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

You should carefully consider the risks described below and all other information contained in this Annual Report on Form 10-K before making an investment decision. TheseWe risksoperate in a rapidly changing environment that involves a number of risks, some of which are beyond our control, that have in the past and could in the future materially and adversely affect our business, financial condition, and results of operations. The risk factors below do not identify all risks that we face; our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. In that event, the trading price of our shares may decline, and you may lose part or all of your investment.

We have incurred substantial operating losses in the pastlast year,several years, and we may not be able to achieve revenue growth or profitability in the future, and if revenue growth or profitability is achieved, we may not be able to sustain it.

In 2024,2025, we incurred an operating loss of $135.0$83.3 million due to the combination of delayed product launches, competition, foreign exchange and the effect of macroeconomic conditions on our business.business, Whileincluding wetariff havevolatility, takeninflation, market volatility, economic recession concerns, and willa continuetemporary toU.S. takegovernment actionsshutdown. to reduce our operating expenses, weWe cannot be certain that we will be able to return to profitability through a combination of revenue growth andgrowth, gross margin improvement.improvement, and actions we have taken and will continue to take to reduce our operating expenses. For example, our annual revenue decreased from $1.09 billion in 2023 to $801.5 million in 2024.2024 to $651.5 million in 2025. In addition, we incurred an operating loss of $75.5$135.0 million in 2023.2024.

WeLooking ahead, we may experience lower levels of revenue, or lower gross margin for a variety of reasons, including, among other factors: ineffective or untimely investments in product innovation and development; product cost overruns; any delays or issues with our new product launches, such as the delayed launch of our next generation 360-camera from 2024 to 2025MAX2; increased advertisingcomponent costs, including both the cost and supply of memory and other semiconductors; lower levels of marketing costsand advertising spend and/or ineffectivenessits effectiveness thereof; increasing freight rates; shipping delays; increased supply chain costs; increased costs; lower average sales pricing for our cameras; or a recession or other sustained adverse market events such as tariffsvolatility of tariff rates that materially impacts consumer purchases of discretionary items, such as our products. For example, recently, prices for critical memory components have increased by more than 80% and price increases are expected to continue in 2026. Currency exchange rate fluctuations may also negatively impact revenue and gross margin. ForWhile example,we inhave 2023,taken ourand marginswill werecontinue negativelyto impactedtake byactions priceto protectionmoderate charges,operating anexpenses, increasewe incannot theguarantee proportionatethat volumewe will be able to return to profitability through a combination of salesrevenue ofgrowth, oursignificant lowgross margin entry-level price point cameras, a decrease of sales from GoPro.com,improvement, and theoperating significantexpense effect of foreign currency fluctuations that also worsened in 2024.reductions.

We may continue to experience fluctuating revenue, expenses, and profitability for a number of reasons, including other risks described in this Annual Report,Report on Form 10-K, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that impact our revenue growth or profitability.

In order to manage our profitability, we will need to effectively manage our existing resources and may also have to continue to reduce costs. We previously implemented company-wide restructurings of our business, including in March 2024, August 2024 and October 2024, resulting in a reduction in our global workforce, the elimination of certain open positions and reduction of certain office space, as well as the elimination of several high-cost initiatives, in order to optimize our cost structure and focus our resources on cameras, accessories, subscription and service, and tech-enabled helmets. In 2025, we reduced our spending on research and development by 32% and decreased our spending on marketing by 37%.

These reductionsReductions in force may result in unintended consequences and costs, such as the loss of institutional knowledge and expertise, attrition beyond the intended number of employees, decreased morale among our remaining employees, difficulty in recruiting employees in the future, and the risk that we may not achieve the anticipated benefits of the reduction in force. In addition, while positions have been eliminated, certain functions necessary to our operations remain, and we may be unsuccessful in distributing the responsibilities of departed employees among our remaining employees.

Further, jobJob candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. Fluctuations in the price of our Class A common stock may make it more difficult or costly to use equity compensation to motivate, incentivize and retain our employees. For example, since 2023, our closing stock price ranged from a high of $6.46 in the first quarter of 2023 to a low of $1.09$0.48 in the fourthsecond quarter of 2024.2025. If we are unable to attract and retain highly skilled personnel, we may not be able to achieve our strategic objectives, and our business, financial condition and operating results could be adversely affected.

We have experienced high subscriber growth over thein past several years, but we may not be able to sustain such growth in the future.future For example,or our subscriber growth slowed to 1% from 12% when comparing subscriber count forcould thedecrease. twelveIn months ending on December 31, 20242022 and 2023, respectively.the number of subscribers grew 43% and 12%, respectively, year-over-year. However, in 2025, our subscriber base declined 7% year-over-year to 2.36 million. Our subscription service is the highest gross margin product we offer. Our revenue growth and profitability are dependent on our ability to continuously attract and retain subscribers, and we cannot be certain that efforts to do so will be successful. Any changes to our subscription offerings, or increases to the offering costs, could have an adverse effect on the success and profitability of our subscription service, attracting new subscribers and retaining existing subscribers. There are many factors that could lead to slowing subscriber growth or a decline in subscribers, including a decline in camera sales, attach rates or retention rates, our failure to introduce new features, benefits, products, or services that customers desire, delay of product launches, changes to existing products, services, and pricing that are not favorably received by our customers, or changes in the perceived value of our offerings. If the attach rate is less than what we forecasted, this could have a negative impact on our overall subscriber growth plans. A decline in subscribers could have an adverse effect on our business, financial condition, and operating results.

The digital imaging market is highly competitive. Further, competition has intensified in digital imaging as new market entrants and existing competitors have introduced newnew, productsinnovative and more competitiveproduct offerings into our markets. Increased competition could resultcontinue into a loss oferode our market share and a decrease in our revenue and profitability.

We compete against established, well-known camera manufacturers such as Canon Inc. and Nikon Corporation, as well as large, diversified electronics companies such as Samsung Electronics Co. and Sony Corporation, and specialty companies such as Garmin Ltd., the Ricoh Company, Ltd., Arashi Vision Inc. (Insta360), and SZ DJI Technology Co., Ltd, Garmin Ltd., and the Ricoh Company, Ltd. Many of our competitors have substantial market share, diversified product lines, well-established supply and distribution systems, strong worldwide brand recognition and greater financial, marketing, research and development and other resources than we do. Additionally, many of our existing and potential competitors enjoy substantial competitive advantages, such as longer operating histories, the capacity to leverage their sales efforts and marketing expenditures across a broader portfolio of products, broader distribution and established relationships with channel partners or vertically integrated business units, access to larger established customer bases, greater resources to make acquisitions, larger intellectual property portfolios, and the ability to bundle competitive offerings with other products and services.services, the ability to maintain or lower selling prices despite tariffs or other margin pressures, and faster product launches. Further, new companies may emerge and offer competitive products directly in our category. Certain companies have developed cameras designed and packaged to appear similar to our products, which may confuse consumers or distract consumers from purchasing GoPro products.

Future growthprofitability depends on our ability to develop new products for new markets with the goal to expand our core community of customers, and we may not be successful in doing so.

Historically, the majority of our growthprofitability has been fueled by the adoption of our HERO and 360-camera products,products (such as MAX2), extensive mount and accessory ecosystem, and subscription products by people looking to self-capture images of themselves and helping those people create and share compelling and meaningful content with friends, family and followers. We believe that our future growthprofitability depends on continuing to add versatility to our products,products through timely development, develop new capture perspectives and reach and expand our core community of customers of our products and services, followers, and fans, and then utilizing that energized community as brand ambassadors to an extended community. Despite this, we may not be successful in further penetratingmaintaining or expanding our existing market.

We may not be able to expand our subscription and service offerings and cannot be certain that these efforts will be successful, and as a result, we may not be able to increase our total addressable market, revenue, or operating profit. We may not be able to maintain or expand our market, revenue and gross margin through this strategy on a timely basis, or at all, or recognize the benefits of our investments in this strategy, and we may not be successful in providing tools that our users adopt or believe are easy to use, which will negatively affect our future growth.

Our growthprofitability also depends on expanding into new markets with new capture perspectives, including with tech-enabled helmets currently in development. We cannot be assured that we will be successful in expanding into markets with new capture perspectives. New markets that we attempt to enter may be highly competitive, and we may have limited experience in those emerging markets. If we are not successful in expanding into additional markets, and enabling new capture perspectives, we might not be able to growachieve our revenueprofitability and we may not recognize benefits from our investment in new areas.

We may not be able to secure additional financing on favorable terms, or at all, to meet ourany future capital needs.needs, and any future equity raises may dilute our existing shareholders.

In the future, we may require additional capital to respond to business opportunities, challenges, or unforeseen circumstances and may determineseek to engage in equity or debt financings or enter into credit facilities for other reasons. We may not be able to timely secure additional financing on favorable terms, or at all, due to among other things, general macroeconomic conditions, including changes in interest rates, market volatility, and inflation.

Additionally, our current credit facilities contain restrictive covenants relating to our capital raising activities and other financial and operational matters, and any debt financing obtained by us in the future could involve modified or further restrictive covenants, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Further, even if we are able to obtain additional financing, we may be required to use such proceeds to repay a portion of our debt.

If we raise additional funds through the issuance of equity or convertible debt or other equity-linked securities, our existing stockholders could suffer significant dilution. If we are unable to obtain adequate financing under our credit facility, or alternative sources, such as the issuance of equity, when we require it, our ability to grow or support our business and to respond to business challenges could be significantly limited. In the event additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all.all, which could require us to delay or limit our operations.

We do not have internal manufacturing capabilities and instead rely on several contract manufacturers, including component vendors, located in China, Japan, Malaysia, Taiwan, Thailand, Vietnam, the U.S., and in other countries, to manufacture our products. Our ability to meet customer demand depends, in part, on our ability to obtain timely and adequate delivery of components for our products. We do not have internal manufacturing capabilities and rely on several contract manufacturers, located in China and Thailand, to manufacture our products. All of the components that go into the manufacturing of our hardware products and accessories are sourced from third-party suppliers. We do not control our contract manufacturers or suppliers, including their cost of components, capacity, bandwidth, or costs of their labor, environmental or other practices.

If we lose access to components from a particular suppliersupplier, experience increased competition for components, or experience a significant disruption in the supply of products and components from a current supplier, we may be unable to locate alternative suppliers or submit orders directly through supplier’s vendors of comparable quality at an acceptable price, or at all, and our business could be materially and adversely affected. In addition, if we experience a significant increase in demand for our products, our suppliers might not have the capacity or elect not to meet our needs as they allocate components to other customers. Developing suitable alternate sources of supply for these components may be time-consuming, difficult and costly, and we may not be able to source these components on terms that are acceptable to us, or at all, which may adversely affect our ability to meet our development requirements or to fill our orders in a timely or cost-effective manner.

Revenue from outside the United States comprised 52%, 64%, 61%, and 59%61% of our revenue in 2025, 2024, 2023, and 2022,2023, respectively, and we expect international revenue to continue to be significant in the future. As a result, we have been and may again be negatively impacted by foreign currency exchange rate fluctuations, which could have a material negative effect on our future operating results. Further, we currently have foreign operations in Australia, China, France, Germany, Hong Kong, Japan, Netherlands, Philippines, Romania, the United Kingdom (U.K.) and a number of other countries in Europe and Asia. Operating in foreign countries requires significant resources and considerable management attention, and we may enter new geographic markets where we have limited or no experience in marketing, selling, and deploying our products. International expansion has required and will continue to require us to invest significant funds and other resources and we cannot be assured our efforts will be successful. Our focus on international operations may expose us to a number of risks in addition to domestic operations, including but not limited to:

•the effect of foreign currency exchange rates and interest rates, including any fluctuations caused by,by inflation, recessionary concerns, or the strengthening of the U.S. dollar relative to the foreign currencies in which we conduct businessbusiness, including relative to the Eurozone;

Our gross margin can vary due to consumer demand, competition, product pricing, promotional activities, product lifecycle, product mix, new product introductions, GoPro.com sales mix, subscription activation, renewals, and cancellations, commoditycosts costs,relating to commodities, supply chain, logisticslogistics, costsshipping, and shipping costs,components, currency exchange rates, trade policy and tariffs, and the complexity and functionality of new product innovations and other factors. For example, our gross margin was 33.6%, 33.8%, 32.2%, and 37.2%32.2% for 2025, 2024, 2023, and 2022,2023, respectively. In particular, if we are not able to introduce new products in a timely manner at the product cost we expect,expect and within our budgetary constraints, if consumer demand for our products is less than we anticipate, if cancellation rates for our subscription offerings are higher than expected or if there are product pricing, marketing and other initiatives by our competitors to which we need to react or that are initiated by us to drive sales that lower our margins, then our overall gross margin will be less than we project.

The impact of these factors on gross margin can create unanticipated fluctuations in our operating results, which may cause volatility in the price of our shares and as a result, harm our liquidity, limit our ability to grow our business, pursue acquisitions, limit our ability to meet our debt obligations, and restrict our ability to compete in our markets.

We have in the pastpast, and will in the futurefuture, integrate new and evolving technologies, such as artificial intelligence (AI), into our products, services and platforms. For example, in the third quarter of 2025, we launched an opt-in AI Training program that enables U.S. subscribers to monetize their GoPro cloud-based content by making it available to help train AI models. We plan to continue to invest in the program and may further expand the program geographically for new subscriber opt-ins. Our investment in the opt-in AI training program and incorporating AI into our products may not be successful over time, which could adversely affect our business, our financial condition, operating results, or cash flow. We also utilize general-purpose artificial intelligence tools in our business and these use cases may become important in our operations over time. As with many new and emerging technologies, AI presents numerous risks and challenges that could adversely affect our business. AI development, adoption, and use is in its early stages, and ineffective or inadequate AI or generative AI development or deployment practices by us or third parties could result in unintended consequences.

Given the complex nature of AI, our use and future plans on implementing AI into our business may be subject to an evolving regulatory landscape. For example, on October 30, 2023, the Biden administration issued an executive order to, among other things, establish extensive new standards for AI safety and security. We continue to monitor AI regulatory developments which may reduce the efficiencies we believe to be gained from AI or require further investment.

Litigation may be necessary to enforce our intellectual property rights. We have initiated legal proceedings to protect our intellectual property rights, and we may file additional actions in the future. For example, on March 29, 2024, we filed a complaint with the U.S. International Trade Commission against Arashi Vision Inc., d/b/a Insta360 and Arashi Vision (U.S.) LLC, d/b/a Insta360 and a lawsuit in the U.S. District Court for the Central District of California against Arashi Vision Inc., d/b/a Insta360,Inc. and Arashi Vision (U.S.) LLC, both d/b/a Insta360,Insta360 (Insta360), alleging patent infringement of certain GoPro patents related to our cameras and digital imaging technology. Insta360 has filed IPR petitions seeking to challenge the validity of the GoPro patents asserted against Insta360.Insta360 at the Patent Office’s Patent Trial and Appeal Board (PTAB). Initiating infringement proceedings against third parties, as well as defending against IPRs, can be expensive, may take significant time, and may divert management’s attention from other business concerns. The cost of protecting our intellectual property has been and may in the future be substantial, and there is no assurance we will be successful. Our business could be adversely affected because of any such legal actions, or a finding that any patents-in-suit are invalid or unenforceable. For example, the ITC determined that certain GoPro patent claims were invalid and certain claims were not infringed. Additionally, while the PTAB found that Insta360 had failed to establish unpatentability of most of GoPro’s patent claims, the PTAB found partial unpatentability on two patents. GoPro is considering its options for appeal of any adverse findings from the ITC and PTAB. These legal actions may in the future lead to additional counterclaims or countersuits against us, which are expensive to defend against and for which there can be no assurance of a favorable outcome. For example, Insta360 has filed three patent infringement actions against us in China (Jiangsu High Court, Changsha Intermediate Court IP Tribunal, and Shenzhen Intermediate People’s Court). Further, parties we bring legal action against could retaliate through non-litigious means, which could harm our business or operations.

We use open-source software in connection with our products and services. From time to time, companies that incorporate open-source software into their products or services have faced claims challenging the ownership of open-source software and/or compliance with open-source license terms. Therefore, we could be subject to suits by parties claiming ownership of what we believe to be open-source software or noncompliance with open-source licensing terms. Some open-source software licenses require users who distribute or make available open-source software as part of their software to publicly disclose all or part of theour proprietary source code to such software or make available any derivative works of the open-source code on unfavorable terms or at no cost. While we monitor our use of open-source software and try to ensure that none is used in a manner that would require us to disclose the source code or that would otherwise breach the terms of an open-source agreement, such use could nevertheless occur despite policies and controls that we have in place, and we may be required to publicly release our proprietary source code, pay damages for breach of contract, re-engineer our applications, discontinue sales in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may divert resources away from our development efforts, any of which could adversely affect our business, financial condition or operating results.

Among other requirements, both the EU and U.K. GDPR regulatesregulate transfers of personal data outside of the EU and U.K., respectively, to countries that have not been found to provide adequate protection to personal data, including the United States, requiring that certain steps are taken to legitimize those transfers. We have undertaken certain efforts to conform transfers of personal data from the EUEuropean Economic Area or the U.K. to the United States and other jurisdictions based on our understanding of current regulatory obligations and the guidance of regulators and data protection authorities. Despite this, we may be unsuccessful in establishing or maintaining conforming means of transferring such data from the European Economic Area or the U.K. particularly as a result of continued legal and legislative activity that has challenged or called into question the legal basis for existing means of data transfers to countries that have not been found to provide adequate protection for personal data. We continue to monitor these regulatory and legal developments.

Since 2023, our closing stock price ranged from a high of $6.46 in the first quarter of 2023 to a low of $1.09$0.48 in the fourthsecond quarter of 2024.2025. Our stock price may fluctuate in response to a number of events and factors, such as quarterly operating results, changes in our financial projections provided to the public or our failure to meet those projections, the public’s reaction to our press releases, other public announcements and filings with the SEC, significant transactions, or new features, products or services offered by us or our competitors, changes in our business lines and product lineup, changes in financial estimates and recommendations by securities analysts, media coverage of our business and financial performance, the operating and stock price performance of, or other developments involving, other companies that investors may deem comparable to us, trends in our industry, trade regulation, any significant change in our management, and general economic conditions. Our existing liquidity and capital resources may not be sufficient to sustain our business conditions and debt obligations, we may need to raise additional capital through the issuance of additional shares which may have an adverse impact on our stock price. These factors, as well as the volatility of our Class A common stock, could also affect the price of our convertible senior notes as well as our ability to recruit and retain employees.

In addition, the stock market in general, and the market prices for companies in our industry, have experienced volatility that often has been unrelated to operating performance. These broad market and industry fluctuations may adversely affect the price of our stock, regardless of our operating performance. Price volatility over a given period may cause the average price at which we repurchase our own stock to exceed the stock’s price at a given point in time. Volatility in our stock price also affects the value of our equity compensation, which affects our ability to recruit and retain employees. In addition, some companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We have been subject to past shareholder class action lawsuits as well as derivative lawsuits and may continue to be a target for such litigation in the future. Securities litigation against us could result in substantial costs and liability and divert our management’s attention from other business concerns, which could harm our business. See Note 1011 Commitments, contingencies, and guarantees, in the Notes to Consolidatedconsolidated Financialfinancial Statementsstatements of this Annual Report on Form 10-K for a discussion on legal proceedings.

We review goodwill for impairment at least annually or more frequently if indicators of impairment arise, and should market conditions or macroeconomic conditions continue to deteriorate, including a rise in inflationary pressures and interest rates, a sustained decline in our share price, or a decline in our results of operations, the result of such review may indicate a decline in the fair value of goodwill resulting in an impairment charge. In the event we are required to record a non-cash impairment charge to our goodwill, other intangibles, and/or long-lived assets, such non-cash charge could have a material adverse effect on our business, financial condition, and results of operations in the reporting period in which we record the charge. For example, in the first quarter of 2025, we conducted a quantitative impairment test and concluded that the carrying value of our single reporting unit exceeded our fair value, resulting in the recognition of an $18.6 million goodwill impairment charge. Additional goodwill impairment charges may be necessary in the future quarters.

On FebruaryMarch 7,6, 2025,2026, our Class A common stock, par value $0.0001 per share, closed below the $1.00 per share minimum bid price requirement for continued inclusion on The Nasdaq Global Select Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Requirement”). Should our Class A common stock trade below the minimum Bid Price Requirement for 30 consecutive business days, Thethe Nasdaq Stock Market LLC (“Nasdaq”) will send a notice to us that, in accordance with Nasdaq Listing Rule 5810(c)(3)(A), we will be provided an initial compliance period of 180 calendar days from receipt of such notice, to regain compliance with the Bid Price Requirement. To regain compliance, the closing bid price for the Class A common stock must be at least $1.00 per share for a minimum of 10 consecutive business days prior to the end of the 180-day period. There can be no assurance that we will be able to regain compliance or that Nasdaq will extend the compliance period.

There can be no assurance that we will be able to regain compliance with the Bid Price Requirement as we have done in the past or will otherwise be in compliance with other applicable Nasdaq listing rules within the applicable compliance period(s), that we will be able to successfully implement a reverse stock split, or, if we receive a delisting determination and decide to appeal the delisting determination, that such appeal would be successful.

Currently, there is no immediate effect on the listing of the Class A common stock on The Nasdaq Global Select Market, and the Class A common stock will continue to trade on The Nasdaq Global Select Market under the symbol “GPRO,” subject to our compliance with the other continued listing requirements of The Nasdaq Global Select Market. If our Class A common stock were to be delisted from The Nasdaq Global Select Market, we might or might not be eligible to list our shares on another market. Such a delisting could negatively impact us by, among other things, reducing the liquidity and market price of our Class A common stock. Additionally, if our Class A common stock were to be delisted, we would be subject to an event of default under the 2025 Credit Agreement or the 2025 Term Loan.

GoPro helps the world capture and share itself in immersive and exciting ways. We are committed to developing solutions that create an easy, seamless experience for consumers to capture, create and share engaging personal content. When consumers use our cameras, accessories, and subscription and services, they often generate and share content that organically increases awareness for GoPro, driving a virtuous cycle and a self-reinforcing demand for our cameras, accessoriesaccessories, and subscription and services. We believe revenue growth may be driven by the introduction of new cameras, accessories, lifestyle gear, and software and subscription offerings. We believe new camera features drive a replacement cycle among existing users and attract new users, expanding our total addressable market. Our investments in image stabilization, mobile app editing and sharing solutions, modular accessories including lens mods, auto-upload capabilities, local language user-interfaces and voice recognition in more than 11 languages with 6 accents are designed to drive the expansion of our global market.

In FebruarySeptember 2025, we reintroducedbegan shipping our MAXMAX2 waterproof 360-camera featuring True 8K video, 10-bit color video in 8K at 30 frames per second (FPS), 29-megapixel resolution for 360-degree photos, and easily replaceable lenses made from water-repelling optical glass. In addition, MAX2 includes in-camera POV and Selfie Video Modes, six built-in microphones that provide 360 audio and wireless Bluetooth functionality, built-in GPS, MAX HyperSmooth image stabilization, 360-degree MAX TimeWarp Video, and MAX SuperView, PowerPano, built-in mounting, high-quality audio, live streaming, voice control and a front facing touch display.SuperView. MAX HyperSmooth provides high performance video stabilization, while MAX SuperView provides a wide field of view. PowerPano allows users to capture a 6.2mp, 270-degree panoramic photo with the push of a button and creates an artifact-free shot of action or movement. Our MAXMAX2 camera features six built-in microphones that allows users to capture immersive 360-degree audio and directional audio for vlogging, andalso includes a MAX Enduro battery which increases recording time and improves cold-weather performance. The Quik app also includes editing tools for our MAXMAX2 camera such as subjectAI trackingObject Tracking and keyframe-basedMotionFrame reframing.editing.

Our HERO13 Black, HERO13 Black Creator Edition, LIT HERO, HERO, HERO12 Black, HERO12 Black Creator Edition, HERO11 Black, HERO11 Black Mini, HERO11 Black Creator Edition,MAX2, and MAX cameras are compatible with our ecosystem of mountable and wearable accessories.

We offer our Premium subscription, which includes unlimited cloud storage of GoPro content supporting source video and photo quality, damaged camera replacement, cloud storage up to 25100 gigabytes (GB) of non-GoPro content, the delivery of highlight videos automatically via our mobile app when GoPro camera footage is uploaded to the user’s GoPro cloud account using Auto Upload or when GoPro camera footage is uploaded to the user’s GoPro cloud account via the user’s mobile phone. Our Premium subscription also provides access to a high-quality live streaming service on GoPro.com, as well as discounts on GoPro cameras, lifestyle gear, mounts and accessories. In February 2024, we launched our Premium+ subscription which includes cloud storage up to 500 GB of non-GoPro content, HyperSmooth Pro and all of the same features included in the Premium subscription.

In addition to the Premium+ and Premium subscriptions, we offer our Quik subscription which makes it easy for users to get the most out of their favorite photos and videos, captured on any phone or camera, using our Quik mobile app’s editing tools. These editing tools include features such as trim, color, crop, filtering, auto-sync of edits to music, and the ability to change video speed. We also offer our GoPro Reframe plugin for Adobe PremierPremiere Pro andPro, Adobe After EffectsEffects, and DaVinci Resolve which provides users with creative control over footage and enabling reframing, animated movements, motion blur transitions, and adjustments to lens curvature.

We continue to monitor the current evolving macroeconomic landscape. Inflation, fluctuating interest rates, a strengthening United States dollar (U.S. dollar), tariffs and recession concerns places increasing pressure on many areas of our business, including hardware and software product pricing, operating expenses, component pricing and consumer spending. In the past, the strength of the U.S. dollar relative to other foreign currencies largely impacted our revenue and gross margin. Revenue from the U.S. was 36.3%47.6% and 38.6%36.3% of annual revenue infor 2024the year ended December 31, 2025 and 2023,2024, respectively. If the U.S. dollar strengthens relative to other foreign currencies in the future, our financial results will be negatively impacted. See Item 1A. Risk Factors for further discussion of the possible impact of evolving macroeconomic conditions on our business.

(3) We define adjusted EBITDA as net income (loss) adjusted to exclude the impact of income tax expense (benefit), interest income, interest expense, depreciation and amortization, point of purchase (POP) display amortization, stock-based compensation, (gain) loss on insurance proceeds, (gain) loss on extinguishment of debt, and restructuring and other costs, including right-of-use asset impairment charges (if applicable)., (gain) loss on the revaluation of warrants, and goodwill impairment charges.

(4) We define non-GAAP net income (loss) as net income (loss) adjusted to exclude stock-based compensation, acquisition-related costs, restructuring and other costs, including right-of-use asset impairment charges (if applicable), (gain) loss on insurance proceeds, (gain) loss on extinguishment of debt, gain on sale and/or license of intellectual property, (gain) loss on the revaluation of warrants, goodwill impairment charges, and income tax adjustments. Acquisition-related costs include the amortization of acquired intangible assets and impairment charges (if applicable), as well as third-party transaction costs for legal and other professional services.

Revenue for the full year of 20242025 was $801.5$651.5 million, whichof representedwhich, a$545.3 20.3%million decreasewas from hardware sales and $106.3 million was from subscription and services. Hardware revenue decreased 21.5% from the prior year period of $1.0 billion. The decrease was primarily driven by a decrease in units shipped of 2.4 million from 3.0 million in 2023, or a decrease of 18.5%,period, primarily due to consumerthe related-macroeconomictiming and mix of product launches in the full years of 2025 and 2024, consumer-related macroeconomic issues resulting in a softer global consumer market, and an increasingly global competitive landscape andwhich has resulted in market share loss. As a result, camera units shipped in the delayfull year of our2025 nextdecreased generation 360-camera. This decrease in annual revenue from lower camera unit sales was partially offset by24.9% year-over-year growth in our subscription and service revenue of 9.7% to $107.01.8 million in 2024.million. For the full year of 2024,2025, camera revenue mix from cameras with an MSRP equal to or greater than $400 was 76%75%, compared to 77%76% for the same period in 2023.2024. Subscription and services revenue was flat year-over-year at $106.3 million. For the full year of 2024,2025, theour average selling price decreasedincreased 2.2%8.2% year-over-year to $330, primarily due to a shift in camera revenue mix with the introduction of our $199 HERO entry level product and an increase in promotional activity during the year.$357. Average selling price is defined as total reported revenue divided by camera units shipped. Retail revenue was $600.9$481.9 million for the full year of 20242025 and represented 75.0%74.0% of total revenue, compared to 70.0%75.0% of total revenue infor the priorsame yearperiod period.in 2024. GoPro.com revenue, which includes subscription and service revenue, was $200.6$169.6 million for the full year of 20242025 and represented 25.0%26.0% of total revenue, compared to 30.0%25.0% of total revenue in the prior year period. Our gross margin percentage for the full year of 20242025 was 33.8%33.6%, and was negatively impacted by approximately 40 basis points duecompared to the strengthening of the U.S. dollar relative to foreign currencies in the year. Our gross margin percentage33.8% for the full year of 2023 was 32.2%. Relative to 2021 when gross margin was 41.1%, the U.S. dollar appreciated, which has negatively impacted revenue and gross margin for the full year 2024 by approximately $50 million, or 390 bps of gross margin.2024. Net loss for the full year of 20242025 was $93.5 million, compared to a net loss of $432.3 million,million in 2024, which included the establishment of a net valuation allowance of $294.9 million on United States federal and state deferred tax assets in the first quarter of 2024, compared to a net loss of $53.2 million in 2023.2024. Adjusted EBITDA for the full year of 20242025 was negative $71.6$28.5 million, compared to negative $27.3$71.6 million in 2023.2024.

Revenue for the fourth quarter of 20242025 was $200.9$201.7 million, whichof representedwhich, a$175.1 32.0%million decreasewas from thehardware samesales periodand in$26.6 2023. The decreasemillion was primarilyfrom drivensubscription byand aservices. 35.1%Hardware decreaserevenue inincreased units shipped0.9% in the fourth quarter of 2024 of 581 thousand,2025 compared to 895 thousand in the sameprior periodyear in 2023period, primarily due to consumerour related-macroeconomiccamera issuesrevenue resultingmix infavoring softerour globalhigher-end consumerproducts, demand,like anMAX2, increasinglywhich global competitive landscape, andhas a nearlyMSRP 20%starting sequentialat reduction in channel inventory, which was$500, partially offset by ana 8.5% increase in our subscription and service revenue. Sell-through in the fourth quarter of 2024 was approximately 775 thousand units, resulting in an approximate 170 thousand unit sequential1.2% decrease in thecamera inventoryunits channel.shipped year-over-year to 574 thousand. Our fourth quarter of 2024 average selling price increased by 4.7% year-over-year to $346, primarily due to a2025 camera revenue mix shift with 84% of camera revenue from cameras with an MSRP equal to or greater than $400 was 79% compared to 74%84% infor the same period in 2023,2024. Subscription and anservices increaserevenue decreased 3% from the prior year period, primarily due to a 6.7% decrease in subscription and service revenuesubscribers as acamera percentageunit ofshipped totaldecreased revenue,year-over-year, partially offset by an increase in promotionalthe activity.average revenue per user. In the fourth quarter of 2025, our average selling price increased 1.6% year-over-year to $351. Retail revenue was $149.6$153.6 million in the fourth quarter of 20242025 and represented 74.4%76.2% of total revenue, compared to 77.2%74.4% inof total revenue for the same period ofin 2023.2024. GoPro.com revenue, which includes subscription and service revenue, was $51.3$48.1 million in the fourth quarter of 20242025 and represented 25.6%23.8% of total revenue, compared to 22.8%25.6% of total revenue infor the same period ofin 2023.2024. Our overall subscription attach rate from both sales on GoPro.com and from post-camera purchases at retail was 34%43% in the fourth quarter of 2024,2025, up from a 29% attach rate34% in the prior year quarter. Our aggregate retention rate for annual subscribers was 69%68% in the fourth quarter of 2024,2025, compared to 67%69% in the same period ofin 2023.2024. Our gross margin percentage infor the fourth quarter of 20242025 was 34.7%31.8%, compared to 34.2%34.7% in the same period of 2023. Our fourth quarter of 2024 gross margin percentage was negatively impacted by 30 basis points due to the strengthening of the U.S. dollar relative to foreign currencies in the quarter compared to the prior year quarter.2024. Net loss for the fourth quarter of 20242025 was $37.2$9.1 million, compared to a net loss of $2.4$37.2 million for the same period in 2023.2024. Adjusted EBITDA for the fourth quarter of 20242025 was negativepositive $14.4$0.8 million, compared to positivenegative $3.3$14.4 million in the same period ofin 2023.2024.

Driving profitability through improved efficiency, lower costs, and better execution. We incurred operating losses in 2025 and 2024 and 2023.may Weincur losses in the future. While our prior restructuring actions have reduced our operating costs compared to our historical levels, we continue to make strategic decisions to drive volume, growth, and profitability in our business. RestructuringWe actionsare in 2024 and prior restructuring actions, along with continued cost management have resulted in a more efficient global organization that has allowed for improved communication and alignment amongimplementing our functional2026 teams.operational Weplan areand changing our approach to operate in a leaner, more focused manner that we believe is sustainable and strategic for long-term success and improved financial performance. This includes pursuing a hardware and software product roadmap we believe will drive innovation, differentiation, and growth. And, inIn the longer term, this includes increasing our total addressable market by introducing new, innovative hardware and software products, increasing unit sales volume of our new and existing products, and increasing our subscriber base. Our expectation is that sales from our retail channel will continue to increase relative to sales on GoPro.com. While growth in subscribers and subscription and service revenue has slowed, we continue to make strategic decisions to enhance our subscription offerings to grow subscribers and increase subscriber retention that results in an increase in subscription and service revenue.

Investing in research and development and enhancing our customer experience. Our performance is significantly dependent on the investments we make in research and development, including our ability to attract and retain highly skilled and experienced research and development personnel. As part of our strategic focus on operational efficiency and implementation of our 2026 operational plan, we have adjusted certain investments in research and development while continuing to prioritize projects that support long-term growth of our company, including the expected launch of our new system-on-chip GP3-based cameras beginning in the second quarter of 2026. We expect the timing of new hardware product releases to continue to have a significant impact on our revenue and we must continually develop and introduce innovative new cameras, software, and other new offerings. We plan to further build upon our integrated mobile and cloud-based storytelling solutions, as well as our subscription offerings. Our investments, including those for marketing and advertising, and those related to development efforts associated with our mostacquisition recentin acquisition,2024, may not successfully drive increased revenue and our customers may not accept our new offerings. Further, we have and will continue to incur substantial research and development expenses and if our efforts are not successful, we may not recover the value of these investments.

Improving profitability. We believe that our continued focus on growing our total addressable market from our retail and GoPro.com channels, including subscription and service revenue, and broadening our range of hardware products will support our ability to return to profitability on an annual basis due to timely and effective product launches, increases in unit volume, subscribers and related revenue, and continued operating expense control. While the total market for digital imagery has seen an increase in competition, we believe that our consumers’ differentiated use of GoPro cameras, our mobile app and cloud solutions, our continued innovation of product features desired by our users, and our brand, all help support our competitiveness within the market for digital cameras. However, we expect that the markets in which we conduct our business will remain highly competitive as we face new or improved product introductions from competitors such as enhanced phone capabilities and technology-enabled glasses. Sales in international locations subject us to foreign currency exchange rate fluctuations and regional macroeconomic conditions that may cause us to adjust pricingpricing, which may make our hardware and software products more or less attractive to the consumer. Continued fluctuations in foreign currency exchange rates and regional macroeconomic conditions could have a continued impact on our future operating results. Our profitability also depends on the continued success of our subscription and service offerings.

Seasonality. Historically, we have typically experienced the highest levels of total revenue and channel inventory sell-through in the fourth quarter of the year, coinciding with the holiday shopping season, particularly in the United States and Europe. However, total revenue in the fourth quarter of 2024 did not continue this trend due to a number of factors, including macroeconomic conditions, competition, and a delay in an expected hardware product release. In the fourth quarter of 2024, channel inventory sell-through continued the historical trend. While we have implemented operational changes aimed at reducing the impact of fourth quarter seasonality on full year performance, timely and effective product introductions, whether just prior to the holiday season or otherwise, and forecasting, are critical to our operations and financial performance.

Macroeconomic risks. Macroeconomic conditions affecting the level of consumer spending include market volatility and fluctuations in tariffs, foreign exchange rates, inflation, and interest rates. Some hardware product costs have become subject to inflationary pressure, and we may not be able to fully offset such higher costs through price increases.

Revenue. Our revenue is primarily comprised of hardware product sales, and subscription and service offerings, net of returns and sales incentives. ProductHardware revenue is derived from the sale of our cameras and accessories directly to retailers, through our network of domestic and international distributors, and on GoPro.com. Subscription and service revenue is primarily derived from the sale of our Premium+, Premium and Quik subscriptions on GoPro.com, and the Quik mobile app. See Critical Accounting Policies and Estimates and Note 1 Summary of business and significant accounting policies, to the Notes to Consolidatedconsolidated Financialfinancial Statementsstatements of this Annual Report on Form 10-K for information regarding revenue recognition.

Cost of revenue. Our hardware cost of revenue primarily consists of product and subscription costs, including costs of contract manufacturing for production, third-party logistics and procurement costs, warranty repair costs, tooling and equipment depreciation, third-party hosting fees, excess and obsolete inventory write-downs, license fees, tariffs and certain allocated costs related to our manufacturing team, facilities, including right-of-use asset impairment charges, cloud storage costscharges and personnel-related expenses. Subscription and service cost of revenue primarily consists of third-party hosting fees, cloud storage costs, personnel-related expenses, and other subscription costs.

The following table sets forth the components of our Consolidatedconsolidated Statementsstatements of Operationsoperations for each of the periods presented, and each component as a percentage of total revenue:

20242025 Compared to 2023.2024. RevenueTotal revenue for the full year of 20242025 was $801.5$651.5 million, whichof representedwhich, a$545.3 20.3%million decreasewas from hardware sales and $106.3 million was from subscription and services. Hardware revenue decreased 21.5% from the prior year period of $1.0 billion. The decrease was primarily driven by a decrease in units shipped of 2.4 million from 3.0 million in 2023, or a decrease of 18.5%, primarily due to consumerthe related-macroeconomictiming and mix of product launches in the full year of 2025 and 2024, consumer-related macroeconomic issues resulting in a softer global consumer market, and an increasingly global competitive landscape andwhich has resulted in market share loss. As a result, camera units shipped in the delayfull year of our2025 nextdecreased generation 360-camera. This decrease in annual revenue from lower camera unit sales was partially offset by24.9% year-over-year growth in our subscription and service revenue of 9.7% to $107.01.8 million in 2024.million. For the full year of 2024,2025, camera revenue mix from cameras with an MSRP equal to or greater than $400 was 76%75% compared to 77%76% for the same period in 2023.2024. Subscription and services revenue was flat year-over-year at $106.3 million. For the full year of 2024,2025, theour average selling price decreasedincreased 2.2%8.2% year-over-year to $330, primarily due to a shift in camera revenue mix with the introduction of our $199 HERO entry level product and an increase in promotional activity during the year.$357. Retail revenue was $600.9$481.9 million for the full year of 20242025 and represented 75.0%74.0% of total revenue, compared to 70.0%75.0% of total revenue infor the priorsame yearperiod period.in 2024. GoPro.com revenue, which includes subscription and service revenue, was $200.6$169.6 million for the full year of 20242025 and represented 25.0%26.0% of total revenue, compared to 30.0%25.0% of total revenue in the prior year period.

2024 Compared to 2023. Gross margin of 33.8% forin the full year of 2024 increased from 32.2% in the priorsame period,period of 2023, or 160 bps, primarily due to an increased margin contribution from subscription and services of (200 bps,bps) and lower operational costs related to warranty, tariff and freight savings of (70 bps,bps), partially offset by higher promotional activity of (70 bps) and the effect of foreign currency fluctuations of (40 bps. Relative to 2021 when gross margin was 41.1%, the U.S. dollar appreciated, which has negatively impacted revenue and gross margin for the full year 2024 by approximately $50 million, or 390 bps of gross margin.).

20242025 Compared to 2023.2024. The year-over-year increasedecrease of $20.2$59.1 million, or 12.2%,31.8%, in total research and development expense forin the full year of 20242025 compared to the priorsame period of 2024 was primarily driven by a $15.9$19.6 million increase in restructuring costs, and an $11.6 million increasedecrease in consulting and professional services primarily fordue development work onto our next generation system-on-chip, partially offset byGP3, a $4.7$19.5 million decrease in cash-based personnel-related costs, a $15.2 million decrease in restructuring costs, a $4.0 million decrease in stock-based compensation expense, and a $3.0$0.8 million decrease in allocatedtravel facilities, depreciation, and supporting overheadrelated expenses.

20242025 Compared to 2023.2024. The year-over-year decrease of $8.9$59.9 million, or 5.3%,37.3%, in total sales and marketing expense forin the full year of 20242025 compared to the priorsame period of 2024 was primarily driven by a $4.8$33.6 million decrease in advertising and marketing expensesexpenses, primarily attributable to online campaigns, partiallyactivation offset by sponsorshipsevents and pointsponsorships, ofan purchase display depreciation expense. The year-over-year decrease in total sales and marketing expense was also driven by a $3.9$8.3 million decrease in creditcash-based cardpersonnel-related fees from sales on GoPro.com,costs, a $2.9$6.8 million decrease in consulting and professional services, a $4.8 million decrease in restructuring costs, a $2.3 million decrease in stock-based compensation expense, and a $2.1$1.7 million decrease in allocated facilities, depreciation, and supporting overhead expenses, partiallya offset$1.0 bymillion decrease in travel related expenses, and a $5.2$1.0 million increasedecrease in restructuringcredit costs.card fees from sales on GoPro.com.

20242025 Compared to 2023.2024. The year-over-year decrease of $4.0$3.4 million, or 6.2%,5.8%, in total general and administrative expense infor the full year of 20242025 compared to the priorsame period of 2024 was primarily driven by a $4.2$4.3 million decrease in cash-based personnel-related costs and a $2.9 million decrease in stock-based compensation expense, a $4.0 million decrease in cash-based personnel-related costs, and a $1.2 million decrease in allocated facilities, depreciation, and supporting overhead expenses, partially offset by a $4.1$4.2 million increase in consulting and professional services, and a $1.8 million increase in restructuring costs.services.

Third quarter 2024 restructuring. In August 2024, we approved a restructuring plan (the Original Restructuring Plan) and in October 2024, we approved an amended restructuring plan (the Updated Restructuring Plan). In connection with the Original Restructuring Plan and Updated Restructuring Plan, we reduced our global workforce by 25% compared to our headcount ending Q2 2024, and we recorded restructuring charges of $18.7 millionmillion, including $12.7 million related to severance and $6.0 million of project cancellation costs.

First quarter 2024 restructuring. In March 2024, we approved a restructuring plan to reduce operating costs and drive stronger operating leverage by reducing our global workforce by approximately 4% and closing certain office space. Under the first quarter 2024 restructuring plan, we recorded restructuring charges of $2.3 million related to severance, $3.3 million related to a right-of-use asset impairment upon ceasing the use of part of our headquarters campus and $0.6 million related to office space charges. The right-of-use asset impairment charge was recorded as a restructuring expense, primarily in the operating expense financial statement line items in the Consolidatedconsolidated Statementsstatements of Operations.operations. The unused portion of our headquarters campus has its own identifiable expenses and is not dependent on other parts of our business, and thus was considered its own asset group. As a result, we impaired the carrying value of the related right-of-use asset to its estimated fair value using the discounted cash flows method. The discounted future cash flows were based on a discount rate based on the weighted-average cost of capital. As of DecemberMarch 31, 2024,2025, weall expect approximately $1.7 million of office spacerestructuring charges associatedrelated with the unused portion of our headquarters campus vacated as a result ofto the first quarter 2024 restructuring plan,plan whichhave willbeen be incurred over the underlying remaining lease term.paid.

20242025 Compared to 2023.2024. We recorded an income tax expense of $299.2$2.0 million for the year ended December 31, 20242025 on a pre-tax net loss of $133.1$91.4 million. Our income tax expense for the year ended December 31, 20242025 primarily resulted from the establishment and the current yeara change in the valuation allowance on the United States federal and state net deferred tax assets, nondeductible equity tax expense from employee stock-based compensation, and tax expense from goodwill impairment, partially offset by a tax benefit on a pre-tax net loss, and the releasefederal ofand aCalifornia portionresearch ofand ourdevelopment uncertain tax positions as a result of a lapse in the statute of limitations in certain jurisdictions.credits.

Our 20232024 income tax benefitexpense of $14.6$299.2 million primarily resulted from the establishment and the change in the 2024 valuation allowance on the United States federal and state net deferred tax assets, partially offset by a tax benefit on a pre-tax net loss, and the federal and California research and development credits, partially offset by the nondeductible equity tax expense from stock-based compensation, and the impact of foreign operations, net of the release of a portion of our uncertain tax positions as a result of a lapse in the statute of limitations in certain jurisdictions.

Our primary source of cash is receipts from sales of our hardware products, and subscription and service. Other sources of cash are from proceeds from the issuance of convertible notes, employeeborrowings participationunder inour credit facility and credit agreement, the employeesale of Class A common stock purchasepursuant plan,to the exerciseSubscription of employee stock options,Agreement, and facility subleases. Our primary uses of cash are for inventory procurement, payroll-related expenses, general operating expenses, including advertising, marketing, office rent, purchases of property and equipment, other costs of revenue,revenue including components, such as memory, share repurchases, repurchases of convertible notes, acquisitions, interest, and taxes. In 2025, we also used $94.3 million in cash to repay the remaining aggregate principal of the 2025 Notes in November 2025.

Our liquidity position has been historically impacted by seasonality, which is primarily driven by higher revenues during the second half of the year as compared to the first half. For example, net cash usedprovided inby operating activities during the second half of 20242025 was $27.3$27.8 million, compared to cash used in operating activities of $97.8$48.4 million during the first half of 2024.2025.

As of December 31, 2024,2025, our cash, cash equivalents, and marketable securities totaled $102.8 million. Our cash, net of the outstanding principal balance of the 2025 Notes, as of December 31, 2024, was $9.1$49.7 million. The overall cash used in operating activities of $125.1$20.7 million for the year ended December 31, 20242025 was primarily attributable to a net loss of $432.3 million and net cash outflows from changes in our working capital of $30.0$93.5 million, partially offset by a deferred tax asset expense of $296.8 million, and net cash inflows from other non-cash expenses of $40.4$31.7 million, an $18.6 million goodwill impairment charge, and changes in our working capital of $22.5 million. Working capital changes for the year ended December 31, 20242025 of $30.0$22.5 million were the result of a decrease in accounts payable and other liabilities of $21.2 million, an increase in inventory of $14.5 million, and a decrease in deferred revenue of $0.8 million, partially offset by a decrease in accounts receivables of $5.3$42.3 million and a decrease in prepaid expenses and other assets of $1.1$2.8 million, partially offset by a decrease in accounts payable and other liabilities of $11.1 million, an increase in accounts receivables of $7.3 million, and a decrease in deferred revenue of $4.1 million. As of December 31, 2024,2025, $8.3$3.1 million of cash was held by our foreign subsidiaries.

We operate in a rapidly changing environment that involves a number of risks, some of which are beyond our control, that have in the past and could in the future materially and adversely affect our business, financial condition, and results of operations. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025,2025 and Part II, Item 1A. Risk Factors in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, which could materially affect our business, financial condition or future results of operations. Except as set forth below, there have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.2025 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026. You should carefully consider the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2025 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 and all other information contained in this Quarterly Report on Form 10-Q before making an investment decision. The risk factors contained in our public filings do not identify all risks that we face; our business, financial condition, operations, and/or future operating results could also be affected by factors that are not presently known to us or that we currently consider to be immaterial. In that event, the trading price of our shares may decline, and you may lose part or all of your investment.

In the firstsecond quarter of 2026, we incurred an operating loss of $57.2$39.0 million, compared to an operating loss of $45.2$14.0 million in the firstsecond quarter of 2025, due to the combination of tariffs, lower promotional activity, an increasingly global competitive landscape, consumer-related macroeconomic issues resulting in a softer global consumer market, and the cost and availability of memory and other semiconductors. Our total revenue decreased from $134.3$152.6 million in the firstsecond quarter of 2025 to $99.1$104.9 million in the firstsecond quarter of 2026. We cannot be certain that we will be able to return to profitability through a combination of revenue growth, gross margin improvement, and actions we have taken and will continue to take to reduce our operating expenses.

Looking ahead, we may experience lower levels of revenue, or lower gross margin for a variety of reasons, including, among other factors: ineffective or untimely investments in product innovation and development; product cost overruns; any delays or issues with our new product launches, such as the delayed launch of MAX2; increased component costs and increased product prices to offset such component costs, including both the cost and supply of memory and other semiconductors; disrupted production due to decreased availability of critical components like memory and silicon; lower levels of marketing and advertising spend and its effectiveness thereof; increasing freight rates; shipping delays; increased supply chain costs; lower average sales pricing for our cameras; or a recession or other sustained adverse market events or macroeconomic factors such as volatility of tariff rates, or geopolitical events and uncertainty, including the effects of global conflicts, that materially impact consumer purchases of discretionary items, such as our products. For example, recently, the cost of memory components has increased sharply, including unexpected price increases ranging from 80% to 115% in the last week of March 2026. This upward trend has continued and is expected to persist. Currency exchange rate fluctuations may also negatively impact revenue and gross margin. While we have taken and will continue to take actions to moderate operating expenses, we cannot guarantee that we will be able to return to profitability through a combination of revenue growth, significant gross margin improvement, and operating expense reductions.

We may continue to experience fluctuating revenue, expenses, and profitability for a number of reasons, including other risks described in this Quarterly Report on Form 10-Q and10-Q, our Annual Report on Form 10-K for the year ended December 31, 2025, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that impact our revenue growth or profitability.

We have experienced high subscriber growth in past years, but we may not be able to sustain such growth in the future or our subscriber count could decrease. In 2022 and 2023, the number of subscribers grew 43% and 12%, respectively, year-over-year. However, in the firstsecond quarter of 2026, our subscriber base declined 8%11% year-over-year to 2.262.18 million. Our subscription service is the highest gross margin product we offer. Our revenue growth and profitability are dependent on our ability to continuously attract and retain subscribers, and we cannot be certain that efforts to do so will be successful. Any changes to our subscription offerings, or increases to the offering costs, could have an adverse effect on the success and profitability of our subscription service, attracting new subscribers and retaining existing subscribers. There are many factors that could lead to slowing subscriber growth or a decline in subscribers, including a decline in camera sales, attach rates or retention rates, our failure to introduce new features, benefits, products, or services that customers desire, delay of product launches, changes to existing products, services, and pricing that are not favorably received by our customers, or changes in the perceived value of our offerings. If the attach rate is less than what we forecasted, this could have a negative impact on our overall subscriber growth plans. A decline in subscribers could have an adverse effect on our business, financial condition, and operating results.

If we lose access to components from a particular supplier, experience increased competition for components, or experience a significant disruption in the supply of products and components from a current supplier, we may be unable to locate alternative suppliers or submit orders directly through supplier’s vendors of comparable quality at an acceptable price, or at all, and our business could be materially and adversely affected. In addition, if we experience a significant increase in demand for our products, our suppliers might not have the capacity or elect not to meet our needs as they allocate components to other customers. Further, if suppliers significantly increase prices of components due to inflationary pressures or other factors, increase their commitment requirements, or require cash in advance payment, fail to deliver manufactured products, pause or cancel any further deliveries, retain or withhold inventory, or materially alter the terms of our supplier agreements, we may need to identify and qualify one or more replacement suppliers. For example, recently, the cost of memory components has increased sharply, including unexpected price increases ranging from 80% to 115% in the last week of March 2026. Any of our single source suppliers may fail to deliver manufactured products, pause or cancel any further deliveries, retain or withhold inventory, or cease doing business with us if we cannot provide cash in advance payment or accept increased prices, commitment requirements, or materially altered terms. Developing suitable alternate sources of supply for these components may be time-consuming, difficult and costly, and we may not be able to source these components from alternative suppliers on terms that are acceptable to us, or at all, which may adversely affect our ability to meet our development requirements or to fill our orders in a timely or cost-effective manner. Disruptions or loss of any of our limited or single source suppliers, or capacity limitations of the suppliers for components, could increase our costs, curtail growth opportunities, cause material delays, and adversely impact our business, financial results, and customer relationships.

We have substantial indebtedness in the form of convertible senior notes, senior secured notes and credit agreements. Our indebtedness and corresponding cash debt service obligations could adversely affect our competitiveness, our liquidity, our operations, and our ability to obtain additional financing if necessary.

On August 4, 2025, we entered into a second lien credit agreement pursuant to which we borrowed $50.0 million. On November 5, 2025, we entered into Amendment No. 1 to the credit agreement and on February 27, 2026 we entered into Amendment No. 2 to the credit agreementmillion (collectively, the 2025 Term Loan), in each case to modify certain financial covenants.. As of MarchJune 31,30, 2026, the outstanding principal under the 2025 Term Loan was $49.4$49.0 million. The 2025 Term Loan is separate from our outstanding credit agreement which provides for a revolving credit facility, as amended from time to time (the 2021 Credit Facility, and together with the 2025 Term Loan, the Credit Facilities). Under the 2021 Credit Facility, we have borrowed $25.5$24.4 million as of MarchJune 31,30, 2026. On February 27, 2026, we entered into Amendment No. 3 to the 2021 Credit Facility to modify certain financial covenants, extend the maturity date and increase the interest rate.

Additionally, on February 27, 2026, we entered into a securities purchase agreement (Securities Purchase Agreement) with YA II PN, Ltd. (YA II PN), in connection with the issuance and sale by the Company of convertible debentures (the Convertible Debentures) issuable in an aggregate principal amount of up to $50.0 million, which Convertible Debentures will be convertible into shares of the Company’s Class A common stock, par value $0.0001 per share (the Common Stock) (as converted, the Conversion Shares). YA II PN purchased $25.0 million in aggregate principal amount of Convertible Debentures upon the signing of the Securities Purchase Agreement. In addition, subject to certain closing conditions, YA II PN would have been able to purchase an additional $5.0 million on the business day prior to the filing of the registration statement registering the resale of the Common Stock issuable upon conversion of the Convertible Debentures, which was filed with the SEC on March 20, 2026. On March 19, 2026, the closing conditions were not met. YA II PN may still purchase and we may issue an additional $20.0 million in aggregate principal amount of Convertible Debentures on or about the second business day following the satisfaction of certain additional closing conditions. As of June 30, 2026, the outstanding principal amount of Convertible Debentures was $13.8 million. Finally, on July 1, 2026, we entered into a securities purchase agreement with certain entities (the Buyers) affiliated with Nicholas Woodman, the Company’s Chief Executive Officer and Chairman of the Board of Directors, pursuant to which the Buyers agreed to purchase from the Company 6.50% senior secured notes due 2028 (Secured Notes) in an aggregate principal amount of $20.0 million.

In future quarters, we anticipate non-compliance with the restrictive covenants of the Credit Facilities, and we may seek further covenant waivers or amendments from our lenders. The lenderslenders, debenture holder, or debenture holderBuyers may not provide any waiver(s) of compliance or amend the Credit FacilitiesFacilities, Convertible Debentures, or ConvertibleSecured Debentures.Notes.

A default under any of the Credit FacilitiesFacilities, Convertible Debentures, or theSecured Convertible DebenturesNotes could also lead to a default under agreements governing our existing or future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay our indebtedness.

If we are unable to meet our liquidity requirements, we could be forced to sell assets, restructure or refinance our debt or raise additional capital through sales of equity or debt. We may be unable to take any of these actions on satisfactory terms or in a timely manner or at all, due to many factors, including our high level of indebtedness. Any of these actions may not be sufficient to allow us to service our debt obligations or may have an adverse impact on our business. Our existing debt agreements limit our ability to take certain of these actions. Our failure to generate sufficient operating cash flow to pay our debt obligations could have a material adverse effect on us. Without obtaining additional sources of financing or consummating a strategic transaction, our ability to continue as a going concern would be materially and adversely impacted, and we may be required to significantly reduce, restructure, or cease operations, or seek protection under the Federal bankruptcy laws.

In future quarters, we anticipate non-compliance with the restrictive covenants of the Credit Facilities, and we may seek further covenant waivers or amendments from our lenders. We may also seek additional sources of financing to avoid a default under either of the Credit Facilities. We may not be able to obtain the necessary waiver or amendments or secure additional financing on favorable terms, or at all. Failure to comply with any particular covenant could result in default. In addition, each of the Credit FacilitiesFacilities, the Convertible Debentures, and the ConvertibleSecured DebenturesNotes contain a cross-default provision whereby a default under one agreement would result in default under the agreements covering other borrowings and vice versa. The occurrence of a default under any of these borrowing arrangements would permit the lenders under the Credit FacilitiesFacilities, the Convertible Debentures, and Convertiblethe DebenturesSecured Notes to declare all amounts outstanding under those borrowing arrangements to be immediately due and payable. If our lenders accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay those borrowings.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the SEC. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, include forward-looking statements that involve risks and uncertainties as described under the heading Special Note About Forward-Looking Statements in this Quarterly Report on Form 10-Q. You should review the disclosures under the heading Risk Factors in Part I, Item 1A. of the Annual Report on Form 10-K for the year ended December 31, 2025 in addition to the Risk Factors disclosed in Part II, Item 1A. of thisour Quarterly ReportReports on Form 10-Q for the three months ended March 31, 2026 and June 30, 2026 for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements. Our MD&A is provided in addition to the accompanying condensed consolidated financial statements and accompanying notes to assist readers in understanding our results of operations, financial condition and cash flows.

•Results of Operations. Analysis of our financial results comparing the second quarter and first quartersix months of 2026 to 2025.

In September 2025, we began shipping our MAX2 waterproof 360-camera featuring True 8K video, 10-bit color video in 8K at 30 frames per second (FPS),FPS, 29-megapixel resolution for 360-degree photos, and easily replaceable lenses made from water-repelling optical glass. In addition, MAX2 includes in-camera POV and Selfie Video Modes, six built-in microphones that provide 360 audio and wireless Bluetooth functionality, built-in GPS, MAX HyperSmooth image stabilization, 360-degree MAX TimeWarp Video, and MAX SuperView. MAX HyperSmooth provides high performance video stabilization, while MAX SuperView provides a wide field of view. Our MAX2 camera also includes a MAX Enduro battery which increases recording time and improves cold-weather performance. The Quik app includes editing tools for our MAX2 camera such as AI Object Tracking and MotionFrame editing.

In September 2024, we began shipping our HERO13 Black flagship camera that includes our GP2 processor, HyperSmooth 6.0 image stabilization, hybrid-log gamma (HLG) high dynamic range (HDR) photos and videos in 5.3K at 60 FPS and 4K at 60 FPS, and a higher capacity battery resulting in longer runtimes and improved thermal performance. HyperSmooth 6.0 image stabilization features AutoBoost, which analyzes up to 4x more data compared to HyperSmooth 5.0 while supporting 360-degree Horizon Lock. The HERO13 Black also includes 10-bit color video at up to 5.3K video at 60 FPS, 27-megapixel photo resolution, 8:7 aspect ratio video for a larger vertical field of view, and HyperView, which allows for a 16:9 field of view, SuperView and Horizon Leveling. The HERO13 Black also includes a front-facing and rear touch display, TimeWarp 3.0, a Timecode Sync feature, and a Night Effects Time Lapse feature. In March 2025, we shipped a limited edition HERO13 Black in a Polar White colorway, and in June 2025, we shipped another limited edition HERO13 Black in a Forest Green colorway, both of which included all of the features of our flagshipHERO13 Black camera. We also offer our Ultra Wide Lens Mod, Macro Lens Mod, Anamorphic Lens Mod and a ND Filter 4-Pack for HERO13 Black. The Ultra Wide Lens Mod allows for an ultra wide-angle digital lens for 4K video at 60 FPS, the Macro Lens Mod allows the HERO13 Black to focus on objects 4x closer than prior generation cameras, and the Anamorphic Lens Mod captures ultra wide-angle footage with reduced distortion and lets anyone tell their stories using the 21:9 aspect ratio used in feature films. The ND Filter 4-Pack allows the HERO13 Black to create motion blur. Additionally, we offer our HERO13 Black Creator Edition, which combines the HERO13 Black, Volta, Enduro Battery, Media Mod, and Light Mod to create professional-quality videos.

Our MISSION 1 PRO, MISSION 1, HERO13 Black, HERO13 Black Creator Edition, LIT HERO, HERO, HERO12 Black, HERO12 Black Creator Edition, MAX2, and MAX cameras are compatible with our ecosystem of mountable and wearable accessories.

We offer our Premium subscription, which includes unlimited cloud storage of GoPro content supporting source video and photo quality, damaged camera replacement, cloud storage up to 100 gigabytes (GB) of non-GoPro content, the delivery of highlight videos automatically via our mobile app when GoPro camera footage is uploaded to the user’s GoPro cloud account using Auto Upload or when GoPro camera footage is uploaded to the user’s GoPro cloud account via the user’s mobile phone. Our Premium subscription also provides access to a high-quality live streaming service on GoPro.com, as well as discounts on GoPro cameras, lifestyle gear, mounts and accessories. InWe Februaryalso 2024, we launchedoffer our Premium+ subscription which includes cloud storage up to 500 GB of non-GoPro content, HyperSmooth Pro and all of the same features included in the Premium subscription.

We continue to monitor the current evolving macroeconomic landscape. Inflation, fluctuating interest rates, tariffs, component pricing, consumer spending, and recession concerns place increasing pressure on many areas of our business, including hardware and software product pricing and operating expenses. In the past, the strength of the U.S. dollar relative to other foreign currencies largely impacted our revenue and gross margin. Revenue from the U.S. was 55.8%59.4% and 46.8%50.3% of revenue for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. If the U.S. dollar strengthens relative to other foreign currencies in the future, our financial results will be negatively impacted. See Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025 and Part II, Item 1A. Risk Factors of thisour Quarterly ReportReports on Form 10-Q for the three months ended March 31, 2026 and June 30, 2026 for further discussion of the possible impact of evolving macroeconomic conditions on our business.

FirstSecond Quarter 2026 financial performance

Revenue for the three months ended MarchJune 31,30, 2026 was $99.1$104.9 million, of which, $72.2$76.0 million was from hardware sales and $26.9$29.0 million was from subscription and services. Hardware revenue decreased 32.8%39.9% from the prior year period primarily due to a 30.6%51.7% year-over-year decrease in camera units shipped. The decrease in cameraCamera units shipped wasdecreased 51.7% year-over-year primarily due to channel partners reducing their on-hand inventories by approximately120 thousand units, or 19.1%, sequentially and by approximately 228 thousand units, or 30.9%, year-over-year, as well as significantly higher average selling prices due to the launches of the MISSION 1 series of cameras, MAX2, and modest price increases across our other cameras due to tariffs, lower promotional activity, an increasingly global competitive landscape,tariffs and consumer-relatedhigher macroeconomicmemory issues.pricing. Subscription and services revenue wasincreased flat10.6% againstfrom the prior year period of $26.9 million, primarily due to an increase in the average revenue per user driven by a slight price increase of our Premium subscription in December 2025, partially offset by ana 8.4%10.7% decrease in subscribers as camera units shipped decreased year-over-year. Retail revenue was $60.9$58.4 million for the three months ended MarchJune 31,30, 2026 and represented 61.5%55.7% of total revenue, compared to 69.9%73.0% of total revenue for the same period in 2025. GoPro.com revenue, which includes subscription and service revenue, was $38.2$46.5 million for the three months ended MarchJune 31,30, 2026 and represented 38.5%44.3% of total revenue, compared to 30.1%27.0% of total revenue in the prior year period. Our overall subscription attach rate from both sales on GoPro.com and from post-camera purchases at retail was 51%69% for the three months ended MarchJune 31,30, 2026, up from 49%54% in the prior year quarter. Our aggregate retention rate for annual subscribers was 71%67% for the three months ended MarchJune 31,30, 2026, compared to 70%68% for the same period in 2025. Our gross margin percentage for the three months ended MarchJune 31,30, 2026 of 4.3% was negatively30.2%, impacted primarily by a discrete $24.5 million charge relatedcompared to certain component purchase commitments. Our gross margin percentage35.8% for the threesame monthsperiod endedin March 31, 2025 was 32.1%.2025. Net loss for the three months ended MarchJune 31,30, 2026 was $80.8$51.0 million, compared to a net loss of $46.7$16.4 million for the same period in 2025. Adjusted EBITDA for the three months ended MarchJune 31,30, 2026 was negative $49.8$29.5 million, compared to negative $15.7$5.7 million for the same period in 2025.

We perform an annual assessment of our goodwill during the fourth quarter of each calendar year, or more frequently if indicators of potential impairment exist, such as an adverse change in business climate, declines in market capitalization or a decline in the overall industry demand, that would indicate it is more likely than not that the fair value of our single reporting unit is less than the carrying value. If we determine that it is more likely than not that the fair value of our single reporting unit is less than the carrying value, we measuresmeasure the amount of impairment as the amount the carrying value of our single reporting unit exceeds the fair value, up to the carrying value of goodwill, by using a discounted cash flow method and market approach method.

In the first quarter of 2026, we identified goodwill impairment triggering events, including: (i) the conclusion of substantial doubt regarding our ability to continue as a going concern, which represents a negative qualitative indicator; and (ii) a significant decline in revenue and gross margin compared to the prior year period. As a result, we performed an interim qualitative goodwill impairment assessment as of March 31, 2026. We evaluated each triggering event and concluded that, while they represent negative qualitative factors, the quantitative evidence did not indicate that these events would more likely than not reduce the reporting unit’s fair value below its carrying amount. Using the market capitalization approach, the fair value of our single reporting unit is estimated based on the trading price of our stock at the test date, which is further adjusted by an acquisition control premium representing the synergies a market participant would obtain when obtaining control of the business. Specifically, as of March 31, 2026, our market capitalization of $126.4 million exceeded the carrying value of our single reporting unit of negative $1.9 million by approximately 101%, before any acquisition control premium, representing the synergies a market participant would obtain when obtaining control of the business. Based on this assessment, we concluded it is not more likely than not that the fair value of our single reporting unit is less than its carrying value, and no goodwill impairment charge was recorded in the first quarter of 2026.

The estimated fair value of our single reporting unit is affected by volatility in our stock price. As a sensitivity, even a 50% decline in our MarchJune 31,30, 2026 stock price would result in our market capitalization exceeding the carrying value of our single reporting unit by more than 100%, before any acquisition control premium. If our market capitalization declines, or if future performance falls below our current expectations, assumptions, or estimates, including assumptions related to current macroeconomic uncertainties, this may trigger a future material non-cash goodwill impairment charge, which could have a material adverse effect on our business, financial condition, and results of operations in the reporting period in which a charge would be necessary. We will continue to monitor developments, including updates to our forecasts and market capitalization, and will update our assessment and related estimates as needed in the future.

As a result of the same impairment triggering events identified, which resulted in an interim qualitative goodwill impairment assessment, we performed an interim quantitative long-lived asset impairment assessment as of March 31, 2026. As we have a single asset group, we considered the undiscounted operating and disposal cash flows to assess recoverability. Based on this assessment, we concluded the carrying amount of our long-lived assets arewere recoverable and no long-lived asset impairment charge was recorded in the first quarter of 2026. No long-lived asset impairment triggering events occurred in the second quarter of 2026.

Driving profitability through improved efficiency, lower costs, and better execution. We incurred operating losses in the first quarterhalf of 2026 and for the full year 2025 and may incur further losses in the future. While our prior restructuring actions have reduced our operating costs compared to our historical levels, we continue to make strategic decisions to drive volume, growth, and profitability in our business. We are implementing our 2026 operational plan and changing our approach to operate in a leaner, more focused manner that we believe is sustainable and strategic for long-term success and improved financial performance. This includes pursuing a hardware and software product roadmap we believe will drive innovation, differentiation, and growth. In the longer term, this includes increasing our total addressable market by introducing new, innovative hardware and software products, increasing unit sales volume of our new and existing products, and increasing our subscriber base. Our expectation is that sales from our retail channel will continue to increase relative to sales on GoPro.com. While growth in subscribers and subscription and service revenue has slowed, we continue to make strategic decisions to enhance our subscription offerings to grow subscribers and increase subscriber retention that results in an increase in subscription and service revenue.

Investing in research and development and enhancing our customer experience. Our performance is significantly dependent on the investments we make in research and development, including our ability to retain highly skilled and experienced research and development personnel. As part of our strategic focus on operational efficiency and implementation of our 2026 operational plan, we have adjusted certain investments in research and development while continuing to prioritize projects that support long-term growth of our Company, including the launch of our new system-on-chipMISSION GP3-based1 Series of cameras beginning in the second quarter of 2026. We expect the timing of new hardware product releases to continue to have a significant impact on our revenue and we must continually develop and introduce innovative new cameras, software, and other new offerings. We plan to further build upon our integrated mobile and cloud-based storytelling solutions, as well as our subscription offerings. Our investments, including those for marketing and advertising, and those related to development efforts associated with our acquisition in 2024, may not successfully drive increased revenue and our customers may not accept our new offerings. Further, we have and will continue to incur substantial research and development expenses and if our efforts are not successful, we may not recover the value of these investments.

Total revenue for the three months ended MarchJune 31,30, 2026 was $99.1$104.9 million, of which, $72.2$76.0 million was from hardware sales and $26.9$29.0 million was from subscription and services. Hardware revenue decreased 32.8%39.9% from the prior year period primarily due to a 30.6%51.7% year-over-year decrease in camera units shipped. The decrease in cameraCamera units shipped wasdecreased 51.7% year-over-year primarily due to channel partners reducing their on-hand inventories by approximately 120 thousand units, or 19.1%, sequentially and by approximately 228 thousand units, or 30.9%, year-over-year, as well as significantly higher average selling prices due to the launches of the MISSION 1 series of cameras, MAX2, and modest price increases across our other cameras due to tariffs, lower promotional activity, an increasingly global competitive landscape,tariffs and consumer-relatedhigher macroeconomicmemory issues.pricing. Subscription and services revenue wasincreased flat10.6% againstfrom the prior year period of $26.9 million, primarily due to an increase in the average revenue per user driven by a slight price increase of our Premium subscription in December 2025, partially offset by ana 8.4%10.7% decrease in subscribers as camera units shipped decreased year-over-year. Retail revenue was $60.9$58.4 million for the three months ended MarchJune 31,30, 2026 and represented 61.5%55.7% of total revenue, compared to 69.9%73.0% of total revenue for the same period in 2025. GoPro.com revenue, which includes subscription and service revenue, was $38.2$46.5 million for the three months ended MarchJune 31,30, 2026 and represented 38.5%44.3% of total revenue, compared to 30.1%27.0% of total revenue in the prior year period.

Gross margin of 4.3%30.2% for the three months ended MarchJune 31,30, 2026 decreased from 32.1%35.8% in the same period of 2025, or 2,780560 bps, primarily due to a discrete $24.5$15.2 million charge related to certain component purchase commitments (2,4801,410 bps), lower hardware average selling pricesvolume and higher camera unit costs (710 bps), and higher supply chain costs as a percentage of total revenue (190800 bps), and higher sales incentives (90 bps), partially offset by an $18.9 million reduction to cost of revenue following U.S. Customs and Border Protection’s (CBP) approval of certain IEEPA tariff refund claims (1,800 bps), an increase in higher-margin subscription and service revenue as a percentage of total revenue (360610 bps), and lowerhigher salesaccessory incentivesgross margin (24040 bps).

The year-over-year decrease of $1.1$0.9 million, or 3.8%,2.8%, in total research and development expense for the three months ended MarchJune 31,30, 2026 compared to the same period of 2025 was primarily driven by a $1.3$1.1 million decrease in cash-based personnel-related costs, a $0.8 million decrease in stock-based compensation expense, a $0.8 million decrease in cash-based personnel-related costs, and a $0.7 million decrease in restructuringconsulting costs,and professional services, partially offset by a $1.8$2.1 million increase in consultingrestructuring and professional services.costs.

The year-over-year decrease of $7.0$0.9 million, or 41.6%,7.1%, in total general and administrative expense for the three months ended MarchJune 31,30, 2026 compared to the same period of 2025 was primarily driven by a $4.2$0.5 million decrease in litigationconsulting expense,and professional services and a $1.1$0.5 million decrease in restructuring costs, partially offset by a $0.7$0.2 million decreaseincrease in stock-basedadministration compensation expense, a $0.4 million decrease in cash-based personnel-related costs, and a $0.4 million decrease in allocated facilities, depreciation, and supporting overhead expenses.charges.

Third quarter 2024 restructuring. In August 2024, we approved a restructuring plan (the Original Restructuring Plan) and in October 2024, we approved an amended restructuring plan (the Updated Restructuring Plan). In connection with the Original Restructuring Plan and Updated Restructuring Plan, we reduced our global workforce by 25% compared to our headcount ending Q2 2024, and we recorded restructuring charges of $18.7 million, including $12.7 million related to severance and $6.0 million of project cancellation costs. As of June 30, 2026, the Company expects to pay the remaining restructuring liability related to the Updated Restructuring Plan in cash.

Total other income (expense), net was an expense of $21.7$11.2 million for the three months ended MarchJune 31,30, 2026 compared to incomeexpense of $0.2$1.1 million in the same period of 2025. The year-over-year change of $21.9$10.1 million was primarily duedriven by a $3.8 million increase in non-cash interest expense primarily related to the impactSecurities ofPurchase our assessment of the 2025 Credit Agreement amendment on February 27, 2026, which resulted in an $8.9 million loss on the extinguishment of debt, andAgreement, a $5.8$4.7 million loss related to changes in value of the claims for the potential refund of IEEPA tariffs transferred to Mateo Financing, LLC as further discussed in Note 4 Financing arrangements.arrangements, The year-over-year change was also driven byand a $7.4$1.2 million netincrease lossin cash interest expense primarily related to the derivative liability recognized and remeasured during the three months ended March 31, 2026 as part of the Securities Purchase Agreement discussed in Note 4 Financing arrangements, partially offset by a $2.8 million gain on the revaluation of the warrants issued in connection with the 2025 Credit Agreement as discussed in Note 4 Financing arrangements.Agreement.

We recorded an income tax expense of $1.8$0.8 million for the three months ended MarchJune 31,30, 2026 on a pre-tax net loss of $79.0$50.2 million. Our income tax expense for the three months ended MarchJune 31,30, 2026 primarily resulted from a tax expense of $1.2 million on pre-tax book income in certain tax jurisdictions and discrete items that included $1.3 million of nondeductible equity tax expense for employee stock-based compensation and $0.6 million from the establishment of valuation allowance on foreign deferred tax assets due to the substantial doubt about our ability to continue as a going concern,jurisdictions, partially offset by a nettax decreasebenefit inon theforeign domesticprovision valuationto allowanceincome tax return adjustments of $1.2$0.5 million.

Each quarter, we assess the realizability of our deferred tax assets under ASC Topic 740. We assess available positive and negative evidence to estimate whether sufficient future taxable income will be generated to realize our deferred tax assets. In the assessment for the period ended MarchJune 31,30, 2026, we concluded that it remains more likely than not that our United States federal and state deferred tax assets would not be realizable. As of MarchJune 31,30, 2026, the total valuation allowance on United States federal and state net deferred tax assets was $344.6 million.

The following table presents selected financial information as of MarchJune 31,30, 2026 and December 31, 2025:

Our primary source of cash is receipts from sales of our hardware products, and subscription and service. Other sources of cash are from proceeds from the issuance of convertible notes, borrowings under our credit facility and credit agreement,debt, the sale of Class A common stock pursuant to the Subscription Agreement, as discussed in Note 9 Related party transactions, and facility subleases. Our primary uses of cash are for inventory procurement, payroll-related expenses, general operating expenses, including advertising, marketing, office rent, purchases of property and equipment, other costs of revenue including components, such as memory, acquisitions, interest, and taxes.

As of MarchJune 31,30, 2026, our cash, cash equivalents, and marketable securities totaled $40.7$27.3 million. The overall cash used in operating activities of $36.6$47.4 million for the threesix months ended MarchJune 31,30, 2026 was primarily attributable to a net loss of $80.8$131.8 million, partially offset by net cash inflows from other non-cash expenses of $30.9$43.2 million, and changes in our working capital of $13.3$41.3 million. Working capital changes for the threesix months ended MarchJune 31,30, 2026 of $13.3$41.3 million were the result of a $31.5$39.4 million decrease in accounts receivables and a $6.2 million decrease in inventory, partially offset by a $24.3 million decreaseincrease in accounts payable and other liabilities.liabilities, and a $33.1 million decrease in accounts receivables, partially offset by a $20.4 million increase in prepaid expenses and other assets, an $8.3 million increase in inventory, and a $2.5 million decrease in deferred revenue . As of MarchJune 31,30, 2026, $3.2$2.8 million of cash was held by our foreign subsidiaries.

In January 2021, we entered into a credit agreement which provides for a revolving credit facility (2021 Credit Facility) and we amended the credit agreement in March 2023, August 2025,2025 and February 20262026. Additionally, on July 9, 2026, we entered into a Waiver and Amendment No. 4 to the credit agreement (as amended, collectively, the 2021 Credit Agreement). Under the 2021 Credit Agreement, we may borrow up to an aggregate amount of $35.0 million (subject to an asset coverage ratio requirement of 1.5x) until the Borrowing Base Conversion DateDate, which was June 30, 2026 (the date on which the lender implementsimplemented a borrowing base following the completion of an appraisal, field exam and other collateral diligence measures), unless our asset coverage ratio is less than 1.50, which would subject the amount that may be borrowed to a customary borrowing base calculation. With the February 2026 amendment, the testing of the asset coverage ratio changed from quarterly to monthly until the Borrowing Base Conversion Date.. The asset coverage ratio is defined as the ratio of (i) the sum of (a) our cash and cash equivalents in the United States plus specified percentages of other qualified debt investments (Qualified Cash) plus (b) specified percentages of the net book values of our accounts receivable and certain inventory to (ii) $50.0 million. After the Borrowing Base Conversion Date, which was June 30, 2026, the amount that may be borrowed under the 2021 Credit Agreement is based on a customary borrowing base calculation, and up to $50.0 million.million Thewith Februaryzero 2026currently amendmentavailable. Amendment No. 3 under the 2021 Credit Agreement extended the maturity of the 2021 Credit Agreement to June 2027, changed the interest rate at which borrowed funds accrue interest, and changed the liquidity minimums, as discussed in Note 4 Financing arrangements. TheAmendment FebruaryNo. 20263 amendmentunder the 2021 Credit Agreement was accounted for as a debt modification, resulting in no gain or loss as there was no unamortized debt discount costs at the time of the modification. UponAmendment terminationNo. 4 under the 2021 Credit Agreement revised certain provisions of the 2021 Credit Agreement to permit the transactions contemplated by the Woodman Purchase Agreement discussed in Note 13 Subsequent events, further increased the interest rate at which borrowed funds accrue interest after June 2027,30, any2026 through maturity, and granted certain waivers as discussed in Note 4 Financing arrangements. In connection with the Waiver and Amendment No. 4 under the 2021 Credit Agreement, on July 9, 2026, we entered into a second supplemental fee letter (the Fee Letter) with the lender under the 2021 Credit Agreement, which provides for the payment of certain fees to the lender, including a $5.0 million restructuring fee payable upon the occurrence of certain bankruptcy events of default, which restructuring fee may be reduced to zero upon a successful refinancing of the amounts outstanding borrowingsunder willthe become2021 dueCredit Facility as a result of a bankruptcy or insolvency proceeding under certain conditions; and payable.a success fee in the amount of $1.0 million 181 days after July 9, 2026, which success fee may be reduced if the amounts outstanding under the 2021 Credit Facility are refinanced or repaid prior to such date. The Fee Letter also provides for the repayments of amounts outstanding under the 2021 Credit Agreement in weekly installments of $250,000 commencing on October 12, 2026, with such amount increasing to $1.0 million from and after November 9, 2026, until January 4, 2027. The Fee Letter also provides that we shall, within 180 days after July 9, 2026, consummate a refinancing, sale or other transaction that causes all amounts outstanding under the 2021 Credit Agreement to be paid in full. As of the issuance of these financial statements, management has not yet completed its evaluation of the financial statement impact of Amendment No. 4. and is unable to reasonably estimate the financial statement effect.

The 2021 Credit Agreement contains customary representations, warranties, affirmative and negative covenants, and events of default. The negative covenants include restrictions on the incurrence of liens and indebtedness, certain investments, dividends, stock repurchases, and other matters, all subject to certain exceptions. In addition, we are required to maintain liquidity (the sum of unused availability under the 2021 Credit Facility and our Qualified Cash) of at least (i) $25.0 million from February 27, 2026 as discussed in Note 4 Financing arrangements through June 30, 2026, (ii) $30.0 million during the period from July 1, 2026 through July 31, 2026, (iii) $35.0 million during the period from August 1, 2026 through August 31, 2026, and (iv) $40.0 million from September 1, 2026 through the maturity date (of which at least $10.0 million shall be attributable to Qualified Cash during all periods), and maintain a minimum unused availability under the credit2021 facilityCredit Facility of at least $10.0 million after the Borrowing Base Conversion Date. The 2021 Credit Agreement also includes customary events of default that include, among other things, non-payment of principal, interest or fees, inaccuracy of representations and warranties, violation of certain covenants, cross default to certain other indebtedness, bankruptcy and insolvency events, material judgments and change of control. Upon an event of default, the lender may, subject to customary cure rights, require the immediate payment of all amounts outstanding.

For the period ended December 31, 2025, we were in compliance with the liquidity and asset coverage ratio financial covenants contained in the 2021 Credit Agreement; however, the 2021 Credit Agreement also required us to be in compliance with the financial covenants within the 2025 Credit Agreement. We were not in compliance with the 2025 Credit Agreement asset coverage ratio of 1.25x or the minimum EBITDA covenant of not less than $10.0 million for the fiscal quarter ending December 31, 2025 and subsequently cured the non-compliance by entering into an amendment on February 27, 2026. For the period ended March 31, 2026, we were in compliance with the liquidity and asset coverage ratio financial covenants contained in the 2021 Credit Agreement; however, we were not in compliance with the minimum asset coverage ratio of 1.05x under the 2025 Credit Agreement. On May 8, 2026, we received a waiver from the Lender under the 2025 Credit Agreement waiving the asset coverage ratio non-compliance as of March 31, 2026. There are outstanding letters of credit under the 2021 Credit Agreement which total $9.2 million for certain duty-related requirements which were not collateralized by any cash on hand. As of March 31, 2026, we had $25.5 million outstanding under the 2021 Credit Agreement and had zero available to draw.

NotwithstandingDuring the waiverthree receivedmonths onended MayMarch 8,31, 2026 and six months ended June 30, 2026, we concluded that substantial doubt existsexisted about our ability to continue as a going concern, as further described in Note 1 Summary of business and significant accounting policies. Based on our current financial forecasts, we doexpect that we will not expect to be able to repay the 2021 Credit Agreement under Amendment No. 4 in 180 days and comply with our financial covenants under the 2021 Credit Agreement and the 2025 Credit Agreement withinas of the next twelvemeasurement months.date. We are actively evaluating potential remediation options, including seeking waivers or amendments from itsour lenders and other repayment options; however, no waiver or amendment, other than forthose thedescribed existing waiver,herein, has been obtained as of the date of the issuance of these condensed consolidated financial statements, and there can be no assurance that any such relief will be obtained. GivenAs a result, beginning with the absenceperiod ofended aMarch waiver31, or amendment obtained prior to the issuance of these condensed consolidated financial statements,2026, ASC 470-10-45 Debt requiresrequired us to classify as current,current all obligations under the 2021 Credit Agreement, the 2025 Credit Agreement and the Convertible Debentures, as direct default and cross-default provisions embedded in each respective agreement could, upon an event of default, permit the applicable lenders to declare all outstanding principal and accrued interest immediately due and payable. As a result, theThe outstanding balance under the 2021 Credit Agreement hascontinues beento be classified as short-term debt in the condensed consolidated balance sheet as of MarchJune 31,30, 2026.2026 as it is also due within a year.

On August 4, 2025, we entered into a credit agreement with Farallon Capital Management, L.L.C., as administrative agent and collateral agent (the Agent), and Mateo Financing, LLC (the Lender) and we amended the credit agreement on November 5, 2025 and February 27, 20262026. Additionally, on July 9, 2026, we entered into a Waiver and Amendment No. 3 to the credit agreement (as amended, collectively, the 2025 Credit Agreement). The 2025 Credit Agreement provides for a second lien credit facility up to $50.0 million (the 2025 Term Loan). The 2025 Credit Agreement will mature, and any outstanding borrowings become due and payable on January 22, 2028. TheAmendment FebruaryNo. 20262 amendmentunder the 2025 Credit Agreement revised the (i) minimum liquidity for the remaining term of the 2025 Credit Agreement, (ii) removed the EBITDA minimums for the fiscal quarter ending December 31, 2025 and for the period of four consecutive fiscal quarters ending March 31, 2026, (iii) revised the EBITDA minimum for the remainder of the 2025 Credit Agreement, and (iv) revised the minimum asset coverage ratio for periods on or prior to March 31, 2026, as discussed in Note 4 Financing arrangements. TheAmendment amendmentNo. on February 27, 2026 of the 2025 Credit Agreement2 was accounted for as a debt extinguishment, resulting in a loss on extinguishment of debt of $8.9 million, which was recorded in other income (expense), net, in the condensed consolidated statements of operations for the threesix months ended MarchJune 31,30, 2026. Amendment No. 3 revised certain provisions of the 2025 Credit Agreement to permit the transactions contemplated by the Woodman Purchase Agreement discussed in Note 13 Subsequent events and granted certain waivers as discussed in Note 4 Financing arrangements. As of the issuance of these financial statements, management has not yet completed its evaluation of the financial statement impact of Amendment No. 3 and is unable to reasonably estimate the financial statement effect.

In connection with the amendment on February 27, 2026 to the 2025 Credit Agreement, we entered into a Claim Sale and Purchase Agreement (the IEEPA Agreement) with the Lender on February 19, 2026, pursuant to which we transferred to the Lender certain of our rights and claims for potential refunds of tariffs previously paid under the International Emergency Economic Powers Act of 1977 (IEEPA), representing an aggregate claim amount of approximately $19.4 million (the IEEPA Claim). On the date of transfer, we assigned no value to the IEEPA Claim on the condensed consolidated balance sheet due to the significant uncertainty of any potential recovery prior to the U.S. Supreme Court’s ruling in Learning Resources, Inc. v. Trump. As a result of the IEEPA Agreement, we will not have rights to any future proceeds from the transferred IEEPA Claim. We accounted for the transfer of the IEEPA Claim as a derivative liability as discussed in Note 1 Summary of business and significant accounting policies and classified the derivative liability as a Level 2 financial instrument as discussed in Note 2 Fair value measurements. Despite assigning no value to the IEEPA Claim on the condensed consolidated balance sheet on the date of transfer, we assigned an $8.7 million value to the IEEPA Claim obligation as of February 27, 2026, and recorded the derivative liability within accrued expenses and other current liabilities in the condensed consolidated balance sheets. The IEEPA Claim obligation is remeasured at each reporting period, with changes in value recorded in other income (expense), net, in the condensed consolidated statements of operations. AsIn the second quarter of March2026, 31,we 2026,received approval by CBP of certain submitted refund claims relating to previously paid IEEPA tariffs as part of the Phase 2 CAPE tariff refunds. As a result, we recorded an $18.9 million reduction to cost of revenue and increase to other current assets for the approved refund claims in the three and six months ended June 30, 2026. Pursuant to the IEEPA ClaimAgreement, obligationany wasrelated remeasuredproceeds atattributable $14.6to million.the IEEPA Claim, when received, will be remitted to the lender under the 2025 Credit Agreement, and accordingly, we recorded a liability for these amounts. Subsequent to June 30, 2026, we received $17.9 million of refunds from CBP, which also included interest.

The 2025 Credit Agreement contains customary representations, warranties, and affirmative and negative covenants, including financial covenants. The negative covenants include restrictions on the incurrence of liens and indebtedness, certain investments, dividends, stock repurchases and other matters, all subject to certain exceptions. The financial covenants require (a) us to maintain liquidity (defined as the sum of unrestricted cash, cash equivalents and availability under the 2021 Credit Agreement) of at least (i) $25.0 million during the fiscal quarters ending March 31, 2026 and June 30, 2026, (ii) $30.0 million during the fiscal month ending July 31, 2026, (iii) $35.0 million during the fiscal month ending August 31, 2026 and (iv) $40.0 million during any fiscal month thereafter; (b) us not to have EBITDA (as defined in the 2025 Credit Agreement) of (i) less than $5.0 million, subject to adjustment, for the fiscal quarter ending June 30, 2026, (ii) less than zero, subject to adjustment, for the fiscal quarter ending September 30, 2026, (iii) less than zero for the fiscal quarter ending December 31, 2026, (iv) less than $20.0 million for the period of four consecutive fiscal quarters ending March 31, 2027, (v) less than $30.0 million for the period of four consecutive fiscal quarters ending June 30, 2027, (vi) less than $35.0 million for the period of four consecutive fiscal quarters ending September 30, 2027, and (vii) less than $40.0 million for the period of four consecutive fiscal quarters ending December 31, 2027 and thereafter; and (c) us not to permit an asset coverage ratio (defined as the ratio of (x) the sum of unrestricted cash, cash equivalents, and certain receivables and inventory, divided by (y) the sum of accounts payable and total debt (as defined in the 2025 Credit Agreement) of less than (i) 1.05:1.00 on or prior to March 31, 2026 or (ii) 1.15:1.00 thereafter. The EBITDA thresholds for fiscal quarters ending June 30, 2026 and September 30, 2026 are subject to potential adjustments in the event of a reduction in tariff amounts in Malaysia or Thailand (or both) to a level that is 10% or lower, as described in further detail in the 2025 Credit Agreement. To the extent there are adjustments to the tariff rates of only one of the countries, the corresponding adjustments will be apportioned accordingly. For the period ended June 30, 2026, no such adjustment was made to the EBITDA threshold.

The 2025 Credit Agreement also includes customary events of default that include, among other things, non-payment of principal, interest or fees, inaccuracy of representations and warranties, violation of certain covenants, cross default to certain other indebtedness, bankruptcy and insolvency events, material judgments, change of control and certain material ERISA events. An event of default would also occur in the event we fail to maintain the listing of our common stock on the Nasdaq stock market for a period of 30 consecutive days. The occurrence of an event of default could result in the acceleration of the obligations under the 2025 Credit Agreement. On July 21, 2026, we received a notice from the Nasdaq Stock Market LLC (Nasdaq) indicating we were not in compliance with Nasdaq’s Listing Rule 5450(a)(1), as the minimum bid price of our Class A common stock has been below $1.00 per share for 30 consecutive business days. See Note 13 Subsequent events for further discussion.

For the period ended December 31, 2025, we were not in compliance with the asset coverage ratio of 1.25x or minimum EBITDA covenant of not less than $10.0 million for the fiscal quarter ending December 31, 2025 and we subsequently cured the non-compliance by entering into an amendment on February 27, 2026. AsFor ofthe period ended March 31, 2026, we were not in compliance with the minimum asset coverage ratio of 1.05x under the 2025 Credit Agreement.1.05x. On May 8, 2026, we received a waiver from the Lender under the 2025 Credit Agreement waiving the asset coverage ratio non-compliance as of March 31, 2026. For the period ended June 30, 2026, we were not in compliance with the minimum EBITDA or the minimum asset coverage ratio of 1.15x under the 2025 Credit Agreement. On July 9, 2026, we entered into a Waiver and Amendment No. 3 to the 2025 Credit Agreement that waived (i) the EBITDA and asset coverage ratio non-compliance as of June 30, 2026, (ii) a failure to deliver annual financial statements without a “going concern” or like qualification, and related notice requirement, and (iii) a default related to compliance with certain negative covenants. No fees or consideration were paid in connection with the waiver.waiver received on July 9, 2026. As of MarchJune 31,30, 2026, the outstanding principal under the 2025 Term Loan was $49.4$49.0 million.

NotwithstandingDuring the waiverthree receivedmonths onended MayMarch 8,31, 2026 and six months ended June 30, 2026, we concluded that substantial doubt exists about our ability to continue as a going concern, as further described in Note 1 Summary of business and significant accounting policies. Based on our current financial forecasts, we doexpect that we will not expect to be able to repay the 2021 Credit Agreement under Amendment No. 4 in 180 days and comply with our financial covenants under the 2021 Credit Agreement and 2025 Credit Agreement withinas of the next twelvemeasurement months.date. We are actively evaluating potential remediation options, including seeking waivers or amendments from the lenders and other repayment options; however, no waiver or amendment, other than forthose thedescribed existing waiver,herein, has been obtained as of the date of the issuance of these condensed consolidated financial statements, and there can be no assurance that any such relief will be obtained. GivenAs a result, beginning with the absenceperiod ofended aMarch waiver31, or amendment obtained prior to the issuance of these condensed consolidated financial statements,2026, ASC 470-10-45 Debt requiresrequired us to classify as current,current all obligations under the 2021 Credit Agreement, the 2025 Credit Agreement, the Convertible Debentures, as direct default and cross-default provisions embedded in each respective agreement could, upon an event of default, permit the applicable lenders to declare all outstanding principal and accrued interest immediately due and payable. As a result, theThe outstanding balance under the 2025 Credit Agreement hascontinues beento be classified as short-term debt in the condensed consolidated balance sheet as of MarchJune 31,30, 2026.

On February 27, 2026, we entered into a securities purchase agreement (Securities Purchase Agreement) with YA II PN, Ltd. (YA II PN), a fund of Yorkville Advisors Global, LP, in connection with the issuance and sale by us of convertible debentures (the Convertible Debentures) issuable in an aggregate principal amount of up to $50.0 million. The Convertible Debentures will beare convertible into shares of our Class A common stock, par value $0.0001 per share (the Common Stock) (as converted, the Conversion Shares). Conversion of the Convertible Debentures will dilute the ownership interests of existing stockholders. Pursuant to the Securities Purchase Agreement, YA II PN purchased $25.0 million in aggregate principal amount of Convertible Debentures upon the signing of the Securities Purchase Agreement. Subject to certain closing conditions, YA II PN would have been able to purchase an additional $5.0 million in aggregate principal amount of Convertible Debentures on the day prior to the filing of the Initial Registration Statement (defined below); however, the closing conditions were not met. YA II PN may still purchase and we may issue an additional $20.0 million in aggregate principal amount of Convertible Debentures on or about the second business day following the satisfaction of certain additional closing conditions, including gaining effectiveness of the Initial Registration Statement bywithin 20 trading days of May 15, 2026. IfOn June 2, 2026, the closingRegistration conditionsStatement for(defined below) was declared effective by the third tranche of Convertible Debentures are not met and remain uncured, we may trigger an event of default under the Convertible Debentures.SEC.

In connection with the Securities Purchase Agreement, we entered into a registration rights agreement (Registration Rights Agreement) with YA II PN pursuant to which YA II PN is entitled to certain registration rights under the Securities Act, and YA II PN has been granted demand registration rights and piggyback registration rights in addition under certain conditions. Under the Registration Rights Agreement, we were required to file a preliminary prospectus registration statement on Form S-1, which was filed on March 20, 2026 with the SEC, to register the resale by YA II PN of all Conversion Shares (Initial Registration Statement) and arewere required to have the Initial Registration Statement declared effective by the SEC by May 15, 2026. AsOn ofJune the1, date2026, ofwe thisfiled QuarterlyAmendment ReportNo. on1 Form 10-Q,to the Initial Registration Statement has(Amendment notNo. been1, declaredand effective.together Failure to havewith the Initial Registration Statement, the Registration Statement). On June 2, 2026, the Registration Statement was declared effective by the SEC by May 15, 2026 would constitute a default under the Convertible Debentures, which if uncured within the timeframe set forth therein, could give rise to an event of default thereunder.SEC.

The Convertible Debentures accrue interest at 0% per annum, unless (i) certain interest rate adjustment events occur, upon which the Convertible Debentures will bear interest at an annual rate of 5.00% until such interest rate adjustment event is resolved, or (ii) we have issued Conversion Shares that reaches a capped level within the first six months or an event of default occurs and remains uncured, upon which the Convertible Debentures will bear interest at an annual rate of 18.00%. The Convertible Debentures will mature in August 2027, unless previously redeemed. The Convertible Debentures may be redeemed prior to maturity if the volume weighted average price of our stock is less than $1.1453 on the date the redemption notice is delivered, with a redemption premium of 7% of the principal amount being paid. The Convertible Debentures will bewere issued at an original issue discount of 3.00%.

The Convertible Debentures are convertible at the option of the holder into Common Stock equal to the applicable Conversion Amount divided by the Conversion Price. The conversion price for the Convertible Debentures will be the lower of (i) $1.1453, or (ii) 98% of the lowest daily volume weighted average price of the Common Stock during the five consecutive trading days immediately preceding the date of conversion or other date of determination, but which shall not be lower than $0.1736,$0.1736 (the Conversion Price). The Conversion Amount with respect to any requested conversion will equal the principal amount requested to be converted plus all accrued and unpaid interest on the Convertible Debentures as of such conversion, with fractional shares rounded up (the Conversion Amount). In addition, no conversion will be permitted to the extent that, after giving effect to such conversion, the holder together with the certain related parties would beneficially own in excess of 4.99% of the Common Stock outstanding immediately after giving effect to such conversion, subject to certain adjustments.

We shall not issue any Common Stock upon conversion of the Convertible Debentures held by YA II PN if the issuance of such Common Stock underlying the Convertible Debentures would exceed the aggregate number of Common Stock that we may issue upon conversion of the Convertible Debentures in compliance with our obligations under the rules or regulations of Nasdaq Stock Market (the Exchange Cap). The Exchange Cap will not apply under certain circumstances, including if we obtain the approval of our stockholders as required by the applicable rules of the Nasdaq Stock Market for issuances of Common Stock in excess of such amount, or if we obtain a written opinion from outside counsel that such stockholder approval is not required. In addition, for the first six months following the date of the Securities Purchase Agreement, we shall not issue any Conversion Shares to the extent that the aggregate number of Conversion Shares that we have issued would exceed 47,650,000 common shares. Any portion of the Convertible Debentures may be converted at any time and from time to time, subject to the Exchange Cap. On June 2, 2026, our stockholders approved, in accordance with Nasdaq Listing Rule 5635(d), the issuance of the maximum number of shares of Common Stock issuable upon conversion of all Convertible Debentures and removal of the Exchange Cap.

We determined the conversion feature of the Convertible Debentures created a derivative liability that required bifurcation from the host debt instrument. At the issuance date, the derivative liability had a fair value of $30.9 million and was recorded in other long-term liabilities on the condensed consolidated balance sheets. The resulting total debt discount, considering the original issue discount, fair value of the conversion feature and debt issuance costs, was limited to the outstanding aggregate principal amount of the Convertible Debentures of $25.0 million. The total debt discount of $25.0 million is being amortized to interest expense over the term of the Convertible Debentures. The excess of the derivative liability fair value of $7.6 million was recognized as derivative expense in other income (expense), net, in the condensed consolidated statements of operations for the threesix months ended MarchJune 31,30, 2026. The fair value of the derivative liability was determined using aan Monteas-converted Carlo simulationvalue and changes in the fair value were recorded in other income (expense), net, in the condensed consolidated statements of operations. As of MarchJune 31,30, 2026, the outstanding principal amount of the Convertible Debentures was $25.0$13.8 million.

Based on our current financial forecast, we docontinue notto expect tothat we will not be able to repay the 2021 Credit Agreement under Amendment No. 4 in 180 days and comply with our financial covenants under the 2021 Credit Agreement and 2025 Credit Agreement withinas of the next twelvemeasurement months.date. We are actively evaluating potential remediation options, including seeking waivers or amendments from the lenders and other repayment options; however, no waiver or amendment, other than forthose thedescribed existing waiver,herein, has been obtained as of the date of the issuance of these condensed consolidated financial statements, and there can be no assurance that any such relief will be obtained. GivenAs a result, beginning with the absenceperiod ofended aMarch waiver31, or amendment obtained prior to the issuance of these condensed consolidated financial statements,2026, ASC 470-10-45 Debt requiresrequired us to classify as current,current all obligations under the 2021 Credit Agreement, the 2025 Credit Agreement, and the Convertible Debentures, as direct default and cross-default provisions embedded in each respective agreement could, upon an event of default, permit the applicable lenders to declare all outstanding principal and accrued interest immediately due and payable. As a result, the outstanding balance under the Convertible Debentures hasand beenrelated derivative liability continues to be classified as short-term debt and a current liability, respectively, in the condensed consolidated balance sheet as of MarchJune 31,30, 2026.

During the threesix months ended MarchJune 31,30, 2026, our performance continued to be adversely impacted by an increasingly global competitive landscape, consumer-related macroeconomic issues resulting in a softer global consumer market, rising memory costs and supply constraints. During the threesix months ended MarchJune 31,30, 2026 and 2025, total revenue was $99.1$204.0 million and $134.3$287.0 million, respectively, representing a 26.2%28.9% decline year-over-year. As a result, we incurred operating losses of $57.2$96.2 million and operating cash outflows of $36.6$47.4 million during the threesix months ended MarchJune 31,30, 2026. As of MarchJune 31,30, 2026 and December 31, 2025, we had cash and cash equivalents of $40.7$27.3 million and $49.7 million, respectively, an aggregate principal debt balance outstanding of $99.9$87.2 million and $69.3 million, respectively, and an accumulated deficit of $855.9$906.9 million and $775.1 million, respectively. Additionally, as of MarchJune 31,30, 2026, we were not in compliance with the financial covenants under our 2025 Credit Agreement due to the impact of the timing of redemption of sales incentives,camera revenue mix, a softer global consumer market, higher operating expenses and timing of working capital changes which impact the covenant calculation.calculations. We were also not in compliance with certain other covenants under the 2021 Credit Agreement and 2025 Credit Agreement that are described further above. We subsequently received a waiverwaivers from the lenderlenders of the 2021 Credit Agreement and 2025 Credit Agreement on MayJuly 8,9, 2026.2026with signing Amendment No. 4. and Amendment No. 3, respectively. Future non-compliance with financial covenants may limit our access to existing credit facilities or result in an acceleration of debt obligations, which would further adversely impact liquidity. Additionally, on July 9, 2026, we entered into the Fee Letter, which provides for the payment of certain fees to the lender of the 2021 Credit Agreement, and that we shall, within 180 days after July 9, 2026, consummate a refinancing, sale or other transaction that causes all amounts outstanding under the 2021 Credit Agreement to be paid in full, as further discussed in Note 4 Financing arrangements. On July 9, 2026, we also entered into the 2026 Notes, as discussed in Note 13 Subsequent events, which provided a $20.0 million loan due in July 2028.