Arlo Technologies, Inc. 10-K

Item 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Arlo Technologies, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheet of Arlo Technologies, Inc. and subsidiaries (the "Company") as of December 31, 2024, the related consolidated statements of comprehensive loss, stockholders' equity, and cash flows, for the year ended December 31, 2024, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2024, 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 financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. Basis for Opinions The Company's management is responsible for these 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 the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion 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 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 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 audit of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. 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 (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the 72 Table of Contents transactions and dispositions of the assets of the company; (2) 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 (3) 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 Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the 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 Returns – Refer to Notes 3 and 4 to the Financial Statements Critical Audit Matter Description The Company has a recorded accrual for estimated sales returns as of December 31, 2024. Revenue is recognized at a transaction price that is calculated as the selling price net of variable consideration which includes estimates for sales returns related to current period product revenue. Sales returns are estimated by analyzing certain factors, including historical sales and returns data, channel inventory levels, current economic trends, and changes in customer demand for the Company’s products. We identified the estimation of the sales return accrual as a critical audit matter. There was a high degree of auditor judgment required to evaluate the impacts of current and historical trends of sales and returns and their impacts on estimated future return levels. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the accrued sales returns included the following, among others: ◦ We tested the effectiveness of controls over management’s calculation of the accrual for estimated sales returns, including management’s control over the estimate of the impacts of historical sales and returns activity on current year estimates. ◦ We tested the completeness and accuracy of the underlying data used in the calculation. For a selection of historical returns we evaluated the reasonableness of trends in return rates compared to sales activity ◦ We evaluated management's ability to accurately estimate returns by comparing actual returns to prior period estimates ◦ Developed an independent estimate of the sales return accrual and compared our estimate to management’s estimate. Our independent estimate included development of a trend of historical sales and return rates using management’s data. This trend was used to develop an expected estimate of the accrual when applied to current sales activity. /s/ Deloitte & Touche LLP Costa Mesa, California February 27, 2025 We have served as the Company’s auditor since 2024. 73 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Arlo Technologies, Inc. Opinion on the Financial Statements We have audited the consolidated balance sheet of Arlo Technologies, Inc and its subsidiaries (the “Company”) as of December 31, 2023, and the related consolidated statements of comprehensive loss, of stockholders’ equity and of cash flows for each of the two 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, 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023 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 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. 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. 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. /s/ PricewaterhouseCoopers LLP San Jose, California February 29, 2024, except for the change in the manner in which the Company accounts for segments discussed in Note 2 to the consolidated financial statements, as to which the date is February 27, 2025 We served as the Company’s auditor from 2018 to 2024. 74 Table of Contents ARLO TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS As of December 31, 2024 2023 (In thousands, except share and per share data) ASSETS Current assets: Cash and cash equivalents $ 82,032 $ 56,522 Short-term investments 69,419 79,974 Accounts receivable, net 57,332 65,360 Inventories 40,633 38,408 Prepaid expenses and other current assets 13,190 10,271 Total current assets 262,606 250,535 Property and equipment, net 4,765 4,761 Operating lease right-of-use assets, net 15,698 11,450 Goodwill 11,038 11,038 Restricted cash — 4,131 Other non-current assets 4,293 3,623 Total assets $ 298,400 $ 285,538 LIABILITIES AND STOCKHOLDERS ’ EQUITY Current liabilities: Accounts payable $ 63,784 $ 55,201 Deferred revenue 27,248 18,041 Accrued liabilities 85,730 88,209 Total current liabilities 176,762 161,451 Non-current operating lease liabilities 18,357 17,021 Other non-current liabilities 2,372 3,790 Total liabilities 197,491 182,262 Commitments and contingencies (Note 8) Stockholders’ Equity: Preferred stock: $ 0.001 par value; 50,000,000 shares authorized; none issued or outstanding — — Common stock: $ 0.001 par value; 500,000,000 shares authorized; shares issued and outstanding: 100,885,158 at December 31, 2024 and 95,380,281 at December 31, 2023 101 95 Additional paid-in capital 498,739 470,322 Accumulated other comprehensive income 34 320 Accumulated deficit ( 397,965 ) ( 367,461 ) Total stockholders’ equity 100,909 103,276 Total liabilities and stockholders’ equity $ 298,400 $ 285,538 The accompanying notes are an integral part of these consolidated financial statements. 75 Table of Contents ARLO TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS Year Ended December 31, 2024 2023 2022 (In thousands, except per share data) Revenue: Products $ 267,888 $ 289,938 $ 353,935 Services 242,998 201,238 136,479 Total revenue 510,886 491,176 490,414 Cost of revenue: Products 268,769 270,663 308,692 Services 54,613 52,950 45,687 Total cost of revenue 323,382 323,613 354,379 Gross profit 187,504 167,563 136,035 Operating expenses: Research and development 73,183 68,647 64,709 Sales and marketing 73,723 66,141 70,081 General and administrative 72,134 56,371 55,932 Others 3,356 1,307 2,192 Total operating expenses 222,396 192,466 192,914 Loss from operations ( 34,892 ) ( 24,903 ) ( 56,879 ) Interest income, net 5,584 3,935 926 Other income (expense), net ( 104 ) 107 302 Loss before income taxes ( 29,412 ) ( 20,861 ) ( 55,651 ) Provision for income taxes 1,092 1,175 975 Net loss $ ( 30,504 ) $ ( 22,036 ) $ ( 56,626 ) Net loss per share: Basic and diluted $ ( 0.31 ) $ ( 0.24 ) $ ( 0.65 ) Weighted average shares used to compute net loss per share: Basic and diluted 98,630 92,754 87,173 Comprehensive loss: Net loss $ ( 30,504 ) $ ( 22,036 ) $ ( 56,626 ) Other comprehensive income (loss), net of tax ( 286 ) 427 ( 107 ) Total comprehensive loss $ ( 30,790 ) $ ( 21,609 ) $ ( 56,733 ) The accompanying notes are an integral part of these consolidated financial statements. 76 Table of Contents ARLO TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Year Ended December 31, 2024 2023 2022 (In thousands) Total stockholders' equity, beginning balances $ 103,276 $ 87,695 $ 112,652 Common stock: Beginning balances $ 95 $ 89 $ 84 Issuance of common stock under stock-based compensation plans 9 9 6 Issuance of common stock under employee stock purchase plan — — 2 Repurchase of common stock — — — Restricted stock unit withholdings ( 3 ) ( 3 ) ( 3 ) Ending balances $ 101 $ 95 $ 89 Additional paid-in capital: Beginning balances $ 470,322 $ 433,138 $ 401,367 Stock-based compensation expense 56,596 36,971 36,985 Settlement of liability classified restricted stock units 12,594 13,480 8,733 Issuance of common stock under stock-based compensation plans 5,413 7,554 1,419 Issuance of common stock under employee stock purchase plan 2,943 2,811 2,833 Repurchase of common stock ( 4,421 ) — — Restricted stock unit withholdings ( 44,708 ) ( 23,632 ) ( 18,199 ) Ending balances $ 498,739 $ 470,322 $ 433,138 Accumulated deficit: Beginning balances $ ( 367,461 ) $ ( 345,425 ) $ ( 288,799 ) Net loss ( 30,504 ) ( 22,036 ) ( 56,626 ) Ending balances $ ( 397,965 ) $ ( 367,461 ) $ ( 345,425 ) Accumulated other comprehensive income (loss): Beginning balances $ 320 $ ( 107 ) $ — Other comprehensive income (loss), net of tax ( 286 ) 427 ( 107 ) Ending balances $ 34 $ 320 $ ( 107 ) Total stockholders' equity, ending balances $ 100,909 $ 103,276 $ 87,695 Common stock shares: Beginning balances 95,380 88,887 84,453 Issuance of common stock under stock-based compensation plans 9,140 9,390 6,155 Issuance of common stock under employee stock purchase plan 365 621 609 Repurchase of common stock ( 379 ) — — Restricted stock unit withholdings ( 3,621 ) ( 3,518 ) ( 2,330 ) Ending balances 100,885 95,380 88,887 The accompanying notes are an integral part of these consolidated financial statements. 77 Table of Contents ARLO TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2024 2023 2022 (In thousands) Cash flows from operating activities: Net loss $ ( 30,504 ) $ ( 22,036 ) $ ( 56,626 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Stock-based compensation expense 68,657 47,948 48,476 Depreciation and amortization 3,200 4,661 4,768 Allowance for credit losses and non-cash changes to reserves 2,085 279 ( 190 ) Deferred income taxes ( 13 ) 112 181 Discount accretion on investments and other ( 3,259 ) ( 2,005 ) 24 Changes in assets and liabilities: Accounts receivable, net 8,228 690 13,517 Inventories ( 4,510 ) 7,777 ( 7,887 ) Prepaid expenses and other assets ( 3,577 ) ( 1,498 ) 3,427 Accounts payable 8,289 3,723 ( 32,520 ) Deferred revenue 9,437 6,610 ( 19,281 ) Accrued and other liabilities ( 6,727 ) ( 7,959 ) 149 Net cash provided by (used in) operating activities 51,306 38,302 ( 45,962 ) Cash flows from investing activities: Purchases of property and equipment ( 2,688 ) ( 2,847 ) ( 2,010 ) Purchases of short-term investments ( 205,068 ) ( 149,870 ) ( 69,305 ) Proceeds from maturities of short-term investments 218,596 102,031 39,542 Net cash provided by (used in) investing activities 10,840 ( 50,686 ) ( 31,773 ) Cash flows from financing activities: Proceeds related to employee benefit plans 8,365 8,493 4,260 Repurchase of common stock ( 4,421 ) — — Restricted stock unit withholdings ( 44,711 ) ( 23,635 ) ( 18,202 ) Net cash used in financing activities ( 40,767 ) ( 15,142 ) ( 13,942 ) Net increase (decrease) in cash, cash equivalents, and restricted cash 21,379 ( 27,526 ) ( 91,677 ) Cash, cash equivalents, and restricted cash, at beginning of period 60,653 88,179 179,856 Cash, cash equivalents, and restricted cash, at end of period $ 82,032 $ 60,653 $ 88,179 Reconciliation of cash, cash equivalents, and restricted cash to Consolidated Balance Sheets Cash and cash equivalents $ 82,032 $ 56,522 $ 84,024 Restricted cash — 4,131 4,155 Total cash, cash equivalents, and restricted cash $ 82,032 $ 60,653 $ 88,179 Supplemental cash flow information: Cash paid for income taxes, net $ 1,156 $ 1,196 $ 415 Non-cash investing activities: Purchases of property and equipment included in accounts payable and accrued liabilities $ 708 $ 189 $ 946 The accompanying notes are an integral part of these consolidated financial statements. 78 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Description of Business and Basis of Presentation Description of Business Arlo Technologies, Inc. (“we” or “Arlo”) is transforming the ways in which people can protect everything that matters to them with home, business, and personal security services that combine a globally scaled cloud platform, monitoring and analytics capabilities, and award-winning app-controlled devices to create a personalized security ecosystem. Arlo’s experience in cloud services, AI and computer vision analytics, wireless connectivity and intuitive user experience design delivers seamless, smart home security for Arlo users that can be setup by the customers and engaged 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 conduct business across three geographic regions—(i) the Americas; (ii) Europe, Middle-East and Africa (“EMEA”); and (iii) Asia Pacific (“APAC”)—and primarily generate revenue by selling devices through retail, wholesale distribution, wireless carrier channels, security solution providers, Arlo’s direct to consumer store and paid subscription services. Our corporate headquarters is located in Carlsbad, California with other satellite offices across North America and various other global locations. Basis of Presentation We prepare our consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of Arlo and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated. Fiscal Periods Our fiscal year begins on January 1 of the year stated and ends on December 31 of the same year. We report the results on a fiscal quarter basis rather than on a calendar quarter basis. Under the fiscal quarter basis, each of the first three fiscal quarters ends on the Sunday closest to the calendar quarter end, with the fourth quarter ending on December 31. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Management bases its estimates on various assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates and operating results for the year ended December 31, 2024 are not necessarily indicative of the results that may be expected for any future period. Note 2. Summary of Significant Accounting Policies Cash and Cash Equivalents We invest excess cash primarily in government securities and money market funds and consider all highly liquid investments with an original maturity or a remaining maturity at the time of purchase of three months or less to be cash equivalents. We deposit cash and cash equivalents with high credit quality financial institutions. 79 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Restricted Cash We maintain certain cash balances restricted historically as to withdrawal or use. Restricted cash is comprised primarily of cash used as a collateral for a letter of credit associated with our lease agreement for office space in San Jose, California. We deposit restricted cash with high credit quality financial institutions. On November 14, 2024, we entered into a Credit Agreement (as defined and further discussed below in Note 7, Revolving Credit Facility ), which provides a three-year revolving credit facility of up to $ 45.0 million that matures on November 14, 2027. This Credit Agreement includes a $ 10.0 million sublimit for the issuance of letters of credit, which we intend to utilize for our lease agreement for our office space in San Jose, California. As a result, the depository bank has fully lifted the restriction on our cash and no restricted cash was recognized as of December 31, 2024. Short-Term Investments Short-term investments are comprised of marketable securities that consist of government securities with an original maturity or a remaining maturity at the time of purchase of greater than three months and no more than 12 months. The marketable securities are held with a high quality financial institution, which acts as our custodian and investment manager. These marketable securities are classified as available-for-sale securities in accordance with the provisions of the authoritative guidance for investments and are carried at fair value with unrealized gains and losses included in accumulated other comprehensive income (loss), net of tax, which is reported in consolidated statements of stockholders’ equity. Fair Value Measurements The carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate their fair values due to their short maturities. Short-term investments are recognized and disclosed at fair value in the financial statements on a recurring basis. The fair value of assets and liabilities is measured based on a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). Trade Accounts Receivable We are exposed to credit losses primarily through sales of products and services. Allowance for current estimated credit losses for trade accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers’ trade accounts receivables. Due to the short-term nature of such receivables, the estimated amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. Monitoring activities include dispute resolution, payment confirmation, review of customers’ financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. Although we have historically not 80 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) experienced significant credit losses, it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of trade accounts receivable. Concentrations of Risk and Other Uncertainties 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. Our cash equivalents and short-term investments primarily consist of government securities and money market funds which are held and managed by high credit quality financial institutions. Our customers are primarily retailers, wholesale distributors and security solution providers who sell or distribute our products to a large group of end-users. We regularly perform credit evaluations of our customers’ financial condition and performance and consider factors such as historical experience, credit quality, age of the accounts receivable balances, geographic or country-specific risks and current economic conditions that may affect our customers’ ability to pay. We do not require collateral from our customers. Historically, a substantial portion of revenue has been derived from a limited number of retailers and wholesale distribution partners. As of December 31, 2024 and 2023, two customers accounted for 54 % and 13 %, and three customers accounted for 37 %, 15 %, and 10 % of the total accounts receivable, net, respectively. No other customers accounted for 10% or greater of the total accounts receivable, net. During the years ended December 31, 2024, 2023 and 2022, one customer accounted for 43 %, 34 %, and 40 % of the total revenue, respectively. No other customers accounted for 10% or greater of the total revenue. 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. If any of the third-party manufacturers cannot or will not manufacture our products in required volumes, on a cost-effective basis, in a timely manner or at all, we will have to secure additional manufacturing capacity. Any interruption or delay in manufacturing could materially and adversely affect our business, results of operations and financial condition. 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. As of December 31, 2024 and 2023, one vendor accounted for 80 % and 88 % of the total accounts payable, respectively. No other vendors accounted for 10% or greater of the total accounts payable. As of December 31, 2024 and 2023, one significant vendor accounted for 93 % and 87 % of the total purchases, respectively. No other vendors accounted for 10% or greater of the total purchases. 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. Any significant delays in the development or introduction of products and services could materially and adversely affect our business, results of operations and financial condition. Inventories 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 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. While management believes the estimates and assumptions underlying its current forecasts are reasonable, there is risk that additional charges may be necessary if current forecasts are greater than actual demand. 81 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Property and Equipment, Net Property and equipment are stated at historical cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows: Asset Category: Range of Useful Lives Computer equipment 2 years Furniture and fixtures 5 years Software 2 - 5 years Machinery and equipment 2 - 3 years Leasehold improvements Shorter of remaining lease term or 7 years Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. The carrying value of the asset is reviewed on a regular basis for the existence of facts, both internal and external, that may suggest impairment. Operating Leases Our operating leases comprise of offices, data centers, and other equipment. We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets, net, accrued liabilities, and non-current operating lease liabilities in the consolidated balance sheets. Leases with an initial term of 12 months or less are expensed as incurred and recorded in the consolidated statements of comprehensive loss. The lease expense for fixed lease payments is recorded in the consolidated statements of comprehensive loss on a straight-line basis over the lease term and variable lease payments are included in the lease expense when the obligation for those payments is incurred. Operating lease assets represent our right to use an underlying asset over the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the leases do not provide an implicit rate, the incremental borrowing rate based on the information available is used at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease asset also includes any lease payments made before the lease commencement date less any lease incentives received. The lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise the options. The lease agreements with lease and non-lease components are generally accounted as a single component. In addition, certain lease agreements contain tenant improvement allowances (“TIA”) from the landlords. We record lessee-owned improvements as leasehold improvements within property and equipment, net in our consolidated balance sheets and the TIA as a reduction to the lease asset with the impact of the decrease recognized prospectively over the remaining lease term. We record lessor-owned improvements as prepaid rent within prepaid expenses and other current assets in our consolidated balance sheets and the TIA as a reduction to prepaid rent. Sublease income from our sublet office space in San Jose, California is recognized on a straight-line basis over the term of the sublease and is recorded as a reduction of lease expense. 82 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Goodwill We perform an annual impairment assessment of goodwill at the reporting unit level on the first day of the fourth fiscal quarter. We operate as one operating and reportable segment and identify that one reporting unit for the purpose of goodwill impairment testing, which is at the same level as our operating and reportable segment. The analysis may include both qualitative and quantitative factors to assess the likelihood of an impairment. Should certain events or indicators of impairment occur between annual impairment tests, we will perform the impairment test as those events or indicators occur. Examples of such events or circumstances include a significant decline in the expected future cash flows, a sustained, significant decline in our stock price and market capitalization, a significant adverse change in the business climate and slower growth rates. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of the reporting unit is less than its carrying amount. The qualitative assessment considers macroeconomic conditions, industry and market considerations, cost factors, overall company financial performance, and events affecting our stock price. If the reporting unit does not pass the qualitative assessment, we estimate the fair value using a discounted cash flow method and compare the fair value with the carrying amount of our reporting unit, including goodwill. If the fair value is greater than the carrying amount of our reporting unit, no impairment is recorded. If the fair value is less than the carrying amount, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to our reporting unit. The impairment charge, if any, would be recorded to earnings in the consolidated statements of comprehensive loss. Revenue Recognition Revenue from contracts with customers is recognized when control of the promised goods or services is transferred to the customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Our product revenue is recognized at a point in time when control of the goods is transferred to the customer, generally occurring upon shipment or delivery, dependent upon the terms of the underlying contract. Our paid subscription services are billed in advance of the start of the subscription and revenues are recognized ratably over subscription period, generally 30 days or 12 months in length. 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 sales returns and sales incentives related to current period product revenue. Contracts with Multiple Performance Obligations Some of our contracts with customers contain multiple promised goods or services. Such contracts include hardware products with bundled services, various subscription services, and support. For these contracts, we account for the promises separately as individual performance obligations if they are distinct. Performance obligations are determined to be distinct if they are both capable of being distinct and separately identifiable within the context of the contract. In determining whether performance obligations meet the criteria for being distinct, we consider a number of factors, such as the degree of interrelation and interdependence between obligations, and whether or not the good or service significantly modifies or transforms another good or service in the contract. The embedded software in most of the hardware products is not considered distinct and therefore the combined hardware and incidental software are treated as one performance obligation and recognized at the point in time when control of product transfers to the customer. Services that are included with certain hardware products are considered distinct and therefore the hardware and service are treated as separate performance obligations. 83 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) After identifying the separate performance obligations, the transaction price is allocated to the separate performance obligations on a relative stand-alone selling price basis. Stand-alone selling prices are generally determined based on the prices charged to customers for standalone sales. Stand-alone selling price of the hardware is directly observable from add-on camera and base station sales. Stand-alone selling price of the premium services are directly observable from direct sales to end users. Revenue is then recognized for each distinct performance obligation as control is transferred to the customer. Revenue attributable to hardware is recognized at the time control of the product transfers to the customer. The transaction price allocated to the service is recognized over the specified service period. Long-Term Supply Arrangement - Verisure We have entered into a Supply Agreement which includes product purchases and paid subscription services with Verisure S.à.r.l. (“Verisure”) . Products sold come with a standard twelve months warranty. Verisure assumes responsibilities for all warranty claims, returns of products and certain technical support provided to the end users. We provide technical support for paid subscription services where Verisure cannot resolve the issue. Verisure is responsible for any marketing and promotion of our products and services sold in Europe. Products are priced at cost plus markup, and paid subscription services are billed based on the number of active cameras monthly and are priced at cost plus markup. 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. The Supply Agreement also provides for certain development services at Verisure's request under various statements of work ("SOW"), which Verisure pays in non-refundable installments upon the commencement of agreed-upon milestones. There is a single performance obligation as the distinct goods and services are promised under each individual SOW. Warranties Sales of hardware products regularly include warranties to end customers ensuring that the product continues to function according to published specifications in a dynamic environment. These standard warranties are assurance type warranties and do not offer any services in addition to the assurance that the product will continue working as specified for one or more years. Therefore, warranties are not considered separate performance obligations in the arrangement. Instead, the expected cost of warranties is accrued as an expense in accordance with authoritative guidance. Sales Incentives Sales incentives that are mutually agreed with customers are recognized as contra revenue while marketing expenses paid to the third parties are recognized as a marketing expense. We accrue estimated contra revenue or marketing expense for these sales incentives either when the related revenue is recognized or prior to customer commitment if customary business practice creates an implied expectation of future activities. 84 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Shipping and Handling Costs We include shipping and handling fees billed to customers in Product Revenue. Shipping and handling costs associated with inbound freight are included in Cost of revenue. In cases where we give a freight allowance to the customer for their own inbound freight costs, such costs are appropriately recorded as a reduction in Product Revenue. Shipping and handling costs associated with outbound freight are included in sales and marketing expenses. We have elected to account for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products. Shipping and handling costs associated with outbound freight totaled $ 3.7 million, $ 5.2 million and $ 3.4 million for the years ended December 31, 2024, 2023 and 2022, respectively. Contract Costs We recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that otherwise would have been recognized is one year or less. These costs are included in operating expenses of sales and marketing and general and administrative in the consolidated statements of comprehensive loss. 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. Contract Balances Contract assets are recorded as accounts receivable, net in the consolidated balance sheets when we have an unconditional right to consideration. Contract liabilities are recorded as deferred revenue in the consolidated balance sheets when cash payments are received or due in advance of performance. Contract liabilities consist of advance payments and customer billings in advance of revenue recognition from subscription contracts where we have unsatisfied performance obligations. Advance payments include prepayments for NRE services under the Supply Agreement with Verisure. Payment terms vary by customer. The time between invoicing and when payment is due is not significant. For certain products or services and customer types, payment is required before the products or services are delivered to the customer. Performance obligations represent the transaction price allocated that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and remaining performance obligations consist of contract liabilities. Research and Development Costs incurred in the research and development of new products are expensed as incurred. Software Development Costs We expense software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products. As a result, development costs that meet the criteria for capitalization were $ 0.7 million, $ 0.6 million and $ 1.8 million for the years ended December 31, 2024, 2023 and 2022, respectively. We capitalize software development costs related to those software applications to be used solely to meet internal needs during the application development stage. Capitalized software development costs are amortized using the straight-line amortization method over the estimated useful life of the applicable software. Costs capitalized for developing such software applications were not material as of December 31, 2024 and 2023. 85 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Advertising Costs Advertising costs are expensed when incurred and included in sales and marketing in the consolidated statements of comprehensive loss. Total advertising costs were $ 18.9 million, $ 17.9 million and $ 27.1 million for the years ended December 31, 2024, 2023 and 2022, respectively. Stock-Based Compensation We measure stock-based compensation at the grant date based on the fair value of the award. The fair value of stock options is estimated on the grant date using the Black-Scholes option pricing model. The fair value of restricted stock units (“RSUs”) and performance-based restricted stock units is measured on the grant date based on the closing fair market value of our common stock. We utilize a Monte Carlo pricing model customized to the specific provisions to value certain market-based restricted stock units on the grant date. The fair value determined using the Monte Carlo simulation model varies based on the assumptions used for the expected stock price volatility, the correlation coefficient between Arlo and Russell 2000 Index, risk-free interest rates, and dividend yield. Forfeitures are accounted for as they occur. Our Employee Stock Purchase Plan (“ESPP”) is intended to provide employees with the opportunity to purchase our common stock through accumulated payroll deductions at the end of specified purchase period. Eligible employees may contribute up to 15 % of compensation, subject to certain income limits, to purchase our common stock. 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 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. The risk-free interest rate of the purchase rights granted under the ESPP is based on the implied yield currently available on U.S. Treasury securities, with a remaining term commensurate with the estimated expected term. 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 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. In addition, we evaluate the probability of achieving the performance conditions at the end of each reporting period and record the related stock-based compensation expense based on performance to date over the service period. For market-based RSUs, stock-based compensation expense is recognized ratably over the performance period subject to achievement of market conditions. Foreign Currency Our functional currency is the U.S. dollar. Foreign currency transactions of international subsidiaries are re-measured into U.S. dollars at the end-of-period exchange rates for monetary assets and liabilities, and at historical exchange rates for non-monetary assets and liabilities. Revenue is re-measured at average exchange rates in effect during each period. Expenses are re-measured at average exchange rates in effect during each period, except for expenses related to non-monetary assets and liabilities, which are re-measured at historical exchange rates. Gains and losses arising from foreign currency transactions are included in other income, net in the consolidated statements of comprehensive loss. 86 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Net Earnings (Loss) Per Share Basic net earnings (loss) per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period. Diluted net earnings per share is computed by dividing the net earnings for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period. Potentially dilutive common shares include common shares issuable upon exercise of stock options, vesting of restricted stock awards and performance shares, and issuances of shares under the ESPP, which are calculated by application of the treasury stock method. Potentially dilutive common shares are excluded from the computation of diluted net loss per share when their effect is anti-dilutive. Segment Information We operate as one operating and reportable segment. Our Chief Executive Officer (“CEO”) is identified as the Chief Operating Decision Maker (“CODM”), who reviews financial information presented in a consolidated basis for purposes of allocating resources and evaluating financial performance. Income Taxes We record the provision for income taxes in the consolidated financial statements using the asset and liability method. Under this method, we recognize income tax liabilities or receivables for the current year. We also recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the net amount that we believe is more likely than not to be realized. 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 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 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. As we expand internationally, we will face increased complexity in determining the appropriate tax jurisdictions for revenue and expense items. Our policy is to adjust these unrecognized tax benefits in the period when facts and circumstances change, such as the closing of a tax audit, the expiration of statute of limitation for a relevant taxing authority to examine a tax position, or when additional information becomes available. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on the financial condition and operating results. The provision for income taxes includes the effects of any accruals that we believe are appropriate, as well as the related interest and penalties. Legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act introduced the global intangible low-taxed income (“GILTI”) provisions effective in 2018, which generally impose a tax on the net income earned by foreign subsidiaries of a U.S. company in excess of a deemed return on their tangible assets. We recognize the tax on GILTI as a period cost when the tax is incurred. 87 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Recent Accounting Pronouncements Accounting Pronouncements Recently Adopted In 2024, we adopted Accounting Standards Update (“ASU”) 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. Refer to Note 12, Segment and Geographic Information for the adoption of this guidance and related disclosures. Accounting Pronouncements Not Yet Effective In October 2023, the Financial Accounting Standards Board (“FASB”) issued 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 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 that this guidance may have on our financial statements and related disclosures. In November 2024, the FASB issued ASU No. 2024-03, Income Statement: Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses , which improves disclosure requirements and mandates enhanced transparency about the types of expenses in commonly presented expense captions in financial statements. This guidance is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. We are currently evaluating the impact that this guidance may have on our financial statements and related disclosures. Note 3. Revenue Contract Balances Deferred revenue as of December 31, 2024 increased, compared to the previous year, primarily due to service revenue increase, driven by the increases in cumulative paid accounts and rates of subscriptions. For the years ended December 31, 2024, 2023, and 2022, $ 17.9 million, $ 11.3 million, and $ 29.4 million, respectively, of the recognized revenue was included in deferred revenue at the beginning of the periods. There were no significant changes in estimates during the periods that would affect the contract balances. Remaining Performance Obligations The total estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied and remaining was $ 29.5 million and $ 18.8 million as of December 31, 2024 and 2023, respectively, substantially related to performance obligations classified as less than one year . 88 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) On April 25, 2024, Verisure Sàrl (“Verisure”), our largest customer, notified us that it was exercising its right under the Supply Agreement to extend the term for another five years (through November 2029) with no minimum purchase obligations. Under the Supply Agreement, a purchase obligation is not deemed to exist until we receive and accept Verisure’s purchase order. As of December 31, 2024, we had a backlog of $ 33.5 million which represents performance obligations that will be recognized as revenue once fulfilled, which is expected to occur over the next six months . Variable Consideration Revenue from all sales types is recognized at transaction price, 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 sales returns and sales incentives related to current period product revenue. Sales returns are estimated by analyzing certain factors, including historical sales and returns data, channel inventory levels, current economic trends, and changes in customer demand for our products. Sales incentives are determined based on a combination of the actual amounts committed and estimated future expenditure based upon historical customary business practice. Refer to Note 4, Balance Sheet Components for accrued sales returns and sales incentives as of December 31, 2024 and 2023. Variable consideration estimates are based on predictive historical data or future commitments that we plan and control. However, we continue to assess variable consideration estimates such that it is probable that a significant reversal of revenue will not occur. Disaggregation of Revenue We disaggregate our revenue into three geographic regions: the Americas, EMEA, and APAC, where we conduct our business. The following table presents revenue disaggregated by geographic region. Year Ended December 31, 2024 2023 2022 (In thousands) Americas $ 266,075 $ 301,418 $ 273,981 EMEA 220,821 164,750 196,465 APAC 23,990 25,008 19,968 Total $ 510,886 $ 491,176 $ 490,414 Note 4. Balance Sheet Components Short-Term Investments As of December 31, 2024 As of December 31, 2023 Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value (In thousands) U.S. Treasuries $ 69,385 $ 34 $ — $ 69,419 $ 79,654 $ 320 $ — $ 79,974 89 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Accounts Receivable, Net As of December 31, 2024 2023 (In thousands) Gross accounts receivable $ 57,464 $ 65,693 Allowance for credit losses ( 132 ) ( 333 ) Total $ 57,332 $ 65,360 The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected. Years Ended December 31, 2024 2023 2022 (In thousands) Balance at the beginning of the period $ 333 $ 423 $ 337 Provision for (release of) expected credit losses ( 201 ) ( 90 ) 86 Balance at the end of the period $ 132 $ 333 $ 423 Property and Equipment, Net The components of property and equipment are as follows: As of December 31, 2024 2023 (In thousands) Machinery and equipment $ 14,399 $ 14,148 Software 16,918 15,639 Computer equipment 894 1,438 Leasehold improvements 3,302 4,661 Furniture and fixtures 1,839 2,544 Total property and equipment, gross 37,352 38,430 Accumulated depreciation ( 32,587 ) ( 33,669 ) Total property and equipment, net $ 4,765 $ 4,761 Depreciation expense pertaining to property and equipment was $ 3.2 million, $ 4.7 million and $ 4.8 million for the years ended December 31, 2024, 2023 and 2022, respectively. Goodwill We have determined that no event occurred or circumstances changed during the year ended December 31, 2024 that would more likely than not reduce the fair value of goodwill below the carrying amount. There was no accumulated goodwill impairment recognized as of December 31, 2024. 90 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Accrued Liabilities As of December 31, 2024 2023 (In thousands) Sales incentives $ 31,947 $ 28,187 Sales returns 10,560 17,058 Compensation 12,921 13,278 Cloud and other costs 9,497 10,985 Other 20,805 18,701 Total $ 85,730 $ 88,209 Note 5. Fair Value Measurements The following table summarizes assets measured at fair value on a recurring basis: As of December 31 2024 2023 (In thousands) Cash equivalents: money-market funds (<90 days) $ 4,095 $ 5,782 Cash equivalents: U.S. Treasuries (<90 days) 22,504 520 Available-for-sale securities: U.S. Treasuries (1) 69,419 79,974 Total $ 96,018 $ 86,276 _________________________ (1) Included in short-term investments in the consolidated balance sheets. Our investments in cash equivalents and available-for-sale securities are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. As of December 31, 2024 and 2023, 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. 91 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 6. Restructuring In November 2022, we initiated a restructuring plan to reduce our cost structure to better align the operational needs of the business to current economic conditions while continuing to support our long-term strategy. 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. As of December 31, 2024, we have incurred all costs pertaining to restructuring activities and completed this restructuring plan. 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 activity is as follows: Total Severance Expense Office Exit Expense Other Exit Expense (In thousands) Balance as of December 31, 2021 $ — $ — $ — $ — Restructuring charges 1,805 798 928 79 Cash payments ( 588 ) ( 579 ) — ( 9 ) Non-cash and other adjustments 48 — 63 ( 15 ) 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 $ — Restructuring charges 2,503 2,503 — — Cash payments ( 2,783 ) ( 2,420 ) ( 363 ) — Balance as of December 31, 2024 $ 172 $ 172 $ — $ — Total costs incurred inception to date $ 5,022 $ 3,865 $ 1,108 $ 49 Note 7. Revolving Credit Facility We had historically maintained a Loan and Security Agreement with Bank of America, N.A., which expired and automatically terminated on October 27, 2024. On November 14, 2024, we entered into a new credit agreement (the “Credit Agreement”) with HSBC Bank USA, National Association, as administrative agent, issuing bank, and lender. The Credit Agreement provides for a three-year revolving credit facility (the “Credit Facility”) of up to $ 45.0 million that matures on November 14, 2027, which also includes a $ 10.0 million sublimit for the issuance thereunder of letters of credit. As of December 31, 2024, we had unused borrowing capacity of $ 45.0 million based on the terms and conditions of the Credit Agreement. In addition, the Credit Agreement includes an uncommitted accordion feature that allows us to, from time to time, request an increase to the aggregate revolving loan commitments by up to an additional $ 30.0 million in the aggregate, subject to the satisfaction of certain conditions. The proceeds of the borrowings under the Credit Facility may be used for working capital and general corporate purposes. The obligations under the Credit Agreement are secured by substantially all of our assets and will be secured, on a post-closing basis, by substantially all of the assets of a material subsidiary; Arlo Technologies International Limited, a limited corporation organized under the laws of Ireland (which is the sole guarantor of the Credit Facility as of the closing of the Credit Facility). Borrowings under the Credit Agreement will bear interest at a floating rate equal to: (i) the term secured 92 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) overnight financing rate plus the applicable rate of 2.25 % to 2.75 %, or (ii) the base rate plus the applicable rate of 1.25 % to 1.75 % both determined based on a total net leverage ratio. Among other fees, we are required to pay a quarterly unused fee of 0.2 % per annum on the amount by which the lenders’ aggregate commitment under the Credit Facility exceeds the daily revolver usage during such quarter. The Credit Agreement contains events of default, representations and warranties, and affirmative and negative covenants customary for credit facilities of this type. The Credit Agreement also contains financial covenants that require us to (i) maintain a fixed charge coverage ratio of at least 1.50 to 1.00 and (ii) maintain a total net leverage ratio, not to exceed 3.00 to 1.00; both covenants being tested quarterly on a trailing four consecutive fiscal quarter basis. As of December 31, 2024, we were in compliance with all the covenants under the Credit Agreement. The Credit Agreement also provides for a number of customary events of default, including a provision that a material adverse change constitutes an event of default that permits the Administrative Agent, at its option, to accelerate the loan. No amount had been drawn under the Credit Facility as of December 31, 2024. Note 8. Commitments and Contingencies Operating Leases Our operating lease obligations mostly include offices, equipment, and distribution centers, with various expiration dates through June 2033. 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. The terms of certain leases provide for rental payments on a graduated scale. Gross lease expense was $ 5.3 million, $ 5.9 million, and $ 7.1 million for the years ended December 31, 2024, 2023 and 2022, respectively. We recorded sublease income as reduction of lease expense, in the amount of $ 2.0 million for each of the years ended December 31, 2024, 2023, and 2022. Supplemental cash flow information related to operating leases is as follows: Year Ended December 31, 2024 2023 2022 (in thousands) Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 5,824 $ 6,756 $ 6,375 Right-of-use assets obtained in exchange for lease liabilities Operating leases $ 7,155 $ 1,873 $ 3,470 Weighted average remaining lease term and weighted average discount rate related to operating leases are as follows: As of December 31, 2024 2023 Weighted average remaining lease term 5.4 years 5.0 years Weighted average discount rate 6.66 % 5.74 % 93 Table of Contents 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, 2024 are as follows: Operating Lease Payments Sublease Payments Net (In thousands) 2025 $ 6,593 $ ( 2,006 ) $ 4,587 2026 5,513 ( 2,066 ) 3,447 2027 5,538 ( 2,322 ) 3,216 2028 4,589 ( 2,392 ) 2,197 2029 2,713 ( 1,228 ) 1,485 Thereafter 3,616 — 3,616 Total future lease payments $ 28,562 $ ( 10,014 ) $ 18,548 Less: imputed interest ( 4,519 ) Present value of future minimum lease payments $ 24,043 Accrued liabilities $ 5,686 Non-current operating lease liabilities 18,357 Total lease liabilities $ 24,043 Letters of Credit 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, 2024, 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. Purchase Obligations We have entered into various inventory-related purchase agreements with suppliers. Generally, under these agreements, 50 % of orders are cancelable by giving notice 46 to 60 days prior to the expected shipment date and 25 % of orders are cancelable by giving notice 31 to 45 days prior to the expected shipment date. Orders are non-cancelable within 30 days prior to the expected shipment date. As of December 31, 2024, we had $ 25.3 million in non-cancelable purchase commitments with suppliers, which is expected to be paid over the next twelve months . As of December 31, 2024, an additional $ 22.0 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. Expenses incurred have historically not been material relative to the original order value. 94 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Litigation and Other Legal Matters From time to time, we may become involved in disputes, litigation, and other legal actions. In all cases, at each reporting period, we evaluate whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. In such cases, we accrue for the amount or, if a range, we accrue the low end of the range, only if there is not a better estimate than any other amount within the range, as a component of legal expense within general and administrative expenses. We monitor developments in these legal matters that could affect the estimate we had previously accrued. We currently believe that there are no existing claims or proceedings that are likely to have a material adverse effect on our financial position within the next 12 months. There are many uncertainties associated with any litigation, and these actions or other third-party claims against us may cause us to incur costly litigation and/or substantial settlement charges. In addition, the resolution of any intellectual property litigation may require us to make royalty payments, which could have an adverse effect in future periods. If any of those events were to occur, our business, financial condition, results of operations, and cash flows could be adversely affected. 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. 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 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, 2024 and 2023, we have not incurred any material costs as a result of such indemnification obligations and we are not currently aware of any indemnification claims. Note 9. Employee Benefit Plans We grant options and restricted stock units (“RSUs”) under the 2018 Equity Incentive Plan (the “2018 Plan”), under which awards may be granted to all employees. We also grant performance-based and market-based restricted stock units (“PSUs”) to our executive officers periodically. Award vesting periods for the 2018 Plan are generally three to five years . As of December 31, 2024, approximately 3.4 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 . On January 24, 2025, we registered an aggregate of up to 5,050,450 shares of common stock on a Registration Statement on Form S-8, including 4,050,450 shares issuable pursuant to the 2018 Plan that were automatically added to the shares authorized for issuance under the 2018 Plan and 1,000,000 shares issuable pursuant to the Employee Stock Purchase Plan (“ESPP”) that were automatically added to the shares authorized for issuance on January 1, 2025, both pursuant to an “evergreen” provision contained in the respective plans. 95 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following table sets forth the available shares for grants as of December 31, 2024: Number of Shares (In thousands) Shares available for grants at the beginning of the period 3,516 Additional authorized shares 3,808 Granted ( 9,163 ) Forfeited / cancelled 1,574 Shares traded / withheld for taxes 3,621 Shares available for grants at the end of the period 3,356 Employee Stock Purchase Plan We sponsor the ESPP to eligible employees. Under our ESPP, employees purchased 365 thousand, 621 thousand, and 609 thousand shares during the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, 2.4 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, 2024 2023 2022 Expected life (in years) 0.5 0.5 0.5 Risk-free interest rate 4.56 % 4.97 % 3.29 % Expected volatility 54.7 % 64.0 % 69.2 % Option Activity We did not grant options during the years ended December 31, 2024, 2023, and 2022. Stock option activity during the year ended of December 31, 2024 was as follows: Number of Shares Weighted Average Exercise Price Per Share Weighted Average Remaining Term Aggregate Intrinsic Value (In thousands) (In dollars) (In years) (In thousands) Outstanding as of December 31, 2023 1,096 $ 12.48 Granted — — Exercised ( 478 ) 11.34 Forfeited/ cancelled — — Expired ( 69 ) 14.39 Outstanding as of December 31, 2024 549 $ 13.24 1.85 $ 382 Vested and exercisable as of December 31, 2024 549 $ 13.24 1.85 $ 382 96 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Year Ended December 31, 2024 2023 2022 (In millions) Total intrinsic value of options exercised $ 2.1 $ 1.8 $ 0.9 Total fair value of options vested $ — $ — $ 2.3 RSU Activity RSU activity, excluding PSU activity, during the year ended of December 31, 2024 was as follows: Number of Shares Weighted Average Grant Date Fair Value Per Share Weighted Average Remaining Term Aggregate Intrinsic Value (In thousands) (In dollars) (In years) (In thousands) Outstanding as of December 31, 2023 9,043 $ 6.15 Granted 3,905 10.99 Vested ( 4,474 ) 7.51 Forfeited ( 1,362 ) 7.15 Outstanding as of December 31, 2024 7,112 $ 7.76 1.33 $ 78,656 Year Ended December 31, 2024 2023 2022 (In millions, except per share data) Total intrinsic value of RSUs vested (the release date fair value) $ 51.4 $ 38.9 $ 41.4 Total fair value of RSUs vested (the grant date fair value) $ 33.6 $ 34.4 $ 34.0 RSU granted weighted-average fair value per share $ 10.99 $ 5.28 $ 7.23 97 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) PSU Activity Our executive officers and other senior employees have been granted performance-based awards with some vesting occurring when performance conditions are met and some vesting occurring at the end of a three or five-year period when 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. At the end of each reporting period, we evaluate the probability of achieving the performance or market conditions and record the related stock-based compensation expense based on the achievement over the service period. PSU activity during the year ended of December 31, 2024 was as follows: Number of Shares Weighted Average Grant Date Fair Value Per Share Weighted Average Remaining Term Aggregate Intrinsic Value (In thousands) (In dollars) (In years) (In thousands) Outstanding as of December 31, 2023 3,851 $ 5.72 Granted 5,265 10.11 Vested ( 4,188 ) 7.13 Forfeited ( 151 ) 8.01 Outstanding as of December 31, 2024 4,777 $ 9.24 0.72 $ 53,458 Year Ended December 31, 2024 2023 2022 (In millions, except per share data) Total intrinsic value of PSUs vested (the release date fair value) $ 55.0 $ 17.7 $ 4.8 Total fair value of PSUs vested (the grant date fair value) $ 29.9 $ 12.4 $ 2.7 PSU granted weighted-average fair value per share $ 10.11 $ 4.56 $ 6.52 For RSUs and PSUs vested prior to September 29, 2024, the tax withholding method is the net withholding method, in which shares with a market value equivalent to the tax withholding obligation are withheld and the net shares are issued to the RSU and PSU holders. Effective in the fourth quarter of 2024, the tax withholding policy changed and our Named Executive Officers (“NEOs”) will use the sell-to-cover method for their tax withholding, in which shares with a market value equivalent to the tax withholding obligation are sold on behalf of the NEOs upon vesting and settlement to cover the tax withholding liability, and the cash proceeds from such sales are remitted by Arlo to taxing authorities. The sell-to-cover method applies to all Arlo employees effective on January 1, 2025. 98 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Stock-Based Compensation Expense The following table sets forth the stock-based compensation expense included in our consolidated statements of comprehensive loss: Year Ended December 31, 2024 2023 2022 (In thousands) Cost of revenue $ 4,025 $ 3,533 $ 4,841 Research and development 16,149 12,700 12,317 Sales and marketing 8,447 5,899 6,290 General and administrative 40,036 25,816 25,028 Total $ 68,657 $ 47,948 $ 48,476 As of December 31, 2024, all outstanding options were fully vested, therefore, there was no unrecognized compensation cost related to stock options. As of December 31, 2024, approximately $ 53.5 million of unrecognized compensation cost related to unvested RSUs and PSUs is expected to be recognized over a weighted-average period of 1.3 years. During the years ended December 31, 2024, 2023, and 2022, we settled executive and employee bonuses by granting and issuing restricted stock units (non-cash financing activities) that vested immediately amounting to $ 12.6 million, $ 13.5 million, and $ 8.7 million, respectively. 401(k) Plan We have a 401(k) Plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. We match 50 % of contributions for employees up to a maximum of $ 4,000 in employee contributions per fiscal year. During the years ended December 31, 2024, 2023 and 2022, we recognized expense of approximately $ 1.6 million, $ 1.1 million and $ 1.1 million, respectively. Note 10. Income Taxes Income (loss) before provision for income taxes consisted of the following: Year Ended December 31, 2024 2023 2022 (In thousands) United States $ ( 35,254 ) $ ( 26,266 ) $ ( 60,374 ) International 5,842 5,405 4,723 Total $ ( 29,412 ) $ ( 20,861 ) $ ( 55,651 ) 99 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Provision for income taxes consisted of the following: Year Ended December 31, 2024 2023 2022 (In thousands) Current: U.S. Federal $ 89 $ 88 $ 166 State 297 273 87 Foreign 794 697 601 1,180 1,058 854 Deferred: U.S. Federal — — — State — — — Foreign ( 88 ) 117 121 ( 88 ) 117 121 Total $ 1,092 $ 1,175 $ 975 The effective tax rate differed from the U.S. federal income tax rate as follows: Year Ended December 31, 2024 2023 2022 Tax benefit at U.S. federal income tax rate 21.0 % 21.0 % 21.0 % State tax benefit (provision), net of federal benefit ( 0.8 ) % ( 1.0 ) % 1.9 % Impact of international operations 3.4 % 3.1 % 1.3 % FDII deduction 1.0 % 1.8 % — % Stock-based compensation ( 12.8 ) % ( 22.5 ) % ( 7.3 ) % U.S. federal tax credits 8.8 % 13.8 % 3.7 % Change in valuation allowance ( 28.0 ) % ( 21.7 ) % ( 21.8 ) % Non-deductible transaction costs ( 0.5 ) % ( 0.6 ) % ( 0.1 ) % Other 4.2 % 0.5 % ( 0.5 ) % Provision for income taxes ( 3.7 ) % ( 5.6 ) % ( 1.8 ) % 100 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The significant components of net deferred tax assets consisted of the following: As of December 31, 2024 2023 (In thousands) Deferred Tax Assets: Accruals and allowances $ 10,730 $ 9,377 Net operating loss carryforwards 15,678 18,940 Stock-based compensation 4,174 3,165 Lease liabilities 5,543 4,965 Deferred revenue 80 100 Tax credit carryforwards 20,090 15,775 Depreciation and amortization 2,947 3,231 Capitalized research and development expenses 58,740 50,519 Total deferred tax assets 117,982 106,072 Deferred Tax Liabilities: Operating lease right-of-use assets ( 3,758 ) ( 2,823 ) Total deferred tax liabilities ( 3,758 ) ( 2,823 ) Valuation Allowance ( 112,939 ) ( 101,977 ) Net deferred tax assets $ 1,285 $ 1,272 Changes in valuation allowance for deferred tax assets were as follows: Year Ended December 31, 2024 2023 2022 (In thousands) Balance at the beginning of the period $ 101,977 $ 93,869 $ 81,742 Additions (1) 14,745 13,892 16,798 Deductions (2) ( 3,783 ) ( 5,784 ) ( 4,671 ) Balance at the end of the period $ 112,939 $ 101,977 $ 93,869 ________________________ (1) Additions are primarily increases in tax attribute carryforwards and capitalized expenditures for income tax purposes. (2) Deductions present the utilization of U.S. federal and state net operating losses and tax credit attributes. Realization of the deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. We do not anticipate to realize the net U.S. federal and state deferred tax assets and certain foreign tax attributes, which have been fully offset by a valuation allowance. As of December 31, 2024 and 2023, the valuation allowance was $ 112.9 million and $ 102.0 million, respectively. The utilization of net operating loss and credit carryforwards may be subject to annual limitation due to the ownership changes provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of portions of the net operating loss and tax credit carryforwards before utilization. 101 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) As of December 31, 2024, net operating loss carryforwards consisted of the following: Amount Beginning Year of Expiration (in thousands) U.S. federal (1) $ 6,831 2031 U.S. federal (1)(2) 47,420 Indefinite California 39,186 2028 Other states 36,074 2026 _________________________ (1) All of the losses are subject to annual usage limitations under Internal Revenue Code Section 382. (2) All of the losses are subject to usage limitation of 80% of taxable income in a year when the losses will be utilized. As of December 31, 2024, tax credit carryforwards consisted of the following: Amount Beginning Year of Expiration (in thousands) U.S. federal $ 12,040 2039 California 11,181 Indefinite Foreign 3,188 2041 As of December 31, 2024, withholding taxes and state income taxes expected to be incurred on the foreign subsidiaries’ earnings that are not indefinitely reinvested are immaterial. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits was as follows: Year Ended December 31, 2024 2023 2022 (In thousands) Balance at the beginning of the period $ 3,554 $ 2,763 $ 1,736 Additions for tax positions taken during the current year 928 679 765 Additions (reductions) for tax positions taken during a prior year 35 133 275 Reductions as a result of a lapse of the applicable statute of limitations ( 34 ) ( 21 ) ( 13 ) Balance at the end of the period $ 4,483 $ 3,554 $ 2,763 The total amount of unrecognized tax benefits, including immaterial interest and penalties, was $ 4.5 million and $ 3.6 million as of December 31, 2024 and 2023, respectively. We recognize interest and penalties accrued related to unrecognized tax benefits as part of the provision for income taxes. We file income tax returns in the U.S. and numerous foreign jurisdictions. We are subject to income tax examinations by taxing authorities globally for years ending or after December 31, 2018. IRS audit of the consolidated returns of Arlo for tax year 2022 was commenced in the fourth fiscal quarter of 2024 and is still pending, while the NETGEAR 2018 California Franchise Tax Board and 2016-2018 Texas Franchise tax audits are likewise 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. We believe that the estimate has adequately reflected these matters. However, the future results may include adjustments to estimates in the period the audits will be resolved, which may impact the effective tax rate. We don't expect a significant change in unrecognized tax benefits within the next twelve months. 102 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 11. Net Loss Per Share Year Ended December 31, 2024 2023 2022 (In thousands, except for per share data) Numerator: Net loss $ ( 30,504 ) $ ( 22,036 ) $ ( 56,626 ) Denominator: Weighted average common shares - basic and diluted 98,630 92,754 87,173 Basic and diluted net loss per share $ ( 0.31 ) $ ( 0.24 ) $ ( 0.65 ) Anti-dilutive employee stock-based awards, excluded 814 1,776 5,451 103 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 12. Segment and Geographic Information Segment Information We operate as one operating and reportable segment. Our CEO is identified as the CODM, who reviews financial information presented in a consolidated basis for purposes of allocating resources and evaluating financial performance. The CODM does not review segment assets at a different asset level and category. The consolidated net loss is the measure of segment net loss that is most consistent with U.S. GAAP. The CODM is regularly provided with not only the consolidated expenses as noted on the face of the income statement, but also the significant segment expenses and other segment items as below: Year Ended December 31, 2024 2023 2022 (In thousands) Revenue $ 510,886 $ 491,176 $ 490,414 Less: Cost of revenue 323,382 323,613 354,379 Operating expenses Personnel-related expense 66,811 65,249 62,099 Stock-based compensation 64,632 44,415 43,635 Outside professional services 54,229 48,336 43,831 Marketing expenditure 18,925 17,910 27,079 Other segment items (1) 10,497 9,010 11,176 Depreciation 1,332 3,131 3,589 Interest expense 490 373 277 Income taxes expense 1,092 1,175 975 Segment net loss $ ( 30,504 ) $ ( 22,036 ) $ ( 56,626 ) Reconciliation of profit or loss: Adjustments and reconciling items — — — Consolidated net loss $ ( 30,504 ) $ ( 22,036 ) $ ( 56,626 ) _________________________ (1) Other segment items include corporate IT and facility overhead, freight out expense, credit card fees, restructuring charges, separation expense, litigation reserves, interest income, net, foreign currency exchange gain (loss), net and others. 104 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Geographic Information for Revenue Revenue consists of gross product shipments and service revenue, less allowances for estimated sales returns, price protection, end-user customer rebates, net changes in deferred revenue, and other channel sales incentives deemed to be a reduction of revenue per the authoritative guidance. Sales and usage-based taxes are excluded from revenue. 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. For comparable purposes, amounts in prior period have been recast. Year Ended December 31, 2024 2023 2022 (In thousands) United States $ 256,737 $ 299,360 $ 268,435 Spain 137,671 113,826 135,896 Sweden 49,648 29,502 15,554 Other countries 66,830 48,488 70,529 Total $ 510,886 $ 491,176 $ 490,414 Geographic Information for Long-Lived Assets Long-lived assets include property and equipment, net and operating lease right-of-use assets, net. Our long-lived assets are based on the physical location of the assets. The following table presents long-lived assets by geographic area. As of December 31, 2024 2023 (In thousands) United States $ 18,201 $ 13,372 Other countries 2,262 2,839 Total $ 20,463 $ 16,211 Note 13. Stock Repurchase Program On September 24, 2024, we announced that our Board of Directors approved a stock repurchase program of up to an aggregate of $ 50.0 million of shares of Arlo’s common stock through open market purchases in a manner deemed to be in the best interests of our company and stockholders, considering the economic cost and prevailing market conditions, including the relative trading prices and volumes of Arlo’s common stock. The stock repurchase program is expected to continue through December 31, 2026 unless extended or shortened by the Board of Directors. The timing and actual number of shares repurchased under the repurchase program depend on a variety of factors, including price, general business and market conditions, and other investment opportunities. Shares may be repurchased through open market purchases or privately negotiated transactions, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. In the fourth quarter of fiscal year 2024, we repurchased and subsequently retired 378,745 shares of Arlo common stock for an aggregate amount of $ 4.4 million. As of December 31, 2024, $ 45.6 million remained available and authorized for future repurchases. 105 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.