What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-30 compared with 2025-04-23 · 109 added, 62 removed, 220 unchanged (44% of the section changed)

78 unchanged sentences

Similarly, in second-quarter 2021, we generated 13% of our revenue from a project-based gateway deployment for RAIN-based self-checkout and loss prevention at a large Europe-based global retailer.

While we continue generating project-based revenue, we have not seen it at a comparable scale in 2022 to 2024, or in first-quarter 2025.

While we continue generating project-based revenue, we have not seen it at a comparable scale in 2022 to 2024, or in the first half of 2025.

Seasonality and Pricing

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System sales tend to be higher in the fourth quarter and lower in the first quarter, we believe due to the availability of residual funding for capital expenditures prior to the end of many end users’ fiscal years.

Quarter-to-quarter revenue variability due to macroeconomic conditions and program-launch timing may impact these seasonal trends in the future.

Quarter-to-quarter revenue and gross margin variability due to macroeconomic conditions, program-launch timing and our ability to migrate OEMs and end users to newer, lower cost products may impact these seasonal trends in the future.

In light of the 2025 macroeconomic environment, we are uncertain whether we will see these trends in 2025.

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The following table presents our results of operations for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands, except percentages)

Loss from operations

Three months ended March 31, 2025 compared with three months ended March 31, 2024

Revenue and gross profit decreased, due primarily to lower systems revenue on lower shipment volumes compared to the prior-year period.

Gross margin increased, due primarily to lower indirect costs in the current-year period, partially offset by a decrease in direct product margin.

Loss from operations decreased, due primarily to decreased operating expenses, partially offset by decreased gross profit.

The operating expense decrease was due to lower sales and marketing costs, restructuring costs, general and administrative costs and amortization of intangibles, partially offset by increased research and development costs.

Three Months Ended March 31,

Income (loss) from operations

Three months ended June 30, 2025 compared with three months ended June 30, 2024

Revenue and gross profit decreased, due primarily to lower endpoint IC revenue partially offset by higher systems revenue.

The endpoint IC revenue decrease was driven primarily by lower ASP when compared to the prior-year period.

Gross margin increased, due primarily to product mix within endpoint IC and an increase in high-margin licensing revenue compared to the prior-year period.

Income from operations increased, due primarily to decreased operating expenses, partially offset by decreased gross profit.

The operating expense decrease was due to lower general and administrative and sales and marketing costs.

Six months ended June 30, 2025 compared with six months ended June 30, 2024

Revenue and gross profit decreased, due primarily to lower endpoint IC and systems revenue.

The endpoint IC revenue decrease was driven primarily by lower ASP when compared to the prior-year period and the systems revenue decrease was driven primarily by decreased shipment volumes when compared to the prior-year period.

Gross margin increased, due primarily to product mix within endpoint IC and an increase in high-margin licensing revenue compared to the prior-year period.

Income from operations increased, due primarily to decreased operating expenses, partially offset by decreased gross profit.

The operating expense decrease was due to lower sales and marketing costs, general and administrative costs, restructuring costs and amortization of intangibles, partially offset by increased research and development costs.

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

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We expect endpoint IC sales to represent the majority of our revenue for the foreseeable future.

Three months ended March 31, 2025 compared with three months ended March 31, 2024

Endpoint IC revenue decreased $0.3 million, due to a $9.3 million decrease from lower ASP due to product mix and new customer pricing that went into effect at the beginning of the year, offset by a $9.0 million increase in shipment volumes.

Three months ended June 30, 2025 compared with three months ended June 30, 2024

Endpoint IC revenue decreased $4.8 million, due to a $8.1 million decrease from lower ASP due to product mix and new customer pricing that went into effect at the beginning of the year, offset by a $2.2 million increase in shipment volumes and a $1.0 million increase in licensing revenue.

Systems revenue increased $0.2 million due primarily to an increase in shipment volumes.

Gateway revenue increased $1.1 million, reader revenue increased by $0.9 million, and test and measurement solutions revenue increased by $0.5 million.

These increases were partially offset by a decrease of $2.2 million in reader IC revenue.

Six months ended June 30, 2025 compared with six months ended June 30, 2024

Endpoint IC revenue decreased $5.1 million, due to a $17.1 million decrease from lower ASP due to product mix and new customer pricing that went into effect at the beginning of the year, offset by a $11.0 million increase in shipment volumes and a $1.0 million increase in licensing revenue.

Systems revenue decreased $2.1 million due primarily to a decrease in shipment volumes.

Gateway revenue decreased $2.8 million and test and measurement solution revenue decreased by $1.0 million.

These decreases were partially offset by increases of $1.1 million and $0.6 million in reader and reader IC revenue, respectively.

Gateway revenue decreased $1.8 million, reader IC revenue decreased $1.6 million, and test and measurement solutions revenue decreased by $0.5 million.

These decreases were partially offset by an increase of $2.0 million in reader revenue.

Gross Profit and Gross Margin

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands, except percentages)

Cost of revenue

Cost of revenue includes costs associated with manufacturing our endpoint ICs, reader ICs, readers, gateways and test and measurement solutions, including direct materials and outsourced manufacturing costs as well as associated overhead costs such as

logistics, quality control, planning and procurement.

Cost of revenue also includes charges for excess and obsolescence and warranty costs.

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as well as from inventory excess and obsolescence charges.

Three months ended March 31, 2025 compared with three months ended March 31, 2024

Gross profit decreased, due primarily to decreased systems revenue.

Gross margin increased, due primarily to lower indirect costs in the current-year period, partially offset by a decrease in direct product margin, due to mix of endpoint IC and systems as well as product mix within endpoint IC.

Three months ended June 30, 2025 compared with three months ended June 30, 2024

Gross profit decreased, due primarily to decreased endpoint IC revenue.

Gross margin increased, due primarily to endpoint IC product mix, specifically a higher contribution from M800 and an increase in high-margin licensing revenue compared to the prior-year period.

Six months ended June 30, 2025 compared with six months ended June 30, 2024

Gross profit decreased, due primarily to decreased endpoint IC and systems revenue.

Gross margin increased, due primarily to endpoint IC product mix, specifically a higher contribution from M800, an increase in high-margin licensing revenue compared to the prior-year period, and lower indirect costs in the current year.

Operating Expenses

Research and Development

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

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We expect research and development expense to increase in absolute dollars in future periods as we continue to focus on new product development and introductions.

Three months ended March 31, 2025 compared with three months ended March 31, 2024

Research and development expense increased $2.8 million, due primarily to increases of $1.8 million in stock-based compensation expense, primarily related to increased outstanding equity grants;

$0.6 million in product development costs due to timing;

Three months ended June 30, 2025 compared with three months ended June 30, 2024

Research and development expense decreased $0.3 million, due primarily to a decrease of $1.1 million in personnel expenses related to lower bonus achievement compared to the prior-year period, partially offset by an increase of $0.8 million in product development costs due to timing.

Six months ended June 30, 2025 compared with six months ended June 30, 2024

Research and development expense increased $2.5 million, due primarily to increases of $1.4 million in product development costs due to timing;

$1.3 million in stock-based compensation expense, primarily related to increased outstanding equity grants;

and $0.9 million in infrastructure costs.

These increases were partially offset by a decrease of $1.2 million in personnel expenses related to lower bonus achievement compared to the prior-year period.

Sales and Marketing

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

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and an allocated portion of infrastructure costs which include occupancy, depreciation and software costs.

Three months ended March 31, 2025 compared with three months ended March 31, 2024

Sales and marketing expense decreased $2.1 million, due primarily to a decrease of $2.1 million in stock-based compensation expense.

This decrease is due primarily to forfeitures related to the company's Chief Revenue Officer retiring in the period.

Three months ended June 30, 2025 compared with three months ended June 30, 2024

Sales and marketing expense decreased $1.1 million, due primarily to a decrease of $0.8 million in stock-based compensation expense related to timing of annual equity grants and lower expense resulting from the retirement of Chief Revenue officer in the first quarter of 2025, and a decrease of $0.4 million in personnel expenses related to lower bonus achievement compared to the prior-year period.

Six months ended June 30, 2025 compared with six months ended June 30, 2024

Sales and marketing expense decreased $3.2 million, due primarily to a decrease of $3.0 million in stock-based compensation expense, driven by forfeitures related to the company's Chief Revenue Officer retiring in the first quarter of fiscal year 2025 and the resulting lower ongoing expense, and a decrease of $0.4 million in personnel expenses related to lower bonus achievement compared to the prior-year period.

General and Administrative

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

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and an allocated portion of infrastructure costs which include occupancy, depreciation and software costs.

Three months ended March 31, 2025 compared with three months ended March 31, 2024

General and administrative expense decreased $1.0 million, due primarily to a decrease of $2.2 million in professional services related to legal fees.

This decrease was partially offset by increases of $1.0 million in stock compensation expense related to increased outstanding equity grants.

Three months ended June 30, 2025 compared with three months ended June 30, 2024

General and administrative expense decreased $1.4 million, due primarily to a decrease of $1.0 million in personnel expenses related to lower bonus achievement compared to the prior-year period and a decrease of $0.4 million in stock-based compensation expense related to timing of annual equity grants.

Six months ended June 30, 2025 compared with six months ended June 30, 2024

General and administrative expense decreased $2.4 million, due primarily to a decrease of $2.2 million in professional services related to legal fees and a decrease of $1.0 million in personnel expenses related to lower bonus achievement compared to the prior-year period.

This decrease was partially offset by an increase of $0.7 million in stock compensation expense related to increased outstanding equity grants.

Amortization of Intangibles

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Amortization of intangibles

Three months ended March 31, 2025 compared with three months ended March 31, 2024

Three months ended June 30, 2025 compared with three months ended June 30, 2024

Amortization of intangibles was comparable for the periods.

Six months ended June 30, 2025 compared with six months ended June 30, 2024

Amortization of intangibles decreased $0.9 million.

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Restructuring Costs

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Restructuring costs

Three months ended March 31, 2025 compared with three months ended March 31, 2024

Three months ended June 30, 2025 compared with three months ended June 30, 2024

There were no restructuring costs for the periods.

Six months ended June 30, 2025 compared with six months ended June 30, 2024

The decrease in restructuring costs relates to the restructuring we initiated on February 7, 2024.

There were no restructuring costs for the three months ended March 31, 2025.

There were no restructuring costs for the six months ended June 30, 2025.

See Note 11 Restructuring for further information.

Other Income, net

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

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Other income, net, comprises primarily interest income on our short-term investments.

Three months ended March 31, 2025 compared with three months ended March 31, 2024

Three months ended June 30, 2025 compared with three months ended June 30, 2024

Other income, net, was comparable for the periods.

Six months ended June 30, 2025 compared with six months ended June 30, 2024

Other income, net, increased from the prior period due to increased interest income given higher invested balances and higher interest rates.

Income From Settlement of Litigation

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Income from settlement of litigation

Three months ended March 31, 2025 compared with three months ended March 31, 2024

Three months ended June 30, 2025 compared with three months ended June 30, 2024

There was no income from settlement of litigation for the periods.

Six months ended June 30, 2025 compared with six months ended June 30, 2024

The decrease in income from settlement of litigation is related to the litigation settlement we reached with NXP on March 13, 2024.

There was no income from litigation for the three months ended March 31, 2025.

There was no income from litigation for the six months ended June 30, 2025.

See Note 6 Commitments and Contingencies for further information.

Interest Expense

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

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Interest expense comprises primarily cash interest and amortization of debt issuance costs on our debt.

Three months ended March 31, 2025 compared with three months ended March 31, 2024

Three months ended June 30, 2025 compared with three months ended June 30, 2024

Interest expense was comparable for the periods.

Six months ended June 30, 2025 compared with six months ended June 30, 2024

Interest expense was comparable for the periods.

Income Tax Expense

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Income tax benefit

Income tax benefit (expense)

We are subject to federal and state income taxes in the United States and foreign jurisdictions.

Income tax benefit increased $0.3 million for the three months ended March 31, 2025, compared to the prior-year period due to changes in income (loss).

Income tax expense increased $0.2 million for the three months ended June 30, 2025 and income tax benefit increased $0.1 million for the six months ended June 30, 2025, each compared to the prior-year periods, due to changes in income (loss).

On July 4, 2025, President Trump signed H.R.

1, the “One Big Beautiful Bill Act,” into law.

In accordance with GAAP, the Company will account for the tax effects of changes in tax law in the period of enactment, which is third-quarter of calendar year 2025.

The Company is currently in the process of analyzing the tax impacts of the law change, but we do not expect a material impact on our financial statements.

Liquidity and Capital Resources

As of March 31, 2025, we had cash, cash equivalents and short-term investments of $147.9 million, comprising cash deposits held at major financial institutions and short-term investments in a variety of securities, including U.S.

As of June 30, 2025, we had cash, cash equivalents and short-term investments of $193.2 million, comprising cash deposits held at major financial institutions and short-term investments in a variety of securities, including U.S.

government securities, treasury bills, corporate notes and bonds, commercial paper and money market funds.

As of March 31, 2025, we had working capital of $280.4 million.

As of June 30, 2025, we had working capital of $319.7 million.

Historically, we have funded our operations primarily through cash generated from operations and by issuing equity securities, convertible-debt offerings and/or borrowing under our prior senior credit facility.

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The following table shows a summary of our cash flows for the periods indicated:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

Net cash provided by (used in) operating activities

Net cash provided by investing activities

Net cash provided by operating activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Operating Cash Flows

For the three months ended March 31, 2025, we used $11.1 million of net cash in operating activities.

This net cash usage was due primarily to $18.5 million in working capital due primarily to lower accrued compensation and accounts payable.

The usage was partially offset by $7.3 million of net income adjusted for non-cash items.

For the six months ended June 30, 2025, we generated $22.7 million of net cash proceeds from operating activities.

These net cash proceeds were due primarily to $35.4 million of net income adjusted for non-cash items.

partially offset by a $12.7 million decrease in working capital due primarily to higher accrued compensation and accounts payable.

Investing Cash Flows

For the three months ended March 31, 2025, we generated $21.2 million of net cash proceeds from investing activities.

These net cash proceeds were due to investment maturities of $49.0 million, partially offset by purchases of investments of $25.9 million and cash paid for equipment purchases of $1.9 million.

For the six months ended June 30, 2025, we used $31.7 million of net cash for investing activities.

This net cash was used for purchases of investments of $107.1 million and equipment purchases of $8.4 million, partially offset by cash generated from investment maturities of $83.8 million.

Financing Cash Flows

For the three months ended March 31, 2025, we generated $5.1 million of net cash from financing activities.

For the six months ended June 30, 2025, we generated $5.0 million of net cash from financing activities.

These net cash proceeds were due to stock-option exercises and our employee stock purchase plan, offset by $1.8 million taxes paid to cover RSU vesting.

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Our operating expenses have generally increased as we invest in developing products and technologies that we believe have the potential to drive long-term business growth.

Convertible Notes – As of March 31, 2025, the principal balance outstanding on the 2021 Notes is $287.5 million.

Convertible Notes – As of June 30, 2025, the principal balance outstanding on the 2021 Notes is $287.5 million.

Refer to Note 7 of our Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for maturity date, stated interest rate and additional information on our 2021 Notes.

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For additional information regarding our operating leases, see Note 11 of our Notes to Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2024.

Purchase Commitments – Purchase commitments as of March 31, 2025 total $31.3 million and comprise noncancelable commitments to purchase inventory.

Purchase Commitments – Purchase commitments as of June 30, 2025 total $29.9 million and comprise noncancelable commitments to purchase inventory.

Off-Balance-Sheet Arrangements

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We evaluate our estimates and assumptions on an ongoing basis.

Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances.

Our estimates are based on

historical experience and various other assumptions that we believe to be reasonable under the circumstances.

Our actual results could differ from these estimates and assumptions.

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We do not enter into investments for trading or speculative purposes.

We had cash, cash equivalents and short-term investments of $147.9 million as of March 31, 2025.

We had cash, cash equivalents and short-term investments of $193.2 million as of June 30, 2025.

Our investments are exposed to market risk due to fluctuations in prevailing interest rates, which may reduce the yield on our investments or their fair value.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis