Arlo Technologies, Inc.ARLO
Arlo Technologies, Inc. Commitments Disclosure
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 | ||||||||||||||
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 | |||
| $ | 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.
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.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 7, 2023 | |
| 2021 | Mar 2, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Feb 22, 2019 | |
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.