Identiv(INVE) - 2024 Q4 - Annual Report

PART I Business Identiv operates as a single IoT Business segment, focusing on RFID and BLE devices, with a strategy to grow in healthcare and high-value markets - The company's vision is to create digital identities for everyday products through specialty RFID and IoT solutions, having integrated its devices into over 1.5 billion applications globally[16] - Identiv's growth strategy, "Perform, Accelerate, Transform," focuses on optimizing its core channel business, accelerating growth in healthcare and high-value segments, and pursuing inorganic growth opportunities[23][24][25] - The company is expanding its BLE/multi-component technology platform and establishing a dedicated business development team to target specific high-value applications in healthcare and other industries[28][32] - As of December 31, 2024, the company had 166 employees, with the majority (106) in manufacturing, primarily located in Thailand and Singapore[35][39] Risk Factors The company faces significant risks including intense competition, customer concentration, supply chain disruptions, and macroeconomic volatility, following the Physical Security Business sale - The sale of the Physical Security Business on September 6, 2024, which accounted for a significant portion of historical revenue, creates uncertainty regarding the use of proceeds and future operations[45][48] - The company is highly dependent on a few significant customers; in 2024, the top ten customers accounted for 51% of total net revenue, with one customer representing 11%, and in 2023, one customer accounted for 32% of net revenue[59] - The business is vulnerable to supply chain disruptions due to reliance on a limited number of suppliers and contract manufacturers for key components, such as semiconductors[57][70] - Adverse global macroeconomic conditions, including inflation and economic slowdowns, have led to delays and reductions in customer orders and increased material and shipping costs[55] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[89] Cybersecurity Identiv maintains a comprehensive cybersecurity risk management strategy, overseen by the board, with no material incidents reported to date - The company has integrated processes for assessing, identifying, and managing material cybersecurity risks into its overall risk management framework[91] - Oversight is provided by the board of directors and its audit committee, with daily management by the Global Director of IT, CEO, and CFO[96][97] - As of the report date, the company has not experienced a cybersecurity threat or incident that resulted in a material adverse impact to its business, operations, or financial condition[95] Properties The company's corporate headquarters are in Santa Ana, California, with major leased facilities in Germany, Thailand, and Singapore Properties Overview | Location | Function | Square Feet | Lease Expiration | | :--- | :--- | :--- | :--- | | Santa Ana, California | Corporate headquarters; administration; research and development; sales | 5,000 | January 2028 | | Sauerlach, Germany | European operations; research and development; sales | 5,156 | April 2026 | | Ayutthaya, Thailand | RFID/NFC product manufacturing; research and development | 41,441 | March 2028 | | Singapore | RFID/NFC product manufacturing; research and development | 27,545 | August 2026 | Legal Proceedings As of December 31, 2024, Identiv is not a party to any material legal proceedings - The company is not a party to any material legal proceedings as of December 31, 2024[100] Mine Safety Disclosures This item is not applicable to the company - Not applicable[102] Information About Our Executive Officers Key executive officers include CEO Kirsten Newquist (since Sept 2024) and CFO Justin Scarpulla (since Dec 2021), with extensive industry experience - Kirsten Newquist, age 58, became CEO in September 2024, having previously held various leadership roles at Avery Dennison Corporation[103] - Justin Scarpulla, age 51, has been the CFO since December 2021, with prior experience including roles at Space Exploration Technologies Corp. (SpaceX), Vizio, Inc., and MaxLinear, Inc[104] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Identiv's common stock trades on Nasdaq, with a $10 million stock repurchase program authorized in November 2024, and no history or intent to pay cash dividends - The company's board authorized a $10 million stock repurchase program effective November 15, 2024[108] Stock Repurchase Program Activity (in thousands, except average price) | Period | Total Shares Purchased (Publicly Announced Program) | Average Price Paid | Remaining Value of Program | | :--- | :--- | :--- | :--- | | Nov 2024 | 199,500 | $3.91 | $9,220,684 | | Dec 2024 | 264,279 | $4.13 | $8,130,420 | | Q4 Total | 463,779 | $4.03 | | - The company has never declared or paid cash dividends and intends to retain future earnings[108] Reserved This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations Identiv's 2024 financial results show a 39% revenue decrease in continuing operations, offset by a $103.5 million asset sale gain, leading to $74.8 million net income - On September 6, 2024, the company completed the sale of its Physical Security Business for approximately $143.9 million in cash, and now operates as a single reportable segment: the IoT Business[112][114] Key Financial Metrics (in thousands, except percentages) | Metric | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Net revenue | $26,628 | $43,445 | (39%) | | Gross profit | $340 | $6,010 | (94%) | | Gross profit margin | 1% | 14% | - | | Loss from continuing operations | ($27,961) | ($13,505) | 107% | | Net income (loss) | $74,820 | ($5,489) | - | - The 39% decrease in net revenue was primarily due to substantially lower unit sales of RFID transponder products to one customer undergoing a technology transition[134] - General and administrative expenses increased 94% in 2024, primarily due to $6.2 million in professional services fees associated with strategic review-related activities[145] - Cash and cash equivalents increased to $135.6 million as of December 31, 2024, largely due to the proceeds from the asset sale[157] Financial Statements and Supplementary Data Audited consolidated financial statements are presented, with an unqualified opinion from BPM LLP and Inventory Valuation identified as a critical audit matter - The independent auditor, BPM LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting[196][197] - The auditor identified Inventory Valuation, specifically adjustments for excess or obsolete inventories, as a critical audit matter due to the significant management judgment involved in forecasting product demand[201][202] - The financial statements classify the results of the sold Physical Security Business as discontinued operations, with a reported gain on sale of $103.5 million, net of taxes, for 2024[217][251] Consolidated Financial Statements Consolidated financial statements show significant increases in cash and assets, and a decrease in liabilities, with 2024 net income of $74.8 million driven by the asset sale Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $135,646 | $23,312 | | Total current assets | $152,845 | $79,486 | | Total assets | $163,225 | $109,723 | | Total current liabilities | $7,960 | $30,782 | | Total liabilities | $9,156 | $35,451 | | Total stockholders' equity | $154,069 | $74,272 | Consolidated Income Statement Data (in thousands) | | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | Net revenue | $26,628 | $43,445 | | Gross profit | $340 | $6,010 | | Net loss from continuing operations | ($25,911) | ($13,875) | | Income from discontinued operations, net of tax | $100,731 | $8,386 | | Net income (loss) | $74,820 | ($5,489) | Notes to Consolidated Financial Statements Notes provide detailed disclosures on accounting policies, discontinued operations, revenue, segment reporting, and equity - Note 3 details the sale of the Physical Security Business for cash proceeds of $144.3 million, resulting in a gain on sale of $103.5 million, net of taxes[248][251] - Note 12 confirms that after the sale of the Physical Security Business, the company has only one reportable segment: the IoT Business segment[311] - Note 9 discloses that as of December 31, 2024, the outstanding Series B convertible preferred stock, including accrued dividends, is convertible into 6,867,990 shares of common stock[289][291] - Note 10 shows total stock-based compensation expense was $8.7 million in 2024, of which $5.3 million was related to discontinued operations, largely due to accelerated vesting of RSUs for employees transferring with the sold business[301][304] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This item is not applicable - Not applicable[324] Controls and Procedures Management and auditors concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2024, with an unqualified opinion from BPM LLP - Management concluded that as of December 31, 2024, the company's disclosure controls and procedures were effective at a reasonable assurance level[326] - Based on an assessment using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2024[331] - No changes were made to internal control over financial reporting during the fourth quarter of 2024 that have materially affected, or are reasonably likely to materially affect, these controls[332] Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during Q4 2024 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the fiscal quarter ended December 31, 2024[342] Disclosure Regarding Foreign Jurisdiction that Prevent Inspections This item is not applicable - Not applicable[343] PART III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement - The information required by this item concerning directors, executive officers, and corporate governance will be set forth in the company's upcoming Proxy Statement and is incorporated herein by reference[346] Executive Compensation Executive compensation information is incorporated by reference from the 2025 Proxy Statement - The information required by this item will be contained in the Proxy Statement under the captions "Compensation of Directors" and "Executive Compensation" and is incorporated herein by reference[348] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership and related stockholder matters are incorporated by reference from the 2025 Proxy Statement - The information required by this item will be set forth in the Proxy Statement under the captions "Security Ownership of Certain Beneficial Owners and Management" and "Equity Compensation Plan Information" and is incorporated herein by reference[349] Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the 2025 Proxy Statement - The information required by this item will be set forth in the Proxy Statement under the captions "Certain Relationships and Related Transactions" and "Director Independence" and is incorporated herein by reference[350] Principal Accountant Fees and Services Principal accountant fees and services information is incorporated by reference from the 2025 Proxy Statement - The information required by this item will be set forth in the Proxy Statement under the captions "Principal Accountant Fees and Services" and is incorporated herein by reference[351] PART IV Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and various exhibits filed as part of the Form 10-K report - This item lists all financial statements, schedules, and exhibits filed with the Annual Report on Form 10-K[353] Form 10-K Summary This item is not applicable - Not applicable[358]