What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-27 compared with 2025-02-27 · 447 added, 410 removed, 627 unchanged (58% of the section changed)

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Arlo Technologies, Inc.

To the shareholders and the Board of Directors of Arlo Technologies, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of Arlo Technologies, Inc.

and subsidiaries (the "Company") as of December 31, 2024, the related consolidated statements of comprehensive loss, stockholders' equity, and cash flows, for the year ended December 31, 2024, and the related notes (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of Arlo Technologies, Inc.

and subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of comprehensive income (loss), stockholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

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Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audit of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

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Opinion on the Financial Statements

We have audited the consolidated balance sheet of Arlo Technologies, Inc and its subsidiaries (the “Company”) as of December 31, 2023, and the related consolidated statements of comprehensive loss, of stockholders’ equity and of cash flows for each of the two years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

We have audited the consolidated statements of operations and comprehensive income (loss), of stockholders’ equity and of cash flows of Arlo Technologies, Inc.

and its subsidiaries (the “Company”) for the year ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

San Jose, California

February 29, 2024, except for the change in the manner in which the Company accounts for segments discussed in Note 2 to the consolidated financial statements, as to which the date is February 27, 2025

February 29, 2024, except for the change in the manner in which the Company accounts for segments discussed in Note 2 (not presented herein) in the consolidated financial statements appearing under Item 8 of the Company’s 2024 annual report on Form 10-K, as to which the date is February 27, 2025

We served as the Company's auditor from 2018 to 2024.

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Goodwill 11,038 11,038

Restricted cash — 4,131

Long-term investment 12,500 —

Other non-current assets 4,171 4,293

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ARLO TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Year Ended December 31,

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(In thousands, except per share data)

Subscriptions and services $ 316,356 $ 242,998 $ 201,238

Products 212,941 267,888 289,938

Services 242,998 201,238 136,479

Total revenue 529,297 510,886 491,176

Cost of revenue:

Subscriptions and services 52,336 54,613 52,950

Products 244,120 268,769 270,663

Services 54,613 52,950 45,687

Total cost of revenue 296,456 323,382 323,613

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General and administrative 66,097 72,134 56,371

Others 3,356 1,307 2,192

Other operating expense 2,181 3,356 1,307

Total operating expenses 226,770 222,396 192,466

Loss from operations ( 34,892 ) ( 24,903 ) ( 56,879 )

Income (loss) from operations 6,071 ( 34,892 ) ( 24,903 )

Other income, net:

Gain on early lease termination 4,144 — —

Interest income, net 5,452 5,584 3,935

5,584 3,935 926

Other income (expense), net — ( 104 ) 107

( 104 ) 107 302

Loss before income taxes ( 29,412 ) ( 20,861 ) ( 55,651 )

Total other income, net 9,596 5,480 4,042

Income (loss) before income taxes 15,667 ( 29,412 ) ( 20,861 )

Provision for income taxes

Net loss $ ( 30,504 ) $ ( 22,036 ) $ ( 56,626 )

Net loss per share:

Basic and diluted $ ( 0.31 ) $ ( 0.24 ) $ ( 0.65 )

Weighted average shares used to compute net loss per share:

Basic and diluted 98,630 92,754 87,173

Comprehensive loss:

Net loss $ ( 30,504 ) $ ( 22,036 ) $ ( 56,626 )

741 1,092 1,175

Net income (loss) $ 14,926 $ ( 30,504 ) $ ( 22,036 )

Earnings (loss) per share:

Basic $ 0.14 $ ( 0.31 ) $ ( 0.24 )

Diluted $ 0.14 $ ( 0.31 ) $ ( 0.24 )

Weighted-average common shares outstanding:

Basic 104,203 98,630 92,754

Diluted 110,156 98,630 92,754

Comprehensive income (loss):

Net income (loss) $ 14,926 $ ( 30,504 ) $ ( 22,036 )

Other comprehensive income (loss), net of tax ( 18 ) ( 286 ) 427

Total comprehensive loss $ ( 30,790 ) $ ( 21,609 ) $ ( 56,733 )

Total comprehensive income (loss) $ 14,908 $ ( 30,790 ) $ ( 21,609 )

The accompanying notes are an integral part of these consolidated financial statements.

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Total stockholders’ equity, beginning balances

Common stock:

Beginning balances $ 95 $ 89 $ 84

Issuance of common stock under stock-based compensation plans 9 9 6

Issuance of common stock under employee stock purchase plan — — 2

Repurchase of common stock — — —

Restricted stock unit withholdings ( 3 ) ( 3 ) ( 3 )

Ending balances $ 101 $ 95 $ 89

Additional paid-in capital:

$ 100,909 $ 103,276 $ 87,695

Common stock and additional paid-in capital:

Beginning balances $ 498,840 $ 470,417 $ 433,227

Stock-based compensation expense 56,596 36,971 36,985

Stock-based compensation 44,652 56,596 36,971

Settlement of liability classified restricted stock units 9,938 12,594 13,480

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Beginning balances $ ( 397,965 ) $ ( 367,461 ) $ ( 345,425 )

Net loss ( 30,504 ) ( 22,036 ) ( 56,626 )

Net income (loss) 14,926 ( 30,504 ) ( 22,036 )

Ending balances $ ( 383,039 ) $ ( 397,965 ) $ ( 367,461 )

Accumulated other comprehensive income (loss):

Accumulated other comprehensive income:

Beginning balances $ 34 $ 320 $ ( 107 )

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Total stockholders’ equity, ending balances

$ 127,841 $ 100,909 $ 103,276

Common stock shares:

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Cash flows from operating activities:

Net loss $ ( 30,504 ) $ ( 22,036 ) $ ( 56,626 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Stock-based compensation expense 68,657 47,948 48,476

Net income (loss) $ 14,926 $ ( 30,504 ) $ ( 22,036 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Stock-based compensation expense, net of amounts capitalized 62,333 68,657 47,948

Depreciation and amortization 3,931 3,200 4,661

Gain on early lease termination ( 4,144 ) — —

Allowance for credit losses and non-cash changes to reserves 888 2,085 279

2,085 279 ( 190 )

Deferred income taxes ( 216 ) ( 13 ) 112

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Accrued and other liabilities ( 2,873 ) ( 6,727 ) ( 7,959 )

Net cash provided by (used in) operating activities 51,306 38,302 ( 45,962 )

Net cash provided by operating activities 78,722 51,306 38,302

Cash flows from investing activities:

Purchases of property and equipment ( 2,688 ) ( 2,847 ) ( 2,010 )

Purchases of property and equipment, including capitalized software ( 11,826 ) ( 2,688 ) ( 2,847 )

Purchases of short-term investments ( 112,932 ) ( 205,068 ) ( 149,870 )

Purchase of long-term investment ( 12,500 ) — —

Proceeds from maturities of short-term investments 165,012 218,596 102,031

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

82,032 60,653 88,179

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

Reconciliation of cash, cash equivalents, and restricted cash to Consolidated Balance Sheets

$ 146,440 $ 82,032 $ 60,653

Reconciliation of cash, cash equivalents, and restricted cash to

Consolidated Balance Sheets

Cash and cash equivalents $ 146,440 $ 82,032 $ 56,522

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Purchases of property and equipment included in accounts payable and accrued liabilities $ 470 $ 708 $ 189

Stock-based compensation expense capitalized for software development $ 1,637 $ — $ —

The accompanying notes are an integral part of these consolidated financial statements.

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Arlo Technologies, Inc.

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

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

Arlo’s experience in cloud services, AI and computer vision analytics, wireless connectivity and intuitive user experience design delivers seamless, smart home security for Arlo users that can be setup by the customers and engaged with every day.

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(ii) Europe, Middle-East and Africa (“EMEA”);

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

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

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

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Under the fiscal quarter basis, each of the first three fiscal quarters ends on the Sunday closest to the calendar quarter end, with the fourth quarter ending on December 31.

Reclassification

Certain prior periods amounts have been reclassified to conform to the current period’s presentation.

None of these reclassifications had a material impact to the consolidated financial statements.

Use of estimates

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Management bases its estimates on various assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Actual results could differ materially from those estimates and operating results for the year ended December 31, 2024 are not necessarily indicative of the results that may be expected for any future period.

Summary of Significant Accounting Policies

Cash and Cash Equivalents

We invest excess cash primarily in government securities and money market funds and consider all highly liquid investments with an original maturity or a remaining maturity at the time of purchase of three months or less to be cash equivalents.

We deposit cash and cash equivalents with high credit quality financial institutions.

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

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Restricted Cash

We maintain certain cash balances restricted historically as to withdrawal or use.

Restricted cash is comprised primarily of cash used as a collateral for a letter of credit associated with our lease agreement for office space in San Jose, California.

We deposit restricted cash with high credit quality financial institutions.

On November 14, 2024, we entered into a Credit Agreement (as defined and further discussed below in Note 7, Revolving Credit Facility ), which provides a three-year revolving credit facility of up to $ 45.0 million that matures on November 14, 2027.

This Credit Agreement includes a $ 10.0 million sublimit for the issuance of letters of credit, which we intend to utilize for our lease agreement for our office space in San Jose, California.

As a result, the depository bank has fully lifted the restriction on our cash and no restricted cash was recognized as of December 31, 2024.

Summary of Significant Accounting Policies

Cash and cash equivalents

All highly liquid instruments with original or remaining maturities at the time of purchase of three months or less are cash equivalents.

We invest cash and cash equivalents in government securities and money market funds with high credit quality financial institutions.

Short-term investments

Short-term investments are comprised of marketable securities that consist of government securities with an original maturity or a remaining maturity at the time of purchase of greater than three months and no more than 12 months.

The marketable securities are held with a high quality financial institution, which acts as our custodian and investment manager.

These marketable securities are classified as available-for-sale securities in accordance with the provisions of the authoritative guidance for investments and are carried at fair value with unrealized gains and losses included in accumulated other comprehensive income (loss), net of tax, which is reported in consolidated statements of stockholders’ equity.

Fair Value Measurements

The carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate their fair values due to their short maturities.

Short-term investments are recognized and disclosed at fair value in the financial statements on a recurring basis.

The fair value of assets and liabilities is measured based on a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement.

The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Trade Accounts Receivable

We are exposed to credit losses primarily through sales of products and services.

Allowance for current estimated credit losses for trade accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers’ trade accounts receivables.

Due to the short-term nature of such receivables, the estimated amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers.

Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default.

Monitoring activities include dispute resolution, payment confirmation, review of customers’ financial condition and macroeconomic conditions.

Balances are written off when determined to be uncollectible.

Although we have historically not

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

experienced significant credit losses, it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of trade accounts receivable.

Concentrations of Risk and Other Uncertainties

Financial instruments that potentially subject us to a concentration of credit risk mainly consist of cash equivalents, short-term investments and accounts receivable.

We believe that there is minimal credit risk associated with the investments of cash equivalents and short-term investments due to the restrictions placed on the type of investment that can be entered into under our investment policy.

Our cash equivalents and short-term investments primarily consist of government securities and money market funds which are held and managed by high credit quality financial institutions.

Our customers are primarily retailers, wholesale distributors and security solution providers who sell or distribute our products to a large group of end-users.

We regularly perform credit evaluations of our customers’ financial condition and performance and consider factors such as historical experience, credit quality, age of the accounts receivable balances, geographic or country-specific risks and current economic conditions that may affect our customers’ ability to pay.

We do not require collateral from our customers.

Historically, a substantial portion of revenue has been derived from a limited number of retailers and wholesale distribution partners.

As of December 31, 2024 and 2023, two customers accounted for 54 % and 13 %, and three customers accounted for 37 %, 15 %, and 10 % of the total accounts receivable, net, respectively.

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

During the years ended December 31, 2024, 2023 and 2022, one customer accounted for 43 %, 34 %, and 40 % of the total revenue, respectively.

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

Additionally, we receive certain of our components from a limited number of suppliers and rely on a limited number of third parties to manufacture all of our products.

If any of the third-party manufacturers cannot or will not manufacture our products in required volumes, on a cost-effective basis, in a timely manner or at all, we will have to secure additional manufacturing capacity.

Any interruption or delay in manufacturing could materially and adversely affect our business, results of operations and financial condition.

At the date of issuance of our financial statements, we are not aware of any event which could cause the severe impact in a near term.

As of December 31, 2024 and 2023, one vendor accounted for 80 % and 88 % of the total accounts payable, respectively.

No other vendors accounted for 10% or greater of the total accounts payable.

As of December 31, 2024 and 2023, one significant vendor accounted for 93 % and 87 % of the total purchases, respectively.

No other vendors accounted for 10% or greater of the total purchases.

Our products are concentrated in the smart security solution industries, which are characterized by rapid technological advances, changes in customer requirements and evolving regulatory requirements and industry standards.

Our success depends on management’s ability to anticipate and/or to respond quickly and adequately to such changes.

Any significant delays in the development or introduction of products and services could materially and adversely affect our business, results of operations and financial condition.

Marketable securities that consist of government securities with original or remaining maturities at the time of purchase of greater than three months and no more than 12 months are short-term investments for use in current operations.

These marketable securities are classified as available-for-sale securities in accordance with the provisions of the authoritative guidance for investments and are reported at fair value, with unrealized gains and non-credit related unrealized losses, net of tax, presented as accumulated other comprehensive income (loss) on the consolidated statements of stockholders’ equity.

Accounts receivable, net

Accounts receivable are recorded and carried at the original invoiced amount less an allowance for credit losses.

We make estimates of expected credit and collectability trends for the allowance for credit losses and allowance for unbilled receivables based upon our assessment of various factors, including historical collection experience, current and future economic and market conditions and a review of the current status of customers’ trade accounts receivables.

Expected credit losses are recorded as general and administrative expenses on the consolidated statements of operations and comprehensive income (loss).

As of and for the years ended December 31, 2025 and 2024, the allowance for credit losses on accounts receivable and provision for expected credit losses recorded on the consolidated statements of operations and comprehensive income (loss) were not material.

Inventories consist of finished goods which are valued at the lower of cost or net realizable value, with cost being determined using the first-in, first-out method.

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Property and equipment, net

Property and equipment are stated at historical cost, less accumulated depreciation.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

Asset Category:

Range of Useful Lives

Property and equipment are recorded at cost, net of accumulated depreciation.

Depreciation of property and equipment is based on the straight-line method over the estimated useful lives of the assets as follows:

Categories Useful Lives

Machinery and equipment 2 - 3 years

Capitalized software development costs 2 years

Software and license 2 - 5 years

Computer equipment 2 years

Furniture and fixtures 5 years

Software 2 - 5 years

Machinery and equipment 2 - 3 years

Leasehold improvements Shorter of remaining lease term or 7 years

Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount of the asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.

The carrying value of the asset is reviewed on a regular basis for the existence of facts, both internal and external, that may suggest impairment.

We evaluate the recoverability of property and equipment for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable.

If such review indicates that the carrying amount of property and equipment assets is not recoverable, and the asset’s fair value is less than the carrying amount, an impairment charge is recognized.

Operating leases

Our operating leases comprise of offices, data centers, and other equipment.

We determine if an arrangement is a lease at inception.

Operating leases are included in operating lease right-of-use assets, net, accrued liabilities, and non-current operating lease liabilities in the consolidated balance sheets.

Leases with an initial term of 12 months or less are expensed as incurred and recorded in the consolidated statements of comprehensive loss.

The lease expense for fixed lease payments is recorded in the consolidated statements of comprehensive loss on a straight-line basis over the lease term and variable lease payments are included in the lease expense when the obligation for those payments is incurred.

Operating lease assets represent our right to use an underlying asset over the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

As most of the leases do not provide an implicit rate, the incremental borrowing rate based on the information available is used at commencement date in determining the present value of lease payments.

We use the implicit rate when readily determinable.

The operating lease asset also includes any lease payments made before the lease commencement date less any lease incentives received.

The lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise the options.

The lease agreements with lease and non-lease components are generally accounted as a single component.

In addition, certain lease agreements contain tenant improvement allowances (“TIA”) from the landlords.

We record lessee-owned improvements as leasehold improvements within property and equipment, net in our consolidated balance sheets and the TIA as a reduction to the lease asset with the impact of the decrease recognized prospectively over the remaining lease term.

We record lessor-owned improvements as prepaid rent within prepaid expenses and other current assets in our consolidated balance sheets and the TIA as a reduction to prepaid rent.

Sublease income from our sublet office space in San Jose, California is recognized on a straight-line basis over the term of the sublease and is recorded as a reduction of lease expense.

We determine if an arrangement is a lease at inception of a contract based on whether the arrangement conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

On the commencement date, leases are evaluated for classification and ROU assets and liabilities are recognized based on the present value of lease payments over the lease term.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date to measure the right-of-use assets and to determine lease liabilities at the present value of lease payments.

Our operating leases comprise of offices, equipment, and distribution centers.

Operating leases are included in operating lease right-of-use assets, net, accrued liabilities, and non-current operating lease liabilities on the consolidated balance sheets.

Operating lease expense is generally recognized on the consolidated statements of operations and comprehensive income (loss) on a straight-line basis over the lease term.

For leases with a term of one year or less, we expense it as incurred and have not elected to record the ROU assets or lease liabilities.

Goodwill represents the excess of the purchase price in a business combination over the fair value of the net tangible and intangible assets acquired.

We assess goodwill for impairment annually at the reporting unit level on the first day of the fourth fiscal quarter each year or whenever events or changes in circumstances indicate the carrying value may not be fully recoverable.

Examples of such events or changes in circumstances include a significant decline in the expected future cash flows, a sustained, significant decline in our stock price and market capitalization, a significant adverse change in the business climate and slower growth rates.

We operate as one operating and reportable segment and identify that one reporting unit for the purpose of goodwill impairment testing, which is at the same level as our operating and reportable segment.

In the annual assessment, g oodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of the reporting unit is less than its carrying amount.

The qualitative assessment considers macroeconomic conditions, industry and market considerations, cost factors, overall

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

We perform an annual impairment assessment of goodwill at the reporting unit level on the first day of the fourth fiscal quarter.

The analysis may include both qualitative and quantitative factors to assess the likelihood of an impairment.

Should certain events or indicators of impairment occur between annual impairment tests, we will perform the impairment test as those events or indicators occur.

Examples of such events or circumstances include a significant decline in the expected future cash flows, a sustained, significant decline in our stock price and market capitalization, a significant adverse change in the business climate and slower growth rates.

Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of the reporting unit is less than its carrying amount.

The qualitative assessment considers macroeconomic conditions, industry and market considerations, cost factors, overall company financial performance, and events affecting our stock price.

financial performance, and events affecting our stock price.

If the reporting unit does not pass the qualitative assessment, we estimate the fair value using a discounted cash flow method and compare the fair value with the carrying amount of our reporting unit, including goodwill.

If the fair value is greater than the carrying amount of our reporting unit, no impairment is recorded.

If the fair value is less than the carrying amount, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to our reporting unit.

The impairment charge, if any, would be recorded to earnings in the consolidated statements of comprehensive loss.

If the fair value of a reporting unit is less than its carrying value, a goodwill impairment charge is recorded for the difference.

The impairment charge, if any, would be recorded as other operating expense on the consolidated statements of operations and comprehensive income (loss).

Long-term investment

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

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

For this investment, we recognize remeasurement adjustments, including upward and downward adjustments, if any, in other income (expense), net on the consolidated statements of operations and comprehensive income (loss).

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

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

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

Fair value measurements

Our financial assets and liabilities are measured and recorded at fair value.

Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Inputs that are generally unobservable and typically reflect management's estimate of assumptions that market participants would use in pricing the asset or liability.

Our cash equivalents and available-for-sale securities are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets.

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

Our non-financial assets, such as property and equipment and goodwill are assessed for impairment when an event or circumstance indicates that an other-than-temporary decline in value may have occurred and, for goodwill, also annually.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Credit risk and concentration

Our financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash equivalents, short-term investments, and accounts receivable.

Cash equivalents and short-term investments primarily consist of government securities and money market funds which are held and managed by high credit quality financial institutions.

We believe the credit risk associated with these investments is minimal due to the restrictions under our investment policy on the types of investments that may be purchased.

Our customers consist primarily of retailers, wholesale distributors and security solution providers who sell or distribute our products to a large group of end-users.

We regularly perform credit evaluations of our customers’ financial condition and payment history, and we consider factors such as historical experience, credit quality, age of the accounts receivable balances, geographic or country-specific risks and current economic conditions that may affect our customers’ ability to pay.

We do not require collateral from our customers.

As of December 31, 2025 and 2024, two customers accounted for 40 % and 17 %, and two customers accounted for 54 % and 13 % of accounts receivable, net, respectively.

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

The allowance for credit losses on accounts receivable for the year ended December 31, 2025 and 2024 was not material.

During the years ended December 31, 2025, 2024 and 2023, one customer accounted for 32 %, 43 %, and 34 % of the total revenue, respectively.

No other customers accounted for 10% or greater of the total revenue in any period presented.

We rely on a limited number of suppliers for certain components and on a limited number of third parties to manufacture all of our products.

Any such interruption or delay in manufacturing could materially and adversely affect our business, results of operations and financial condition.

As of December 31, 2025 and 2024, three vendors accounted for 58 %, 15 %, and 10 %, and one vendor accounted for 80 % of accounts payable, respectively.

No other vendors accounted for 10% or greater of accounts payable.

During the years ended December 31, 2025, 2024 and 2023, one significant vendor accounted for 84 %, 93 % and 87 % of the total trade purchases, respectively.

No other vendors accounted for 10% or greater of the total trade purchases.

At the date of issuance of our financial statements, we are not aware of any event which could cause severe impact in a near term.

Revenue recognition

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Our product revenue is recognized at a point in time when control of the goods is transferred to the customer, generally occurring upon shipment or delivery, dependent upon the terms of the underlying contract.

Our paid subscription services are billed in advance of the start of the subscription and revenues are recognized ratably over subscription period, generally 30 days or 12 months in length.

Revenue from all sales types is recognized at the transaction price, which is the amount we expect to be entitled to in exchange for transferring goods or providing services.

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

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

Our paid subscriptions and services are billed in advance of the start of the subscription and revenues are recognized ratably over subscription period, generally one to twelve months in length.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Contracts with multiple performance obligations

Some of our contracts with customers contain multiple promised goods or services.

Such contracts include hardware products with bundled services, various subscription services, and support.

Some of our contracts with customers contain multiple promised goods or services, such as hardware products bundled with various subscription, service and support.

For these contracts, we account for the promises separately as individual performance obligations if they are distinct.

Performance obligations are determined to be distinct if they are both capable of being distinct and separately identifiable within the context of the contract.

In determining whether performance obligations meet the criteria for being distinct, we consider a number of factors, such as the degree of interrelation and interdependence between obligations, and whether or not the good or service significantly modifies or transforms another good or service in the contract.

In determining whether performance obligations meet the criteria for being distinct, we consider a number of factors, such as the degree of interrelation and interdependence between obligations, and whether or not the goods or services significantly modify or transform other goods or services in the contract.

The embedded software in most of the hardware products is not considered distinct and therefore the combined hardware and incidental software are treated as one performance obligation and recognized at the point in time when control of product transfers to the customer.

Services that are included with certain hardware products are considered distinct and therefore the hardware and service are treated as separate performance obligations.

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Subscriptions and services that are purchased with certain hardware products are considered distinct and therefore the hardware products or subscription and service are treated as separate performance obligations.

In certain cases where subscriptions and services are enabled only by specific hardware products, we consider the hardware products or subscriptions and services components highly interrelated and interdependent and not distinct in the context of the arrangement, and therefore treated as one performance obligation and recognize ratably over the subscriptions and services period.

After identifying the separate performance obligations, the transaction price is allocated to the separate performance obligations on a relative stand-alone selling price basis.

Stand-alone selling prices are generally determined based on the prices charged to customers for standalone sales.

Stand-alone selling price of the hardware is directly observable from add-on camera and base station sales.

Stand-alone selling price of the premium services are directly observable from direct sales to end users.

Stand-alone selling prices of the hardware products are directly observable from add-on camera and base station sales.

Stand-alone selling prices of the premium subscriptions and services are directly observable from direct sales to end users.

Revenue is then recognized for each distinct performance obligation as control is transferred to the customer.

Revenue attributable to hardware is recognized at the time control of the product transfers to the customer.

The transaction price allocated to the service is recognized over the specified service period.

Revenue attributable to hardware products is recognized at the time control of the product transfers to the customer.

The transaction price allocated to the subscriptions and services is recognized over the specified subscriptions and services period.

Long-term supply arrangement - Verisure

We have entered into a Supply Agreement which includes product purchases and paid subscription services with Verisure S.à.r.l.

We have a Supply Agreement which includes product purchases and paid subscriptions and services with Verisure S.à.r.l.

(“Verisure”) .

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Verisure assumes responsibilities for all warranty claims, returns of products and certain technical support provided to the end users.

We provide technical support for paid subscription services where Verisure cannot resolve the issue.

Verisure is responsible for any marketing and promotion of our products and services sold in Europe.

Products are priced at cost plus markup, and paid subscription services are billed based on the number of active cameras monthly and are priced at cost plus markup.

The transaction price for products and paid subscription services is entirely variable because the consideration is dependent on the actual costs.

We provide technical support for paid subscriptions and services where Verisure cannot resolve the issue.

Verisure is responsible for any marketing and promotion of our products or subscriptions and services sold in Europe.

Products are priced at cost plus markup, and paid subscriptions and services are billed based on the number of active cameras monthly and are priced at cost plus markup.

The transaction price for products and paid subscriptions and services is entirely variable because the consideration is dependent on the actual costs.

For products, since quantity and product types are not specified in the agreement, contracts are not deemed to exist until we receive and accept the customer purchase order (“PO”).

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There is a single performance obligation as the distinct goods and services are promised under each individual SOW.

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Sales of hardware products regularly include warranties to end customers ensuring that the product continues to function according to published specifications in a dynamic environment.

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We accrue estimated contra revenue or marketing expense for these sales incentives either when the related revenue is recognized or prior to customer commitment if customary business practice creates an implied expectation of future activities.

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Shipping and handling costs

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We recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that otherwise would have been recognized is one year or less.

These costs are included in operating expenses of sales and marketing and general and administrative in the consolidated statements of comprehensive loss.

If the incremental costs of obtaining a contract, which consist of sales commissions, relate to a service recognized over a period longer than one year, costs are deferred and amortized in line with the related services over the period of benefit.

These costs are included in operating expenses of sales and marketing and general and administrative on the consolidated statements of operations and comprehensive income (loss).

If the incremental costs of obtaining a contract, which consist of sales commissions, relate to subscriptions and services recognized over a period longer than one year, costs are deferred and amortized in line with the related subscriptions and services over the period of benefit.

Contract balances

Contract assets are recorded as accounts receivable, net in the consolidated balance sheets when we have an unconditional right to consideration.

Contract liabilities are recorded as deferred revenue in the consolidated balance sheets when cash payments are received or due in advance of performance.

Contract liabilities consist of advance payments and customer billings in advance of revenue recognition from subscription contracts where we have unsatisfied performance obligations.

Advance payments include prepayments for NRE services under the Supply Agreement with Verisure.

Payment terms vary by customer.

The time between invoicing and when payment is due is not significant.

For certain products or services and customer types, payment is required before the products or services are delivered to the customer.

Performance obligations represent the transaction price allocated that are unsatisfied or partially unsatisfied as of the end of the reporting period.

Unsatisfied and remaining performance obligations consist of contract liabilities.

Research and Development

Costs incurred in the research and development of new products are expensed as incurred.

Software Development Costs

We expense software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external users, before technological feasibility is reached.

Technological feasibility is typically reached shortly before the release of such products.

As a result, development costs that meet the criteria for capitalization were $ 0.7 million, $ 0.6 million and $ 1.8 million for the years ended December 31, 2024, 2023 and 2022, respectively.

We capitalize software development costs related to those software applications to be used solely to meet internal needs during the application development stage.

Capitalized software development costs are amortized using the straight-line amortization method over the estimated useful life of the applicable software.

Costs capitalized for developing such software applications were not material as of December 31, 2024 and 2023.

The timing of revenue recognition, billings and cash collections may result in accounts receivable, contract assets, and contract liabilities (deferred revenue) on the consolidated balance sheets.

Receivables are recorded in the period we deliver products or provide subscriptions and services when we have an unconditional right to payment.

Contract assets are related to the value of products or subscriptions and services transferred to the customer for which the right to payment is not just dependent on the passage of time.

As of December 31, 2025, there were no contract assets.

Contract liabilities are recognized when we receive payment or have an unconditional right to payment in advance of the satisfaction of performance.

The contract liabilities represent (i) deferred subscriptions and services revenue, which consists of payments and customer billings in advance of revenue recognition from contracts where we have unsatisfied performance obligations, and (ii) deferred products revenue related to the value of products that have been shipped and billed to customers and for which control has not been transferred to the customers.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Software development costs

Software development costs, including costs to develop software products or the software component of products to be marketed or sold to external users, are expensed before the software or technology reach technological feasibility.

We capitalize costs incurred subsequent to the establishment of technological feasibility for software embedded to our products to be marketed or sold to external users.

These costs include employee compensation and professional service fees from third-party developers, only when it is probable that the development will result in new or additional functionality.

Software development costs that meet the criteria for capitalization were $ 1.7 million for the year ended December 31, 2025 and not material for the years ended December 31, 2024 and 2023, respectively.

Software development costs also include costs to develop software to be used solely to meet internal needs and applications used to deliver our subscriptions and services.

Costs related to preliminary project activities and post-implementation activities including maintenance are expensed as incurred.

We capitalize costs associated with such applications during its development stage once the preliminary project stage is complete.

These costs include external direct costs incurred in developing or obtaining software applications and payroll and stock-based compensation expenses for employees, who are directly associated with the development of the application.

Software development costs that meet the criteria for capitalization were $ 9.7 million for the year ended December 31, 2025 and not material for the years ended December 31, 2024 and 2023, respectively.

Capitalized software development costs less accumulated amortization are recorded in property and equipment, net on the consolidated balance sheets and amortized on a straight-line basis over the estimated useful lives of the related software applications of up to two years .

Amortization is included in cost of revenue or general and administrative expense on the consolidated statements of operations and comprehensive income (loss) based on the software’s end use.

Research and development

Research and development of new products are expensed as incurred.

Advertising costs

Advertising costs are expensed when incurred and included in sales and marketing in the consolidated statements of comprehensive loss.

Advertising costs are expensed when incurred and included in sales and marketing on the consolidated statements of operations and comprehensive income (loss).

Total advertising costs were $ 19.4 million, $ 18.9 million and $ 17.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.

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The fair value of stock options is estimated on the grant date using the Black-Scholes option pricing model.

The fair value of restricted stock units (“RSUs”) and performance-based restricted stock units is measured on the grant date based on the closing fair market value of our common stock.

We utilize a Monte Carlo pricing model customized to the specific provisions to value certain market-based restricted stock units on the grant date.

The fair value of restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”) is measured on the grant date based on the closing fair market value of our common stock.

We utilize a Monte Carlo pricing model customized to the specific provisions to value certain market-based PSUs on the grant date.

The fair value determined using the Monte Carlo simulation model varies based on the assumptions used for the expected stock price volatility, the correlation coefficient between Arlo and Russell 2000 Index, risk-free interest rates, and dividend yield.

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We determine the fair value using the Black-Scholes Model using various inputs, including its estimate of expected volatility, term, dividend yield and risk-free interest rate.

The risk-free interest rate of the purchase rights granted under the ESPP is based on the implied yield currently available on U.S.

The risk-free interest rate of the purchase rights granted

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

under the ESPP is based on the implied yield currently available on U.S.

Treasury securities, with a remaining term commensurate with the estimated expected term.

Expected volatility of the purchase rights granted under the ESPP is based on historical volatility over the most recent period commensurate with the estimated expected term.

We recognize compensation costs for RSUs, stock options, and ESPP on a straight-line basis over the requisite service period of the award, usually the vesting period, which is generally four years for stock options and three to five years for RSUs.

For performance-based RSUs, compensation costs associated with individual performance milestones is recognized over the period when the performance conditions achievement become probable.

We recognize compensation costs for RSUs and ESPP sales on a straight-line basis over the requisite service period of the award, usually the vesting period, which is generally three to five years for RSUs.

For PSUs, compensation costs associated with individual performance milestones is recognized over the period when the performance conditions achievement become probable.

In addition, we evaluate the probability of achieving the performance conditions at the end of each reporting period and record the related stock-based compensation expense based on performance to date over the service period.

For market-based RSUs, stock-based compensation expense is recognized ratably over the performance period subject to achievement of market conditions.

Foreign currency

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Expenses are re-measured at average exchange rates in effect during each period, except for expenses related to non-monetary assets and liabilities, which are re-measured at historical exchange rates.

Gains and losses arising from foreign currency transactions are included in other income, net in the consolidated statements of comprehensive loss.

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Net Earnings (Loss) Per Share

Basic net earnings (loss) per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period.

Diluted net earnings per share is computed by dividing the net earnings for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period.

Potentially dilutive common shares include common shares issuable upon exercise of stock options, vesting of restricted stock awards and performance shares, and issuances of shares under the ESPP, which are calculated by application of the treasury stock method.

Potentially dilutive common shares are excluded from the computation of diluted net loss per share when their effect is anti-dilutive.

Gains and losses arising from foreign currency transactions are included in other income (expense), net on the consolidated statements of operations and comprehensive income (loss).

Earnings (loss) per share

Basic earnings (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period.

Diluted earnings (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of shares of common shares outstanding and potentially dilutive common shares outstanding during the period.

Potentially dilutive common shares include common shares issuable upon exercise of stock options, vesting of RSUs and PSUs, and issuances of shares under the ESPP, which are calculated by application of the treasury stock method.

Potentially dilutive common shares are excluded from the computation of diluted net income (loss) per share when their effect is anti-dilutive.

Segment information

We operate as one operating and reportable segment.

Our Chief Executive Officer (“CEO”) is identified as the Chief Operating Decision Maker (“CODM”), who reviews financial information presented in a consolidated basis for purposes of allocating resources and evaluating financial performance.

We record the provision for income taxes in the consolidated financial statements using the asset and liability method.

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

The CODM does not review segment assets at a different asset level and category.

The consolidated net income (loss) is the measure of segment net income (loss) that is most consistent with U.S.

We record the provision for income taxes on the consolidated financial statements using the asset and liability method.

Under this method, we recognize income tax liabilities or receivables for the current year.

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We have recorded a valuation allowance against U.S.

federal and state deferred tax assets and certain foreign tax attribute carryforwards since we do not anticipate realizing the benefits of these deferred tax assets.

federal and state

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

deferred tax assets and certain foreign tax attribute carryforwards since we do not anticipate realizing the benefits of these deferred tax assets.

The net deferred tax assets are included in other non-current assets on the consolidated balance sheets.

We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position.

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We recognize the tax on GILTI as a period cost when the tax is incurred.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In 2024, we adopted Accounting Standards Update (“ASU”) 2023-07, Segment Reporting:

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

Refer to Note 12, Segment and Geographic Information for the adoption of this guidance and related disclosures.

The One Big Beautiful Bill Act (“OBBBA”) was enacted in 2025 and changed the default U.S.

federal income tax treatment of domestic research and development expenses from capitalization to immediate expensing.

Based on our evaluation of the enacted provisions and current facts and circumstances, we applied the default expensing treatment to eligible domestic research and development expenditures for the 2025 tax year.

The application of this default treatment is expected to result in a U.S.

federal tax loss for the year.

The effects of the enacted legislation reflected in the consolidated financial statements are based on management’s current interpretation of the law.

We will evaluate the treatment of research and development expenditures in future tax years based on then-applicable law and facts and circumstances.

Accounting Pronouncements

Accounting pronouncement recently adopted

Income tax disclosures.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-09, Income Taxes:

Improvements to Income Tax Disclosures, which requires on an annual basis to (1) disclose specific categories in the rate reconciliation, (2) provide additional information for reconciling items that meet a quantitative threshold, and (3) disclose income taxes paid disaggregated by jurisdiction.

We adopted ASU 2023-09 on a prospective basis.

Refer to Note 9, Income Taxes for the adoption of this guidance and related disclosures.

Accounting pronouncements not yet effective

In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No.

Disclosure improvements.

In October 2023, the FASB issued ASU No.

2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, which modifies the disclosure or presentation requirements of a variety of Topics in the Codification.

Among the various codification amendments, Topic 470 Debt is applicable to Arlo which requires the disclosure of amounts, terms and weighted-average interest rates of unused lines of credit.

The effective date is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirement by that date, with early adoption prohibited.

The effective date is either (i) the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or (ii) on June 30, 2027, if the SEC has not removed the requirement by that date, with early adoption prohibited.

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

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes:

Improvements to Income Tax Disclosures , which requires on an annual basis to (1) disclose specific categories in the rate reconciliation, (2) provide additional information for reconciling items that meet a quantitative threshold, and (3) income taxes paid disaggregated by jurisdiction.

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

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

Expense disaggregation disclosures.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement:

Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses , which improves disclosure requirements and mandates enhanced transparency about the types of expenses in commonly presented expense captions in financial statements.

Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses,

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

which improves disclosure requirements and mandates enhanced transparency about the types of expenses in commonly presented expense captions in financial statements.

This guidance is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

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

Credit Losses Accounting .

In July 2025, the FASB issued ASU No.

2025-05, Financial Instruments - Credit

Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient permitting companies to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and current contract assets.

This guidance is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods.

Early adoption is permitted and is effective on a prospective basis.

We plan to adopt this guidance for our fiscal year beginning January 1, 2026, and we do not expect it to have a material effect on our financial statements.

Software Development Costs Accounting and Disclosure .

In September 2025, the FASB issued ASU No.

2025-06, Intangibles - Goodwill and Other - Internal-Use Software:

Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the recognition and capitalization framework to reflect current software development practices, including iterative and agile methodologies, by removing references to “development stages”.

It also clarifies the criteria for capitalization, which begins when both of the following occur:

(1) management has authorized and committed to funding the software project and (2) it is probable that the project will be completed and the software will be used to perform the function intended.

This guidance is effective for annual periods beginning after December 15, 2027, and for interim periods within those annual reporting periods.

Early adoption is permitted and is effective on either a prospective basis or retrospective basis.

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

Contract balances

Deferred revenue as of December 31, 2024 increased, compared to the previous year, primarily due to service revenue increase, driven by the increases in cumulative paid accounts and rates of subscriptions.

The following table reflects the changes in contract balances for the year ended December 31, 2025:

Contract Classification Balance Sheet Classification December 31, 2025 December 31, 2024 $ change % change

(In thousands)

Receivables Accounts receivable, net $ 39,666 $ 57,332 $ ( 17,666 ) ( 30.8 ) %

Contract liabilities, current Deferred revenue $ 37,139 $ 27,248 $ 9,891 36.3 %

Contract liabilities, non-current Other non-current liabilities $ 1,476 $ 326 $ 1,150 352.8 %

Receivables decreased primarily due to strong collections coupled with lower product sales to our retail customers in the fourth quarter of 2025.

Contract liabilities increased primarily due to increases in subscriptions and services revenue as a result of changes in consumer subscription plans and a shift to additional annual prepaid subscriptions, as well as increases in cumulative paid accounts and rates of subscriptions.

For the years ended December 31, 2025, 2024, and 2023, $ 27.0 million, $ 17.9 million, and $ 11.3 million, respectively, of the recognized revenue was included in deferred revenue at the beginning of the periods.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

On April 25, 2024, Verisure Sàrl (“Verisure”), our largest customer, notified us that it was exercising its right under the Supply Agreement to extend the term for another five years (through November 2029) with no minimum purchase obligations.

Under the Supply Agreement, a purchase obligation is not deemed to exist until we receive and accept Verisure’s purchase order.

Under the Supply Agreement with Verisure Sàrl (“Verisure”), our largest customer, a performance obligation is not deemed to exist until we receive and accept Verisure’s purchase order.

As of December 31, 2025, we had a backlog of $ 46.3 million which represents performance obligations that will be recognized as revenue once fulfilled, which is expected to occur over the next six months .

Variable consideration

Revenue from all sales types is recognized at transaction price, the amount we expect to be entitled to in exchange for transferring goods or providing services.

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

Sales returns are estimated by analyzing certain factors, including historical sales and returns data, channel inventory levels, current economic trends, and changes in customer demand for our products.

Revenue from all sales is recognized at transaction price, the amount we expect to be entitled to in exchange for providing services or transferring goods.

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

Sales incentives are determined based on a combination of the actual amounts committed and estimated future expenditure based upon historical customary business practice.

Refer to Note 4, Balance Sheet Components for accrued sales returns and sales incentives as of December 31, 2024 and 2023.

Variable consideration estimates are based on predictive historical data or future commitments that we plan and control.

However, we continue to assess variable consideration estimates such that it is probable that a significant reversal of revenue will not occur.

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

Sales Incentives Sales Returns

As of December 31, As of December 31,

2025 2024 2023 2025 2024 2023

(In thousands) (In thousands)

Balance at the beginning of the period $ 29,846 $ 26,110 $ 33,233 $ 11,651 $ 17,058 $ 18,656

Credits issued ( 106,467 ) ( 84,224 ) ( 89,400 ) ( 16,356 ) ( 23,768 ) ( 32,748 )

Additions 105,745 87,960 82,277 13,978 18,361 31,150

Balance at the end of the period $ 29,124 $ 29,846 $ 26,110 $ 9,273 $ 11,651 $ 17,058

Disaggregation of revenue

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Total $ 529,297 $ 510,886 $ 491,176

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Related party transaction

In December 2025, we entered into an amendment to the Partnership, License and Supply Agreement with our strategic partner, in which our CEO is a member of the board of directors.

This amendment is in the ordinary course of our business as we provide non-recurring engineering services (“NRE”) to commercially develop and productize Arlo cameras with our strategic partner’s IP license.

For the year ended December 31, 2025, we have recognized $ 4.1 million in NRE as subscriptions and services revenue on the consolidated statements of operations and comprehensive income (loss).

Balance Sheet Components

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

(In thousands)

(In thousands) (In thousands)

Treasuries $ 19,980 $ 5 $ — $ 19,985 $ 69,385 $ 34 $ — $ 69,419

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Accounts Receivable, Net

As of December 31,

(In thousands)

Gross accounts receivable $ 57,464 $ 65,693

Allowance for credit losses ( 132 ) ( 333 )

Total $ 57,332 $ 65,360

The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected.

Years Ended December 31,

2024 2023 2022

(In thousands)

Balance at the beginning of the period $ 333 $ 423 $ 337

Provision for (release of) expected credit losses ( 201 ) ( 90 ) 86

Balance at the end of the period $ 132 $ 333 $ 423

Property and equipment, net

The components of property and equipment are as follows:

As of December 31,

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Machinery and equipment $ 16,093 $ 14,399

Software 16,918 15,639

Computer equipment 894 1,438

Leasehold improvements 3,302 4,661

Capitalized software development costs 22,002 10,612

Software and license 5,877 6,306

Furniture and fixtures 941 1,839

Leasehold improvements 1,393 3,302

Computer equipment 881 894

Total property and equipment, gross 47,187 37,352

Accumulated depreciation ( 32,587 ) ( 33,669 )

accumulated depreciation and amortization

( 34,029 ) ( 32,587 )

Total property and equipment, net $ 13,158 $ 4,765

Depreciation and amortization expense pertaining to property and equipment are as follows:

Years Ended December 31,

2025 2024 2023

Depreciation expense pertaining to property and equipment was $ 3.2 million, $ 4.7 million and $ 4.8 million for the years ended December 31, 2024, 2023 and 2022, respectively.

We have determined that no event occurred or circumstances changed during the year ended December 31, 2024 that would more likely than not reduce the fair value of goodwill below the carrying amount.

There was no accumulated goodwill impairment recognized as of December 31, 2024.

(In thousands)

Depreciation:

Operating expenses $ 1,754 $ 2,456 $ 4,056

Amortization:

Subscriptions and services cost 1,841 744 605

Operating expenses 336 — —

Total depreciation and amortization $ 3,931 $ 3,200 $ 4,661

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

We have determined that no event occurred or circumstances changed during the year ended December 31, 2025 that would more likely than not reduce the fair value of goodwill below the carrying amount.

There was no accumulated goodwill impairment recognized as of December 31, 2025.

Accrued liabilities

1 unchanged sentence

(In thousands)

Sales incentives $ 31,947 $ 28,187

Sales incentives and marketing expenditures $ 31,976 $ 31,947

Sales returns

10,560 17,058

Compensation 12,921 13,278

Employee compensation 23,221 12,921

Cloud and other costs 6,052 9,497

10 unchanged sentences

Treasuries (<90 days)

20,506 22,504

Available-for-sale securities:

3 unchanged sentences

_________________________

(1) Included in short-term investments in the consolidated balance sheets.

Our investments in cash equivalents and available-for-sale securities are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets.

As of December 31, 2024 and 2023, assets and liabilities measured as Level 2 fair value were not material and there were no Level 3 fair value assets or liabilities measured on a recurring basis.

(1) Included in short-term investments on the consolidated balance sheets.

Our short-term investments in cash equivalents and marketable securities are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets.

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

Our long-term investment in a privately held company is classified within Level 3 of the fair value hierarchy.

As of December 31, 2025, the carrying value of our strategic equity investment was $ 12.5 million.

There was no observable price change or impairment during the year ended December 31, 2025.

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Restructuring

In November 2022, we initiated a restructuring plan to reduce our cost structure to better align the operational needs of the business to current economic conditions while continuing to support our long-term strategy.

This restructuring includes the reduction of headcount as well as the abandonment of certain lease contracts and the cancellation of contractual services arrangements with certain suppliers.

As of December 31, 2024, we have incurred all costs pertaining to restructuring activities and completed this restructuring plan.

The restructuring liabilities are included in accrued liabilities in the consolidated balance sheets.

The restructuring charges are included in “Others” in the consolidated statements of comprehensive loss.

Restructuring activity is as follows:

Total Severance Expense Office Exit Expense Other Exit Expense

(In thousands)

Balance as of December 31, 2021

$ — $ — $ — $ —

Restructuring charges 1,805 798 928 79

Cash payments ( 588 ) ( 579 ) — ( 9 )

Non-cash and other adjustments 48 — 63 ( 15 )

Balance as of December 31, 2022

$ 1,265 $ 219 $ 991 $ 55

Restructuring charges 692 564 117 11

Cash payments ( 1,479 ) ( 694 ) ( 745 ) ( 40 )

Non-cash and other adjustments ( 26 ) — — ( 26 )

Balance as of December 31, 2023

$ 452 $ 89 $ 363 $ —

Restructuring charges 2,503 2,503 — —

Cash payments ( 2,783 ) ( 2,420 ) ( 363 ) —

Balance as of December 31, 2024 $ 172 $ 172 $ — $ —

Total costs incurred inception to date $ 5,022 $ 3,865 $ 1,108 $ 49

Revolving Credit Facility

We had historically maintained a Loan and Security Agreement with Bank of America, N.A., which expired and automatically terminated on October 27, 2024.

On November 14, 2024, we entered into a new credit agreement (the “Credit Agreement”) with HSBC Bank USA, National Association, as administrative agent, issuing bank, and lender.

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.

2 unchanged sentences

The proceeds of the borrowings under the Credit Facility may be used for working capital and general corporate purposes.

The obligations under the Credit Agreement are secured by substantially all of our assets and will be secured, on a post-closing basis, by substantially all of the assets of a material subsidiary;

Arlo Technologies International Limited, a limited corporation organized under the laws of Ireland (which is the sole guarantor of the Credit Facility as of the closing of the Credit Facility).

The obligations under the Credit Agreement are secured by substantially all of our assets, including substantially all of the assets of a material subsidiary, Arlo Technologies International Limited, a limited corporation organized under the laws of Ireland.

Borrowings under the Credit Agreement will bear interest at a floating rate equal to:

(i) the term secured

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

overnight financing rate plus the applicable rate of 2.25 % to 2.75 %, or (ii) the base rate plus the applicable rate of 1.25 % to 1.75 % both determined based on a total net leverage ratio.

(i) the term secured overnight financing rate plus the applicable rate of 2.25 % to 2.75 %, or (ii) the base rate plus the applicable rate of 1.25 % to 1.75 % both determined based on a total net leverage ratio.

Among other fees, we are required to pay a quarterly unused fee of 0.20 % per annum on the amount by which the lenders’ aggregate commitment under the Credit Facility exceeds the daily revolver usage during such quarter.

3 unchanged sentences

As of December 31, 2025, we were in compliance with all the covenants under the Credit Agreement.

The Credit Agreement also provides for a number of customary events of default, including a provision that a material adverse change constitutes an event of default that permits the Administrative Agent, at its option, to accelerate the loan.

No amount had been drawn under the Credit Facility as of December 31, 2025.

2 unchanged sentences

Our operating lease obligations mostly include offices, equipment, and distribution centers, with various expiration dates through June 2033.

Certain lease agreements include options to renew or terminate the lease, which are not reasonably certain to be exercised and therefore are not factored into our determination of lease payments.

Certain lease agreements include options to renew or terminate the lease, which are generally not reasonably certain to be exercised and therefore are not factored into our determination of lease payments.

The terms of certain leases provide for rental payments on a graduated scale.

Gross lease expense was $ 4.9 million, $ 5.3 million, and $ 5.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.

We recorded sublease income as reduction of lease expense, in the amount of $ 2.0 million for each of the years ended December 31, 2024, 2023, and 2022.

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

6 unchanged sentences

Operating leases $ 107 $ 7,155 $ 1,873

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

2 unchanged sentences

Weighted average discount rate 7.68 % 6.66 %

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The future minimum undiscounted lease payments under operating leases and future non-cancelable rent payments from our subtenants for each of the next five years and thereafter as of December 31, 2024 are as follows:

Operating Lease Payments Sublease Payments Net

The future minimum undiscounted lease payments under operating leases for each of the next five years and thereafter are as follows:

December 31, 2025

(In thousands)

2025 $ 6,593 $ ( 2,006 ) $ 4,587

2026 5,513 ( 2,066 ) 3,447

2027 5,538 ( 2,322 ) 3,216

2028 4,589 ( 2,392 ) 2,197

2029 2,713 ( 1,228 ) 1,485

Thereafter 2,622

5 unchanged sentences

Total lease liabilities $ 8,652

Letters of Credit

In connection with the lease agreement for our office space located in San Jose, California, we executed a letter of credit with the landlord as the beneficiary.

As of December 31, 2024, we had $ 3.6 million of unused letters of credit outstanding, of which $ 3.1 million pertains to the lease arrangement in San Jose, California.

During the third quarter of 2025, we terminated our office lease located in San Jose, California.

We recorded the derecognition of ROU assets and lease liabilities and recognized a gain of $ 4.1 million, net of $ 1.6 million write-off loss from sublease and $ 1.0 million lease termination fees, upon the termination.

Contemporaneously with this termination, our sublease arrangement was also terminated and our letter of credit of $ 3.1 million in connection with this lease was released subsequent to December 31, 2025.

Purchase obligations

9 unchanged sentences

Litigation and other legal matters

From time to time, we may become involved in disputes, litigation, and other legal actions.

In all cases, at each reporting period, we evaluate whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies.

In such cases, we accrue for the amount or, if a range, we accrue the low end of the range, only if there is not a better estimate than any other amount within the range, as a component of legal expense within general and administrative expenses.

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

At each reporting period, we evaluate whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies.

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

In such cases, we accrue for the amount or, if a range, we accrue the low end of the range, only if there is not a better estimate than any other amount within the range, as litigation reserves in other operating expense on the consolidated statements of comprehensive income (loss).

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

10 unchanged sentences

Employee Benefit Plans

We grant options and restricted stock units (“RSUs”) under the 2018 Equity Incentive Plan (the “2018 Plan”), under which awards may be granted to all employees.

We also grant performance-based and market-based restricted stock units (“PSUs”) to our executive officers periodically.

We grant options and RSUs under the 2018 Equity Incentive Plan (the “2018 Plan”), under which awards may be granted to all employees.

We also grant performance-based and market-based PSUs to our executive officers and other senior employees periodically.

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

As of December 31, 2024, approximately 3.4 million shares were available for future grants.

As of December 31, 2025, 4.4 million shares were available for future grants.

Options may be granted for periods of up to 10 years or such shorter term as may be provided in the agreement and at prices no less than 100 % of the fair market value of Arlo’s common stock on the date of grant.

Options granted under the 2018 Plan generally vest over four years , the first tranche at the end of 12 months and the remaining shares underlying the option vesting monthly over the remaining three years .

On January 24, 2025, we registered an aggregate of up to 5,050,450 shares of common stock on a Registration Statement on Form S-8, including 4,050,450 shares issuable pursuant to the 2018 Plan that were automatically added to the shares authorized for issuance under the 2018 Plan and 1,000,000 shares issuable pursuant to the Employee Stock Purchase Plan (“ESPP”) that were automatically added to the shares authorized for issuance on January 1, 2025, both pursuant to an “evergreen” provision contained in the respective plans.

On January 23, 2026, we registered an aggregate of up to 4,200,189 shares of common stock under the 2018 Plan on a Registration Statement on Form S-8 pursuant to an “evergreen” provision contained in the 2018 Plan.

ARLO TECHNOLOGIES, INC.

3 unchanged sentences

(In thousands)

Shares available for grants at the beginning of the period 3,516

Shares available for grants as of December 31, 2024

Additional authorized shares 5,550

Granted ( 5,194 )

Forfeited / cancelled

Shares traded / withheld for taxes 3,621

Shares available for grants at the end of the period 3,356

Forfeited / expired / cancelled 697

Shares available for grants as of December 31, 2025

Employee stock purchase plan

We sponsor the ESPP to eligible employees.

Under our ESPP, employees purchased 365 thousand, 621 thousand, and 609 thousand shares during the years ended December 31, 2024, 2023 and 2022, respectively.

We sponsor the ESPP for eligible employees, under which, employees purchased 262 thousand, 365 thousand, and 621 thousand shares during the years ended December 31, 2025, 2024 and 2023, respectively.

As of December 31, 2025, 3.1 million shares were available for issuance under the ESPP.

6 unchanged sentences

Option activity

We did not grant options during the years ended December 31, 2024, 2023, and 2022.

During the years ended December 31, 2025, 2024, and 2023, there were no options granted and the intrinsic value of options exercised was $ 0.5 million, $ 2.1 million, and $ 1.8 million, respectively.

Stock option activity during the year ended of December 31, 2025 was as follows:

Number of Shares Weighted Average Exercise Price Per Share Weighted

(In thousands) (In dollars) (In years) (In thousands)

Term Aggregate

(In thousands) (In dollars) (In years) (In millions)

Outstanding as of December 31, 2024

Exercised ( 94 ) 8.55

Forfeited/ cancelled — —

Expired ( 69 ) 14.39

Expired / cancelled ( 180 ) 14.39

Outstanding as of December 31, 2025

275 $ 14.10 2.50 $ 0.3

Vested and exercisable as of December 31, 2025

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Year Ended December 31,

2024 2023 2022

(In millions)

Total intrinsic value of options exercised

$ 2.1 $ 1.8 $ 0.9

Total fair value of options vested $ — $ — $ 2.3

RSU activity, excluding PSU activity, during the year ended of December 31, 2024 was as follows:

RSU activity, exclusive of PSU activity, during the year ended of December 31, 2025 was as follows:

Number of Shares Weighted Average Grant Date Fair Value Per Share Weighted

(In thousands) (In dollars) (In years) (In thousands)

Term Aggregate

(In thousands) (In dollars) (In years) (In millions)

Outstanding as of December 31, 2024

1 unchanged sentence

Vested ( 3,446 ) 8.82

Forfeited ( 1,362 ) 7.15

Forfeited / cancelled ( 514 ) 8.67

Outstanding as of December 31, 2025

6,481 $ 9.99 1.32 $ 90.7

Year Ended December 31,

6 unchanged sentences

$ 13.32 $ 10.99 $ 5.28

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Our executive officers and other senior employees have been granted performance-based awards with some vesting occurring when performance conditions are met and some vesting occurring at the end of a three or five-year period when market conditions are met.

The number of units earned and eligible to vest are determined based on the achievement of various performance conditions or market conditions, including the cumulative paid accounts targets, stock price, cash balances at reporting period, and the recipients’ continued services.

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

Our executive officers and other senior employees have been granted PSUs with some vesting occurring when performance conditions are met and some vesting occurring at the end of a three or five-year period when market conditions are met.

The number of units earned and eligible to vest are determined based on the achievement of various performance conditions or market conditions, including annual recurring revenue, cumulative paid accounts, subscriptions and services gross margin, stock price, cash balances at reporting period, and the recipients’ continued services.

PSU activity during the year ended of December 31, 2025 was as follows:

Number of Shares Weighted Average Grant Date Fair Value Per Share Weighted

(In thousands) (In dollars) (In years) (In thousands)

Term Aggregate

(In thousands) (In dollars) (In years) (In millions)

Outstanding as of December 31, 2024

1 unchanged sentence

Vested ( 3,669 ) 9.18

Forfeited ( 151 ) 8.01

Forfeited / cancelled ( 3 ) 8.28

Outstanding as of December 31, 2025

2,970 $ 10.56 0.83 $ 41.6

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Year Ended December 31,

6 unchanged sentences

$ 11.22 $ 10.11 $ 4.56

For RSUs and PSUs vested prior to September 29, 2024, the tax withholding method is the net withholding method, in which shares with a market value equivalent to the tax withholding obligation are withheld and the net shares are issued to the RSU and PSU holders.

Effective in the fourth quarter of 2024, the tax withholding policy changed and our Named Executive Officers (“NEOs”) will use the sell-to-cover method for their tax withholding, in which shares with a market value equivalent to the tax withholding obligation are sold on behalf of the NEOs upon vesting and settlement to cover the tax withholding liability, and the cash proceeds from such sales are remitted by Arlo to taxing authorities.

The sell-to-cover method applies to all Arlo employees effective on January 1, 2025.

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stock-based compensation expense

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

The following table sets forth the stock-based compensation expense by line item on the consolidated statements of operations and comprehensive income (loss):

Year Ended December 31,

5 unchanged sentences

General and administrative 30,312 40,036 25,816

Total $ 68,657 $ 47,948 $ 48,476

Stock-based compensation, net of amounts capitalized $ 62,333 $ 68,657 $ 47,948

Capitalized stock-based compensation $ 1,637 $ — $ —

Total stock-based compensation $ 63,970 $ 68,657 $ 47,948

As of December 31, 2025, all outstanding options were fully vested, therefore, there was no unrecognized compensation cost related to stock options.

As of December 31, 2024, approximately $ 53.5 million of unrecognized compensation cost related to unvested RSUs and PSUs is expected to be recognized over a weighted-average period of 1.3 years.

During the years ended December 31, 2024, 2023, and 2022, we settled executive and employee bonuses by granting and issuing restricted stock units (non-cash financing activities) that vested immediately amounting to $ 12.6 million, $ 13.5 million, and $ 8.7 million, respectively.

As of December 31, 2025, $ 59.6 million of unrecognized compensation cost related to unvested RSUs and PSUs is expected to be recognized over a weighted-average period of 2.7 years.

During the years ended December 31, 2025, 2024, and 2023, we settled executive and employee bonuses by granting and issuing RSUs (non-cash financing activities) that vested immediately amounting to $ 9.9 million, $ 12.6 million, and $ 13.5 million, respectively.

We have a 401(k) Plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code.

1 unchanged sentence

During the years ended December 31, 2025, 2024 and 2023, we recognized expense of approximately $ 1.8 million, $ 1.6 million and $ 1.1 million, respectively.

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Income (loss) before provision for income taxes consisted of the following:

2 unchanged sentences

(In thousands)

United States $ ( 35,254 ) $ ( 26,266 ) $ ( 60,374 )

United States (“U.S.”) $ 7,611 $ ( 35,254 ) $ ( 26,266 )

International 8,056 5,842 5,405

Total $ 15,667 $ ( 29,412 ) $ ( 20,861 )

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Provision for income taxes consisted of the following:

2 unchanged sentences

(In thousands)

Federal $ 89 $ 88 $ 166

$ ( 46 ) $ 89 $ 88

State 342 297 273

1 unchanged sentence

900 1,180 1,058

Federal — — —

Foreign ( 159 ) ( 88 ) 117

1 unchanged sentence

Total $ 741 $ 1,092 $ 1,175

The effective tax rate differed from the U.S.

federal income tax rate as follows:

Income taxes paid (net of refunds) are as following:

Year Ended December 31, 2025

(In thousands)

state and local

Australia 289

Other Foreign Jurisdictions (1)

Total $ 1,219

_______________________

(1) No other individual U.S.

states or foreign jurisdiction accounted for 5% or greater of the total income taxes paid for the periods presented.

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Beginning in 2025 annual reporting, we adopted ASU 2023-09 prospectively.

See Note 2 — Summary of Significant Accounting Policies – Recently Adopted Accounting Pronouncements for additional details on the adoption of ASU 2023-09.

A reconciliation of the U.S.

federal statutory income tax rate to our effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 is as follows:

Year Ended December 31, 2025

(In thousands, except percentage)

federal statutory tax rate $ 3,290 21.0 %

State and local income taxes, net of federal income tax effect (1)

Foreign tax effects

Statutory tax rate difference between Ireland and U.S.

( 523 ) ( 3.3 ) %

Research and development tax credits ( 432 ) ( 2.8 ) %

Other ( 120 ) ( 0.8 ) %

Other foreign jurisdictions ( 171 ) ( 1.1 ) %

Effect of cross-border tax laws

Subpart F inclusion 202 1.3 %

Research and development tax credits ( 2,671 ) ( 17.1 ) %

Change in valuation allowance ( 2,575 ) ( 16.4 ) %

Non-taxable or non-deductible items

Stock based compensation 3,362 21.5 %

Other 131 0.8 %

Changes in unrecognized tax benefits ( 22 ) ( 0.1 ) %

Effective income tax rate $ 741 4.7 %

_______________________

(1) State income taxes attributable to Florida and Texas represent a majority of our state income tax expense, collectively accounting for more than 50% of the state income tax impact.

The statutory rate used in the effective tax rate reconciliation is the U.S.

federal corporate income tax rate of 21%, as we are domiciled in the United States.

In 2025, the effective tax rate differed from the statutory rate primarily due to lower effective tax rate on foreign earnings, valuation allowance on our net U.S.

deferred tax assets and certain foreign tax attributes and research and development tax credit generated during the year.

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A reconciliation of the U.S.

federal statutory income tax rates to our effective tax rate for the years ended December 31, 2024 and 2023 is as follows:

Year Ended December 31,

(In percentage)

Tax benefit at U.S.

federal income tax rate 21.0 % 21.0 %

State tax benefit (provision), net of federal benefit

( 0.8 ) % ( 1.0 ) % 1.9 %

State tax benefit, net of federal benefit ( 0.8 ) % ( 1.0 ) %

Impact of international operations 3.4 % 3.1 %

FDII deduction

1.0 % 1.8 % — %

Foreign-derived intangible income deduction

Stock-based compensation ( 12.8 ) % ( 22.5 ) %

2 unchanged sentences

Non-deductible transaction costs ( 0.5 ) % ( 0.6 ) %

Other 4.2 % 0.5 % ( 0.5 ) %

Provision for income taxes ( 3.7 ) % ( 5.6 ) % ( 1.8 ) %

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Others 4.2 % 0.5 %

Effective income tax rate ( 3.7 ) % ( 5.6 ) %

The significant components of net deferred tax assets consisted of the following:

2 unchanged sentences

Deferred Tax Assets:

Accruals and allowances $ 10,730 $ 9,377

Capitalized research and development expenses $ 46,757 $ 57,475

Tax credit carryforwards 25,291 20,090

Net operating loss carryforwards 22,008 15,678

Accruals and allowances 11,204 10,730

Stock-based compensation 5,774 4,174

Lease liabilities 5,543 4,965

Deferred revenue 80 100

Tax credit carryforwards 20,090 15,775

Operating lease liabilities 2,079 5,543

Depreciation and amortization 1,423 4,212

Capitalized research and development expenses 58,740 50,519

Deferred revenue 134 80

Total deferred tax assets 114,670 117,982

4 unchanged sentences

Net deferred tax assets $ 1,501 $ 1,285

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Changes in valuation allowance for deferred tax assets were as follows:

9 unchanged sentences

________________________

(1) Additions are primarily increases in tax attribute carryforwards and capitalized expenditures for income tax purposes.

(2) Deductions present the utilization of U.S.

federal and state net operating losses and tax credit attributes.

Realization of the deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain.

We do not anticipate to realize the net U.S.

federal and state deferred tax assets and certain foreign tax attributes, which have been fully offset by a valuation allowance.

As of December 31, 2024 and 2023, the valuation allowance was $ 112.9 million and $ 102.0 million, respectively.

The utilization of net operating loss and credit carryforwards may be subject to annual limitation due to the ownership changes provided by the Internal Revenue Code and similar state provisions.

Such an annual limitation could result in the expiration of portions of the net operating loss and tax credit carryforwards before utilization.

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) Additions are primarily attributable to increases in tax attribute carryforwards, including net operating losses and research and development tax credits.

(2) Deductions primarily relate to amortization of previously capitalized research and development costs.

Based on a review of all available evidence as of December 31, 2025, we concluded that it was more likely than not that a valuation allowance was required against our U.S.

deferred tax assets and, as a result, we are maintaining the full valuation allowance.

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

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

net deferred tax assets would no longer be required.

As of December 31, 2025, net operating loss carryforwards consisted of the following:

6 unchanged sentences

_________________________

(1) All of the losses are subject to annual usage limitations under Internal Revenue Code Section 382.

(2) All of the losses are subject to usage limitation of 80% of taxable income in a year when the losses will be utilized.

(1) All net operating losses are subject to annual usage limitations under Internal Revenue Code (“IRC”) Section 382.

(2) All net operating losses may be subject to annual limitation under IRC Section 382 in the event of an ownership change.

(3) All net operating losses are subject to an annual utilization limitation of 80% of taxable income in a year when the losses are utilized.

As of December 31, 2025, tax credit carryforwards consisted of the following:

1 unchanged sentence

(In thousands)

federal $ 12,040 2039

$ 14,707 2039

California 13,779 Indefinite

Foreign 3,943 2045

As of December 31, 2024, withholding taxes and state income taxes expected to be incurred on the foreign subsidiaries’ earnings that are not indefinitely reinvested are immaterial.

As of December 31, 2025, we expect to indefinitely reinvest the earnings of certain foreign subsidiaries.

Accordingly, withholding taxes and state income taxes that would otherwise be incurred upon the repatriation of such earnings have not been considered in our liquidity or cash flow expectations.

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits was as follows:

3 unchanged sentences

Balance at the beginning of the period $ 4,483 $ 3,554 $ 2,763

Additions for tax positions taken during the current year 928 679 765

Additions (reductions) for tax positions taken during a prior year 35 133 275

Additions based on tax positions related to the current year 591 928 679

Additions (reduction) for tax positions taken during a prior year ( 231 ) 35 133

Reductions as a result of a lapse of the applicable statute of limitations ( 26 ) ( 34 ) ( 21 )

2 unchanged sentences

We recognize interest and penalties accrued related to unrecognized tax benefits as part of the provision for income taxes.

We file income tax returns in the U.S.

and numerous foreign jurisdictions.

We are subject to income tax examinations by taxing authorities globally for years ending or after December 31, 2018.

IRS audit of the consolidated returns of Arlo for tax year 2022 was commenced in the fourth fiscal quarter of 2024 and is still pending, while the NETGEAR 2018 California Franchise Tax Board and 2016-2018 Texas Franchise tax audits are likewise still in progress.

Our estimate of the potential outcome of any uncertain tax positions is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time.

We believe that the estimate has adequately reflected these matters.

However, the future results may include adjustments to estimates in the period the audits will be resolved, which may impact the effective tax rate.

We don't expect a significant change in unrecognized tax benefits within the next twelve months.

ARLO TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Net Loss Per Share

We are subject to income tax examinations in the U.S.

federal jurisdiction and various state and foreign jurisdictions.

Tax years of 2021 through 2025 remain open to the examination.

It is not reasonably possible that the amount of unrecognized tax benefits will change materially within the next twelve months.

Earnings (Loss) Per Share

Year Ended December 31,

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(In thousands, except for per share data)

Net loss $ ( 30,504 ) $ ( 22,036 ) $ ( 56,626 )

Weighted average common shares - basic and diluted 98,630 92,754 87,173

Basic and diluted net loss per share $ ( 0.31 ) $ ( 0.24 ) $ ( 0.65 )

Net income (loss) $ 14,926 $ ( 30,504 ) $ ( 22,036 )

Weighted-average common shares outstanding - basic 104,203 98,630 92,754

Effect of dilutive stock-based awards 5,953 — —

Weighted-average common shares outstanding - diluted 110,156 98,630 92,754

Earnings (loss) per share - basic $ 0.14 $ ( 0.31 ) $ ( 0.24 )

Earnings (loss) per share - diluted $ 0.14 $ ( 0.31 ) $ ( 0.24 )

Anti-dilutive employee stock-based awards, excluded 378 814 1,776

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We operate as one operating and reportable segment.

Our CEO is identified as the CODM, who reviews financial information presented in a consolidated basis for purposes of allocating resources and evaluating financial performance.

The CODM does not review segment assets at a different asset level and category.

The consolidated net loss is the measure of segment net loss that is most consistent with U.S.

The CODM is regularly provided with not only the consolidated expenses as noted on the face of the income statement, but also the significant segment expenses and other segment items as below:

The consolidated net income (loss) is the measure of segment net income (loss) that is most consistent with U.S.

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

Year Ended December 31,

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Marketing expenditure 19,381 18,925 17,910

Credit card and in-app processing fee 17,534 8,777 7,335

Other segment items (1)

( 4,403 ) 596 750

Depreciation 1,332 3,131 3,589

Depreciation and amortization 2,090 2,456 4,056

Interest expense 378 490 373

Income taxes expense 1,092 1,175 975

Segment net loss $ ( 30,504 ) $ ( 22,036 ) $ ( 56,626 )

Provision for income taxes 741 1,092 1,175

Segment net income (loss)

$ 14,927 $ ( 30,504 ) $ ( 22,036 )

Reconciliation of profit or loss:

Adjustments and reconciling items — — —

Consolidated net loss $ ( 30,504 ) $ ( 22,036 ) $ ( 56,626 )

Consolidated net income (loss)

$ 14,927 $ ( 30,504 ) $ ( 22,036 )

(1) Other segment items include corporate IT and facility overhead, freight out expense, credit card fees, restructuring charges, separation expense, litigation reserves, interest income, net, foreign currency exchange gain (loss), net and others.

_________________________

(1) Other segment items include corporate IT and facility overhead, freight out expense, workforce reduction costs, separation expense, litigation reserves, gain on early lease termination, interest income, foreign currency exchange gain (loss), net and others.

ARLO TECHNOLOGIES, INC.

1 unchanged sentence

Geographic information for revenue

Revenue consists of gross product shipments and service revenue, less allowances for estimated sales returns, price protection, end-user customer rebates, net changes in deferred revenue, and other channel sales incentives deemed to be a reduction of revenue per the authoritative guidance.

Revenue consists of subscriptions and services revenue and product sales, less allowances for estimated sales returns, price protection, end-user customer rebates, net changes in deferred revenue, and other channel sales incentives deemed to be a reduction of revenue per the authoritative guidance.

Sales and usage-based taxes are excluded from revenue.

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The following table presents revenue by geographic area.

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

Year Ended December 31,

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Stock Repurchase Program

On September 24, 2024, we announced that our Board of Directors approved a stock repurchase program of up to an aggregate of $ 50.0 million of shares of Arlo’s common stock through open market purchases in a manner deemed to be in the best interests of our company and stockholders, considering the economic cost and prevailing market conditions, including the relative trading prices and volumes of Arlo’s common stock.

The stock repurchase program is expected to continue through December 31, 2026 unless extended or shortened by the Board of Directors.

The timing and actual number of shares repurchased under the repurchase program depend on a variety of factors, including price, general business and market conditions, and other investment opportunities.

Shares may be repurchased through open market purchases or privately negotiated transactions, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

In the fourth quarter of fiscal year 2024, we repurchased and subsequently retired 378,745 shares of Arlo common stock for an aggregate amount of $ 4.4 million.

As of December 31, 2024, $ 45.6 million remained available and authorized for future repurchases.

In September 2024, our Board of Directors approved a stock repurchase program of up to an aggregate of $ 50.0 million shares of our common stock, which has been fully implemented and completed as of December 31, 2025.

During the fiscal year 2025, we repurchased and subsequently retired 3.3 million shares of Arlo common stock for an aggregate repurchase amount of $ 45.5 million.

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.

Subsequent Events

In February 2026, a privately held company, in which we have strategic equity investment, announced the sale of itself to a public company.

The sale will become effective upon execution of the public company’s acquisition agreement.

We expect to realize a gain from our equity investment following the closing of the acquisition based on the final transaction terms.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data