What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-29 compared with 2023-03-07 · 186 added, 240 removed, 834 unchanged (34% of the section changed)

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To the Board of Directors and Stockholders of Arlo Technologies, Inc.

Opinion on the Financial Statements

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Arlo Technologies, Inc.

and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of comprehensive loss, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because a material weakness in internal control over financial reporting existed as of that date as a result of information technology general control (ITGC) deficiencies related to (i) user access and segregation of duty controls that restrict user and privileged access to appropriate personnel;

(ii) program change management controls;

and (iii) certain computer operations controls.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness referred to above is described in Management's Report on Internal Control over Financial Reporting appearing under Item 9A.

We considered this material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in management's report referred to above.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and

disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accrued Sales Warranty Returns

As described in Note 2 to the consolidated financial statements, the Company’s standard obligation to direct customers for product sales generally provides for a full refund in the event that such product is found to be damaged or defective.

At the time revenue is recognized, management records an estimate of sales warranty returns to reduce revenue in the amount of the expected credit or refund to be provided to direct customers.

In determining estimates for sales returns, management analyzes certain factors, including historical sales and returns data, channel inventory levels, current economic trends, and changes in customer demand for products.

As of December 31, 2023, accrued sales warranty returns were $16.6 million.

The principal considerations for our determination that performing procedures relating to accrued sales warranty returns is a critical audit matter are (i) the significant judgment by management in developing the estimate of accrued sales warranty returns and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s estimate of sales returns considering historical sales and returns data.

As described in the “Opinions on the Financial Statements and Internal Control over Financial Reporting” section, a material weakness was identified related to the Company’s information technology general controls, which impacted this matter.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, (i) testing management’s process for developing the estimate of accrued sales warranty returns, (ii) evaluating the appropriateness of

the analysis performed by management, (iii) testing the completeness, accuracy, and relevance of data used by management in the analysis, and (iv) evaluating the reasonableness of management’s estimate of sales returns.

Evaluating management’s estimate of sales returns involved evaluating whether the estimate was reasonable considering the related historical sales and returns activity.

/s/ PricewaterhouseCoopers LLP

San Jose, California

March 7, 2023

February 29, 2024

We have served as the Company’s auditor since 2018.

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Additional paid-in capital 470,322 433,138

Accumulated other comprehensive loss ( 107 ) —

Accumulated other comprehensive income (loss)

Accumulated deficit ( 367,461 ) ( 345,425 )

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General and administrative 56,371 55,932 49,489

Restructuring charges 1,805 — —

Impairment charges — — 9,116

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Net loss per share:

Basic $ ( 0.65 ) $ ( 0.68 ) $ ( 1.30 )

Diluted $ ( 0.65 ) $ ( 0.68 ) $ ( 1.30 )

Basic and diluted $ ( 0.24 ) $ ( 0.65 ) $ ( 0.68 )

Weighted average shares used to compute net loss per share:

Basic 87,173 82,688 78,084

Diluted 87,173 82,688 78,084

Basic and diluted 92,754 87,173 82,688

Comprehensive loss:

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Net loss $ ( 22,036 ) $ ( 56,626 ) $ ( 56,029 )

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Stock-based compensation expense 47,948 48,476 38,030

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Depreciation and amortization 4,661 4,768 5,975

Allowance for credit losses and inventory reserves ( 190 ) ( 3,125 ) 964

Provision for (release of) expected credit losses and inventory reserves 279 ( 190 ) ( 3,125 )

Deferred income taxes 112 181 ( 296 )

Others 24 ( 3 ) ( 238 )

Discount accretion on investments and other ( 2,005 ) 24 ( 3 )

Changes in assets and liabilities:

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Accrued and other liabilities ( 7,959 ) 149 ( 24,158 )

Net cash used in operating activities ( 45,962 ) ( 23,197 ) ( 46,530 )

Net cash provided by (used in) operating activities 38,302 ( 45,962 ) ( 23,197 )

Cash flows from investing activities:

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Arlo Technologies, Inc.

(“Arlo”) combines an intelligent cloud infrastructure and mobile app with a variety of smart connected devices that transform the way people experience the connected lifestyle.

Our deep expertise in product design, wireless connectivity, cloud infrastructure and cutting-edge AI capabilities focuses on delivering a seamless, smart home experience for Arlo users that is easy to setup and interact with every day.

Our cloud-based platform provides users with visibility, insight and a powerful means to help protect and connect in real-time with the people and things that matter most, from any location with a Wi-Fi or a cellular connection.

(“we” or “Arlo”) is transforming the ways in which people can protect everything that matters to them with advanced home, business, and personal security services that combine a globally scaled cloud platform, advanced monitoring and analytics capabilities, and award-winning app-controlled devices to create a personalized security ecosystem.

Arlo’s deep expertise in cloud services, cutting-edge AI and computer vision analytics, wireless connectivity and intuitive user experience design delivers seamless, smart home security for Arlo users that is easy to setup and engage with every day.

Our highly secure, cloud-based platform provides users with visibility, insight and a powerful means to help protect and connect in real-time with the people and things that matter most, from any location with a Wi-Fi or a cellular connection – all rooted in a commitment to safeguard privacy for our users and their personal data.

We conduct business across three geographic regions—(i) the Americas;

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Concentrations of Risk and Other Uncertainties

Financial instruments that are potentially subject us to a concentration of credit risk mainly consist of cash equivalents, short term investments and accounts receivable.

Financial instruments that potentially subject us to a concentration of credit risk mainly consist of cash equivalents, short-term investments and accounts receivable.

We believe that there is minimal credit risk associated with the investments of cash equivalents and short-term investments due to the restrictions placed on the type of investment that can be entered into under our investment policy.

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Historically, a substantial portion of revenue has been derived from a limited number of retailers and wholesale distribution partners.

As of December 31, 2022 and 2021, four customers accounted for 28.4 %, 26.8 %, 16.6 % and 13.3 %, and three customers accounted for 35.3 %, 20.1 % and 10.1 % of the total accounts receivable, net, respectively.

As of December 31, 2023 and 2022, three customers accounted for 37.1 %, 15.2 %, and 10.2 %, and four customers accounted for 28.4 %, 26.8 %, 16.6 %, and 13.3 % of the total accounts receivable, net, respectively.

No other customers accounted for 10% or greater of the total accounts receivable, net.

During the year ended December 31, 2022, 2021 and 2020, one customer accounted for 40.1 %, two customers accounted for 30.8 %, and 13.0 %, and four customers accounted for 20.6 %, 17.3 %, 14.6 % and 12.2 % of the total revenue, respectively.

No other customers accounted for 10% or greater of the total revenue.

During the year ended December 31, 2023, 2022 and 2021, one customer accounted for 33.5 %, one customer accounted for 40.1 %, and two customers accounted for 30.8 % and 13.0 % of the total revenue, respectively.

Additionally, we receive certain of our components from a limited number of suppliers and rely on a limited number of third parties to manufacture all of our products.

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At the date of issuance of our financial statements, we are not aware of any event which could cause the severe impact in a near term.

Our products are concentrated in the connected lifestyle solution industries, which are characterized by rapid technological advances, changes in customer requirements and evolving regulatory requirements and industry standards.

Our products are concentrated in the smart security solution industries, which are characterized by rapid technological advances, changes in customer requirements and evolving regulatory requirements and industry standards.

Our success depends on management’s ability to anticipate and/or to respond quickly and adequately to such changes.

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Inventories consist of finished goods which are valued at the lower of cost or net realizable value, with cost being determined using the first-in, first-out method.

We write down inventories based on estimated excess and obsolete amounts, determined primarily based on demand forecasts, but takes into account market conditions, product development plans, product life expectancy and other factors.

We write down inventories based on estimated excess and obsolete amounts, determined primarily based on demand forecasts, but take into account market conditions, product development plans, product life expectancy and other factors.

At the point of loss recognition, a new lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase of the newly established cost basis.

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Operating Leases

Our operating leases comprised of offices, data centers, and other equipment.

Our operating leases comprise of offices, data centers, and other equipment.

We determine if an arrangement is a lease at inception.

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Revenue from all sales types is recognized at the transaction price, which is the amount we expect to be entitled to in exchange for transferring goods or providing services.

Transaction price is calculated as selling price net of variable consideration which may include estimates for future returns, sales incentives, and price protection related to current period product revenue.

Our standard obligation to our direct customers generally provides for a full refund in the event that such product is not merchantable or is found to be damaged or defective.

In determining estimates for future returns, management analyzes historical sales and returns data, channel inventory levels, current economic trends, and changes in customer demand for our products.

Transaction price is calculated as selling price net of variable consideration which may include estimates for sales returns, sales incentives, and price protection related to current period product revenue.

Our standard obligation to our direct customers generally provides for a full refund in the event that such product is found to be damaged or defective.

At the time revenue is recognized, management records an estimate of sales warranty returns to reduce revenue in the amount of the expected credit or refund to be provided to direct customers as a contra revenue.

Sales incentives and price protection are determined based on a combination of the actual amounts committed and estimated future expenditure based upon historical customary business practice.

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Products are priced at a cost plus markup as specified in the Supply Agreement.

The paid subscription services is billed based on the number of active cameras monthly and is priced at a cost plus markup specified in the Supply Agreement.

T he transaction price for products and paid subscription services is entirely variable because the consideration is dependent on the actual costs.

The paid subscription services are billed based on the number of active cameras monthly and are priced at a cost plus markup specified in the Supply Agreement.

The transaction price for products and paid subscription services is entirely variable because the consideration is dependent on the actual costs.

For products, since quantity and product types are not specified in the agreement, contracts are not deemed to exist until we receive and accept the customer purchase order (“PO”).

Each product with a valid PO is considered a single performance obligation.

NRE Arrangement - Verisure

The Supply Agreement also provides for certain development services under an SOW to Verisure (“NRE arrangement”), which Verisure pays non-refundable installments upon the commencement of agreed-upon milestones.

Non-Recurring Engineering (“NRE”) Arrangement - Verisure

The Supply Agreement also provides for certain development services under an SOW to Verisure, which Verisure pays non-refundable installments upon the commencement of agreed-upon milestones.

There is a single performance obligation as the distinct goods and services promised under the SOW are highly interdependent or interrelated inputs that produce a single combined output given the nature of such arrangements.

The output (or work-in-progress of such output) typically has no alternative use to us given the customized nature of the arrangement and we have

We determined that the most appropriate measure of progress for revenue recognition is the input method based on cost because we can reasonably estimate the total costs for the NRE, and the costs incurred reasonably reflect our efforts to satisfy the performance obligation.

The NRE costs include

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

enforceable rights given that the non-refundable milestone payments are prepayments in nature;

control for NRE development services therefore transfers over time.

The NRE costs include labor, material, overhead as well as the use of outside services.

The total estimated NRE costs are based on a combination of historical costs together with quotes from vendors for supplying parts or services towards the completion.

Adjustments to cost and profit estimates are made periodically due to changes in scope of work, hours to complete and estimated profitability, including those arising from final contract settlements.

These changes may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

labor, material, overhead as well as the use of outside services.

Any losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined.

If total NRE costs calculated upon completion in the current period are more than the estimated total costs at completion used to calculate revenue in a prior period, then the profits in the current period will be lower than if the estimated costs used in the prior period calculation were equal to the actual total costs upon completion.

Sales of hardware products regularly include warranties to end customers that cover bug fixes, minor updates such that the product continues to function according to published specifications in a dynamic environment, and phone support.

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Sales Incentives

We accrue for sales incentives offered to our customers as a marketing expense if we receive an identifiable benefit in exchange and can reasonably estimate the fair value of the identifiable benefit received;

otherwise, it is recorded as a contra revenue.

As a consequence, we record a substantial portion of the channel marketing costs as a reduction of revenue.

We record estimated reductions to revenue for sales incentives when the related revenue is recognized or ahead of customer or end customer commitment if customary business practice creates an implied expectation that such activities will occur in the future.

We recognize sales incentives offered to our customers as a marketing expense if we receive an identifiable benefit in exchange and can reasonably estimate the fair value of the identifiable benefit received;

otherwise, it is recognized as a contra revenue.

Consequently, we recognize a substantial portion of sales incentives as channel marketing costs accounted as a contra revenue.

We accrue estimated contra revenue or marketing expense for sales incentives when the related revenue is recognized or ahead of customer or end customer commitment if customary business practice creates an implied expectation that such activities will occur in the future.

Shipping and Handling Costs

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If the incremental costs of obtaining a contract, which consist of sales commissions, relate to a service recognized over a period longer than one year, costs are deferred and amortized in line with the related services over the period of benefit.

Deferred commissions are

Deferred commissions are classified as non-current based on the original amortization period of over one year.

There were no deferred commissions as of December 31, 2023 and 2022.

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

classified as non-current based on the original amortization period of over one year.

There were no deferred commissions as of December 31, 2022 and 2021.

Contract Balances

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Technological feasibility is typically reached shortly before the release of such products.

As a result, development costs that meet the criteria for capitalization were $ 1.8 million for the year ended December 31, 2022.

There was no capitalized development costs for the years ended 2021 and 2020.

As a result, development costs that meet the criteria for capitalization were $ 0.6 million and $ 1.8 million for the years ended December 31, 2023 and 2022, respectively.

There were no capitalized development costs for the year ended 2021.

We capitalize software development costs related to those software applications to be used solely to meet internal needs during the application development stage.

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Advertising Costs

Advertising costs are expensed when incurred and included in sales and marketing on the consolidated statements of comprehensive loss.

Advertising costs are expensed when incurred and included in sales and marketing in the consolidated statements of comprehensive loss.

Total advertising costs were $ 17.9 million, $ 27.1 million and $ 9.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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Eligible employees may contribute up to 15 % of compensation, subject to certain income limits, to purchase our common stock.

The terms of the plan

The terms of the plan include a look-back feature that enables employees to purchase stock semi-annually at a price equal to 85 % of the lesser of the fair market value at the beginning of the offering period or the purchase date.

The duration of each purchasing period is

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

include a look-back feature that enables employees to purchase stock semi-annually at a price equal to 85 % of the lesser of the fair market value at the beginning of the offering period or the purchase date.

The duration of each purchasing period is generally six months .

generally six months .

We determine the fair value using the Black-Scholes Model using various inputs, including its estimate of expected volatility, term, dividend yield and risk-free interest rate.

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Expected volatility of the purchase rights granted under the ESPP is based on historical volatility over the most recent period commensurate with the estimated expected term.

We recognize compensation costs for RSUs.

stock options, and ESPP on a straight-line basis over the requisite service period of the award, usually the vesting period, which is generally four years for stock options and three to four years for RSUs.

We recognize compensation costs for RSUs, stock options, and ESPP on a straight-line basis over the requisite service period of the award, usually the vesting period, which is generally four years for stock options and three to five years for RSUs.

For performance-based RSUs, compensation costs associated with individual performance milestones is recognized over the period when the performance conditions achievement become probable.

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Our assessment considers the recognition of deferred tax assets on a jurisdictional basis.

Accordingly, in assessing the future taxable income on a jurisdictional basis, we consider the

Accordingly, in assessing the future taxable income on a jurisdictional basis, we consider the effect of the transfer pricing policies on that income.

We have recorded a valuation allowance against U.S.

federal and state

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

effect of the transfer pricing policies on that income.

We have recorded a valuation allowance against U.S.

federal and state deferred tax assets and certain foreign tax attribute carryforwards since we do not anticipate to realize the benefits of these deferred tax assets.

deferred tax assets and certain foreign tax attribute carryforwards since we do not anticipate realizing the benefits of these deferred tax assets.

We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position.

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Recent Accounting Pronouncements

Emerging Growth Company Status

As an emerging growth company (“EGC”), we may, under the Jumpstart Our Business Startups Act, delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies, unless we otherwise irrevocably elect not to avail ourselves of this exemption.

We did not make such an irrevocable election and have not delayed the adoption of any applicable accounting standards.

Accounting Pronouncements Recently Adopted

In 2022, we adopted Accounting Standards Update (“ASU”) 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

The ASU intended to provide temporary optional expedients and exceptions to the U.S.

GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”).

The adoption of this guidance did not have a material impact on our financial statements and related disclosures.

There were no accounting pronouncements adopted during the year ended December 31, 2023.

Accounting Pronouncements Not Yet Effective

We have considered all recent accounting pronouncements issued, but not yet effective, and do not expect any to have a material effect on our financial statements and related disclosures.

In October 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative , which modifies the disclosure or presentation requirements of a variety of Topics in the Codification.

Among the various codification amendments, Topic 470 Debt is applicable to Arlo which requires the disclosure of amounts, terms and weighted-average interest rates of unused lines of credit.

The effective date is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirement by that date, with early adoption prohibited.

The adoption of this new standard will not have a material impact on our consolidated financial statements.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting:

Improvements to Reportable Segment Disclosures , which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

This guidance is effective for annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted.

We are currently evaluating the impact of this guidance may have on our financial statements and related disclosures.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes:

Improvements to Income Tax Disclosures , which requires on an annual basis to (1) disclose specific categories in the rate reconciliation, (2) provide additional information for reconciling items that meet a quantitative threshold, and (3) income taxes paid disaggregated by jurisdiction.

This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

We are currently evaluating the impact of this guidance may have on our financial statements and related disclosures.

ARLO TECHNOLOGIES, INC.

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The following table reflects the changes in contract balances for the years ended December 31, 2023 and 2022:

Contract Balances

Balance Sheet Location December 31, 2023 December 31, 2022

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Accounts receivable, net Accounts receivable, net $ 65,360 $ 65,960 $ ( 600 ) ( 0.9 ) %

Contract liabilities - current Deferred revenue $ 11,291 $ 29,442 $ ( 18,151 ) ( 61.7 ) %

Contract liabilities - non-current Other non-current liabilities $ 212 $ 1,344 $ ( 1,132 ) ( 84.2 ) %

For the year ended December 31, 2022, compared to the previous year, accounts receivable, net decreased, primarily driven by the decrease in revenue in the fourth quarter of 2022, current portion of deferred revenue decreased, primarily due to utilization of Verisure prepayments for product purchases, Verisure NRE installment payments and recognition of prepaid service revenue, and non-current deferred revenue decreased due to the recognition of prepaid service revenue.

Contract liabilities current

Deferred revenue $ 18,041 $ 11,291 $ 6,750 59.8 %

Contract liabilities non-current

Other non-current liabilities $ 73 $ 212 $ ( 139 ) ( 65.6 ) %

For the year ended December 31, 2023, compared to the previous year, deferred revenue increased, primarily due to deferred service revenue increase, driven by the increases in cumulative paid accounts and rates of subscriptions.

For the years ended December 31, 2023 and 2022, $ 11.3 million and $ 29.4 million, respectively, of the recognized revenue was included in the contract liability balance at the beginning of the periods.

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Performance Obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied and partially unsatisfied as of December 31, 2022

1 year 2 years Greater than 2 years Total

(In thousands)

Performance obligations $ 11,291 $ 202 $ 10 $ 11,503

During the five-year period commencing January 1, 2020, Verisure has an aggregate purchase commitment of $ 500.0 million.

As of December 31, 2022, $ 336.7 million of the purchase commitment has been fulfilled with a backlog of $ 97.9 million.

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The total estimated service revenue expected to be recognized in the future related to performance obligations that are unsatisfied and partially unsatisfied as of December 31, 2023 was $ 18.8 million, with $ 18.7 million related to a performance obligation classified as less than one year.

The performance obligation classified as greater than one year pertains to revenue deferral from prepaid services.

During the five-year period that commenced on January 1, 2020, Verisure Sàrl (“Verisure”) has an aggregate purchase commitment of $ 500.0 million.

Based on the Supply Agreement with Verisure, a purchase obligation is not deemed to exist until we receive and accept Verisure’s purchase order.

As of December 31, 2023, $ 469.8 million of the purchase commitment has been fulfilled.

As of December 31, 2023, we had a backlog of $ 52.3 million which represents performance obligations that will be recognized as revenue once fulfilled, which is expected to occur over the next twelve months .

Disaggregation of Revenue

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the Americas, EMEA, and APAC, where we conduct our business.

The following table presents revenue by geography.

The following table presents revenue disaggregated by geographic region.

Year Ended December 31,

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Total $ 491,176 $ 490,414 $ 435,137

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Balance Sheet Components

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Provision for (release of) expected credit losses ( 90 ) 86 ( 182 )

Amount recovered due to collection — — ( 276 )

Balance at the end of the period $ 333 $ 423 $ 337

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Depreciation expense pertaining to property and equipment was $ 4.7 million, $ 4.8 million and $ 5.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Long-lived assets

During the second quarter of 2021, we evaluated our real estate lease portfolio in light of the COVID-19 pandemic and the changing nature of office space use by our workforce.

This evaluation included the decision to sublease our office space in San Jose, California.

This change in the circumstances for the San Jose office space use led management to test the recoverability of the carrying amount of the asset group related to the sublease.

On May 25, 2021, the carrying amount of the asset group exceeded the anticipated undiscounted value of the sublease income over the sublease term.

Accordingly, we reviewed our operating lease right-of-use assets and other lease related assets including leasehold improvements, furniture, fixtures and equipment under the sublease asset group for impairment in accordance with Accounting Standards Codification ( “ ASC”) 360 Property, Plant, and Equipment .

As a result of the evaluation, we recorded an impairment charge of $ 9.1 million, which included $ 6.8 million associated with operating lease right-of-use assets and $ 2.3 million associated with lease related property and equipment.

The assets were written down to fair value as calculated using a discounted cash flow method (income approach) with unobservable inputs when are classified as Level 3 within the fair value hierarchy.

The fair value of the asset group was determined by utilizing projected cash flows from the sublease, discounted by a risk-adjusted discount rate of 8.0 % that reflects the level of risk associated with receiving future cash flows.

We have determined that there was no event occurred or circumstances changed during the year ended December 31, 2022 that would more likely than not reduce the fair value below the carrying amount.

No goodwill impairment was recognized in the years ended December 31, 2022, 2021 and 2020 and the goodwill as of December 31, 2022 and 2021 was $ 11.0 million .

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Other non-current assets

As of December 31,

(In thousands)

Net deferred taxes assets $ 1,384 $ 1,565

Sublease initial direct cost 777 1,471

Other 1,920 1,278

Total $ 4,081 $ 4,314

We have determined that no event occurred or circumstances changed during the year ended December 31, 2023 that would more likely than not reduce the fair value of goodwill below the carrying amount.

No goodwill impairment was recognized in the years ended December 31, 2023, 2022 and 2021.

Accrued Liabilities

4 unchanged sentences

17,058 18,656

Accrued employee compensation 15,774 12,367

Compensation 13,278 15,556

Cloud and other costs 10,985 11,154

Current operating lease liabilities 4,190 4,609

Professional services 3,703 2,505

Warranty obligations 1,174 1,330

Freight 1,050 8,086

Accrued restructuring charges 1,047 —

Other 18,701 17,218

Total $ 88,209 $ 98,855

Other non-current liabilities

As of December 31,

(In thousands)

Non-current deferred revenue $ 212 $ 1,344

Non-current income taxes payable 77 94

Other 2,660 1,001

Total $ 2,949 $ 2,439

ARLO TECHNOLOGIES, INC.

1 unchanged sentence

Fair Value Measurements

Fair Value Measurements - Recurring Basis

The following tables summarize assets measured at fair value on a recurring basis:

The following table summarizes assets measured at fair value on a recurring basis:

As of December 31

7 unchanged sentences

Treasuries (1)

79,974 29,700

Total $ 86,276 $ 62,588

3 unchanged sentences

As of December 31, 2023 and 2022, assets and liabilities measured as Level 2 fair value were not material and there were no Level 3 fair value assets or liabilities measured on a recurring basis.

Fair Value Measurements - Nonrecurring Basis

We measure the fair value of certain assets on a nonrecurring basis when events or changes in circumstances indicate that the carrying amount the asset may not be recoverable.

For the year ended December 31, 2022, we have no assets or liabilities measured on a non-recurring basis.

For the year ended December 31, 2021, in connection with the long-lived assets impairment analysis, we recorded an impairment charge of $ 9.1 million associated with our operating lease right-of-use assets and lease related property and equipment assets on a nonrecurring basis.

Refer to Note 4, Balance Sheet Components , for further information about the impairment of our long-lived assets.

Restructuring

1 unchanged sentence

This restructuring includes the reduction of headcount as well as the abandonment of certain lease contracts and the cancellation of contractual services arrangements with certain suppliers.

We expect the completion date to be in the third quarter of 2023 with the total estimated restructuring charges of $ 1.9 million.

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As of December 31, 2023, we have substantially incurred all costs pertaining to restructuring activities, with related cash outflows extending until the fourth quarter of 2024.

The restructuring liabilities are included in accrued liabilities in the consolidated balance sheets.

The restructuring charges are included in others in the consolidated statements of comprehensive loss.

Restructuring activities for the year ended December 31, 2023 are as follows:

1 unchanged sentence

(In thousands)

Balance at the beginning of the period $ — $ — $ — $ —

Balance as of December 31, 2021

$ — $ — $ — $ —

Restructuring charges 1,805 798 928 79

1 unchanged sentence

Non-cash and other adjustments 48 — 63 ( 15 )

Balance at the end of the period $ 1,265 $ 219 $ 991 $ 55

Balance as of December 31, 2022

$ 1,265 $ 219 $ 991 $ 55

Restructuring charges 692 564 117 11

Cash payments ( 1,479 ) ( 694 ) ( 745 ) ( 40 )

Non-cash and other adjustments ( 26 ) — — ( 26 )

Balance as of December 31, 2023

$ 452 $ 89 $ 363 $ —

Total costs incurred inception to date $ 2,746 $ 1,609 $ 1,073 $ 64

Total expected expense to be incurred as of December 31, 2022 $ 137 $ 137 $ — $ —

Revolving Credit Facility

On October 27, 2021, we entered into a Loan and Security Agreement (the “Credit Agreement”) with Bank of America, N.A., a national banking association, as lender (the “Lender”).

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Credit Agreement provides for a three-year revolving credit facility (the “Credit Facility”) that matures on October 27, 2024.

5 unchanged sentences

Based on certain terms and conditions including eligible accounts receivable as of December 31, 2023, we had unused borrowing capacity of $ 13.9 million.

The obligations under the Credit Agreement are secured by substantially all of our domestic working capital assets, including accounts receivable, cash and cash equivalents, inventory, and other assets to the extent related to such working capital assets.

Our obligations under the Credit Agreement are secured by substantially all of our domestic working capital assets, including accounts receivable, cash and cash equivalents, inventory, and other assets to the extent related to such working capital assets.

At our option, borrowings under the Credit Agreement will bear interest at a floating rate equal to:

3 unchanged sentences

The Credit Agreement also contains financial covenants that require us to (a) until we achieve a fixed charge coverage ratio of at least 1.00 to 1.00 for two consecutive quarters, maintain minimum liquidity of not less than $ 20.0 million at all times and (b) thereafter, if the Financial Covenant Trigger Period (as defined in the Credit Agreement) is in effect, maintain a fixed charge coverage ratio, tested quarterly on a trailing twelve month basis, of at least 1.00 to 1.00 at any time.

As of December 31, 2022, we are in compliance with all the covenants of the Credit Agreement.

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As of December 31, 2023, we were in compliance with all the covenants of the Credit Agreement.

If an event of default under the Credit Agreement occurs, then the Lender may cease making advances under the Credit Agreement and declare any outstanding obligations under the Credit Agreement to be immediately due and payable.

3 unchanged sentences

Operating Leases

Our operating leases comprise offices, equipment, data centers, and distribution centers, with various expiration dates through June 2029.

Our operating lease obligations mostly include offices, equipment, data centers, and distribution centers, with various expiration dates through June 2029.

Certain lease agreements include options to renew or terminate the lease, which are not reasonably certain to be exercised and therefore are not factored into our determination of lease payments.

3 unchanged sentences

for approximately 78,000 rentable square feet of office space located at 3030 Orchard Parkway in San Jose, California.

The initial term of the sublease commenced on February 1, 2022, and will expire on June 30, 2029, unless earlier terminated in accordance with the sublease.

The sublease income was $ 2.0 million and $ 0.5 million as a reduction of lease expense for the years ended December 31, 2022 and 2021, respectively.

Supplemental cash flow information related to operating leases was as follows:

The initial term of the

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

sublease commenced on February 1, 2022, and will expire on June 30, 2029, unless earlier terminated in accordance with the sublease.

The sublease income was $ 2.0 million, $ 2.0 million, and $ 0.5 million which is recorded as a reduction of lease expense for the years ended December 31, 2023, 2022, and 2021, respectively.

Supplemental cash flow information related to operating leases is as follows:

Year Ended December 31,

9 unchanged sentences

Weighted average discount rate 5.74 % 5.69 %

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The future minimum undiscounted lease payments under operating leases and future non-cancelable rent payments from our subtenants for each of the next five years and thereafter as of December 31, 2023 were as follows:

15 unchanged sentences

In connection with the lease agreement for our office space located in San Jose, California, we executed a letter of credit with the landlord as the beneficiary.

As of December 31, 2022, we have approximately $ 3.6 million of unused letters of credit outstanding, of which $ 3.1 million pertains to the lease arrangement in San Jose, California.

As of December 31, 2023, we had $ 3.6 million of unused letters of credit outstanding, of which $ 3.1 million pertains to the lease arrangement in San Jose, California.

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Purchase Obligations

2 unchanged sentences

Orders are non-cancelable within 30 days prior to the expected shipment date.

As of December 31, 2022, we have approximately $ 44.3 million in non-cancelable purchase commitments with suppliers.

As of December 31, 2022, a further $ 14.8 million of purchase orders beyond contractual termination periods have been issued to supply chain partners in anticipation of demand requirements.

As of December 31, 2023, we had $ 40.2 million in non-cancelable purchase commitments with suppliers.

As of December 31, 2023, an additional $ 31.4 million of purchase orders beyond contractual termination periods have been issued to supply chain partners in anticipation of demand requirements.

Consequently, we may incur expenses for the materials and components, such as chipsets already purchased by the supplier to fulfill our orders if the purchase order is cancelled.

1 unchanged sentence

As of December 31, 2023, the loss liability from committed purchases was not material.

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Warranty Obligations

17 unchanged sentences

The actual liability in any such matters may be materially different from our estimates, which could result in the need to adjust the liability and record additional expenses.

Securities Class Action Lawsuits and Derivative Suit

On December 11, 2018, purported stockholders of Arlo Technologies, Inc.

filed six putative securities class action complaints in the Superior Court of California, County of Santa Clara (the “ State Action”), and one complaint in the U.S.

District Court for the Northern District of California (the “ Federal Action”) against us and certain of its executives and directors.

The plaintiffs in the State Action allege that we failed to adequately disclose quality control problems and adverse sales trends ahead of our initial public offering (the “ IPO”), violating the Securities Act of 1933, as amended (the “ Securities Act”).

The complaint seeks unspecified monetary damages and other relief on behalf of investors who purchased Company common stock issued pursuant and/or traceable to the IPO.

In the Federal Action, the court appointed a shareholder named Matis Nayman as lead plaintiff.

Lead plaintiff alleged violations of the Securities Act and the Securities Exchange Act of 1934, as amended, based on alleged materially false and misleading statements about our sales trends and products.

In the amended complaint, lead plaintiff sought to represent a class of persons who purchased or otherwise acquired our common stock (i) during the period between August 3, 2018 through December 3, 2018 and/or (ii) pursuant to or traceable to the IPO.

Lead plaintiff sought class certification, an award of unspecified damages, an award of costs and expenses, including attorneys’ fees, and other further relief as the court may deem just and proper.

On August 6, 2019, defendants filed a motion to dismiss.

The federal court granted that motion, and lead plaintiff filed an amended complaint.

On June 12, 2020, lead plaintiff filed an unopposed motion for preliminary approval of a class action settlement for $ 1.25 million, which was also the amount that we had accrued for loss contingency.

In October 2020, we made a $ 1.25 million payment to an escrow account administered by the court and plaintiff’s counsel (the “Settlement

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Settlement Fund was deemed to be in the custody of the court and remained subject to the jurisdiction of the court until such time as the Settlement Fund was distributed pursuant to the settlement agreement and/or further order of the court.

On February 5, 2021, lead plaintiff filed a motion for final approval of the settlement.

In advance of the final approval hearing, three of the named plaintiffs in the State Action requested exclusion from the settlement.

The court held a final approval hearing on March 11, 2021, and, on March 25, 2021, entered an order and final judgment approving the settlement and, among other things, dismissed with prejudice all claims of lead plaintiff and the Settlement Class (as defined in the settlement agreement).

The Federal Action is now closed.

In the State Action, on May 5, 2021, the court held a status conference and instructed plaintiffs Perros, Patel, and Pham (“Plaintiffs”), who were the only Arlo stockholders to opt out of the federal settlement, to file an amended complaint by June 4, 2021.

Plaintiffs filed their amended complaint, asserting their individual Securities Act claims, but also purporting to represent a new class of Arlo stockholders who purchased Arlo shares between December 3, 2018 and February 22, 2019.

Securities Class Action Lawsuits and Derivative Suit

On December 11, 2018, purported stockholders of Arlo filed six putative securities class action complaints in the Superior Court of California, County of Santa Clara (the “State Action”), against us and certain of our executives and directors.

The plaintiffs in the State Action alleged that we failed to adequately disclose quality control problems and adverse sales trends ahead of our initial public offering (the “IPO”), violating the Securities Act of 1933, as amended (the “Securities Act”).

The complaint sought unspecified monetary damages and other relief on behalf of investors who purchased Company common stock issued pursuant and/or traceable to the IPO.

On May 5, 2021, the court instructed plaintiffs Perros, Patel, and Pham (“Plaintiffs”) to file an amended complaint by June 4, 2021.

Plaintiffs filed their amended complaint, asserting their individual Securities Act claims, but also purporting to represent a new class of Arlo stockholders.

On June 21, 2021, the Arlo defendants filed a motion to dismiss the State Action (for forum non conveniens) based on the federal forum provision in Arlo’s certificate of incorporation.

Plaintiffs opposed on July 28, 2021, and the Arlo defendants replied on August 13, 2021.

On September 9, 2021, the court issued an order granting the Arlo defendants’ forum non conveniens motion, and on September 17, 2021, the court issued a final judgment dismissing the State Action in its entirety.

On November 16, 2021, Plaintiffs filed a Notice of Appeal.

The appeal is pending before the California Court of Appeal, Sixth Appellate District.

Plaintiffs-Appellants filed their opening brief on May 20, 2022.

Defendants-Respondents filed their responding brief on August 18, 2022, and Plaintiffs-Appellants filed their reply brief on September 7, 2022.

The oral arguments on the appeal originally set for February 16, 2023 were postponed and have not yet been rescheduled.

Arlo Technologies, Inc., et al.

In addition to the State Action and the Federal Action, a purported stockholder named Leonard Pinto filed a tagalong derivative action on June 13, 2019 in the U.S.

District Court for the Northern District of California, captioned Pinto v.

Arlo Technologies, Inc.

19-CV-03354 (the “Derivative Action”).

The Derivative Action is brought on behalf of us against the majority of our current directors.

The complaint is based on the same alleged misconduct as the securities class actions but asserts claims for breach of fiduciary duty, waste of corporate assets, and violation of the Securities Exchange Act of 1934, as amended.

On August 20, 2019, the court stayed the Derivative Action in deference to the Federal Action.

On April 8, 2021, because it had granted final approval of the settlement in the Federal Action, the court lifted the stay in the Derivative Action and asked the parties to file a joint status report by April 22, 2021.

In their status report, the parties stipulated to a schedule for plaintiff to file an amended complaint and for the parties to brief a motion to dismiss.

Plaintiff filed his amended complaint on May 24, 2021.

Defendants moved to dismiss the amended complaint on July 9, 2021.

On August 23, 2021, plaintiff filed a second amended complaint.

Defendants moved to dismiss the second amended complaint on December 17, 2021.

Plaintiff filed his opposition on January 31, 2022, and defendants filed their reply on March 2, 2022.

On July 28, 2022, the Court heard defendants’ motion to dismiss.

At the hearing, the Court informed the parties that it was inclined to grant defendants’ motion to dismiss for lack of jurisdiction, and the Court’s corresponding written order dismissing the case followed on August 8, 2022.

Skybell Technologies, Inc.

Arlo Technologies, Inc.

On December 18, 2020, Skybell Technologies, Inc., SB IP Holdings, LLC, and Eyetalk365, LLC (collectively, “Skybell”) filed a Section 337 complaint against us, Vivint Smart Home, Inc.

and SimpliSafe, Inc.

(collectively “Respondents”) at the U.S.

International Trade Commission (“ITC”).

The action alleges that our cameras and video doorbell cameras infringe certain patents (the “Asserted Patents”).

On September 15, 2021, the Administrative Law Judge (“ALJ”) hearing the case at the ITC issued an Initial Determination (“ID”) ruling that all the Asserted Patents are invalid.

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Skybell appealed the ID by submitting its Petition for Review to the ITC on September 27, 2021, and the Respondents submitted their Response to the Petition to Review on October 4, 2021.

On November 10, 2021, The ITC affirmed the ALJ’s ruling and did not grant any review of the ID, meaning that there is no trial on the ITC docket since there are no valid patents remaining, and the case is concluded at the ITC level.

On January 9, 2022, Skybell filed its Notice of Appeal to the Federal Circuit to appeal the ITC’s rulings invalidating the Asserted Patents.

On June 23, 2022, Skybell and the Respondents stipulated to the dismissal of the Skybell’s appeal, and on June 27, 2022, the Federal Circuit correspondingly dismissed the appeal.

There was no material financial impact to us resulting from this litigation matter.

The appeal occurred before the California Court of Appeal, Sixth Appellate District.

On May 5, 2023, the Court of Appeal affirmed the trial court’s dismissal of the State Action.

On June 14, 2023, Plaintiffs filed a petition for review in the Supreme Court of California.

On July 19, 2023, the Supreme Court of California denied Plaintiffs’ petition for review and closed the case.

The deadline for Plaintiffs to file a petition for writ of certiorari to the Supreme Court of the United States appealing the dismissal of the State Action was October 17, 2023.

To our knowledge, no such petition was filed, and the State Action has terminated.

Indemnifications

In the ordinary course of business, we may provide indemnification of varying scope and terms to customers, distributors, resellers, vendors, lessors, business partners, and other parties with respect to certain matters including, but not limited to, losses arising from breach of such agreements or from intellectual property infringement claims made by third parties.

In addition, we have entered into indemnification agreements with members of its board of directors and certain of its executive officers that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers.

In addition, we have entered into indemnification agreements with members of our board of directors and certain of our executive officers that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers.

The maximum potential amount of future payments we could be required to make under these indemnification agreements is, in many cases, unlimited.

As of December 31, 2022 and 2021, there has not incurred any material costs as a result of such indemnifications and we are not currently aware of any indemnification claims.

As of December 31, 2023 and 2022, we have not incurred any material costs as a result of such indemnifications and we are not currently aware of any indemnification claims.

Employee Benefit Plans

2 unchanged sentences

Award vesting periods for the 2018 Plan are generally three to four years .

As of December 31, 2022, approximately 4.2 million shares are available for future grants.

As of December 31, 2023, 3.5 million shares were available for future grants.

Options may be granted for periods of up to 10 years or such shorter term as may be provided in the agreement and at prices no less than 100 % of the fair market value of Arlo’s common stock on the date of grant.

Options granted under the 2018 Plan generally vest over four years , the first tranche at the end of 12 months and the remaining shares underlying the option vesting monthly over the remaining three years .

During the years ended December 31, 2022 and 2021, the Compensation Committee of the Board of Directors (the “Committee”) unanimously approved amendments to the 2018 Plan to, among other things, reserve an additional 3,000,000 shares and 1,500,000 , respectively, of our common stock to be used exclusively for grants of awards to individuals who were not previously employees or non-employee directors (or following a bona fide period of non-employment), as an inducement material to the individual’s entry into employment with us within the meaning of Rule 303A.08 of the New York Stock Exchange (the “NYSE”) Listed Company Manual (“Rule 303A.08”).

During the year ended December 31, 2022, the Compensation and Human Capital Committee of the Board of Directors (the “Committee”) unanimously approved amendments to the 2018 Plan to, among other things, reserve an additional 3,000,000 shares of our common stock to be used exclusively for grants of awards to individuals who were not previously employees or non-employee directors (or following a bona fide period of non-employment), as an inducement material to the individual’s entry into employment with us within the meaning of Rule 303A.08 of the New York Stock Exchange (the “NYSE”) Listed Company Manual (“Rule 303A.08”).

The 2018 Plan was amended by the Committee without stockholder approval pursuant to Rule 303A.08.

On January 21, 2022, we registered an aggregate of up to 4,222,270 shares of common stock on a Registration Statement on Form S-8, including 3,377,816 shares issuable pursuant to the 2018 Plan that were automatically added to the shares authorized for issuance under the 2018 Plan and 844,454 shares issuable pursuant to the Employee Stock Purchase Plan (“ESPP”) that were automatically added to the shares authorized for issuance on January 1, 2022, both pursuant to an “evergreen” provision contained in the respective plans.

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

On January 19, 2024, we registered an aggregate of up to 4,759,901 shares of common stock on a Registration Statement on Form S-8, including 3,807,921 shares issuable pursuant to the 2018 Plan that were automatically added to the shares authorized for issuance under the 2018 Plan and 951,980 shares issuable pursuant to the Employee Stock Purchase Plan (“ESPP”) that were automatically added to the shares authorized for issuance on January 1, 2024, both pursuant to an “evergreen” provision contained in the respective plans.

The following table sets forth the available shares for grants as of December 31, 2023:

1 unchanged sentence

(In thousands)

Shares available for grants as of December 31, 2021

Shares available for grants at the beginning of the period 4,213

Additional authorized shares 3,555

2 unchanged sentences

Shares traded for taxes 3,518

Shares available for grants as of December 31, 2022

Shares available for grants at the end of the period 3,516

Employee Stock Purchase Plan

We sponsor the ESPP to eligible employees.

As of December 31, 2022, approximately 1.6 million shares were available for issuance under the ESPP.

As of December 31, 2023, 1.8 million shares were available for issuance under the ESPP.

The following table sets forth the weighted average assumptions used to estimate the fair value of purchase rights granted under the ESPP.

As of December 31,

2023 2022 2021

2 unchanged sentences

Expected volatility 64.0 % 69.2 % 63.8 %

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Option Activity

We granted no options during the years ended December 31, 2023, 2022, and 2021.

Stock option activity during the year ended of December 31, 2023 was as follows:

3 unchanged sentences

Outstanding as of December 31, 2022 2,082 $ 10.24

2,574 $ 10.55

Exercised ( 974 ) 7.76

2 unchanged sentences

Outstanding as of December 31, 2023 1,096 $ 12.48 3.48 $ 483

Vested and expected to vest 2,082 $ 10.24 3.82 $ —

Vested and expected to vest as of December 31, 2023 1,096 $ 12.48 3.48 $ 483

Exercisable Options as of December 31, 2023 1,096 $ 12.48 3.48 $ 483

5 unchanged sentences

Total fair value of options vested $ — $ 2.3 $ 2.6

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

RSU activity, excluding PSU activity, during the year ended of December 31, 2023 was as follows:

3 unchanged sentences

Outstanding as of December 31, 2022

10,080 $ 5.73

Granted 6,331 5.28

12 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

During the years ended December 31, 2022 and 2021, our executive officers were granted performance-based awards with vesting occurring at the end of a three or five-year period if performance conditions or market conditions are met.

Our executive officers and other senior employees have been granted performance-based awards with vesting occurring at the end of a three or five-year period if performance conditions or market conditions are met.

The number of units earned and eligible to vest are determined based on the achievement of various performance conditions or market conditions, including the cumulative paid accounts targets, stock price, cash balances at reporting period, and the recipients’ continued services.

11 unchanged sentences

Year Ended December 31,

2022 2021 2020

(In millions, except per share data)

14 unchanged sentences

Total $ 47,948 $ 48,476 $ 38,030

As of December 31, 2022, there was no unrecognized compensation cost related to stock options.

As of December 31, 2023, all outstanding options were fully vested, therefore, there was no unrecognized compensation cost related to stock options.

Approximately $ 58.6 million of unrecognized compensation cost related to unvested RSUs and PSUs is expected to be recognized over a weighted-average period of 1.7 years as of December 31, 2023.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

During the years ended December 31, 2023, 2022, and 2021, we settled executive and employee bonuses by granting and issuing restricted stock units (non-cash financing activities) that vested immediately amounting to $ 13.5 million, $ 8.7 million, and $ 15.1 million, respectively.

We have a 401(K) Plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code.

30 unchanged sentences

Impact of international operations 3.1 % 1.3 % 1.3 %

FDII deduction

1.8 % — % — %

taxes on foreign entities — % — % ( 3.9 ) %

78 unchanged sentences

We are subject to income tax examinations by taxing authorities globally for years ending or after December 31, 2018.

As a result of the spin-off of Arlo from NETGEAR in 2018, Arlo filed the consolidated U.S.

federal and various combined state income tax returns with NETGEAR for the calendar year ended December 31, 2018.

The IRS has examined NETGEAR’s U.S.

federal income tax return for the calendar year of 2018 and such examination was closed in 2022 without any adjustments.

In addition, the California Franchise Tax Board began an examination of NETGEAR’s 2018 tax year.

IRS audit of the consolidated returns of NETGEAR for which Arlo was a part of in 2018, had been closed with no findings, while the 2018 California Franchise Tax Board and 2016-2018 Texas Franchise tax audits are still in progress.

Our estimate of the potential outcome of any uncertain tax positions is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time.

7 unchanged sentences

Net loss $ ( 22,036 ) $ ( 56,626 ) $ ( 56,029 )

Weighted average common shares - basic 87,173 82,688 78,084

Potentially dilutive common shares — — —

Weighted average common shares - dilutive 87,173 82,688 78,084

Basic net loss per share $ ( 0.65 ) $ ( 0.68 ) $ ( 1.30 )

Diluted net loss per share $ ( 0.65 ) $ ( 0.68 ) $ ( 1.30 )

Weighted average common shares - basic and diluted 92,754 87,173 82,688

Basic and diluted net loss per share $ ( 0.24 ) $ ( 0.65 ) $ ( 0.68 )

Anti-dilutive employee stock-based awards, excluded 1,776 5,451 5,041

8 unchanged sentences

Sales and usage-based taxes are excluded from revenue.

For reporting purposes, revenue by geography is generally based upon the ship-to location of the customer for device sales and device location for service sales.

The following table presents revenue by geography.

For comparative purposes, amounts in prior periods have been recast.

For reporting purposes, revenue by geographic area is generally based upon the bill-to location of the customer.

The following table presents revenue by geographic area.

Year Ended December 31,

9 unchanged sentences

Our long-lived assets are based on the physical location of the assets.

The following table presents long-lived assets by geography.

For comparative purposes, amounts in prior periods have been recast.

The following table presents long-lived assets by geographic area.

As of December 31,

5 unchanged sentences

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.

What changed 10-K

Item 8. Financial Statements and Supplementary Data