What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-07 · 126 added, 110 removed, 172 unchanged (58% of the section changed)

17 unchanged sentences

Since the launch of our first product in December 2014, we have shipped over 41.4 million smart connected devices.

As of June 29, 2025, the Arlo platform had approximately 11.2 million cumulative registered accounts across more than 100 countries around the world coupled with approximately 5.1 million cumulative paid subscribers and annual recurring revenue of $315.7 million.

As of September 28, 2025, the Arlo platform had approximately 11.8 million cumulative registered accounts across more than 100 countries around the world coupled with approximately 5.4 million cumulative paid accounts and annual recurring revenue (“ARR”) of $323.2 million.

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

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and (iii) Asia Pacific (“APAC”)—and we 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.

For the three months ended June 29, 2025 and June 30, 2024, we generated total revenue of $129.4 million and $127.4 million, respectively, and income (loss) from operations was $1.9 million and $(12.8) million, respectively.

For the six months ended June 29, 2025 and June 30, 2024, we generated total revenue of $248.5 million and $251.6 million, respectively, and income (loss) from operations was $0.5 million and $(23.4) million, respectively.

For the three months ended September 28, 2025 and September 29, 2024, we generated total revenue of $139.5 million and $137.7 million, respectively, and income (loss) from operations was $0.9 million and $(5.5) million, respectively.

For the nine months ended September 28, 2025 and September 29, 2024, we generated total revenue of $388.0 million and $389.3 million, respectively, and income (loss) from operations was $1.4 million and $(28.9) million, respectively.

Our goal is to continue to develop innovative, world-class smart security solutions to expand and further monetize our current and future user and paid account bases.

We believe that the growth of our business is dependent on many factors, including our ability to innovate and launch successful new products on a timely basis and grow our installed base, to increase subscription-based recurring revenue, to invest in channel and other strategic partnerships and to continue our global expansion.

We expect to increase our investment in research and development going forward as we continue to

introduce new and innovative products and services to enhance the Arlo platform and compete for engineering talent.

global expansion.

We expect to increase our investment in research and development going forward as we continue to introduce new and innovative products and services to enhance the Arlo platform and compete for engineering talent.

We also expect our sales and marketing expenses to increase in the future as we invest in marketing to drive demand for our products and services.

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We believe that any such adjustments are immaterial unless otherwise stated.

2025 % Change June 30,

September 28,

2025 % Change September 29,

(In thousands, except percentage data)

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Cumulative Registered Accounts .

We believe that our ability to increase our user base is an indicator of our market penetration and growth of our business as we continue to expand and innovate our Arlo platform.

We define our registered accounts at the end of a particular period as the number of unique registered accounts on the Arlo platform as of the end of such period.

The number of registered accounts does not necessarily reflect the number of end-users on the Arlo platform as one registered account may be used by multiple end-users to monitor the devices attached to that household.

Registered accounts at the end of a particular period are defined as the number of unique registered accounts on the Arlo platform.

The number of registered accounts on the Arlo platform does not directly correspond to the number of users.

A single account may be shared by multiple users (which we consider as one account) and a single user may have multiple accounts (which we consider as multiple accounts).

Cumulative Paid Accounts .

Paid accounts are defined as any account worldwide where a subscription to a paid service is being collected (either by us or by our customers or channel partners, including Verisure).

Paid accounts at the end of a particular period are defined as any account worldwide where a subscription-based or otherwise reoccurring service fee was collected by Arlo (either directly from a user or from a partner).

Annual Recurring Revenue .

We believe ARR enables measurement of our business initiatives and serves as an indicator of our future growth.

ARR represents and is defined as the annualized paid subscriptions and services revenue we expect to recognize from subscription contracts, as calculated by taking the average paid subscriptions and services revenue of the reporting period multiplied by the number of subscription accounts at the end of the reporting period.

ARR represents and is defined as the annualized paid subscriptions and services revenue we expect to recognize from subscription contracts, as calculated by taking the average paid subscriptions and services revenue per paid account of the reporting period multiplied by the number of paid accounts at the end of the reporting period.

ARR is a performance metric and should be viewed independently of revenue and deferred revenue, and is not intended to be a substitute for, or combined with, any of these items.

Impact of Global Geopolitical, Economic and Business Conditions

government recently implemented new tariff measures and potential additional reciprocal tariffs affecting a broad range of imported materials.

government implemented new tariff measures affecting a broad range of imported materials.

Certain countries have responded to the U.S.

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While we are actively monitoring the changes in global trade policy and the effects they may have on our business and broader macroeconomic environment, we have not experienced a material impact on our financial position to date and do not expect them to have a material detrimental impact on our business operations in the near term.

However, given the uncertainty surrounding global markets and general global uncertainty as a result of the new U.S.

However, given the uncertainty surrounding global markets as a result of the new U.S.

tariff policy, we do not have clarity at this point over the potential medium to long term impacts our business may face.

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The following table sets forth, for the periods presented, the unaudited condensed consolidated statements of comprehensive income (loss) data, which we derived from the accompanying unaudited condensed consolidated financial statements:

Three Months Ended Six Months Ended

2025 June 30,

2024 June 29,

2025 June 30,

Three Months Ended Nine Months Ended

September 28,

2025 September 29,

2024 September 28,

2025 September 29,

(In thousands, except percentage data)

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Income (loss) from operations 872 0.6 % (5,453) (4.0) % 1,354 0.3 % (28,864) (7.5) %

Gain on early lease termination 4,144 3.0 % — — % 4,144 1.1 % — — %

Interest income, net 1,508 1.1 % 1,400 1.0 % 4,168 1.1 % 4,281 1.1 %

Other non-operating expense, net (407) (0.3) % (18) — % (605) (0.3) % (43) — %

Other non-operating income (expense), net 503 0.4 % (57) — % (102) — % (100) — %

Income (loss) before income taxes 7,027 5.1 % (4,110) (3.0) % 9,564 2.5 % (24,683) (6.4) %

Provision (benefit) for income taxes

(254) (0.2) % 236 0.2 % 248 0.1 % 631 0.2 %

Provision for income taxes 154 0.1 % 329 0.2 % 402 0.1 % 960 0.2 %

Net income (loss) $ 6,873 5.0 % $ (4,439) (3.2) % $ 9,162 2.4 % $ (25,643) (6.6) %

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and (iii) APAC—and generally base revenue by geographic region on the bill-to location of the customer for device location for subscriptions and services sales and device sales.

Three Months Ended Six Months Ended

2025 % Change June 30,

2024 June 29,

2025 % Change June 30,

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

(In thousands, except percentage data)

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Revenue by classification is as follows:

Three Months Ended Six Months Ended

2025 % Change June 30,

2024 June 29,

2025 % Change June 30,

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

(In thousands, except percentage data)

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Total revenue $ 139,529 1.4 % $ 137,667 $ 388,000 (0.3) % $ 389,314

Subscriptions and services revenue increased by $17.9 million or 29.7%, and $30.1 million or 25.7%, for the three and six months ended June 29, 2025 compared to the prior year periods, respectively, primarily due to a 28.5% increase in cumulative paid accounts and continued increase in average revenue per user (“ARPU”) of retail and direct paid subscriptions.

Products revenue decreased by $16.0 million or 23.7%, and $33.2 million or 24.7%, for the three and six months ended June 29, 2025 compared to the prior year periods, respectively, primarily from the decrease in product sales in EMEA due to the timing of device shipments from our largest customer and the reduction in average selling prices (“ASPs”) of our products as we increased promotional activities to stimulate household acquisition and subscriber growth.

The decrease in products revenue due to the higher sales incentives are deemed to be reductions of revenue.

Subscriptions and services revenue increased by $18.1 million or 29.2%, and $48.1 million or 26.9%, for the three and nine months ended September 28, 2025 compared to the prior year periods, respectively, primarily due to a 27.4% increase in cumulative paid accounts and continued increase in average revenue per user (“ARPU”) on retail and direct paid subscription services.

Products revenue decreased by $16.2 million or 21.4%, and $49.4 million or 23.5%, for the three and nine months ended September 28, 2025 compared to the prior year periods, respectively, primarily from the decrease in product sales in EMEA due to the timing of device shipments from our largest customer and the reduction in average selling prices (“ASPs”) of our products as we increased promotional activities to stimulate household acquisition and subscriber growth.

The decrease in products revenue was due to the higher sales incentives which are deemed to be reductions of revenue.

Cost of Revenue

Cost of revenue consists of both subscriptions and services cost as well as products cost.

Subscriptions and services cost consists of costs attributable to the provision and maintenance of our cloud-based platform, including personnel expense, data storage, security and computing, IT and facilities overhead.

Products cost primarily consists of the cost of finished products from our third-party manufacturers and overhead costs, including personnel expense for operations staff, purchasing, product planning, inventory control, warehousing and distribution logistics, third-party software licensing fees, inbound freight, duty and tariff costs, IT and facilities overhead, warranty costs associated with returned goods, write-downs for excess and obsolete inventory and excess components, and royalties to third parties.

goods sold due to fluctuations in prices paid for components, net of vendor rebates, cloud platform costs, warranty and overhead costs, inbound freight, duty and tariff costs, and charges for excess or obsolete inventory.

Our cost of revenue as a percentage of revenue can vary based upon a number of factors, including those that may affect our revenue set forth above and factors that may affect our cost of revenue, including, without limitation, product mix, sales channel mix, registered accounts’ acceptance of paid subscription service offerings, and changes in our cost of goods sold due to fluctuations in prices paid for components, net of vendor rebates, cloud platform costs, warranty and overhead costs, inbound freight, duty and tariff costs, and charges for excess or obsolete inventory.

We outsource our manufacturing, warehousing, and distribution logistics.

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manufacturers, our ability to manage product costs through this strategy has been, and may continue to be, negatively impacted by tariffs.

Three Months Ended Six Months Ended

2025 % Change June 30,

2024 June 29,

2025 % Change June 30,

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

(In thousands, except percentage data)

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Total cost of revenue $ 83,023 (7.0) % $ 89,251 $ 220,692 (10.5) % $ 246,664

Subscriptions and services cost of revenue decreased by 16.0% and 13.0% for the three and six months ended June 29, 2025, compared to the prior year periods, primarily due to cost savings as we optimize our cloud platform to improve customer experience which assists in reduced data storage and cloud costs.

Products cost of revenue decreased by 10.5% and 12.4% for the three and six months ended June 29, 2025, compared to the prior year periods, primarily due to the decrease in product sales partially offset by an increase in freight cost mainly as a result of increased duties and tariffs, and to a lesser extent, the utilization of air freight.

Three Months Ended Six Months Ended

2025 % Change June 30,

2024 June 29,

2025 % Change June 30,

Subscriptions and services cost of revenue decreased by 13.9% and 13.3% for the three and nine months ended September 28, 2025, compared to the prior year periods, respectively, primarily due to cost savings as we optimize our cloud platform to improve customer experience which assists in reduced data storage and cloud costs.

Products cost of revenue decreased by 5.6% and 10.0% for the three and nine months ended September 28, 2025, compared to the prior year periods, respectively, primarily due to the decrease in product sales partially offset by an increase in freight cost mainly as a result of increased duties and tariffs, and to a lesser extent, the utilization of air freight.

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

(In thousands, except percentage data)

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**Percentage change not meaningful.

Subscriptions and services gross profit increased by $20.2 million and $33.7 million for the three and six months ended June 29, 2025, compared to the prior year periods, respectively, primarily due to subscriptions and services revenue growth as a result of increases in cumulative paid accounts, continued increase in ARPU of retail subscriptions, and cost optimizations.

Products gross profit decreased by $9.0 million and $17.1 million for the three and six months ended June 29, 2025, compared to the prior year periods, respectively, primarily driven by a reduction in the ASPs of our products as we increased promotional activities to stimulate household acquisition and subscriber growth and an increase in freight cost mainly as a result of increased duties and tariffs, and to a lesser extent, the utilization of air freight.

Subscriptions and services gross profit increased by $20.1 million and $53.8 million for the three and nine months ended September 28, 2025, compared to the prior year periods, respectively, primarily due to subscriptions and services revenue growth as a result of increases in cumulative paid accounts, continued increase in ARPU on retail subscriptions, and cost optimizations.

Products gross profit decreased by $12.0 million and $29.1 million for the three and nine months ended September 28, 2025, compared to the prior year periods, respectively, primarily driven by a reduction in the ASPs of our products as we increased promotional activities to stimulate household acquisition and subscriber growth and an increase in freight cost mainly as a result of increased duties and tariffs, and to a lesser extent, the utilization of air freight.

Operating Expenses

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We believe that innovation and technological leadership are critical to our future success, and we are committed to continuing a significant level of research and development to develop new technologies, products and services, including our hardware devices, cloud-based software, AI-based algorithms, and machine learning capabilities.

Three Months Ended Six Months Ended

2025 % Change June 30,

2024 June 29,

2025 % Change June 30,

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

(In thousands, except percentage data)

Research and development expense $ 18,144 3.3 % $ 17,562 $ 52,798 (8.8) % $ 57,916

Research and development expense decreased by $1.1 million for the three months ended June 29, 2025 compared to the prior year period, primarily due to decreases of $1.7 million in professional services and $1.3 million in IT and facilities overhead related to allocation associated with corporate infrastructure as a result of the capitalization of software development costs, partially offset by an increase of $2.1 million in personnel-related expenses due the headcount increase as a result of our research and development investment.

Research and development expense decreased by $5.7 million for the six months ended June 29, 2025 compared to the prior year period, primarily due to decreases of $3.7 million in professional services, $2.3 million in IT and facilities overhead related to allocation associated with corporate infrastructure, and $1.3 million in personnel-related expenses as a result of the capitalization of software development costs, partially offset by an increase of $1.7 million in personnel-related expenses due the headcount increase as a result of our research and development investment.

Research and development expense slightly increased by $0.6 million for the three months ended September 28, 2025 compared to the prior year period, primarily due to an increase of $2.1 million in personnel-related expenses due to the headcount increases as a result of our research and development investment, partially offset by a decrease of $1.3 million in professional services due to the capitalization of software development costs as we invest in software capabilities.

Research and development expense decreased by $5.1 million for the nine months ended September 28, 2025 compared to the prior year period, primarily due to decreases of $5.0 million in professional services, $2.9 million in IT and facilities overhead related to allocation associated with corporate infrastructure, and $1.1 million in personnel-related expenses due to the capitalization of software development costs as we invest in software capabilities, partially offset by an increase of $3.8 million in personnel-related expenses due to the headcount increases as a result of our research and development investment.

Sales and Marketing

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We expect our sales and marketing expense to increase in the future as we invest in marketing to drive demand for our subscriptions and services and device products.

Three Months Ended Six Months Ended

2025 % Change June 30,

2024 June 29,

2025 % Change June 30,

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

(In thousands, except percentage data)

Sales and marketing expense $ 20,459 14.7 % $ 17,832 $ 61,765 16.8 % $ 52,900

Sales and marketing expense increased by $3.4 million for the three months ended June 29, 2025 compared to the prior year period, primarily due to increases of $2.4 million in credit card and in-app processing fees as a result of increases in paid subscriber accounts and focused efforts to improve our customer’s app experience and $1.4 million in marketing expenditures.

Sales and marketing expense increased by $6.2 million for the six months ended June 29, 2025 compared to the prior year period, primarily due to increases of $4.1 million in credit card and in-app processing fees as a result of increases in paid subscriber accounts and focused efforts to improve our customer’s app experience, $1.9 million in marketing expenditures, and $0.7 million in personnel-related expenses mainly from stock-based compensation, partially offset by a decrease of $0.5 million in freight-out expenses.

Sales and marketing expense increased by $2.6 million for the three months ended September 28, 2025 compared to the prior year period, primarily due to increases of $2.4 million in credit card and in-app processing fees as a result of increases in paid accounts and focused efforts to improve our customer’s app experience.

Sales and marketing expense increased by $8.9 million for the nine months ended September 28, 2025 compared to the prior year period, primarily due to increases of $6.5 million in credit card and in-app processing fees as a result of increases in paid accounts and focused efforts to improve our customer’s app experience, $1.4 million in marketing expenditures, and $1.0 million in personnel-related expenses mainly from stock-based compensation as a result of the increase in our stock price.

General and Administrative

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We expect our general and administrative expense to fluctuate as a percentage of our revenue in future periods based on fluctuations in our revenue and the timing of such expense.

Three Months Ended Six Months Ended

2025 % Change June 30,

2024 June 29,

2025 % Change June 30,

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

(In thousands, except percentage data)

General and administrative expense $ 15,091 (11.5) % $ 17,052 $ 49,210 (14.9) % $ 57,830

General and administrative expense decreased by $5.1 million and $6.7 million for the three and six months ended June 29, 2025, respectively compared to the prior year periods, primarily due to the decrease of $5.2 million and $6.3 million, respectively, in personnel-related expenses mainly from stock-based compensation from the achievement of performance-based awards target in the prior year periods.

General and administrative expense decreased by $2.0 million and $8.6 million for the three and nine months ended September 28, 2025, respectively compared to the prior year periods, primarily due to (i) the decrease of $1.6 million and $7.9 million, respectively, in personnel-related expenses mainly from stock-based compensation as a result of the achievement of certain performance-based equity award targets in the prior year periods;

and (ii) the decrease of $0.3 million and $0.9 million, respectively, in IT and facilities overhead related to allocation associated with corporate infrastructure.

Other operating expenses

Other operating expenses include restructuring charges, which consist primarily of severance costs, and separation expenses, which consist primarily of costs of legal and professional services.

Interest Income, Net and Other Non-Operating Expense, Net

Three Months Ended Six Months Ended

2025 % Change June 30,

2024 June 29,

2025 % Change June 30,

Other Income (Expense)

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

(In thousands, except percentage data)

Gain on early lease termination

$ 4,144 ** $ — 4,144 ** —

Interest income, net

$ 1,508 7.7 % $ 1,400 4,168 (2.6) % 4,281

Other non-operating expense, net $ (407) ** $ (18) (605) ** (43)

Other non-operating income (expense), net $ 503 ** $ (57) (102) ** (100)

** Percentage change not meaningful.

Interest income, net decreased for the three and six months ended June 29, 2025 compared to the prior year periods, primarily due to the lower interest rates.

Provision (Benefit) for Income Taxes

Three Months Ended Six Months Ended

2025 % Change June 30,

2024 June 29,

2025 % Change June 30,

In July 2025, we entered into a termination agreement for our office lease located in San Jose, California.

We recorded the derecognition of right-of-use assets and lease liabilities and recognized a gain of $4.1 million upon the termination effective in the third quarter of 2025.

Interest income, net increased for the three months ended September 28, 2025 compared to the prior year period, primarily due to the increase in our short-term investments balance.

Interest income, net decreased for the nine months ended September 28, 2025 compared to the prior year period, primarily due to the declines in interest rates.

Provision for Income Taxes

Three Months Ended Nine Months Ended

September 28,

2025 % Change September 29,

2024 September 28,

2025 % Change September 29,

(In thousands, except percentage data)

Provision (benefit) for income taxes

$ (254) (207.6) % $ 236 $ 248 (60.7) % $ 631

Provision for income taxes $ 154 (53.2) % $ 329 $ 402 (58.1) % $ 960

Effective tax rate 2.2 % (8.0) % 4.2 % (3.9) %

The effective tax rate for the three and six months ended June 29, 2025 was lower than the U.S.

The effective tax rate for the three and nine months ended September 28, 2025 was lower than the U.S.

federal income tax rate due to a lower effective tax rate on foreign earnings and valuation allowance on our net U.S.

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However, as we continue to generate income, we are approaching the point at which the accumulated rolling 36-month pre-tax income turns positive—a key piece of objectively verifiable evidence supporting the realizability of deferred tax assets.

If this positive trend continues and a cumulative income position is achieved within the year, we may consider a partial or full reversal of the valuation allowance.

We have recorded a full valuation allowance against U.S.

net deferred tax assets.

We will continue to maintain a full valuation allowance on U.S.

net deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of this allowance.

However, given our current and anticipated future domestic earnings, we believe that there is a reasonable possibility that within the next 12-24 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of the U.S.

valuation allowance will no longer be needed.

A release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense, which could be material, for the period the release is recorded.

There is a reasonable possibility that within the next several quarters, sufficient positive evidence will become available to reach a conclusion that all or a significant portion of the valuation allowance against our U.S.

net deferred tax assets would no longer be required.

On July 4, 2025, the OBBBA, a significant tax reform package, was enacted.

Included in this legislation are provisions that allow for the immediate expensing of domestic U.S.

research and development expenses, and certain capital expenditures, as well as other changes to the U.S.

taxation of profits derived from foreign operations.

Management is continuing to evaluate the provisions of the OBBBA, including treatment of previously capitalized domestic U.S.

research and development expenses.

Based on information available to date, management does not expect the enactment of the OBBBA to have a material impact on our consolidated financial statements;

however, the ultimate effect may differ from the amounts reflected in the interim financial statements once the analysis is complete and elections are finalized.

Liquidity and Capital Resources

As of June 29, 2025, our cash and cash equivalents and short-term investments totaled $160.4 million and the unused borrowing capacity of $45.0 million based on the terms and conditions of the Credit Agreement.

As of September 28, 2025, our cash and cash equivalents and short-term investments totaled $165.5 million and our unused borrowing capacity was $45.0 million based on the terms and conditions of the Credit Agreement.

The proceeds of the borrowings under this credit facility may be used for working capital and general corporate purposes.

We have a history of losses and may incur operating and net losses in the future.

As of June 29, 2025, our accumulated deficit was $395.7 million.

As of September 28, 2025, our accumulated deficit was $388.8 million.

Historically, we have funded our principal business activities through cash flows generated from operations and available cash on hand.

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As we grow our installed base and related cost structure, there will be a need for additional working capital, hence, we may increase our product and subscription rates in the future.

Leases and Contractual Commitments

Our operating lease obligations mostly include offices, equipment, data centers, and distribution centers.

Operating Leases and Contractual Commitments

Our operating lease obligations mostly include offices, equipment, and distribution centers.

Our contractual commitments are primarily inventory-related purchase obligations with suppliers.

Contingencies

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

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.

Legal Contingencies

We are, and from time to time, we may become involved in disputes, litigation, and other legal actions in the ordinary course of business.

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.

Significant judgment is required to determine both the probability and the estimated amount of loss.

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 litigation reserves, net.

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 litigation reserves in other operating expense on the unaudited condensed consolidated statements of comprehensive income (loss).

Refer to Note 7.

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Our Board of Directors authorized a stock repurchase program of up to an aggregate of $50.0 million of shares, which commenced in September 2024 and is expected to continue through December 31, 2026 unless extended or shortened by the Board of Directors.

During the six months ended June 29, 2025, we repurchased and subsequently retired 1.5 million shares of Arlo common stock for an aggregate amount of $16.1 million.

As of June 29, 2025, $29.4 million remained available and authorized for future repurchases.

Six Months Ended

2025 June 30,

During the nine months ended September 28, 2025, we repurchased and subsequently retired 2.1 million shares of Arlo common stock for an aggregate amount of $26.8 million.

As of September 28, 2025, $18.8 million remained available and authorized for future repurchases.

Nine Months Ended

September 28,

2025 September 29,

(In thousands)

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$ 58,952 $ 44,634

Net cash used in investing activities (36,668) (268)

Net cash provided by (used in) investing activities (30,428) 11,229

Net cash used in financing activities (24,544) (35,830)

Net cash increase (decrease)

$ (10,788) $ 5,899

Net cash increase $ 3,980 $ 20,033

Operating activities

Net cash provided by operating activities increased by $13.5 million for the six months ended June 29, 2025 compared to the prior year period, primarily due to improved profitability, partially offset by unfavorable working capital movements as a result of (i) decreased accounts payable balances mainly due to timing of payments;

and (ii) higher accounts receivable balances in connection with our subscription sales growth;

partially offset by (i) lower inventory balances as a result of strong hardware sales with higher inventory turn;

and (ii) increase in deferred revenue due to the growth in our subscription paid accounts and rates.

Net cash provided by operating activities increased by $14.3 million for the nine months ended September 28, 2025 compared to the prior year period, primarily due to improved profitability, partially offset by unfavorable working capital movements as a result of (i) higher accounts receivable balances in connection with our subscription sales growth;

and (ii) decreased accounts payable balances mainly due to timing of payments;

partially offset by (i) higher inventory balances as we prepare for the holiday season and (ii) increases in deferred revenue due to the growth in our paid accounts and subscription rates.

Investing activities

Net cash used in investing activities increased by $36.4 million for the six months ended June 29, 2025 compared to the prior year period, primarily due to our strategic long-term investment in a privately-held company, higher net purchases of short-term investments, and to a lesser extent, an increase in capitalized software development costs.

Net cash used in investing activities increased by $41.7 million for the nine months ended September 28, 2025 compared to the prior year period, primarily due to higher net purchases of short-term investments, coupled with our strategic long-term investment in a privately-held company, as well as to a lesser extent, the increases in capitalized software development costs.

Financing activities

Net cash used in financing activities decreased by $6.2 million for the six months ended June 29, 2025 compared to the prior year period, primarily due to the decrease in withholding tax from RSU and PSU releases as a result of the sell-to-cover method being applied to all Arlo employees for their tax withholding effective on January 1, 2025, partially offset by the stock repurchases.

Net cash used in financing activities decreased by $11.3 million for the nine months ended September 28, 2025 compared to the prior year period, primarily due to the decrease in withholding tax from RSU and PSU releases as a result of the sell-to-cover method being applied to all Arlo employees for their tax withholding effective on January 1, 2025, partially offset by the stock repurchases.

Critical Accounting Policies and Estimates

For a complete description of what we believe to be the critical accounting policies and estimates used in the preparation of our unaudited condensed consolidated financial statements, refer to our Annual Report on Form 10-K for the year ended December 31, 2024.

There have been no material changes to our critical accounting policies and estimates during the six months ended June 29, 2025, other than as discussed in Note 2.

There have been no material changes to our critical accounting policies and estimates during the nine months ended September 28, 2025, other than as discussed in Note 2.

Significant Accounting Policies and Recent Accounting Pronouncements, in the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report.

Quantitative and Qualitative Disclosures About Market Risk

During the six months ended June 29, 2025, there were no material changes to our market risk disclosures as set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2024.

During the nine months ended September 28, 2025, there were no material changes to our market risk disclosures as set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2024.

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 2. Management’s Discussion and Analysis