Identiv Inc

Statement Regarding Forward Looking Statements

This Annual Report on Form 10-K (“Annual Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For example, other than statements of historical facts, statements regarding our strategy, future operations and growth, financial position, expected financial or business results, projected costs, prospects, plans, market trends, potential market size, product attributes and benefits, growth drivers, competition and competitive advantages, objectives of management, management judgements and estimates, and the expected impact of changes in laws or accounting pronouncements constitute forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “will,” “believe,” “could,” “should,” “would,” “may,” “anticipate,” “intend,” “plan,” “estimate,” “expect,” “project” or the negative of these terms or other similar expressions. Although we believe that our expectations reflected in or suggested by the forward-looking statements that we make in this Annual Report are reasonable, we cannot guarantee future results, performance or achievements. You should not place undue reliance on these forward-looking statements. All forward-looking statements speak only as of the date of this Annual Report. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our expectations change, whether as a result of new information, future events or otherwise. We also caution you that such forward-looking statements are subject to risks, uncertainties and other factors, not all of which are known to us or within our control, and that actual events or results may differ materially from those indicated by these forward-looking statements. Factors that could cause our actual results to differ materially from our expectations include, but are not limited to our ability to successfully execute our business plan and sell our products; continued market acceptance and growth or expansion in our target markets; our ability to successfully compete; our history of losses; the effects of product and component shortages; our ability to obtain additional capital; the benefits and attributes of our products and services; the level of customer orders; the ability of our products to perform as expected; risks related to the recent COVID-19 pandemic; fluctuations in net cash provided and used by operating, financing and investing activities; sources and uses of our cash, and expense levels; the loss of significant customers or types of business; the impact of macroeconomic conditions, including inflation, on our business; and the risks discussed elsewhere in this Annual Report under the heading “Risk Factors”. These cautionary statements qualify all of the forward-looking statements included in this Annual Report.

Identiv and the Identiv logo are trademarks of Identiv, Inc., registered in many jurisdictions worldwide. Certain product and service brands are also trademarks or registered trademarks of the Company, including HIRSCH, ScramblePad, TouchSecure, Velocity, Velocity Vision, Velocity AI, Bitse.io, Freedom, Enterphone MESH, 3VR, VisionPoint, Thursby Software, and Thursby SubRosa. Other product and brand names not belonging to Identiv that appear in this Annual Report may be trademarks or registered trademarks of their respective owners.

Each of the terms the “Company,” “Identiv,” “we," “us” and “our” as used herein refers collectively to Identiv, Inc. and its wholly owned subsidiaries, unless otherwise stated.

Overview

Our mission is to software-enable the entire physical world.

Our radio-frequency identification ("RFID") Internet of Things ("IoT") devices and IoT software platform are designed to digitally enable and secure any physical item. Our products enable unique and secure digital interaction with the physical world while simultaneously managing data flows from each physical object, thereby creating a software-enabled experience for the user that goes beyond a purely physical interaction.

Our physical security systems secure virtually every aspect of places and our interaction with them. Our systems provide customers with identification, access control, video surveillance and analytics. The result is a secure and responsive experience between the user and the place they are accessing. We believe our systems are built to meet the needs of various stakeholders, from engineers, systems designers, installers, and administrators to systems managers and individual users.

By digitally enabling physical "things," we make them more secure, responsive, feature-rich, interactive and customer-connected. RFID powers a wide range of IoT applications, including customer engagement, product authenticity, enhanced consumer experiences, instrumentation and sensor enabling, brand protection, product tracking, and tamper detection.

We execute our strategy of securing every place and thing through our two business segments: Identity segment for IoT and RFID-enabled solutions, and Premises segment for our physical security and access control.

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Identity: Our Identity business is focused on digitally enabling and securing every physical thing. Our designs and products include RFID-enabled IoT solutions to make digital and physical devices secure, responsive, and meaningful for the end user. Our RFID units have been integrated into more than a billion and a half IoT items around the world.

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Premises: Our Premises business is focused on securing every physical place. We offer what we believe to be one of the most comprehensive, end-to-end systems available from a single service provider in the physical security market. Our product portfolio includes identity credentials, access readers, access control systems, video management systems, and video analytics, deployed in a hyper-converged platform or a cloud-based architecture. Our platform is deployed across buildings worldwide, including sensitive government facilities, schools, utilities, hospitals, stores, and apartment buildings.

Market Drivers

In our Identity segment, the emerging RFID market is driven by pervasive use cases to the extent they are adopted by companies and consumers. For example, RFID devices can verify whether a syringe dispenses the exact right amount of a patient’s medication. Mobile phone accessories can work together intelligently with a person’s handset to create novel experiences and applications. Temperature-sensitive products can be tracked to ensure the shipment has stayed within its safety parameters and remains unspoiled. RFID-enabled smart packaging products allow service operators to remain in compliance with government regulations and, potentially, tax authorities.

These examples demonstrate the scale of the RFID market opportunity of hundreds of billions of units over time. As technology improves and costs drop, we believe competitive pressures will drive adoption across each sector until virtually all physical items have a sensor-augmented, integrated, digital existence – a vision we share with leading semiconductor manufacturers. Identiv enables tiny, low-cost RFID chips with highly tuned and optimized antennas, systems, software and security to become embedded in a wide range of products, providing a digital identity to almost any object on the planet.

Within our Premises segment, we believe the physical security market is undergoing a generational, technology-driven transformation. Fully integrated, software-defined, video, access and identity systems are being deployed to address evolving security threats that prior generations of security systems can no longer adequately secure. Lower cost of ownership, lower cost of administration, higher security and lower cost of upgrades and enhancements are the internal drivers of this technological transformation. Cyber-attacks, identity cloning and user expectations are some of the external forces also driving this generational turnover of systems and expansion of their reach. Our physical security platforms enable this transformation by encompassing each of the major components that work together to create a secure yet frictionless experience, tailored to the requirements of each customer and all stakeholders within each customer.

Competitive Advantages

In the Identity segment, we believe our core differentiation is our best-in-class designs, technologies, and intellectual property ("IP") that enable the secure digital capabilities of RFID chips to work within the analog world of antennas, power harvesting, data conversion and security. Our devices can be attached to a prescription bottle, affixed to a shipment pallet, or embedded in an athletic jersey; they must then communicate through radio frequency (RF) and harvest power from the radio signal of a phone or reader in order to run the chip. Furthermore, the device must perform reliably in real-world environments. We design the systems, the antennas, software, security and physical form that connects the chips, accesses their capabilities, manages RF communications and power conversion, and creates the platform for the digital experience, all harmoniously integrated with the physical experience of the product.

We make this happen with our library of designs, patented technologies like tag-on-metal, and IP we have developed working with early adopters of RFID in multiple customer verticals including mobility and healthcare. We believe we deepen our value and competitive advantage by providing both the devices themselves in high volume, as well as the readers and programmers to personalize and read the RFID devices. Our RFID readers are among the most widely deployed for NFC (near-field communication) and high-frequency RFID programming and reading, which we believe gives us both credibility with our customers’ engineering teams and the flexibility to add software value. We then work closely with our customers to build the complicated analog bridge and system to make the device function across radio frequencies. The result for the end user is an engaged, dynamic interaction with very high reliability, high data security and optimized power transfer.

Our vertical integration allows us to go directly from prototypes to pilot runs to volume production and deliver a high-quality product, even for the most complicated devices. Oftentimes, the customers' engineers want to improve the product, making adjustments from lessons learned or because our chip suppliers release new chips, new features, and new price points. We would then typically run another rapid cycle of re-design, re-prototype, re-pilot, and re-production processes. We believe the design-through-production platform incentivizes our customers to continue working with us as they drive increasing functionality and better performance into the experiences for their customers. We anticipate this dynamic will accelerate, driven by improving semiconductor performance as outlined in industry-recognized Moore's Law, and by competitive forces created when any digitally-enabled product is launched, pressuring others to catch up or lose the market opportunity.

In the Premises segment, we believe our competitive advantages are our technical depth and ability to offer a comprehensive, end-to-end product line with customization that meets the varying needs of our customers’ key stakeholders. Our platform encompasses the total digitization of physical places; it spans access control, video, analytics, access card readers, credentials, and hyperconverged appliances, with the ability to manage the system using on-premises, hybrid or cloud architectures, using hardware and software that are either enterprise-grade or small-business optimized. Our Premises products are developed and produced for high security applications and have met the requirements and are deployed in some of the most secure government facilities in the United States. We believe that a high-security foundation creates a solid base for all systems, whatever security level is needed.

Our Premises products are built on Identiv-designed and built hardware that reduces component vulnerabilities. We believe this purpose-built solution is more secure than comparable systems, and provides customers with higher performance, while retaining the ability to improve and quickly integrate new security features. We also embed cybersecure technology into all our access control, credentials, and door readers. From CAC/PIV credentials for US government customers to FICAM architecture that we helped to define, we believe our strong reputation in the physical security industry is a competitive advantage.

Growth Strategy

Our Identity segment growth strategy is focused on pervasive deployment of high-end, sensor-enabled RFID devices in every physical thing. We are engaged with technology early adopters, built on our reputation as the go-to partner for technologically complex advanced RFID devices. We believe there are three growth drivers in RFID: customer launches, design wins and technology expansion.

Use Case Examples

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Mobile Accessories: Our RFID devices embedded in mobile phone accessories enable rich, extensible experiences on a mobile device with an RFID-enabled accessory.

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Medical Devices: It is critical that a patient’s medication be dispensed at the right dosage and temperature. Our RFID devices, when attached to a syringe, can enable doctors and their patients to monitor medical compliance.

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Supply Chain Tracking: Our RFID devices, when attached to a shipment palette, enable a company to track the ambient conditions of goods in their supply chain, ensuring cold items remain cold and are delivered to the appropriate location.

Design Wins

Design wins are the key to our leadership in the market as it expands. We believe our technical expertise, leadership, IP, active customer engagements and reputation across all facets of RFID provide a pipeline of design win opportunities. We also engage in non-recurring engineering ("NRE") projects with strategic customers, with the expectation that many of these projects evolve into design wins.

Technology Expansion

Our ability to secure additional design wins and successful customer launches relies upon our best-in-class engineering team and production capabilities, as well as new technologies that we design and incorporate as new capabilities for our customers.

In our Premises segment, our platform has the capability to secure virtually every place on the planet. Our platform is anchored by the reliability and robustness of our complete security solution. This includes our Velocity single-pane solution and software, our line of controllers and IoT gateways including Mx, our EG Edge controller, our TouchSecure access sensors, our Velocity Vision video and our VisionAI machine-learning based analytics platform, our TS Cards credentials as well as our mobile credentials, and a wide range of integrations.

We build our Premises solution to meet the stringent requirements of the most high-security facilities in the world and offer a complete security solution that includes hardware, software, and professional services. Our broad product portfolio allows us to provide customers a complete deployment, allowing them to consolidate vendors, minimizing execution risk. This also leverages our channel strength as well as the engineering and product investments the company has made. A key focus area for us is growing sales of our software licenses and related maintenance services.

We sell our current high-security solution to customers within the U.S. government. Since we offer a fully featured product portfolio that meets the needs of many end users, we aim to drive sales of our solution to quasi-governmental customers like airports and commercial customers in verticals such as retail, medical, and education. We also expect to drive sales of our enterprise-level solution into the SMB markets that also have high-security needs, thereby expanding the market for our solution. Additionally, we have partnerships with original equipment manufacturers (OEMs) that make our products available to their respective sales teams, leveraging our engineering investment.

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Premises Software: Our software platform for premises digitization enables centralized management of a physical place, including control of doors, cameras, gates, elevators and other building equipment, monitoring users as they move around a facility, preventing unwanted access, maintaining compliance and providing a continuous audit trail. Our platforms are IT-centric and highly scalable from small businesses through global organizations, multi-tenant, special-purpose campuses such as schools, military bases, utilities and others. Our platforms are available as local software or cloud based, accessible through browser, mobile and desktop interfaces. We leverage data infrastructures across LAN's, Wi-Fi, Bluetooth, mobile, RFID and emerging communication standards such as 5G and UWB (Ultra-Wideband). As communications infrastructure becomes fully wireless, low-power and high-security, our software is architected to support seamless migration to fully software-defined systems, compatible with pervasive RFID devices to enable a frictionless, convenient and secure experience in almost any physical location.

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Access Readers & Sensors: As most of the physical infrastructure becomes wireless, virtual and software-defined, the remaining device will be the sensors at the door. As platforms for local presence confirmation, video and audio interaction, and to signal a door to open, we believe our family of TouchSecure (TS) sensors will continue to play a key physical role in providing security and convenience at the door.

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Video Analytics: We have integrated a wide set of machine learning analytics into our Velocity Vision system. Integrated with our Velocity access management platform, we are bringing intelligence to physical security and the entire experience as people interact with buildings and other facilities around them.

Sales & Marketing Strategy

Our go-to-market strategy is consistent across our business. We believe our competitive advantage is our technical expertise, technology and know-how which covers both the user side and the programmer/reader/infrastructure side. With this depth of technology across the overall system we develop and prove our best-in-class use cases with our customers.

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Use-case Proliferation: We apply our digital marketing platforms, sales teams and channel partners to proliferate each use case as best-in-class. We target product engineers or other decision makers to build awareness of a proven solution. We drive our marketing message in terms that engineers value because we have established the benefits from comparable use cases. As a company adopts RFID and delivers superior product experiences, we believe that drives faster adoption by others, until a use-case becomes pervasive.

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Trusted advisor: Reducing adoption cost and risk: We have built a reputation as the trusted advisor to our customers by sharing benefits and pitfalls, risks and tradeoffs, as well as ways to mitigate them. We also communicate the risk of inaction, as others come to market with new capabilities. By highlighting risks of inaction, making customers aware of upcoming competitive threats and sharing insights into how they can confidently build competitive capabilities themselves, we believe we become their trusted advisor early in their learning and decision cycle. Then, because we help with the designs, provide devices as well as reader/programmers, and complete solutions or best-of-breed components, we often become a long-term partner, reducing their risks and efforts and improving their competitive advantages. Throughout this process, confidentiality is paramount. A capability developed uniquely with and for a customer is not shared with another. That is fundamental to our culture and to our business practices.

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Industry Leader and Facilitator: As we develop general use-case capabilities and insights, we share and leverage those cross-industry, adding value and building our competitive advantage. Specific differentiation established with a customer is protected. With this key guideline, we optimize our value across each use case, to each individual customer, and to the industry overall.

Research and Development

In RFID, we are a leader in a wide range of chip use cases, antenna designs across HF, UHF and LF (low frequency) as well as sensors, materials and form factors. We encompass both sides of the underlying technology platforms, the devices themselves as well as the programmers, testers, configurators and readers. We believe this provides credibility with customers, demonstrating an understanding of all components of the devices, because our devices are programming, configuring, testing and validating them at the time of production, as well as in use among customers. Similarly with our physical security IoT platforms, we encompass the total solution. We believe our technology and products span a far greater range of the platform solution than most of our competitors, encompassing readers, controllers, video, cards and software across local, cloud, mobile, and hybrid modes.

Our research and development (“R&D”) investment is highly leveraged because we optimally access expertise wherever we believe it is most advanced and most efficient. We maintain RFID R&D in Germany, in the region where the initial NFC and smart card technologies developed, and in Singapore/Southeast Asia, where the most advanced and flexible RFID production is centered. We also deploy Premises software and systems teams in India, Vietnam, Mexico and the U.S.

Proprietary Technology and Intellectual Property

We currently rely on a combination of patent, copyright and trademark laws, trade secrets, confidentiality agreements and contractual provisions to protect our proprietary rights. Although we may seek to protect our proprietary technology through patents, it is possible that no new patents will be issued, that our proprietary products or technologies are not patentable, and that any issued patent will fail to provide us with any competitive advantages. The core of our proprietary technology is the combination of our advanced technical expertise combined with our intimate customer knowledge, enabling us to develop bring to market and sometimes patent products uniquely positioned to deliver benefits to customers. We have a portfolio of approximately 36 patent families (designs, patents, utility models, patents pending and exclusive licenses) in individual or regional filings, covering products, electrical and mechanical designs, software systems and methods and manufacturing process ideas for our various businesses. Additionally, we leverage our own ASIC designs for smart card interface in some of our reader devices. Our issued patents expire between 2024 and 2033.

Manufacturing and Sources of Supply

We utilize a combination of our own manufacturing facilities and the services of contract manufacturers in various countries around the world to manufacture our products and components. Our RFID devices are predominantly manufactured and assembled by our own internal manufacturing teams in Singapore and Thailand primarily using locally sourced components and are certified to the ISO 9001:2015 and ISO 14001:2015 quality manufacturing standard. Our premises sensors readers, controllers and software are manufactured primarily in California. Our video appliances are manufactured primarily in Wisconsin and Arizona. The majority of our smart card reader products and components are manufactured in Singapore, Cambodia and South Korea. We have implemented formal quality control programs to satisfy customer requirements for high quality and reliable products. To ensure that products manufactured by third parties are consistent with internal standards, our quality control programs include management of all key aspects of the production process, including establishing product specifications, selecting the components to be used to produce products, selecting the suppliers of these components and negotiating the prices for certain of these components. In addition, we may work with suppliers to improve process control and product design.

For the majority of our product manufacturing, we utilize a global sourcing strategy that serves all business solution areas within the company, which allows us to achieve economies of scale and uniform quality standards for our products. On an ongoing basis, we analyze the need to add alternative sources for both our products and components. For example, we currently utilize the foundry services of external suppliers to produce our ASICs for smart cards readers and RFID devices, and we use chips and antenna components from third-party suppliers. Wherever possible, we have qualified additional sources of supply for components.

Government Regulation

Our business is subject to government regulation as discussed under "Risk Factors".

Human Capital

Our key human capital management objectives are to attract, retain and develop the highest quality talent. To support these objectives, our human resources program is designed to develop talent to prepare them for critical roles and leadership positions for the future; reward and support employees through competitive pay and benefits; enhance our culture through efforts aimed at making the workplace more engaging and inclusive; acquire talent and facilitate internal talent mobility to create a high-performing and diverse workforce. As of December 31, 2023, we had 394 employees, of which 78 were in research and development, 93 were in sales and marketing, 181 were in manufacturing and 42 were in general and administrative. We are not subject to any collective bargaining agreements and, to our knowledge, none of our employees are currently represented by a labor union. To date, we have experienced no work stoppages and believe that our employee relations are generally good.

Corporate Information

Our corporate headquarters are located in Fremont, California. We maintain research and development facilities in California, India, Germany, manufacturing facilities in Singapore and Thailand, and local operations and sales facilities in Germany, the United Kingdom, Hong Kong, Japan, Canada, and the United States. We were founded in 1990 in Munich, Germany and incorporated in 1996 under the laws of the State of Delaware.

Availability of SEC Filings

We make available through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments to those reports free of charge as soon as reasonably practicable after we electronically file such reports with the Securities and Exchange Commission (“SEC”). Our Internet address is www.identiv.com. The content on our website is not, nor should it be deemed to be, incorporated by reference into this Annual Report. Our filings with the SEC are also available to the public through the SEC’s website at www.sec.gov.