Arlo Technologies ARLO Form 10-Q filing Q2 FY2026

PART I: FINANCIAL INFORMATION

Item 1.Financial Statements

ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

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

ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

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

ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

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

ARLO TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED 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, strategic partners, 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 unaudited condensed 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 unaudited condensed consolidated financial statements include the accounts of Arlo and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

These unaudited condensed consolidated financial statements should be read in conjunction with the notes to the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, which was filed with the SEC on February 27, 2026. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for fair statement of the unaudited condensed consolidated financial statements for interim periods.

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 period amounts have been reclassified to conform to the current period’s presentation. None of these reclassifications had a material impact to the unaudited condensed consolidated financial statements.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Use of estimates

The preparation of these unaudited condensed 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 six months ended June 28, 2026 and are not necessarily indicative of the results that may be expected for the year ending December 31, 2026 or any future period.

Note 2. Significant Accounting Policies and Recent Accounting Pronouncements

Our significant accounting policies are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025. During the six months ended June 28, 2026, there have been no significant changes to such policies except for the items below.

Business combinations

We account for business combinations using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The purchase consideration for business combinations is measured at fair value as of the acquisition date and includes the fair value of assets transferred, liabilities incurred, and equity interests issued, as well as the fair value of any contingent consideration arrangements. Transaction costs associated with business combinations, such as legal, accounting, and advisory fees, are expensed as incurred and included in other operating expense on our unaudited condensed consolidated statements of operations and comprehensive income (loss). The results of operations of acquired businesses are included in our unaudited condensed consolidated financial statements from the respective acquisition dates.

Identifiable assets acquired and liabilities assumed are recognized at their acquisition‑date fair values. Any excess of the purchase consideration over the fair value of the identifiable net assets acquired is recorded as goodwill. Goodwill represents the future economic benefits arising from assets acquired that are not individually identifiable and separately recognized. Goodwill is not amortized but is subject to impairment testing at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired.

The determination of the acquisition‑date fair values of assets acquired and liabilities assumed requires management to make significant estimates and assumptions, including assumptions related to forecasted cash flows, discount rates, expected useful lives of intangible assets, and the probability and timing of contingent payments. These estimates are based on information available as of the acquisition date and on assumptions management believes are reasonable; however, actual results may differ from those estimates.

The initial accounting for business combinations may be incomplete as of the reporting date. In such cases, provisional amounts are recorded based on the best information available, and these amounts may be adjusted during the measurement period as additional information is obtained related to facts and circumstances that existed as of the acquisition date. Measurement period adjustments are recorded retrospectively, with corresponding adjustments to goodwill. The measurement period ends when we receive the information we were seeking about facts and circumstances that existed as of the acquisition date, or when it is determined that no additional information is obtainable, but shall not exceed one year from the acquisition date.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Acquired intangible assets

Intangible assets acquired in a business combination are recorded at their estimated fair values at the acquisition date. Intangible assets with finite lives are amortized on a straight-line basis over their estimated respective useful lives, which is based on our expected period of benefit generally ranging from five to thirteen years. Amortization expense is recorded as cost of subscriptions and services revenue on our unaudited condensed consolidated statements of operations and comprehensive income (loss). Intangible assets are assessed for impairment annually or whenever events or changes in circumstances indicate that the carrying value of assets may not be recoverable.

Accounting pronouncements recently adopted

During the six months ended June 28, 2026, we adopted Accounting Standards Update (“ASU”) No. 2025-05, 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 adoption did not have a material effect on our financial statements.

Accounting pronouncements not yet effective

Disclosure improvements. In October 2023, the Financial Accounting Standards Board (“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, 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.

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.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 3. Revenue

Contract balances

The following table reflects the changes in contract balances for the six months ended June 28, 2026:

Receivables increased primarily due to higher product and service sales. Contract liabilities increased primarily due to growth in subscriptions and services revenue driven by changes in consumer subscription plans, a shift toward additional annual prepaid subscriptions, and increases in cumulative paid accounts and subscription rates. As of June 28, 2026, there were no contract assets.

For the six months ended June 28, 2026 and June 29, 2025, $29.5 million and $21.7 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 $54.0 million as of June 28, 2026 and $40.6 million as of December 31, 2025, substantially related to performance obligations classified as less than one year.

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 June 28, 2026, we had a backlog of $40.0 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.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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.

For the six months ended June 28, 2026 and June 29, 2025, one customer accounted for 40% and 35% of the total revenue, respectively. No other customer accounted for 10% or greater of the total revenue. As of June 28, 2026, one customer accounted for 60%, and as of December 31, 2025, two customers accounted for 40% and 17% of the total accounts receivable, net. No other customers accounted for 10% or greater of the total accounts receivable, net.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 4. Business Combinations

Canary Connect, Inc.

On March 11, 2026, we entered into and simultaneously closed an Asset Purchase Agreement with Canary Connect, Inc. (“Canary”), a New York-based Internet of Things (“IoT”) company that designs and sells smart home security devices and SaaS solutions. The purpose of this transaction is to expand our presence in the AI-driven smart home security market. The transaction is accounted for as a business combination in accordance with ASC 805, Business Combinations. As a result of the transaction, we obtained control of Canary by obtaining the ability to direct its ongoing operations and to receive substantially all of the economic benefits associated with Canary.

As part of this transaction, we also entered into a Transitional Service Agreement with Canary and a Platform Transformation Agreement with Smartfrog & Canary Holdings, Inc. (“Smartfrog Group”) in order to continue servicing Canary’s existing customers and subscribers.

We allocate the purchase consideration to the identifiable assets acquired and liabilities assumed in this business combination based on their acquisition-date fair values, which is determined using income and market-based valuation techniques that require significant judgments and assumptions, including projected revenue, profitability and cash flows. Goodwill recognized through the Canary acquisition represents the excess of the purchase price over the fair value of identifiable net assets and is primarily attributable to expected synergies and operational efficiencies and anticipated future economic benefits. The resulting goodwill associated with Canary is deductible for income tax purposes.

The preliminary fair value estimates of the net assets acquired are based upon preliminary calculations and valuations, and those estimates and assumptions are subject to change as we obtain additional information for those estimates during the measurement period, which is up to one year from the acquisition date. The acquired intangible assets will be amortized over their estimated useful lives.

The acquisition date fair value of the consideration transferred consisted of the following (in thousands):

The purchase price allocation is as follows (in thousands):

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The fair values and useful lives of identifiable intangible assets were as follows:

(1) Customer relationship intangible assets were valued using the multi-period excess earnings method, which is the present value of the projected cash flows expected to be generated by the existing customer relationships, after deducting contributory asset charges representing a fair return on other assets required to generate those cash flows. Key assumptions included discounted cash flow and estimated customer retention rates.

(2) Proprietary technologies intangible assets comprised of various developed technologies, which were valued using the relief-from-royalty method and the multi-period excess earnings method. For the proprietary technology intangible asset valued using the relief-from-royalty method, which is based on the discounted cash flow savings accruing to the owner from not having to license the technology from a third party. Key assumptions included attributable revenue, royalty rates, and technology obsolescence rates. For the proprietary technology intangible asset valued using the multi-period excess earnings method, which is based on the discounted cash flows after deducting contributory asset charges representing a fair return on other assets required to generate those cash flows. Key assumptions included attributable revenue, profitability, cash flows, and technology obsolescence rates.

(3) Trade names intangible assets were valued using the relief from royalty method, which is the discounted cash flow savings accruing to the owner by virtue of the fact that the owner is not required to license the trade names from a third party. Key assumptions included attributable revenue expected from the trade names, royalty rates, and assumed asset life.

During the six months ended June 28, 2026, we recorded $0.8 million acquisition-related costs, which are expensed when incurred and included in other operating expense on the unaudited condensed consolidated statements of operations and comprehensive income (loss).

During the six months ended June 28, 2026, Canary’s results of operations are not material and are included within our unaudited condensed consolidated financial statements from an effective date of March 1, 2026. The effect of this business combination was not material to our financial results. Therefore, the actual and pro-forma results of operations from the acquisition date to June 28, 2026 have not been presented.

Aloe Care Health, Inc.

On April 16, 2026, we entered into and simultaneously closed a Merger Agreement with Aloe Care Health, Inc. (“Aloe Care”), a privately held company that provides an AI-powered medical alert and fall prevention platform for patients and their caregivers. The transaction is intended to accelerate the expansion of our AI-powered services for aging-in-place care in collaboration with health providers, patients and their families. The transaction is accounted for as a business combination in accordance with ASC 805, Business Combinations. As a result of the transaction, we obtained control of Aloe Care by obtaining the ability to direct its ongoing operations and to receive substantially all of the economic benefits associated with Aloe Care.

Under the Merger Agreement, we acquired 100% of the outstanding equity interests of Aloe Care in exchange for (i) $15.0 million of cash consideration paid at closing; and (ii) contingent earnout of up to $25.0 million, payable, at our option, in cash, shares of our common stock, or a combination of cash and shares, subject to the terms of the Merger Agreement.

We allocate the purchase consideration to the identifiable assets acquired and liabilities assumed in this business combination based on their acquisition-date fair values, which is determined using income and market-based valuation

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

techniques that require significant judgments and assumptions, including projected revenue, profitability and cash flows. Goodwill recognized through the Aloe Care acquisition represents the excess of the purchase price over the fair value of identifiable net assets and is primarily attributable to expected synergies and operational efficiencies and anticipated future economic benefits. The resulting goodwill associated with Aloe Care is not deductible for income tax purposes.

The preliminary fair value estimates of the net assets acquired are based upon preliminary calculations and valuations, and those estimates and assumptions are subject to change as we obtain additional information for those estimates during the measurement period, which is up to one year from the acquisition date. The acquired intangible assets will be amortized over their estimated useful lives.

The acquisition date fair value of the consideration transferred consisted of the following (in thousands):

(1) Cash paid at close does not include the acquisition-related costs which are expensed when incurred and are not purchase consideration.

(2) The earnout was accounted for as contingent consideration at fair value and was valued using a Monte Carlo simulation model, applying a revenue discount rate of 6.3% to the projected revenue inputs and a discount rate of 7.75% to present value the resulting payment as of the acquisition date. The fair value measurement was based on significant inputs not observable in the market, including projected revenue, probability, and the timing of achieving the earnout targets.

The purchase price allocation is as follows (in thousands):

(1) Restricted cash is in escrow funds to secure post-acquisition indemnification obligations and working capital adjustments.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The fair values and useful lives of identifiable intangible assets were as follows:

(1) Customer relationship intangible assets were valued using the distributor method, which is the present value of the after-tax cash flows expected to be generated by the existing customer relationships, after reduction by an estimated fair rate of return on contributory assets required to generate the customer relationship revenues. Key assumptions included the discount rate, estimated customer retention rates, and the selected distributor profit margin derived from guideline public distributor companies.

(2) Proprietary technologies intangible assets were valued using the multi-period excess earnings method based on the discounted cash flows and technology obsolescence rate. Key assumptions included attributable revenue, profitability, cash flows, and technology obsolescence rates.

(3) Trade names intangible assets were valued using the relief from royalty method, which is the discounted cash flow savings accruing to the owner by virtue of the fact that the owner is not required to license the trade names from a third party. Key assumptions included attributable revenue expected from the trade names, royalty rates, and assumed asset life.

During the six months ended June 28, 2026, we recorded $2.2 million acquisition-related costs, which are expensed when incurred and included in other operating expense on the unaudited condensed consolidated statements of operations and comprehensive income (loss).

During the six months ended June 28, 2026, Aloe Care’s results of operations are not material and are included within our unaudited condensed consolidated financial statements from an effective date of April 16, 2026. The effect of this business combination was not material to our financial results. Therefore, the actual and pro-forma results of operations from the acquisition date to June 28, 2026 have not been presented.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 5. Balance Sheet Components

Short-term investments

Property and equipment, net

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

Goodwill

We have determined that no event occurred or circumstances changed during the six months ended June 28, 2026 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 June 28, 2026.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Intangible assets, net

Intangible assets acquired through business combinations as of June 28, 2026 were as follows:

Amortization of intangible assets resulting from business combinations during the three and six months ended June 28, 2026 was $1.2 million and $1.2 million, respectively. There were no accumulated intangible assets impairment recognized as of June 28, 2026. The expected future amortization expense for intangible assets as of June 28, 2026 was as follows (in thousands):

Accrued liabilities

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 6. Fair Value Measurements

Fair value on a recurring basis

(1) Included in short-term investments on our unaudited condensed 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 June 28, 2026 and December 31, 2025, assets and liabilities measured as Level 2 fair value were not material and there were no financial assets measured as Level 3 fair value.

Earnout contingent consideration recognized through the Aloe Care acquisition is measured at the fair value on a recurring basis and is classified within Level 3 of the fair value hierarchy because the measurement requires the use of significant unobservable inputs. The fair value of the earnout contingent consideration was estimated using income and market-based valuation techniques and discounted to present value. Significant unobservable inputs used in the valuation include projected revenue, profitability, cash flows, and the discount rate. Changes in these assumptions could result in a significantly higher or lower fair value measurement.

The contingent consideration liability was $5.4 million as of June 28, 2026 and was included in other non-current liabilities on the unaudited condensed consolidated balance sheets. Changes in the fair value of the contingent consideration liability will be recognized in other operating expense on the unaudited condensed consolidated statements of operations and comprehensive income (loss). During the six months ended June 28, 2026, there was no fair value adjustment related to the earnout contingent consideration.

Fair value on a non-recurring basis

Our non-financial assets, such as property and equipment, goodwill, and intangible assets are assessed for impairment annually or whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable.

Sale of long-term investment

During the first fiscal quarter of 2026, we sold our investment in connection with a privately held company’s acquisition by a public company. This investment was accounted for as an equity security without a readily determinable fair value and was measured at cost, less impairment, adjusted for observable price changes in orderly transactions for the identical or similar investment in the same issuer in accordance with ASC 321, Investments-Equity Securities. Upon completion of the sale, we received total cash proceeds of $18.9 million and recognized a realized gain of $6.4 million, representing the excess of proceeds received over the carrying value of the investment. The gain from the sale of the investment is included in other income (expense), net on the unaudited condensed consolidated statements of operations and comprehensive income (loss). Our Chief Executive Officer served on the board of directors of the privately held company and, as a result, the investee is considered a related party and the sale of our investment is a related party transaction.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 7. 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 June 28, 2026, 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 June 28, 2026, we were in compliance with all the covenants under the Credit Agreement. No amount had been drawn under the Credit Facility as of June 28, 2026.

Note 8. 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 $0.8 million and $1.6 million for the three and six months ended June 28, 2026, respectively, and $1.4 million and $2.8 million for the three and six months ended June 29, 2025, respectively.

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

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

The future minimum undiscounted lease payments under operating leases for each of the next five years and thereafter as of June 28, 2026 were as follows (in thousands):

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 June 28, 2026, we had $37.4 million in non-cancelable purchase commitments with suppliers which is expected to be paid over the next twelve months.

As of June 28, 2026, an additional $32.8 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.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Tariff refunds

On February 20, 2026, the U.S. Supreme Court ruled that certain of the tariffs imposed in fiscal 2025 under the International Emergency Economic Powers Act (“IEEPA”) were unlawful. The ruling did not address potential refunds; however, on March 4, 2026, the U.S. Court of International Trade ordered U.S. Customs and Border Protection (“CBP”) to begin refunding all tariffs imposed under IEEPA. On April 20, 2026, the CBP launched a process for submitting IEEPA refund claims and subsequently, we submitted refund claims. We applied a gain contingency model in accordance with ASC 450, Contingencies, and account for refunds when the amounts are collected as a reduction of cost of revenue on the unaudited condensed consolidated statements of operations and comprehensive income (loss). Additionally, interest associated with refunds is accounted for as interest income on the unaudited condensed consolidated statements of operations and comprehensive income (loss). For the three months ended June 28, 2026, we received and recognized tariff refunds of $8.0 million and interest income of $0.2 million. Subsequent to June 28, 2026, we received and recognized tariff refunds of $6.3 million and interest income of $0.2 million. We have received substantially all tariff refunds as of the date the financial statements were issued.

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 unaudited condensed consolidated statements of operations and 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 June 28, 2026 and December 31, 2025, we have not incurred any material costs as a result of such indemnification obligations and we are not currently aware of any indemnification claims.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 9. Employee Benefit Plans

We grant options and restricted stock units (“RSUs”) under the 2018 Equity Incentive Plan (the “2018 Plan”), under which awards may be granted to all employees. We also grant performance-based and market-based restricted stock units (“PSUs”) to our executive officers and other senior employees periodically. Award vesting periods for the 2018 Plan are generally three to five years. As of June 28, 2026, 2.9 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 three to four years, the first tranche at the end of 12 months and the remaining shares underlying the option vesting monthly over the remaining 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.

The following table sets forth the available shares for grants as of June 28, 2026:

Employee stock purchase plan

We sponsor the ESPP for eligible employees, under which, employees purchased 187 thousand shares and 155 thousand shares during the six months ended June 28, 2026 and June 29, 2025, respectively. As of June 28, 2026, 3.0 million shares were available for issuance under the ESPP.

Option activity

We did not grant options during the six months ended June 28, 2026. Stock option activity during the six months ended June 28, 2026 was as follows:

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

RSU activity

RSU activity, exclusive of PSU activity, during the six months ended June 28, 2026 was as follows:

PSU activity

Our executive officers and other senior employees have been granted PSUs with some vesting occurring when performance conditions are met. The number of units earned and eligible to vest are determined based on the achievement of various performance conditions, including annual recurring revenue, cumulative paid accounts, subscriptions and services gross profit and gross margin, and the recipients’ continued services. At the end of each reporting period, we evaluate the probability of achieving the performance conditions and record the related stock-based compensation expense based on the estimated achievement over the service period.

PSU activity during the six months ended June 28, 2026 was as follows:

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stock-based compensation expense

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

As of June 28, 2026, all outstanding options were fully vested, therefore, there was no unrecognized compensation cost related to stock options. As of June 28, 2026, $92.9 million of unrecognized compensation cost related to unvested RSUs and PSUs is expected to be recognized over a weighted-average period of 2.3 years.

Note 10. Income Taxes

The provision for income taxes for the three and six months ended June 28, 2026 was $0.4 million and $0.8 million, respectively, or an effective tax rate of 12.5% and 4.5%, respectively. The provision (benefit) for income taxes for the three and six months ended June 29, 2025 was $(0.3) million and $0.2 million, respectively, or an effective tax rate of (8.9)% and 9.8%, respectively. Provision for income taxes increased for the three and six months ended June 28, 2026 compared to the prior year periods, primarily due to higher pre-tax income in the current periods and the prior year three-month period’s income tax benefit. The lower effective tax rate for the six months ended June 28, 2026, compared to the U.S. federal statutory rate, is primarily driven by lower tax rate on foreign earnings and valuation allowance on our net U.S. deferred tax assets and certain foreign tax attributes.

We evaluated the realizability of deferred tax assets on a jurisdictional basis in accordance with ASC 740 Income taxes. A valuation allowance is maintained when it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. As of June 28, 2026, we continue to maintain a full valuation allowance against our deferred tax assets at both federal and state levels. In making this determination, we considered all available positive and negative evidence, with greater weight given to objectively verifiable evidence.

Although we have recently generated cumulative pre-tax income, we determined that we have not yet demonstrated a sustained level of profitability sufficient to support realization of the deferred tax assets. We also considered forecasted future taxable income; however, such projections are inherently uncertain and do not outweigh the available negative evidence. Based on the totality of evidence, we concluded that it is not more-likely-than-not that the deferred tax assets will be realized. Accordingly, a full valuation allowance has been maintained as of June 28, 2026. There is a reasonable possibility that within the next few 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.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 11. Earnings Per Share

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 12. 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 our unaudited condensed consolidated statements of operations and comprehensive income (loss), but also the significant segment expenses and other segment items as below:

(1) Other segment items include acquisition-related expense, corporate IT and facility overhead, freight out expense, workforce reduction costs, interest income, foreign currency exchange gain (loss), net and others.

ARLO TECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Geographic information for revenue

Revenue consists of 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.

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.

Note 13. Stock Repurchase Program

On February 3, 2026, our Board of Directors approved a stock repurchase program for up to an aggregate of $50.0 million of shares of Arlo’s common stock through open market purchases in a manner deemed to be in the best interests of our company and stockholders, considering the economic cost and prevailing market conditions, including the relative trading prices and volumes of Arlo’s common stock. The stock repurchase program is expected to continue through December 31, 2027, unless extended or shortened by the Board of Directors.

The timing and actual number of shares repurchased under the repurchase program depend on a variety of factors, including price, general business and market conditions, and other investment opportunities. Shares may be repurchased through open market purchases or privately negotiated transactions, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. During the six months ended June 28, 2026, we repurchased and subsequently retired 2.3 million shares of Arlo common stock for an aggregate repurchase amount of $29.9 million. As of June 28, 2026, $20.1 million remained available and authorized for future repurchases.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cumulative Registered Accounts. Registered accounts at the end of a particular period are defined as the number of unique registered accounts on our platforms. The number of registered accounts does not directly correspond to the number of users. A single account may be shared by multiple users (which we consider as one account) and a single user may have multiple accounts (which we consider as multiple accounts).

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

Annual Recurring Revenue. We believe ARR enables measurement of our business initiatives and serves as an indicator of our future growth. ARR represents and is defined as the annualized paid subscriptions and services revenue we expect to recognize from subscription contracts, as calculated by taking the average paid subscriptions and services revenue per paid account of the reporting period multiplied by the number of paid accounts at the end of the reporting period. ARR is a performance metric and should be viewed independently of revenue and deferred revenue, and is not intended to be a substitute for, or combined with, any of these items.

Impact of Global Geopolitical, Economic and Business Conditions

The U.S. government has implemented tariff measures affecting a broad range of imported materials, and these measures have been subject to change. While we are actively monitoring the changes in global trade policy and the effects they may have on our business and broader macroeconomic environment, we do not expect them to have a material detrimental impact on our business operations in the near term. However, given the uncertainty surrounding global markets as a result of the fluid U.S. tariff policy, we do not have clarity at this point over the potential medium to long term impacts our business may face. We continue to monitor and evaluate these developments and assess their potential impact on our business, financial condition, and results of operations. The availability of certain goods could be affected if foreign suppliers choose to limit their exposure to U.S. markets in response to unfavorable trade policies, which could negatively impact our suppliers’ ability to deliver materials or manufacture equipment for us and, therefore, delay or impede our product deliveries. Furthermore, rising inflation, slower economic growth and increases in unemployment that may result from global trade disruptions could further deflate consumer demand and impact the demand for our products.

Results of Operations

We operate as one operating and reportable segment. The following table sets forth, for the periods presented, the unaudited condensed consolidated statements of operations and comprehensive income (loss) data, which we derived from the accompanying unaudited condensed consolidated financial statements:

Revenue

Our gross revenue consists primarily of paid subscriptions and services revenue and sales of devices. Our paid subscription services are billed in advance of the start of the annual or monthly subscription and revenue is recognized ratably over the subscription period. We generally recognize revenue from product sales at the time the product is shipped and transfer of control from us to the customer occurs.

Our revenue consists of gross revenue, less customer rebates and other channel sales incentives, allowances for estimated sales returns, price protection, and net changes in deferred revenue. A significant portion of our marketing expenditure is with customers and is deemed to be a reduction of revenue under authoritative guidance for revenue recognition.

We conduct business across three geographic regions—(i) the Americas; (ii) EMEA; and (iii) APAC—and generally base revenue by geographic region on the bill-to location of the customer for device location for subscriptions and services sales and device sales.

Revenue by classification is as follows:

Subscriptions and services revenue increased by $14.9 million or 19.0%, and $36.1 million or 24.6%, for the three and six months ended June 28, 2026, respectively, compared with the prior year periods. The increases were primarily driven by a 23.2% increase in cumulative paid accounts and the growth in average revenue per user (“ARPU”) on retail and direct paid subscription services, reflecting a higher volume of annual plan renewals.

Products revenue increased by $11.7 million or 22.8%, and $21.7 million or 21.4%, for the three and six months ended June 28, 2026, respectively, compared with the prior year periods. The increases were primarily driven by higher product shipments to our largest customer in EMEA, reflecting stronger customer demand, as well as lower sales incentives and sales returns in retail channels, both of which are recorded as reductions of revenue. These increases were partially offset by lower average selling prices (“ASPs”) for our products sold through retail channels as we continued promotional activities to stimulate household acquisition and subscriber growth.

Cost of Revenue

Cost of revenue consists of both subscriptions and services cost as well as products cost. Subscriptions and services cost consists of costs attributable to the provision and maintenance of our cloud-based platform, including personnel expense, data storage, security and computing, IT and facilities overhead, and amortization of software development. Products cost primarily consists of the cost of finished products from our third-party manufacturers and overhead costs, including personnel expense for operations staff, purchasing, product planning, inventory control, warehousing and distribution logistics, third-party software licensing fees, inbound freight, duty and tariff costs, IT and facilities overhead, warranty costs associated with returned goods, write-downs for excess and obsolete inventory and excess components, and royalties to third parties.

Our cost of revenue as a percentage of revenue can vary based upon a number of factors, including those that may affect our revenue set forth above and factors that may affect our cost of revenue, including, without limitation, product mix, sales channel mix, registered accounts’ acceptance of paid subscription service offerings, and changes in our cost of goods sold due to fluctuations in prices paid for components, net of vendor rebates, cloud platform costs, warranty and overhead costs, inbound freight, duty and tariff costs, and charges for excess or obsolete inventory. We outsource our manufacturing, warehousing, and distribution logistics. We also outsource certain components of the required infrastructure to support our cloud-based back-end IT infrastructure. We believe this outsourcing strategy generally allows us to better manage our products cost and subscriptions and services cost and gross margin and allows us to adapt to changing market dynamics and supply chain constraints. However, with respect to manufacturing that we have outsourced to ex-U.S. manufacturers, our ability to manage product costs through this strategy has been, and may continue to be, negatively impacted by tariffs.

Subscriptions and services cost of revenue increased by 43.7% and 31.7% for the three and six months ended June 28, 2026, respectively, compared with the prior year periods. The increases were primarily driven by growth in subscriptions and services revenue and continued investments in platform services to support subscription-based business growth and improve customer experience.

Products cost of revenue increased by 6.8% and 11.5% for the three and six months ended June 28, 2026, respectively, compared with the prior year periods, The increases were primarily driven by higher product shipments and partially offset by an $8.0 million tariff refund recorded as a reduction of cost of revenue and coupled with lower freight-in costs resulting from increased use of ocean freight. For the six months ended June 28, 2026, the increase was also partially offset by lower product warranty and inventory reserves.

Gross Profit

**Percentage change not meaningful.

Subscriptions and services gross profit increased by $9.5 million and $28.4 million for the three and six months ended June 28, 2026, respectively, compared with the prior year periods. The increases were primarily driven by growth in

subscriptions and services revenue, partially offset by higher subscriptions and services cost of revenue as we continued investing in platform services to support subscription-based business growth and improve customer experience.

Products gross profit increased by $7.6 million and $8.7 million for the three and six months ended June 28, 2026, respectively, compared with the prior year periods. The increases were primarily driven by the $8.0 million tariff refund recorded as a reduction of cost of revenue, lower freight-in costs resulting from increased use of ocean freight, and lower product warranty and inventory reserves. These increases were partially offset by lower ASPs for our products sold through retail channels as we continued promotional activities to stimulate household acquisition and subscriber growth.

Operating Expenses

Research and Development

Research and development expense consists primarily of personnel-related expense, safety, security, regulatory services and testing, other research and development consulting fees, and allocated IT and facilities overhead. Generally, we recognize research and development expenses as they are incurred, exclusive of capitalized software development costs. We have invested in and expanded our research and development organization to enhance our ability to introduce innovative products and services. We expect research and development expense to increase in absolute dollars as we develop new product and service offerings and compete for engineering talent. We believe that innovation and technological leadership are critical to our future success, and we are committed to continuing a significant level of research and development to develop new technologies, products and services, including our hardware devices, cloud-based software, AI-based algorithms, and machine learning capabilities.

Research and development expense increased by $5.2 million for the three months ended June 28, 2026 compared to the prior year period, primarily due to increases of $2.2 million in stock-based compensation and $1.0 million in payroll-related compensation, driven by headcount growth, as well as a $1.6 million increase in outside professional services as we continued to invest in platform services to support our subscription business.

Research and development expense increased by $11.8 million for the six months ended June 28, 2026 compared to the prior year period, primarily due to increases of $5.5 million in stock-based compensation and $3.5 million in payroll-related compensation, driven by headcount growth, as well as a $2.3 million increase in outside professional services as we continued to invest in platform services to support our subscription business.

Sales and Marketing

Sales and marketing expense consists primarily of personnel expense for sales and marketing staff, technical support expense, advertising, trade shows, media and placement, corporate communications and other marketing expense, product marketing expense, allocated IT and facilities overhead, outbound freight costs, and credit card processing fees. We expect our sales and marketing expense to increase in the future as we invest in marketing to drive demand for our subscriptions and services and devices.

Sales and marketing expense increased by $3.0 million for the three months ended June 28, 2026 compared to the prior year period, primarily due to increases of $0.8 million in stock-based compensation and $0.7 million in payroll-related compensation, driven by headcount growth, as well as increases of $0.6 million in marketing expenditures and $0.4 million in professional services as we continued to invest in customer experience improvements.

Sales and marketing expense increased by $5.4 million for the six months ended June 28, 2026 compared to the prior year period, primarily due to increases of $1.5 million in marketing expenditures; $1.2 million in credit card and in-app processing fees, driven by an increase in paid accounts and focused efforts to improve the customer app experience; $0.9 million in stock-based compensation and $0.7 million in payroll-related compensation, driven by headcount growth; and $0.7 million in professional services as we continued to invest in customer experience improvements.

General and Administrative

General and administrative expense consists primarily of personnel-related expense for certain executives, finance and accounting, investor relations, human resources, legal, information technology, professional fees, allocated IT and facilities overhead, strategic initiatives expense, and other general corporate expense. We expect our general and administrative expense to fluctuate as a percentage of our revenue in future periods based on fluctuations in our revenue and the timing of such expense.

General and administrative expense increased by $6.8 million for the three months ended June 28, 2026 compared to the prior year period, primarily due to increases of $3.4 million in stock-based compensation and $0.8 million in payroll-related compensation, driven by headcount growth, as well as a $2.4 million increase in legal professional services.

General and administrative expense increased by $7.2 million for the six months ended June 28, 2026 compared to the prior year period, primarily due to increases of $2.5 million in stock-based compensation and $1.0 million in payroll-related compensation, driven by headcount growth, as well as a $4.4 million increase in legal professional services. The increase was partially offset by a $0.5 million decrease in IT and facilities overhead related to allocations associated with corporate infrastructure.

Other operating expenses

Other operating expenses primarily include acquisition-related expense and workforce reduction costs.

Other Income, Net

** Percentage change not meaningful.

During the first fiscal quarter of 2026, we sold our strategic long-term investment. Upon completion of the sale, we received total cash proceeds of $18.9 million and recognized a realized gain of $6.4 million, representing the excess of proceeds received over the carrying value of the investment.

Interest income, net slightly decreased for the three and six months ended June 28, 2026 compared to the prior year periods, primarily due to the decline in interest rates.

Provision (Benefit) for Income Taxes

Provision (benefit) for income taxes increased for the three and six months ended June 28, 2026 compared to the prior year periods, primarily due to higher pre-tax income in the current periods and the prior year three-month period’s income tax benefit. The effective tax rate for the six months ended June 28, 2026 was lower than the U.S. federal income tax rate primarily due to earnings generated in lower-tax foreign jurisdictions and the continued impact of valuation allowances recorded against substantially all of our U.S. deferred tax assets and certain foreign tax attributes.

Although we have recently generated cumulative pre-tax income, we determined that we have not yet demonstrated a sustained level of profitability sufficient to support realization of the deferred tax assets. We also considered forecasted future taxable income; however, such projections are inherently uncertain and do not outweigh the available negative evidence. Based on the totality of evidence, we concluded that it is not more-likely-than-not that the deferred tax assets will be realized. Accordingly, a full valuation allowance has been maintained as of June 28, 2026. There is a reasonable possibility that within the next few 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.

Liquidity and Capital Resources

As of June 28, 2026, our cash and cash equivalents and short-term investments totaled $141.1 million and our unused borrowing capacity was $45.0 million based on the terms and conditions of the Credit Agreement. The proceeds of the borrowings under this credit facility may be used for working capital and general corporate purposes.

We have a history of losses and may incur operating and net losses in the future. As of June 28, 2026, our accumulated deficit was $365.1 million. Historically, we have funded our principal business activities through cash flows generated from operations and available cash on hand.

Material Cash Requirements

We believe that our existing sources of liquidity will be sufficient to meet our anticipated cash requirements for at least the next 12 months and beyond. However, in the future we may require or desire additional funds to support our operating expenses and capital requirements. To the extent that current and anticipated future sources of liquidity are insufficient, we may seek to raise additional funds through public or private equity. We have no commitments to obtain such additional financing and cannot provide assurance that additional financing will be available at all or, if available, that such financing would be obtainable on terms favorable to us and would not be dilutive.

Our future liquidity and cash requirements may vary from those currently planned and will depend on numerous factors, including the introduction of new products, the growth in our subscriptions and services revenue, the ability to increase our gross margin dollars, as well as cost optimization initiatives and controls over our operating expenditures. As we grow our installed base and related cost structure, there will be a need for additional working capital, hence, we may increase our product and subscription rates in the future.

Operating leases and contractual commitments

Our operating lease obligations mostly include offices, equipment, and distribution centers. Our contractual commitments are primarily inventory-related purchase obligations with suppliers.

Legal contingencies

We are, and from time to time, we may become involved in disputes, litigation, and other legal actions in the ordinary course of business. At each reporting period, we evaluate whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. Significant judgment is required to determine both the probability and the estimated amount of loss. In such cases, we accrue for the amount or, if a range, we accrue the low end of the range, only if there is not a better estimate than any other amount within the range, as litigation reserves in other operating expense on the unaudited condensed consolidated statements of operations and comprehensive income (loss).

Refer to Note 8. Commitments and Contingencies in the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report for further information about our operating leases, purchase obligations, and legal contingencies.

Stock repurchase program

On February 3, 2026, our Board of Directors authorized a stock repurchase program of up to an aggregate of $50.0 million of shares, which commenced in March 2026 and is expected to continue through December 31, 2027 unless extended or shortened by the Board of Directors. During the six months ended June 28, 2026, we repurchased and subsequently retired 2.3 million shares of Arlo common stock for an aggregate repurchase of $29.9 million. As of June 28, 2026, $20.1 million remained available and authorized for future repurchases.

Cash Flow

The following table presents our cash flows for the periods presented.

Operating activities

Net cash provided by operating activities decreased by $0.5 million for the six months ended June 28, 2026 compared with the prior year period. The decrease was primarily driven by improved profitability offset by unfavorable working capital movements, including higher accounts receivable balances resulting from strong product sales and higher inventory purchases, which were partially offset by an increase in accounts payable balances, primarily due to the timing of payments.

Investing activities

Net cash used in investing activities increased by $17.4 million for the six months ended June 28, 2026 compared with the prior year period. The increase was primarily attributable to cash paid for business acquisitions and lower net proceeds from available-for-sale securities, partially offset by proceeds from the sale of a strategic investment.

Financing activities

Net cash used in financing activities increased by $14.5 million for the six months ended June 28, 2026 compared with the prior year period, primarily due to higher repurchases of common stock.

Critical Accounting Policies and Estimates

For a complete description of what we believe to be the critical accounting policies and estimates used in the preparation of our unaudited condensed consolidated financial statements, refer to our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to our critical accounting policies and estimates during the six months ended June 28, 2026, other than as discussed in Note 2. Significant Accounting Policies and Recent Accounting Pronouncements, in the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

During the six months ended June 28, 2026, there were no material changes to our market risk disclosures as set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2025.

Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on this evaluation, our management, including our CEO and our CFO, has concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were, in design and operation, effective at the reasonable assurance level. A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within an organization have been detected.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

Item 1.Legal Proceedings

We are, and from time to time, we may become involved in disputes, litigation and other legal actions in the ordinary course of business. We are not currently party to any claim or proceedings that, in the opinion of our management, are likely to have a material adverse effect on our financial position. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. For additional discussion of certain risks associated with legal proceedings, see the section entitled “Risk Factors” in Part II, Item 1A of this Quarterly Report.

Item 1A.Risk Factors

Our business, reputation, results of operations and financial condition, as well as the price of our stock, can be affected by a number of factors, whether currently known or unknown, including those described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 under the heading “Risk Factors.” During the six months ended June 28, 2026, there have been no significant changes to the risk factors under the heading “Risk Factors” described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table summarizes the share repurchase activity for the quarter ended June 28, 2026.

(1) On February 3, 2026, our Board of Directors approved a stock repurchase program of up to an aggregate of $50.0 million of shares of our common stock through open market purchases in a manner deemed to be in the best interests of our company and stockholders, considering the economic cost and prevailing market conditions, including the relative trading prices and volumes of our common stock. The stock repurchase program is expected to continue through December 31, 2027, unless extended or shortened by the Board of Directors.

(2) Average price paid per share includes commission costs, but excludes the 1% excise tax accrued on our share repurchases as a result of the Inflation Reduction Act of 2022. Commission costs associated with share repurchases and excise taxes do not reduce the remaining authorized amount under our repurchase programs.

Item 5. Other Information

Trading Arrangements

During the quarter ended June 28, 2026, our directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated the contracts, instructions or written plans for the purchase or sale of Arlo’s securities set forth in the table below:

(1) Contract, instruction or written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.

(2)“Non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K under the Exchange Act.

(3) Represents the termination of a written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) adopted on August 27, 2025.

(4) Adopted for personal tax planning purposes.

Item 6.Exhibits