Identiv(INVE) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for the period ended September 30, 2022, show an increase in total assets to $101.4 million, a net loss of $0.7 million for the nine months ended, and negative cash flow from operations of $3.0 million Condensed Consolidated Balance Sheets | Balance Sheet Items (in thousands) | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $21,202 | $28,553 | | Accounts receivable, net | $23,588 | $19,963 | | Inventories | $25,060 | $19,924 | | Total current assets | $74,456 | $72,726 | | Total assets | $101,400 | $96,663 | | Accounts payable | $15,074 | $10,502 | | Total current liabilities | $23,757 | $20,848 | | Total liabilities | $27,440 | $22,151 | | Total stockholders' equity | $73,960 | $74,512 | - Total assets increased to $101.4 million as of September 30, 2022, from $96.7 million at year-end 2021, driven by increases in inventories and accounts receivable[10] - Total liabilities also grew to $27.4 million from $22.2 million, primarily due to higher accounts payable[10] Condensed Consolidated Statements of Comprehensive Income (Loss) | Income Statement (in thousands) | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $30,996 | $29,097 | $83,914 | $75,252 | | Gross profit | $11,188 | $11,118 | $30,364 | $27,650 | | Income (loss) from operations | $549 | $2,060 | $(733) | $531 | | Net income (loss) | $519 | $2,540 | $(731) | $3,541 | | Diluted EPS | $0.01 | $0.09 | $(0.07) | $0.12 | - For the nine months ended September 30, 2022, the company reported a net loss of $731,000, compared to a net income of $3,541,000 in the same period of 2021, primarily due to the absence of a $2,946,000 gain on PPP loan forgiveness in 2022[11] Condensed Consolidated Statements of Stockholders' Equity - Total stockholders' equity decreased slightly from $74.5 million at the end of 2021 to $74.0 million as of September 30, 2022, driven by a net loss of $0.7 million and an unrealized loss from foreign currency translation of $1.5 million, partially offset by $2.6 million in stock-based compensation[13] Condensed Consolidated Statements of Cash Flows | Cash Flow Summary (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(3,014) | $5 | | Net cash used in investing activities | $(2,978) | $(1,312) | | Net cash provided by (used in) financing activities | $(896) | $19,560 | | Net (decrease) increase in cash | $(7,907) | $17,809 | - Cash used in operating activities was $3.0 million for the first nine months of 2022, a significant shift from being cash neutral in the prior year, mainly due to a $5.2 million increase in inventories and a $3.7 million increase in accounts receivable[17] Notes to Unaudited Condensed Consolidated Financial Statements Revenue by Geography (YTD, in thousands) | Region | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | | Americas | $55,480 | $49,023 | | Europe and the Middle East | $11,473 | $9,309 | | Asia-Pacific | $16,961 | $16,920 | | Total | $83,914 | $75,252 | - Goodwill remained stable at $10.2 million as of September 30, 2022, with no indicators of impairment noted during the nine months ended[48][49] Segment Performance (YTD, in thousands) | Segment | Net Revenue | Gross Profit | Gross Margin | | :--- | :--- | :--- | :--- | | 2022 | | | | | Identity | $50,647 | $11,459 | 23% | | Premises | $33,267 | $18,905 | 57% | | 2021 | | | | | Identity | $47,199 | $12,133 | 26% | | Premises | $28,053 | $15,517 | 55% | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes the 12% year-over-year revenue growth for the first nine months of 2022 to strong performance in the Premises segment (up 19%) and moderate growth in the Identity segment (up 7%), with stable gross margin at 36% and increased operating expenses leading to an operating loss of $0.7 million, while liquidity remains solid with $21.2 million in cash and access to a $20.0 million revolving credit facility Overview - Identiv is a global provider of secure identification and physical security, leveraging RFID, NFC, and cybersecurity technologies for the Internet of Things (IoT) market[96][97] - The company operates through two reportable business segments: Identity (secure access to information, RFID) and Premises (access control, video surveillance, analytics)[99] Results of Operations Financial Highlights (YTD 2022 vs YTD 2021, in thousands) | Metric | YTD 2022 | YTD 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Revenue | $83,914 | $75,252 | 12% | | Gross Profit | $30,364 | $27,650 | 10% | | Total Operating Expenses | $31,097 | $27,119 | 15% | | Income (Loss) from Operations | $(733) | $531 | (238%) | - Identity segment revenue grew 7% YTD, driven by higher sales of RFID transponders, though gross margin decreased from 26% to 23% due to product mix and investments in manufacturing[115][123] - Premises segment revenue grew 19% YTD, driven by higher sales of Hirsch Velocity hardware, software, and video products, with gross margin improving from 55% to 57% due to product mix and logistical efficiencies[118][119][124] - Operating expenses increased across the board for the nine months ended Sep 30, 2022: R&D up 16%, Selling & Marketing up 24%, and G&A up 7%, primarily due to higher headcount and related costs[128][130][132] Liquidity and Capital Resources - As of September 30, 2022, the company had working capital of $50.7 million and a cash and cash equivalents balance of $21.2 million[140] - The company maintains a $20.0 million non-formula revolving loan facility with East West Bank, maturing in February 2023, with no amounts outstanding as of September 30, 2022[142] - Management believes existing cash, cash from operations, and available credit will be sufficient to fund operations for the next 12 months[145] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is from foreign currency exchange rate fluctuations, as it conducts operations in currencies like the Indian Rupee, Canadian Dollar, and Euro, affecting both transaction gains/losses and the translation of foreign subsidiary financial statements, with a hypothetical 10% movement in the U.S. Dollar resulting in a $0.8 million impact on foreign currency gains or losses - The company is primarily exposed to market risk from changes in foreign currency exchange rates, including the Indian Rupee, Canadian Dollar, and Euro[159] - A sensitivity analysis as of September 30, 2022, indicated that a hypothetical 10% movement in the U.S. Dollar exchange rate would result in an incremental gain or loss of $0.8 million[161] Controls and Procedures The company's management, including the CEO and CFO, evaluated the disclosure controls and procedures as of September 30, 2022, concluding their effectiveness at a reasonable assurance level, with no material changes to internal control over financial reporting during the third quarter of 2022 - The Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2022, the company's disclosure controls and procedures were effective at the reasonable assurance level[165] - No material changes were made to the company's internal control over financial reporting during the three months ended September 30, 2022[167] PART II. OTHER INFORMATION Legal Proceedings The company states that it may be subject to various legal proceedings and claims that arise in the ordinary course of business, with uncertain outcomes that could potentially have a material effect on its financial condition - The company is, and may become, subject to various legal proceedings and claims arising in the ordinary course of business, the outcomes of which cannot be predicted with certainty[168] Risk Factors The company highlights that adverse global and regional economic conditions pose a material risk to its business, including inflation, foreign currency fluctuations, and economic slowdown, which have already caused delays and reductions in customer orders, supply chain challenges, and increased costs for materials and transportation in the third quarter of 2022 - Adverse global economic conditions, including inflation, currency fluctuations, and economic slowdowns, may materially and adversely affect the company's business, results, and financial condition[170] - In Q3 2022, the company experienced negative impacts from macroeconomic conditions, including delays in customer orders, component shortages, and increased costs of materials and shipping[171] Unregistered Sales of Equity Securities and Use of Proceeds During the third quarter of 2022, the company repurchased 19,963 shares of its common stock to satisfy employee tax withholding obligations related to the vesting of restricted stock units (RSUs), not as part of a publicly announced buyback program - In the three months ended September 30, 2022, the company repurchased 19,963 shares of its common stock, which were surrendered by employees to satisfy tax withholding obligations upon the vesting of restricted stock units[174] Exhibits This section lists the exhibits filed with the Form 10-Q, which include certifications from the CEO and CFO as required by the Sarbanes-Oxley Act, and Inline XBRL data files for financial reporting - The exhibits filed with this report include CEO and CFO certifications pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002, as well as Inline XBRL documents[176]