Business context and reporting period
Identiv, Inc. (Nasdaq: INVE) filed this unaudited Form 10-Q for the quarter ended March 31, 2020. The filing describes a global physical-security and secure-identification business, with Premises and Identity segments. The request metadata names INVE Technologies, Inc.; the filing itself identifies the registrant as Identiv, Inc.
Financial results and liquidity
Unless otherwise noted, amounts are in millions of dollars. Comparisons are with the three months ended March 31, 2019.
| Metric | Q1 2020 | Q1 2019 / prior balance |
|---|---|---|
| Revenue | $18.12 | $19.52 |
| Gross profit / margin | $7.50 / 41% | $8.70 / 45% |
| Operating expenses | $9.35 | $9.13 |
| Operating loss | $(1.85) | $(0.43) |
| Net loss | $(2.05) | $(0.82) |
| Net loss per share, basic and diluted | $(0.13) | $(0.06) |
| Cash from operating activities | $(3.71) | $1.49 |
| Cash and working capital, March 31, 2020 | $8.70 / $11.03 | Cash $9.38 at Dec. 31, 2019 |
- Revenue fell 7%. Premises revenue declined 12% to $8.23 million; Identity revenue declined 3% to $9.89 million.
- Premises gross margin improved to 55% from 47%, while Identity margin fell to 30% from 42%; consolidated margin decreased four percentage points.
- Research and development expense rose 28% to $2.60 million; selling and marketing was essentially flat at $4.50 million; general and administrative expense fell 16% to $2.19 million.
- At quarter-end, financial liabilities were $17.87 million, comprising $13.87 million under the revolving facility and a $4.00 million term-loan balance. The balance sheet also reported a $1.38 million contractual payment obligation. Current liabilities were $36.19 million versus current assets of $47.21 million.
- Operating cash use reflected the net loss and a $3.2 million cash outflow from changes in operating assets and liabilities. Financing provided $3.41 million, including net borrowing proceeds.
Material changes, outlook and risks
- Management attributed lower Premises sales mainly to reduced video/analytics, Freedom/Liberty/Enterphone and Hirsch physical-access sales. Identity sales were affected by lower smart-card reader and access-card sales and the absence of a large U.S. Navy Reserve order received in Q1 2019; higher RFID transponder sales partly offset the declines.
- Management reported typical stronger demand in the second half of the year, with results also affected by government budget cycles, large-project timing and product mix. It provided no specific revenue or earnings guidance.
- The company said it could not fully determine COVID-19’s future effect. It warned of possible demand, supply-chain, operating and collection disruptions, and said the impact could be material to 2020 results.
- Identiv was not in compliance with certain lender financial covenants at March 31, 2020; East West Bank waived the non-compliance. A May 5 amendment lowered the required cash balance to $3.0 million through September 2020, set minimum trailing six-month EBITDA requirements, and deferred three term-loan principal payments.
- Subsequent to quarter-end, the company obtained a $2.9 million Paycheck Protection Program loan, potentially forgivable under program rules, and issued $4.0 million of secured subordinated notes. The notes initially bear no interest for nine months; higher interest and additional warrants may apply if repayment is delayed. The notes’ proceeds are restricted to costs under a third-party statement of work.
- Management said existing cash, operating cash generation and available credit should fund operations for the next twelve months, while noting historical operating losses, negative operating cash flow and uncertainty about obtaining additional capital on acceptable terms.
- Three shareholder derivative cases remain stayed in state court. The Ninth Circuit affirmed judgment for defendants in a related federal case on April 2, 2020; the company said it intended to seek dismissal of the state cases and could not estimate any possible loss.
Important facts for investors to verify
- Confirm the registrant identity: the filing is for Identiv, Inc. (INVE), despite the request metadata naming INVE Technologies, Inc.
- Track cash burn, working capital, borrowing availability and compliance with amended lender covenants, including minimum cash and EBITDA requirements.
- Assess whether COVID-19, customer project timing and product mix affect sales, gross margins, receivables and inventory.
- Review repayment terms and potential warrant dilution from the $4.0 million notes, the PPP loan’s forgiveness eligibility, and the impact of outstanding preferred shares convertible into approximately 5.54 million common shares at quarter-end.
- Monitor resolution of the stayed shareholder litigation and the company’s remaining contractual and purchase commitments.