Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit to the SEC under the Securities Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation and in reference only to the matter described below, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of December 31, 2023, our disclosure controls and procedures are not effective at a reasonable assurance level due to a material weakness in internal control over financial reporting.
Our management has performed additional analyses, reconciliations, and other post-closing procedures as well as assessed all key non-IT related internal control over financial reporting noting no deficiencies were identified; and therefore, we have concluded that, notwithstanding the matter described below, the consolidated financial statements are fairly presented, in all material respects. Management, including our Chief Executive Officer and Chief Financial Officer, believe that the consolidated financial statements contained in this Form 10-K fairly present, in all material respects, the financial condition, results of operations and cash flows for all periods presented in accordance with U.S. Generally Accepted Accounting Principles.
Management’s Report on Internal Control over Financial Reporting
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2023 based on the criteria set forth in Internal Control - Integrated Framework ( “ 2013 Framework ” ) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and concluded that our internal control over financial reporting was not effective as of December 31, 2023 as a result of the material weakness described below.
In connection with our assessment of the effectiveness of internal control over financial reporting, management identified certain control deficiencies in the area of our Information Technology General Control (“ITGC”) 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 that, when aggregated, arise to a material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial
106
Table of Contents
reporting, such that there is a reasonable possibility that a material misstatement of a company ’ s annual or interim financial statements will not be prevented or detected on a timely basis.
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. However, a material weakness could result in misstatements potentially impacting our account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.
The effectiveness of our internal control over financial reporting as of December 31, 2023, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included in Item 8 of this Annual Report on Form 10-K.
Remediation Plans for the Material Weakness
Management is committed to remediating the material weakness in a timely manner. Our remediation process includes, but is not limited to: (i) increasing timely reviews of IT system changes made; (ii) rationalizing access privileges for developer system users; (iii) implementing or modifying controls related to program change management and certain computer operations; and (iv) training of relevant personnel on the design and operation of any new or modified ITGCs.
These steps are subject to ongoing management review, as well as oversight by the audit committee of our board of directors. Additional or modified measures may also be required to remediate the material weakness. We will not be able to conclude that we have completely remediated the material weakness until the applicable controls are fully implemented and have operated for a sufficient period of time and management has concluded, through formal testing, that the remediated controls are operating effectively. We will continue to monitor the design and effectiveness of these and other processes, procedures, and controls and make any further changes management deems appropriate.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
107
Table of Contents
Item 9B. Other Information
(a) None.
(b) Trading Arrangements
During the quarter ended December 31, 2023, our directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated the contracts, instructions or written plans for the purchase or sale of Arlo's securities set forth in the table below:
Type of Trading Arrangement
Name and Position Action
Action Date
Rule 10b5-1 (1)
Non-Rule 10b5-1 (2)
Total Shares to be Sold Expiration Date
Matthew McRae ,
Chief Executive Officer
Adoption
November 30, 2023 (3)
X 525,594 March 7, 2025
Kurtis Binder ,
Chief Financial Officer
Adoption November 29, 2023 (3)
X 131,213 December 13, 2024
Brian Busse ,
General Counsel
Adoption November 16, 2023 (3)
X 99,134 November 15, 2024
_________________________
(1) Contract, instruction or written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.
(2) “Non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K under the Exchange Act.
(3) Adopted for personal tax planning purposes.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
108
Table of Contents
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item and not set forth below is incorporated by reference to our definitive proxy statement for our 2024 Annual Meeting of Stockholders (the “Proxy Statement”) to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2023, under the sections headed “Election of Directors,” “Continuing Directors,” “Information Regarding the Board of Directors and Corporate Governance,” and “Information About Our Executive Officers.”.
We have adopted a Code of Ethics that applies to our Chief Executive Officer and senior financial officers, including our Chief Financial Officer, as required by the SEC. The current version of our Code of Ethics can be found on our Internet site at http://www.arlo.com. Additional information required by this Item regarding our Code of Ethics is incorporated by reference to the information contained in the section captioned “Code of Business Conduct and Ethics” in our Proxy Statement.
We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of our Code of Ethics by posting such information on our website at http://www.arlo.com within four business days following the date of such amendment or waiver.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to our Proxy Statement to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2023, under the sections headed “Compensation and Human Capital Committee” and “Executive Compensation.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to our Proxy Statement to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2023, under the section headed “Security Ownership of Certain Beneficial Owners and Management.”
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference to our Proxy Statement to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2023, under the sections headed “Certain Relationships and Related Transactions” and “Information Regarding the Board of Directors and Corporate Governance.”
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference to our Proxy Statement to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2023, under the section headed “Ratification of Appointment of Independent Registered Public Accounting Firm.”
109
Table of Contents
PART IV
Item 15. Exhibit and Financial Statement Schedules
(a) The following documents are filed as part of this report:
(1) Consolidated Financial Statements.
The following consolidated financial statements of Arlo Technologies, Inc. are filed as part of this Annual Report on Form 10-K in Item 8, Financial Statements and Supplementary Data .
Page
Report of Independent Registered Public Accounting Firm ( PricewaterhouseCoopers LLP ; San Jose, California ; PCAOB ID: 238 )
73
Consolidated Balance Sheets as of December 31, 2023 and 2022
76
Consolidated Statements of Comprehensive Loss for the three years ended December 31, 2023, 2022 and 2021
77
Consolidated Statements of Stockholders’ Equity for the three years ended December 31, 2023, 2022 and 2021
78
Consolidated Statements of Cash Flows for the three years ended December 31, 2023, 2022 and 2021
79
Notes to Consolidated Financial Statements 80
(2) Financial Statement Schedules.
All financial statement schedules have been omitted as the information is not required under the related instructions or is not applicable or because the information required is already included in the consolidated financial statements or the notes to those consolidated financial statements.
(3) Exhibits.
110
Table of Contents
INDEX TO EXHIBITS
Incorporated by Reference
Exhibit Number
Exhibit Description Form Date Number Filed Herewith
3.1
Amended and Restated Certificate of Incorporation of Arlo Technologies, Inc.
8-K 8/7/2018 3.1
3.2
Amended and Restated Bylaws of Arlo Technologies, Inc.
8-K 8/7/2018 3.2
4.1
Common Stock Certificate of Arlo Technologies, Inc.
S-1/A 7/23/2018 4.1
4.2
Description of Common Stock of Arlo Technologies, Inc.
10-K 2/26/2021 4.2
10.1
Master Separation Agreement, by and between NETGEAR, Inc. and Arlo Technologies, Inc. dated as of August 2, 2018
8-K 8/7/2018 10.1
10.2
Transition Services Agreement, by and between NETGEAR, Inc. and Arlo Technologies, Inc. dated as of August 2, 2018
8-K 8/7/2018 10.2
10.3
Tax Matters Agreement, by and between NETGEAR, Inc. and Arlo Technologies, Inc. dated as of August 2, 2018
8-K 8/7/2018 10.3
10.4
Employee Matters Agreement, by and between NETGEAR, Inc. and Arlo Technologies, Inc. dated as of August 2, 2018
8-K 8/7/2018 10.4
10.5
Intellectual Property Rights Cross-License Agreement, by and between NETGEAR, Inc. and Arlo Technologies, Inc. dated as of August 2, 2018
8-K 8/7/2018 10.5
10.6
Registration Rights Agreement, by and between NETGEAR, Inc. and Arlo Technologies, Inc. dated as of August 2, 2018
8-K 8/7/2018 10.6
10.7
Office Lease, by and between LT Orchard Parkway, LLC and Arlo Technologies, Inc. dated as of June 28, 2018
S-1 7/6/2018 10.7
10.8 *
Confirmatory Employment Letter with Matthew McRae
8-K 8/7/2018 10.7
10.9 *
Confirmatory Employment Letter with Christine Gorjanc
8-K 8/7/2018 10.8
10.10 *
Confirmatory Employment Letter with Patrick Collins
8-K 8/7/2018 10.9
10.11 *
Confirmatory Employment Letter with Brian Busse
8-K 8/7/2018 10.10
10.12 *
Change in Control and Severance Agreement
8-K 8/7/2018 10.11
10.13 *
2018 Employee Stock Purchase Plan
10-K 2/22/2019 10.14
10.14 *
Indemnification Agreement for directors and executive officers
S-1/A 7/23/2018 10.16
10.15
Cooperation Agreement, dated April 30, 2019, by and among Arlo Technologies, Inc. and the VIEX Parties listed therein
8-K 5/1/2019 10.1
10.16 †
Asset Purchase Agreement, by and between Arlo Technologies, Inc. and Verisure S.à.r.l. dated as of November 4, 2019
10-K 2/28/2020 10.23
10.17 †
Supply Agreement, by and between Arlo Technologies, Inc. and Verisure S.à.r.l. dated as of November 4, 2019, as amended on June 23, 2020, November 1, 2021, and December 1, 2021
10-K 3/2/2022 10.23
10.18 *
Confirmatory Employment Letter with Gordon Mattingly
10-Q 8/6/2020 10.2
10.19 *
Form of Change in Control and Severance Agreement for non-CEO Executive Officers
10-Q 8/6/2020 10.3
10.20 *
Non-Employee Director Compensation Policy
10-K 2/26/2021 10.30
10.21
Sublease, by and between Arlo Technologies, Inc. and Vocera Communications, Inc., dated as of May 25, 2021
10-Q 8/5/2021 10.1
10.22 *
Performance Stock Unit Award under 2018 Equity Incentive Plan to Matthew McRae, dated September 9, 2021
10-Q 11/10/2021 10.2
10.23
Loan and Security Agreement, by and between Arlo Technologies, Inc. and Bank of America, N.A. dated as of October 27, 2021
10-K 3/2/2022 10.31
10.24 *
Form of Service and Cash Balance Performance-Based Restricted Stock Unit Agreement for Executive Officers
10-Q 5/11/2022 10.1
10.25 *
Form of Service and Stock Market Performance-Based Restricted Stock Unit Agreement for Executive Officers
10-Q 5/11/2022 10.2
10.26 *
Performance Stock Unit Award under 2018 Equity Incentive Plan
10-Q 5/11/2022 10.3
10.27 *
Form of Notice of Stock Option Grant (Change in Control)
10-Q 11/9/2022 10.1
10.28 *
Form of Notice of Stock Option Grant (Global)
10-Q 11/9/2022 10.2
111
Table of Contents
10.29 *
Form of Notice of Grant of Restricted Stock Units (Standard)
10-Q 11/9/2022 10.3
10.30 *
Form of Notice of Grant of NEO Service and Performance-Based Stock Option (IPO Grant)
10-Q 11/9/2022 10.4
10.31 *
Form of Notice of Grant of Restricted Stock Units (Non-Employee Director)
10-Q 11/9/2022 10.5
10.32 *
Form of Notice of Grant of Service and Performance-Based Restricted Stock Units (Cash Balance)
10-Q 11/9/2022 10.6
10.33 *
Form of Notice of Grant of Service and Performance-Based Restricted Stock Units (TSR)
10-Q 11/9/2022 10.7
10.34 *
Employment Offer Letter with Kurt Binder, dated August 23, 2022
8-K 8/26/2022 10.1
10.35 *
Arlo Technologies, Inc. 2018 Equity Incentive Plan, as amended
8-K 8/26/2022 10.2
10.36 *
Form of Retention Agreement
10-Q 11/9/2022 10.10
10.37 *
Form of Notice of Grant of Performance-Based Restricted Stock Units (Retention Agreement)
10-Q 11/9/2022 10.11
10.38 *
Form of Notice of Grant of Restricted Stock Units (Inducement Award)
10-Q 11/9/2022 10.12
10.39 *
Form of Notice of Grant of Performance-Based Restricted Stock Units (Inducement Award)
10-Q 11/9/2022 10.13
21.1
List of subsidiaries and affiliates
X
23.1
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm
X
24.1
Power of Attorney (included on the Signatures page)
X
31.1
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
X
31.2
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
X
32.1
Section 1350 Certification of Principal Executive Officer
X
32.2
Section 1350 Certification of Principal Financial Officer
X
97 †
Arlo Technologies, Inc. Clawback Policy
X
101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document X
101.SCH Inline XBRL Taxonomy Extension Schema Document X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X
104 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) X
* Indicates management contract or compensatory plan or arrangement.
† Pursuant to Item 601(b)(10) of Regulation S-K, certain portions of this exhibit have been omitted by means of marking such portions with asterisks because the Registrant has determined that the information is both not material and is the type that the Registrant treats as private or confidential.
Item 16. Form 10-K Summary
None.
112
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ARLO TECHNOLOGIES, INC.
Registrant
/s/ MATTHEW MCRAE
Matthew McRae
Chief Executive Officer
(Principal Executive Officer)
/s/ KURTIS BINDER
Kurtis Binder
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: February 29, 2024
113
Table of Contents
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Matthew McRae and Kurtis Binder, and each of them, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature Title Date
/s/ MATTHEW MCRAE Chief Executive Officer February 29, 2024
Matthew McRae (Principal Executive Officer)
/s/ KURTIS BINDER Chief Financial Officer February 29, 2024
Kurtis Binder (Principal Financial and Accounting Officer)
/s/ PRASHANT AGGARWAL Director February 29, 2024
Prashant Aggarwal
/s/ JOCELYN E. CARTER-MILLER Director February 29, 2024
Jocelyn E. Carter-Miller
/s/ RALPH E. FAISON Director February 29, 2024
Ralph E. Faison
/s/ CATRIONA FALLON Director February 29, 2024
Catriona Fallon
/s/ AMY ROTHSTEIN Director February 29, 2024
Amy Rothstein
/s/ GRADY K. SUMMERS Director February 29, 2024
Grady K. Summers
114