Identiv, Inc. (INVE) Earnings Call Transcript & Summary

Appreciate it, operator, and thanks to everyone for being on our Quarter 3 2025 Earnings Call. As we go through the results for this quarter, I'd like to point out that Perform, Accelerate and Transform — our strategy — still shapes every single thing we do, whether that's taking care of customers, growing our pipeline, pushing innovation and commercial momentum in high-value segments, or meeting our financial commitments. That strategy stays at the heart of reshaping this organization and building durable value for shareholders. I'm happy to say that sales in quarter 3 came in on target with guidance, while each of the other key financial metrics came in above what we expected. What stands out especially this quarter is our better gross profit margin, which shows the early payoff from wrapping up our 2-year shift of production out of Singapore into the brand-new, state-of-the-art manufacturing facility in Thailand; this marks the first quarter where every bit of our production happened in Thailand. That's a major milestone, and it has substantially brought down our cost structure, boosted efficiency and scalability, and put us in a strong position for margins to keep growing. We anticipate additional margin expansion across the coming few quarters as we finish shutting down the Singapore site by year-end and the Thailand team gets to full productivity. Ed Kirnbauer, our CFO, will now walk through our quarter 3 financial performance in detail, and after that I'll come back to talk more about how we're progressing on our strategic initiatives.

Thanks for that, Kirsten. Turning to Q3 2025, revenue came to $5.0 million, landing inside the guidance range we had given earlier, versus $6.5 million in Q3 2024. That year-over-year drop was something we anticipated, and it resulted from softer sales following our exit from lower-margin business earlier in the year. Gross margin on a GAAP basis for the third quarter was 10.7%, while non-GAAP gross margin came in at 19.1%, versus 3.6% GAAP and 9.3% non-GAAP in Q3 2024. A number of items fueled that gross margin improvement: reduced fixed manufacturing overhead and direct labor costs associated with our discontinued Singapore operation, better utilization at our Thailand manufacturing production facility, and $0.2 million from sales of fully reserved inventory. On our August call, we mentioned that manufacturing of RFID inlays and labels in Singapore had been completed, and that requalifying customers at our Thailand site was also done, both before Q2 2025 came to a close. At the Singapore location, shutdown activities moved forward as planned and should be largely complete by year-end. In Q3 2025, operating expenses on both a GAAP and non-GAAP basis — covering R&D, sales and marketing, and general and administrative costs — were $6.1 million and $4.5 million, respectively, versus $9.8 million and $5.1 million, respectively, in Q3 2024. The year-over-year reduction in GAAP operating expenses was mainly the result of lower costs related to strategic review efforts that were recorded in 2024. Our non-GAAP opex declined because leadership is intentionally steering resources toward activities that generate organic growth, consistent with the P-A-T strategic framework we've described. For continuing operations, our GAAP net loss in Q3 was $3.5 million, equal to $0.15 per basic and diluted share. In the third quarter of 2024, a year earlier, that same figure was a loss of $9.3 million, or $0.40 per basic and diluted share. What caused the improvement? Several things. Strategic review-related costs fell to $0.4 million in the third quarter of 2025, from $3.6 million in the third quarter of 2024. Interest income increased by $1.1 million versus last year. And we booked an income tax benefit of $0.8 million in the third quarter of 2025, compared with an income tax provision of $0.4 million in the same quarter of 2024. Our non-GAAP adjusted EBITDA loss in Q3 2025 was $3.6 million, better than the $4.5 million loss recorded in the third quarter of 2024. That smaller loss stemmed primarily from reduced fixed manufacturing costs at our Singapore facility, improved utilization of our Thailand production plant, and management's continued disciplined approach to allocating operating expenses as we execute our P-A-T strategic initiatives. A full reconciliation between GAAP and non-GAAP financial information is included in the appendix of today's presentation and also appears in our earnings release. Let's move on now to the balance sheet. Also, during the quarter, $500,000 was recorded as of 09/30/2024. At the conclusion of Q3 2025, cash, cash equivalents and restricted cash came to $126.6 million. In that same third quarter, cash of $3.1 million flowed out the door. When you tally everything up, net cash used in operations across the twelve months beginning after September 30, 2024 — the date Q3 2024 ended — totals $13.4 million, which sits comfortably inside the $13 million to $15 million range we had previously outlined. At Q3's close, working capital stood at $135.4 million. A robust balance sheet remains something we possess. A full reconciliation of year-to-date cash flows can be found in our 10-Q filing. And so nothing is left out, the complete balance sheet is included in the appendix of today's earnings release. To wrap up, I'd like to go over our financial outlook. That outlook rests on how the market appears at present and what we expect, including the macroeconomic environment and customer demand. Based on where things stand as of this call, for the fourth quarter of 2025, we currently expect net revenue to land somewhere between $5.4 million and $5.9 million. That concludes the financial portion. Kirsten, I'll hand the call back to you.

Thanks, Ed. You just heard the numbers we reported, and they landed either right at or above the guidance we gave — a real step forward as we continue executing our Perform, Accelerate and Transform strategy. We know more work remains before we reach our larger financial objectives, yet the tangible progress on each pillar leaves us confident: running with discipline, gaining traction in our high-value segments and ultimately reshaping the company, we're building a more solid foundation for growth that lasts and stays profitable. So let me take you through how that progress is unfolding across the organization. Perform — deliver exceptional results for customers and drive operational excellence. Perform, our first pillar, is about strengthening and growing our core channel business. Toward that end, we're prioritizing higher-margin opportunities, expanding gross margins through our Thailand transition and executing our new product development, NPD pipeline with added discipline. Our goal is to consistently exceed what customers expect through exceptional support, reliable performance and on-time delivery. As I mentioned at the start, we reached a major milestone in our manufacturing transformation this quarter. All of our RFID tags inlays and labels — 100% — are now produced at our new state-of-the-art Thailand facility. We remain on track to complete the closure of the Singapore site before this year ends, which will wrap up a successful two-year transition. Lower manufacturing costs, greater efficiency and improved scalability have resulted from the Thailand facility, handing us a stronger base for ongoing margin improvement. To push operational excellence further, we rolled out CRM and MRP automation programs at the beginning of this year, designed to make key sales and operations planning processes more efficient. Progress has been steady, and we anticipate these systems will be largely in place by year-end, which will reinforce our operational foundation and safeguard availability as we expand. On the commercial side, our pipeline of new opportunities keeps growing, fueled by recently added salespeople gaining momentum across their regions together with our channel partners. Through this year so far, we've converted 18% of that new opportunity pipeline, accounting for nearly 10% of quarter 3 sales, and we anticipate additional gains as this new business continues to scale. On the marketing side, once we finished the transition services agreement, or TSA, with Vitaprotech, we've been rebuilding critical capabilities — deploying Hubspot to enhance lead generation and visibility — and we're getting ready to launch our new corporate website before this year ends. We also kept a strong presence at several major industry gatherings, among them WIoT Tomorrow in Wiesbaden, Germany, and Labelexpo in Barcelona, Spain. Every initiative drew solid customer participation and strengthened our strategic alliances. At Labelexpo, our VP of Business Development, Klaus Simonmeyer, joined Narravero CEO Thomas Rödding to share their views on DPP compliance during an engaging NFC RFID panel at the smart labeling seminar 2025 — a showing that reinforces Identiv's reputation as an innovation leader. And the TSA transition with Vitaprotech is now essentially finished, so we are now entirely independent from the physical security operation we sold off 1 year ago. That's a major milestone highlighting our strategic direction and our move to function as a pure play in IoT and RFID technology. Accelerate. Growing faster in high-value segments, achieved via technological innovation — let's move to the second pillar of our P-A-T framework, accelerate — we are pushing forward 3 particular growth initiatives meant to reinforce our pipeline while generating revenue and margin expansion over the long term. First, growing our BLE technology platform together with capabilities in multi-component manufacturing. Second, chasing growth across 3 high-value applications in health care. And third, generating further growth in 3 high-value applications across consumer and logistics. This quarter delivered meaningful progress in R&D and new product development, especially within our Bluetooth Low Energy, BLE programs. BLE is IoT's next wave, delivering live tracking plus condition-monitoring functions that standard RFID struggles to deliver. From where we sit, the engineering complexity behind BLE smart labels—how they're engineered and how they're produced—lines up closely with our team's strengths, handing us a clear advantage over competitors. We finished the first production runs for both the IFCO BLE prototypes and Wiliot's next-gen pixels. Those represent important advances on two key BLE initiatives driven by customer requirements. Beyond those milestones, we manufactured our BLE shipping label internally, which broadens our customer offerings and bolsters our position in next-gen RFID and multi-part production. Additionally, we established formal agreements with Wiliot — a partnership deal plus a manufacturing one — intended to scale and commercialize that company's next-generation pixels. These Wiliot IoT pixels are small Bluetooth sensors that operate without batteries, gaining power by harvesting ambient radio frequency energy. They enable continuous data transmission — items like temperature, motion, and location — for smart supply chain and IoT use cases. Now to health care innovation: our R&D collaboration with Lilly drew attention in a new white paper we published in September, which demonstrates our leadership in RFID innovation connected to drug adherence and delivery. This clearly illustrates how our technology helps build patient experiences that are smarter and safer. Furthermore, we're progressing with collaborations begun earlier in the year — among them our strategic partnerships with Novanta for medical device applications and with Tag-N-Trac for pharmaceutical cold chain management. We announced a fresh commercial alliance involving TUK as well, bringing our secure NFC tech into children's publishing. With customizable NFC tags, each book links seamlessly to TUK's speakers. What that means is guided audio can begin with no screen, no WiFi, and no extra devices needed. Engineered for toughness and safety, the solution is built to grow across classrooms, libraries, and the home. By giving the next generation of young readers more power, these new interactive books are on sale as of now in Scandinavia, and there are plans to extend into the remainder of Europe. During 2025, we were honored as a winner at the World Beverage Innovation Awards, together with our partners ZATAP by collectID and Genuine Analytics AG, for a smart packaging solution driven by NFC that shields luxury wine makers and collectors from counterfeiting. Receiving this prize in the best technology innovation category underscores our engineering excellence and the cooperative manner in which we tackle smart packaging. Finally, under our accelerate initiatives, we completed in-depth product road maps that line up with our high-value market segments, intended to ensure our innovation and go-to-market work remains closely tied to customer needs and strategic priorities. Multiple of these NPD programs are set to kick off next quarter, and 108 of them are already underway. Transform is entirely about generating meaningful business growth and deploying M&A to build capability so we can prevail over the long term. Expanding via strategic M&A — that is the focus of our third pillar, transform — and it speeds the path to EBITDA breakeven while widening our offerings and strengthening our technical capabilities; alongside Raymond James, our financial adviser, we keep evaluating our strategic alternatives. Now onto metrics. This year we started reporting several new metrics, which allow us to track our progress against strategic objectives. These metrics are still being honed, and we intend to set formal targets in 2026. Regarding the first metric — new sales pipeline and conversion rate — those are the quarter 3 results. This measurement tallies opportunities involving either brand-new customers or accounts we had not sold to for more than two years. At the close of quarter 3, 118 such new opportunities were sitting in our pipeline. We added 46, finalized 28, and converted 7 into sales, giving us an 18% net improvement over quarter 2. When quarter 2 closed, 100 new opportunities were in the pipeline, versus 75 during quarter 1, showing a steady upward trend across the periods. So far this year, 18% of these new opportunities have turned into sales. Moving to NPD projects, this measurement tallies how many active NPD initiatives we have.

These projects are about creating completely new RFID or BLE tag inlays or labels. At the close of quarter 3, we had 17 active NPD projects — 11 driven by customers and 6 driven internally. Among the customer-driven ones, 4 target health care applications and 4 use BLE technology, and that group accounts for the biggest portion of potential volume and steady state revenue. Now for our third metric, NPD project completion. This metric tracks how many NPD projects got finished during the quarter. During quarter 3, 3 customer-driven projects were completed, and 2 of those are transitioning into commercialization. Both were anti-counterfeiting initiatives in the high-end spirits and wine market, and they'll be scaling up in 2026. To wrap up, this quarter brought steady financial performance along with meaningful operational milestones. We met or exceeded guidance, hit 100% production of tags, inlays and labels in Thailand, moved forward on key R&D and commercialization initiatives, and kept making progress under our Perform, Accelerate and Transform strategy. We reaffirm Identiv's commitment to advancing specialized IoT solutions, growing our BLE capabilities, and fully leveraging the strategic advantages of our Thailand-based production. By continuing to execute against our Perform, Accelerate and Transform strategy, we believe we're well positioned to capture future growth opportunities within the rapidly evolving global IoT market. Looking ahead, our priorities are clear. Finish the Singapore site shutdown by year-end, deliver excellent service to our customers while driving productivity and efficiency in Thailand, execute our key new product development initiatives with excellence, grow our commercial and business development pipeline across high-value segments, and position the company for sustained growth and stronger financial performance in 2026 and beyond. I'd like to take a moment to thank our employees, customers, partners and shareholders for their continued trust and support; we're encouraged by our progress, confident in our strategy, and excited about the opportunities ahead as we continue to lead in the fast-growing RFID and BLE markets. With that, I'd like to open the call for your questions. Operator, please open the question queue.

Great work on the gross margins this quarter. I'd like to begin, however, with the top line; for Q4, it appears we anticipate sales rising roughly 11%. So my question is, when we examine the various vectors of the business, whether that's channel or NPD conversion, what's fueling the sequential growth? And what are a few of the pluses and minuses as we consider tailwinds and headwinds going out of the year?

Yes. No, thank you. Let's see; so certainly, we are experiencing a bit of growth from our current channel customers. But I also believe we're witnessing some uptick tied to a few of our BLE projects for which we're seeing added traction in Q4. So it's a pleasant mix of both our perform customers and a few of the accelerate initiatives where we're beginning to see traction quarter-over-quarter.

And if we're talking about BLE, during the prepared remarks you mentioned the advances made with IFCO and Wiliot. Is it fair to say IFCO remains on schedule for shipments at volume during next year's second half? And Wiliot was described before as a customer that could potentially do high volume — definitely smaller than IFCO, but still high volume — so how should we view what Wiliot might make possible next year?

Yes. Let me begin with what you asked about IFCO. Yes, progress is happening. Product development, then, is moving along nicely. As we said, we sent out prototypes built through production that are currently being utilized for proof of concept out in the field. From that, naturally, plenty of learnings will emerge, and those learnings will be applied as we keep refining the design. So that effort is going well. Then regarding Wiliot, over the past 6 months we've worked extremely hard to qualify the product from their next generation; that work is in progress; and during this quarter — and even the prior quarter, since the prior quarter was starting and this quarter continuing it — we'll be sending those next-generation products out into the field. So each represents a good opportunity. Both have us excited, and we're putting in serious effort to ensure we finish developing the IFCO product and then genuinely assist all the various Wiliot customers as they seek to commercialize the Wiliot solution.

Great. And if I could squeeze in one for Ed. Ed, the team did a really nice job on gross margin in the third quarter. With the business benefiting from the full Singapore shutdown in the fourth quarter, with revenues higher, and with some of that coming from the higher-quality revenue basket the company has been prioritizing. Could you talk a bit about what we might expect for gross margins in the fourth quarter? And whether there are any headwinds we should understand.

Thanks, Craig. Yes, in our Q3 numbers, we saw significant benefits from the reduction in fixed costs with the discontinuance of our Singapore operations, from both an overhead cost perspective and direct labor; now we expect that to continue. We are — we will be substantially complete with all shutdown activities in Q4. So we're still working through the remainder there. I don't really expect a full impact on gross margin until we enter Q1 of next year.

All right. What about additional possible gains, like sales mix and shifting toward products with better margins as the mix tilts further toward NPD?

That's something I'll hand over to Kirsten. Still, I'd like to add that beyond this, we have the — we're going to keep lifting margins by raising how much use we get out of our Thailand facility. Yet when it comes to mix?