21 unchanged sentences
Some of our components have long lead times, such as wireless local area network chipsets, physical layer transceivers, connector jacks, and metal and plastic enclosures.
−Removed: If our forecasts are not timely provided or are less than our actual requirements, our third-party manufacturers may be unable to manufacture products in a timely manner or at all.
+Added: If our forecasts are not timely provided or are lower than our actual requirements, our third-party manufacturers may be unable to manufacture products in a timely manner or at all.
If our forecasts are too high, our third-party manufacturers will be unable to use the components they have purchased on our behalf.
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We depend on a limited number of third-party manufacturers for substantially all of our manufacturing needs.
−Removed: If these third-party manufacturers experience any delay, disruption, or quality control problems in their operations, including due to the COVID-19 pandemic, we could lose or fail to grow our market share and our brand may suffer.
+Added: If these third-party manufacturers experience any delay, disruption, or quality control problems in their operations, we could lose or fail to grow our market share and our brand may suffer.
All of our products are manufactured, assembled, tested and generally packaged by a limited number of third-party original design manufacturers (“ODMs”).
1 unchanged sentence
We currently outsource manufacturing to Foxconn Cloud Network Technology Singapore Pte.
−Removed: Ltd., Pegatron Corporation, and Chicony Electronics Co., Ltd..
+Added: Ltd., Pegatron Corporation, Alpha Networks, Inc., and Chicony Electronics Co., Ltd..
We do not have any long-term contracts with any of these third-party manufacturers, although we have executed product supply agreements with these manufacturers, which typically provide indemnification for intellectual property infringement, epidemic failure clauses, agreed-upon price concessions, and certain product quality requirements.
Some of these third-party manufacturers produce products for our competitors.
−Removed: Due to changing economic conditions, including due to the COVID-19 pandemic, the viability of some of these third-party manufacturers may be at risk.
+Added: Due to changing economic conditions, the viability of some of these third-party manufacturers may be at risk.
The loss of the services of any of our primary third-party manufacturers could cause a significant disruption in operations and delays in product shipments.
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Our third-party manufacturers are primarily responsible for conducting the tests that support our applications for most regulatory approvals for our products.
−Removed: If our third-party manufacturers fail to timely and accurately conduct these tests, we would be unable to obtain the necessary domestic or foreign regulatory approvals or certificates to
−Removed: sell our products in certain jurisdictions.
+Added: If our third-party manufacturers fail to timely and accurately conduct these tests, we would be unable to obtain the necessary domestic or foreign regulatory approvals or certificates to sell our products in certain jurisdictions.
As a result, we would be unable to sell our products and our sales and profitability could be reduced, our relationships with our sales channel could be harmed, and our reputation and brand would suffer.
Specifically, substantially all of our manufacturing and assembly occurs in the Asia Pacific region, primarily in Vietnam, and any disruptions due to natural disasters, health epidemics, and political, social, and economic instability in the region would affect the ability of our third-party manufacturers to manufacture our products.
−Removed: In particular, in the event the labor market in Vietnam becomes saturated, our third-party manufacturers in Vietnam may increase our costs of production.
+Added: In particular, in the event the labor market in Vietnam becomes saturated, our third-party manufacturers in that region may increase our costs of production.
If these costs increase, it may affect our margins and ability to lower prices for our products to stay competitive.
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If we are unable to properly manage these risks, our products may be more susceptible to defects, and our business, results of operations, and financial condition could be materially and adversely affected.
−Removed: If disruptions in our transportation network occur or our shipping costs substantially increase, including due to the COVID-19 pandemic, we may be unable to sell or timely deliver our products, and our operating expenses could increase.
+Added: If disruptions in our transportation network occur or our shipping costs substantially increase, we may be unable to sell or timely deliver our products, and our operating expenses could increase.
We are highly dependent upon the transportation systems we use to ship our products, including surface, ocean and air freight.
1 unchanged sentence
On a quarterly basis, our shipping volume also tends to steadily increase as the quarter progresses, which means that any disruption in our transportation network in the latter half of a quarter will likely have a more material effect on our business than a disruption at the beginning of a quarter.
−Removed: The transportation network is subject to disruption or congestion from a variety of causes, including labor disputes or port strikes, international conflicts, such as the potential escalating conflict between Russia and Ukraine, acts of war or terrorism, natural disasters, and congestion resulting from higher shipping volumes.
+Added: The transportation network is subject to disruption or congestion from a variety of causes, including labor disputes or port strikes, international conflicts, such as the ongoing escalating conflict between Russia and Ukraine, hostilities in the Middle-East, attacks on shipping vessels in Red Sea, acts of war or terrorism, natural disasters, and congestion resulting from higher shipping volumes.
Labor disputes among freight carriers and at ports of entry are common, particularly in Europe, and we expect labor unrest and its effects on shipping our products to be a continuing challenge for us.
1 unchanged sentence
Our international freight is regularly subject to inspection by governmental entities.
−Removed: As a result of the COVID-19 pandemic, international freight capacity has dropped, causing air and ocean freight rates to materially increase.
−Removed: Transit times have also increased.
If our delivery times increase unexpectedly for these or any other reasons, our ability to deliver products on time would be materially and adversely affected and result in delayed or lost revenue as well as customer imposed penalties.
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Moreover, the cost of shipping our products by air freight is greater than by other methods.
−Removed: From time to time in the past and increasingly more common during the COVID-19 pandemic, we have shipped products using extensive air freight to meet unexpected spikes in demand and shifts in demand between product categories, to bring new product introductions to market quickly and to timely ship products previously ordered.
+Added: From time to time in the past, we have shipped products using extensive air freight to meet unexpected spikes in demand and shifts in demand between product categories, to bring new product introductions to market quickly and to timely ship products previously ordered.
If we continue to rely more heavily upon air freight to deliver our products, our overall shipping costs will increase.
−Removed: A prolonged transportation disruption or a significant increase in the cost of freight could materially and adversely affect our business, results of operations, and financial
−Removed: The effects of health epidemics, including the COVID-19 pandemic and its variants, could have an adverse impact on our business, operations and the markets and communities in which we, our partners and customers operate.
−Removed: Our business and operations could be adversely affected by health epidemics, including the recent COVID-19 pandemic, impacting the markets and communities in which we, our partners and our customers operate.
−Removed: On March 11, 2020, the World Health Organization announced that COVID-19, a respiratory illness, caused by a novel coronavirus is a pandemic.
−Removed: In response to the COVID-19 pandemic, many state, local and foreign governments have put in place, and others in the future may put in place, quarantines, executive orders, shelter-in-place orders and similar government orders and restrictions in order to control the spread of the disease.
−Removed: Such orders or restrictions, or the perception that such orders or restrictions could occur, have resulted in business closures, work stoppages, slowdowns and delays, work-from-home policies, travel restrictions and cancellation of events, among other effects that could negatively impact productivity and disrupt our operations and those of our partners and our customers.
−Removed: For example, we have implemented a work-from-home policy for the vast majority of employees, and we may take further actions that alter our operations as may be required by federal, state or local authorities, or which we determine are in the best interests of our employees, customers, partners and stockholders.
−Removed: In addition, while the potential impact and duration of the COVID-19 pandemic on the global economy and our business in particular may be difficult to assess or predict, the pandemic has resulted in, and may continue to result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity.
−Removed: The COVID-19 pandemic also could reduce demand for our products and services as our largest channel partners focus on selling essential goods, temporarily close stores or experience decreases in foot traffic.
−Removed: In addition, a recession or market correction resulting from the spread of COVID-19 could further decrease technology spending, adversely affecting demand for our products and services, our business and the value of our common stock.
−Removed: The COVID-19 pandemic may adversely affect the ability of our third-party manufacturers and other suppliers to fulfill their obligations to us.
−Removed: We rely on these manufacturers to procure components and, in some cases, subcontract engineering work.
−Removed: We cannot guarantee that our third-party manufacturers or other suppliers will be able to meet our near-term or long-term manufacturing requirements.
−Removed: If we experience supply constraints from our third-party manufacturers, we may be required to allocate the affected products amongst our customers, which could have a material adverse effect on our relationships with these customers and on our financial condition.
−Removed: In addition, if we are unable to meet customer demand due to fluctuating or late supply from our third-party manufacturers and other suppliers, it could result in lost sales and have a material adverse effect on our business.
−Removed: We also rely on other suppliers such as cloud infrastructure services providers, distribution centers and logistics and transportation services providers.
−Removed: If our manufacturers and other suppliers are unable to fulfill their obligations to us, we could face products shortages, delay in new product introductions, services to our customers could be interrupted, and our products distribution could be delayed and thus adversely affecting our revenue.
−Removed: For example, increased demand for electronics as a result of the COVID-19 pandemic, effects of the U.S.
−Removed: trade war with China, increased demand for chips in the automotive industry and certain other factors have led to a global shortage of semiconductors.
−Removed: As a result, we have experienced component shortages, including longer lead times for components and supply constraints, that have affected both our ability to meet scheduled product deliveries and worldwide demand for our products.
−Removed: Also, as a result of the COVID-19 pandemic, our supply chain partners are limited by production capacity, constrained by material availability, labor shortages, factory uptime and freight capacity, each of which constrains our ability to capitalize fully on end market demand.
−Removed: While we have been successful in navigating COVID-19 related challenges to date, any further disruptions brought about by the COVID-19 pandemic to our supply chain and operations could have a significant negative impact on our net revenue, gross and operating margin performance.
−Removed: The global pandemic of COVID-19 continues to rapidly evolve, and we will continue to monitor the COVID-19 situation closely.
−Removed: The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and
−Removed: subject to change.
−Removed: We do not yet know the full extent of potential delays or impacts on our business, operations or the global economy as a whole.
+Added: A prolonged transportation disruption or a significant increase in the cost of freight could materially and adversely affect our business, results of operations, and financial condition.
If we lose the services of key personnel, we may not be able to execute our business strategy effectively.
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• delays in the introduction of new products by us or market acceptance of these products;
−Removed: • health epidemics and other outbreaks, including the COVID-19 pandemic, which could significantly disrupt our operations;
+Added: • health epidemics and other outbreaks, which could significantly disrupt our operations;
• introductions of new technologies and changes in consumer preferences that result in either unanticipated or unexpectedly rapid product category shifts;
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• epidemic or widespread product failure, or unanticipated safety issues, in one or more of our products;
−Removed: • slow or negative growth in the connected lifestyle, home electronics, and related technology markets;
+Added: • slow or negative growth in the smart security, home electronics, and related technology markets;
• seasonal shifts in end-market demand for our products;
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We operate in a highly competitive, quickly changing environment, and our future success depends on our ability to develop or acquire and introduce new products and services that achieve broad market acceptance.
−Removed: Our future success will depend in large part upon our ability to identify demand trends in the connected lifestyle market and quickly develop or acquire, and design, manufacture and sell, products and services that satisfy these demands in a cost-effective manner.
+Added: Our future success will depend in large part upon our ability to identify demand trends in the smart security market and quickly develop or acquire, and design, manufacture and sell, products and services that satisfy these demands in a cost-effective manner.
In order to differentiate our products and services from our competitors’ products, we must continue to increase our focus and capital investment in research and development, including software development.
We have committed a substantial amount of resources to the manufacture, development and sale of our Arlo Secure services and our wire-free smart Wi-Fi cameras, advanced baby monitors, and smart lights, and to introducing additional and improved models in these lines.
−Removed: In addition, we plan to continue to introduce new categories of smart connected devices to the Arlo platform in the near future.
−Removed: If our existing products and services do not continue, or if our new products or services fail, to achieve widespread market acceptance, if existing customers do not subscribe to our paid subscription services such as Arlo Secure, if those services do not achieve widespread market acceptance, or if we are unsuccessful in capitalizing on opportunities in the connected lifestyle market, as well as in the related market in the small business segment, our future growth may be slowed and our business, results of operations, and financial condition could be materially and adversely affected.
+Added: In addition, we plan to continue to introduce new categories of smart security devices to the Arlo platform in the near future.
+Added: If our existing products and services do not continue, or if our new products or services fail, to achieve widespread market acceptance, if existing customers do not subscribe to our paid subscription services such as Arlo Secure or Arlo Total Security, if those services do not achieve widespread market acceptance, or if we are unsuccessful in capitalizing on opportunities in the smart security market, as well as in the related market in the small business segment, our future growth may be slowed and our business, results of operations, and financial condition could be materially and adversely affected.
Successfully predicting demand trends is difficult, and it is very difficult to predict the effect that introducing a new product or service will have on existing product or service sales.
1 unchanged sentence
Also, we may not be able to respond effectively to new product or service announcements by our competitors by quickly introducing competitive products and services.
−Removed: In addition, we may acquire companies and technologies in the future and, consistent with our vision for Arlo, introduce new product and service lines in the connected lifestyle market.
+Added: In addition, we may acquire companies and technologies in the future and, consistent with our vision for Arlo, introduce new product and service lines in the smart security market.
In these circumstances, we may not be able to successfully manage integration of the new product and service lines with our existing suite of products and services.
−Removed: If we are unable to effectively and successfully further develop these new product and service lines, we may not be able to increase or maintain our sales, and our gross margin may be adversely affected.
+Added: are unable to effectively and successfully further develop these new product and service lines, we may not be able to increase or maintain our sales, and our gross margin may be adversely affected.
We may experience delays and quality issues in releasing new products and services, which may result in lower quarterly revenue than expected.
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• increased levels of product returns.
−Removed: Throughout the past few years, Arlo has significantly increased the rate of new product and service introductions, with the introduction of new lines of Arlo cameras, smart lights, and doorbell products, as well as the introduction of our Arlo Secure services and Arlo Home Security System.
−Removed: If we cannot sustain that pace of product and service introductions, either through rapid innovation or acquisition of new products and services or product and service lines, we may not be able to maintain or increase the market share of our products and services or expand further into the connected lifestyle market in accordance with our current plans.
+Added: Throughout the past few years, Arlo has significantly increased the rate of new product and service introductions, with the introduction of new lines of Arlo camera, home security system, and doorbell products, as well as the introduction of Arlo Secure, Arlo Total Security, and Arlo Safe.
+Added: If we cannot sustain that pace of product and service introductions, either through rapid innovation or acquisition of new products and services or product and service lines, we may not be able to maintain or increase the market share of our products and services or expand further into the smart security market in accordance with our current plans.
In addition, if we are unable to successfully introduce or acquire new products and services with higher gross margin, our revenue and overall gross margin would likely decline.
2 unchanged sentences
As of December 31, 2023, our accumulated deficit was $367.5 million.
−Removed: As of December 31, 2022, our cash and cash equivalents and short-term investments totaled $113.7 million.
+Added: As of December 31, 2023, our cash and cash equivalents and short-term investments totaled $136.5 million and we generated free cash flow of $35.5 million for the year ended December 31, 2023.
In October 2021, we entered into a Loan and Security Agreement with Bank of America, N.A.
−Removed: (the "Credit Agreement"), providing for a credit facility of up to $40.0 million and as of December 31, 2022, we have not borrowed against this credit facility.
+Added: (the "Credit Agreement"), providing for a credit facility of up to $40.0 million and, as of December 31, 2023, we have not borrowed against this credit facility and we had unused borrowing capacity of $13.9 million.
Refer to Note 7, Revolving Credit Facility in the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for further details on the Credit Agreement.
1 unchanged sentence
We have no commitments to obtain such additional financing, and we may not be able to obtain any such additional financing on terms favorable to us, or at all.
−Removed: If adequate financing is not available, we may further delay, postpone or terminate product and service expansion and curtail
−Removed: certain selling, general and administrative operations.
+Added: If adequate financing is not available, we may further delay, postpone or terminate product and service expansion and curtail certain selling, general and administrative operations.
The inability to raise additional financing may have a material adverse effect on our future performance.
−Removed: In addition, the COVID-19 pandemic has already resulted in a significant disruption of global financial markets.
−Removed: If the disruption persists and deepens, we could experience an inability to access additional capital.
Some of our competitors have substantially greater resources than we do, and to be competitive we may be required to lower our prices or increase our sales and marketing expenses, which could result in reduced margins and loss of market share.
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These companies could devote more capital resources to develop, manufacture, and market competing products than we could.
−Removed: Amazon is both a competitor and a distribution channel for our products as well as a provider of services to support our cloud-based storage.
+Added: Amazon.com is both a competitor and a distribution channel for our products as well as a provider of services to support our cloud-based storage.
If Amazon decided to end our distribution channel relationship or ceased providing cloud storage services to us, our sales and product performance could be harmed, which could seriously harm our business, financial condition, results of operations, and cash flows.
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Our results of operations may be negatively impacted if Verisure is not successful in continuing to sell our products in Europe.
−Removed: Even though the Supply Agreement provides for minimum purchase commitments, if Verisure fails to pay on a timely basis, or at all, including because of effects from COVID-19, or otherwise does not perform under the Supply Agreement, our cash flow would be
+Added: Even though the Supply Agreement provides for minimum purchase commitments, if Verisure fails to pay on a timely basis, or at all, or otherwise does not perform under the Supply Agreement, our cash flow would be reduced.
We are also exposed to increased credit risk if Verisure fails or becomes insolvent.
We also cannot provide any assurance that we will successfully develop custom products as specified by Verisure under the Supply Agreement.
−Removed: The Asset Purchase Agreement and Supply Agreement with Verisure contain customary representations and warranties regarding, the Business and the Assets, indemnification provisions, termination rights, certain financial covenants and other customary provisions.
−Removed: Additionally, we have agreed not to engage in any business that competes with the Business for a period of three years.
+Added: The Asset Purchase Agreement and Supply Agreement with Verisure contain customary representations and warranties regarding, the Business and the Assets (each as defined in the Asset Purchase Agreement), indemnification
+Added: provisions, termination rights, certain financial covenants and other customary provisions.
Our failure to comply with these provisions may have a material adverse effect on our future performance.
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During times of war and other major conflicts, we, the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our products and services.
−Removed: We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
−Removed: In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, loss of sensitive data and income, reputational harm, and diversion of funds.
+Added: We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing attacks, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, attacks enhanced or facilitated by AI, and other similar threats.
+Added: In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, ability to provide our products or services, loss of sensitive data and income, reputational harm, and diversion of funds.
Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.
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Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.
−Removed: We may rely on third-party service providers and technologies to operate critical business systems to process sensitive information in a variety of contexts, including, without limitation, cloud-based infrastructure, data center
−Removed: facilities, encryption and authentication technology, employee email, content delivery to customers, and other functions.
+Added: We may rely on third-party service providers and technologies to operate critical business systems to process sensitive information in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, content delivery to customers, and other functions.
We may also rely on third-party service providers to provide other products, services, parts, or otherwise to operate our business.
1 unchanged sentence
If our third-party service providers experience a security incident or other interruption, we could experience adverse consequences.
−Removed: While we may be entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.
+Added: While we may be entitled to damages if our third-party
+Added: service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.
In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised.
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This could cause our stock price to decline significantly.
−Removed: Changes in how our employees work and access our systems during the current COVID-19 pandemic also could lead to additional opportunities for bad actors to launch cyberattacks or for employees to cause inadvertent security risks or incidents.
+Added: Changes in how our employees work and access our systems, as experienced during the COVID-19 pandemic, also could lead to additional opportunities for bad actors to launch cyberattacks or for employees to cause inadvertent security risks or incidents.
While we have implemented security measures designed to protect against security incidents, including those described above, there can be no assurance that these measures will be effective.
1 unchanged sentence
We take steps to detect and remediate vulnerabilities, but we have not always been able in the past and may not be able in the future to detect and remediate all vulnerabilities in our information technology systems (including our products) because such threats and techniques used to exploit vulnerabilities change frequently and are often sophisticated in nature.
+Added: Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.
Therefore, such vulnerabilities could be exploited but may not be detected until after a security incident has occurred.
−Removed: These vulnerabilities pose a material risk to our business.
+Added: Unremedied high risk or critical vulnerabilities pose a material risk to our business.
For example, the firmware, software, and open source software that we or our manufacturing partners have installed on our products may be susceptible to hacking, unauthorized manipulation, or misuse.
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Such disclosures are costly, and the disclosure or the failure to comply with such requirements could lead to adverse consequences.
−Removed: If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences such as:
+Added: If we (or a third party upon whom we rely) experience a security incident or are perceived to have
+Added: experienced a security incident, we may experience adverse consequences such as:
government enforcement actions (for example, investigations, fines, penalties, audits, and inspections);
11 unchanged sentences
and other similar harms.
−Removed: Security incidents and attendant consequences may cause customers to stop using our products and services, deter new customers from using our products and services, and negatively impact our ability to grow and operate our business.
−Removed: The effects of a security breach or privacy violation could be further amplified during the current COVID-19 pandemic.
+Added: Security incidents and attendant consequences may prevent or cause customers to stop using our products and services, deter new customers from using our products and services, and negatively impact our ability to grow and operate our business.
In addition, the cost and operational consequences of implementing further data protection measures could be significant and theft of our intellectual property or proprietary business information could require substantial expenditures to remedy.
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Our future success is largely dependent on increasing sales of our paid subscription services.
−Removed: Even if we are successful in selling our smart connected devices and accessories, if we are unable to maintain or increase sales of Arlo Secure and Arlo Safe services, our revenue and overall gross margin would likely decline.
−Removed: Interruptions with the cloud-based systems that we use in our operations provided by an affiliate of Amazon.com, Inc.
−Removed: (“Amazon”), which is also one of our primary competitors, may materially and adversely affect our business, results of operations, and financial condition.
+Added: Even if we are successful in selling our smart security devices and accessories, if we are unable to maintain or increase sales of Arlo Secure, Arlo Total Security, and Arlo Safe services, our revenue and overall gross margin would likely decline.
+Added: Interruptions with the cloud-based systems that we use in our operations provided by an affiliate of Amazon, which is also one of our primary competitors, may materially and adversely affect our business, results of operations, and financial condition.
We host our platform using Amazon Web Services (“AWS”) data centers, a provider of cloud infrastructure services, and may in the future use other third-party cloud-based systems in our operations.
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Amazon may choose to hamper our competitive efforts, using provision of AWS services as leverage.
−Removed: In the event that there is a lapse of service, elimination of AWS services or features that we use, interruption of internet service provider connectivity, or damage to such facilities, we could experience interruptions in access to our platform as well as significant delays and additional expense in arranging or creating new facilities and services and/or re-architecting our solutions for deployment on a different cloud infrastructure service provider, which could materially and adversely affect our business, results of operations, and financial condition.
+Added: In the event that there is a lapse of service, elimination of AWS services or features that we use, interruption of internet service provider connectivity, or damage to such facilities, we could experience interruptions in access to our platform as well as significant delays and additional expense in
+Added: arranging or creating new facilities and services and/or re-architecting our solutions for deployment on a different cloud infrastructure service provider, which could materially and adversely affect our business, results of operations, and financial condition.
Our current and future products may experience quality problems, including defects or errors, from time to time that can result in adverse publicity, product recalls, litigation, regulatory proceedings, and warranty claims and could lead to significant direct or indirect costs, decreased revenue, and operating margin, and harm to our brand.
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We rely on a limited number of traditional and online retailers and wholesale distributors for a substantial portion of our sales, and our revenue could decline if they refuse to pay our requested prices or reduce their level of purchases or if there is significant consolidation in our sales channels, which results in fewer sales channels for our products.
−Removed: We sell a substantial portion of our products through traditional and online retailers, including Amazon, Best Buy Co., Inc.
−Removed: ("Best Buy"), and Costco Wholesale Corporation (“Costco”);
−Removed: and to security solutions provider, including Verisure and their respective affiliates.
−Removed: For the year ended December 31, 2022, we derived 40.1% of our revenue from Verisure and its affiliates, respectively.
+Added: We sell a substantial portion of our products through traditional and online retailers, including Amazon, Best Buy Co., Inc., Walmart, Inc., and Costco Wholesale Corporation;
+Added: and to security solutions providers, including Verisure and its affiliates.
+Added: For the year ended December 31, 2023, we derived 33.5% of our revenue from Verisure and its affiliates.
In addition, we sell to wholesale distributors, including Ingram Micro, Inc., D&H Distributing Company, and Synnex Corporation.
1 unchanged sentence
In addition, because our accounts receivable are often concentrated within a small group of retailers, distributors, and other channel partners, the failure of any of them to pay on a timely basis, or at all, would reduce our cash flow.
−Removed: If Best Buy or other retailers closes any of its retail stores due to COVID-19 pandemic, our revenue could be adversely impacted.
We are also exposed to increased credit risk if any one of these limited numbers of retailer and distributor channel partners fails or becomes insolvent.
−Removed: Verisure has an aggregate purchase commitment of $500.0 million during a five-year period commencing January 1, 2020.
+Added: Verisure has an aggregate purchase commitment of $500.0 million during a five-year period commencing January 1, 2020 and continuing through December 2024.
Other than with Verisure, we generally have no minimum purchase commitments or long-term contracts with our retailers, distributors and other channel partners.
11 unchanged sentences
If consolidation among the retailers, distributors, or other channel partners who purchase our products becomes more prevalent, our business, results of operations, and financial condition could be materially and adversely affected.
−Removed: In particular, the retail and connected home markets in some countries, including the United States, are dominated by a few large retailers with many stores.
+Added: In particular, the retail and smart security home markets in some countries, including the United States, are dominated by a few large retailers with many stores.
These retailers have in the past increased their market share and may continue to do so in the future by expanding through acquisitions and construction of additional stores.
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We have spent, and expect to continue to spend, significant amounts on advertising and other marketing campaigns, such as television, print advertising, and social media, as well as increased promotional activities, to acquire new customers.
−Removed: For the years ended December 31, 2022 and 2021, sales and marketing expenses were $70.1 million, including a brand awareness campaign of $15.6 million, and $48.9 million, respectively, representing approximately 14% and 11% of our revenue, respectively.
+Added: For the years ended December 31, 2023 and 2022, sales and marketing expenses were $66.1 million and $70.1 million, respectively, representing approximately 13% and 14% of our revenue, respectively.
While we seek to structure our advertising campaigns in the manner that we believe is most likely to encourage people to purchase our products and services, we may fail to identify advertising opportunities that satisfy our anticipated return on advertising spend as we scale our investments in marketing or to fully understand or estimate the conditions and behaviors that drive customer behavior.
3 unchanged sentences
If we are unable to do so successfully, our brand may be adversely affected and we may not be able to maintain or grow our current revenue and profit levels.
−Removed: To successfully evolve our product offerings of smart connected devices to appeal to our consumers, we will be required to predict, understand, and react to the rapidly changing tastes of consumers and provide appealing products in a timely manner.
+Added: To successfully evolve our product offerings of smart security devices to appeal to our consumers, we will be required to predict, understand, and react to the rapidly changing tastes of consumers and provide appealing products in a timely manner.
New product models that we introduce may not be successful with consumers or our brand may fall out of favor with consumers.
1 unchanged sentence
We have increased the rate of new product and service introductions, including new lines of Arlo cameras, smart lights, and doorbell products, and we may encounter difficulties that we did not anticipate during the product development stage.
−Removed: If we are not able to efficiently manufacture new products in quantities sufficient to support wholesale, retail, and e-commerce distribution, especially in light of the ongoing COVID-19 pandemic and its variants, we may not be able to recover our investment in the development of new product and service iterations and product lines, and we would continue to be subject to the risks inherent to having a limited product line.
+Added: If we are not able to efficiently manufacture new products in quantities sufficient to support wholesale, retail, and e-commerce distribution, we may not be able to recover our investment in the development of new product and service iterations and product lines, and we would continue to be subject to the risks inherent to having a limited product line.
Even if we develop and manufacture new products and services that consumers find appealing, the ultimate success of any new products or services may depend on our pricing.
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In addition, brand promotion efforts may not yield significant revenue or increased revenue sufficient to offset the additional expenses incurred in building our brand.
−Removed: Maintaining, protecting, and enhancing our brand may require us to make substantial investments, and these investments may not be successful or we may suspend or reduce the amount of
−Removed: investment spent on brand promotion and awareness efforts.
−Removed: If we fail to successfully maintain, promote, and position our brand and protect our reputation, or if we incur significant expenses in this effort, our business, financial condition and operating results may be adversely affected.
+Added: Maintaining, protecting, and enhancing our brand may require us to make substantial investments, and these investments may not be successful or we may suspend or reduce the amount of investment spent on brand promotion and awareness efforts.
+Added: If we fail to successfully maintain, promote, and position our
+Added: brand and protect our reputation, or if we incur significant expenses in this effort, our business, financial condition and operating results may be adversely affected.
The reputation of our services may be damaged, and we may face significant direct or indirect costs, decreased revenue, and operating margins if our services contain significant defects or fail to perform as intended.
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In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping and recording laws).
−Removed: For example, the California Consumer Privacy Act of 2018 (“CCPA”) applies to personal information of consumers, business representatives and employees and requires businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights.
+Added: For example, the California Consumer Privacy Act of 2018 (“CCPA”) applies to personal information of consumers, business representatives and employees and requires businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights, such as those noted below.
The CCPA provides for civil penalties of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages.
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Other states, such as Colorado, Connecticut, Virginia and Utah, have also passed comprehensive privacy laws, and similar laws are being considered in several other states, as well as at the federal and local levels.
+Added: These state laws and the CCPA provide individuals with certain rights concerning their personal information, including the right to access, correct, or delete certain personal information, and opt-out of certain data processing activities, such as targeted advertising, profiling, and
+Added: automated decision-making.
+Added: The exercise of these rights may impact our business and ability to provide our products and services.
These developments further complicate compliance efforts, and increase legal risk and compliance costs for us, the third parties upon whom we rely.
−Removed: Additionally, under various privacy laws and
−Removed: other obligations, we may be required to obtain certain consents to process personal data.
−Removed: Our inability or failure to do so could result in adverse consequences.
+Added: Additionally, under various privacy laws and other obligations, we may be required to obtain certain consents to process personal data.
+Added: For example, some of our data processing practices have in the past and may in the future be challenged under wiretapping laws, because we obtain consumer information from third parties through various methods, including chatbot and session replay providers, or via third-party marketing pixels.
+Added: These practices may be subject to increased challenges by class action plaintiffs.
+Added: Our inability or failure to obtain consent for these practices could result in adverse consequences.
Outside the United States, an increasing number of laws, regulations, and industry standards may govern data privacy and security.
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Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws.
−Removed: Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA and UK’s standard contractual clauses, these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States.
−Removed: If there is no lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.
+Added: Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA and UK’s standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S.
+Added: Data Privacy Framework and the UK extension thereto (which allows for transfers for relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States.
+Added: If there is no lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions (such as Europe) at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.
+Added: Additionally, companies that transfer personal data out of the EEA and UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist groups.
Some European regulators have prevented companies from transferring personal data out of Europe for allegedly violating the GDPR’s cross-border data transfer limitations.
+Added: For example, in May 2023, the Irish Data Protection Commission determined that a major social media company’s use of the standard contractual clauses to transfer personal data from Europe to the United States was insufficient and levied a 1.2 billion Euro fine against the company and prohibited the company from transferring personal data to the United States.
+Added: Our employees and personnel use generative artificial intelligence (“AI”) technologies to perform their work, and the disclosure and use of personal information in generative AI technologies are subject to various privacy laws and other privacy obligations.
+Added: Governments have passed and are likely to pass additional laws regulating generative AI.
+Added: Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and consumer lawsuits.
+Added: If we are unable to use generative AI, it could make our business less efficient and result in competitive disadvantages.
+Added: We use AI and machine learning (“ML”) to assist us in making certain decisions, which are regulated by certain privacy laws.
+Added: Due to inaccuracies or flaws in the inputs, outputs, or logic of the AI/ML, the model could be biased and could lead us to make decisions that could bias certain individuals (or classes of individuals), and adversely impact their rights, employment, and ability to obtain certain pricing, products, services, or benefits.
+Added: We also use AI/ML technologies in our
+Added: products and services.
+Added: The development and use of AI/ML present various privacy and security risks that may impact our business.
+Added: AI/ML are subject to privacy and data security laws, as well as increasing regulation and scrutiny.
+Added: Several jurisdictions around the globe, including Europe and certain U.S.
+Added: states, have proposed or enacted laws governing AI/ML.
+Added: For example, European regulators have proposed a stringent AI regulation, and we expect other jurisdictions will adopt similar laws.
+Added: Additionally, certain privacy laws extend rights to consumers (such as the right to delete certain personal data) and regulate automated decision making, which may be incompatible with our use of AI/ML.
+Added: These obligations may make it harder for us to conduct our business using AI/ML, lead to regulatory fines or penalties, require us to change our business practices, retrain our AI/ML, or prevent or limit our use of AI/ML.
+Added: For example, the FTC has required other companies to turn over (or disgorge) valuable insights or trainings generated through the use of AI/ML where they allege the company has violated privacy and consumer protection laws.
+Added: If we cannot use AI/ML or are restricted in the use of AI/ML, our business may be less efficient, or we may be at a competitive disadvantage.
+Added: We use identity verification technologies in connection with the “person detection” feature in some of our products and services that may subject us to biometric privacy laws.
+Added: For example, the Illinois Biometric Information Privacy Act (“BIPA”) regulates the collection, use, safeguarding, and storage of biometric information.
+Added: BIPA provides for substantial penalties and statutory damages and has generated significant class action activity, and the cost of litigating and settling past and any future claims that we have violated BIPA or similar laws could be significant.
+Added: In addition to litigation, regulators, such as the Federal Trade Commission (FTC), have indicated that use of biometric technologies (including facial recognition technologies) may be subject to additional scrutiny.
In addition to data privacy and security laws, we may be contractually subject to industry standards adopted by industry groups and may become subject to such obligations in the future.
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For example, certain privacy laws, such as the GDPR and the CCPA, require our customers to impose specific contractual restrictions on their service providers.
−Removed: We may publish privacy policies, marketing materials and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security.
+Added: We publish privacy policies, marketing materials and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security.
If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.
−Removed: Obligations related to data privacy and security are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty.
+Added: Obligations related to data privacy and security (and consumers’ data privacy expectations) are quickly changing, becoming increasingly stringent, and creating uncertainty.
Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions.
−Removed: Preparing for and complying with these obligations requires us to devote significant resources, which may necessitate changes to our services, information technologies, systems, and
−Removed: practices and to those of any third parties that process personal data on our behalf.
+Added: Preparing for and complying with these obligations requires us to devote significant resources, which may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process personal data on our behalf.
In addition, these obligations may require us to change our business model.
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Moreover, despite our efforts, our personnel or third parties on whom we rely may fail to comply with such obligations, which could negatively impact our business operations.
−Removed: If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to:
+Added: If we or the third parties on which
+Added: we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to:
government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar);
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The Credit Agreement contains other customary covenants, including certain restrictions on maintaining a minimum cash balance, achieving certain fixed charge coverage ratio for two consecutive quarters, our ability to incur additional indebtedness, consolidate or merge, enter into acquisitions, pay any dividend or distribution on our capital stock, redeem, retire or purchase shares of our capital stock, make investments or pledge or transfer assets, in each case subject to limited exceptions.
−Removed: There can be no assurance that we will be able to comply with the financial and other covenants in the Credit Agreement, and the effects of the COVID-19 pandemic may increase the risk of our inability to comply with such covenants.
+Added: There can be no assurance that we will be able to comply with the financial and other covenants in the Credit Agreement.
Our failure to comply with these covenants could cause us to be unable to borrow under the Credit Agreement and may constitute an event of default which, if not cured or waived, could result in the acceleration of the maturity of any indebtedness then outstanding under the Credit Agreement, which would require us to pay all amounts then outstanding.
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Various countries in which we operate are experiencing and may continue to experience military action and civil and political unrest.
−Removed: We have operations in the emerging market economies of Eastern Europe, previously including operations in Belarus, utilizing employees and contractors who perform services relating to new product releases.
+Added: We have operations in the emerging market economies of Eastern Europe, utilizing employees and contractors who perform services relating to new product releases.
In late February 2022, Russian military forces launched significant military action against Ukraine.
−Removed: Sustained conflict and disruption in the region is likely.
+Added: The conflict remains ongoing.
The impact to Belarus, Russia and Ukraine, as well as actions taken by other countries, including new and stricter export controls and sanctions by Canada, the United Kingdom, the European Union, the U.S.
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We are actively monitoring the security of our remaining employees and contractors in Eastern Europe and the stability of our infrastructure, including communications and internet availability.
−Removed: To date we have not experienced any material interruptions in our operations there, but if we are unable to effectively replicate the capabilities previously provided by our Belarusian operations in other countries, our ability to timely introduce new products and financial results may be harmed.
+Added: To date we have not experienced any material interruptions in our operations there.
Global geopolitical, economic and business conditions could materially and adversely affect our revenue and results of operations.
−Removed: Our business has been, and may continue to be, affected by a number of factors that are beyond our control, including but not limited to general geopolitical, economic and business conditions, conditions in the financial markets, and changes in the overall demand for connected lifestyle products.
+Added: Our business has been, and may continue to be, affected by a number of factors that are beyond our control, including but not limited to general geopolitical, economic and business conditions, conditions in the financial markets, and changes in the overall demand for smart security products.
Our products and services may be considered discretionary items for our consumer and small business end-users.
−Removed: A severe and/or prolonged economic downturn, including as a result of the COVID-19 pandemic, the ongoing conflict in Ukraine, inflation, supply chain disruptions, rising interest rates, or lower consumer confidence, among other things, could adversely affect our customers’ financial condition and their levels of business activity.
−Removed: As a result of stimulus programs put in place over the past two years, the U.S.
+Added: A severe and/or prolonged economic downturn, the ongoing conflict in Ukraine, hostilities in the Middle-East, inflation, supply chain disruptions, rising interest rates, fluctuating consumer confidence, or current financial conditions within the banking industry, including the effects of recent failures of financial institutions, among other things, could adversely affect our customers’ financial condition and their levels of business activity.
+Added: As a result of stimulus programs put in place over the past three years, the U.S.
and many countries are currently experiencing an inflationary environment.
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Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which in turn has negatively impacted equity values.
−Removed: capital markets experienced and continue to experience extreme volatility and disruption following the global outbreak of COVID-19, the Russian invasion of Ukraine, and inflationary pressures.
+Added: capital markets experienced and continue to experience extreme volatility and disruption following the Russian invasion of Ukraine, and inflationary pressures.
Weakness in, and uncertainty about, global economic conditions may also cause businesses to postpone spending in response to tighter credit, rising interest rates, inflation, lower consumer confidence, negative financial news and/or general declines in income or asset values, which could have a material negative effect on the demand for our products and services.
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In addition, the challenges faced by the European Union to stabilize some of its member state economies, such as Greece, Portugal, Spain, Hungary, and Italy, have had international implications, affecting the stability of global financial markets and hindering economies worldwide.
−Removed: Many member states in the European Union have been addressing the issues
−Removed: with controversial austerity measures.
+Added: Many member states in the European Union have been addressing the issues with controversial austerity measures.
In addition, the potential consequences of the “Brexit” process in the United Kingdom have led to significant uncertainty in the region.
−Removed: Should the European Union monetary policy measures be insufficient to restore confidence and stability to the financial markets, or should the United Kingdom’s “Brexit” decision lead to additional economic or political instability, the global economy, including the U.S.
+Added: Should the European Union monetary policy measures be
+Added: insufficient to restore confidence and stability to the financial markets, or should the United Kingdom’s “Brexit” decision lead to additional economic or political instability, the global economy, including the U.S.
and European Union economies where we have a significant presence, could be hindered, which could have a material adverse effect on our business, results of operations, and financial condition.
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A portion of our global and U.S.
−Removed: sales are comprised of goods assembled and manufactured in our facilities in Taiwan and the People’s Republic of China, and components for a number of our goods are sourced from suppliers in the People’s Republic of China.
+Added: sales are comprised of goods assembled and manufactured in our facilities in Asia.
+Added: The components for a number of our goods are sourced from suppliers in the People’s Republic of China.
When tariffs, duties, or other restrictions are placed on goods imported into the United States from China or any related counter-measures are taken by China, our revenue and results of operations may be materially harmed.
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We are actively addressing the risks related to these additional duties, which have affected, or have the potential to affect, at least some of our imports from China.
−Removed: Although we have already taken some steps to mitigate these risks, including by moving a significant portion of our manufacturing and assembly to Vietnam and other areas in the Asia Pacific region outside of China, if these duties are imposed, the cost of our products may increase.
+Added: Although we have already taken steps to mitigate these risks, including by moving our manufacturing and assembly to Vietnam and other areas in the Asia Pacific region outside of China, if these duties are imposed, the cost of our products may increase.
These duties may also make our products more expensive for consumers, which may reduce consumer demand.
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Our stock price may be volatile and your investment in our common stock could suffer a decline in value.
−Removed: There has been significant volatility in the market price and trading volume of securities of technology and other companies, including recently in connection with the ongoing COVID-19 pandemic, which may be unrelated to the financial performance of these companies.
+Added: There has been significant volatility in the market price and trading volume of securities of technology and other companies, which may be unrelated to the financial performance of these companies.
These broad market fluctuations may negatively affect the market price of our common stock .
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• actual or anticipated fluctuations in our results of operations or our competitors’ operating results;
−Removed: • actual or anticipated changes in the growth rate of the connected lifestyle market, our growth rate or our competitors’ growth rates;
+Added: • actual or anticipated changes in the growth rate of the smart security market, our growth rate or our competitors’ growth rates;
• delays in the introduction of new products by us or market acceptance of these products;
−Removed: • conditions in the financial markets in general or changes in general economic conditions, including due to the COVID-19 pandemic;
+Added: • conditions in the financial markets in general or changes in general economic conditions;
• changes in governmental regulation, including taxation and tariff policies;
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We determine production levels based on our forecasts of demand for our products.
−Removed: Actual demand for our products depends on many factors, which makes it difficult to forecast.
+Added: Actual demand for our
+Added: products depends on many factors, which makes it difficult to forecast.
We have experienced differences between our actual and our forecasted demand in the past and expect differences to arise in the future.
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Moreover, if a competitor or potential competitor enters into an exclusive arrangement with any of our key third-party technology providers, or if any of these providers unilaterally decides not to do business with us for any reason, our ability to develop and sell products containing that technology would be severely limited.
−Removed: In addition, certain of Arlo’s firmware and the AI-based algorithms that we use in our Arlo Secure services incorporate open source software, the licenses for which may include customary requirements for, and restrictions on, use of the open source software.
+Added: In addition, certain of Arlo’s firmware and the AI-based algorithms that we use in our Arlo Secure and Arlo Total Security services incorporate open source software, the licenses for which may include customary requirements for, and restrictions on, use of the open source software.
If we are offering products or services that contain third-party technology that we subsequently lose the right to license, then we will not be able to continue to offer or support those products or services.
In addition, these licenses may require royalty payments or other consideration to the third-party licensor.
−Removed: Our success will depend, in part, on our continued ability to access these technologies, and we do not know whether these third-party technologies will continue to
−Removed: be licensed to us on commercially acceptable terms, if at all.
+Added: Our success will depend, in part, on our continued ability to access these technologies, and we do not know whether these third-party technologies will continue to be licensed to us on commercially acceptable terms, if at all.
In addition, if these third-party licensors fail or experience instability, then we may be unable to continue to sell products and services that incorporate the licensed technologies, in addition to being unable to continue to maintain and support these products and services.
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International sales were 39% and 45% of overall revenue for the years ended December 31, 2023 and 2022, respectively.
−Removed: We continue to be committed to growing our international sales, and while we have committed resources to expanding our international operations and sales channels, these efforts may not be successful and could be impacted by COVID-19 pandemic.
+Added: We continue to be committed to growing our international sales, and while we have committed resources to expanding our international operations and sales channels, these efforts may not be successful.
International operations are subject to a number of risks, including but not limited to:
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Governmental regulations of imports or exports affecting internet security could affect our revenue.
−Removed: Any additional governmental regulation of imports or exports or failure to obtain required export approval of our encryption technologies could adversely affect our international and domestic sales.
+Added: Any additional governmental regulation of imports or exports or failure to obtain required export approval of our
+Added: encryption technologies could adversely affect our international and domestic sales.
The United States and various foreign governments have imposed controls, export license requirements, and restrictions on the import or export of some technologies, particularly encryption technology.
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If we do not resolve these claims on a favorable basis, our business, results of operations, and financial condition could be materially and adversely affected.
+Added: We have been subject to securities class action and derivative litigation in the past, as more fully discussed under the heading “Litigation and Other Legal Matters” in Note 8, Commitments and Contingencies in the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K, and may in the future become involved in such litigation.
+Added: In the event we are involved in such litigation, regardless of the merits or ultimate results of such litigation, this could result in substantial costs, which would hurt our financial condition and results of operations and divert management’s attention and resources from our business.
As part of growing our business, we may make acquisitions.
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From time to time, we may undertake acquisitions to add new product and service lines and technologies, acquire talent, gain new sales channels, or enter into new sales territories.
−Removed: Acquisitions involve numerous risks and challenges, including relating to the successful integration of the acquired business, entering into new territories or markets with which
−Removed: we have limited or no prior experience, establishing or maintaining business relationships with new retailers, distributors, or other channel partners, vendors, and suppliers, and potential post-closing disputes.
+Added: Acquisitions involve numerous risks and challenges, including relating to the successful integration of the acquired business, entering into new territories or markets with which we have limited or no prior experience, establishing or maintaining business relationships with new retailers, distributors, or other channel partners, vendors, and suppliers, and potential post-closing disputes.
We cannot ensure that we will be successful in selecting, executing, and integrating acquisitions.
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In December 2010, the Federal Communications Commission (the “FCC”), adopted net neutrality rules barring internet providers from blocking or slowing down access to online content, protecting services like ours from such interference.
−Removed: Recently, the FCC voted in favor of repealing the net neutrality rules, and it is currently uncertain how the U.S.
+Added: In December 2017, the FCC voted in favor of repealing the net neutrality rules, and it is currently uncertain how the U.S.
Congress will respond to this decision.
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Within such a regulatory environment, we could experience discriminatory or anti-competitive practices that could impede our domestic and international growth, cause us to incur additional expense, or otherwise materially and adversely affect our business, results of operations, and financial condition.
+Added: In addition, the enactment or application of network neutrality laws could impact our business.
+Added: For example, California’s state-specific “network neutrality” law took effect in early 2021, and the FCC has proposed to re-adopt federal network neutrality rules and other states could begin to enforce existing laws or adopt new network neutrality requirements.
+Added: As we are reliant on robust internet connectivity, failure to broadly require the application of network neutrality could result in discriminatory or anti-competitive practices that could impede our domestic and international growth, increased expenses, or otherwise negatively affect our business.
+Added: To the extent internet service providers attempt to interfere with our services, extract fees from us in exchange for making our platform available, or otherwise engage in discriminatory practices, our business could be adversely impacted.
Changes in tax laws or exposure to additional income tax liabilities could affect our future profitability.
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We are subject to income taxes in the United States and numerous foreign jurisdictions.
−Removed: Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be recognized under GAAP, changes in the composition of earnings in countries with differing tax rates, changes in deferred tax assets and liabilities, or changes in tax laws.
+Added: Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be recognized under U.S.
+Added: Generally Accepted Accounting Principles (“U.S.
+Added: GAAP”), changes in the composition of earnings in countries with differing tax rates, changes in deferred tax assets and liabilities, or changes in tax laws.
As of December 31, 2023, our U.S.
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Moreover, our U.S.
−Removed: federal and state research and development tax credits were approximately $6.5 million and approximately $6.4 million, respectively, with the amount of federal credit already reduced by the expected utilization for such year.
−Removed: The utilization of our net operating loss and tax
−Removed: credit carryforwards may be subject to annual limitation due to ownership changes as provided by Sections 382 and 383 of the Code and similar state provisions.
+Added: federal and state research and development tax credits were approximately $9.2 million and approximately $8.7 million, respectively, with
+Added: the amount of federal credit already reduced by the expected utilization for such year.
+Added: The utilization of our net operating loss and tax credit carryforwards may be subject to annual limitation due to ownership changes as provided by Sections 382 and 383 of the Code and similar state provisions.
Such an annual limitation could result in the expiration of portions of our net operating loss and tax credit carryforwards before utilization.
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If we do not prevail in any such disagreements, our profitability may be affected.
−Removed: In addition, the Organization for Economic Co-operation and Development (“OECD”) has been working on new laws on the taxation of the digital economy to provide taxing rights to jurisdictions where the customers or users are located.
+Added: In addition, the OECD has been working on new laws on the taxation of the digital economy to provide taxing rights to jurisdictions where the customers or users are located.
Some countries have enacted, and others have proposed the new laws to tax digital transactions.
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Environmental regulations require us to reduce product energy usage, monitor and exclude an expanding list of restricted substances, and participate in required recovery and recycling of our products.
−Removed: While future changes in regulations are certain, we are currently unable to predict how any such changes will impact us and if such impacts will be
−Removed: material to our business.
+Added: While future changes in
+Added: regulations are certain, we are currently unable to predict how any such changes will impact us and if such impacts will be material to our business.
If there is a new law or regulation that significantly increases our costs of manufacturing or causes us to significantly alter the way that we manufacture our products, this could have a material adverse effect on our business, financial condition, and results of operations.
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A core part of our solution is the interoperability of our platform with third-party IoT products and protocols.
−Removed: We have designed the Arlo platform to seamlessly integrate with third-party IoT products and protocols, such as Amazon
−Removed: Alexa, Apple HomeKit, Apple TV, Google Assistant, IFTTT, Stringify, and Samsung SmartThings.
+Added: We have designed the Arlo platform to seamlessly integrate with third-party IoT products and protocols, such as Amazon Alexa, Apple HomeKit, Apple TV, Google Assistant, IFTTT, Stringify, and Samsung SmartThings.
If these third parties were to alter their products, we could be adversely impacted if we fail to timely create compatible versions of our products, and such incompatibility could negatively impact the adoption of our products and solutions.
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If the Distribution (as defined below), together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S.
−Removed: federal income tax purposes, NETGEAR, Arlo and Arlo stockholders could be subject to significant tax liabilities, and, in certain circumstances, we could be required to indemnify
−Removed: NETGEAR for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement.
+Added: federal income tax purposes, NETGEAR, Arlo and Arlo stockholders could be subject to significant tax liabilities, and, in certain circumstances, we could be required to indemnify NETGEAR for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement.
In November 2018, NETGEAR announced that its board of directors had approved a special stock dividend (the “Distribution”) to its stockholders, consisting of 62,500,000 shares of our common stock owned by NETGEAR.
2 unchanged sentences
The opinion was based upon and relied on, among other things, certain facts and assumptions, as well as certain representations, statements and undertakings of NETGEAR and us, including those relating to the past and future conduct of NETGEAR and us.
−Removed: If any of these representations, statements or undertakings are, or become, incomplete or inaccurate, or if we or NETGEAR breach any of the respective covenants in any of the separation-related agreements, the opinion of the outside tax counsel could be invalid and the conclusions reached therein could be jeopardized.
−Removed: As of December 31, 2022, the 2018 IRS audit had been closed without any adjustments and the 2018 California Franchise Tax Board audit is still ongoing.
+Added: If any of these representations, statements or undertakings are, or become, incomplete or inaccurate, or if we or NETGEAR breach any of the respective covenants in any of the separation-related agreements (in connection with our separation from NETGEAR (the “Separation”)), the opinion of the outside tax counsel could be invalid and the conclusions reached therein could be jeopardized.
+Added: There is a 2018 California Franchise Tax Board and a 2016-2018 Texas Franchise tax audit still ongoing for NETGEAR.
We entered into the tax matters agreement with NETGEAR to indemnify NETGEAR for any taxes (and any related costs and other damages) resulting from the Separation and Distribution, and certain other related transactions, to the extent such amounts were to result from (i) an acquisition after the Distribution of all or a portion of our equity securities, whether by merger or otherwise (and regardless of whether we participated in or otherwise facilitated the acquisition), (ii) other actions or failures to act by us or (iii) any of the representations or undertakings contained in any of the Separation-related agreements or in the documents relating to the opinion of counsel being incorrect or violated.
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federal income tax purposes, under Sections 355 and 368(a)(1)(D) and certain other relevant provisions of the Code, to the extent that the failure to so qualify is attributable to actions, events or transactions relating to such party’s respective stock, assets or business, or a breach of the relevant representations or covenants made by that party in the tax matters agreement.
−Removed: The transition services agreement generally provides that the applicable service recipient indemnifies the applicable service provider for liabilities that such service provider incurs arising from the provision of services other than liabilities arising from such service provider’s gross negligence, bad faith or willful misconduct or material breach of the transition services agreement, and that the applicable service provider indemnifies the applicable service recipient for liabilities that such service recipient incurs arising from such service provider’s gross negligence, bad faith or willful misconduct or material breach of the transition services agreement.
−Removed: Pursuant to the registration rights agreement, we have agreed to indemnify NETGEAR and its subsidiaries that hold registrable securities (and their directors, officers, agents and, if applicable, each
−Removed: other person who controls such holder under Section 15 of the Securities Act) registering shares pursuant to the registration rights agreement against certain losses, expenses and liabilities under the Securities Act, common law or otherwise.
+Added: The transition services agreement generally provides that the applicable service recipient indemnifies the applicable service
+Added: provider for liabilities that such service provider incurs arising from the provision of services other than liabilities arising from such service provider’s gross negligence, bad faith or willful misconduct or material breach of the transition services agreement, and that the applicable service provider indemnifies the applicable service recipient for liabilities that such service recipient incurs arising from such service provider’s gross negligence, bad faith or willful misconduct or material breach of the transition services agreement.
+Added: Pursuant to the registration rights agreement, we have agreed to indemnify NETGEAR and its subsidiaries that hold registrable securities (and their directors, officers, agents and, if applicable, each other person who controls such holder under Section 15 of the Securities Act) registering shares pursuant to the registration rights agreement against certain losses, expenses and liabilities under the Securities Act, common law or otherwise.
NETGEAR and its subsidiaries that hold registrable securities similarly indemnify us but such indemnification will be limited to an amount equal to the net proceeds received by such holder under the sale of registrable securities giving rise to the indemnification obligation.
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Under generally accepted accounting principles, we review our intangible assets and long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
−Removed: Goodwill is required to be tested for impairment at least annually.
+Added: required to be tested for impairment at least annually.
Factors that may be considered when determining if the carrying value of our goodwill, other intangible assets and long-lived assets may not be recoverable include a significant decline in our expected future cash flows or a sustained, significant decline in our stock price and market capitalization.
−Removed: If, in any period our stock price decreases to the point where the fair value of our assets (as partially indicated by our market capitalization) is less than our book value, this could indicate a potential impairment and we may be required to
−Removed: record an impairment charge in that period.
+Added: If, in any period our stock price decreases to the point where the fair value of our assets (as partially indicated by our market capitalization) is less than our book value, this could indicate a potential impairment and we may be required to record an impairment charge in that period.
Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on projections of future operating performance.
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If there is a decline in our stock price based on market conditions and deterioration of our business, we may have to record a charge to our earnings for the associated goodwill impairment of up to $11.0 million.
−Removed: We are subject to securities class action and derivative litigation.
−Removed: We are subject to various securities class action and derivative complaints, as more fully discussed in the heading under “Litigation and Other Legal Matters” in Note 8, Commitments and Contingencies , in the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
−Removed: Regardless of the merits or ultimate results of the above-described litigation matters, they could result in substantial costs, which would hurt our financial condition and results of operations and divert management’s attention and resources from our business.
−Removed: At this point, however, it is too early to reasonably estimate any financial impact to us resulting from these litigation matters.
Your percentage ownership in Arlo may be diluted in the future.
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Similarly, the repurchase or redemption rights or liquidation preferences that Arlo could assign to holders of preferred stock could affect the residual value of the common stock.
−Removed: We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common shares less attractive to investors.
−Removed: We are an “emerging growth company,” as defined in the Jumpstart Our Business Act ("JOBS Act").
−Removed: For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes Oxley Act of 2002 ("Section 404"), reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
−Removed: We will remain an emerging growth company until the earliest of (1) December 31, 2023, (2) the last day of the fiscal year in which we have total annual revenue of at least $1.235 billion, (3) the last day of the fiscal year in which we become a large accelerated filer, which means that we have been public for at least 12 months, have filed at least one annual report and the market value of our common stock that is held by non-affiliates exceeds $700 million as of the
−Removed: last day of our then most recently completed second fiscal quarter, or (4) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
−Removed: Even after we no longer qualify as an emerging growth company, we may still re-qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements including exemption from compliance with the auditor attestation requirements of Section 404 and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
−Removed: We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.
−Removed: If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our share price may be more volatile.
Certain provisions in our amended and restated certificate of incorporation and amended and restated bylaws and of Delaware law may prevent or delay an acquisition of Arlo, which could decrease the trading price of our common stock.
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(ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of such corporation at the time the transaction commenced (excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) the voting stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender or vote stock held by the plan);
−Removed: or (iii) on or subsequent to such time the business combination is approved by the board of directors of such
−Removed: corporation and authorized at a meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock of such corporation not owned by the interested stockholder.
+Added: or (iii) on or subsequent to such time the business combination is approved by the board of directors of such corporation and authorized at a meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock of such corporation not owned by the interested stockholder.
We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal.
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While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions.
−Removed: In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation.
+Added: In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated
+Added: certificate of incorporation.
This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.
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We incur significant costs as a result of operating as a public company, and our management devotes substantial time to complying with public company regulations.
−Removed: Prior to the Separation, we historically operated our business as a segment of a public company.
−Removed: As a standalone public company, we have additional legal, accounting, insurance, compliance, and other expenses that we had not incurred historically.
−Removed: We are obligated to file with the SEC annual and quarterly reports and other reports that are specified in Section 13 and other sections of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
−Removed: We are also required to ensure that we have the ability to prepare financial statements that are fully compliant with all SEC reporting
−Removed: requirements on a timely basis.
−Removed: In addition, we are and will continue to become subject to other reporting and corporate governance requirements, including certain requirements of the New York Stock Exchange ("NYSE"), and certain provisions of the Section 404 and the regulations promulgated thereunder, which will impose significant compliance obligations upon us.
−Removed: Section 404, as well as rules subsequently implemented by the SEC and the NYSE, have imposed increased regulation and disclosure and required enhanced corporate governance practices of public companies.
−Removed: We are committed to maintaining high standards of corporate governance and public disclosure, and our efforts to comply with evolving laws, regulations and standards in this regard are likely to result in increased selling and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities.
+Added: As a public company, we are obligated to file with the SEC annual and quarterly reports and other reports that are specified in Section 13 and other sections of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
+Added: We are also required to ensure that we have the ability to prepare financial statements that are fully compliant with all SEC reporting requirements on a timely basis.
+Added: In addition, we are and will continue to become subject to other reporting and corporate governance requirements, including certain requirements of the New York Stock Exchange (“NYSE”), and certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX Act”) and the regulations promulgated thereunder, which will impose significant compliance obligations upon us.
+Added: Section 404 of the SOX Act, as well as rules subsequently implemented by the SEC and the NYSE, have imposed increased regulation and disclosure and required enhanced corporate governance practices of public companies.
+Added: We are committed to maintaining high standards of corporate governance and public disclosure, and our efforts to comply with evolving laws, regulations and standards in this regard are likely to result in increased selling, general, and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities.
These changes will require a significant commitment of additional resources.
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Any such action could harm our reputation and the confidence of investors and customers in us and could materially and adversely affect our business and cause our share price to fall.
−Removed: Failure to achieve and maintain effective internal controls in accordance with Section 404 of Sarbanes-Oxley could materially and adversely affect our business, results of operations, financial condition, and stock price.
−Removed: As a public company, we are required to document and test our internal control procedures in order to satisfy the requirements of Section 404, which requires annual management assessments of the effectiveness of our internal control over financial reporting.
−Removed: Upon loss of status as an “emerging growth company” as defined in the JOBS Act, an annual report by our independent registered public accounting firm that addresses the effectiveness of internal control over financial reporting will be required.
−Removed: During the course of our testing, we may identify deficiencies which we may not be able to remediate in time to meet our deadline for compliance with Section 404.
−Removed: Testing and maintaining internal control can divert our management’s attention from other matters that are important to the operation of our business.
−Removed: We also expect the regulations under Section 404 to increase our legal and financial compliance costs, make it more difficult to attract and retain qualified officers and members of our board of directors, particularly to serve on our audit committee, and make some activities more difficult, time consuming, and costly.
−Removed: We may not be able to conclude on an ongoing basis that we have effective internal control over our financial reporting in accordance with Section 404 or our independent registered public accounting firm may not be able or willing to issue an unqualified report on the effectiveness of our internal control over financial reporting.
−Removed: If we conclude that our internal control over financial reporting is not effective, we cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or their effect on our operations because there is presently no precedent available by which to measure compliance adequacy.
−Removed: If either we are unable to conclude that we have effective internal control over our financial reporting or our independent auditors are unable to provide us with an unqualified report as required by Section 404, then investors could lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
+Added: We have identified a material weakness in our internal control over financial reporting related to certain ineffective information technology general controls.
+Added: Failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could materially and adversely affect our business, results of operations, financial condition, and stock price.
+Added: As a public company, we are required to document and test our internal control over financial reporting in order to satisfy the requirements of rules and regulations of the SEC regarding compliance with Section 404 of the SOX Act, which requires an annual management assessment of the effectiveness of our internal control over financial reporting.
+Added: We are required to provide our independent registered public accounting firm’s annual report addressing the effectiveness of internal control over financial reporting.
+Added: During the course of our testing, we may identify deficiencies which we may not be able to remediate in time to meet our deadline for compliance with Section 404 of the SOX Act.
+Added: Testing and maintaining internal control over financial reporting can divert our management’s attention from other matters that are important to the operation of our business.
+Added: We also expect the regulations under Section 404 of the SOX Act to increase
+Added: our legal and financial compliance costs, make it more difficult to attract and retain qualified officers and members of our board of directors, particularly to serve on our audit committee, and make some activities more difficult, time consuming, and costly.
+Added: As of December 31, 2023, management identified certain control deficiencies in the area of our information technology general controls (“ITGCs”) related to (i) user access controls that restrict user and privileged access to appropriate personnel;
+Added: (ii) program change management controls;
+Added: and (iii) certain computer operations controls that, when aggregated, arise to a material weakness.
+Added: There is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis as a result of such material weakness.
+Added: However, this material weakness did not result in any material misstatements in our consolidated financial statements or disclosures in any of the fiscal years ended December 31, 2023, 2022 or 2021.
+Added: Management did not identify any deficiencies related to the key non-IT internal control over financial reporting as of December 31, 2023.
+Added: Management has developed and is implementing a remediation plan to address the material weakness.
+Added: However, we cannot provide assurance that the testing of the design and operational effectiveness of the new controls will be complete within a specific timeframe.
+Added: There is no assurance that additional material weaknesses will not occur or that we will be able to remediate such material weaknesses in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404 of the SOX Act.
+Added: If we identify any additional material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 of the SOX Act in a timely manner or continue to assert that our internal control over financial reporting is ineffective, or if our independent registered public accounting firm continues to express an adverse opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be materially adversely affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our stock, or if our operating results do not meet their expectations, our stock price could decline.
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Moreover, if one or more of the analysts who cover us downgrades our stock or if our operating results do not meet their expectations, our stock price could decline.
−Removed: Unresolved Staff Comments
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.