What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-05-08 compared with 2024-11-07 · 209 added, 214 removed, 382 unchanged (53% of the section changed)

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

September 29,

2025 December 31,

10 unchanged sentences

Goodwill 11,038 11,038

Restricted cash 3,654 4,131

Long-term investment

Other non-current assets 4,655 4,293

19 unchanged sentences

shares issued and outstanding:

100,321,524 at September 29, 2024 and 95,380,281 at December 31, 2023

103,304,904 at March 30, 2025 and 100,885,158 at December 31, 2024

Additional paid-in capital 502,062 498,739

6 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three Months Ended Nine Months Ended

September 29,

2024 October 1,

2023 September 29,

2024 October 1,

Three Months Ended

2025 March 31,

(In thousands, except per share data)

Subscriptions and services $ 68,849 $ 56,707

Products 50,217 67,493

Services 61,883 51,042 178,851 145,313

Total revenue 119,066 124,200

Cost of revenue:

Subscriptions and services 12,265 13,596

Products 54,074 63,224

Services 14,431 13,529 42,584 38,349

Total cost of revenue 66,339 76,820

4 unchanged sentences

General and administrative 17,785 19,348

Others 1,423 263 2,868 1,236

Other operating expense 25 479

Total operating expenses 54,178 57,990

Loss from operations

( 1,451 ) ( 10,610 )

Interest income, net 1,316 1,386

Other income (loss), net ( 57 ) 10 ( 100 ) 23

Other non-operating expense, net ( 198 ) ( 25 )

Loss before income taxes

10 unchanged sentences

$ ( 835 ) $ ( 9,644 )

Other comprehensive income (loss), net of tax

Other comprehensive loss, net of tax

( 29 ) ( 40 )

4 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three Months Ended Nine Months Ended

September 29,

2024 October 1,

2023 September 29,

2024 October 1,

Three Months Ended

2025 March 31,

(In thousands)

4 unchanged sentences

Issuance of common stock under stock-based compensation plans 3 3

Repurchase of common stock ( 1 ) —

Restricted stock unit withholdings — ( 1 )

5 unchanged sentences

Issuance of common stock under stock-based compensation plans 646 570

Issuance of common stock under Employee Stock Purchase Plan — — 1,692 1,617

Repurchase of common stock ( 15,434 ) —

Restricted stock unit withholdings

2 unchanged sentences

Beginning balances $ ( 397,965 ) $ ( 367,461 )

Net loss ( 4,439 ) ( 1,120 ) ( 25,643 ) ( 22,728 )

( 835 ) ( 9,644 )

Ending balances $ ( 398,800 ) $ ( 377,105 )

1 unchanged sentence

Beginning balances $ 34 $ 320

Other comprehensive income (loss), net of tax

Other comprehensive loss, net of tax

( 29 ) ( 40 )

5 unchanged sentences

Issuance of common stock under stock-based compensation plans 3,817 3,221

Issuance of common stock under Employee Stock Purchase Plan — — 233 460

Repurchase of common stock ( 1,397 ) —

Restricted stock unit withholdings — ( 1,399 )

3 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 29,

2024 October 1,

Three Months Ended

2025 March 31,

(In thousands)

Cash flows from operating activities:

Net loss $ ( 25,643 ) $ ( 22,728 )

$ ( 835 ) $ ( 9,644 )

Adjustments to reconcile net loss to net cash provided by operating activities:

3 unchanged sentences

Deferred income taxes ( 155 ) 68

( 2,493 ) ( 1,224 )

Discount accretion on investments and other ( 657 ) ( 792 )

Changes in assets and liabilities:

Accounts receivable

( 3,095 ) ( 4,262 )

Accounts receivable, net 11,287 8,978

Inventories 5,648 ( 6,275 )

8 unchanged sentences

Purchases of short-term investments ( 44,049 ) ( 40,802 )

Purchase of long-term investment

Proceeds from maturities of short-term investments 45,000 40,718

Net cash provided by (used in) investing activities

11,229 ( 46,094 )

Net cash used in investing activities ( 14,352 ) ( 440 )

Cash flows from financing activities:

Proceeds related to employee benefit plans 649 573

Repurchase of common stock ( 15,239 ) —

Restricted stock unit withholdings — ( 14,355 )

Net cash used in financing activities ( 14,590 ) ( 13,782 )

Net increase (decrease) in cash, cash equivalents, and restricted cash

20,033 ( 32,967 )

Net increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash , at beginning of period

15 unchanged sentences

Arlo Technologies, Inc.

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

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

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

(“we” 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 channels, wholesale distribution, security solution providers, and Arlo’s direct to consumer store and paid subscription services.

and (iii) Asia Pacific (“APAC”)—and primarily generate revenue by selling paid subscription services, as well as devices through retail, wholesale distribution, wireless carrier channels, security solution providers, and Arlo’s direct to consumer store.

Our corporate headquarters is located in Carlsbad, California, with other satellite offices across North America and various other global locations.

19 unchanged sentences

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 three and nine months ended September 29, 2024 and are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or any future period.

Actual results could differ materially from those estimates and operating results for the three months ended March 30, 2025 and are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 or any future period.

Significant Accounting Policies and Recent Accounting Pronouncements

Our significant accounting policies are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

There have been no significant changes to such policies during the nine months ended September 29, 2024.

There have been no significant changes to such policies except the one below during the three months ended March 30, 2025.

We invested in a strategic investment, which consists of non-marketable securities in a privately held company in which we do not have a controlling interest or significant influence.

We apply the measurement alternative for non-marketable equity securities that do not have readily determinable fair values, measuring them at cost, less any impairment, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

For this investment, we recognize remeasurement adjustments, including upward and downward adjustments, and impairments, if any, in “Other non-operating income (expense), net” on the consolidated statements of comprehensive loss.

The strategic investment is subject to periodic impairment analysis, which involves an assessment of both qualitative and quantitative factors, including the investee’s financial metrics, market acceptance of the investee’s product or technology, and the rate at which the investee is using its cash.

An impairment loss is recorded when an event or circumstance indicates a decline in value has occurred.

If the strategic investment is considered impaired, we will recognize an impairment through “Other non-operating income (expense), net” on the consolidated statements of comprehensive loss and establish a new carrying value for the investment.

Accounting Pronouncements Recently Adopted

There were no accounting pronouncements adopted during the nine months ended September 29, 2024.

There were no accounting pronouncements adopted during the three months ended March 30, 2025.

Accounting Pronouncements Not Yet Effective

5 unchanged sentences

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

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting:

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

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

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

In December 2023, the FASB issued ASU No.

1 unchanged sentence

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.

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

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Performance Obligations

The total estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied and partially unsatisfied was $ 29.0 million as of September 29, 2024 and $ 18.8 million as of December 31, 2023, substantially related to performance obligations classified as less than one year .

For the nine months ended September 29, 2024 and October 1, 2023, $ 161.3 million and $ 131.8 million of revenue, respectively, was deferred due to unsatisfied performance obligations, primarily relating to over time service revenue, and $ 154.5 million and $ 125.6 million of revenue, respectively, was recognized for the satisfaction of performance obligations over time.

Approximately $ 17.3 million and $ 10.6 million of this recognized revenue, respectively, was included in the contract liability balance at the beginning of the periods.

There were no significant changes in estimates during the period that would affect the contract balances.

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.

Contract Balances

The following table reflects the changes in contract balances for the three months ended March 30, 2025:

Contract Balances

Balance Sheet Location March 30, 2025 December 31, 2024

(In thousands)

Accounts receivable, net Accounts receivable, net $ 46,054 $ 57,332 $ ( 11,278 ) ( 19.7 ) %

Contract liabilities current Deferred revenue $ 42,751 $ 27,248 $ 15,503 56.9 %

Contract liabilities non-current Other non-current liabilities $ 426 $ 326 $ 100 30.7 %

Deferred revenue as of March 30, 2025 increased primarily due to increases in subscription and service revenue as a result of changes in consumer subscription plans and a shift to additional annual prepaid subscriptions, as well as increases in cumulative paid accounts and rates of subscriptions.

For the three months ended March 30, 2025 and March 31, 2024, $ 14.6 million and $ 12.1 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 $ 44.6 million as of March 30, 2025 and $ 29.5 million as of December 31, 2024, substantially related to performance obligations classified as less than one year .

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 September 29, 2024, we had a backlog of $ 27.9 million which represents performance obligations that will be recognized as revenue once fulfilled, which is expected to occur over the next six months .

As of March 30, 2025, we had a backlog of $ 35.5 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 providing services or transferring goods.

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

Sales incentives are determined based on a combination of the actual amounts committed and estimated future

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

expenditure based upon historical customary business practice.

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.

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.

The following table provides activities related to sales incentives and sales returns that are recognized as contra-revenue.

Sales Incentives

Sales Returns

Three Months Ended Three Months Ended

2025 March 31,

2024 March 30,

2025 March 31,

(In thousands) (In thousands)

Balance at the beginning of the period $ 29,846 $ 26,110 $ 10,560 $ 16,553

Credits issued

( 21,718 ) ( 19,788 ) ( 4,199 ) ( 7,666 )

20,250 14,997 1,796 2,220

Balance at the end of the period $ 28,378 $ 21,319 $ 8,157 $ 11,107

Disaggregation of Revenue

2 unchanged sentences

The following table presents revenue disaggregated by geographic region.

Three Months Ended Nine Months Ended

September 29,

2024 October 1,

2023 September 29,

2024 October 1,

Three Months Ended

2025 March 31,

(In thousands)

3 unchanged sentences

Total $ 119,066 $ 124,200

As of September 29, 2024 and December 31, 2023, three customers accounted for 55.4 %, 11.3 %, and 10.7 %, and three customers accounted for 37.1 %, 15.2 %, and 10.2 % of the total accounts receivable, net, respectively.

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

For the three months ended September 29, 2024 and October 1, 2023, one customer accounted for 42.0 % and 33.0 % of the total revenue, respectively.

For the nine months ended September 29, 2024 and October 1, 2023, one customer accounted for 45.2 % and 34.4 % of the total revenue, respectively.

For the three months ended March 30, 2025 and March 31, 2024, one customer accounted for 36.0 % and 49.4 % of the total revenue, respectively.

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

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As of March 30, 2025, two customers accounted for 41 % and 20 %, and as of December 31, 2024, two customers accounted for 54 % and 13 % of the total accounts receivable, net.

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

Balance Sheet Components

Short-Term Investments

As of September 29, 2024 As of December 31, 2023

As of March 30, 2025 As of December 31, 2024

Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value

1 unchanged sentence

Treasuries $ 69,092 $ 5 $ — $ 69,097 $ 69,385 $ 34 $ — $ 69,419

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Accounts Receivable, Net

September 29,

2025 December 31,

4 unchanged sentences

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.

Three Months Ended Nine Months Ended

September 29,

2024 October 1,

2023 September 29,

2024 October 1,

Three Months Ended

2025 March 31,

(In thousands)

Balance at the beginning of the period $ 132 $ 333

Provision for (release of) expected credit losses

Release of expected credit losses

( 8 ) ( 115 )

Balance at the end of the period $ 124 $ 218

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Property and Equipment, Net

The components of property and equipment are as follows:

September 29,

2025 December 31,

9 unchanged sentences

$ 7,194 $ 4,765

_________________________

(1) $ 0.6 million and $ 1.0 million of property and equipment, net, was included in the sublease arrangement for the San Jose office building as of September 29, 2024 and December 31, 2023, respectively.

Depreciation expense pertaining to property and equipment was $ 0.7 million and $ 2.4 million for the three and nine months ended September 29, 2024, respectively, and $ 1.5 million and $ 3.8 million for the three and nine months ended October 1, 2023, respectively.

We have determined that no event occurred or circumstances changed during the nine months ended September 29, 2024 that would more likely than not reduce the fair value of goodwill below the carrying amount.

No goodwill impairment was recognized in the nine months ended September 29, 2024 and October 1, 2023.

Depreciation expense pertaining to property and equipment was $ 0.8 million and $ 0.9 million for the three months ended March 30, 2025 and March 31, 2024, respectively.

We have determined that no event occurred or circumstances changed during the three months ended March 30, 2025 that would more likely than not reduce the fair value of goodwill below the carrying amount.

There was no accumulated goodwill impairment recognized during the three months ended March 30, 2025.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Accrued Liabilities

September 29,

2025 December 31,

(In thousands)

Sales incentives $ 28,228 $ 28,187

Sales returns

Sales and marketing incentives

$ 30,088 $ 31,947

Sales returns

Compensation 13,200 12,921

2 unchanged sentences

Total $ 81,367 $ 85,730

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Fair Value Measurements

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

September 29,

2025 December 31,

10 unchanged sentences

_________________________

(1) Included in short-term investments on our unaudited condensed consolidated balance sheets.

(1) Included in short-term investments in our unaudited condensed 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 September 29, 2024 and December 31, 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.

As of March 30, 2025 and December 31, 2024, assets and liabilities measured as Level 2 fair value were not material.

Our strategic long-term investment that does not have a readily determinable fair value was accounted for using a measurement alternative under which it is measured at cost and adjusted for observable price changes and impairments.

This investment without readily determinable fair value is classified within Level 3 in the fair value hierarchy and the subsequent adjustment to its fair value by applying the measurement alternative will be disclosed as non-recurring fair value measurement, including the level in the fair value hierarchy that was used.

As of March 30, 2025, the carrying value of long-term investment was $ 12.5 million.

There was no observable price change or impairment during the three months ended March 30, 2025.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 September 29, 2024, we have substantially incurred all costs pertaining to restructuring activities, with related cash outflows extending until the fourth quarter of 2024.

The restructuring liabilities are included in accrued liabilities in our unaudited condensed consolidated balance sheets.

The restructuring charges are included in “Others” in the unaudited condensed 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 484 484 — —

Cash payments ( 640 ) ( 525 ) ( 115 ) —

Balance as of March 31, 2024

$ 296 $ 48 $ 248 $ —

Restructuring charges 914 914 — —

Cash payments ( 569 ) ( 477 ) ( 92 ) —

Balance as of June 30, 2024 $ 641 $ 485 $ 156 $ —

Restructuring charges 613 613 — —

Cash payments ( 1,036 ) ( 943 ) ( 93 ) —

Balance as of September 29, 2024 $ 218 $ 155 $ 63 $ —

Total costs incurred inception to date $ 4,530 $ 3,373 $ 1,108 $ 49

Revolving Credit Facility

On November 14, 2024, we entered into a 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 March 30, 2025, 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, including 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 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 0.20 % 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 March 30, 2025, 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 March 30, 2025.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Revolving Credit Facility

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

As of September 29, 2024, we were in compliance with all the covenants of the Credit Agreement.

No amounts had been drawn under the credit facility as of September 29, 2024.

The Credit Agreement provided for a three-year revolving credit facility that matured on October 27, 2024, in which the Credit Agreement and the credit facility provided thereunder were automatically terminated.

Commitments and Contingencies

1 unchanged sentence

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.

Certain lease agreements include options to renew or terminate the lease, which are generally 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 $ 1.4 million and $ 4.2 million for the three and nine months ended September 29, 2024, respectively, and $ 1.5 million and $ 4.5 million for the three and nine months ended October 1, 2023, respectively.

We recorded sublease income as reduction of lease expense, in the amount of $ 0.5 million and $ 1.5 million for the three and nine months ended September 29, 2024 and October 1, 2023, respectively.

Gross lease expense was $ 1.4 million and $ 1.5 million for the three months ended March 30, 2025 and March 31, 2024, respectively.

We recorded sublease income as reduction of lease expense, in the amount of $ 0.7 million and $ 0.5 million for the three months ended March 30, 2025 and March 31, 2024, respectively.

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

Nine Months Ended

September 29,

2024 October 1,

Three Months Ended

2025 March 31,

(In thousands)

4 unchanged sentences

Weighted average remaining lease term and weighted average discount rate related to operating leases are as follows:

September 29,

2025 December 31,

3 unchanged sentences

NOTES TO UNAUDITED CONDENSED 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 September 29, 2024 are as follows:

Operating Lease Payments Sublease Payments Net

(In thousands)

2024 (Remaining three months)

$ 1,267 $ ( 533 ) $ 734

2025 (Remaining nine months) $ 3,456 $ ( 1,646 ) $ 1,810

2026 5,532 ( 2,066 ) 3,466

9 unchanged sentences

Total lease liabilities $ 21,262

We entered into an operating lease for our new corporate headquarter located in Carlsbad, California.

Upon lease commencement expected to be December 1, 2024, the initial base term is 8.5 years, with a renewal option to extend the term for an additional five years .

As of September 29, 2024, we had approximately $ 7.3 million of future lease obligations subject to non-cancellable leases that have been signed but have not yet commenced.

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 September 29, 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.

As of March 30, 2025, 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

2 unchanged sentences

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

As of September 29, 2024, we had $ 29.3 million in non-cancelable purchase commitments with suppliers which is expected to be paid over the next twelve months .

As of September 29, 2024, an additional $ 25.8 million of purchase orders beyond contractual termination periods have been issued to supply chain partners in anticipation of demand requirements.

As of March 30, 2025, we had $ 23.3 million in non-cancelable purchase commitments with suppliers which is expected to be paid over the next twelve months .

As of March 30, 2025, an additional $ 24.3 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.

2 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Warranty Obligations

Changes in warranty obligations, which are included in accrued liabilities in the unaudited condensed consolidated balance sheets, are as follows:

Three Months Ended Nine Months Ended

September 29,

2024 October 1,

2023 September 29,

2024 October 1,

(In thousands)

Balance at the beginning of the period $ 1,056 $ 1,093 $ 1,193 $ 1,174

Provision for (release of) warranty obligations

( 89 ) 86 ( 80 ) 141

Settlements ( 63 ) ( 65 ) ( 209 ) ( 201 )

Balance at the end of the period $ 904 $ 1,114 $ 904 $ 1,114

Litigation and Other Legal Matters

We are involved in disputes, litigation, and other legal actions.

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.

1 unchanged sentence

We monitor developments in these legal matters that could affect the estimate we had previously accrued.

In relation to such matters, 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, or the outcome of these matters is currently not determinable.

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.

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

As of September 29, 2024 and December 31, 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.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As of March 30, 2025 and December 31, 2024, we have not incurred any material costs as a result of such indemnification obligations and we are not currently aware of any indemnification claims.

Employee Benefit Plans

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

As of September 29, 2024, approximately 4.8 million shares were available for future grants.

As of March 30, 2025, 4.1 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 19, 2024, we registered an aggregate of up to 4,759,901 shares of common stock on a Registration Statement on Form S-8, including 3,807,921 shares issuable pursuant to the 2018 Plan that were automatically added to the shares authorized for issuance and 951,980 shares issuable pursuant to the Employee Stock Purchase Plan (“ESPP”) that were automatically added to the shares authorized for issuance on January 1, 2024, both pursuant to an “evergreen” provision contained in the respective plans.

The following table sets forth the available shares for grants as of September 29, 2024:

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.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table sets forth the available shares for grants as of March 30, 2025:

Number of Shares

4 unchanged sentences

Forfeited / cancelled 8

Shares traded / withheld for taxes

Shares available for grants as of September 29, 2024

Shares available for grants as of March 30, 2025

Employee Stock Purchase Plan

We sponsor the ESPP to eligible employees.

Under our ESPP, employees purchased 233 thousand shares and 460 thousand shares during the nine months ended September 29, 2024 and October 1, 2023, respectively.

As of September 29, 2024, 2.5 million shares were available for issuance under the ESPP.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

There were no ESPP purchases during either the three months ended March 30, 2025 or March 31, 2024.

As of March 30, 2025, 3.4 million shares were available for issuance under the ESPP.

Option Activity

We did not grant options during the nine months ended September 29, 2024.

Stock option activity during the nine months ended September 29, 2024 was as follows:

We did not grant options during the three months ended March 30, 2025.

Stock option activity during the three months ended March 30, 2025 was as follows:

Number of Shares Weighted Average Exercise Price Per Share

1 unchanged sentence

Outstanding as of December 31, 2024

1,096 $ 12.48

Granted — $ —

2 unchanged sentences

Expired ( 130 ) $ 14.39

Outstanding as of September 29, 2024

Vested and exercisable as of September 29, 2024

RSU activity, excluding PSU activity, during the nine months ended September 29, 2024 was as follows:

Outstanding as of March 30, 2025

Vested and exercisable as of March 30, 2025

RSU activity, excluding PSU activity, during the three months ended March 30, 2025 was as follows:

Number of Shares Weighted Average Grant Date Fair Value Per Share

4 unchanged sentences

Forfeited ( 40 ) $ 7.77

Outstanding as of September 29, 2024

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.

Outstanding as of March 30, 2025

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

PSU activity during the nine months ended September 29, 2024 was as follows:

At the end of each reporting period, we evaluate the probability of achieving the performance and record the related stock-based compensation expense based on the achievement over the service period.

PSU activity during the three months ended March 30, 2025 was as follows:

Number of Shares Weighted Average Grant Date Fair Value Per Share

4 unchanged sentences

Forfeited ( 3 ) $ 8.28

Outstanding as of September 29, 2024

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 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 of their RSUs and PSUs 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 will apply to all Arlo employees effective on January 1, 2025.

Outstanding as of March 30, 2025

Stock-Based Compensation Expense

The following table sets forth the stock-based compensation expense included in our unaudited condensed consolidated statements of comprehensive loss:

Three Months Ended Nine Months Ended

September 29,

2024 October 1,

2023 September 29,

2024 October 1,

Three Months Ended

2025 March 31,

(In thousands)

4 unchanged sentences

Total $ 17,012 $ 18,550

As of September 29, 2024, all outstanding options were fully vested;

therefore, there was no unrecognized compensation cost related to stock options.

Approximately $ 59.7 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 as of September 29, 2024.

During the nine months ended September 29, 2024 and October 1, 2023, we settled executive and employee bonuses by granting and issuing RSUs (non-cash financing activities) that vested immediately amounting to $ 12.6 million and $ 13.5 million, respectively.

As of March 30, 2025, all outstanding options were fully vested, therefore, there was no unrecognized compensation cost related to stock options.

As of March 30, 2025, $ 74.0 million of unrecognized compensation cost related to unvested RSUs and PSUs is expected to be recognized over a weighted-average period of 1.7 year.

During the three months ended March 30, 2025 and March 31, 2024, we settled executive and employee bonuses by granting and issuing RSUs (non-cash financing activities) that vested immediately amounting to $ 5.0 million and $ 6.9 million, respectively.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The provision for income taxes for the three and nine months ended September 29, 2024 was $ 0.3 million and $ 1.0 million, respectively, or an effective tax rate of ( 8.0 )% and ( 3.9 )%, respectively.

The provision for income taxes for the three and nine months ended October 1, 2023 was $ 0.03 million and $ 1.04 million, respectively, or an effective tax rate of ( 2.7 )% and ( 4.8 )%, respectively.

During the three and nine months ended September 29, 2024 and October 1, 2023, we sustained U.S.

The provision for income taxes for the three months ended March 30, 2025 was $ 0.5 million or an effective tax rate of ( 150.8 )%.

The provision for income taxes for the three months ended March 31, 2024 was $ 0.4 million or an effective tax rate of ( 4.3 )%.

Provision for income taxes increased for the three months ended March 30, 2025, compared to the prior year period, primarily due to the increase in state income taxes that no longer have the net operating losses in the U.S.

The lower effective tax rate this quarter is due to the lower loss from operations this quarter compared to the prior year period.

Consistent with the prior year periods, we maintained a valuation allowance against our U.S.

federal and state deferred tax assets and did not record a tax benefit on these deferred tax assets since it is more likely than not that these deferred tax assets will not be realized.

Provision for income taxes increased for the three months ended September 29, 2024, compared to the prior year period, primarily due to increase in U.S.

Provision for income taxes decreased for the nine months ended September 29, 2024, compared to the prior year period, primarily due to (i) foreign-derived intangible income (“FDII”) and higher Section 174 amortization in the U.S.

and (ii) the utilization of R&D credit in Ireland to partially offset its tax liability.

The lower effective tax rate for the three months ended March 30, 2025, compared to the U.S.

federal income tax rate, is primarily due to the valuation allowance on our net U.S.

deferred tax assets and the impact of a lower tax rate on foreign earnings.

Net Loss Per Share

Three Months Ended Nine Months Ended

September 29,

2024 October 1,

2023 September 29,

2024 October 1,

Three Months Ended

2025 March 31,

(In thousands, except per share data)

Net loss $ ( 4,439 ) $ ( 1,120 ) $ ( 25,643 ) $ ( 22,728 )

$ ( 835 ) $ ( 9,644 )

Weighted average common shares - basic and diluted

102,217 96,264

Basic and diluted net loss per share

$ ( 0.01 ) $ ( 0.10 )

Anti-dilutive employee stock-based awards, excluded 572 805

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Segment and Geographic Information

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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 on a consolidated basis for purposes of allocating resources and evaluating financial performance.

Our Chief Executive Officer (“CEO”) is identified as the Chief Operating Decision Maker (“CODM”), who reviews financial information presented in a consolidated basis and considers budget-to-actual variances quarterly for allocation of operating and capital resources and evaluation of 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.

The CODM is regularly provided with not only the consolidated expenses on the unaudited condensed consolidated statements of comprehensive loss, but also the significant segment expenses and other segment items as below:

Three Months Ended

2025 March 31,

(In thousands)

Revenue $ 119,066 $ 124,200

Cost of revenue 66,339 76,820

Operating expenses

Personnel-related expense 17,567 17,927

Stock-based compensation 15,894 17,179

Outside professional services 11,513 15,007

Marketing expenditure 4,255 3,681

Other segment items (1)

Depreciation 557 464

Interest expense 86 95

Income taxes expense 502 395

Segment net loss $ ( 835 ) $ ( 9,644 )

Reconciliation of profit or loss:

Adjustments and reconciling items — —

Consolidated net loss $ ( 835 ) $ ( 9,644 )

_________________________

(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.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED 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.

Revenue consists of subscription and service revenue and product sales, 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.

1 unchanged sentence

The following table presents revenue by geographic area.

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

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Three Months Ended Nine Months Ended

September 29,

2024 October 1,

2023 September 29,

2024 October 1,

Three Months Ended

2025 March 31,

(In thousands)

8 unchanged sentences

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

September 29,

2025 December 31,

4 unchanged sentences

Stock Repurchase Program

On September 19, 2024, our Board of Directors approved a stock repurchase program of up to an aggregate of $ 50 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.

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.

There were no repurchases during the three months ended September 29, 2024 and $ 50 million remained authorized for repurchase under this stock repurchase program as of September 29, 2024.

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.

During the three months ended March 30, 2025, we repurchased and subsequently retired 1.4 million shares of Arlo common stock for an aggregate amount of $ 15.2 million.

As of March 30, 2025, $ 30.3 million remained available and authorized for future repurchases.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements