholesale Corporation; and to security solutions providers, including Verisure and its affiliates. For the year ended December 31, 2024,2025, we derived 43.2%32% of our revenue from Verisure and its affiliates. In addition, we sell to wholesale distributors, including IngramSynnex Micro,Corporation Inc.,and D&H Distributing Company, and Synnex Corporation.Company. We expect that a significant portion of our revenue will continue to come from sales to a small number of such retailers, distributors, and other channel partners. In addition, because our accounts receivable are often concentrated within a small group of retailers, distributors, and other channel partners, the failure of any of them to pay on a timely basis, or at all, would reduce our cash flow. We are also exposed to increased credit risk if any one of these limited numbers of retailer and distributor channel partners fails or becomes insolvent. We generally have no minimum purchase commitments or long-term contracts with our retailers, distributors and other channel partners. Verisure had an aggregate purchase commitment of $500.0 million during a five-year period that commenced January 1, 2020 and was fulfilled in 2024. However, on April 25, 2024, Verisure notified us that it was exercising its right under the Supply Agreement to extend the term of the Supply Agreement for another five years (through November 2029) with no minimum purchase obligations. In the absence of the minimum purchase obligations, we have experienced lower purchase volumes from Verisure. If we are unable to maintain and expand our revenue from Verisure in the absence of minimum purchase obligations,Verisure, our revenue, business, results of operations, financial condition and cash flows may be materially and adversely affected. Verisure and our other retailers, distributors and other channel partners could decide at any time to discontinue, decrease, or delay their purchases of our products. If our retailers, distributors, and other channel partners increase the size of their product orders without sufficient lead-time for us to process the order, our ability to fulfill product orders would be compromised. These channel partners have a variety of suppliers to choose from and therefore can make substantial demands on us, including demands on product pricing and on contractual terms, which often results in the allocation of risk to us as the supplier. Accordingly, the prices that they pay for our products are subject to negotiation and could change at any time. Our ability to maintain strong relationships with these channel partners is essential to our future performance. If any of our major channel partners reduce their level of purchases or refuse to pay the prices that we set for our products, our revenue and results of operations could be harmed. The traditional retailers that purchase from us have faced increased and significant competition from online retailers. If our key traditional retailers continue to reduce their level of purchases from us, our business, results of operations, and financial condition could be harmed.

Instability in geographies where we have operations and personnel or where we derive amounts of revenue could have a material adverse effect on our business, customers, operations and financial results.

Economic, civil, military and political uncertainty exists and may increase in regions where we operate and derive our revenue. Various countries in which we operate are experiencing and may continue to experience military action and civil and political unrest. We have operations in the emerging market economies of Eastern Europe, utilizing employees and contractors who perform services relating to new product releases.Europe. In late February 2022, Russian military forces launched significant military action against Ukraine. The conflict remains ongoing. The impact to Belarus, Russia and Ukraine, as well as actions taken by other countries, including new and stricter export controls and sanctions by Canada, the United Kingdom, the European Union, the U.S. and other countries and organizations against officials, individuals, regions, and industries in Russia, Belarus and Ukraine, and each country’s potential response to such sanctions, tensions and military actions, could have a material adverse effect on our product development timelines and increase our research and development expenditure. Material adverse effects from the conflict and enhanced sanctions activity has caused us to transition our operations out of Belarus to other countries. We are actively monitoring the security of our remaining employees and contractors in Eastern Europe and the stability of our infrastructure, including communications and internet availability. To date we have not experienced any material interruptions in our operations there.

Our business has been, and may continue to be, affected by a number of factors that are beyond our control, including but not limited to general geopolitical, economic and business conditions, conditions in the financial markets, and changes in the overall demand for smart security products. Our products and services may be considered discretionary items for our consumer and small business end-users. A severe and/or prolonged economic downturn, thegeopolitical ongoing conflict in Ukraine, hostilities in the Middle-East,conflicts, inflation, supply chain disruptions, high interest rates, the housing and mortgage markets, energy costs, unemployment trends, fluctuating consumer confidence, or current financial conditions within the banking industry, including the effects of recent failures of financial institutions, among other things, could adversely affect our customers’ financial condition and their levels of business activity. As a result of stimulus programs put in place overin the past threerecent years, the U.S. and many countries are currently experiencing an inflationary environment. In addition, although the U.S. Federal Reserve recently lowered interest rates, in the past it has raised, and may again raise, interest rates in response to concerns about inflation, which in turn has negatively impacted equity values. The U.S. capital markets experienced and continue to experience extreme volatility and disruption followingdue theto Russiangeopolitical invasion of Ukraine,conflicts and inflationary pressures. Weakness in, and uncertainty about, global economic conditions may also cause businesses to postpone spending in response to tighter credit, high interest rates, inflation, lower consumer confidence, negative financial news and/or general declines in income or asset values, which could have a material negative effect on the demand for our products and services.

In the recent past, various regions worldwide have experienced slow economic growth. In addition, current economic challenges in China may continue to put negative pressure on global economic conditions. If conditions in the global economy, including in Europe, China, Australia and the United States, or other key vertical or geographic markets deteriorate, such conditions could materially and adversely affect our business, results of operations, and financial condition. Political developments impacting government spending and international trade, including future government shutdowns in the United States or elsewhere, debt ceiling negotiations, actual or potential government shutdowns, armedarmed, conflictgeopolitical such as the conflicts in Ukraine and Israel,conflicts, retaliatory actions, treaties, increased barriers, policies favoring domestic industries, increased import or export licensing requirements or restrictions, trade disputes and tariffs, including the U.S.’s ongoing trade disputes with China and other countries, inflation, and high interest rates, may adversely impact markets and cause weaker macroeconomic conditions. The continuing effect of any or all of these political or other uncertainties could adversely impact demand for our products and services, harm our operations and weaken our financial results. If we are unable to successfully anticipate changing economic and political conditions, we may be unable to effectively plan for and respond to those changes, which could materially and adversely affect our business, results of operations, and financial condition. In addition, the economic problems affecting the financial markets and the uncertainty in global economic conditions resulted in a number of adverse effects, including a low level of liquidity in many financial markets, extreme volatility in credit, equity, currency, and fixed income markets, instability in the stock market, and high unemployment.

In addition, the challenges faced by the European Union to stabilize some of its member state economies, such as Greece, Portugal, Spain, Hungary, and Italy, have had international implications, affecting the stability of global financial markets and hindering economies worldwide. Many member states in the European Union have been addressing the issues with controversial austerity measures. In addition, the potential consequences of the “Brexit” process in the United Kingdom have led to significant uncertainty in the region. Should the European Union monetary policy measures be insufficient to restore confidence and stability to the financial markets, or should the United Kingdom’s “Brexit” decision lead to additional economic or political instability, the global economy, including the U.S. and European Union economies where we have a significant presence, could be hindered, which could have a material adverse effect on our business, results of operations, and financial condition. There could also be a number of other follow-on effects from these economic developments on our business, including the inability of customers to obtain credit to finance purchases of our products, customer insolvencies, decreased customer confidence to make purchasing decisions, decreased customer demand, and decreased customer ability to pay their trade obligations.

In addition, availability of our products from third-party manufacturers and our ability to distribute our products into non-U.S. jurisdictions may be impacted by factors such as ongoing supply chain disruptions, an increase in duties, tariffs, or other restrictions on trade; raw material shortages, work stoppages, strikes and political unrest; economic crises and international disputes or conflicts; changes in leadership and the political climate in countries from which we import products. Further, the imposition of and changes in the U.S.' and other governments' duties, trade regulations, trade wars, tariffs, other restrictions or other geopolitical events, including the evolving relations between U.S. and China and evolving relations with Russia due to the currentongoing hostilitiesconflict between Russia and Ukraine, create uncertainty regarding our ability to market and distribute our products into non-U.S. jurisdictions and any failure to effectively anticipate or respond to such events could materially and adversely affect our business, results of operations, and financial condition.

In recent years, the U.S. Governmentgovernment has imposed increases to the ad valorem duties applicable to certain products imported from China, including increases of up10% toor 25%more for some items. We are actively addressing the risks related to these additional duties, which have affected, or have the potential to affect, at least some of our imports from China. For example, our tariff costs increased by $13.5 million for the year ended December 31, 2025 compared to the prior year, which accounted for the decline of 6.3% in products gross margin. Although we have already taken steps to mitigate these risks, including by moving our manufacturing and assembly to Vietnam and other areas in the Asia Pacific region outside of China, if these duties are imposed, the cost of our products may increase. These duties may also make our products more expensive for consumers, which may reduce consumer demand. We may need to offset the financial impact by, among other things, moving even more of our product manufacturing to other locations, modifying other business practices or raising prices. If we are not successful in offsetting the impact of any such duties, our revenue, gross margins, and operating results may be materially and adversely affected.

Moreover, for the year ended December 31, 2024,2025, we derived 43.2%32% of our revenue from Verisure and its affiliates. Beginning in the year ended December 31, 2025 through November 2029, Verisure will no longer be subject to minimum purchase obligations under our Supply Agreement. If we are unable to maintain and expand our revenue from Verisure in the absence of minimum purchase obligations,Verisure, our revenue, business, results of operations, financial condition and cash flows may be materially and adversely affected.

We determine production levels based on our forecasts of demand for our products. Actual demand for our products depends on many factors, which makes it difficult to forecast. In addition, the longer lead time for certain of our components presents challenges in our efforts to manage component inventory, as our third-party manufacturers procure such components based on our then-current forecast of demand for our products. We have experienced differences between our actual and our forecasted demand in the past and expect differences to arise in the future. If we improperly forecast demand for our products, we could end up with too many products and be unable to sell the excess inventory in a timely manner, if at all, or, alternatively, we could end up with too few products and not be able to satisfy demand. This problem is exacerbated because we attempt to closely match inventory levels with product demand, leaving limited margin for error. If these events occur, we could incur increased expenses associated with writing off excessive or obsolete inventory, lose sales, incur penalties for late delivery, or have to ship products by air freight to meet immediate demand, thereby incurring incremental freight costs above the sea freight costs, a preferred method, and suffering a corresponding decline in gross margin.

In addition, we have had to redesign certain of our products to comply with evolving foreign regulations and may have to do so in the future, which has caused manufacturing delays and may in the future cause further delays and have a negative impact on our manufacturing costs and supply chain management. We are also required to comply with local environmental legislation, and those who sell our products rely on this compliance in order to sell our products. If those who sell our products do not agree with our interpretations and requirements of new legislation, they may cease to order our products and our business, results of operations, and financial condition could be materially and adversely affected.

From time to time, we may undertake acquisitions or engage in other strategic transactions to add new product and service lines and technologies, acquire talent, gain new sales channels, or enter into new sales territories. We have evaluated and expect to continue to evaluate a wide array of potential acquisitions and strategic transactions.transactions as part of our growth strategy. Acquisitions and other strategic transactions involve numerous risks and challenges, including relating to: the successful integration of an acquired business, product, service, technology or talent; entering into new territories or markets with which we have limited or no prior experience; establishing or maintaining business relationships with new retailers, distributors, or other channel partners, vendors, and suppliers; maintaining customers on terms similar to, or better than, those in place with the acquired business; the diversion of our management’s time and attention from current operations; unanticipated costs; legal and regulatory challenges; equity or debt financing transactions to finance an acquisition, including potential dilution to stockholders, the incurrence of debt or the failure to obtain satisfactory financing terms; the failure of due diligence to identify significant issues associated with or arising out of an acquisition or other strategic transaction, such as the quality of a new product or technology, issues related to financial reporting or accounting practices, unknown liabilities or noncompliance with foreign laws and regulations; potential post-closing disputes; our inability to fully realize the expected financial or strategic benefits of an acquisition or other strategic transaction in the timeframe expected or at all; the failure to retain acquired talent; employee retention costs; adverse tax consequences; and the failure to maintain our internal controls and systems. Any of these risks and challenges could adversely impact our business, financial condition and results of operations.

In December 2010,Under the FederalFCC’s Communications2018 Commissionrules, (the “FCC”), adopted net neutrality rules barringbroadband internet access providers frommay blockingbe or slowing down access to online content, protecting services like ours from such interference. In December 2017, the FCC voted in favor of repealing the net neutrality rules, and it is currently uncertain how the U.S. Congress will respond to this decision. To the extent network operators attemptable to interfere with our services, extract fees from us to deliver our solution, or otherwise engage in discriminatory practices, and accordingly, our business, results of operations, and financial condition could be materially and adversely affected. Within such a regulatory environment, we could experience discriminatory or anti-competitive practices that could impede our domestic and international growth, cause us to incur additional expense, or otherwise materially and adversely affect our business, results of operations, and financial condition.

•increases in interestsinterest and penalties related to income taxes;

As of December 31, 2024,2025, our U.S. federal and state net operating loss carryforwards were approximately $54.3$83.8 million and approximately $75.3$79.5 million, respectively. TheseThe amounts have been reduced by the amount offederal net operating lossesloss expectedcarryforwards toreflect bethe utilizedimpact toof reducethe taxablecurrent-year incometax forloss. suchState net operating loss carryforwards reflect the effects of current-year tax loss in certain jurisdictions and utilization in other jurisdictions during the year. Moreover, our U.S. federal and state research and development tax credits were approximately $12.0$14.7 million and approximately $11.2$13.8 million, respectively,respectively. These balances reflect the increase during the year as a result of credits generated in the current year, with theno amountexpected utilization of federal creditor alreadystate reducedcredits byduring the expected utilization for such year.period. The utilization of our net operating loss and tax credit carryforwards may be subject to annual limitation due to ownership changes as provided by Sections 382 and 383 of the Code and similar state provisions. Such an annual limitation could result in the expiration of portions of our net operating loss and tax credit carryforwards before utilization. In the event that we experience ownership changes due to future transactions in our stocks,stock, the utilization of net operating loss and tax credit carryforwards to reduce our future taxable income and tax liabilities may be limited, which could affect our profitability.

The Internal Revenue Services ("IRS") and several foreign tax authorities have increasingly focused attention on intercompany transfer pricing with respect to sales of products and services and the use of intangibles. Tax authorities could disagree with our intercompany charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. If we do not prevail in any such disagreements, our profitability may be affected.

In addition, the OECDOrganization for Economic Co-operation and Development has been working on new laws on the taxation of the digital economy to provide taxing rights to jurisdictions where the customers or users are located. Some countries have enacted, and others have proposed the new laws to tax digital transactions. These developments may result in material impacts to our financial statements.

Our operations are routinely subject to audit by tax authorities in various countries. Many countries have indirect tax systems where the sale and purchase of goods and services are subject to tax based on the transaction value. These taxes are commonly referred to as value-added tax (“VAT”) or goods and services tax (“GST”). In addition, the distribution of our products subjects us to numerous complex customs regulations, which frequently change over time. Failure to comply with these systems and regulations can result in the assessment of additional taxes, duties, interest, and penalties. While we believe we are in compliance with local laws, we cannotcan assureprovide no assurance that tax and customs authorities will agree with our reporting positions and upon audit such tax and customs authorities may assess additional taxes, duties, interest, and penalties against us. Adverse action by any government agencies related to indirect tax laws could materially and adversely affect our business, results of operations and financial condition.

We are exposed to the credit risk of some of our customers and sublease counterparties and to credit exposures in certain markets, which could result in material losses.

Any bankruptcies or illiquidity among our customer base or sublease counterparties could harm our business and have a material adverse effect on our financial condition and results of operations. To the degree that turmoil in the credit markets makes it more difficult for some customers or sublease counterparties to obtain financing, our customers’ or sublease counterparties' ability to pay could be adversely impacted, which in turn could materially and adversely affect our business, results of operations, and financial condition.

•anythe announcementsimplementation relatedof to,a ournew stock repurchase program;

Since the launch of our first product in December 2014, we have shipped over 37.442.7 million smart security devices. As of December 31, 2024,2025, the Arlo platform had approximately 10.812.1 million cumulative registered accounts across more than 100 countries around the world coupled with 4.6approximately 5.7 million cumulative paid subscribersaccounts and annual recurring revenue of $257.3$330.5 million.

We conduct business across three geographic regions—(i) the Americas; (ii) Europe, Middle-East and Africa (“EMEA”); and (iii) Asia Pacific (“APAC”)—and we primarily generate revenue by selling paid subscription services, as well as devices through retail, wholesale distribution, wireless carrier channels, security solution providers, and Arlo’s direct to consumer store and paid subscription services.store. For the years ended December 31, 20242025 and 2023,2024, we generated total revenue of $510.9$529.3 million and $491.2$510.9 million, respectively. LossIncome from operations was $6.1 million and our loss from operations was $34.9 million and $24.9 million for the years ended December 31, 20242025 and 2023,2024, respectively.

In addition to the measures presented in our consolidated financial statements, we use the following key metrics to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions. We believe these key business metrics provide useful information by offering the ability to make more meaningful period-to-period comparisons of our on-going operating results and a better understanding of how management plans and measures our underlying business. Our key business metrics may be calculated in a manner different from the same key business metrics used by other companies. We regularly review our processes for calculating these metrics, and from time to time we may discover a need to make adjustments to better reflect our business or to improve their accuracy.business. We believe that any such adjustments are immaterial unless otherwise stated.

Cumulative Registered Accounts. We believe that our ability to increase our user base is an indicator of our market penetration and growth of our business as we continue to expand and innovate our Arlo platform. We define our registeredRegistered accounts at the end of a particular period are defined as the number of unique registered accounts on the Arlo platform as of the end of such period.platform. The number of registered accounts does not necessarily reflect the number of end-users on the Arlo platform asdoes onenot registereddirectly correspond to the number of users. A single account may be usedshared by multiple end-usersusers to(which monitorwe theconsider devicesas attachedone toaccount) thatand household.a single user may have multiple accounts (which we consider as multiple accounts).

Cumulative Paid Accounts. Paid accounts at the end of a particular period are defined as any account worldwide where a subscriptionsubscription-based toor aotherwise paidrecurring service isfee beingwas collected by Arlo (either bydirectly usfrom a user or byfrom oura customers or channel partners, including Verisurepartner).

Annual Recurring Revenue. We believe ARR enables measurement of our business initiatives and serves as an indicator of our future growth. ARR represents and is defined as the annualized paid servicesubscriptions and services revenue we expect to recognize from subscription contracts, as calculated by taking the average paid servicesubscriptions and services revenue per paid account of the reporting period multiplied by the number of subscriptionpaid accounts at the end of the reporting period. ARR is a performance metric and should be viewed independently of revenue and deferred revenue, and is not intended to be a substitute for, or combined with, any of these items.

Components of Results of Operations

Our gross revenue consists primarily of paid subscriptions and services revenue and sales of devicesdevices. andOur paid subscription serviceservices revenue.are billed in advance of the start of the annual or monthly subscription and revenue is recognized ratably over the subscription period. We generally recognize revenue from product sales at the time the product is shipped and transfer of control from us to the customer occurs. Our paid subscription services are billed in advance of the start of the monthly subscription and revenue is recognized ratably over subscription period.

Cost of revenue consists of both productsubscriptions and services cost as well as products cost. Subscriptions and services cost consists of costs attributable to the provision and servicemaintenance costs.of Productour costscloud-based platform, including personnel expense, data storage, security and computing, IT and facilities overhead, and amortization of software development. Products cost primarily consistconsists of the cost of finished products from our third-party manufacturers and overhead costs, including personnel expense for operationoperations staff, purchasing, product planning, inventory control, warehousing and distribution logistics, third-party software licensing fees, inbound freight, duty and tariff costs, IT and facilities overhead, warranty costs associated with returned goods, write-downs for excess and obsolete inventory and excess components, and royalties to third parties. Service costs consist of costs attributable to the provision and maintenance of our cloud-based platform, including personnel, storage, security and computing, IT and facilities overhead.

Our cost of revenue as a percentage of revenue can vary based upon a number of factors, including those that may affect our revenue set forth above and factors that may affect our cost of revenue, including, without limitation, product mix, sales channel mix, registered accounts’ acceptance of paid subscription service offerings, and changes in our cost of goods sold due to fluctuations in prices paid for components, net of vendor rebates, cloud platform costs, warranty and overhead costs, inbound freightfreight, duty and dutytariff costs, and charges for excess or obsolete inventory. We outsource our manufacturing, warehousing, and distribution logistics. We also outsource certain components of the required infrastructure to support our cloud-based back-end IT infrastructure. We believe this outsourcing strategy generally allows us to better manage our productproducts cost and servicesubscriptions costsand services cost and gross margin and allows us to adapt to changing market dynamics and supply chain constraints. However, with respect to manufacturing that we have outsourced to ex-U.S. manufacturers, our ability to manage product costs through this strategy has been, and may continue to be, negatively impacted by tariffs.

Research and development expense consists primarily of personnel-related expense, safety, security, regulatory services and testing, other research and development consulting fees, and allocated IT and facilities overhead. Generally, we recognize research and development expenses as they are incurred.incurred, exclusive of capitalized software development costs. We have invested in and expanded our research and development organization to enhance our ability to introduce innovative products and services. We expect research and development expense to increase in absolute dollars as we develop new product and service offerings and compete for engineering talent. We believe that innovation and technological leadership are critical to our future success, and we are committed to continuing a significant level of research and development to develop new technologies, products and services, including our hardware devices, cloud-based software, AI-based algorithms, and machine learning capabilities.

Sales and marketing expense consists primarily of personnel expense for sales and marketing staff, technical support expense, advertising, trade shows, media and placement, corporate communications and other marketing expense, product marketing expense, allocated IT and facilities overhead, outbound freight costs, and credit card processing fees. We expect our sales and marketing expense to increase in the future as we invest in marketing to drive demand for our productssubscriptions and services.services and device products.

General and administrative expense increaseddecreased by $15.8$6.0 million for the year ended December 31, 20242025 compared to the prior year, primarily due to increasesdecreases of $12.3$7.7 million in personnel-related expenses mainly from stock-based compensation as a result of the achievement of certain performance-based equity award targets,targets $2.0in the prior year periods and $1.3 million in IT and facilities overhead related to allocation associated with corporate infrastructure; partially offset by the increase of $2.6 million in legal and professional services, and $0.8 million in corporate IT and facilities overhead costs.services.

Interest Income and Other Income (Expense),Income, Net

Interest income, net increaseddecreased for the year ended December 31, 2024,2025, compared to the prior year,year period, primarily due to the increasedeclines in our cash and cash equivalents and short-term investments as well as higher interest rates.

As of December 31, 2024,2025, our cash and cash equivalents and short-term investments totaled $151.5 million. Additionally, on November 14, 2024, we entered into the Credit Agreement, which provides for a three-year revolving credit facility of up to $45.0$166.4 million thatand matures on November 14, 2027. As of December 31, 2024, we hadour unused borrowing capacity ofwas $45.0 million based on the terms and conditions of the Credit Agreement. The proceeds of the borrowings under this credit facility may be used for working capital and general corporate purposes.

Our future liquidity and cash requirements may vary from those currently planned and will depend on numerous factors, including the introduction of new products, the growth in our servicesubscriptions and services revenue, the ability to increase our gross margin dollars, as well as cost optimization initiatives and controls over our operating expenditures. As we grow our installed base and related cost structure, there will be a need for additional working capital, hence, we may increase our product and subscription rates in the future.

LeasesOperating leases and Contractualcontractual Commitmentscommitments

Our operating lease obligations mostly include offices, equipment, data centers, and distribution centers. Our contractual commitments are primarily inventory-related purchase obligations with suppliers.

ContingenciesLegal contingencies

We areare, and from time to time, we may become involved in disputes, litigation, and other legal actions.actions Wein the ordinary course of business. At each reporting period, we evaluate whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. Significant judgment is required to determine both the probability and the estimated amount of loss. In such cases, we accrue for the amount or, if a range, we accrue the low end of the range, only if there is not a better estimate than any other amount within the range, as alitigation componentreserves in other operating expense on the consolidated statements of legaloperations expenseand withincomprehensive litigationincome reserves, net.(loss).

Our business, reputation, results of operations and financial condition, as well as the price of our stock, can be affected by a number of factors, whether currently known or unknown, including those described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 under the heading “Risk Factors.” During the threesix months ended MarchJune 29,28, 2026, there have been no significant changes to the risk factors under the heading “Risk Factors” described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025.

Since the launch of our first product in December 2014, we have shipped over 44.145.6 million smart security devices. As of MarchJune 29,28, 2026, the Arlo platform had approximately 13.113.6 million cumulative registered accounts across more than 100 countries around the world coupled with approximately 6.06.3 million cumulative paid accounts and annual recurring revenue (“ARR”) of $356.9$365.0 million.

We conduct business across three geographic regions—(i) the Americas; (ii) Europe, Middle-East and Africa (“EMEA”); and (iii) Asia Pacific (“APAC”)—and we primarily generate revenue by selling paid subscription services, as well as devices through retail, wholesale distribution, strategic partners, security solution providers, and Arlo’s direct to consumer store. For the three months ended MarchJune 29,28, 2026 and MarchJune 30,29, 2025, we generated total revenue of $150.4$155.9 million and $119.1$129.4 million, respectively, and income (loss)from operations was $2.5 million and $1.9 million, respectively. For the six months ended June 28, 2026 and June 29, 2025, we generated total revenue of $306.3 million and $248.5 million, respectively, and income from operations was $7.6$10.0 million and $(1.5)$0.5 million, respectively.

The U.S. government has implemented tariff measures affecting a broad range of imported materials, and these measures have been subject to change. While we are actively monitoring the changes in global trade policy and the effects they may have on our business and broader macroeconomic environment, we have not experienced a material impact on our financial position to date and do not expect them to have a material detrimental impact on our business operations in the near term. However, given the uncertainty surrounding global markets as a result of the fluid U.S. tariff policy, we do not have clarity at this point over the potential medium to long term impacts our business may face. We continue to monitor and evaluate these developments and assess their potential impact on our business, financial condition, and results of operations. The availability of certain goods could be affected if foreign suppliers choose to limit their exposure to U.S. markets in response to unfavorable trade policies, which could negatively impact our supplierssuppliers’ ability to deliver materials or manufacture equipment for us and, therefore, delay or impede our product deliveries. Furthermore, rising inflation, slower economic growth and increases in unemployment that may result from global trade disruptions could further deflate consumer demand and impact the demand for our products.

Subscriptions and services revenue increased by $21.3$14.9 million or 30.9%,19.0%, and $36.1 million or 24.6%, for the three and six months ended MarchJune 29,28, 20262026, respectively, compared towith the prior year period,periods. The increases were primarily duedriven toby a 22.6%23.2% increase in cumulative paid accounts and continuedthe increasegrowth in average revenue per user (“ARPU”) on retail and direct paid subscription servicesservices, drivenreflecting bya higher volume of annual plan renewals.

Products revenue increased by $10.1$11.7 million or 20.0%,22.8%, and $21.7 million or 21.4%, for the three and six months ended MarchJune 29,28, 20262026, respectively, compared towith the prior year period,periods. The increases were primarily duedriven toby the increase inhigher product shipments to our largest customer in EMEAEMEA, due toreflecting stronger customer demanddemand, coupledas withwell as lower sales incentives and sales returns onin retail thatchannels, both of which are bothrecorded deemed to beas reductions of revenue. TheThese increaseincreases waswere partially offset by a reduction inlower average selling prices (“ASPs”) offor our products insold through retail channels as we continuecontinued promotional activities to stimulate household acquisition and subscriber growth.

Subscriptions and services cost of revenue increased by 19.7%43.7% and 31.7% for the three and six months ended MarchJune 29,28, 2026, respectively, compared towith the prior year period,periods. The increases were primarily duedriven toby growth in subscriptions and services revenue growth,and partiallycontinued offsetinvestments by cost savings as we optimize our cloudin platform services to support subscription-based business growth and improve customer experience which assists in reduced data storage and cloud compute costs.experience.

Products cost of revenue increased by 16.6%6.8% and 11.5% for the three and six months ended MarchJune 29,28, 2026, respectively, compared towith the prior year period,periods, The increases were primarily duedriven toby the increase inhigher product shipments,shipments and partially offset by decreasesan in$8.0 million tariff refund recorded as a reduction of cost of revenue and coupled with lower freight-in costs resulting from increased use of ocean freight. For the six months ended June 28, 2026, the increase was also partially offset by lower product warranty and inventory reserves, as well as the decrease in freight-in costs as a result of the utilization of ocean freight.reserves.

Subscriptions and services gross profit increased by $18.8$9.5 million and $28.4 million for the three and six months ended MarchJune 29,28, 2026, respectively, compared towith the prior year period,periods. The increases were primarily duedriven toby growth in subscriptions and services revenue, partially offset by higher subscriptions and services cost of revenue as we continued investing in platform services to support subscription-based business growth as a result of increases in cumulative paid accounts, continued increase in ARPU on retail subscriptions, and costimprove optimizations.customer experience.

Products gross profit improvedincreased by $1.1$7.6 million and $8.7 million for the three and six months ended MarchJune 29,28, 2026, respectively, compared towith the prior year period,periods. The increases were primarily driven by the $8.0 million tariff refund recorded as a reduction of cost of revenue, lower freight-in costs resulting from increased use of ocean freight, and lower product warranty and inventory reserves,reserves. asThese wellincreases as the decrease in freight-in costs due to the utilization of ocean freight. The improvement waswere partially offset by a reduction in thelower ASPs offor our products insold through retail channelchannels as we continuecontinued promotional activities to stimulate household acquisition and subscriber growth.

Research and development expense increased by $6.6$5.2 million for the three months ended MarchJune 29,28, 2026,2026 compared to the prior year period, primarily due to increases of $3.3$2.2 million in stock-based compensation asand a result of the increase in our stock price; $2.5$1.0 million in payroll-related compensationcompensation, driven by headcount growth, as well as a result of headcount increases; and $0.5$1.6 million increase in outside professional services as we continued ourto investmentinvest in platform services.services to support our subscription business.

Sales and marketing expense increased by $2.5$3.0 million for the three months ended MarchJune 29,28, 2026,2026 compared to the prior year period, primarily due to increases of $1.2$0.8 million in creditstock-based cardcompensation and in-app$0.7 processingmillion feesin payroll-related compensation, driven by headcount growth, as awell resultas increases of the increase in paid accounts and focused efforts to improve our customer’s app experience; $0.9$0.6 million in marketing expenditures; and $0.2$0.4 million in professional services as we continued ourto investmentinvest in our customer experience improvement.improvements.

General and administrative expense increased by $0.4$6.8 million for the three months ended MarchJune 29,28, 2026,2026 compared to the prior year period, primarily due to an increaseincreases of $2.0$3.4 million in legalstock-based professionalcompensation services. The increase was partially offset by decreases ofand $0.8 million in payroll-related compensationcompensation, driven by headcount growth, as well as a result of headcount decreases and $0.6$2.4 million increase in ITlegal andprofessional facilities overhead related to allocation associated with corporate infrastructure.services.

During the threefirst monthsfiscal endedquarter March 29,of 2026, we sold our strategic long-term investment. Upon completion of the sale, we received total cash proceeds of $18.9 million and recognized a realized gain of $6.4 million, representing the excess of proceeds received over the carrying value of the investment.

Interest income, net slightly decreased for the three and six months ended MarchJune 29,28, 2026 compared to the prior year period,periods, primarily due to the declinesdecline in interest rates.

Provision (Benefit) for Income Taxes

Provision (benefit) for income taxes decreasedincreased for the three and six months ended MarchJune 29,28, 2026,2026 compared to the prior year period,periods, primarily due to thehigher eliminationpre-tax ofincome in the mandatorycurrent capitalization of researchperiods and developmentthe expenses,prior resultingyear inthree-month higher current deductions, lower taxable income and a reducedperiod’s income tax provision.benefit. The higher effective tax rate for the threesix months ended MarchJune 29,28, 2026,2026 comparedwas tolower than the U.S. federal income tax rate, israte primarily drivendue byto earnings generated in lower-tax foreign jurisdictions and the shiftcontinued fromimpact aof relativelyvaluation smallallowances pre-taxrecorded lossagainst insubstantially theall priorof yearour periodU.S. todeferred atax largerassets pre-taxand profitcertain inforeign thetax current period.attributes.

Although we have recently generated cumulative pre-tax income, we determined that we have not yet demonstrated a sustained level of profitability sufficient to support realization of the deferred tax assets. We also considered forecasted future taxable income; however, such projections are inherently uncertain and do not outweigh the available negative evidence. Based on the totality of evidence, we concluded that it is not more-likely-than-not that the deferred tax assets will be realized. Accordingly, a full valuation allowance has been maintained as of MarchJune 29,28, 2026. There is a reasonable possibility that within the next few quarters, sufficient positive evidence will become available to reach a conclusion that all or a significant portion of the valuation allowance against our U.S. net deferred tax assets would no longer be required.

As of MarchJune 29,28, 2026, our cash and cash equivalents and short-term investments totaled $167.5$141.1 million and our unused borrowing capacity was $45.0 million based on the terms and conditions of the Credit Agreement. The proceeds of the borrowings under this credit facility may be used for working capital and general corporate purposes.

We have a history of losses and may incur operating and net losses in the future. As of MarchJune 29,28, 2026, our accumulated deficit was $368.2$365.1 million. Historically, we have funded our principal business activities through cash flows generated from operations and available cash on hand.

On February 3, 2026, our Board of Directors authorized a stock repurchase program of up to an aggregate of $50.0 million of shares, which commenced in March 2026 and is expected to continue through December 31, 2027 unless extended or shortened by the Board of Directors. During the threesix months ended MarchJune 29,28, 2026, we repurchased and subsequently retired 0.62.3 million shares of Arlo common stock for an aggregate repurchase of $8.0$29.9 million. As of MarchJune 29,28, 2026, $42.0$20.1 million remained available and authorized for future repurchases.

Net cash provided by operating activities decreased by $3.1$0.5 million for the threesix months ended MarchJune 29,28, 2026 compared towith the prior year period,period. The decrease was primarily duedriven toby improved profitability offset by unfavorable working capital movementsmovements, of (i)including higher accounts receivable balancebalances primarilyresulting due tofrom strong product sales; (ii)and higher inventory purchases;purchases, andwhich (iii) increases in deferred revenue due to the growth in our paid accounts and subscription rates;were partially offset by thean increase in accounts payable balancesbalances, mainlyprimarily due to the timing of payments; partially offset by improved profitability.payments.

Net cash used in investing activities wasincreased flatby $17.4 million for the threesix months ended MarchJune 29,28, 2026 compared towith the prior year period,period. The increase was primarily dueattributable to thecash paymentpaid for business combinationacquisitions and lower net proceeds from available-for-sale securities, partially offset by proceeds from the sale of oura strategic investment and higher net proceeds from our available-for-sale securities investment.

Net cash used in financing activities decreasedincreased by $7.3$14.5 million for the threesix months ended MarchJune 29,28, 2026 compared towith the prior year period, primarily due to lower stockhigher repurchases offsetof bycommon lower proceeds from employee stock plans.stock.

For a complete description of what we believe to be the critical accounting policies and estimates used in the preparation of our unaudited condensed consolidated financial statements, refer to our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to our critical accounting policies and estimates during the threesix months ended MarchJune 29,28, 2026, other than as discussed in Note 2. Significant Accounting Policies and Recent Accounting Pronouncements, in the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report.