Identiv(INVE) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section details unaudited financial statements, management's discussion, and related disclosures Item 1. Financial Statements (Unaudited) This section presents Identiv, Inc.'s unaudited condensed consolidated financial statements for the period ended June 30, 2025, including balance sheets, statements of comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, discontinued operations, revenue recognition, fair value measurements, balance sheet components, income taxes, stockholders' equity, stock-based compensation, net loss per common share, segment reporting, restructuring, leases, and commitments Condensed Consolidated Balance Sheets The company's total assets decreased by approximately $9.3 million from December 31, 2024, to June 30, 2025, primarily driven by a reduction in cash and cash equivalents, accounts receivable, and inventories Condensed Consolidated Balance Sheets | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $129,339 | $135,646 | $(6,307) | -4.65% | | Accounts receivable, net | $3,466 | $4,214 | $(748) | -17.75% | | Inventories | $6,133 | $7,475 | $(1,342) | -17.95% | | Total current assets | $144,112 | $152,845 | $(8,733) | -5.71% | | Total assets | $153,876 | $163,225 | $(9,349) | -5.73% | | Total current liabilities | $6,642 | $7,960 | $(1,318) | -16.56% | | Total liabilities | $7,461 | $9,156 | $(1,695) | -18.51% | | Total stockholders' equity | $146,415 | $154,069 | $(7,654) | -4.97% | Condensed Consolidated Statements of Comprehensive Loss Identiv reported a net loss of $6.042 million for the three months ended June 30, 2025, and $10.831 million for the six months ended June 30, 2025, representing a decrease in net loss compared to the prior year's three-month period but an increase for the six-month period, primarily due to a significant decline in net revenue and a shift from gross profit to gross loss, partially offset by reduced operating expenses and increased interest income Key Financial Highlights (Continuing Operations) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Net revenue | $5,040 | $6,741 | -25.23% | $10,309 | $13,399 | -23.06% | | Gross profit (loss) | $(474) | $614 | -177.20% | $(342) | $1,097 | -131.18% | | Operating expenses | $5,913 | $7,334 | -19.38% | $11,513 | $12,880 | -10.61% | | Loss from continuing operations | $(6,387) | $(6,720) | -4.96% | $(11,855) | $(11,783) | 0.61% | | Net loss | $(6,042) | $(6,216) | -2.79% | $(10,831) | $(10,774) | 0.53% | | Basic & Diluted EPS (Net Loss) | $(0.26) | $(0.27) | -3.70% | $(0.47) | $(0.48) | -2.08% | - Income from discontinued operations, net of tax, was $0 for the three and six months ended June 30, 2025, compared to $707,000 and $1,531,000 respectively in 2024, reflecting the sale of the Physical Security Business in September 2024[12] Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity decreased from $154.069 million at January 1, 2025, to $146.415 million at June 30, 2025, primarily due to the net loss incurred during the period, partially offset by stock-based compensation and unrealized gains from foreign currency translation adjustments Changes in Stockholders' Equity (Six Months Ended June 30, 2025) | Item (in thousands) | Amount | | :------------------ | :----- | | Balance, January 1, 2025 | $154,069 | | Net loss | $(10,831) | | Unrealized gain from foreign currency translation adjustments | $1,828 | | Stock-based compensation | $1,703 | | Shares withheld in payment of taxes | $(354) | | Balance, June 30, 2025 | $146,415 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased significantly to $6.848 million for the six months ended June 30, 2025, compared to $2.294 million in the prior year, mainly due to the net loss and changes in operating assets and liabilities, while cash used in investing activities also increased, and cash used in financing activities decreased due to no borrowings or repayments under the revolving loan facility in 2025 Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity (in thousands) | 2025 | 2024 | | :-------------------------------- | :-------- | :-------- | | Net cash used in operating activities | $(6,848) | $(2,294) | | Net cash used in investing activities | $(553) | $(367) | | Net cash used in financing activities | $(354) | $(2,654) | | Effect of exchange rates | $1,448 | $(68) | | Net decrease in cash | $(6,307) | $(5,383) | | Cash, cash equivalents, and restricted cash at end of period | $129,639 | $19,001 | Notes to Unaudited Condensed Consolidated Financial Statements The notes provide essential context and detail for the unaudited condensed consolidated financial statements, covering accounting policies, the impact of discontinued operations, revenue recognition practices, fair value measurements, specific balance sheet components, income tax considerations, changes in stockholders' equity, stock-based compensation, net loss per common share calculations, segment reporting, restructuring activities, lease obligations, and contractual commitments Note 1. Basis of Presentation The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim information and SEC rules, and include Identiv, Inc. and its wholly-owned subsidiaries, with reclassifications made to 2024 statements for conformity with 2025 presentation, having no impact on net loss, total assets, liabilities, or stockholders' equity, and results for the three and six months ended June 30, 2025, are not indicative of future periods - The company reclassified certain fiscal 2024 condensed consolidated financial statements to conform with the fiscal 2025 presentation, which had no impact on net loss, total assets, total liabilities, or stockholders' equity[21] - The Physical Security Business was sold on September 6, 2024, and its results are classified as discontinued operations for 2024 periods[23] Note 2. Significant Accounting Policies and Recent Accounting Pronouncements No material changes were made to the company's significant accounting policies, and Identiv is evaluating the impact of recently issued FASB ASUs, including ASU 2023-09 (Income Tax Disclosures, effective 2025), ASU 2024-03 (Disaggregation of Income Statement Expenses, effective 2026/2027), and ASU 2025-05 (Credit Losses for Accounts Receivable, effective 2025), none of which are expected to have a material impact on financial position or results of operations upon adoption, though the impact on disclosures is being assessed - No material changes to significant accounting policies were made from the 2024 Annual Report on Form 10-K[24] - The company is evaluating ASU 2023-09 (Income Taxes) effective for fiscal year ending December 31, 2025, for potential impact on financial statement disclosures[26] - The company is evaluating ASU 2024-03 (Disaggregation of Income Statement Expenses) effective for annual periods beginning after December 15, 2026, for potential impact on financial statements and related disclosures[27] - The company is evaluating ASU 2025-05 (Credit Losses for Accounts Receivable and Contract Assets) effective for annual reporting periods beginning after December 15, 2025, for potential impact on financial statements and related disclosures[28] Note 3. Discontinued Operations On September 6, 2024, Identiv completed the sale of its Physical Security Business for approximately $143.9 million in cash, and this business, which represented a significant strategic shift, is reported as discontinued operations for the 2024 periods presented, with the company also entering into a transition services agreement with the buyer, with immaterial fees earned/incurred for the current periods - Identiv completed the sale of its Physical Security Business on September 6, 2024, for approximately $143.9 million in cash[29] - The Physical Security Business results are reported as discontinued operations for the 2024 periods due to its significant strategic impact[31] Financial Results of Discontinued Operations (2024, in thousands) | Metric | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :----------------------------- | | Net revenue | $17,592 | $33,428 | | Gross profit | $7,904 | $15,813 | | Income from operations | $756 | $1,624 | | Income from discontinued operations | $707 | $1,531 | Note 4. Revenue Revenue is recognized when control of products is transferred to customers, typically upon shipment or delivery, and for contracts with multiple performance obligations, the transaction price is allocated based on standalone selling price, with revenue from continuing operations disaggregated by customer shipping location (Americas, Europe and the Middle East, and Asia-Pacific) and recognized at a point-in-time - Revenue is recognized upon transfer of control of products to customers, generally at shipment or delivery[32] - Revenue is disaggregated by customer shipping location: Americas, Europe and the Middle East, and Asia-Pacific[33] Note 5. Fair Value Measurements Identiv measures financial instruments using a fair value hierarchy (Level 1, 2, or 3), with recurring fair value measurements including cash equivalents (money market accounts and treasury bills) classified as Level 1, and non-recurring measurements including privately-held investments, classified as Level 3 due to unobservable inputs and lack of liquidity, which are reviewed for impairment - Cash equivalents (money market accounts and treasury bills) are measured at fair value on a recurring basis and classified as Level 1[35] - Privately-held investments are measured at fair value on a non-recurring basis if impairment is indicated and are classified as Level 3 due to unobservable inputs[36] Cash Equivalents Measured at Fair Value (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Money market accounts | $16,300 | $31,600 | | Treasury bills | $110,700 | $83,000 | Note 6. Balance Sheet Components This note details the composition of inventories, property and equipment, and other accrued expenses and liabilities, with inventories decreasing from $7.475 million to $6.133 million, primarily in raw materials and finished goods, property and equipment, net, seeing a slight decrease, while other accrued expenses and liabilities also declined, notably due to the absence of purchase price adjustment amounts Inventories (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------- | :------------ | :---------------- | | Raw materials | $3,162 | $3,893 | | Work-in-progress | $55 | $0 | | Finished goods | $2,916 | $3,582 | | Total | $6,133 | $7,475 | Property and Equipment, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------- | :------------ | :---------------- | | Total | $19,465 | $20,227 | | Accumulated depreciation | $(11,939) | $(12,533) | | Property and equipment, net | $7,526 | $7,694 | Other Accrued Expenses and Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------- | :------------ | :---------------- | | Accrued professional fees | $516 | $526 | | Accrued warranties | $324 | $214 | | Amounts payable under Transition Services Agreement | $297 | $354 | | Amounts payable related to purchase price adjustment | $0 | $474 | | Other accrued expenses | $786 | $759 | | Total | $1,923 | $2,327 | Note 7. Income Taxes Identiv applies ASC 740 for income taxes and uncertain tax positions, and the company is generally not subject to tax examinations for years prior to 2020, though older years may be investigated if loss carryforwards are utilized, and the company does not expect a material change in unrecognized tax benefits within the next 12 months, with the recently signed 'One Big Beautiful Bill Act' (H.R. 1) being analyzed for tax impacts, but no material effect is anticipated - The company generally is no longer subject to tax examinations for years prior to 2020[44] - The 'One Big Beautiful Bill Act' (H.R. 1), signed on July 4, 2025, will be accounted for in Q3 2025, with no material impact expected on financial statements[45][46] Note 8. Stockholders' Equity This note details Series B convertible preferred stock, which accrues a cumulative annual dividend of 5% (first six years) then 3% (thereafter), convertible into common stock, and the company also has a stock repurchase program authorized for up to $10 million, under which 463,779 shares totaling $1.9 million have been repurchased as of June 30, 2025, with no repurchases occurring under this program during the six months ended June 30, 2025, but 105,862 shares were repurchased to satisfy tax withholding for RSU vesting Series B Convertible Preferred Stock and Dividend Accretion (in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------------------- | :------------ | :------------ | | Balance at end of period (Preferred Stock) | $27,882 | $27,070 | | Number of Common Shares Issuable Upon Conversion (at end of period) | 6,971 | 6,767 | - The Series B convertible preferred stock has a cumulative annual dividend of 5% for the first six years and 3% thereafter, payable in kind upon conversion[48] - As of June 30, 2025, the company repurchased 463,779 shares of common stock for approximately $1.9 million under its $10 million Stock Repurchase Program, with no repurchases under this program during the first six months of 2025[50] - During the six months ended June 30, 2025, 105,862 shares of common stock were repurchased to satisfy tax withholding obligations related to RSU vesting[51] Note 9. Stock-Based Compensation This note details stock option, restricted stock unit (RSU), and performance stock unit (PSU) activity, with no unrecognized compensation expense for stock options as of June 30, 2025, while for RSUs, $3.0 million of unrecognized expense remains, to be recognized over 2.06 years, and for PSUs, $890,000 of unrecognized expense remains, to be recognized over 0.5 years, with total stock-based compensation expense for continuing operations being $907,000 and $1.703 million for the three and six months ended June 30, 2025, respectively Stock-Based Compensation Expense (Continuing Operations, in thousands) | Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Cost of revenue | $5 | $5 | $10 | $12 | | Research and development | $32 | $43 | $52 | $77 | | Selling and marketing | $77 | $443 | $136 | $561 | | General and administrative | $793 | $494 | $1,505 | $854 | | Total | $907 | $985 | $1,703 | $1,504 | - As of June 30, 2025, there was $3.0 million of unrecognized compensation expense related to unvested RSUs, expected to be recognized over a weighted average period of 2.06 years[54] - As of June 30, 2025, there was $890,000 of unrecognized compensation expense related to unvested PSUs, expected to be recognized over a period of 0.5 years[56] Note 10. Net Loss per Common Share Basic and diluted net loss per common share from continuing operations was $(0.26) for the three months and $(0.47) for the six months ended June 30, 2025, with dilutive potential common shares, including RSUs, PSUs, stock options, and convertible preferred stock, excluded from the computation as their effect would be anti-dilutive due to the net loss Net Loss per Common Share (Continuing Operations) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss from continuing operations | $(6,042) | $(6,923) | $(10,831) | $(12,305) | | Net loss available to common stockholders | $(6,247) | $(6,449) | $(11,241) | $(11,255) | | Basic and diluted net loss per common share (Continuing Operations) | $(0.26) | $(0.31) | $(0.47) | $(0.55) | - Approximately 8.4 million common stock equivalents were excluded from diluted net loss per share for the three and six months ended June 30, 2025, as their inclusion would have been anti-dilutive[61] Note 11. Segment Reporting Following the sale of its Physical Security Business in Q3 2024, Identiv now operates as a single reportable segment: the Internet of Things (IoT) Business segment, with the CODM (Chief Executive Officer) assessing performance and allocating resources based on consolidated loss from continuing operations, and geographic net revenue showing a shift in concentration, with Americas revenue decreasing significantly while Europe and the Middle East, and Asia-Pacific regions show smaller changes - Identiv now has one reportable segment: the Internet of Things (IoT) Business segment, following the sale of its Physical Security Business[63] Geographic Net Revenue (in thousands) | Region | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :------------------------ | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Americas | $1,833 | $3,386 | -45.85% | $4,071 | $6,344 | -35.83% | | Europe and the Middle East | $1,964 | $2,068 | -5.03% | $3,751 | $4,606 | -18.56% | | Asia-Pacific | $1,243 | $1,287 | -3.39% | $2,487 | $2,449 | 1.55% | | Total | $5,040 | $6,741 | -25.23% | $10,309 | $13,399 | -23.06% | - One customer accounted for 19% of net revenue for the three months ended June 30, 2025, and 18% for the six months ended June 30, 2025[67] Note 12. Restructuring and Severance Restructuring expenses for the three and six months ended June 30, 2025, totaled $420,000 and $680,000, respectively, with these costs primarily including severance and impairment charges for an operating lease right-of-use asset, associated with the shutdown of the Singapore manufacturing facility Restructuring Expenses (in thousands) | Expense Type | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | | :----------- | :--------------------------- | :--------------------------- | | Severance costs | $312 | $334 | | Impairment of operating lease right-of-use asset | $108 | $346 | | Total | $420 | $680 | Note 13. Leases Identiv's leases are primarily operating leases for administrative, R&D, manufacturing, and sales offices globally, with total rent expense being $0.2 million for the three months and $0.4 million for the six months ended June 30, 2025, and the weighted average remaining lease term being 2.2 years, with a weighted average discount rate of 7.7%, and impairment charges of $108,000 and $346,000 recorded for a right-of-use asset at the Singapore manufacturing facility - Total rent expense was $0.2 million for the three months and $0.4 million for the six months ended June 30, 2025[70] - As of June 30, 2025, the weighted average remaining lease term for operating leases was 2.2 years, and the weighted average discount rate was 7.7%[72] - Impairment charges of $108,000 and $346,000 were recorded for an operating lease right-of-use asset at the Singapore manufacturing facility during the three and six months ended June 30, 2025, respectively[73] Note 14. Commitments and Contingencies Identiv's contractual commitments as of June 30, 2025, total $2.454 million, with the majority ($2.445 million) due in the remaining six months of 2025, primarily for purchase commitments, and the company provides product warranties ranging from 12 to 36 months, with allowances based on historical costs and sales activities, and warranty accruals and expenses have historically been immaterial Contractual Commitments (in thousands) | Year | Purchase Commitments | Other Contractual Commitments | Total | | :------------------------ | :------------------- | :---------------------------- | :---- | | 2025 (remaining six months) | $1,797 | $648 | $2,445 | | 2026 | $0 | $9 | $9 | | Total | $1,797 | $657 | $2,454 | - The company provides warranties on certain product sales for periods ranging from 12 to 36 months, with allowances based on historical costs and sales activities[76] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Identiv's financial condition and results of operations, focusing on the IoT Business segment after the sale of the Physical Security Business, discussing factors affecting performance, detailed results of operations, liquidity, capital resources, and critical accounting estimates, with the company experiencing significant revenue decline and gross loss, attributed to lower RFID transponder sales, production transition costs, and underutilization of facilities, while managing liquidity with existing cash Overview Identiv has transitioned from two segments (Identity and Premises) to a single Internet of Things (IoT) Business segment following the sale of its Physical Security Business on September 6, 2024, with the IoT segment focusing on developing, manufacturing, and supplying specialized RFID IoT solutions for healthcare and other high-value markets, including NFC, HF, DF, UHF, and BLE devices - Identiv now operates as a single reportable segment: the IoT Business segment, after selling its Physical Security Business[80] - The IoT Business segment develops and supplies specialty IoT solutions, including various RFID technologies (NFC, HF, DF, UHF, BLE), for industries like pharmaceutical, medical devices, consumer electronics, and luxury goods[81] Closing of Asset Sale On September 6, 2024, Identiv completed the sale of its Physical Security Business to Hawk Acquisition, Inc. for approximately $143.9 million in cash, and a transition services agreement was also entered into, outlining support for 12 to 18 months, with Identiv continuing as a public company, focusing solely on its IoT Business post-sale - The Physical Security Business was sold on September 6, 2024, for approximately $143.9 million in cash[82] - A transition services agreement was established to provide support to the buyer for 12 to 18 months post-transaction[82] - Following the Asset Sale, Identiv, Inc. continues as a public company, focusing on its IoT Business[83] Factors Affecting Our Performance Identiv's performance is influenced by RFID market adoption, which has been slower than anticipated for certain applications, leading to fluctuations in operating results and lower unit sales of BLE transponder products to a key customer, and the company completed the transition of RFID device production from Singapore to Thailand, aiming to increase gross margins, while competitive pricing pressure and macroeconomic conditions, including tariffs and foreign currency fluctuations, continue to negatively impact operating results and gross margins, and the Asset Sale significantly lowered revenue and gross margin profile, leading to expected continued losses until revenue scales up - Lower unit sales of BLE transponder products to a customer undergoing a technology transition have impacted operating results[84] - RFID market adoption, particularly in regulated industries like healthcare, has taken longer than anticipated[85][86] - Production of RFID devices in Singapore was completed at the end of Q2 2025, with customers requalified in the Thailand facility, expected to increase gross product margins in H2 2025[90][104] - Competitive pricing pressure and the company's strategy to exit low-margin business have negatively impacted operating results[92] - Macroeconomic conditions, including inflation, foreign currency fluctuations, and tariffs (e.g., 19% tariff on imports from Thailand effective July 31), continue to affect costs and pricing[95][149] - The Asset Sale, representing approximately 63% of 2023 revenue, has significantly lowered the gross margin profile and revenue base, leading to expected continued losses[96] Results of Operations Identiv experienced a significant decline in net revenue and a shift to gross loss for both the three and six months ended June 30, 2025, compared to 2024, with operating expenses decreasing, but not enough to offset the revenue and gross profit decline, resulting in a net loss, and non-operating income improved due to higher interest income, while foreign currency losses increased, and income from discontinued operations ceased after the 2024 sale Consolidated Results of Operations (Continuing Operations, in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Net revenue | $5,040 | $6,741 | -25% | $10,309 | $13,399 | -23% | | Gross profit (loss) | $(474) | $614 | -177% | $(342) | $1,097 | -131% | | Gross profit (loss) margin | -9% | 9% | | -3% | 8% | | | Total operating expenses | $5,913 | $7,334 | -19% | $11,513 | $12,880 | -11% | | Loss from continuing operations | $(6,387) | $(6,720) | -5% | $(11,855) | $(11,783) | 1% | | Net loss | $(6,042) | $(6,216) | -3% | $(10,831) | $(10,774) | 1% | Net Revenue Net revenue for the three and six months ended June 30, 2025, decreased by 25% and 23% respectively, compared to the prior year, with this decline primarily driven by lower unit sales of RFID transponder products due to exiting low-margin business and reduced sales to a major customer working through safety stock built in 2024 Net Revenue (in thousands) | Period | 2025 | 2024 | Change | % Change | | :----- | :--- | :--- | :----- | :------- | | 3 Months | $5,040 | $6,741 | $(1,701) | -25.23% | | 6 Months | $10,309 | $13,399 | $(3,090) | -23.06% | - The decrease in net revenue was primarily due to lower unit sales of RFID transponder products as the company exits low-margin business opportunities and reduced sales to its largest customer[101] Gross Profit (Loss) and Gross Margin Identiv reported a gross loss of $474,000 (9% margin) for the three months and $342,000 (3% margin) for the six months ended June 30, 2025, a significant decline from gross profits in 2024, mainly due to incremental costs from the production transition to Thailand, dual manufacturing sites, underutilization of facilities, and a $639,000 obsolete inventory write-down in Singapore, with gross margins expected to increase in H2 2025 with the elimination of fixed costs from the Singapore facility Gross Profit (Loss) and Margin (in thousands) | Period | Gross Profit (Loss) 2025 | Gross Profit 2024 | % Change | Gross Margin 2025 | Gross Margin 2024 | | :----- | :----------------------- | :---------------- | :------- | :---------------- | :---------------- | | 3 Months | $(474) | $614 | -177% | -9% | 9% | | 6 Months | $(342) | $1,097 | -131% | -3% | 8% | - Decreases in gross profit margins were primarily due to incremental costs from the Thailand production transition, dual manufacturing sites, underutilization of facilities, and a $639,000 obsolete inventory write-down in Singapore[103] - Gross product margins are expected to increase in the second half of 2025 due to the elimination of fixed costs from the Singapore facility[104] Operating Expenses Total operating expenses decreased by 19% for the three months and 11% for the six months ended June 30, 2025, compared to 2024, with this reduction driven by lower R&D, selling and marketing, and general and administrative expenses, partially offset by new restructuring and severance costs related to the Singapore facility shutdown Total Operating Expenses (in thousands) | Period | 2025 | 2024 | Change | % Change | | :----- | :--- | :--- | :----- | :------- | | 3 Months | $5,913 | $7,334 | $(1,421) | -19.38% | | 6 Months | $11,513 | $12,880 | $(1,367) | -10.61% | Research and Development Research and development expenses decreased by 8% for the three months and 10% for the six months ended June 30, 2025, primarily due to lower external services and prototype costs, however, as a percentage of net revenue, R&D increased due to the overall decline in revenue Research and Development Expenses (in thousands) | Period | 2025 | 2024 | % Change | | :----- | :--- | :--- | :------- | | 3 Months | $890 | $966 | -8% | | 6 Months | $1,677 | $1,863 | -10% | - R&D expenses decreased in dollars due to lower external services and prototype costs but increased as a percentage of revenue due to lower revenue levels[108] Selling and Marketing Selling and marketing expenses decreased by 15% for the three months and 1% for the six months ended June 30, 2025, mainly due to lower stock-based compensation, advertising, trade show, and travel costs, and similar to R&D, these expenses increased as a percentage of net revenue due to the revenue decline Selling and Marketing Expenses (in thousands) | Period | 2025 | 2024 | % Change | | :----- | :--- | :--- | :------- | | 3 Months | $1,546 | $1,828 | -15% | | 6 Months | $2,953 | $2,997 | -1% | - Selling and marketing expenses decreased in dollars due to lower stock-based compensation, advertising, trade show, and travel costs, but increased as a percentage of revenue[110] General and Administrative General and administrative expenses decreased by 33% for the three months and 23% for the six months ended June 30, 2025, with the three-month decrease primarily due to the non-recurrence of $1.6 million in strategic review-related costs from 2024, and the six-month decrease also due to $2.6 million in strategic review costs in 2024, partially offset by higher stock-based compensation in 2025 General and Administrative Expenses (in thousands) | Period | 2025 | 2024 | % Change | | :----- | :--- | :--- | :------- | | 3 Months | $3,057 | $4,540 | -33% | | 6 Months | $6,203 | $8,020 | -23% | - The decrease in G&A expenses was primarily due to the non-recurrence of strategic review-related costs from the Asset Sale in 2024 ($1.6 million for Q2, $2.6 million for H1)[112] Restructuring and Severance Restructuring and severance expenses were $420,000 for the three months and $680,000 for the six months ended June 30, 2025, representing a 100% increase from 2024 (where there were no such costs), with these costs associated with severance and impairment of an operating lease right-of-use asset due to the shutdown of the Singapore manufacturing facility Restructuring and Severance Expenses (in thousands) | Expense Type | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | | :----------- | :--------------------------- | :--------------------------- | | Severance costs | $312 | $334 | | Impairment of operating lease right-of-use asset | $108 | $346 | | Total | $420 | $680 | - Restructuring expenses in 2025 primarily consist of severance costs and impairments of an operating lease right-of-use asset related to the shutdown of the Singapore manufacturing facility[113] Non-operating Income (Expense) Non-operating income significantly improved for the three and six months ended June 30, 2025, primarily due to a substantial increase in net interest income from money market accounts and treasury bills, however, foreign currency losses also increased significantly, mainly due to exchange rate movements between the U.S. Dollar, Euro, and Thai Baht Non-operating Income (Expense) (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :------------------------ | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Interest income (expense), net | $1,320 | $(149) | N.M. | $2,532 | $(236) | N.M. | | Foreign currency losses, net | $(870) | $(59) | N.M. | $(1,400) | $(285) | 391% | - The increase in net interest income was primarily due to interest earned on money market accounts and treasury bills[116] - Foreign currency losses increased significantly due to exchange rate movements between the U.S. Dollar, Euro, and Thai Baht[117] Income Tax Provision Identiv recorded an income tax provision for the three and six months ended June 30, 2025, primarily due to withholding taxes on interest income from a foreign subsidiary, with the effective tax rates differing from the federal statutory rate of 21% mainly due to a full valuation allowance against net U.S. and foreign deferred tax assets and provisions in certain foreign jurisdictions with higher tax rates Income Tax Benefit (Provision) (in thousands) | Period | 2025 | 2024 | % Change | | :----- | :--- | :--- | :------- | | 3 Months | $(105) | $5 | N.M. | | 6 Months | $(108) | $(1) | N.M. | - A full valuation allowance is provided against all net U.S. and foreign deferred tax assets due to historical operating losses and difficulty in forecasting future results[118] - The income tax provision is primarily associated with withholding taxes on interest income earned at a foreign subsidiary[119] Income from Discontinued Operations, net of tax There was no income from discontinued operations for the three and six months ended June 30, 2025, compared to $707,000 and $1,531,000 respectively in 2024, reflecting the completion of the Physical Security Business sale in September 2024 Income from Discontinued Operations, net of tax (in thousands) | Period | 2025 | 2024 | % Change | | :----- | :--- | :--- | :------- | | 3 Months | $0 | $707 | -100% | | 6 Months | $0 | $1,531 | -100% | - The absence of income from discontinued operations in 2025 is a direct result of the sale of the Physical Security Business in September 2024[120] Liquidity and Capital Resources As of June 30, 2025, Identiv's working capital was $137.5 million, a decrease of $7.4 million from December 31, 2024, with cash and cash equivalents at $129.3 million, and the company believes existing cash and cash generated from operations will be sufficient for the next twelve months and beyond, despite historical operating losses and negative cash flows, and Identiv has a stock repurchase program of up to $10 million, under which $1.9 million has been repurchased as of June 30, 2025, with no activity in the first half of 2025 Liquidity Metrics (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Working capital | $137,470 | $144,885 | | Cash and cash equivalents | $129,339 | $135,646 | - The company believes its existing cash and cash equivalents, along with cash from operations, will be sufficient to fund operations for the next twelve months and beyond[125] - As of June 30, 2025, $1.9 million has been repurchased under the $10 million Stock Repurchase Program, with no repurchases during the three and six months ended June 30, 2025[122] - Cash used in operating activities for the six months ended June 30, 2025, was $6.8 million, primarily due to a net loss of $10.8 million[127] Contractual Obligations Identiv's contractual obligations include operating lease agreements and purchase commitments for inventories, with purchase commitments highly dependent on customer demand and potentially leading to cancellation charges, and the company is unable to reliably estimate the timing of payments for gross unrecognized tax benefits and related interest and penalties - Contractual obligations include operating lease agreements and purchase commitments for inventories[132][133] - The company cannot reliably estimate the timing of payments for gross unrecognized tax benefits and related interest and penalties[134] Off-Balance Sheet Arrangements Identiv has not entered into any off-balance sheet arrangements or issued guarantees to third parties - The company has not entered into off-balance sheet arrangements or issued guarantees to third parties[135] Climate Change Identiv believes that neither climate change nor related governmental regulations have had a material effect on its business, financial condition, or results of operations - Climate change and related governmental regulations have not had a material effect on the company's business, financial condition, or results of operations[136] Critical Accounting Estimates Identiv's critical accounting estimates, which involve significant judgments and assumptions, relate to revenue recognition, inventory, income taxes, long-lived assets, and stock-based compensation, and management believes there have been no significant changes to these critical accounting policies and estimates during the three months ended June 30, 2025 - Critical accounting estimates include revenue recognition, inventory, income taxes, long-lived assets, and stock-based compensation[137] - No significant changes to critical accounting policies and estimates were made during the three months ended June 30, 2025[138] Recent Accounting Pronouncements Refer to Note 2, 'Significant Accounting Policies and Recent Accounting Pronouncements,' for a description of recent accounting pronouncements and their potential impact on the company's financial statements - Refer to Note 2 for details on recent accounting pronouncements[139] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is marked as 'Not applicable,' indicating that Identiv does not have material quantitative and qualitative disclosures about market risk for the reporting period - This item is not applicable for the current reporting period[140] Item 4. Controls and Procedures Identiv's management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025, and no material changes were made to internal control over financial reporting during the three months ended June 30, 2025 Evaluation of Disclosure Controls and Procedures Identiv's CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025, with these controls designed to ensure timely and accurate reporting of information required under the Exchange Act - The CEO and CFO concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[143] Changes in Internal Controls over Financial Reporting No changes to Identiv's internal control over financial reporting occurred during the three months ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting - No material changes were made to internal control over financial reporting during the three months ended June 30, 2025[144] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings Identiv is, and may become, subject to various legal proceedings and claims in the ordinary course of business, and the outcome of such proceedings cannot be predicted with certainty and could materially affect the company's financial condition, results of operations, or cash flows - The company is subject to various legal proceedings and claims, the outcome of which is uncertain and could have a material effect on financial results[146] Item 1A. Risk Factors Identiv's business faces numerous risks, including those detailed in its 2024 Annual Report on Form 10-K, and a new material risk factor is the impact of changes in U.S. trade policy and tariffs, specifically a 19% tariff on imports from Thailand effective July 31, 2025, which could increase costs, reduce demand, and negatively affect revenue and gross margin, despite efforts to mitigate these impacts - No material changes to risk factors from the 2024 Annual Report on Form 10-K, except for the impact of U.S. trade policy and tariffs[147] - Approximately 25% of the company's business is exposed to U.S. tariffs due to manufacturing in Thailand, with a 19% tariff on imports from Thailand announced effective July 31, 2025[149] - Tariffs could increase costs, and there is no assurance that mitigation efforts (e.g., pass-through strategy, supply chain optimization) will successfully offset these costs or prevent negative impacts on revenue and gross margin[149] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended June 30, 2025, Identiv repurchased 58,324 shares of its common stock at an average price of $3.19 per share, with these repurchases solely to satisfy tax withholding obligations related to the vesting of Restricted Stock Units (RSUs) issued to employees, and no repurchases made under the Stock Repurchase Program during this period Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025) | Period | Total number of shares purchased | Average price paid per share | | :-------------------------- | :------------------------------- | :--------------------------- | | April 1, 2025 – April 30, 2025 | 44,878 | $3.16 | | May 1, 2025 – May 31, 2025 | 798 | $3.34 | | June 1, 2025 – June 30, 2025 | 12,648 | $3.27 | | Total | 58,324 | $3.19 | - Shares were repurchased to satisfy tax withholding obligations in connection with the vesting of RSUs, not under the Stock Repurchase Program[152][153] Item 5. Other Information During the quarter ended June 30, 2025, no director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" - No director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[154] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Restated Certificate of Incorporation, Amended and Restated Bylaws, CEO and CFO certifications (pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act), and Inline XBRL documents - Exhibits include corporate governance documents (Restated Certificate of Incorporation, Amended and Restated Bylaws) and certifications from the CEO and CFO[156] - Certifications under 18 U.S.C. Section 1350 (Sarbanes-Oxley Act Section 906) are furnished, not filed, and not incorporated by reference into other filings unless specifically stated[157] SIGNATURES The report is duly signed on August 8, 2025, by Kirsten Newquist, Chief Executive Officer (Principal Executive Officer), and Ed Kirnbauer, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer), certifying its submission pursuant to the Securities Exchange Act of 1934 - The report was signed by Kirsten Newquist, CEO, and Ed Kirnbauer, CFO, on August 8, 2025[163]