INVE - Earnings call transcript Q2 2024

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Operator

Good afternoon. Welcome to Identiv's presentation of its second quarter 2024 earnings call. My name is Holly, and I will be your operator this afternoon.

Joining us for today's presentation are the company's CEO, Steven Humphreys; CFO, Justin Scarpulla; and President, IoT Solutions, Kirsten Newquist.

Following the management's remarks, we will open the call for questions.

margin note to this guidance non-GAAP adjusted non-GAAP please be management including begin, expenses. EBITDA, references operating making financial gross we that call, during may non-GAAP Before non-GAAP and measures or

including In plans addition, be statements. future respect or post-closing statement market with Any future events, projections and management and including refers and expectations, asset characteristics conditions making business forward-looking transaction sale to transaction, forward-looking the that other and the is during business call, prospects, statement. will of future the opportunities, to pending and Identiv's a

Actual expressed those results in statements. materially may differ these from forward-looking

latest Humphreys, as well now to once the assumes no to report filed more our to SEC, time to Form filed. please refer please will discussed company's Identiv Form Steven factors XX-Q the his XX-Q, from second report and forward-looking over XX-K turn I the obligation annual as For on proceed. on quarterly time statements. for documents in call with comments. information, the these risk Sir, including update quarter CEO,

Steven Humphreys

Thanks, operator, all and joining thank us. you for

company's second future. The the goals the main the to accomplished build for base X business our for quarter long-term

be Identiv our of business First, the plan growth. future business rigorous Kirsten for core Newquist, President and made understanding IoT and CEO soon our IoT progress to of great developing a

context track. the of could team transaction the total divest the our but and results one above the to over and leadership projected, to distracting of IoT across I'll on revenues forward company of and able deliver the all for identity delivering consensus performance be cleared last turn business continued the that third, for physical consensus the exceeded QX the estimates, to a in to security reader security results teams. going Kirsten's our support to we the lines. address keep estimates in our our and as Kirsten. Execution revenues Second, pre-closing transaction strategy organization. any of process hurdles were solid call state needed then We And business close despite being Identiv the through combined

As the enabling focus strategic our deliver a to for on been preparations the growth through we closing has this Vitaprotech partner, management plan transaction, executing supportive progress revenue. the to of

Just as businesses sure tightly the healthy managing we're important, cash to our be transition. are during

in we our a As a internal cash finished than result, forecasts. position better

and phaseout business. Operationally, as we business to margin pressure to the lower-margin had we our due Thailand, some of temporarily some mix absorption the by gross offset in accelerate move lower-overhead Security partly

transaction the of regulatory cleared we our executed on step received approval, shareholders the voting we've for transaction. XX% strategic in We've favor each our Regarding vote process, track. Antitrust approval. positive U.K. a among shareholder and And

financials. I'd are well, This going and we're track only operations, onetime CFIUS $XXX is expect and remaining time our the our In fees government communicated expect in decision reported to U.S. net to step business approval. cash GAAP, transaction costs. One as our about operations, earnings is after reported our million discontinued within the Our release, we other physical add about we planned. We're to Upon financials today's and bankers' make clarification, being reader QX and continuing confident on with as accordance closure, businesses. close we've in security IoT taxes, a like now frame regulatory before.

current on financial these over to in further cover but the for her to like you. IoT over discussion, that, update detail in the Now I'd the Kirsten, business. to Kirsten Justin call will turn before

Kirsten Newquist

in and on to the strategic since go-to-market IoT Thank May. you, growth on business the provide made last an good with Steve, we've and spoke we be you to today and progress glad our plans I'm afternoon, update everyone. all

I've spent close and transaction I've into X been the preparing will of at the details that which and our asset much Identiv time the of company. future significant business for diving the provide anticipated IoT deep of to the months, fund growth sale of nearly for capital

our R&D have Singapore to learn their about visited and our offices listen Germany, with in and our sales processes, meet teams, feedback. Thailand I to and

to We talented the of energizing. we for excel some about working opportunity of customers and from the most with and meet technology the areas to hear we and at our also their our RFID and the them allowing people customers have had Identiv, some suppliers, in is industry improve. passion where can where me directly I've

solutions on positive and technical ability produce our quickly testing. received develop for I've prototypes feedback to particularly

some As the more. I've evolved were others as have while know confirmed gotten learned impressions business, to of initial my I've

on core solutions I'll space our our clear understanding update business. IoT discussion of start me is with strong. deeper a that capabilities is With customers, it opportunity IoT for specialty products an to and Identiv's the today's

Going organization forward, most opportunities. we the to need focus and highest sustainable on potential the

selling on of partners. us through the allows and sales those focused primarily RFID serve our industries channel, which is our many and to complement marketing segments, business marketing with core efforts and own Our and

our We to partnership collaborative a customers, are model. with from more relationships channel shifting a strengthening our approach traditional supplier

labels many product customer-driven smart labels liquor authentication for top-shelf new brands consumer auto-injectors engagement. as promising HF development have enhance solution for consumables, opportunities Such surgical We NFC-enabled for and progress. in an to smart NFC-enabled

will the advantage evaluating However, for these a expect the start to and opportunities the sustainable ROI on we business. focus competitive to approach that throughout and from we process development product have we a disciplined strong those more need ensure

this, address maintain each implementing assess engagement. to customer are projects, stage-gate ROI the and at a we and continuous To actively process manage stage, viability

are for development as the as entering accepting process. We well opportunities, of for stage new clear each developing criteria

team. we I diligent structure skilled his was highly-experienced must will work, leader our new in criteria our and projects reassessing gate. When each I these with facility begin competitive meet New at and impressed its stage operations led very we state-of-the-art Thailand, be with design production cost before acceptance RFID and by visited

our quality receiving facility priority, and and it call, including Thailand and of near-term XXXX key progressing is certifications mentioned continue are ISO of urgency. ISO the move our to sense significant progress highest last in second we Thailand we made RFID of Thailand on XXXXX from with quarter As a the that to machines We Singapore this transition earnings throughout our in year. count the X the objective, head we will half for add and production towards

the to We to customers will to XXXX. of these X, Due in we complete track and on support are quarter requirements, into the with the transition continue majority three customers XXXX. of regulatory by Singapore three qualification exception

another and completing We are continuing to discontinuing anticipate XX% this year's volume transition. phase very low-margin line business with of our the out in

to our XX% team business full can of non-GAAP ultimately with achieved expect to gross those we the efforts achieve the higher-margin segments, shift to plus margin business. all for gross reaching we we non-GAAP the gross production Thailand double, productivity, XX%. we over margin XX% on focusing growth almost and XX% a believe By Once our core margin,

Nonetheless, during there physical focus, on do business self-sustaining the physical require achieve capitalize its period. XX-month become stand-alone to and scale the security much remains resources collaboration to business company. for necessary a to business Separating potential team the the from the IoT security with will and transition IoT fully the

external priority and adviser an identify assess areas. business to key We have our engaged current processes

scale to ensure which these the the a areas building foundation address are plan business. have to we We to strong on

This non-GAAP size scale to we gross margin, Although OpEx with and annual million path achieving our current our we the need sales. $XX being our with at strategy breakeven believe leads the to which IoT able XX% we priority, plan. complete key a growth a $XX profile, will costs to be million to to is we publicly should in listed, achieve my of including second associated see EBITDA to business

as rate annual to reach So quickly clear we possible. have as a path this run

that the also strategy mergers, acquisitions. strategic we organic, much and options, expect we such of While be partnerships will other as exploring are

focus to we also scale options, and consider only strong are complementary financially. that accretive not bring these offer but As talent on those we synergies, products, highly intend

strategy X. But so requirements well The to next off I the hand combined our and into the months continuing the business. for to cash guidance provide financial can as operations the the update for of quarter like I before would our X efforts, quarter on the call get Justin he XX details as

Justin Scarpulla

Thanks, Kirsten.

second the with GAAP, as the are report mentioned, we required financials accordance the to company, a combined in XXXX for concluded Steve of we Although as company. continuing quarter operations of

company, of and financials of including the guidance the the IoT business QX Business operations, IoT due business. the for reports provided security discontinued pending combined for the our and security businesses. both Our Since that we as assets physical sale to physical of

the which company purposes, total today's considered have now aggregated comparison release. For non-GAAP also are we in provided earnings results,

XXXX. of our million was customers. result of $X.X revenue quarter The GAAP $XX.X revenue of sales million BLE GAAP in from second in products lower our Our transponder second business primarily for of the one quarter to was IoT compared to our decrease the of year-over-year the XXXX

GAAP July in attributable well XX.X% our Asia, and XXXX. of and gross discussed as in as in in margin primarily XXXX. lower non-GAAP profit XXXX GAAP our and was gross production in X.X% of XX.X%, decrease to facility non-GAAP and facilities margin XX.X%, sales, respectively, resulted margins of which The Thailand underutilization as respectively, Southeast gross opening in the compared was QX QX to

our Kirsten we efforts XX% higher-margin IoT a As achieve for plus mentioned, segments, non-GAAP margin our can growth we believe focusing by on gross business.

were transaction-related administrative research our $X.X in quarter development, and in and from second in operating were quarter and in the XXXX, second the costs. including GAAP GAAP and million the of expenses to XXXX. operating strategic as expenses sales IoT of second general quarter business, million million $X compared Included $X.X marketing

consisting to certain XXXX, adjusted compensation, costs, million from costs of restructuring, were June transaction-related XX, business and our cumulative $X charges million As the $X.X and second operating in in second transaction-related the amortization of depreciation exclude stock-based quarter $X.X severance strategic noncash and IoT quarter XXXX million. Non-GAAP compared as XXXX. the strategic of and expenses to of totaled

business per per or the our and $X.X from in to XXXX was GAAP loss net million $X.XX basic $X.X of XXXX. in or loss diluted QX diluted IoT and of compared quarter net share $X.XX basic share second million GAAP

as our adjusted from Southeast well July our a revenues, negative million result EBITDA primarily quarter business Asia, second in The IoT a was underutilization in the XXXX. decrease the $X.X which of production as IoT in year-over-year non-GAAP resulted the of was opening our our Thailand lower million XXXX of in compared also quarter of to $X.X facility facilities negative Second XXXX.

included full of GAAP appendix non-GAAP information. the provided of today's have presentation, reconciliation also release. In financial which we a earnings is in our to

to results for now second quarter Moving of XXXX. our the aggregated non-GAAP

we and non-GAAP a businesses. Security summary transition complete includes provided have Physical view an summary this IoT aggregated the and of entire this financial quarter, business, to For aggregated provide our

of quarter XXXX. for compared XXXX, decrease primarily non-GAAP to quarter revenue was the million non-GAAP transponder of in the of second aggregated of The million year-over-year result noted. Aggregated BLE as $XX.X the been lower $XX.X products second revenue sales have our in previously would

XXXX, margin XXXX, non-GAAP for the in the in of quarter was the would XX.X% second XX.X% of due mix year-over-year of XX.X% XX% in Aggregated Aggregated in compared Southeast been for The the margin and decrease security to absorption to non-GAAP quarter have would compared lower-overhead of to quarter operations. have business gross quarter been XXXX. our adjusted the second XXXX. Asia second second gross physical

management. been in now compared $XX.X Aggregated $XX.X QX to operating would non-GAAP expense for have million XXXX. to operating Moving XXXX, expenses our QX million

quarter costs. $X.X transaction-related strategic include operating expenses non-GAAP million Second in aggregated

XXXX of to in EBITDA result and quarter a XXXX. Aggregated in loss the lower adjusted margins, in in the XXXX, second quarter a certain quarter primarily compared to exclude been positive negative million previously transaction-related $X.X non-GAAP aggregated would is of non-GAAP of non-GAAP second amortization costs would the compensation and of adjusted the as $X.X second been quarter non-GAAP severance XXXX Aggregated operating and quarter net for compared second loss the been million of EBITDA stock-based adjusted $X.X in of have in second to depreciation $XX.X of XXXX. $X XXXX. have revenues second the quarter This expenses, Aggregated million consisting million million the of restructuring, described. to have noncash a and of adjusted change net million charges, strategic would $XX.X and compared

a provided financial the non-GAAP have in earnings adjusted to release. included which also our reconciliation is non-GAAP In appendix presentation, of of today's we information, full

are to liabilities which Turning our liabilities while now the as and Security separate and to as related and balance business and sale. our labeled items business, related assets IoT current reflects assets held liabilities sheet, for to reported the noncurrent Physical being assets line

XXXX. decrease a restricted QX cash December $XX exited in million We XX, with since cash, XXXX cash, of equivalents million $X.X and

our to Now expectations transaction. discuss to sale related the asset

net and transaction adjustments, for million. taxes, be on fees we Assuming most other costs the as estimates to based recent currently banker closes expect asset sale onetime anticipated, $XXX and our approximately proceeds

transaction extinguishing It existing be is we which the with will repaid facility, closes, worth that be noting once our will cash. credit

closing, upon use in is over next million income expected interest addition, of In our cash $XX of the to $XX XX million. net the net months, range

filing, reconciliation cash our be In XX-Q providing flows. will full we of year-to-date the a

we completeness, balance sheet For in appendix today's have release. of the the included full earnings

Lastly, our financial outlook.

million. range IoT we expect million. million QX the $XX third as IoT If not expect our currently range physical and quarter, does be close the security $X.X of million to to $XX For end transaction anticipated, from XXXX, be we the to businesses in to business prior revenue aggregated our of the the in from $X.X to strategic revenue of

to I'll Kirsten. concludes the discussion. financial call pass the This back you, now

Kirsten Newquist

Thank Justin. you,

I'd we are strategy, are the with strategic dive So horizons. There that three our longer-term financial with our progress and medium context, plan. pillars covering into to short, like making growth to

The partners our first business. leveraging set core customers, portfolio pillar our existing grow product ensure channel. channel is and is for to have we this strategy in to the broad a near-term about Fundamentally, growing clear that of focus

our We opportunity with is we set market and are relationships, We the supporting. partners portfolio our within our joint expand currently share customers strengthening our there ample customers. partners products supporting think applications current these to of channel efforts grow are to marketing and our and to adding customer with

Dual NFC, product focus HF, be BLE. and to Frequency, continues Our

requiring for We rather logistics also for where where the not and UHF built but These expanding a applications applications designs. cases competitors UHF, to specialty and their be will use include we our build advantage. applications can our thoughtfully differentiate retail evaluating are leadership, ourselves portfolio have new competitive high-volume, or are specialized low-cost

new identified. strengthen applications continue technology also this BLE will for to as our We capability are

we product important in As IoT core I mentioned, the execute development such these successfully the profitability our business. new underway our initiatives growth have of on we several be customer-driven and to pipeline, product intended as process, will as ensure stage-gate development driving improved programs future

the of For evaluating highly-engineered a high-margin medium the into where term, be we time our focused market are pillar, high-value the growth outside the introduced health address high-growth needs care, with solutions driving in second in frame shorter we health and can customer on customers. can segments that via care

we've CAGR three strategy smart a expansion could Those doing place. had and traction are retail with areas inlays a partners dive the We high-value segments RFID our years. specialty over for smart devices, initial channel go-to-market expected direct where deep XX% alone believe retail. through to three packaging is X on high-growth and and we in significant see proactive specialty in are applications over next be growth home The some

pleased time the founder associated spending I these with the to out our am in be Manfred of TAMs, to our and key strategy Board are estimating segments. effectively ecosystems, compete underlying mapping areas. closely We map Adviser, in Smartrac, in needs unmet Rietzler, the how support drive development these can of success understanding road and and to support Identiv these the working

our strategy strategic is within our high-value growth transformational Finally, the for care, third industries. medical longer-term device pillar and health pharmaceutical applications

Laura and this Rick health X have growth are who in area, care, Dr. closely Board roots Angelini. Kuntz working For Directors we deep our important with strategic

we worked and We applications firm, help care-focused identify the health greatest long-term evaluate advantage. for have broad TAMs advisory also competitive have the to us where IoT whom engaged care-related range Fletcher potential those and in with a I've Spaght, health potential of the a past

married X diagnostic areas: and that priority of for billion X globally authentication narrowed have consumables our or assembly devices. consumables calibration With equipment medical our up verification. assessment, genuineness, high-value with to use technical year for Fletcher higher-value analysis and medical first, focus we These authentication require input, test market Spaght devices per over

to HF consumables there customized fit technology. several and an and have encoding this through We be as expand. diagnostic excellent appears our application, HF today to our services good inlays for a surgical of ventilator, providing for commercial opportunity programs and We see authentication

Labels adverse as recalls, expiration and taggable includes are as syringes and of potential well the and to injectable potentially prefilled inhalers setting. for overall companies pharmaceutical provides delivery It and and drug smart dates medication other can patient, the improved devices. information safety easier events. counterfeiting, billion drug management Globally, there Second, with NFC-enabled auto-injectors These dosing reduced provide important labels X.X and in units between for home delivery inhalers. adherence, over devices

third condition cold and The area, chain tracking for industry. pharmaceutical monitoring the

increasing. support for units information functionality chain tracking BLE develop have and devices and cold units that the The to X high the the pharma, We is believe biologics to address monitoring annually. is partnered chain taggable a and billion and volume real-time more rapidly million of the need the X we can solution within Given provide of between cold needs. additional global these growth in

clinical The are chain. the samples BLE real-time there that U.S. also In monitoring year. similar could tests location over devices condition fourth every cold lab done clinical our the area, leverage pharmaceutical to billion and require X alone,

explore Opportunities success assured, our growth when As clarity for the offers entity gain areas the investors. for are the have invest inorganic we strong significant also new be go-to-market segments for and compelling will these if on a in Identiv's we combined our capital on intend only we and compelling carefully confidence develop and and growth potential in and further return a investment. synergies prioritize for there considered return will to high-value opportunities Rest we plan. our Identiv,

excitement want In IoT transformational my this through about reaffirm period. leading I the team to closing,

strong grow a foundation, have the the of to focusing do to opportunities the we lot on a and highest-potential business. has We work are ensure business to

and clear on focused call disciplined with us. more in investors growth that comprehensive plan coming in months. capitalize next for I and tremendous earnings opportunity meeting look the the we sharing a on can a execution, vision, forward to confident before profitable details our and I'm with November

With I'll Steve. that, back turn to the call

Steven Humphreys

won't stand excellent and have. Thanks, personally any their further add found I'm take and we leadership have business such thankful an the comments opportunity very Kisten. leader since on own. I realize tremendous our forward comments Kirsten's to to

to Kirsten call, also all the I my support supporter forward. to people, for as takes earnings investor our thank it and customers. partners of Since thank like forward substantial look be business remaining will team as your and I'd this and last a and her you

like Operator, please for With open open call queue. your to question the the questions. that, I'd

Operator

[Operator question Lake Street. is Instructions] Your from first Schmidt with for today Jaeson

Jaeson Schmidt

You noted meet related phasing the low-margin just there But the curious, out current criteria? pipeline, looking implemented any probability and been XX% as year's pipeline that to don't volume are of projects within that this deem low at you newly once business. you've

Kirsten Newquist

Yes.

through So use continuously, development, required what's or right? to you promising. more start, them. they as discontinue new want assessing I look development product mean pipeline And as what we're requirements learn or do case we either the that about go is things oftentimes, the pretty projects they But the

So we will normal. up. that certainly taking we're the to decide setting be meet and don't the And some look pipeline, because that's very there's criteria at good that certainly we're a current discontinue they ultimately

that that we course we of -- it. and that as know, they're amount have make want development the I new very disciplined criteria any of a do them. we stop not mean the pipeline, as you soon resources to going putting of sure, to that's will meet just kind on product We fallout being we're over certain

Jaeson Schmidt

as that that a get sense. makes EBITDA follow-up, breakeven you does That And target, Okay. million that that to million assume $XX XX% gross on to can that Or above XX%? in a margin XX% $XX does assume a then range? clarification just

Kirsten Newquist

getting right XX%. that It close assumes to

Operator

from today with for is question Riley. next B. Your Stacy

Unknown Analyst

questions. Ellis, asking I'm some the Craig for of regarding

first, if bit. your your think wondering half Thailand to of if second at that we on we Kirsten break the forward it So plans based or If down the going about do little was the that looking going sequentially you Do Steve, facility expect for When you maybe, strategic could can near how we're a headcount, year? I forward? go some down the of maybe moves OpEx? break up for the

Kirsten Newquist

Yes.

So the in we're We're mode we're how terms transition in getting of in place. many overhead the ramping up Thailand. training the staff. expense, in And we're of the certainly staff still

bit ramping So has we're a we to down ahead still in ramp at in when that Singapore. unfortunately, of of be Thailand. can definitely process up the And phased, little

things completing have a customers we reduction. of going the supporting year, you'll still couple at see And see going where this the are to grow. quarters steady into to to transition we'll end next only X a start of then year are So and continue we these as

Unknown Analyst

going and the it. we your forward. regarding helpful. the quarters next And Got versus run quarter? going just How when long-term mitigating ask burn we're account the follow-up meaning I That's flow you of think And cash the that for plan to can have of if whether or noncash into more what if do short-term, forward over a play midterm few current that we business?

Justin Scarpulla

to $XX our I higher take $XX out This guide noticed million that. can was the We is time and this you Justin. guide one. prior million put than that

So are. we've and look taken XX a months pencils our what next at our sharpened

far X As XX linearity months, over linear going the to be that's quarters. next the next the over pretty as

$XX is the to looking months. going for evenly quarterly think million I guide, pretty million that over be So a $XX if next to you're XX spreading pretty

Was answering follow-up there that's a I think that? to your question.

Unknown Analyst

about that about understand going how we Identiv us when level? the growth with go do Yes. want how to can the that. about think going And both forward, to that just Justin, expect answering about If should is we thank back to business? maybe can forward? we we Or building do and And you, the with go sequential we think for -- Premises, that last normal forward help question seasonality you the

Justin Scarpulla

Yes.

is the company within part all forward, separate quarter business if of physical will going a those think this security planned, I Vitaprotech. of under be

go-forward out, reporting So everything our if you put business. IoT look just is at we we're under release our now press

to security I'm think what a the we because looks I for IoT identity side, side, answer from what from QX. So yes, going But QX is like see, the that It's not side. go-forward our revenue I'm is. and physical the out down -- going slightly our going -- you'll to go-forward put

So physical talking you security to a due federal a when past saw you're most business, in was seasonality that quarter our and year-end, of side about is third the lot going the away. spike of within that combined

So of when you're looking IoT you historically a a at that it seen perspective, be lot pure Identiv from seasonality going will combined that a company away. for had as

did in. the QX So we give guide. I would factor one that

think seasonality that's I to answers has seasonality, your QX on the that I question Like in spike historically, been our business. because our security quarter. related said, physical

Operator

We Humphreys question-and-answer the Steve closing now over I the have session, turn the reached call to remarks. will end and for of

Steven Humphreys

Thanks, to all of business transaction. with continue and as you Kirsten's on certainly you line joining evening. and KPIs thank update and the course, for this described, especially time operator, closure and for on all us the the progress Okay. our We'll progress of

to any you Investor out please questions, reach have Relations If our IR@identiv.com. at

and joining a for very thank good again So you all us, have evening.

Operator

This concludes and you participation. at you may Thank time. your for today's disconnect lines your this conference,

Identiv (INVE) 8 Aug 242024 Q2 Earnings call transcript