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If we are unable to obtain a sufficient supply of components, or if we experience any interruption in the supply of components, our product shipments could be reduced or delayed or our cost of obtaining these components may increase.
−Removed: In addition, sole suppliers of highly specialized components may provide, or have provided components that were either defective or did not meet the criteria required by us or our manufacturers, retailers, distributors, or other channel partners, resulting in delays, lost revenue opportunities, and potentially substantial write-offs.
+Added: In addition, sole suppliers of highly specialized components may provide, or have provided components that were either
+Added: defective or did not meet the criteria required by us or our manufacturers, retailers, distributors, or other channel partners, resulting in delays, lost revenue opportunities, and potentially substantial write-offs.
We depend on a limited number of third-party manufacturers for substantially all of our manufacturing needs.
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A prolonged transportation disruption or a significant increase in the cost of freight could materially and adversely affect our business, results of operations, and financial condition.
−Removed: If we lose the services of key personnel, we may not be able to execute our business strategy effectively.
−Removed: Our future success depends in large part upon the continued services of our key technical, engineering, sales, marketing, finance, and senior management personnel.
+Added: If we lose the services of key personnel or are unable to attract new qualified personnel, we may not be able to execute our business strategy effectively.
+Added: Our future success depends in large part upon the continued services of our key technical, engineering, sales, marketing, finance, and senior management personnel and our ability to attract new qualified personnel, including in new markets we may enter.
The competition for qualified personnel with significant experience in the design, development, manufacturing, marketing, and sales in the markets in which we operate is intense, both where our U.S.
operations are based, including Silicon Valley, and in global markets in which we operate.
+Added: This competition for labor has made it more challenging to locate candidates with the desired talents, particularly in emerging technologies.
Our inability to attract qualified personnel, including hardware and software engineers and sales and marketing personnel, could delay the development and introduction of, and harm our ability to sell, our products and services.
−Removed: Decreases in our stock price may negatively affect our efforts to attract and retain qualified personnel.
+Added: In addition, decreases in our stock price may negatively affect our efforts to attract and retain qualified personnel.
Changes to U.S.
immigration policies that restrict our ability to attract and retain technical personnel may negatively affect our research and development efforts.
+Added: For example, obtaining and maintaining a work visa, especially in the United States, has become significantly more difficult and costly, making it challenging to source qualified personnel from other countries or even to hire those already in the United States on current visas.
+Added: Regulatory requirements may also create risks in our ability to recruit and retain key personnel.
We will continue to replace key personnel, from within or looking outside, wherever we find the best candidates.
+Added: We may be at a disadvantage to larger companies with greater brand recognition or financial resources, to competitors with faster growth rates or higher valuations, or to start-ups or other emerging companies in trending market sectors.
+Added: Efforts we engage in to establish operations in new geographies where additional talent may be available, potentially at a lower cost, may be unsuccessful or fail to result in the desired cost savings or quality.
+Added: We may also recruit talent for remote positions, which also comes with challenges, including with respect to retention, collaboration, training, and corporate culture.
+Added: If we are unable to attract and retain qualified management and key personnel when and where they are needed or to develop our remote workforce, our ability to operate and grow our business could be impaired.
+Added: Moreover, if we are not able to properly balance investment in personnel with sales, our profitability may be adversely affected.
We do not maintain any key person life insurance policies.
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As a result, period-to-period comparisons of our results of operations may not be meaningful, and you should not rely on them as an indication of our future performance.
−Removed: If we fail to continue to introduce or acquire new products or services that achieve broad market acceptance on a timely basis, or if our products or services are not adopted as expected, we will not be able to compete effectively and we will be unable to increase or maintain revenue and gross margin.
+Added: If we fail to continue to introduce or acquire new products or services that achieve broad market acceptance on a timely basis, if our products or services are not adopted as expected, or if we fail to successfully manage the introduction of such products or services, we will not be able to compete effectively and we will be unable to increase or maintain revenue and gross margin.
We operate in a highly competitive, quickly changing environment, and our future success depends on our ability to develop or acquire and introduce new products and services that achieve broad market acceptance.
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In order to differentiate our products and services from our competitors’ products, we must continue to increase our focus and capital investment in research and development, including software development.
−Removed: We have committed a substantial amount of resources to the manufacture, development and sale of our Arlo Secure services and our wire-free smart Wi-Fi cameras, advanced baby monitors, and smart lights, and to introducing additional and improved models in these lines.
+Added: We have committed a substantial amount of resources to the manufacture, development and sale of our Arlo Secure services and our wire-free smart Wi-Fi cameras, advanced baby monitors, and smart lights, and to introducing additional and improved models in
In addition, we plan to continue to introduce new categories of smart security devices to the Arlo platform in the near future.
1 unchanged sentence
Successfully predicting demand trends is difficult, and it is very difficult to predict the effect that introducing a new product or service will have on existing product or service sales.
+Added: For example, customers may choose to forego purchasing existing products or services in advance of new or anticipated product and services launches, and we may experience higher returns from users of existing products or increases in credit issuances under our price protection policy.
+Added: In addition, new or enhanced products or services may have varying selling prices and costs compared to legacy products and services, which could negatively impact our brand, gross margins and operating results.
It is possible that Arlo may not be as successful with its new products and services, and as a result our future growth may be slowed and our business, results of operations and financial condition could be materially and adversely affected.
Also, we may not be able to respond effectively to new product or service announcements by our competitors by quickly introducing competitive products and services.
+Added: Development of new or enhanced products and services may require significant time and financial investment, which could result in increased costs and a reduction in our profit margins.
+Added: For example, we have historically incurred higher levels of sales and marketing expenses accompanying product and service introductions.
+Added: In addition, as we introduce new or enhanced products and services, we may face additional challenges managing a more complex supply chain and manufacturing processes, including the time and cost associated with onboarding and overseeing additional suppliers, third-party retailers and manufactures or challenges managing the reduction in supply from, or off-boarding of, suppliers, manufacturers, supply chain partners and third-party retailers.
+Added: Additionally, we may face challenges managing the inventory of new or existing products, which could lead to excess inventory and discounting of such products, among other things.
In addition, we may acquire companies and technologies in the future and, consistent with our vision for Arlo, introduce new product and service lines in the smart security market.
In these circumstances, we may not be able to successfully manage integration of the new product and service lines with our existing suite of products and services.
−Removed: are unable to effectively and successfully further develop these new product and service lines, we may not be able to increase or maintain our sales, and our gross margin may be adversely affected.
+Added: If we are unable to effectively and successfully further develop these new product and service lines, we may not be able to increase or maintain our sales, and our gross margin may be adversely affected.
We may experience delays and quality issues in releasing new products and services, which may result in lower quarterly revenue than expected.
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We may need additional financing to meet our future long-term capital requirements and may be unable to raise sufficient capital on favorable terms or at all.
−Removed: We have recorded a net loss of $30.5 million for the year ended December 31, 2024, and we have a history of losses and may continue to incur operating and net losses for the foreseeable future.
+Added: Although we have recorded a net income of $14.9 million for the year ended December 31, 2025, we have a history of losses and may continue to incur operating and net losses for the foreseeable future.
As of December 31, 2025, our accumulated deficit was $383.0 million.
We had historically maintained a Loan and Security Agreement with Bank of America, N.A., which expired and automatically terminated on October 27, 2024.
−Removed: 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.
+Added: 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.
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While, based on our current plans, the Credit Agreement, and market conditions, we believe that such sources of liquidity will be sufficient to satisfy our anticipated cash requirements for at least the next 12 months, we may require additional funds, either through equity or debt financings or collaborative agreements or from other sources.
−Removed: commitments to obtain such additional financing, and we may not be able to obtain any such additional financing on terms favorable to us, or at all.
+Added: We have no commitments to obtain such additional financing, and we may not be able to obtain any such additional financing on terms favorable to us, or at all.
If adequate financing is not available, we may further delay, postpone or terminate product and service expansion and curtail certain selling, general and administrative operations.
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We compete in a rapidly evolving and fiercely competitive market, and we expect competition to continue to be intense, including price competition.
−Removed: Our principal competitors include Amazon (Blink and Ring), Canary, D-Link, Eufy, Google (Nest), Foxconn Corporation (Belkin), Night Owl, Samsung, SimpliSafe, Swann, and Wyze.
+Added: Our principal competitors include Amazon (Blink and Ring), Google (Nest), Canary, D-Link, Foxconn Corporation (Belkin), Night Owl, Samsung, SimpliSafe, Swann, TP Link, Eufy, and Wyze.
Other competitors include numerous local vendors such as Netatmo, Logitech, Bosch, Instar, and Uniden.
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If any of these companies are successful in competing against us, our sales could decline, our margins could be negatively impacted, and we could lose, or fail to grow, our market share, any of which could seriously harm our business, financial condition, and results of operations.
−Removed: We entered into an asset purchase agreement (the “Asset Purchase Agreement”) and supply agreement (the “Supply Agreement”) with Verisure Sàrl (“Verisure”) that gives Verisure exclusive marketing and distribution rights for our products in Europe as well as the ability to sell our products through their direct channel globally.
+Added: We have an asset purchase agreement (the “Asset Purchase Agreement”) and supply agreement (the “Supply Agreement”) with Verisure Sàrl (“Verisure”) that gives Verisure exclusive marketing and distribution rights for our products in Europe as well as the ability to sell our products through their direct channel globally.
We cannot provide assurance that the arrangement with Verisure will continue to be a successful collaboration.
1 unchanged sentence
Our results of operations may be negatively impacted if Verisure is not successful in continuing to sell our products in Europe.
−Removed: In addition, if Verisure fails to pay us on a timely basis, or at all, or otherwise does not perform under the Supply Agreement, our cash flow would be
+Added: In addition, if Verisure fails to pay us on a timely basis, or at all, or otherwise does not perform under the Supply Agreement, our cash flow would be reduced.
We are also exposed to increased credit risk if Verisure fails or becomes insolvent.
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Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties upon which we rely.
−Removed: These information security risks have significantly increased in recent years in part due to the proliferation of new technologies and the increased sophistication and activities of organized crime, hackers, terrorists, threat actors, “hacktivists,” personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors and other external parties.
+Added: These information security risks have significantly increased in recent years in part due to the proliferation of new technologies and the increased sophistication and activities of organized crime, hackers, terrorists,
+Added: threat actors, “hacktivists,” personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors and other external parties.
Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities.
−Removed: During times of war and other major conflicts, we, the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our products and services.
+Added: During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our products and services.
We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing attacks, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, attacks enhanced or facilitated by AI, and other similar threats.
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Our products and services may contain unknown security vulnerabilities.
−Removed: We take steps to detect and remediate vulnerabilities, but we have not always been able in the past and may not be able in the future to detect and remediate all vulnerabilities in our information technology systems (including our products) because such threats and techniques used to
−Removed: exploit vulnerabilities change frequently and are often sophisticated in nature.
+Added: We take steps to detect and remediate vulnerabilities, but we have not always been able in the past and may not be able in the future to detect and remediate all vulnerabilities in our information technology systems (including our products) because such threats and techniques used to exploit vulnerabilities change frequently and are often sophisticated in nature.
Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.
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interruptions in our operations (including availability of data);
−Removed: negative impacts to our business, results of operations and financial condition;
+Added: negative impacts to our business, results of
+Added: operations and financial condition;
financial loss;
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In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.
−Removed: Additionally, sensitive information of the Company or our customers could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or vendors’ use of generative AI technologies.
+Added: Additionally, sensitive information about our company or our customers could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or vendors’ use of generative AI technologies.
Any sensitive information (including confidential, competitive, proprietary, or personal data) that we input into a third-party generative AI and machine learning (“AI/ML”) platform could be leaked or disclosed to others, including if sensitive information is used to train the third parties’ AI/ML model.
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We may use AI/ML outputs to make certain decisions.
−Removed: Due to these potential inaccuracies or flaws, the model could be biased and could lead us to make
−Removed: decisions that could bias certain individuals (or classes of individuals), and adversely impact their rights, employment, and ability to obtain certain pricing, products, services, or benefits.
+Added: Due to these potential inaccuracies or flaws, the model could be biased and could lead us to make decisions that could bias certain individuals (or classes of individuals), and adversely impact their rights, employment, and ability to obtain certain pricing, products, services, or benefits.
For example, we use AI/ML in our products and services, and if such AI/ML-based outputs are deemed to be biased, we could face adverse consequences, including exposure to reputational and competitive harm, customer loss, and legal liability.
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If customers do not renew their subscriptions, renew on less favorable terms, or we fail to convert our existing smart security device and accessory customers into paying subscribers, convert customers using free trials of our subscription services into paying subscribers, expand the subscription services our existing paying subscribers utilize or attract new customers, our revenues may decline or grow less quickly than anticipated, which would harm our business, results of operations, and financial condition.
+Added: insurance industry were to change its practice of providing incentives to homeowners for the use of home security services, we could experience a reduction in new subscriber growth or an increase in our subscriber churn.
+Added: It has been common practice in the U.S.
+Added: insurance industry to provide a reduction in rates for policies written on residences that have certain home security systems.
+Added: There can be no assurance that insurance companies will continue to offer these rate reductions.
+Added: If these incentives were reduced or eliminated, new homeowners who otherwise may not feel the need for home security services would be removed from our potential subscriber pool, which could hinder the growth of our business, and existing subscribers may choose to disconnect or not renew their service contracts, which could increase our churn and reduce the life time value of our customers.
+Added: In either case, our results of operations and growth prospects could be adversely affected.
Interruptions with the cloud-based systems that we use in our operations provided by an affiliate of Amazon, which is also one of our primary competitors, may materially and adversely affect our business, results of operations, and financial condition.
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Amazon may choose to hamper our competitive efforts, using provision of AWS services as leverage.
−Removed: In the event that there is a lapse of service, elimination of AWS services or features that we use, interruption of internet service provider connectivity, or damage to such facilities, we could experience interruptions in access to our platform as well as significant delays and additional expense in arranging or creating new facilities and services and/or re-architecting our solutions for deployment on a different cloud
−Removed: infrastructure service provider, which could materially and adversely affect our business, results of operations, and financial condition.
+Added: In the event that there is a lapse of service, elimination of AWS services or features that we use, interruption of internet service provider connectivity, or damage to such facilities, we could experience interruptions in access to our platform as well as significant delays and additional expense in arranging or creating new facilities and services and/or re-architecting our solutions for deployment on a different cloud infrastructure service provider, which could materially and adversely affect our business, results of operations, and financial condition.
Our current and future products may experience quality problems, including defects or errors, from time to time that can result in adverse publicity, product recalls, litigation, regulatory proceedings, and warranty claims and could lead to significant direct or indirect costs, decreased revenue, and operating margin, and harm to our brand.
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If that happens, affected end-users or others may file actions against us alleging product liability, tort, or breach of warranty claims.
−Removed: We rely on a limited number of traditional and online retailers and wholesale distributors for a substantial portion of our sales, and our revenue could decline if they refuse to pay our requested prices or reduce their level of purchases or if there is significant consolidation in our sales channels, which results in fewer sales channels for our products.
−Removed: We sell a substantial portion of our products through traditional and online retailers, including Amazon, Best Buy Co., Inc., Walmart, Inc., and Costco Wholesale Corporation;
−Removed: and to security solutions providers, including Verisure and its affiliates.
−Removed: For the year ended December 31, 2024, we derived 43.2% of our revenue from Verisure and its affiliates.
−Removed: In addition, we sell to wholesale distributors, including Ingram Micro, Inc., D&H Distributing Company, and Synnex Corporation.
−Removed: We expect that a significant portion of our revenue will continue to come from sales to a small number of such retailers, distributors, and other channel partners.
−Removed: In addition, because our accounts receivable are often concentrated within a small group of retailers, distributors, and other channel partners, the failure of any of them to pay on a timely basis, or at all, would reduce our cash flow.
−Removed: We are also exposed to increased credit risk if any one of these limited numbers of retailer and distributor channel partners fails or becomes insolvent.
−Removed: We generally have no minimum purchase commitments or long-term contracts with our retailers, distributors and other channel partners.
−Removed: Verisure had an aggregate purchase commitment of $500.0 million during a five-year period that commenced January 1, 2020 and was fulfilled in 2024.
−Removed: However, on April 25, 2024, Verisure notified us that it was exercising its right under the Supply Agreement to extend the term of the Supply Agreement for another five years (through November 2029) with no minimum purchase obligations.
−Removed: If we are unable to maintain and expand our revenue from Verisure in the absence of minimum purchase obligations, our revenue, business, results of operations, financial condition and cash flows may be materially and adversely affected.
−Removed: Verisure and our other retailers, distributors and other channel partners could decide at any time to discontinue, decrease, or delay their purchases of our products.
−Removed: If our retailers, distributors, and other channel partners increase the size of their product orders without sufficient lead-time for us to process the order, our ability to fulfill product orders would be compromised.
−Removed: These channel partners have a variety of suppliers to choose from and therefore can make substantial demands on us, including demands on product pricing and on contractual terms, which often results in the allocation of risk to us as the supplier.
−Removed: Accordingly, the prices that they pay for our products are subject to negotiation and could change at any time.
−Removed: Our ability to maintain strong relationships with these channel partners is essential to our future performance.
−Removed: If any of our major channel partners reduce their level of purchases or refuse to pay the prices that we set for our products, our revenue and results of operations could be harmed.
−Removed: The traditional retailers that purchase from us have faced increased and significant competition from online retailers.
−Removed: If our key traditional retailers continue to reduce their level of purchases from us, our business, results of operations, and financial condition could be harmed.
−Removed: Additionally, concentration and consolidation among our channel partner base may allow certain retailers and distributors to command increased leverage in negotiating prices and other terms of sale, which could adversely affect our profitability.
−Removed: In addition, if, as a result of increased leverage, channel partner pressures require us to reduce our pricing such that our gross margin is diminished, we could decide not to sell our products to a particular channel partner, which could result in a decrease in our revenue.
−Removed: Consolidation among our channel partner base may also lead to reduced demand for our products, elimination of sales opportunities, replacement of our products with those of our competitors, and cancellations of orders, each of which could materially and adversely affect our business, results of operations, and financial condition.
−Removed: If consolidation among the retailers, distributors, or other channel partners who purchase our products becomes more prevalent, our business, results of operations, and financial condition could be materially and adversely affected.
−Removed: In particular, the retail and smart security home markets in some countries, including the United States, are dominated by a few large retailers with many stores.
−Removed: These retailers have in the past increased their market share and may continue to do so in the future by expanding through acquisitions and construction of additional stores.
−Removed: These situations concentrate our credit risk with a relatively small number of retailers, and, if any of these retailers were to experience a shortage of liquidity, it could increase the risk that their outstanding payables to us may not be paid.
−Removed: In addition, increasing market share concentration among one or a few retailers in a particular country or region increases the risk that if any one of them substantially reduces its purchases of our devices, we may be unable to find a sufficient number of other retail outlets for our products to sustain the same level of sales.
−Removed: Any reduction in sales by our retailers could materially and adversely affect our business, results of operations, and financial condition.
−Removed: We depend on large, recurring purchases from certain significant retailers, distributors, and other channel partners, and a loss, cancellation, or delay in purchases by these channel partners could negatively affect our revenue.
−Removed: The loss of recurring orders from any of our more significant retailers, distributors, and other channel partners could cause our revenue and profitability to suffer.
−Removed: Our ability to attract new retailers, distributors, and other channel partners will depend on a variety of factors, including the cost-effectiveness, reliability, scalability, breadth, and depth of our products.
−Removed: In addition, a change in the mix of our retailers, distributors, and other channel partners, or a change in the mix of direct and indirect sales, could adversely affect our revenue and gross margin.
−Removed: Although our financial performance may depend on large, recurring orders from certain retailers, distributors, and other channel partners, we do not generally have binding commitments from them.
−Removed: • our channel partner agreements generally do not require minimum purchases;
−Removed: • our retailers, distributors, and other channel partners can stop purchasing and stop marketing our products at any time;
−Removed: • our channel partner agreements generally are not exclusive.
−Removed: Further, our revenue may be impacted by significant one-time purchases that are not intended to be repeatable.
−Removed: While such purchases are reflected in our financial statements, we do not rely on and do not forecast for continued significant one-time purchases.
−Removed: As a result, lack of repeatable one-time purchases will adversely affect our revenue.
−Removed: Additionally, we may from time to time grant our retailers, distributors, and other channel partners the exceptional right to return certain products, based on the best interests of our mutual businesses, and such returns, if material, could adversely affect our revenue and gross margin.
−Removed: Because our expenses are based on our revenue forecasts, a substantial reduction or delay in sales of our products to, or unexpected returns from, channel partners, or the loss of any significant channel partners, could materially and adversely affect our business, results of operations, and financial condition.
−Removed: Although our largest channel partners may vary from period to period, we anticipate that our results of operations for any given period will continue to depend on large orders from a small number of channel partners.
−Removed: The average selling prices of our products typically decrease rapidly over the sales cycle of the product, which may negatively affect our revenue and gross margin.
−Removed: Our products typically experience price erosion, a fairly rapid reduction in the average unit selling prices over their sales cycles.
−Removed: In order to sell products that have a falling average unit selling price and maintain margins at the same time, we need to continually reduce product and manufacturing costs.
−Removed: To manage manufacturing costs, we must partner with our third-party manufacturers to engineer the most cost-effective design for our products.
−Removed: In addition, we must carefully manage the price paid for components used in our products, and we must also successfully manage our freight and inventory costs to reduce overall product costs.
−Removed: We also need to continually introduce new products with higher sales prices and gross margin in order to maintain our overall gross margin.
−Removed: If we are unable to manage the cost of older products or successfully introduce new products with higher gross margin, our revenue and overall gross margin would likely decline.
−Removed: We have spent, and expect to continue to spend, significant amounts on advertising and other marketing campaigns, which may not be successful or cost effective.
−Removed: We have spent, and expect to continue to spend, significant amounts on advertising and other marketing campaigns, such as television, print advertising, and social media, as well as increased promotional activities, to acquire new customers.
−Removed: For the years ended December 31, 2024 and 2023, sales and marketing expenses were $73.7 million and $66.1 million, respectively, representing approximately 14% and 13% of our revenue, respectively.
−Removed: While we seek to structure our advertising campaigns in the manner that we believe is most likely to encourage people to purchase our products and services, we may fail to identify advertising opportunities that satisfy our anticipated return on advertising spend as we scale our investments in marketing or to fully understand or estimate the conditions and behaviors that drive customer behavior.
−Removed: If any of our advertising campaigns prove less successful than anticipated in attracting customers, we may not be able to recover our advertising spend, and our revenue may fail to meet market expectations, either of which could have an adverse effect on our business.
−Removed: There can be no assurance that our advertising and other marketing efforts will result in increased sales of our products or services.
−Removed: Introducing new products and services may be difficult and expensive.
−Removed: If we are unable to do so successfully, our brand may be adversely affected and we may not be able to maintain or grow our current revenue and profit levels.
−Removed: To successfully evolve our product offerings of smart security devices to appeal to our consumers, we will be required to predict, understand, and react to the rapidly changing tastes of consumers and provide appealing products in a timely manner.
−Removed: New product models that we introduce may not be successful with consumers or our brand may fall out of favor with consumers.
−Removed: If we are unable to anticipate, identify, or react appropriately to changes in consumer preferences, our revenue may decrease, our brand image may suffer, our operating performance may decline, and we may not be able to execute our growth plans.
−Removed: We have increased the rate of new product and service introductions, including new lines of Arlo cameras, smart lights, and doorbell products, and we may encounter difficulties that we did not anticipate during the product development stage.
−Removed: If we are not able to efficiently manufacture new products in quantities sufficient to support wholesale, retail, and e-commerce distribution, we may not be able to recover our investment in the development of new product and service iterations and product lines, and we would continue to be subject to the risks inherent to having a limited product line.
−Removed: Even if we develop and manufacture new products and services that consumers find appealing, the ultimate success of any new products or services may depend on our pricing.
−Removed: We may not provide the appropriate level of marketing in order to educate the market and potential consumers about our new products and services.
−Removed: Achieving market acceptance will require us to exert substantial product development and marketing efforts, which could result in a material increase in our research and development and sales and marketing expenses.
−Removed: There can be no assurance that we will have the resources necessary to undertake such efforts effectively or that such efforts will be successful or that we will dedicate our limited marketing resources to the right product lines and services.
−Removed: Failure to gain market acceptance for new products and services could impede our ability to maintain or grow current revenue levels, reduce profits, adversely affect the image of our brand, erode our competitive position, and result in long-term harm to our business and financial results.
−Removed: If we fail to enhance our brand, our ability to expand our customer base will be impaired and our operating results may suffer.
−Removed: We believe that developing and maintaining awareness of the Arlo brand is critical to achieving widespread acceptance of our existing and future products and is an important element in attracting new customers.
−Removed: Furthermore, we expect the importance of global brand recognition to increase as competition increases.
−Removed: If customers do not perceive our products to be of high quality, our brand and reputation could be harmed, which could adversely impact our financial results.
−Removed: In addition, brand promotion efforts may not yield significant revenue or increased revenue sufficient to offset the additional expenses incurred in building our brand.
−Removed: Maintaining, protecting, and enhancing our brand may require us to make substantial investments, and these investments may not be successful or we may suspend or reduce the amount of investment spent on brand promotion and awareness efforts.
−Removed: If we fail to successfully maintain, promote, and position our
−Removed: brand and protect our reputation, or if we incur significant expenses in this effort, our business, financial condition and operating results may be adversely affected.
−Removed: The reputation of our services may be damaged, and we may face significant direct or indirect costs, decreased revenue, and operating margins if our services contain significant defects or fail to perform as intended.
−Removed: Our services, including our intelligent cloud and App platform and our Arlo Secure services, are complex, and may not always perform as intended due to outages of our systems or defects affecting our services.
−Removed: Systems outages could be disruptive to our business and damage the reputation of our services and result in potential loss of revenue.
−Removed: Significant defects affecting our services may be found following the introduction of new software or enhancements to existing software or in software implementations in varied information technology environments.
−Removed: Internal quality assurance testing and end-user testing may reveal service performance issues or desirable feature enhancements that could lead us to reallocate service development resources or postpone the release of new versions of our software.
−Removed: The reallocation of resources or any postponement could cause delays in the development and release of future enhancements to our currently available software, damage the reputation of our services in the marketplace, and result in potential loss of revenue.
−Removed: Although we attempt to resolve all errors that we believe would be considered serious by our partners and customers, the software powering our services is not error-free.
−Removed: Undetected errors or performance problems may be discovered in the future, and known errors that we consider minor may be considered serious by our channel partners and end-users.
−Removed: System disruptions and defects in our services could result in lost revenue, delays in customer deployment, or legal claims and could be detrimental to our reputation.
We and the third parties with whom we work are subject to stringent and evolving U.S.
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For example, the California Consumer Privacy Act of 2018 (“CCPA”) applies to personal information of consumers, business representatives and employees and requires businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights, such as those noted above.
−Removed: The CCPA provides for civil penalties of up to $7,500 per violation and allows private litigants affected by certain data breaches to
−Removed: recover significant statutory damages.
+Added: The CCPA provides for civil penalties of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages.
Similar laws are being considered in several other states, as well as at the federal and local levels, and we expect more states to pass similar laws in the future.
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Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries.
−Removed: In particular, the European Economic Area (“EEA”) and the United Kingdom (“UK”) have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it believes are inadequate.
+Added: In particular, the European Economic Area (“EEA”) and the United Kingdom (“UK”) have significantly restricted the transfer of personal data to the United States and other countries whose
+Added: privacy laws it believes are inadequate.
Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws.
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For example, in May 2023, the Irish Data Protection Commission determined that a major social media company’s use of the standard contractual clauses to transfer personal data from Europe to the United States was insufficient and levied a 1.2 billion Euro fine against the social media company and prohibited the social media company from transferring personal data to the United States.
−Removed: Regulators in the United States such as the Department of Justice are also increasingly scrutinizing certain personal data transfers and have proposed and may enact certain data localization requirements, for example, the Biden Administration’s executive order Preventing Access to Americans’ Bulk Sensitive Personal Data and United States Government-Related Data by Countries of Concern.
+Added: Regulators in the United States such as the Department of Justice are also increasingly scrutinizing certain personal data transfers and have proposed and may enact certain data localization requirements, for example, the U.S.
+Added: Department of Justice’s rule entitled Preventing Access to U.S.
+Added: Sensitive Personal Data and Government-Related Data by Countries of Concern or Covered Persons.
Our employees and personnel use generative AI technologies to perform their work, and the disclosure and use of personal information in generative AI technologies are subject to various privacy laws and other privacy obligations.
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Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and consumer lawsuits.
−Removed: If we are unable to use
−Removed: generative AI, it could make our business less efficient and result in competitive disadvantages.
+Added: If we are unable to use generative AI, it could make our business less efficient and result in competitive disadvantages.
We use AI/ML to assist us in making certain decisions, which are regulated by certain privacy laws.
Due to inaccuracies or flaws in the inputs, outputs, or logic of the AI/ML, the model could be biased and could lead us to make decisions that could bias certain individuals (or classes of individuals), and adversely impact their rights, employment, and ability to obtain certain pricing, products, services, or benefits.
−Removed: We also use AI/ML technologies in our products and services.
+Added: We also use AI/ML technologies, including generative AI and automated decision-making technologies in our products and services.
The development and use of AI/ML present various privacy and security risks that may impact our business.
AI/ML are subject to privacy and data security laws, as well as increasing regulation and scrutiny.
+Added: Further, countries and states are applying their data and consumer protection laws to AI technologies, and particularly generative AI.
Several jurisdictions around the globe, including Europe and certain U.S.
−Removed: states, have proposed or enacted laws governing AI/ML.
−Removed: For example, European regulators have proposed a stringent AI regulation, and we expect other jurisdictions will adopt similar laws.
+Added: states, have proposed or enacted laws governing AI/ML, such as the EU’s AI Act, the Colorado Artificial Intelligence Act, California Bot Disclosure Law, the Utah Artificial Intelligence Policy Act, and the CCPA regulations on automated decision-making technology.
+Added: For example, the EU AI Act sets out a risk-based framework, subjecting certain AI technologies to numerous compliance obligations, including transparency, conformity and risk assessment, monitoring and human oversight requirements.
+Added: Under the EU AI Act, non-compliant companies may be subject to administrative fines of up to 35 million Euros or 7% of a company’s total worldwide annual turnover for the preceding financial year, whichever is the higher.
+Added: Certain of our activities subject us to the EU AI Act and depending on how the EU AI Act is implemented and interpreted, we may have to adapt our business practices, contractual arrangements, and services to comply with such obligations.
+Added: We expect other jurisdictions will adopt similar laws.
Additionally, certain privacy laws extend rights to consumers (such as the right to delete certain personal data) and regulate automated decision making, which may be incompatible with our use of AI/ML.
These obligations may make it harder for us to conduct our business using AI/ML, lead to regulatory fines or penalties, require us to change our business practices, retrain our AI/ML, or prevent or limit our use of AI/ML.
−Removed: For example, the Federal Trade Commission (“FTC”) has required other companies to turn over (or disgorge) valuable insights or trainings generated through the use of AI/ML where they allege such companies have violated privacy and consumer protection laws.
+Added: For example, the Federal Trade Commission (“FTC”) has required other companies to turn over (or disgorge) valuable insights or trainings generated through the use of AI/ML where they allege such companies have violated privacy and consumer
+Added: protection laws.
If we cannot use AI/ML or are restricted in the use of AI/ML, our business may be less efficient, or we may be at a competitive disadvantage.
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In addition, these obligations may require us to change our business model.
−Removed: Our business model materially depends on our ability to process personal data, so we are particularly exposed to the risks associated with the rapidly changing legal
+Added: Our business model materially depends on our ability to process personal data, so we are particularly exposed to the risks associated with the rapidly changing legal landscape.
For example, we may be at heightened risk of regulatory scrutiny, and any changes in the regulatory framework could require us to fundamentally change our business model.
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inability to process personal data or to operate in certain jurisdictions;
−Removed: limited ability to develop or commercialize our products;
+Added: limited ability to develop or commercialize our
expenditure of time and resources to defend any claim or inquiry;
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or substantial changes to our business model or operations.
+Added: We rely on a limited number of traditional and online retailers and wholesale distributors for a substantial portion of our sales, and our revenue could decline if they refuse to pay our requested prices or reduce their level of purchases or if there is significant consolidation in our sales channels, which results in fewer sales channels for our products.
+Added: We sell a substantial portion of our products through traditional and online retailers, including Amazon, Best Buy, Walmart, Sam’s Club, Home Depot, Lowe’s and Costco;
+Added: and to security solutions providers, including Verisure and its affiliates.
+Added: For the year ended December 31, 2025, we derived 32% of our revenue from Verisure and its affiliates.
+Added: In addition, we sell to wholesale distributors, including Synnex Corporation and D&H Distributing Company.
+Added: We expect that a significant portion of our revenue will continue to come from sales to a small number of such retailers, distributors, and other channel partners.
+Added: In addition, because our accounts receivable are often concentrated within a small group of retailers, distributors, and other channel partners, the failure of any of them to pay on a timely basis, or at all, would reduce our cash flow.
+Added: We are also exposed to increased credit risk if any one of these limited numbers of retailer and distributor channel partners fails or becomes insolvent.
+Added: We generally have no minimum purchase commitments or long-term contracts with our retailers, distributors and other channel partners.
+Added: Verisure had an aggregate purchase commitment of $500.0 million during a five-year period that commenced January 1, 2020 and was fulfilled in 2024.
+Added: However, on April 25, 2024, Verisure notified us that it was exercising its right under the Supply Agreement to extend the term of the Supply Agreement for another five years (through November 2029) with no minimum purchase obligations.
+Added: In the absence of the minimum purchase obligations, we have experienced lower purchase volumes from Verisure.
+Added: If we are unable to maintain and expand our revenue from Verisure, our revenue, business, results of operations, financial condition and cash flows may be materially and adversely affected.
+Added: Verisure and our other retailers, distributors and other channel partners could decide at any time to discontinue, decrease, or delay their purchases of our products.
+Added: If our retailers, distributors, and other channel partners increase the size of their product orders without sufficient lead-time for us to process the order, our ability to fulfill product orders would be compromised.
+Added: These channel partners have a variety of suppliers to choose from and therefore can make substantial demands on us, including demands on product pricing and on contractual terms, which often results in the allocation of risk to us as the supplier.
+Added: Accordingly, the prices that they pay for our products are subject to negotiation and could change at any time.
+Added: Our ability to maintain strong relationships with these channel partners is essential to our future performance.
+Added: If any of our major channel partners reduce their level of purchases or refuse to pay the prices that we set for our products, our revenue and results of operations could be harmed.
+Added: The traditional retailers that purchase from us have faced increased and significant competition from online retailers.
+Added: If our key traditional retailers continue to reduce their level of purchases from us, our business, results of operations, and financial condition could be harmed.
+Added: Additionally, concentration and consolidation among our channel partner base may allow certain retailers and distributors to command increased leverage in negotiating prices and other terms of sale, which could adversely affect our profitability.
+Added: In addition, if, as a result of increased leverage, channel partner pressures require us to reduce our pricing such that our gross margin is diminished, we could decide not to sell our products to a particular channel partner, which could result in a decrease in our revenue.
+Added: Consolidation among our channel partner base may also lead to reduced demand for our products, elimination of sales opportunities, replacement of our products with those of our competitors, and cancellations of orders, each of which could materially and adversely affect our business, results of operations, and financial condition.
+Added: If consolidation among the retailers, distributors, or other channel partners who purchase our products becomes more prevalent, our business, results of operations, and financial condition could be materially and adversely affected.
+Added: In particular, the retail and smart security home markets in some countries, including the United States, are dominated by a few large retailers with many stores.
+Added: These retailers have in the past increased their market share and may continue to do so in the future by expanding through acquisitions and construction of additional stores.
+Added: These situations concentrate our credit risk with a relatively small number of retailers, and, if any of these retailers were to experience a shortage of liquidity, it could increase the risk that their outstanding payables to us may not be paid.
+Added: In addition, increasing market share concentration among one or a few retailers in a particular country or region increases the risk that if any one of them substantially reduces its purchases of our devices, we may be unable to find a sufficient number of other retail
+Added: outlets for our products to sustain the same level of sales.
+Added: Any reduction in sales by our retailers could materially and adversely affect our business, results of operations, and financial condition.
+Added: We depend on large, recurring purchases from certain significant retailers, distributors, and other channel partners, and a loss, cancellation, or delay in purchases by these channel partners could negatively affect our revenue.
+Added: The loss of recurring orders from any of our more significant retailers, distributors, and other channel partners could cause our revenue and profitability to suffer.
+Added: Our ability to attract new retailers, distributors, and other channel partners will depend on a variety of factors, including the cost-effectiveness, reliability, scalability, breadth, and depth of our products.
+Added: In addition, a change in the mix of our retailers, distributors, and other channel partners, or a change in the mix of direct and indirect sales, could adversely affect our revenue and gross margin.
+Added: Although our financial performance may depend on large, recurring orders from certain retailers, distributors, and other channel partners, we do not generally have binding commitments from them.
+Added: • our channel partner agreements generally do not require minimum purchases;
+Added: • our retailers, distributors, and other channel partners can stop purchasing and stop marketing our products at any time;
+Added: • our channel partner agreements generally are not exclusive.
+Added: Further, our revenue may be impacted by significant one-time purchases that are not intended to be repeatable.
+Added: While such purchases are reflected in our financial statements, we do not rely on and do not forecast for continued significant one-time purchases.
+Added: As a result, lack of repeatable one-time purchases will adversely affect our revenue.
+Added: Additionally, we may from time to time grant our retailers, distributors, and other channel partners the exceptional right to return certain products, based on the best interests of our mutual businesses, and such returns, if material, could adversely affect our revenue and gross margin.
+Added: Because our expenses are based on our revenue forecasts, a substantial reduction or delay in sales of our products to, or unexpected returns from, channel partners, or the loss of any significant channel partners, could materially and adversely affect our business, results of operations, and financial condition.
+Added: Although our largest channel partners may vary from period to period, we anticipate that our results of operations for any given period will continue to depend on large orders from a small number of channel partners.
+Added: The average selling prices of our products typically decrease rapidly over the sales cycle of the product, which may negatively affect our revenue and gross margin.
+Added: Our products typically experience price erosion, a fairly rapid reduction in the average unit selling prices over their sales cycles.
+Added: In order to sell products that have a falling average unit selling price and maintain margins at the same time, we need to continually reduce product and manufacturing costs.
+Added: To manage manufacturing costs, we must partner with our third-party manufacturers to engineer the most cost-effective design for our products.
+Added: In addition, we must carefully manage the price paid for components used in our products, and we must also successfully manage our freight and inventory costs to reduce overall product costs.
+Added: We also need to continually introduce new products with higher sales prices and gross margin in order to maintain our overall gross margin.
+Added: If we are unable to manage the cost of older products or successfully introduce new products with higher gross margin, our revenue and overall gross margin would likely decline.
+Added: We have spent, and expect to continue to spend, significant amounts on advertising and other marketing campaigns, which may not be successful or cost effective.
+Added: We have spent, and expect to continue to spend, significant amounts on advertising and other marketing campaigns, such as television, print advertising, and social media, as well as increased promotional activities, to acquire new customers.
+Added: For the years ended December 31, 2025 and 2024, sales and marketing expenses were $84.8 million and $73.7 million, respectively, representing approximately 16% and 14% of our revenue, respectively.
+Added: While we seek to structure our advertising campaigns in the manner that we believe is most likely to encourage people to purchase our products and services, we may fail to identify advertising opportunities that satisfy our anticipated return on advertising spend as we scale our investments in marketing or to fully understand or estimate the conditions and behaviors that drive customer behavior.
+Added: If any of our advertising campaigns prove less successful than anticipated in attracting customers, we may not be able to recover our advertising spend, and our revenue may fail to meet market expectations, either of which could have an adverse effect on our business.
+Added: There can be no assurance that our advertising and other marketing efforts will result in increased sales of our products or services.
+Added: Introducing new products and services may be difficult and expensive.
+Added: If we are unable to do so successfully, our brand may be adversely affected and we may not be able to maintain or grow our current revenue and profit levels.
+Added: To successfully evolve our product offerings of smart security devices to appeal to our consumers, we will be required to predict, understand, and react to the rapidly changing tastes of consumers and provide appealing products in a timely manner.
+Added: New product models that we introduce may not be successful with consumers or our brand may fall out of favor with consumers.
+Added: If we are unable to anticipate, identify, or react appropriately to changes in consumer preferences, our revenue may decrease, our brand image may suffer, our operating performance may decline, and we may not be able to execute our growth plans.
+Added: We have increased the rate of new product and service introductions, including new lines of Arlo cameras, smart lights, and doorbell products, and we may encounter difficulties that we did not anticipate during the product development stage.
+Added: If we are not able to efficiently manufacture new products in quantities sufficient to support wholesale, retail, and e-commerce distribution, we may not be able to recover our investment in the development of new product and service iterations and product lines, and we would continue to be subject to the risks inherent to having a limited product line.
+Added: Even if we develop and manufacture new products and services that consumers find appealing, the ultimate success of any new products or services may depend on our pricing.
+Added: We may not provide the appropriate level of marketing in order to educate the market and potential consumers about our new products and services.
+Added: Achieving market acceptance will require us to exert substantial product development and marketing efforts, which could result in a material increase in our research and development and sales and marketing expenses.
+Added: There can be no assurance that we will have the resources necessary to undertake such efforts effectively or that such efforts will be successful or that we will dedicate our limited marketing resources to the right product lines and services.
+Added: Failure to gain market acceptance for new products and services could impede our ability to maintain or grow current revenue levels, reduce profits, adversely affect the image of our brand, erode our competitive position, and result in long-term harm to our business and financial results.
+Added: If we fail to enhance our brand, our ability to expand our customer base will be impaired and our operating results may suffer.
+Added: We believe that developing and maintaining awareness of the Arlo brand is critical to achieving widespread acceptance of our existing and future products and is an important element in attracting new customers.
+Added: Furthermore, we expect the importance of global brand recognition to increase as competition increases.
+Added: If customers do not perceive our products to be of high quality, our brand and reputation could be harmed, which could adversely impact our financial results.
+Added: In addition, brand promotion efforts may not yield significant revenue or increased revenue sufficient to offset the additional expenses incurred in building our brand.
+Added: Maintaining, protecting, and enhancing our brand may require us to make substantial investments, and these investments may not be successful or we may suspend or reduce the amount of investment spent on brand promotion and awareness efforts.
+Added: If we fail to successfully maintain, promote, and position our
+Added: brand and protect our reputation, or if we incur significant expenses in this effort, our business, financial condition and operating results may be adversely affected.
+Added: The reputation of our services may be damaged, and we may face significant direct or indirect costs, decreased revenue, and operating margins if our services contain significant defects or fail to perform as intended.
+Added: Our services, including our intelligent cloud and App platform and our Arlo Secure services, are complex, and may not always perform as intended due to outages of our systems or defects affecting our services.
+Added: Systems outages could be disruptive to our business and damage the reputation of our services and result in potential loss of revenue.
+Added: Significant defects affecting our services may be found following the introduction of new software or enhancements to existing software or in software implementations in varied information technology environments.
+Added: Internal quality assurance testing and end-user testing may reveal service performance issues or desirable feature enhancements that could lead us to reallocate service development resources or postpone the release of new versions of our software.
+Added: The reallocation of resources or any postponement could cause delays in the development and release of future enhancements to our currently available software, damage the reputation of our services in the marketplace, and result in potential loss of revenue.
+Added: Although we attempt to resolve all errors that we believe would be considered serious by our partners and customers, the software powering our services is not error-free.
+Added: Undetected errors or performance problems may be discovered in the future, and known errors that we consider minor may be considered serious by our channel partners and end-users.
+Added: System disruptions and defects in our services could result in lost revenue, delays in customer deployment, or legal claims and could be detrimental to our reputation.
We are subject to financial and operating covenants in the Credit Agreement with HSBC and any failure to comply with such covenants, or obtain waivers in the event of non-compliance, could limit our borrowing availability under the Credit Agreement, resulting in our being unable to borrow under the Credit Agreement and materially and adversely impact our liquidity.
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Such perception could adversely affect the market price for our common stock and our ability to obtain financing in the future.
−Removed: Instability in geographies where we have operations and personnel or where we derive amounts of revenue could have a material adverse effect on our business, customers, operations and financial results.
+Added: Instability in geographies where we have operations or where we derive amounts of revenue could have a material adverse effect on our business, customers, operations and financial results.
Economic, civil, military and political uncertainty exists and may increase in regions where we operate and derive our revenue.
Various countries in which we operate are experiencing and may continue to experience military action and civil and political unrest.
−Removed: We have operations in the emerging market economies of Eastern Europe, utilizing employees and contractors who perform services relating to new product releases.
+Added: We have operations in the emerging market economies of Eastern Europe.
In late February 2022, Russian military forces launched significant military action against Ukraine.
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and other countries and organizations against officials, individuals, regions, and industries in Russia, Belarus and Ukraine, and each country’s potential response to such sanctions, tensions and military actions, could have a material adverse effect on our product development timelines and increase our research and development expenditure.
−Removed: Material adverse effects from the conflict and enhanced sanctions activity has caused us to transition our operations out of Belarus to other countries.
−Removed: We are actively monitoring the security of our remaining employees and contractors in Eastern Europe and the stability of our infrastructure, including communications and internet availability.
To date we have not experienced any material interruptions in our operations there.
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Our products and services may be considered discretionary items for our consumer and small business end-users.
−Removed: A severe and/or prolonged economic downturn, the ongoing conflict in Ukraine, hostilities in the Middle-East, inflation, supply chain disruptions, high interest rates, fluctuating consumer confidence, or current financial conditions within the banking industry, including the effects of recent failures of financial institutions, among other things, could adversely affect our customers’ financial condition and their levels of business activity.
−Removed: As a result of stimulus programs put in place over the past three years, the U.S.
+Added: A severe and/or prolonged economic downturn, geopolitical conflicts, inflation, supply chain disruptions, high interest rates, the housing and mortgage markets, energy costs, unemployment trends, fluctuating consumer confidence, or current financial conditions within the banking industry, including the effects of recent failures of financial institutions, among other things, could adversely affect our customers’ financial condition and their levels of business activity.
+Added: As a result of stimulus programs put in place in recent years, the U.S.
and many countries are currently experiencing an inflationary environment.
−Removed: In addition, the U.S.
−Removed: Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which in turn has negatively impacted equity values.
−Removed: capital markets experienced and continue to experience extreme volatility and disruption following the Russian invasion of Ukraine, and inflationary pressures.
+Added: In addition, although the U.S.
+Added: Federal Reserve recently lowered interest rates, in the past it has raised, and may again raise, interest rates in response to concerns about inflation, which in turn has negatively impacted equity values.
+Added: capital markets experienced and continue to experience volatility and disruption due to geopolitical conflicts and inflationary pressures.
Weakness in, and uncertainty about, global economic conditions may also cause businesses to postpone spending in response to tighter credit, high interest rates, inflation, lower consumer confidence, negative financial news and/or general declines in income or asset values, which could have a material negative effect on the demand for our products and services.
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If conditions in the global economy, including in Europe, China, Australia and the United States, or other key vertical or geographic markets deteriorate, such conditions could materially and adversely affect our business, results of operations, and financial condition.
−Removed: Political developments impacting government spending and international trade, including future government shutdowns in the United States or elsewhere, debt ceiling negotiations, potential government shutdowns, armed conflict such as the conflicts in Ukraine and Israel, retaliatory actions, treaties, increased barriers, policies favoring domestic industries, increased import or export licensing requirements or restrictions, trade disputes and tariffs, including the U.S.’s ongoing trade disputes with China and other countries, inflation, and high interest rates, may adversely impact markets and cause weaker macroeconomic conditions.
+Added: Political developments impacting government spending and international trade, including future government shutdowns in the United States or elsewhere, debt ceiling negotiations, actual or potential government shutdowns, armed, geopolitical conflicts, retaliatory actions, treaties, increased barriers, policies favoring domestic industries, increased import or export licensing requirements or restrictions, trade disputes and tariffs, including the U.S.’s ongoing trade disputes with China and other countries, inflation, and high interest rates, may adversely impact markets and cause weaker macroeconomic conditions.
The continuing effect of any or all of these political or other uncertainties could adversely impact demand for our products and services, harm our operations and weaken our financial results.
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In addition, the economic problems affecting the financial markets and the uncertainty in global economic conditions resulted in a number of adverse effects, including a low level of liquidity in many financial markets, extreme volatility in credit, equity, currency, and fixed income markets, instability in the stock market, and high unemployment.
−Removed: In addition, the challenges faced by the European Union to stabilize some of its member state economies, such as Greece, Portugal, Spain, Hungary, and Italy, have had international implications, affecting the stability of global financial markets and hindering economies worldwide.
+Added: In addition, the challenges faced by the European Union to stabilize some of its member state economies, such as Greece, Portugal, Spain, Hungary, and Italy, have had international implications, affecting the stability of global financial
+Added: markets and hindering economies worldwide.
Many member states in the European Union have been addressing the issues with controversial austerity measures.
−Removed: In addition, the potential consequences of the “Brexit” process in the United Kingdom have led to significant uncertainty in the region.
−Removed: Should the European Union monetary policy measures be insufficient to restore confidence and stability to the financial markets, or should the United Kingdom’s “Brexit” decision lead to additional economic or political instability, the global economy, including the U.S.
−Removed: and European Union economies where we have a significant presence, could be hindered, which could have a material adverse effect on our business, results of operations, and financial condition.
There could also be a number of other follow-on effects from these economic developments on our business, including the inability of customers to obtain credit to finance purchases of our products, customer insolvencies, decreased customer confidence to make purchasing decisions, decreased customer demand, and decreased customer ability to pay their trade obligations.
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Further, the imposition of and changes in the U.S.' and other governments' duties, trade regulations, trade wars, tariffs, other restrictions or other geopolitical events, including the evolving relations between U.S.
−Removed: and China and evolving relations with Russia due to the current hostilities between Russia and Ukraine, create uncertainty regarding our ability to market and distribute our products into non-U.S.
+Added: and China and evolving relations with Russia due to the ongoing conflict between Russia and Ukraine, create uncertainty regarding our ability to market and distribute our products into non-U.S.
jurisdictions and any failure to effectively anticipate or respond to such events could materially and adversely affect our business, results of operations, and financial condition.
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In recent years, the U.S.
−Removed: Government has imposed increases to the ad valorem duties applicable to certain products imported from China, including increases of up to 25% for some items.
+Added: government has imposed increases to the ad valorem duties applicable to certain products imported from China, including increases of 10% or more for some items.
We are actively addressing the risks related to these additional duties, which have affected, or have the potential to affect, at least some of our imports from China.
+Added: For example, our tariff costs increased by $13.5 million for the year ended December 31, 2025 compared to the prior year, which accounted for the decline of 6.3% in products gross margin.
Although we have already taken steps to mitigate these risks, including by moving our manufacturing and assembly to Vietnam and other areas in the Asia Pacific region outside of China, if these duties are imposed, the cost of our products may increase.
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Our traditional retail customers have faced increased and significant competition from online retailers.
−Removed: we cannot effectively manage our business amongst our online customers and traditional retail customers, our business would be harmed.
+Added: If we cannot effectively manage our business amongst our online customers and traditional retail customers, our business would be harmed.
The recent trend in the consolidation of online retailers has resulted in intensified competition for preferred product placement, such as product placement on an online retailer’s internet home page.
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Beginning in the year ended December 31, 2025 through November 2029, Verisure will no longer be subject to minimum purchase obligations under our Supply Agreement.
−Removed: If we are unable to maintain and expand our revenue from Verisure in the absence of minimum purchase obligations, our revenue, business, results of operations, financial condition and cash flows may be materially and adversely affected.
+Added: If we are unable to maintain and expand our revenue from Verisure, our revenue, business, results of operations, financial condition and cash flows may be materially and adversely affected.
We must also continuously monitor and evaluate emerging sales channels.
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Actual demand for our products depends on many factors, which makes it difficult to forecast.
+Added: In addition, the longer lead time for certain of our components presents challenges in our efforts to manage component inventory, as our third-party manufacturers procure such components based on our then-current forecast of demand for our products.
We have experienced differences between our actual and our forecasted demand in the past and expect differences to arise in the future.
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We rely on a combination of copyright, trademark, patent, and trade secret laws, nondisclosure agreements with employees, consultants, and suppliers, and other contractual provisions to establish, maintain, and protect our intellectual property and technology.
−Removed: Despite efforts to protect our intellectual property, unauthorized third parties may attempt to
−Removed: design around, copy aspects of our product design or obtain and use technology or other intellectual property associated with our products.
+Added: Despite efforts to protect our intellectual property, unauthorized third parties may attempt to design around, copy aspects of our product design or obtain and use technology or other intellectual property associated with our products.
Furthermore, our competitors may independently develop similar technology or design around our intellectual property.
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• preference for locally branded products, and laws and business practices favoring local competition;
−Removed: • potential consequences of, and uncertainty related to, the “Brexit” process in the United Kingdom, which could lead to additional expense and complexity in doing business there;
• increased difficulty in managing inventory;
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• changes in local tax and customs duty laws or changes in the enforcement, application, or interpretation of such laws.
+Added: In addition, we have had to redesign certain of our products to comply with evolving foreign regulations and may have to do so in the future, which has caused manufacturing delays and may in the future cause further delays and have a negative impact on our manufacturing costs and supply chain management.
We are also required to comply with local environmental legislation, and those who sell our products rely on this compliance in order to sell our products.
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As a result, they may be able to compete more effectively than we can in the United States and the international internet security market.
+Added: The current international trade environment and related unfavorable macroeconomic conditions have adversely affected, and may continue to adversely affect, our business.
+Added: Under the current U.S.
+Added: administration, tariffs, and retaliatory tariffs imposed by other nations, have created a dynamic and unpredictable trade landscape, which is adversely impacting, and may continue to adversely impact, our business.
+Added: Current or future tariffs impacting our products, which are manufactured outside of the United States, have raised and may further raise our product costs.
+Added: In addition, other trade restrictions could negatively impact our ability to obtain finished products from our ex-U.S.
+Added: manufacturers and suppliers or other retaliatory trade measures may increase the costs of raw materials or finished goods, which could negatively impact our suppliers’ ability to deliver materials or manufacture equipment for us and, therefore, delay or impede our product deliveries.
+Added: Tariff-related costs and supply chain disruptions may lead to reputational harm if we are unable to deliver products or services on expected timelines or if any price increases are poorly received by customers or business partners.
+Added: Furthermore, ongoing uncertainty regarding trade disputes, tariffs and other political tensions between the United States and other countries, including in Asia, may also exacerbate unfavorable macroeconomic conditions, which may negatively impact international customer demand for our products or services and may lead to increased preference for local competitors.
+Added: While we continue to monitor these developments, the full impact of these risks remains uncertain, and any prolonged economic downturn, escalation in trade tensions or deterioration in international perception of U.S.-based companies could materially and adversely affect our business, results of operations and financial condition.
+Added: In addition, trade developments have heightened, and may continue to heighten, the risks related to the other risk factors described in this Annual Report on Form 10-K.
We are involved in litigation matters in the ordinary course and may in the future become involved in additional litigation, including litigation regarding intellectual property rights, which could be costly and subject us to significant liability.
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In addition, activist directors may make overly burdensome demands of our management and materially and unnecessarily increase management’s workload.
−Removed: Furthermore, if our retailers, distributors and other channel partners choose to delay, defer, or reduce transactions with us or do business with
−Removed: our competitors instead of us as a result of perceived uncertainties as to our future direction, then our business, financial condition, and operating results would be adversely affected.
+Added: Furthermore, if our retailers, distributors and other channel partners choose to delay, defer, or reduce transactions with us or do business with our competitors instead of us as a result of perceived uncertainties as to our future direction, then our business, financial condition, and operating results would be adversely affected.
In addition, market volatility may lead to increased stockholder activism if we experience a market valuation that activists believe is not reflective of our intrinsic value and our stock price could experience periods of increased volatility as a result of stockholder activism.
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From time to time, we may undertake acquisitions or engage in other strategic transactions to add new product and service lines and technologies, acquire talent, gain new sales channels, or enter into new sales territories.
−Removed: We have evaluated and expect to continue to evaluate a wide array of potential acquisitions and strategic transactions.
+Added: We have evaluated and expect to continue to evaluate a wide array of potential acquisitions and strategic transactions as part of our growth strategy.
Acquisitions and other strategic transactions involve numerous risks and challenges, including relating to:
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potential post-closing disputes;
−Removed: our inability to fully realize the expected financial or strategic benefits of an acquisition or other strategic transaction in the timeframe expected or at all;
+Added: inability to fully realize the expected financial or strategic benefits of an acquisition or other strategic transaction in the timeframe expected or at all;
the failure to retain acquired talent;
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Some providers may take measures that affect their customers’ ability to use our platform, such as degrading the quality of the data packets we transmit over their lines, giving those packets lower priority, giving other packets higher priority than ours, blocking our packets entirely, or attempting to charge their customers more for using our platform.
−Removed: In December 2010, the Federal Communications Commission (the “FCC”), adopted net neutrality rules barring internet providers from blocking or slowing down access to online content, protecting services like ours from such interference.
−Removed: In December 2017, the FCC voted in favor of repealing the net neutrality rules, and it is currently uncertain how the U.S.
−Removed: Congress will respond to this decision.
−Removed: To the extent network operators attempt to interfere with our services, extract fees from us to deliver our solution, or otherwise engage in discriminatory practices, our business, results of operations, and financial condition could be materially and adversely affected.
+Added: Since 2010, the Federal Communications Commission (the “FCC”), has considered whether and how to adopt network neutrality rules barring internet providers from blocking or slowing down access to online content, protecting services like ours from such interference.
+Added: In 2018, the FCC issued an order that overturned earlier rules and largely deregulated broadband internet access services and on April 24, 2024, the FCC adopted an order that substantially reinstated earlier rules that treated broadband internet access service as a telecommunications service subject to rules prohibiting discrimination and unreasonable practices, including blocking and slowing down access to online content.
+Added: On January 2, 2025, the U.S.
+Added: Court of Appeals for the Sixth Circuit issued a decision overturning the FCC order.
+Added: A petition for rehearing of the decision filed by proponents of network neutrality was denied on March 11, 2025, and the parties did not seek Supreme Court review.
+Added: As a result of those decisions, the FCC’s 2018 rules went back into effect.
+Added: Under the FCC’s 2018 rules, broadband internet access providers may be able to interfere with our services, extract fees from us to deliver our solution, or otherwise engage in discriminatory practices, and accordingly, our business, results of operations, and financial condition could be materially and adversely affected.
Within such a regulatory environment, we could experience discriminatory or anti-competitive practices that could impede our domestic and international growth, cause us to incur additional expense, or otherwise materially and adversely affect our business, results of operations, and financial condition.
−Removed: In addition, the enactment or application of network neutrality laws could impact our business.
−Removed: For example, California’s state-specific “network neutrality” law took effect in early 2021, and the FCC has proposed to re-adopt federal network neutrality rules and other states could begin to enforce existing laws or adopt new network neutrality requirements.
−Removed: As we are reliant on robust internet connectivity, failure to broadly require the application of network neutrality could result in discriminatory or anti-competitive practices that could impede our domestic and international growth, increased expenses, or otherwise negatively affect our business.
−Removed: To the extent internet service providers attempt to interfere with our services, extract fees from us in exchange for making our platform available, or otherwise engage in discriminatory practices, our business could be adversely impacted.
+Added: In addition, a number of states have adopted or are adopting or considering legislation or executive actions that would regulate the conduct of broadband providers.
+Added: After a federal court judge denied a request for a preliminary injunction against California’s state-specific network neutrality law, California began enforcing that law on March 25, 2021.
+Added: A number of other states have adopted or are adopting or considering legislation or executive actions that would regulate the conduct of broadband providers.
+Added: A similar law in Vermont is subject to a pending challenge, but went into effect on April 20, 2022.
+Added: We cannot predict whether other state initiatives will be enforced, modified, overturned, or vacated by legal action of the court, federal legislation, or the FCC.
Changes in tax laws or exposure to additional income tax liabilities could affect our future profitability.
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• changes in the valuation allowance against deferred tax assets;
−Removed: • increases in interests and penalties related to income taxes;
+Added: • increases in interest and penalties related to income taxes;
• changes in accounting and tax standards or practices;
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• changes in our operating results before taxes.
+Added: For example, the U.S.
+Added: government recently enacted legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”), that (along with other recent U.S.
+Added: federal tax reform) has resulted in significant changes to the taxation of business entities including, among other changes, changes to the taxation of income derived from international operations, changes in the deduction and amortization of research and development expenditures, and limitations on the deductibility of business interest.
+Added: Future guidance from the Internal Revenue Service (“IRS”) and other tax authorities with respect to any legislation may affect us, and certain aspects of such legislation could be repealed, modified or sunset in future years.
We are subject to income taxes in the United States and numerous foreign jurisdictions.
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federal and state net operating loss carryforwards were approximately $83.8 million and approximately $79.5 million, respectively.
−Removed: These amounts have been reduced by the amount of net operating losses expected to be utilized to reduce taxable income for such year.
+Added: The federal net operating loss carryforwards reflect the impact of the current-year tax loss.
+Added: State net operating loss carryforwards reflect the effects of current-year tax loss in certain jurisdictions and utilization in other jurisdictions during the year.
Moreover, our U.S.
−Removed: federal and state research and development tax credits were approximately $12.0 million and approximately $11.2 million, respectively, with the amount of federal credit already reduced by the expected utilization for such year.
+Added: federal and state research and development tax credits were approximately $14.7 million and approximately $13.8 million, respectively.
+Added: These balances reflect the increase during the year as a result of credits generated in the current year, with no expected utilization of federal or state credits during the period.
The utilization of our net operating loss and tax credit carryforwards may be subject to annual limitation due to ownership changes as provided by Sections 382 and 383 of the Code and similar state provisions.
Such an annual limitation could result in the expiration of portions of our net operating loss and tax credit carryforwards before utilization.
−Removed: In the event that we experience ownership changes due to future transactions in our stocks, the utilization of net operating loss and tax credit carryforwards to reduce our future taxable income and tax liabilities may be limited, which could affect our profitability.
−Removed: The Internal Revenue Services ("IRS") and several foreign tax authorities have increasingly focused attention on intercompany transfer pricing with respect to sales of products and services and the use of intangibles.
+Added: In the event that we experience ownership changes due to future transactions in our stock, the utilization of net operating loss and tax credit carryforwards to reduce our future taxable income and tax liabilities may be limited, which could affect our profitability.
+Added: The IRS and several foreign tax authorities have increasingly focused attention on intercompany transfer pricing with respect to sales of products and services and the use of intangibles.
Tax authorities could disagree with our intercompany charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes.
If we do not prevail in any such disagreements, our profitability may be affected.
−Removed: In addition, the OECD has been working on new laws on the taxation of the digital economy to provide taxing rights to jurisdictions where the customers or users are located.
−Removed: Some countries have enacted, and others have proposed the new laws to tax digital transactions.
+Added: In addition, the Organization for Economic Co-operation and Development has been working on new laws on the taxation of the digital economy to provide taxing rights to jurisdictions where the customers or users are located.
+Added: Some countries have enacted, and others have proposed new laws to tax digital transactions.
These developments may result in material impacts to our financial statements.
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Failure to comply with these systems and regulations can result in the assessment of additional taxes, duties, interest, and penalties.
−Removed: While we believe we are in compliance with local laws, we cannot assure that tax and customs authorities will agree with our reporting positions and upon audit such tax and customs authorities may assess additional taxes, duties, interest, and penalties against us.
+Added: While we believe we are in compliance with local laws, we can provide no assurance that tax and customs authorities will agree with our reporting positions and upon audit such tax and customs authorities may assess additional taxes, duties, interest, and penalties against us.
Adverse action by any government agencies related to indirect tax laws could materially and adversely affect our business, results of operations and financial condition.
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We are also subject to various domestic and international anti-corruption laws, such as the United States Foreign Corrupt Practices Act, as well as other similar anti-bribery laws and regulations.
−Removed: These laws and regulations generally prohibit companies and their employees and intermediaries from authorizing, offering, providing, and accepting improper payments or benefits for improper purposes.
+Added: These laws and regulations generally
+Added: prohibit companies and their employees and intermediaries from authorizing, offering, providing, and accepting improper payments or benefits for improper purposes.
These laws also require that we keep accurate books and records and maintain compliance procedures designed to prevent any such actions.
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federal and state as well as foreign, antitrust and competition laws and regulations.
−Removed: In general, the objective of these laws is to promote and maintain free
−Removed: competition by prohibiting certain forms of conduct that tend to restrict production, raise prices or otherwise control the market for goods or services to the detriment of consumers of those goods and services.
+Added: In general, the objective of these laws is to promote and maintain free competition by prohibiting certain forms of conduct that tend to restrict production, raise prices or otherwise control the market for goods or services to the detriment of consumers of those goods and services.
Potentially prohibited activities under these laws may include unilateral conduct or conduct undertaken as the result of an agreement with one or more of our suppliers, competitors, or customers.
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We utilize a number of different distribution channels to deliver our products to customers and end-users and regularly enter into agreements with resellers of our products at various levels in the distribution chain that could be subject to scrutiny under these laws in the event of private litigation or an investigation by a governmental competition authority.
−Removed: In addition, many of our products are sold to consumers via the internet.
+Added: In addition, many of our products are sold to
+Added: consumers via the internet.
Many of the competition-related laws that govern these internet sales were adopted prior to the advent of the internet and, as a result, do not contemplate or address the unique issues raised by online sales.
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Any failure on our part or on the part of our employees, agents, distributors, or other business partners to comply with the laws and regulations governing competition can result in negative publicity and diversion of management time and effort and may subject us to significant litigation liabilities and other penalties.
−Removed: We are exposed to the credit risk of some of our customers and sublease counterparties and to credit exposures in certain markets, which could result in material losses.
+Added: Disruption of our manufacturing facilities or other operations or those of our suppliers, or in the operations of our customers, due to climate change, severe weather events, and other natural catastrophic events, could result in cancellation of orders, delays in deliveries or other business activities, or loss of customers and could seriously harm our business.
+Added: Our products are manufactured and packaged for retail sale by our manufacturers mostly in Vietnam and shipped to our logistics hubs located in the United States and Australia.
+Added: Our operations teams based in the United States, Ireland, Taiwan, and Vietnam coordinate with our manufacturers’ engineering, manufacturing and quality control personnel to develop the requisite manufacturing processes, quality checks and testing and general oversight of the manufacturing activities.
+Added: We believe this model has enabled us to quickly and efficiently deliver high-quality and innovative products, while enabling us to minimize costs and manage inventory.
+Added: In addition, our business is international in nature, with our sales, service and administrative personnel and our customers and suppliers located in numerous countries throughout the world.
+Added: Operations at our manufacturing facilities and our assembly subcontractors and those of our suppliers, as well as our other operations and those of our customers, are subject to disruption for a variety of reasons, including hurricanes, tornadoes, flooding, drought, wildfires, damaging winds, earthquake, and extreme temperatures, or other natural disasters.
+Added: Certain of these events may become more frequent or intense as a result of climate change, or other environmental or social issues, which may in some instances also contribute to chronic changes such as sea-level rise or changes to meteorological or hydrological patterns that may also disrupt our or our suppliers’ operations or otherwise adversely impact our business.
+Added: Such disruption could in the future cause inefficiencies in our workforce and delays in, among other things, shipments of products to our customers, our ability to perform services requested by our customers, the ability of our suppliers to supply us components for our products in a timely manner, or the timely installation and acceptance of our products at customer sites.
+Added: Such disruptions could also induce illiquidity for our customers and suppliers, further straining our supply chain and causing continued uncertainty in customers’ abilities to pay for the products they purchase and their demand for our products and services.
+Added: If any such disruptions occur in a region from which we derive a significant portion of our revenue, such as metropolitan areas of North America, particularly during periods of peak sales demand, customers in that region may delay or forgo purchases of our products and services or cancel existing subscriptions, which may harm our results of operations.
+Added: In case of any disruptions in our supply chain, we may need to commit to increased purchases and provide longer lead times to secure critical components, which could increase inventory obsolescence risk.
+Added: All of the aforementioned risks may be augmented if the disaster recovery plans for us, our third party partners or our suppliers prove to be inadequate.
+Added: We are exposed to the credit risk of some of our customers and to credit exposures in certain markets, which could result in material losses.
A substantial portion of our sales are on an open credit basis, with typical payment terms of 30 to 60 days in the United States and, because of local customs or conditions, longer in some markets outside the United States.
We monitor individual customer financial viability in granting such open credit arrangements, seek to limit such open credit to amounts we believe the customers can pay and maintain reserves we believe are adequate to cover exposure for doubtful accounts.
−Removed: Any bankruptcies or illiquidity among our customer base or sublease counterparties could harm our business and have a material adverse effect on our financial condition and results of operations.
−Removed: To the degree that turmoil in the credit markets makes it more difficult for some customers or sublease counterparties to obtain financing, our customers’ or sublease counterparties' ability to pay could be adversely impacted, which in turn could materially and adversely affect our business, results of operations, and financial condition.
−Removed: In June 2021, we entered into a sublease agreement, with a term that runs concurrent with the term of the head lease, for our San Jose office space in light of the COVID-19 pandemic and its impact on the changing nature of office space use by our workforce.
−Removed: We believe we have secured a quality subtenant with appropriate sublease terms.
−Removed: However, if the subtenant default on their sublease obligations with us or otherwise terminate their sublease with us, we may experience a loss of planned sublease rental income, which could result in a material charge against our operating results.
−Removed: If that were to happen, we may be unable to enter into a new sublease on acceptable terms or at all and even if we do, such sublease may result in our incurring liabilities and expenses in future periods or the rent payments we receive from a new subtenant being less than our rent obligations under the head lease.
−Removed: Under these circumstances, we would be responsible for any shortfall.
+Added: Any bankruptcies or illiquidity among our customer base could harm our business and have a material adverse effect on our financial condition and results of operations.
+Added: To the degree that turmoil in the credit markets makes it more difficult for some customers to obtain financing, our customers’ ability to pay could be adversely impacted, which in turn could materially and adversely affect our business, results of operations, and financial condition.
+Added: We are subject to payment processing risk.
+Added: We rely on a variety of payment methods to collect funds from our customers, including bank transfers such as wire transfers and ACH, credit and debit cards, gift cards, lines of credit, “buy now pay later” financial products, and online wallets.
+Added: We rely on internal systems as well as those of third-party payment processors to facilitate payment.
+Added: The acceptance and processing of these payment methods are subject to applicable rules and regulations and involves the payment of interchange and other fees.
+Added: To the extent there are disruptions in our payment processing systems, increases in payment processing fees, material changes in the payment ecosystem, such as large re-issuances of payment cards, delays in receiving payments from payment processors, or changes to rules or regulations governing payment processing, our revenue, operating expenses and results of operation could be adversely impacted.
+Added: We rely on our third-party payment processors to bill directly to customers on our behalf.
+Added: If these processors become unwilling or unable to continue providing services to us, we would need to transition to alternative providers or adopt new methods of collecting payments, which could increase costs and adversely impact customer acquisition and retention.
+Added: In addition, from time to time, we encounter fraudulent transactions or misuse of payment methods.
+Added: If we are unable to effectively detect, prevent, and manage fraudulent activity, our results of operation could be adversely affected and our brand and consumer perceptions could be harmed.
If our products are not compatible with some or all leading third-party IoT products and protocols, we could be materially and adversely affected.
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Although a portion of our international sales are currently invoiced in U.S.
−Removed: dollars, we have implemented and continue to implement for certain countries and customers both invoicing and payment in foreign currencies.
+Added: dollars, we have implemented and continue to implement
+Added: for certain countries and customers both invoicing and payment in foreign currencies.
Our primary exposure to movements in foreign currency exchange rates relates to non-U.S.
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This could result in customers eventually terminating contracts with us or in our decision to terminate certain contracts, which would adversely affect our sales.
−Removed: Risks Related to Our Separation from NETGEAR
−Removed: NETGEAR has agreed to indemnify us for certain liabilities.
−Removed: However, we cannot assure that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that NETGEAR’s ability to satisfy its indemnification obligation will not be impaired in the future.
−Removed: Pursuant to the master separation agreement entered into between us and NETGEAR and certain other agreements with NETGEAR entered into in connection with our separation from NETGEAR, NETGEAR has agreed to indemnify us for certain liabilities.
−Removed: The master separation agreement provides for cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of our business with us and financial responsibility for the obligations and liabilities of NETGEAR’s business with NETGEAR.
−Removed: Under the intellectual property rights cross-license agreement entered into between us and NETGEAR, each party, in its capacity as a licensee, indemnifies the other party, in its capacity as a licensor, as well as its directors, officers, agents, successors and subsidiaries against any losses suffered by such indemnified party as a result of the indemnifying party’s practice of the intellectual property licensed to such indemnifying party under the intellectual property rights cross-license agreement.
−Removed: The transition services agreement generally provides that the applicable service recipient indemnifies the applicable service provider for liabilities that such service provider incurs arising from the provision of services other than liabilities arising from such service provider’s gross negligence, bad faith or willful misconduct or material breach of the transition services agreement, and that the applicable service provider indemnifies the applicable service recipient for liabilities that such service recipient incurs arising from such service provider’s gross negligence, bad faith or willful misconduct or material breach of the transition
−Removed: services agreement.
−Removed: Pursuant to the registration rights agreement, we have agreed to indemnify NETGEAR and its subsidiaries that hold registrable securities (and their directors, officers, agents and, if applicable, each other person who controls such holder under Section 15 of the Securities Act) registering shares pursuant to the registration rights agreement against certain losses, expenses and liabilities under the Securities Act, common law or otherwise.
−Removed: NETGEAR and its subsidiaries that hold registrable securities similarly indemnify us but such indemnification will be limited to an amount equal to the net proceeds received by such holder under the sale of registrable securities giving rise to the indemnification obligation.
−Removed: However, third parties could also seek to hold us responsible for any of the liabilities that NETGEAR has agreed to retain, and we cannot assure that an indemnity from NETGEAR will be sufficient to protect us against the full amount of such liabilities, or that NETGEAR will be able to fully satisfy its indemnification obligations in the future.
−Removed: Even if we ultimately succeed in recovering from NETGEAR any amounts for which we are held liable, we may be temporarily required to bear these losses.
−Removed: Each of these risks could materially and adversely affect our business, results of operations, and financial condition.
Risks Related to Ownership of Our Common Stock
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• interest rate or currency exchange rate fluctuations;
−Removed: • any announcements related to, our stock repurchase program;
+Added: • the implementation of a new stock repurchase program;
• instances of stockholder activism;
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In addition, price volatility may be greater if the public float and trading volume of our common stock is low.
−Removed: Stock repurchases could increase the volatility of the trading price of our common stock and diminish our cash reserves, and we cannot guarantee that our stock repurchase program will be fully implemented or that such program will enhance long-term stockholder value.
−Removed: In September 2024, our Board of Directors approved a stock repurchase program of up to an aggregate of $50 million of shares of our common stock, of which $4.4 million has been utilized and $45.6 million remained available and authorized for future repurchases as of December 31, 2024.
−Removed: Repurchases will be made 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 our common stock.
−Removed: The stock repurchase program is expected to continue through December 31, 2026, unless extended or shortened by the Board of Directors.
−Removed: Although our Board of Directors has authorized the stock repurchase program, it does not obligate us to repurchase any specific dollar amount or number of shares and the stock repurchase program may be modified, suspended or terminated at any time and for any reason.
−Removed: The timing and actual number of shares repurchased under the stock repurchase program will depend on a variety of factors, including the acquisition price of the shares, our liquidity position, general market and economic conditions, legal and regulatory requirements and other considerations.
−Removed: Our ability to repurchase shares may also be limited by restrictive covenants in our Credit Agreement or in future borrowing arrangements we may enter into from time to time.
−Removed: As a result, there can be no guarantee around the timing or volume of our share repurchases.
+Added: Stock repurchases could increase the volatility of the trading price of our common stock and diminish our cash reserves, and we cannot guarantee that any stock repurchase program we implement will enhance long-term stockholder value.
+Added: In September 2024, our Board of Directors approved a stock repurchase program of up to an aggregate of $50 million of shares of our common stock, which has been fully implemented and completed as of December 31, 2025.
+Added: Repurchases under this program were made through open market purchases in a manner deemed 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 our common stock.
+Added: Although we fully implemented our stock repurchase program as of December 31, 2025, we may authorize additional stock repurchase programs in the future.
Repurchases of our shares could increase the volatility of the trading price of our stock, which could have a negative impact on the trading price of our stock.
−Removed: Similarly, the future announcement of the termination or suspension of the stock repurchase program, or our decision not to utilize the full authorized repurchase amount under the stock repurchase program, could result in a decrease in the trading price of our stock.
−Removed: In addition, the stock repurchase program could have the impact of diminishing our cash reserves, which may impact our ability to finance our growth, complete acquisitions and execute our strategic plan.
+Added: Similarly, the future announcement of a new stock repurchase program or the termination or suspension of such stock repurchase program, or our decision not to utilize the full authorized repurchase amount under such stock repurchase program, could result in a decrease in the trading price of our stock.
+Added: In addition, any future stock repurchase program could have the impact of diminishing our cash reserves, which may impact our ability to finance our growth, complete acquisitions and execute our strategic plan.
There can be no assurance that any share repurchases we do elect to make will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased our shares.
In addition, as part of the Inflation Reduction Act signed into law in August 2022, the United States implemented a 1% excise tax on the value of certain stock repurchases by publicly traded companies.
−Removed: Although our stock repurchase program is intended to enhance long-term stockholder value, we cannot guarantee that it will do so, and short-term stock price fluctuations could reduce the effectiveness of the stock repurchase program.
+Added: Although stock repurchase programs are intended to enhance long-term stockholder value, we cannot guarantee that any stock repurchase program we implement will do so, and short-term stock price fluctuations could reduce the effectiveness of any such stock repurchase program.
If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our stock, or if our operating results do not meet their expectations, our stock price could decline.
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If, in any period our stock price decreases to the point where the fair value of our assets (as partially indicated by our market capitalization) is less than our book value, this could indicate a potential impairment and we may be required to record an impairment charge in that period.
−Removed: Our valuation methodology for assessing impairment requires management to
−Removed: make judgments and assumptions based on projections of future operating performance.
+Added: Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on projections of future operating performance.
We operate in highly competitive environments and projections of future operating results and cash flows may vary significantly from actual results.
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In addition, because we have not elected to be exempt from Section 203 of the Delaware General Corporation Law (the “DGCL”), this provision could also delay or prevent a change of control that you may favor.
−Removed: Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with a person that acquires, more than 15% of the outstanding voting stock of a Delaware corporation (an “interested stockholder”) shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which the person became an interested stockholder, unless (i) prior to such time, the Board of Directors of such corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
+Added: Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with a person that acquires, more than 15% of the outstanding voting stock of a Delaware corporation (an “interested stockholder”) shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a
+Added: three-year period following the date on which the person became an interested stockholder, unless (i) prior to such time, the Board of Directors of such corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
(ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of such corporation at the time the transaction commenced (excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) the voting stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender or vote stock held by the plan);
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These exclusive forum provisions may limit the ability of Arlo’s stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with Arlo or Arlo’s directors or officers, which may discourage such lawsuits against Arlo and Arlo’s directors and officers.
−Removed: Alternatively, if a court were to find one or more of these exclusive forum provisions inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, Arlo may incur further significant additional costs associated with resolving such matters in other
−Removed: jurisdictions or forums, all of which could materially and adversely affect Arlo’s business, financial condition, or results of operations.
+Added: Alternatively, if a court were to find one or more of these exclusive forum provisions inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, Arlo may incur further significant additional costs associated with resolving such matters in other jurisdictions or forums, all of which could materially and adversely affect Arlo’s business, financial condition, or results of operations.
Our Board of Directors has the ability to issue blank check preferred stock, which may discourage or impede acquisition attempts or other transactions.
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Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the SOX Act could materially and adversely affect our business, results of operations, financial condition, and stock price.
−Removed: As a public company, we are required to document and test our internal control over financial reporting in order to satisfy the requirements of rules and regulations of the SEC regarding compliance with Section 404 of the SOX Act, which requires an annual management assessment of the effectiveness of our internal control over financial reporting.
−Removed: We are required to provide our independent registered public accounting firm’s annual report addressing the effectiveness of internal control over financial reporting.
−Removed: During the course of our testing, we may identify deficiencies which we may not be able to remediate in time to meet our deadline for compliance with Section 404 of the SOX Act.
−Removed: Testing and maintaining internal control over financial reporting can divert our management’s attention from other matters that are
−Removed: important to the operation of our business.
−Removed: We also expect the regulations under Section 404 of the SOX Act to increase our legal and financial compliance costs, make it more difficult to attract and retain qualified officers and members of our board of directors, particularly to serve on our audit committee, and make some activities more difficult, time consuming, and costly.
−Removed: For the year ended December 31, 2023 through September 29, 2024, management identified certain control deficiencies in the area of our information technology general controls that, when aggregated, arose to a material weakness.
−Removed: Although we remediated this material weakness as of December 31, 2024, there is no assurance that additional material weaknesses will not occur or that we will be able to remediate any additional material weaknesses in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404 of the SOX Act.
−Removed: If we identify any additional material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 of the SOX Act in a timely manner, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be materially adversely affected, and we could become subject to investigations by the NYSE, the SEC or other regulatory authorities, which could require additional financial and management resources.
+Added: As a public company, we are required to document and test our internal control over financial reporting in order to satisfy the requirements of rules and regulations of the SEC regarding compliance with Section 404 of the SOX Act, which requires an annual management assessment of the effectiveness of our internal control over financial reporting We are required to provide our independent registered public accounting firm’s annual report addressing the effectiveness of internal control over financial reporting.
+Added: During the course of our testing, we have in the past and may in the future identify deficiencies which we may not be able to remediate in time to meet our deadline for compliance with Section 404 of the SOX Act.
+Added: Although we have been able remediate our previously identified material weakness, there is no assurance that additional material weaknesses will not occur or that we will be able to remediate any additional material weaknesses in time to meet the applicable Section 404 compliance deadline.
+Added: Testing and maintaining internal control over financial reporting can divert our management’s attention from other matters that are important to the operation of our business.
+Added: also expect the regulations under Section 404 of the SOX Act to increase our legal and financial compliance costs, make it more difficult to attract and retain qualified officers and members of our board of directors, particularly to serve on our audit committee, and make some activities more difficult, time consuming, and costly.
+Added: Additionally, if we identify any additional material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 of the SOX Act in a timely manner, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be materially adversely affected, and we could become subject to investigations by the NYSE, the SEC or other regulatory authorities, which could require additional financial and management resources.
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