What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-07-29 compared with 2026-04-29 · 113 added, 75 removed, 207 unchanged (48% of the section changed)

27 unchanged sentences

Our mission is to connect every thing.

We have enabled connectivity for more than 150 billion items to date, delivering item visibility, traceability and improved operational efficiencies for retailers, supply chain and logistics, or SC&L providers, restaurants and food-service providers, airlines, automobile manufacturers, healthcare companies and many more.

We have enabled connectivity for more than 160 billion items to date, delivering item visibility, traceability and improved operational efficiencies for retailers, supply chain and logistics, or SC&L providers, grocers, restaurants and food-service providers, airlines, automobile manufacturers, healthcare companies and many more.

We are today focused on extending item connectivity from tens of billions to trillions of items and delivering item data not just to enterprises but to people, so they too can benefit from their connected items.

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We believe that that connectivity will transform the world.

We and our partner ecosystem build item-visibility solutions using products that we design and either sell or license, including silicon radios, reading systems, tag production systems and intellectual property.

We and our partner ecosystem build item-visibility solutions using products that we design and either sell or license, including silicon radios, reading systems, label production systems and intellectual property.

We also offer software and cloud services, and while nascent from a standalone revenue perspective, they enable our other product offerings, and we intend to expand them as a part of our growth strategy.

We sell two types of silicon radios.

The first are endpoint ICs that store a serialized number to wirelessly identify an

The first are endpoint ICs that store a serialized number to wirelessly

identify an item.

Our partners embed endpoint ICs into an item or its packaging.

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Our reading systems comprise high-performance finished readers and gateways used primarily in autonomous reading solutions.

Our tag production systems enable partner products and facilitate enterprise deployments.

Our label production systems enable partner products and facilitate enterprise deployments.

Our software and cloud service offerings focus on solutions enablement, particularly for key enterprise customers.

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Macroeconomic Factors

We are subject to impacts from the evolving macroeconomic environment, including uncertainty and volatility in trade measures and tariffs, as well as military conflicts or blockades, inflation and geopolitical tensions.

Because most of our revenue derives from endpoint ICs that our partners embed into or onto items, to the extent that those items are impacted, positively or negatively, by trade measures, tariffs and inflation, we are impacted as well.

While the impact that recent trade measures, military conflicts or blockades, inflation and geopolitical tensions will have on our business and financial results is difficult to predict, they could negatively affect our business and financial results.

We continue to monitor the broader impacts of these measures on our business, our supply chain and our results of operations.

See risk factors “Changes in global trade policies could have a material adverse effect on us.” and “Instability or deterioration in the political, legal, social, business or economic conditions in the U.S.

or in key jurisdictions could harm our business.” in Part II, Item 1A.

We are subject to impacts from the evolving macroeconomic environment, including uncertainty and volatility from trade measures and tariffs, military conflicts or blockades, inflation and geopolitical tensions.

Because most of our revenue derives from endpoint ICs that our partners embed into or onto items, to the extent that those items are impacted, positively or negatively, by the macroeconomic environment, we are impacted as well.

While the impact that the macroeconomic environment may have on our business and financial results is difficult to predict, any or all of these above factors could negatively affect our business and financial results.

We continue to monitor the broader impacts of the macroeconomic situation on our business, our supply chain and our results of operations.

See risk factors “Changes in global trade policies could have a material adverse effect on us.” and “Geopolitical disruptions could impact our product supply, ability to sell and/or customer or market demand.” in Part II, Item 1A.

of this report for further information.

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We sell most of our products, both endpoint ICs and systems, through partners and distributors, limiting our visibility to actual enterprise demand.

Although we work closely with those partners and distributors to gain as accurate a view as possible, correctly forecasting demand for our products and identifying market shifts in a timely manner remains a challenge.

This challenge can be exacerbated when major end users adjust the mix of inlay providers from which they procure inlays incorporating our endpoint ICs.

Although we work closely with those partners and distributors to gain as accurate a view of that demand as possible, correctly forecasting demand and identifying market shifts in a timely manner remains a challenge.

This challenge can be exacerbated when major end users adjust the mix of label providers from which they procure labels incorporating our endpoint ICs.

We also sometimes experience inventory overages or shortages.

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Inventory shortages can cause long lead times, missed opportunities, market-share losses and/or damaged customer relationships, also negatively affecting our business.

In 2021 and 2022, demand for our endpoint ICs increased while worldwide wafer demand also increased, leading to wafer shortfalls for many semiconductor companies, including us.

For example, in 2023, macroeconomic conditions led to softness in demand and inventory overages.

As another example, in 2021 and 2022, demand for our endpoint ICs increased while worldwide wafer demand also increased, leading to wafer shortfalls for many semiconductor companies, including us.

These wafer shortfalls prevented us from fully meeting customer demand and, in some cases, caused customers to cancel orders, qualify alternative suppliers or purchase from our competitors.

In 2023, macroeconomic conditions led to softness in demand and inventory overages.

Product Adoption and Unit Growth Rates

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For example, we generated 14% of total 2019 revenue from a gateway deployment at a large North American SC&L provider.

We did not have comparable project-based revenue in 2020.

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 did not see it at a comparable percentage in 2022 to 2025, or in the first quarter of fiscal year 2026.

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

While we continue generating project-based revenue, we have not seen it at comparable percentages for any annual or quarterly periods since the periods noted above.

Seasonality and Pricing

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In the past, this negotiation typically resulted in reduced revenue and gross margins in the first quarter compared to prior periods, which then normalized in subsequent quarters as we reduced costs and adjust product mix by migrating those OEMs and end users to newer, lower-cost products.

Recently, and significantly due to increasing worldwide semiconductor demand, many of our vendors and subcontractors have either increased prices, signaled future price increases or both.

In response, we have notified our customers of modest, impending product price increases.

If we are unable to successfully increase our prices or if our customers choose competitors' products due to our higher prices, then our product margins, operating results or both may suffer.

Endpoint IC volumes tend to be lower in the fourth quarter than in the third quarter.

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We saw these seasonal trends in second-half 2024 and in 2025.

We expect continued 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.

These factors, among others, may impact seasonal trends.

We also see 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.

These factors, among others, may impact the seasonal trends.

Results of Operations

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, 2026 compared with three months ended March 31, 2025

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

The systems revenue decrease was driven primarily by decreased shipment volumes while the endpoint IC revenue increase was driven primarily by increased shipment volumes.

Gross margin decreased due to high indirect costs in the period partially offset by higher endpoint IC gross margin due to product mix.

Loss from operations increased, due primarily to decreased revenue and increased operating expenses.

The operating expense increase was due primarily to higher research and development and sales and marketing costs.

Three Months Ended March 31,

Income (loss) from operations

Three months ended June 30, 2026 compared with three months ended June 30, 2025

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

The endpoint IC revenue increase was driven primarily by increased shipment volumes while the systems revenue decrease was driven primarily by decreased gateway revenue.

Gross margin increased from higher endpoint IC gross margin due to product mix.

Income from operations decreased slightly, due primarily to increased operating expenses.

The operating expense increase was due to higher research and development, sales and marketing and general and administrative costs.

Six months ended June 30, 2026 compared with six months ended June 30, 2025

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

The endpoint IC revenue increase was driven primarily by increased shipment volumes while the systems revenue decrease was driven primarily by decreased reader IC and gateway revenue.

Gross margin increased from higher endpoint IC gross margin due to product mix.

Loss from operations increased, due primarily to increased operating expenses.

The operating expense increase was due to higher research and development, sales and marketing and general and administrative costs.

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Total revenue

We currently derive substantially all our revenue from sales of endpoint ICs, reader ICs, readers, gateways, tag production systems and licensing.

We sell our endpoint ICs and tag production systems primarily to inlay manufacturers;

We currently derive substantially all our revenue from sales of endpoint ICs, reader ICs, readers, gateways, label production systems and licensing.

We sell our endpoint ICs and label production systems primarily to inlay manufacturers;

our reader ICs primarily to OEMs and ODMs through distributors;

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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, 2026 compared with three months ended March 31, 2025

Endpoint IC revenue increased $2.0 million, due to a $7.9 million increase in shipment volumes offset by a $5.9 million decrease from lower ASP due to product mix and new customer pricing that went into effect at the beginning of the year.

Systems revenue decreased $2.0 million due primarily to a decrease in shipment volumes.

Reader IC revenue decreased $2.6 million and gateway revenue decreased $1.1 million.

These decreases were partially offset by an increase of $0.8 million in reader revenue and $0.6 million in tag production systems revenue.

Three months ended June 30, 2026 compared with three months ended June 30, 2025

Endpoint IC revenue increased $11.8 million, due to a $16.0 million increase in shipment volumes and a $1.0 million increase in licensing revenue, partially offset by a $5.2 million decrease from lower ASP from product mix and new customer pricing that went into effect at the beginning of the year.

Systems revenue decreased $1.3 million primarily due to a $1.2 million decrease in gateway revenue and a $0.8 million decrease in label production systems revenue.

These decreases were partially offset by a $0.4 million increase in reader revenue.

Six months ended June 30, 2026 compared with six months ended June 30, 2025

Endpoint IC revenue increased $13.8 million, due to a $24.0 million increase in shipment volumes and a $1.0 million increase in licensing revenue, partially offset by an $11.2 million decrease from lower ASP from product mix and new customer pricing that went into effect at the beginning of the year.

Systems revenue decreased $3.3 million primarily due to a decrease of $2.5 million in reader IC revenue and a $2.3 million decrease in gateway revenue.

These decreases were partially offset by a $1.2 million increase 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 tag production systems, including direct materials and outsourced manufacturing costs as well as associated overhead costs such as logistics, quality control, planning and procurement.

Cost of revenue includes costs associated with manufacturing our endpoint ICs, reader ICs, readers, gateways and label production systems, 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.

Our gross margin varies from period to period based on the mix of endpoint IC and systems;

underlying product margins driven by changes in mix, ASPs or costs;

Our gross margin varies from period to period based on the endpoint IC and systems revenue mix;

underlying product margins driven by changes in product mix, ASPs or costs;

as well as from inventory excess and obsolescence charges.

Three months ended March 31, 2026 compared with three months ended March 31, 2025

Gross profit and gross margin decreased, due primarily to higher indirect costs in the current year compared to the prior-year period and revenue mix, partially offset by higher endpoint IC gross margin due to product mix.

Three months ended June 30, 2026 compared with three months ended June 30, 2025

Gross profit increased primarily due to increased endpoint IC revenue.

Gross margin increased, due primarily to endpoint IC product mix, specifically a higher contribution from M800 compared to the prior-year period, partially offset by revenue mix.

Six months ended June 30, 2026 compared with six months ended June 30, 2025

Gross profit increased primarily due to increased endpoint IC revenue.

Gross margin increased, due primarily to endpoint IC product mix, specifically a higher contribution from M800 compared to the prior-year period, partially offset by revenue mix.

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, 2026 compared with three months ended March 31, 2025

Research and development expense increased $3.4 million, due primarily to increases of $2.6 million in personnel expenses due to higher headcount, an increase of $0.6 million in infrastructure costs and an increase of $0.2 million in stock-based compensation expense, primarily related to increased outstanding equity grants.

Three months ended June 30, 2026 compared with three months ended June 30, 2025

Research and development expense increased $4.6 million, due primarily to increases of $2.8 million in personnel expenses due to higher headcount and higher bonus achievement compared to the prior-year period, an increase of $1.9 million in stock-based compensation expense, primarily related to increased outstanding equity grants, and an increase of $0.6 million in infrastructure costs, partially offset by a decrease of $0.7 million in product development costs, due to timing.

Six months ended June 30, 2026 compared with six months ended June 30, 2025

Research and development expense increased $8.0 million, due primarily to increases of $5.3 million in personnel expenses due to higher headcount and higher bonus achievement compared to the prior-year period, an increase of $2.0 million in stock-based compensation expense, primarily related to increased outstanding equity grants, and an increase of $1.2 million in infrastructure costs, partially offset by a decrease of $0.6 million in product development costs, due to timing.

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, 2026 compared with three months ended March 31, 2025

Sales and marketing expense increased $1.7 million, due primarily to an increase of $2.1 million in stock-based compensation expense related to lower expense in the prior-year period from the retirement of our Chief Revenue Officer.

This increase is partially offset by a decrease of $0.4 million in personnel expenses.

Three months ended June 30, 2026 compared with three months ended June 30, 2025

Sales and marketing expense increased $1.1 million, due primarily to an increase of $0.7 million in stock-based compensation expense, primarily related to increased outstanding equity grants and an increase of $0.5 million in personnel expenses.

Six months ended June 30, 2026 compared with six months ended June 30, 2025

Sales and marketing expense increased $2.8 million, due to an increase of $2.8 million in stock-based compensation expense related to lower expense in the prior-year period from the retirement of our Chief Revenue Officer.

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, 2026 compared with three months ended March 31, 2025

General and administrative expense was comparable for the periods.

Three months ended June 30, 2026 compared with three months ended June 30, 2025

General and administrative expense increased $1.6 million, due primarily to an increase of $0.8 million in stock-based compensation expense, primarily related to increased outstanding equity grants, an increase of $0.4 million in professional service costs and an increase of $0.2 million in infrastructure costs.

Six months ended June 30, 2026 compared with six months ended June 30, 2025

General and administrative expense increased $1.8 million, due primarily to an increase of $0.9 million in stock-based compensation expense, primarily related to increased outstanding equity grants, an increase of $0.6 million in professional service costs and an increase of $0.2 million in infrastructure costs.

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, 2026 compared with three months ended March 31, 2025

Three months ended June 30, 2026 compared with three months ended June 30, 2025

Amortization of intangibles was comparable for the periods.

Six months ended June 30, 2026 compared with six months ended June 30, 2025

Amortization of intangibles was comparable for the periods.

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, 2026 compared with three months ended March 31, 2025

Three months ended June 30, 2026 compared with three months ended June 30, 2025

Other income, net, increased $0.2 million, due to increased interest income given higher invested balances.

Six months ended June 30, 2026 compared with six months ended June 30, 2025

Other income, net, increased $0.8 million, due to increased interest income given higher invested balances.

Induced Conversion Expense

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Induced conversion expense

Three months ended March 31, 2026 compared with three months ended March 31, 2025

Three months ended June 30, 2026 compared with three months ended June 30, 2025

There were no induced conversion expenses for the periods.

Six months ended June 30, 2026 compared with six months ended June 30, 2025

In March 2026, we completed a privately negotiated induced conversion of $40.2 million principal amount of the 2021 Notes.

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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, 2026 compared with three months ended March 31, 2025

Interest expense decreased by $0.5 million, due primarily to decreased interest on our convertible debt, primarily from the 2021 Note Exchange transaction, which was completed in September 2025.

Three months ended June 30, 2026 compared with three months ended June 30, 2025

Interest expense decreased by $0.6 million, due primarily to decreased interest on our convertible debt, primarily from the 2021 Note Exchange transaction, which was completed in September 2025 and the 2021 Note Repurchase, which was completed in March 2026 .

Six months ended June 30, 2026 compared with six months ended June 30, 2025

Interest expense decreased by $1.4 million, due primarily to decreased interest on our convertible debt, primarily from the 2021 Note Exchange transaction, which was completed in September 2025 and the 2021 Note Repurchase, which was completed in March 2026 .

Income Tax Expense

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

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

Income tax expense increased $0.3 million for the three months ended March 31, 2026, compared to the prior-year period, due to changes in effective tax rates for each period.

Income tax benefit increased $0.2 million for the three months ended June 30, 2026 and decreased $0.1 million for the six months ended June 30, 2026 compared to the prior-year periods, due to changes in effective tax rates for each period.

On July 4, 2025, President Trump signed Public Law No.

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Liquidity and Capital Resources

As of March 31, 2026, we had cash, cash equivalents and short-term investments of $131.8 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, 2026, we had cash, cash equivalents and short-term investments of $133.0 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, 2026, we had working capital of $266.5 million.

As of June 30, 2026, we had working capital of $211.6 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 (used in) financing activities

Operating Cash Flows

For the three months ended March 31, 2026, we generated $4.0 million of net cash proceeds from operating activities.

These net cash proceeds were due primarily to $5.4 million of net income adjusted for non-cash items, partially offset by a $1.5 million decrease in working capital due primarily to higher inventory and accounts receivable, partially offset by higher accounts payable.

For the six months ended June 30, 2026, we generated $35.6 million of net cash proceeds from operating activities.

These net cash proceeds were due primarily to $38.1 million of net income adjusted for non-cash items, partially offset by a $2.5 million decrease in working capital due primarily to higher inventory, partially offset by higher accounts payable and accrued compensation and employee related benefits.

Investing Cash Flows

For the three months ended March 31, 2026, we generated $25.7 million of net cash proceeds from investing activities.

For the six months ended June 30, 2026, we generated $0.5 million of net cash proceeds from investing activities.

These net cash proceeds were due to investment maturities of $90.6 million, partially offset by investment purchases of $85.9 million and equipment purchases of $4.2 million.

Financing Cash Flows

For the three months ended March 31, 2026, we used $45.6 million of net cash from financing activities to purchase a portion of our 2021 Notes for $47.0 million and pay $1.6 million in taxes to cover RSU vesting, partially offset by proceeds of $3.0 million from stock-option exercises and our employee stock purchase plan.

For the six months ended June 30, 2026, we used $45.6 million of net cash from financing activities to purchase a portion of our 2021 Notes for $47.0 million and pay $1.8 million in taxes to cover RSU vesting, partially offset by proceeds of $3.2 million from stock-option exercises and our employee stock purchase plan.

Cash Requirements and Contractual Obligations

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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, 2026, the principal balance outstanding on the 2021 Notes and 2025 Notes is $57.3 million and $190.0 million, respectively.

Convertible Notes – As of June 30, 2026, the principal balance outstanding on the 2021 Notes and 2025 Notes is $57.3 million and $190.0 million, respectively.

Refer to Note 7 to our Condensed Consolidated Financial Statements included elsewhere in this report for maturity date, stated interest rate and additional information on the 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, 2025.

Purchase Commitments – Purchase commitments as of March 31, 2026 total $41.7 million and consist primarily of noncancelable commitments to purchase inventory.

Purchase Commitments – Purchase commitments as of June 30, 2026 total $35.8 million and consist primarily of noncancelable commitments to purchase inventory.

Off-Balance-Sheet Arrangements

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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 $131.8 million as of March 31, 2026.

We had cash, cash equivalents and short-term investments of $133.0 million as of June 30, 2026.

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