Arlo Technologies, Inc. 10-K

Item 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm 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 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, 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. Basis for Opinions The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our 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 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. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the 75 Table of Contents transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Accrued Sales Returns—Refer to Notes 3 and 4 to the Financial Statements Critical Audit Matter Description The Company has a recorded accrual for estimated sales returns as of December 31, 2025. Revenue is recognized at a transaction price that is calculated as the selling price net of variable consideration which includes estimates for sales returns related to current period product revenue. Sales returns are estimated by analyzing certain factors, including historical sales and returns data, channel inventory levels, current economic trends, and changes in customer demand for the Company’s products. We identified the estimation of the sales return accrual as a critical audit matter. There was a high degree of auditor judgment required to evaluate the impacts of current and historical trends of sales and returns and their impacts on estimated future return levels. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the accrued sales returns included the following, among others: • We tested the effectiveness of controls over management’s calculation of the accrual for estimated sales returns, including management’s control over the estimate of the impacts of historical sales and returns activity on current year estimates. • We tested the completeness and accuracy of the underlying data used in the calculation. For a selection of historical returns we evaluated the reasonableness of trends in return rates compared to sales activity. • We evaluated management’s ability to accurately estimate returns by comparing actual returns to prior period estimates. • Developed an independent estimate of the sales return accrual and compared our estimate to management’s estimate. Our independent estimate included development of a trend of historical sales and return rates using management’s data. This trend was used to develop an expected estimate of the accrual when applied to current sales activity. /s/ Deloitte & Touche LLP Costa Mesa, California February 26, 2026 We have served as the Company’s auditor since 2024. 76 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Arlo Technologies, Inc. Opinion on the Financial Statements We have audited the consolidated 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 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 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 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 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 (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. 77 Table of Contents ARLO TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS As of December 31, 2025 2024 (In thousands, except share and per share data) ASSETS Current assets: Cash and cash equivalents $ 146,440 $ 82,032 Short-term investments 19,985 69,419 Accounts receivable, net 39,666 57,332 Inventories 41,185 40,633 Prepaid expenses and other current assets 13,210 13,190 Total current assets 260,486 262,606 Property and equipment, net 13,158 4,765 Operating lease right-of-use assets, net 9,195 15,698 Goodwill 11,038 11,038 Long-term investment 12,500 — Other non-current assets 4,171 4,293 Total assets $ 310,548 $ 298,400 LIABILITIES AND STOCKHOLDERS ’ EQUITY Current liabilities: Accounts payable $ 42,826 $ 63,784 Deferred revenue 37,139 27,248 Accrued liabilities 92,372 85,730 Total current liabilities 172,337 176,762 Non-current operating lease liabilities 6,743 18,357 Other non-current liabilities 3,627 2,372 Total liabilities 182,707 197,491 Commitments and contingencies (Note 7) Stockholders’ Equity: Preferred stock: $ 0.001 par value; 50,000,000 shares authorized; none issued or outstanding — — Common stock: $ 0.001 par value; 500,000,000 shares authorized; shares issued and outstanding: 105,030,947 at December 31, 2025 and 100,885,158 at December 31, 2024 105 101 Additional paid-in capital 510,759 498,739 Accumulated other comprehensive income 16 34 Accumulated deficit ( 383,039 ) ( 397,965 ) Total stockholders’ equity 127,841 100,909 Total liabilities and stockholders’ equity $ 310,548 $ 298,400 The accompanying notes are an integral part of these consolidated financial statements. 78 Table of Contents ARLO TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) Year Ended December 31, 2025 2024 2023 (In thousands, except per share data) Revenue: Subscriptions and services $ 316,356 $ 242,998 $ 201,238 Products 212,941 267,888 289,938 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 Total cost of revenue 296,456 323,382 323,613 Gross profit 232,841 187,504 167,563 Operating expenses: Research and development 73,650 73,183 68,647 Sales and marketing 84,842 73,723 66,141 General and administrative 66,097 72,134 56,371 Other operating expense 2,181 3,356 1,307 Total operating expenses 226,770 222,396 192,466 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 Other income (expense), net — ( 104 ) 107 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 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 income (loss) $ 14,908 $ ( 30,790 ) $ ( 21,609 ) The accompanying notes are an integral part of these consolidated financial statements. 79 Table of Contents ARLO TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Year Ended December 31, 2025 2024 2023 (In thousands) Total stockholders’ equity, beginning balances $ 100,909 $ 103,276 $ 87,695 Common stock and additional paid-in capital: Beginning balances $ 498,840 $ 470,417 $ 433,227 Stock-based compensation 44,652 56,596 36,971 Settlement of liability classified restricted stock units 9,938 12,594 13,480 Issuance of common stock under stock-based compensation plans 806 5,422 7,563 Issuance of common stock under employee stock purchase plan 2,725 2,943 2,811 Repurchase of common stock ( 46,097 ) ( 4,421 ) — Restricted stock unit withholdings — ( 44,711 ) ( 23,635 ) Ending balances $ 510,864 $ 498,840 $ 470,417 Accumulated deficit: Beginning balances $ ( 397,965 ) $ ( 367,461 ) $ ( 345,425 ) Net income (loss) 14,926 ( 30,504 ) ( 22,036 ) Ending balances $ ( 383,039 ) $ ( 397,965 ) $ ( 367,461 ) Accumulated other comprehensive income: Beginning balances $ 34 $ 320 $ ( 107 ) Other comprehensive income (loss), net of tax ( 18 ) ( 286 ) 427 Ending balances $ 16 $ 34 $ 320 Total stockholders’ equity, ending balances $ 127,841 $ 100,909 $ 103,276 Common stock shares: Beginning balances 100,885 95,380 88,887 Issuance of common stock under stock-based compensation plans 7,210 9,140 9,390 Issuance of common stock under employee stock purchase plan 262 365 621 Repurchase of common stock ( 3,326 ) ( 379 ) — Restricted stock unit withholdings — ( 3,621 ) ( 3,518 ) Ending balances 105,031 100,885 95,380 The accompanying notes are an integral part of these consolidated financial statements. 80 Table of Contents ARLO TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2025 2024 2023 (In thousands) Cash flows from operating activities: 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 Deferred income taxes ( 216 ) ( 13 ) 112 Discount accretion on investments and other ( 2,662 ) ( 3,259 ) ( 2,005 ) Changes in assets and liabilities: Accounts receivable, net 17,653 8,228 690 Inventories ( 1,428 ) ( 4,510 ) 7,777 Prepaid expenses and other assets 318 ( 3,577 ) ( 1,498 ) Accounts payable ( 21,068 ) 8,289 3,723 Deferred revenue 11,064 9,437 6,610 Accrued and other liabilities ( 2,873 ) ( 6,727 ) ( 7,959 ) Net cash provided by operating activities 78,722 51,306 38,302 Cash flows from investing activities: 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 Net cash provided by (used in) investing activities 27,754 10,840 ( 50,686 ) Cash flows from financing activities: Proceeds related to employee benefit plans 3,531 8,365 8,493 Repurchase of common stock ( 45,599 ) ( 4,421 ) — Restricted stock unit withholdings — ( 44,711 ) ( 23,635 ) Net cash used in financing activities ( 42,068 ) ( 40,767 ) ( 15,142 ) Net increase (decrease) in cash, cash equivalents, and restricted cash 64,408 21,379 ( 27,526 ) 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 $ 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 Restricted cash — — 4,131 Total cash, cash equivalents, and restricted cash $ 146,440 $ 82,032 $ 60,653 Supplemental cash flow information: Cash paid for income taxes, net $ 1,219 $ 1,156 $ 1,196 Non-cash investing activities: 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. 81 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Description of Business and Basis of Presentation Description of business Arlo Technologies, Inc. (“we,” “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. Our cloud-based platform provides users with visibility, insight and a powerful means to help protect and connect in real-time with the people and things that matter most, from any location with a Wi-Fi or a cellular connection. We conduct business across three geographic regions—(i) the Americas; (ii) Europe, Middle-East and Africa (“EMEA”); and (iii) Asia Pacific (“APAC”)—and primarily generate revenue by selling 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. Basis of presentation We prepare our consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of Arlo and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. Fiscal periods Our fiscal year begins on January 1 of the year stated and ends on December 31 of the same year. We report the results on a fiscal quarter basis rather than on a calendar quarter basis. Under the fiscal quarter basis, each of the first three fiscal quarters ends on the Sunday closest to the calendar quarter end, with the fourth quarter ending on December 31. 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 The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Management bases its estimates on various assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates and operating results for the year ended December 31, 2025 and are not necessarily indicative of the results that may be expected for any future period. 82 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 2. 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 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 Inventories consist of finished goods which are valued at the lower of cost or net realizable value, with cost being determined using the first-in, first-out method. We write down inventories based on estimated excess and obsolete amounts, determined primarily based on demand forecasts, but take into account market conditions, product development plans, product life expectancy and other factors. At the point of loss recognition, a new lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase of the newly established cost basis. While management believes the estimates and assumptions underlying its current forecasts are reasonable, there is risk that additional charges may be necessary if current forecasts are greater than actual demand. 83 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Property and equipment, net 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 Leasehold improvements Shorter of remaining lease term or 7 years 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 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 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 84 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 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. 85 Table of Contents ARLO TECHNOLOGIES, INC. 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. 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 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 Revenue from contracts with customers is recognized when control of the promised goods or services is transferred to the customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Our product revenue is recognized at a point in time when control of the goods is transferred to the customer, generally occurring upon shipment or delivery, dependent upon the terms of the underlying contract. 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. 86 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Contracts with multiple performance obligations 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 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. 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 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 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 a Supply Agreement which includes product purchases and paid subscriptions and services with Verisure S.à.r.l. (“Verisure”) . Products sold come with a standard twelve months warranty. Verisure assumes responsibilities for all warranty claims, returns of products and certain technical support provided to the end users. We provide technical support for paid 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”). Each product with a valid PO is considered a single performance obligation. The Supply Agreement also provides for certain development services at Verisure's request under various statements of work (“SOW”), which Verisure pays in non-refundable installments upon the commencement of agreed-upon milestones. There is a single performance obligation as the distinct goods and services are promised under each individual SOW. 87 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Warranties Sales of hardware products regularly include warranties to end customers ensuring that the product continues to function according to published specifications in a dynamic environment. These standard warranties are assurance type warranties and do not offer any services in addition to the assurance that the product will continue working as specified for one or more years. Therefore, warranties are not considered separate performance obligations in the arrangement. Instead, the expected cost of warranties is accrued as an expense in accordance with authoritative guidance. Sales incentives Sales incentives that are mutually agreed with customers are recognized as contra revenue while marketing expenses paid to the third parties are recognized as a marketing expense. We accrue estimated contra revenue or marketing expense for these sales incentives either when the related revenue is recognized or prior to customer commitment if customary business practice creates an implied expectation of future activities. Shipping and handling costs We include shipping and handling fees billed to customers in Product Revenue. Shipping and handling costs associated with inbound freight are included in Cost of revenue. In cases where we give a freight allowance to the customer for their own inbound freight costs, such costs are appropriately recorded as a reduction in Product Revenue. Shipping and handling costs associated with outbound freight are included in sales and marketing expenses. We have elected to account for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products. Shipping and handling costs associated with outbound freight totaled $ 3.2 million, $ 3.7 million and $ 5.2 million for the years ended December 31, 2025, 2024 and 2023, respectively. Contract costs We recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that otherwise would have been recognized is one year or less. These costs are included in operating expenses of sales and marketing and general and administrative 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 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. 88 Table of Contents ARLO TECHNOLOGIES, INC. 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 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. Stock-based compensation We measure stock-based compensation at the grant date based on the fair value of the award. The fair value of stock options is estimated on the grant date using the Black-Scholes option pricing model. The fair value of restricted stock units (“RSUs”) and performance-based restricted stock units (“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. Forfeitures are accounted for as they occur. Our Employee Stock Purchase Plan (“ESPP”) is intended to provide employees with the opportunity to purchase our common stock through accumulated payroll deductions at the end of specified purchase period. Eligible employees may contribute up to 15 % of compensation, subject to certain income limits, to purchase our common stock. The terms of the plan include a look-back feature that enables employees to purchase stock semi-annually at a price equal to 85 % of the lesser of the fair market value at the beginning of the offering period or the purchase date. The duration of each purchasing period is generally six months . We determine the fair value using the Black-Scholes Model using various inputs, including its estimate of expected volatility, term, dividend yield and risk-free interest rate. The risk-free interest rate of the purchase rights granted 89 Table of Contents 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 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. Foreign currency Our functional currency is the U.S. dollar. Foreign currency transactions of international subsidiaries are re-measured into U.S. dollars at the end-of-period exchange rates for monetary assets and liabilities, and at historical exchange rates for non-monetary assets and liabilities. Revenue is re-measured at average exchange rates in effect during each period. Expenses are re-measured at average exchange rates in effect during each period, except for expenses related to non-monetary assets and liabilities, which are re-measured at historical exchange rates. Gains and losses arising from foreign currency transactions are included in other income (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 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. GAAP. Income taxes 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. We also recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the net amount that we believe is more likely than not to be realized. Our assessment considers the recognition of deferred tax assets on a jurisdictional basis. Accordingly, in assessing the future taxable income on a jurisdictional basis, we consider the effect of the transfer pricing policies on that income. We have recorded a valuation allowance against U.S. federal and state 90 Table of Contents ARLO TECHNOLOGIES, INC. 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. As we expand internationally, we will face increased complexity in determining the appropriate tax jurisdictions for revenue and expense items. Our policy is to adjust these unrecognized tax benefits in the period when facts and circumstances change, such as the closing of a tax audit, the expiration of statute of limitation for a relevant taxing authority to examine a tax position, or when additional information becomes available. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on the financial condition and operating results. The provision for income taxes includes the effects of any accruals that we believe are appropriate, as well as the related interest and penalties. Legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act introduced the global intangible low-taxed income (“GILTI”) provisions effective in 2018, which generally impose a tax on the net income earned by foreign subsidiaries of a U.S. company in excess of a deemed return on their tangible assets. We recognize the tax on GILTI as a period cost when the tax is incurred. 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 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 (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. 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, 91 Table of Contents 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. 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. Credit Losses Accounting . In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments - Credit Losses: 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. Note 3. Revenue Contract balances 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. There were no significant changes in estimates during the periods that would affect the contract balances. Remaining performance obligations The total estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied and remaining was $ 40.6 million and $ 29.5 million as of December 31, 2025 and 2024, respectively, substantially related to performance obligations classified as less than one year . 92 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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 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. Sales returns are estimated by analyzing certain factors, including historical sales and returns data, channel inventory levels, current economic trends, and changes in customer demand for our products. Variable consideration estimates are based on predictive historical data or future commitments that we plan and control. However, we continue to assess variable consideration estimates such that it is probable that a significant reversal of revenue will not occur. The following 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 We disaggregate our revenue into three geographic regions: the Americas, EMEA, and APAC, where we conduct our business. The following table presents revenue disaggregated by geographic region. Year Ended December 31, 2025 2024 2023 (In thousands) Americas $ 339,740 $ 266,075 $ 301,418 EMEA 167,400 220,821 164,750 APAC 22,157 23,990 25,008 Total $ 529,297 $ 510,886 $ 491,176 93 Table of Contents ARLO TECHNOLOGIES, INC. 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). Note 4. Balance Sheet Components Short-term investments As of December 31, 2025 As of December 31, 2024 Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value (In thousands) (In thousands) U.S. Treasuries $ 19,980 $ 5 $ — $ 19,985 $ 69,385 $ 34 $ — $ 69,419 Property and equipment, net As of December 31, 2025 2024 (In thousands) Machinery and equipment $ 16,093 $ 14,399 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 Less: 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 (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 94 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Goodwill 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 As of December 31, 2025 2024 (In thousands) Sales incentives and marketing expenditures $ 31,976 $ 31,947 Sales returns 9,273 11,651 Employee compensation 23,221 12,921 Cloud and other costs 6,052 9,497 Other 21,850 19,714 Total $ 92,372 $ 85,730 Note 5. Fair Value Measurements The following table summarizes assets measured at fair value on a recurring basis: As of December 31 2025 2024 (In thousands) Cash equivalents: money-market funds (<90 days) $ 71,987 $ 4,095 Cash equivalents: U.S. Treasuries (<90 days) 20,506 22,504 Available-for-sale securities: U.S. Treasuries (1) 19,985 69,419 Total $ 112,478 $ 96,018 _________________________ (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. 95 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 6. Revolving Credit Facility On November 14, 2024, we entered into a credit agreement (the “Credit Agreement”) with HSBC Bank USA, National Association, as administrative agent, issuing bank, and lender. The Credit Agreement provides for a three-year revolving credit facility (the “Credit Facility”) of up to $ 45.0 million that matures on November 14, 2027, which also includes a $ 10.0 million sublimit for the issuance thereunder of letters of credit. As of December 31, 2025, we had unused borrowing capacity of $ 45.0 million based on the terms and conditions of the Credit Agreement. In addition, the Credit Agreement includes an uncommitted accordion feature that allows us to, from time to time, request an increase to the aggregate revolving loan commitments by up to an additional $ 30.0 million in the aggregate, subject to the satisfaction of certain conditions. The proceeds of the borrowings under the Credit Facility may be used for working capital and general corporate purposes. The obligations under the Credit Agreement are secured by substantially all of our assets, including substantially all of the assets of a material subsidiary, Arlo Technologies International Limited, a limited corporation organized under the laws of Ireland. Borrowings under the Credit Agreement will bear interest at a floating rate equal to: (i) the term secured overnight financing rate plus the applicable rate of 2.25 % to 2.75 %, or (ii) the base rate plus the applicable rate of 1.25 % to 1.75 % both determined based on a total net leverage ratio. Among other fees, we are required to pay a quarterly unused fee of 0.20 % per annum on the amount by which the lenders’ aggregate commitment under the Credit Facility exceeds the daily revolver usage during such quarter. The Credit Agreement contains events of default, representations and warranties, and affirmative and negative covenants customary for credit facilities of this type. The Credit Agreement also contains financial covenants that require us to (i) maintain a fixed charge coverage ratio of at least 1.50 to 1.00 and (ii) maintain a total net leverage ratio, not to exceed 3.00 to 1.00; both covenants being tested quarterly on a trailing four consecutive fiscal quarter basis. As of December 31, 2025, we were in compliance with all the covenants under the Credit Agreement. No amount had been drawn under the Credit Facility as of December 31, 2025. Note 7. Commitments and Contingencies Operating leases Our operating lease obligations mostly include offices, equipment, and distribution centers, with various expiration dates through June 2033. Certain lease agreements include options to renew or terminate the lease, which are 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. Supplemental cash flow information related to operating leases is as follows: Year Ended December 31, 2025 2024 2023 (in thousands) Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 5,399 $ 5,824 $ 6,756 Right-of-use assets obtained in exchange for lease liabilities Operating leases $ 107 $ 7,155 $ 1,873 96 Table of Contents 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: As of December 31, 2025 2024 Weighted average remaining lease term 5.5 years 5.4 years Weighted average discount rate 7.68 % 6.66 % The future minimum undiscounted lease payments under operating leases for each of the next five years and thereafter are as follows: As of December 31, 2025 (In thousands) 2026 $ 2,493 2027 2,384 2028 1,313 2029 1,021 2030 994 Thereafter 2,622 Total future lease payments $ 10,827 Less: imputed interest ( 2,175 ) Present value of future minimum lease payments $ 8,652 Accrued liabilities $ 1,909 Non-current operating lease liabilities 6,743 Total lease liabilities $ 8,652 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 We have entered into various inventory-related purchase agreements with suppliers. Generally, under these agreements, 50 % of orders are cancelable by giving notice 46 to 60 days prior to the expected shipment date and 25 % of orders are cancelable by giving notice 31 to 45 days prior to the expected shipment date. Orders are non-cancelable within 30 days prior to the expected shipment date. As of December 31, 2025, we had $ 33.6 million in non-cancelable purchase commitments with suppliers, which is expected to be paid over the next twelve months . As of December 31, 2025, an additional $ 33.2 million of purchase orders beyond contractual termination periods have been issued to supply chain partners in anticipation of demand requirements. Consequently, we may incur expenses for the materials and components, such as chipsets already purchased by the supplier to fulfill our orders if the purchase order is cancelled. Expenses incurred have historically not been material relative to the original order value. 97 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Litigation and other legal matters 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. We currently believe that there are no existing claims or proceedings that are likely to have a material adverse effect on our financial position within the next 12 months. There are many uncertainties associated with any litigation, and these actions or other third-party claims against us may cause us to incur costly litigation and/or substantial settlement charges. In addition, the resolution of any intellectual property litigation may require us to make royalty payments, which could have an adverse effect in future periods. If any of those events were to occur, our business, financial condition, results of operations, and cash flows could be adversely affected. The actual liability in any such matters may be materially different from our estimates, which could result in the need to adjust the liability and record additional expenses. Indemnifications In the ordinary course of business, we may provide indemnification of varying scope and terms to customers, distributors, resellers, vendors, lessors, business partners, and other parties with respect to certain matters including, but not limited to, losses arising from breach of such agreements or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with members of our Board of Directors and certain of our executive officers that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments we could be required to make under these indemnification agreements is, in many cases, unlimited. As of December 31, 2025 and 2024, we have not incurred any material costs as a result of such indemnification obligations and we are not currently aware of any indemnification claims. Note 8. Employee Benefit Plans 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, 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 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. 98 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following table sets forth the available shares for grants as of December 31, 2025: Number of Shares (In thousands) Shares available for grants as of December 31, 2024 3,356 Additional authorized shares 5,550 Granted ( 5,194 ) Forfeited / expired / cancelled 697 Shares available for grants as of December 31, 2025 4,409 Employee stock purchase plan 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. The following table sets forth the weighted average assumptions used to estimate the fair value of purchase rights granted under the ESPP. As of December 31, 2025 2024 2023 Expected life (in years) 0.5 0.5 0.5 Risk-free interest rate 3.87 % 4.56 % 4.97 % Expected volatility 52.3 % 54.7 % 64.0 % Option activity 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 Average Remaining Term Aggregate Intrinsic Value (In thousands) (In dollars) (In years) (In millions) Outstanding as of December 31, 2024 549 $ 13.24 Granted — — Exercised ( 94 ) 8.55 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 275 $ 14.10 2.50 $ 0.3 99 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) RSU activity 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 Average Remaining Term Aggregate Intrinsic Value (In thousands) (In dollars) (In years) (In millions) Outstanding as of December 31, 2024 7,112 $ 7.76 Granted 3,329 13.32 Vested ( 3,446 ) 8.82 Forfeited / cancelled ( 514 ) 8.67 Outstanding as of December 31, 2025 6,481 $ 9.99 1.32 $ 90.7 Year Ended December 31, 2025 2024 2023 (In millions, except per share data) Total intrinsic value of RSUs vested (the release date fair value) $ 47.1 $ 51.4 $ 38.9 Total fair value of RSUs vested (the grant date fair value) $ 30.4 $ 33.6 $ 34.4 RSU granted weighted-average fair value per share $ 13.32 $ 10.99 $ 5.28 PSU activity 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. 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 estimated achievement over the service period. 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 Average Remaining Term Aggregate Intrinsic Value (In thousands) (In dollars) (In years) (In millions) Outstanding as of December 31, 2024 4,777 $ 9.24 Granted 1,865 11.22 Vested ( 3,669 ) 9.18 Forfeited / cancelled ( 3 ) 8.28 Outstanding as of December 31, 2025 2,970 $ 10.56 0.83 $ 41.6 100 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Year Ended December 31, 2025 2024 2023 (In millions, except per share data) Total intrinsic value of PSUs vested (the release date fair value) $ 48.9 $ 55.0 $ 17.7 Total fair value of PSUs vested (the grant date fair value) $ 33.7 $ 29.9 $ 12.4 PSU granted weighted-average fair value per share $ 11.22 $ 10.11 $ 4.56 Stock-based compensation expense 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, 2025 2024 2023 (In thousands) Cost of revenue $ 3,820 $ 4,025 $ 3,533 Research and development 18,400 16,149 12,700 Sales and marketing 9,801 8,447 5,899 General and administrative 30,312 40,036 25,816 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, 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. 401(k) plan We have a 401(k) Plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. We match 50 % of contributions for employees up to a maximum of $ 4,000 in employee contributions per fiscal year. During the years ended December 31, 2025, 2024 and 2023, we recognized expense of approximately $ 1.8 million, $ 1.6 million and $ 1.1 million, respectively. 101 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 9. Income Taxes Income (loss) before provision for income taxes consisted of the following: Year Ended December 31, 2025 2024 2023 (In thousands) United States (“U.S.”) $ 7,611 $ ( 35,254 ) $ ( 26,266 ) International 8,056 5,842 5,405 Total $ 15,667 $ ( 29,412 ) $ ( 20,861 ) Provision for income taxes consisted of the following: Year Ended December 31, 2025 2024 2023 (In thousands) Current: U.S. federal $ ( 46 ) $ 89 $ 88 State 342 297 273 Foreign 604 794 697 900 1,180 1,058 Deferred: U.S. federal — — — State — — — Foreign ( 159 ) ( 88 ) 117 ( 159 ) ( 88 ) 117 Total $ 741 $ 1,092 $ 1,175 Income taxes paid (net of refunds) are as following: Year Ended December 31, 2025 (In thousands) U.S. federal $ 73 U.S. state and local Florida 75 Texas 59 Other U.S. States (1) 300 Foreign Ireland 350 Australia 289 Other Foreign Jurisdictions (1) 73 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. 102 Table of Contents 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) U.S. federal statutory tax rate $ 3,290 21.0 % State and local income taxes, net of federal income tax effect (1) 270 1.7 % Foreign tax effects Ireland 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 % Tax credits 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. 103 Table of Contents 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, 2024 2023 (In percentage) Tax benefit at U.S. federal income tax rate 21.0 % 21.0 % State tax benefit, net of federal benefit ( 0.8 ) % ( 1.0 ) % Impact of international operations 3.4 % 3.1 % Foreign-derived intangible income deduction 1.0 % 1.8 % Stock-based compensation ( 12.8 ) % ( 22.5 ) % U.S. federal tax credits 8.8 % 13.8 % Change in valuation allowance ( 28.0 ) % ( 21.7 ) % Non-deductible transaction costs ( 0.5 ) % ( 0.6 ) % 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: As of December 31, 2025 2024 (In thousands) Deferred Tax Assets: 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 Operating lease liabilities 2,079 5,543 Depreciation and amortization 1,423 4,212 Deferred revenue 134 80 Total deferred tax assets 114,670 117,982 Deferred Tax Liabilities: Operating lease right-of-use assets ( 2,203 ) ( 3,758 ) Total deferred tax liabilities ( 2,203 ) ( 3,758 ) Valuation Allowance ( 110,966 ) ( 112,939 ) Net deferred tax assets $ 1,501 $ 1,285 104 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Changes in valuation allowance for deferred tax assets were as follows: Year Ended December 31, 2025 2024 2023 (In thousands) Balance at the beginning of the period $ 112,939 $ 101,977 $ 93,869 Additions (1) 8,139 14,745 13,892 Deductions (2) ( 10,112 ) ( 3,783 ) ( 5,784 ) Balance at the end of the period $ 110,966 $ 112,939 $ 101,977 ________________________ (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: Amount Beginning Year of Expiration (In thousands) U.S. federal (1) $ 6,831 2031 U.S. federal (2)(3) 77,017 Indefinite California 38,178 2039 Other states 41,344 2026 _________________________ (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: Amount Beginning Year of Expiration (In thousands) U.S. federal $ 14,707 2039 California 13,779 Indefinite Foreign 3,943 2045 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. 105 Table of Contents 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: Year Ended December 31, 2025 2024 2023 (In thousands) Balance at the beginning of the period $ 4,483 $ 3,554 $ 2,763 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 ) Balance at the end of the period $ 4,817 $ 4,483 $ 3,554 The total amount of unrecognized tax benefits, including immaterial interest and penalties, was $ 4.8 million and $ 4.5 million as of December 31, 2025 and 2024, respectively. We recognize interest and penalties accrued related to unrecognized tax benefits as part of the provision for income taxes. 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. Note 10. Earnings (Loss) Per Share Year Ended December 31, 2025 2024 2023 (In thousands, except for per share data) Numerator: Net income (loss) $ 14,926 $ ( 30,504 ) $ ( 22,036 ) Denominator: 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 1,776 106 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 11. Segment and Geographic Information 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 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. GAAP. 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, 2025 2024 2023 (In thousands) Revenue $ 529,297 $ 510,886 $ 491,176 Less: Cost of revenue 296,456 323,382 323,613 Operating expenses: Personnel-related expense 74,605 66,811 65,249 Stock-based compensation 58,513 64,632 44,415 Outside professional services 49,075 54,229 48,336 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 and amortization 2,090 2,456 4,056 Interest expense 378 490 373 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 income (loss) $ 14,927 $ ( 30,504 ) $ ( 22,036 ) _________________________ (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. 107 Table of Contents ARLO TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Geographic information for revenue 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. For reporting purposes, revenue by geographic area is generally based upon the bill-to location of the customer. The following table presents revenue by geographic area. Year Ended December 31, 2025 2024 2023 (In thousands) United States $ 328,780 $ 256,737 $ 299,360 Spain 108,126 137,671 113,826 Sweden 46,766 49,648 29,502 Other countries 45,625 66,830 48,488 Total $ 529,297 $ 510,886 $ 491,176 Geographic information for long-lived assets Long-lived assets include property and equipment, net and operating lease right-of-use assets, net. Our long-lived assets are based on the physical location of the assets. The following table presents long-lived assets by geographic area. As of December 31, 2025 2024 (In thousands) United States $ 20,242 $ 18,201 Other countries 2,111 2,262 Total $ 22,353 $ 20,463 Note 12. Stock Repurchase Program 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. Note 13. 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. 108 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.