Identiv, Inc.

Previous wording

This Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other parts of this Quarterly Report on Form 10-Q (“Quarterly Report”) contain forward-looking statements, within the meaning of the safe harbor provisions under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. Forward-looking statements reflect current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “will,” “believe,” “could,” “should,” “would,” “may,” “anticipate,” “intend,” “plan,” “estimate,” “expect,” “project” or the negative of these terms or other similar expressions. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part II, Item 1A of this Quarterly Report and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024 under the heading “Risk Factors,” The following discussion should be read in conjunction with the audited consolidated financial statements and notes thereto included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2024. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Current wording

This Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other parts of this Quarterly Report on Form 10-Q (“Quarterly Report”) contain forward-looking statements, within the meaning of the safe harbor provisions under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. Forward-looking statements reflect current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “will,” “believe,” “could,” “should,” “would,” “may,” “anticipate,” “intend,” “plan,” “estimate,” “expect,” “project” or the negative of these terms or other similar expressions. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part II, Item 1A of this Quarterly Report, and Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024 under the heading “Risk Factors”. The following discussion should be read in conjunction with the audited consolidated financial statements and notes thereto included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2024. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Previous wording

On September 6, 2024, we completed the sale of our Physical Security Business (as defined below), which historically represented our Premises segment, as well as our access card and identity reader operations, which were historically were part of our Identity segment. As a result, we currently have one reportable segment: the IoT Business segment.

Current wording

On September 6, 2024, we completed the sale of our Physical Security Business (as defined below), which historically represented our Premises segment, as well as our access card and identity reader operations, which were historically part of our Identity segment. As a result, we currently have one reportable segment: the IoT Business segment.

Previous wording

We believe significant improvement in chip capabilities at lower costs has accelerated the opportunities for product engineers to integrate RFID into their products to create new and more engaging customer experiences, reduce counterfeiting, and ensure proper product use and adherence. Though we believe the number of opportunities for RFID-based solutions has increased, the evaluation period and customer adoption originally expected for certain applications has taken longer than we anticipated.

Current wording

We believe significant improvement in chip capabilities at lower costs has accelerated the opportunities for product engineers to integrate RFID into their products to create new and more engaging customer experiences, reduce counterfeiting, and ensure proper product use and adherence. Though we believe the number of opportunities for RFID-based solutions has increased, the evaluation period and customer adoption originally expected for certain applications have taken longer than we anticipated.

Previous wording

We believe the underlying, long-term trend is continued RFID adoption across multiple verticals, but regulated industries like healthcare take longer to optimize the technology and fully understand the benefits. We also believe that expanding use cases fosters adoption across verticals and into other markets.

Current wording

We believe the underlying, long-term trend is continued RFID adoption across multiple verticals, but regulated industries like healthcare take longer to optimize the technology and fully understand the benefits. We also believe that expanding use cases foster adoption across verticals and into other markets.

Previous wording

Given the uncertainties of the specific timing of our new customer deployments, we cannot assure you that we have appropriate inventory and capacity levels or that we will not experience inventory shortfalls or overages in the future or acquire inventory at costs to maintain gross margins. We attempt to mitigate those risks by being deeply embedded in our customers’ design cycles, working with our chip partners on long lead time components, managing our limited capital equipment needs within a short cycle and future proofing our facilities to accommodate several scenarios for growth potential.

Current wording

Given the uncertainties of the specific timing of our new customer deployments, we cannot assure you that we will have appropriate inventory and capacity levels or that we will not experience inventory shortfalls or overages in the future or acquire inventory at costs to maintain gross margins. We attempt to mitigate those risks by being deeply embedded in our customers’ design cycles, working with our chip partners on long lead time components, managing our limited capital equipment needs within a short cycle and future proofing our facilities to accommodate several scenarios for growth potential.

Previous wording

We conduct operations internationally with sales in the Americas, Europe and the Middle East, and Asia-Pacific regions. Our manufacturing operations and third-party contract manufacturers are in China, Singapore, and Thailand. We purchase certain products and key components from a limited number of sources that depend on the supply chain, including freight, to receive components, transport finished goods and deliver our products across the world. In view of the rapidly changing business environment, we have experienced delays and reductions in customer orders, shifting supply chain availability, component shortages, and other production-related challenges. We continue to monitor the global supply chain and its effect on our financial position, results of operations, and cash flows.

Current wording

We conduct operations internationally with sales in the Americas, Europe and the Middle East, and Asia-Pacific regions. Our manufacturing operations and third-party contract manufacturers are in Southeast Asia. We purchase certain products and key components from a limited number of sources that depend on the supply chain, including freight, to receive components, transport finished goods and deliver our products across the world. In view of the rapidly changing business environment, we have experienced delays and reductions in customer orders, shifting supply chain availability, component shortages, and other production-related challenges. We continue to monitor the global supply chain and its effect on our financial position, results of operations, and cash flows.

Previous wording

Our results of operations for the three months ended March 31, 2025 and 2024 are as follows (in thousands, except percentages).

Current wording

Our results of operations for the three and six months ended June 30, 2025 and 2024 are as follows (in thousands, except percentages).

Previous wording

Net revenue was $5.3 million for the three months ended March 31, 2025, a decrease of $1.4 million compared with $6.7 million for the three months ended March 31, 2024. Net revenue in the Americas for three months ended March 31, 2025 decreased 24% compared with the comparable period of 2024. Net revenue in Europe, the Middle East, and the Asia-Pacific for three months ended March 31, 2025 was $3.0 million, a decrease of 18% compared with $3.7 million in the comparable period of 2024. The decrease was primarily due to substantially lower unit sales of RFID transponder products as we exit low margin business opportunities.

Current wording

Net revenue for the three and six months ended June 30, 2025 was $5.0 million and $10.3 million, respectively, and decreased by $1.7 million and $3.1 million, respectively, compared with net revenue of $6.7 million and $13.4 million in the comparable periods of 2024. Net revenue in the Americas for three and six months ended June 30, 2025 decreased 46% and 36%, respectively, compared with the comparable periods of 2024. Net revenue in Europe, the Middle East, and the Asia-Pacific for three and six months ended June 30, 2025 was $3.2 million and $6.2 million, respectively, and decreased 4% and 12%, respectively, compared with $3.4 million and $7.1 million, respectively, in the comparable periods of 2024. The decrease was primarily due to lower unit sales of RFID transponder products as we exit low margin business opportunities, as well as reduced sales to our largest customer, who is working through safety stock they built up in 2024 in anticipation of transitioning production to Thailand.

Previous wording

Gross profit for the three months ended March 31, 2025 was $0.1 million compared with $0.5 million in the comparable period of 2024. Gross profit represents net revenue less direct cost of product sales, manufacturing overhead, other costs directly related to preparing the product for sale including freight, scrap, and inventory adjustments, where applicable.

Current wording

Gross profit (loss) for the three and six months ended June 30, 2025 was a gross loss of $474,000 and $342,000, respectively, compared with gross profit of $614,000 and $1.1 million, respectively, in the comparable periods of 2024. Gross profit represents net revenue less direct cost of product sales, manufacturing overhead, other costs directly related to preparing the product for sale including freight, scrap, and inventory adjustments, where applicable.

Previous wording

Gross profit margin for the three months ended March 31, 2025 decreased to 3% from 7% in the comparable period of 2024. The decrease in gross profit margin was primarily attributable to incremental costs related to the transition of production to our Thailand facility and the dual manufacturing sites required during the transition, combined with underutilization of our manufacturing production facilities due to lower sales. In addition, we recorded a charge to cost of revenue of approximately $0.4 million in the first quarter of 2025, which included the write-down of approximately $0.3 million of obsolete inventory at our Singapore production facility, and a warranty claim from one of our customers of approximately $0.2 million.

Current wording

Gross profit (loss) margin for the three and six months ended June 30, 2025 decreased to gross loss margins of 9% and 3%, respectively, compared with gross profit margins of 9% and 8%, respectively, in the comparable periods of 2024. The decreases in gross profit margins were primarily attributable to incremental costs related to the transition of production to our Thailand facility and the dual manufacturing sites required during the transition, combined with underutilization of our manufacturing production facilities due to lower sales. In addition, we recorded a charge to cost of revenue of approximately $639,000 in the second quarter of 2025 related to the write-down of obsolete inventory at our Singapore production facility.

Previous wording

We expect there will be variation in our gross profit from period to period, as our gross profit has been and will continue to be affected primarily by varying mix among our products. Within each product category, gross margins have tended to be consistent, but over time may be affected by a variety of factors, including, without limitation, competition, product pricing, the volume of sales in any given quarter, manufacturing volumes, product configuration and mix, the availability of new products, product enhancements, risk of inventory write-downs and the cost and availability of components. We expect gross product margins to increase overall after our RFID transponder production is transitioned from Singapore to our Thailand production facility. We anticipate this transition to be complete in the third quarter of 2025.

Current wording

We expect there will be variation in our gross profit from period to period, as our gross profit has been and will continue to be affected primarily by varying mix among our products. Within each product category, gross margins have tended to be consistent, but over time may be affected by a variety of factors, including, without limitation, competition, product pricing, the volume of sales in any given quarter, manufacturing volumes, product configuration and mix, the availability of new products, product enhancements, risk of inventory write-downs and the cost and availability of components. At the end of the second quarter of 2025, we completed production of RFID transponder devices in our manufacturing facility in Singapore. We have requalified our customers in our Thailand production facility. Furthermore, in the fourth quarter of 2025, we expect to complete all shutdown activities associated with our Singapore facility. As a result of the elimination of fixed costs from our Singapore facility, we expect gross product margins to increase overall in the second half of 2025.

Previous wording

Information about our operating expenses for the three months ended March 31, 2025 and 2024 is set forth below (dollars in thousands).

Current wording

Information about our operating expenses for the three and six months ended June 30, 2025 and 2024 is set forth below (dollars in thousands).

Previous wording

Research and development expenses consist primarily of employee compensation and fees for the development of hardware, software and firmware products. We focus the bulk of our research and development activities on the continued development of existing products and the development of new offerings for emerging market opportunities.

Current wording

Research and development expenses consist primarily of employee compensation and fees for the development of hardware, software and firmware products. The majority of our research and development activities focused on the continued development of existing products and the development of new offerings for emerging market opportunities.

Previous wording

Research and development expenses for the three months ended March 31, 2025 decreased compared to the comparable prior year period primarily due to lower subscription fees and external services costs, as well as lower prototype related costs.

Current wording

Research and development expenses for the three and six months ended June 30, 2025 decreased in dollars compared to the comparable prior year periods primarily due to lower external services costs, as well as lower prototype related costs but increased as a percentage of revenue due to lower revenue levels.

Previous wording

General and administrative expenses for the three months ended March 31, 2025 decreased compared to the comparable period in 2024 primarily due to strategic review-related costs associated with the asset sale of $0.9 million incurred in the first quarter of 2024 that did not recur in the first quarter of 2025, partially offset by higher stock-based compensation expense in the first quarter of 2025.

Current wording

General and administrative expenses for the three months ended June 30, 2025 decreased compared to the comparable period in 2024 primarily due to strategic review-related costs incurred in 2024 of $1.6 million related to the Asset Sale in 2024 that did not recur in 2025. The dollar decrease in general and administrative expenses for the six months ended June 30, 2025 compared to the prior year period was due to strategic review-related costs of $2.6 million, partially offset by higher stock-based compensation expense in 2025.

Previous wording

Restructuring expenses for the three months ended March 31, 2025 related primarily to the impairment of an operating lease right-of-use asset associated with vacated production space at our Singapore manufacturing facility, and the remaining restructuring expense related to severance costs.

Current wording

Restructuring expenses for the three and six months ended June 30, 2025 consist of severance costs of $312,000 and $334,000, respectively, and impairments of an operating lease right-of-use asset of $108,000 and $346,000, respectively, primarily associated with shutdown related activities and vacated production space at the Company's Singapore manufacturing facility.

Previous wording

Information about our non-operating income (expense) for the three months ended March 31, 2025 and 2024 is set forth below (dollars in thousands).

Current wording

Information about our non-operating income (expense) for the three and six months ended June 30, 2025 and 2024 is set forth below (dollars in thousands).

Previous wording

Interest income (expense), net consists of interest income generated on our cash equivalents net of interest costs on our financial liabilities and amortization of debt issuance costs. The increase in interest income (expense), net for the three months ended March 31, 2025 compared to the comparable period of 2024 was primarily attributable to interest earned on our money market accounts and treasury bills.

Current wording

Interest income (expense), net consists of interest income generated on our cash equivalents net of interest costs on our financial liabilities and amortization of debt issuance costs. The increase in interest income (expense), net for the three and six months ended June 30, 2025 compared to the comparable period of 2024 was primarily attributable to interest earned on our money market accounts and treasury bills.

Previous wording

We recorded an income tax provision during the three months ended March 31, 2025, respectively, associated with taxable income from one of our foreign subsidiaries. The effective tax rates for the three months ended March 31, 2025 and 2024 differ from the federal statutory rate of 21% primarily due to a change in valuation allowance, and the provision or benefit in certain foreign jurisdictions, which are subject to higher tax rates.

Current wording

We recorded an income tax provision during the three and six months ended June 30, 2025, respectively, associated primarily with withholding taxes on interest income earned on cash equivalents at one of our foreign subsidiaries. The effective tax rates for the three and six months ended June 30, 2025 and 2024 differ from the federal statutory rate of 21% primarily due to a change in valuation allowance, and the provision or benefit in certain foreign jurisdictions, which are subject to higher tax rates.

Previous wording

As of March 31, 2025, our working capital, defined as current assets less current liabilities, was $141.5 million, a decrease of $3.4 million compared to $144.9 million as of December 31, 2024. As of March 31, 2025, our cash and cash equivalents balance was $132.4 million.

Current wording

As of June 30, 2025, our working capital, defined as current assets less current liabilities, was $137.5 million, a decrease of $7.4 million compared to $144.9 million as of December 31, 2024. As of June 30, 2025, our cash and cash equivalents balance was $129.3 million.

Previous wording

On November 7, 2024, we announced that our board of directors authorized a stock repurchase program (the “Stock Repurchase Program”). Under the Stock Repurchase Program, effective November 15, 2024, we may repurchase up to $10 million of shares of common stock on a discretionary basis from time to time through open market repurchases, privately negotiated transactions, or other means. The timing and amount of shares repurchased depends on a number of factors, including stock price, trading volume, general market and business conditions, liquidity and capital needs, and other factors. The Stock Repurchase Program does not obligate us to repurchase any specific dollar amount or acquire any specific number of shares of common stock. The Stock Repurchase Program has no expiration date and may be suspended or discontinued at any time without notice. As of March 31, 2025, we have repurchased a total of 463,779 shares of common stock under the Stock Repurchase Program for total consideration of approximately $1.9 million. During the quarter ended March 31, 2025, there were no repurchases of shares of common stock under the Stock Repurchase Program.

Current wording

On November 7, 2024, we announced that our board of directors authorized a stock repurchase program (the “Stock Repurchase Program”). Under the Stock Repurchase Program, effective November 15, 2024, we may repurchase up to $10 million of shares of common stock on a discretionary basis from time to time through open market repurchases, privately negotiated transactions, or other means. The timing and amount of shares repurchased depends on a number of factors, including stock price, trading volume, general market and business conditions, liquidity and capital needs, and other factors. The Stock Repurchase Program does not obligate us to repurchase any specific dollar amount or acquire any specific number of shares of common stock. The Stock Repurchase Program has no expiration date and may be suspended or discontinued at any time without notice. As of June 30, 2025, we have repurchased a total of 463,779 shares of common stock under the Stock Repurchase Program for total consideration of approximately $1.9 million. During the three and six months ended June 30, 2025, there were no repurchases of shares of common stock under the Stock Repurchase Program.

Previous wording

As our previously unremitted earnings have been subjected to U.S. federal income tax, we expect any repatriation of these earnings to the U.S. would not incur significant additional taxes related to such amounts. However, our estimates are provisional and subject to further analysis. Generally, most of our foreign subsidiaries have accumulated deficits and cash and cash equivalents that are held outside the United States are typically not cash generated from earnings that would be subject to tax upon repatriation if transferred to the United States. We have access to the cash held outside the United States to fund domestic operations and obligations without any material income tax consequences. As of March 31, 2025, the amount of cash included at such subsidiaries was $14.7 million. We have not, nor do we anticipate the need to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.

Current wording

As our previously unremitted earnings have been subjected to U.S. federal income tax, we expect any repatriation of these earnings to the U.S. would not incur significant additional taxes related to such amounts. However, our estimates are provisional and subject to further analysis. Generally, most of our foreign subsidiaries have accumulated deficits and cash and cash equivalents that are held outside the United States are typically not cash generated from earnings that would be subject to tax upon repatriation if transferred to the United States. We have access to the cash held outside the United States to fund domestic operations and obligations without any material income tax consequences. As of June 30, 2025, the amount of cash included at such subsidiaries was $13.7 million. We have not, nor do we anticipate the need to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business.

Previous wording

We have historically incurred operating losses and negative cash flows from operating activities, and we expect to continue to incur losses in the future. As of March 31, 2025, we had an accumulated deficit of $344.8 million. During the three months ended March 31, 2025, we had a loss from continuing operations of $4.8 million.

Current wording

We have historically incurred operating losses and negative cash flows from operating activities, and we expect to continue to incur losses in the future. As of June 30, 2025, we had an accumulated deficit of $350.9 million. During the six months ended June 30, 2025, we had a loss from continuing operations of $10.8 million.

Previous wording

The following summarizes our cash flows for the three months ended March 31, 2025 and 2024 (in thousands):

Current wording

The following summarizes our cash flows for the six months ended June 30, 2025 and 2024 (in thousands):

Previous wording

Cash used in operating activities for the three months ended March 31, 2025 of $3.3 million was primarily due to a net loss of $4.8 million and a decrease in cash from net changes in operating assets and liabilities of $0.2 million; partially offset by adjustments to net loss for certain non-cash items of $1.7 million, consisting of depreciation, amortization, stock-based compensation, and impairment of operating lease ROU asset.

Current wording

Cash used in operating activities for the six months ended June 30, 2025 of $6.8 million was primarily due to a net loss of $10.8 million, partially offset by an increase in cash from net changes in operating assets and liabilities of $647,000 and adjustments to net loss for certain non-cash items of $3.3 million, consisting of depreciation, amortization, stock-based compensation, and impairment of operating lease right-of-use asset.

Previous wording

Cash used in operating activities for the three months ended March 31, 2024 of $1.3 million was primarily due to net loss of $4.6 million, partially offset by an increase in cash from net changes in operating assets and liabilities of $1.4 million and adjustments for certain non-cash items of $1.8 million, consisting primarily of depreciation, amortization and stock-based compensation.

Current wording

Cash used in operating activities for the six months ended June 30, 2024 of $2.3 million was primarily due to net loss of $10.8 million, partially offset by an increase in cash from net changes in operating assets and liabilities of $3.9 million and adjustments for certain non-cash items of $4.6 million, consisting primarily of depreciation, amortization and stock-based compensation.

Previous wording

Cash used in investing activities for the three months ended March 31, 2025 and 2024 was $0.3 million and $0.2 million, respectively, which related to capital expenditures for our manufacturing facilities in Singapore and Thailand.

Current wording

Cash used in investing activities for the six months ended June 30, 2025 and 2024 was $553,000 and $367,000, respectively, which related to capital expenditures for our manufacturing facility in Thailand.

Previous wording

Cash used in financing activities during the three months ended March 31, 2025 was $0.2 million which related to taxes paid related to net share settlements of RSUs.

Current wording

Cash used in financing activities during the six months ended June 30, 2025 was $354,000 which related to taxes paid related to net share settlements of RSUs.

Previous wording

Cash used in financing activities during the three months ended March 31, 2024 was $0.4 million, which consisted of net borrowings of $5.9 million offset by repayments of $6.0 million under our revolving loan facility, and taxes paid related to net share settlements of RSUs of $0.3 million.

Current wording

Cash used in financing activities during the six months ended June 30, 2024 was $2.7 million, which consisted of net borrowings of $9.9 million offset by repayments of $12.0 million under our revolving loan facility, and taxes paid related to net share settlements of RSUs of $541,000.