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

Thanks, operator, and good afternoon to all of you. Welcome to our earnings conference call for the third quarter of 2026, which marks our first as INVE Technologies. I'm James Greenwell, serving as interim CEO of INVE Technologies. It's a pleasure to speak with you today regarding the path ahead for INVE. I came to the company with a clear mandate from our board: to carry out our physical AI strategy and to grow INVE Technologies into a disciplined, high-growth enterprise AI software operating company. As some background, I have spent more than 30 years building, scaling, and running technology businesses in SaaS, advanced manufacturing, and regulated industries. Throughout my career, I've concentrated on executing with discipline, expanding recurring-revenue businesses, and completing strategic acquisitions and integrations. In my early years at DecisionOne, I contributed to revenue growth from $100 million up to $850 million, backed our oversubscribed $110 million IPO along with the $975 million acquisition that followed, and over four years closed and integrated upwards of 40 acquisitions. During my time as chairman and CEO of Datria Systems, we brought to market sophisticated supply-chain software that had originated at Lockheed Martin. We developed enterprise SaaS solutions with strong retention and then completed a strategic sale in a roll-up to Intelligrated, a company Honeywell subsequently purchased for $1.5 billion. Lately, in my roles as president of SpotLite360 and CEO of Spectrum Labs, my focus was on upgrading operating infrastructure, growing gross margin, and linking IoT hardware straight into software workflows. Next I'll cover recent operational milestones and how we're returning capital to shareholders. After that, Ed Kirnbauer, our CFO, will provide the quarterly financial review. Then I'll explain our growth strategy for building a physical AI SaaS operating company; on September 15, 2026, we completed the sale of our IoT business to Trackonomy, receiving $50 million in preferred equity in Trackonomy as consideration. The transition services agreement—our TSA—that we established back then is moving forward and still on schedule to enable the complete operational handoff by the end of 2026. Through this deal, our balance sheet became simpler, and we created a tight strategic alignment with a truly innovative physical AI company on the global stage. This week brought a definitive strategic partnership with Trackonomy; that agreement puts our commercial relationship on a formal footing so we can deploy Trackonomy's physical AI platform throughout the software businesses we acquire. I'll go into the commercial terms of this partnership in greater detail after the financial review; at this point I'll turn to the return of capital initiative. We're actively following through on our promise to give capital back to INVE shareholders. Back in November 2024, the board gave its initial approval to a stock repurchase program worth $10 million. During Q4 2024, we bought 463,779 shares on the open market, spending roughly $1.9 million. Then in June 2026, when we announced the asset sale, the Board raised the size of INVE's repurchase authorization to $40 million—an increase of about $32 million on top of the roughly $8.1 million that was left under the original authorization. That step up shows the Board's confidence in INVE's intrinsic value and our focus on delivering tangible returns to shareholders. We resumed open market purchases in August 2026, and by September 30th we had repurchased 611,144 shares for a total of $1.8 million. All told, between the initial authorization of the stock repurchase program in Q4 2024 and the end of Q3 2026, INVE repurchased roughly 1.07 million shares in the open market, with total consideration paid of $3.7 million. On October 21st, we launched a modified Dutch auction tender offer of $20 million for our common stock, at a price range of $2.85 to $3.40 per share. That offer closes at 5:00 P.M. Eastern Time on November 19th. Regarding the capital remaining available under the share repurchase authorization, the board remains fully flexible and will consider the most accretive mechanisms after the tender closes. These could include resuming open market buybacks, special dividends, distributions, and/or any strategic options. What matters here is that our capital allocation approach stays balanced — that lets us keep our promise to shareholders and still maintain the liquidity and balance sheet flexibility required to fund M&A and carry out our strategic plan. Ed Kirnbauer, our CFO, will take you through the Q3 financial results in detail, and then I'll return to explain more about how we plan to execute our strategy so we succeed as a physical AI SaaS operating company.

Thanks, James. Turning to Q3 2026: we recorded $3.1 million in revenue, compared with $5.0 million for Q3 2025. The drop versus last year matched our expectations and was driven by lower unit volumes of RFID transponder products. Because the asset sale to Trackonomy closed on September 15, 2026, net revenue for the third quarter of 2026 reflects only activity through that date, making it not comparable to the full prior-year period. GAAP gross margin came in at 18.3% for the quarter, with non-GAAP gross margin at 31.6%, versus 10.7% GAAP and 19.1% non-GAAP in Q3 2025. The primary reason gross margin improved year over year was the shift of production to our Thailand facility. That move produced cost savings along with efficiencies in procurement and production, better utilization of the facility, and the elimination of manufacturing costs associated with our discontinued Singapore operation. For the third quarter of 2026, GAAP operating expenses—including research and development, sales and marketing, general and administrative expenses, and restructuring and severance—came to $8.8 million, and non-GAAP operating expenses were $4.0 million, versus $6.1 million and $4.5 million, respectively, in Q3 2025. The increase in GAAP operating expenses year over year was driven primarily by higher costs related to the asset sale transaction that closed in Q3. The decline in non-GAAP operating expenses compared with a year earlier shows how we keep holding the line on cost management throughout the company. For the third quarter, GAAP net income came to $0.6 million, equal to $0.02 per basic and diluted share, compared with a GAAP net loss of $3.5 million, or $0.15 per basic and diluted share, in the third quarter of 2025. Driving that gain was mainly the $6.1 million we booked on the asset sale to Trackonomy, together with strategic transaction-related costs that rose year-over-year and greater stock-based compensation expense tied to accelerated vesting of RSUs in connection with closing that asset sale. After our preliminary results came out, we booked a net gain of $1.8 million tied to the dissolution of a foreign subsidiary, and that produced net income for the third quarter of 2026. For Q3 2026, the non-GAAP adjusted EBITDA loss came in at $3.0 million, versus a loss of $3.6 million in the third quarter of 2025. That smaller non-GAAP adjusted EBITDA loss stemmed from keeping a tight rein on operating expenses as we carried out the company's strategic initiatives. In the appendix of today's presentation, we've laid out a complete reconciliation of GAAP to non-GAAP financial information, and that same reconciliation appears in our earnings release. Turning to the balance sheet — we ended Q3 2026 with $87.1 million in cash equivalents and restricted cash, which reflects $32.6 million of cash used during the quarter. That Q3 cash usage included $23.4 million paid in the asset sale, subject to Q4 adjustments for working capital and other post-closing items, along with $2.2 million in transaction-related payments and $1.8 million spent buying our common stock on the open market. Our balance sheet remains strong, and we finished the quarter with $81.4 million in working capital. A full reconciliation of year-to-date cash flows is available in our 10-Q filing. Also, the complete balance sheet appears in the financial tables of the earnings release we issued today. Last, I want to cover capital allocation and how we expect to use cash. After the September 15th sale of our IoT business, we have no commercial operating revenue right now. Because of that, we aren't giving forward-looking revenue guidance at this point. INVE Technologies is moving to a new physical AI strategy, centered on buying and integrating high-value enterprise software to fuel our next stage of growth. To carry out that strategy, we expect to put roughly $30 million toward targeted SaaS acquisitions. Starting in 2027, our go-forward plan sets aside approximately $12 million-$15 million to cover operating expenses and public company compliance costs over an estimated three-year period. That wraps up our financial review. I'll hand the call back to James now.

Appreciate that, Ed. For the remainder of my comments, I want to cover what lies ahead for INVE Technologies — the opportunity in our market, how we'll pursue it, and the operating model we intend to run. INVE Technologies is moving in a direction that's both focused and opportunistic. Our mission is to provide real-time, verified intelligence for the operational workflows that count the most. The thinking behind our model begins with one core operational fact: physical assets require a voice. That voice today is supplied by ground truth IoT sensor data, which captures measures like temperature, humidity, moisture, G-force, and assembly line delay times. Once physical world data runs directly into intelligent software workflows, enterprise applications move past manual tracking and turn into automated, transparent operating systems. Generative AI is reshaping workflow software for enterprises. Old-school forms, checklists, and separate SOP platforms face margin strain, because AI tools are able to automate routine admin workflows quite fast. On its own, though, software can't independently confirm ground truth data out in the physical world. Plenty of systems continue to rely on manual data entry, self-reported checkboxes, and audit trails assembled after the fact. When it comes to critical, heavily regulated sectors, manual attestation generates both operational and regulatory liability. Regulators, insurers, and enterprise customers are increasingly asking for continuous physical proof that is tamper-evident. That's exactly the role physical AI and intelligent enterprise software play. Software supported by verified, real-time data from the physical world delivers workflow transparency, preserves pricing power, and fuels long-term customer retention. The foundation for our new physical AI strategy comes from our strategic partnership with Trackonomy. Each day, Trackonomy orchestrates over 20 million shipments for global enterprises in logistics, aviation, healthcare, defense, and retail, spanning more than 55 countries. Through our definitive strategic agreement, Trackonomy becomes our advanced physical AI technology partner, providing the physical data engine, site infrastructure, and hardware deployment; this allows our acquired software businesses to integrate Trackonomy's Sentient platform, smart BLE labels, and sensors straight into their applications under our strategic terms. Such integration builds a structured data layer from verified real-world operational inputs, letting our acquired SaaS businesses roll out premium physical AI offerings aimed at expanding existing customer value and improving margins. To make that vision a reality, we're actively going after acquisitions of established enterprise software businesses, with the goal of assembling an integrated operating platform. The kinds of companies we're looking for have durable recurring revenue, healthy gross margin, strong customer retention, and an underlying reliance on physical world verification. Our pipeline covers compliance and regulated sectors—worker safety, food safety, pharmaceutical logistics, and environmental monitoring among them—while we're also expanding into broader enterprise software, where physical custody and operating conditions dictate business outcomes. Companies we acquire are expected to keep their brand identities, product roadmaps, and customer relationships. At the same time, INVE anticipates centralizing corporate G&A, managing finance, legal, human resources, IT, and public company reporting at the corporate level. The aim here is to take away administrative headaches for the companies we've acquired and generate operating leverage. Target opportunities are being actively assessed by our corporate development team; we've set clear screening criteria and are looking at small to mid-sized businesses in our priority vertical markets. Acquisitions will be financed through a careful mix of cash and equity under our plan, and we'll preserve the flexibility to form strategic relationships when that makes sense. Completing our first deal remains a leading priority; in closing, as we move toward 2027, INVE Technologies has solid fundamentals in place to execute our physical AI strategy and succeed. Our balance sheet carries no debt and we hold cash for strategic acquisitions, an active capital return program is underway, we have valuable equity ownership, and we have a strategic commercial partnership with Trackonomy; this focused operating strategy can scale our physical AI enterprise software platform. I'd like to express gratitude to our employees, to our partners at Trackonomy, and to our shareholders for their ongoing support as we build INVE 2.0. With that said, I'd like to open up the call for questions. Operator, please open the question queue. Okay, thank you, operator. That brings our comments for today to a close. Thank you, everyone, for joining.

That brings us to the end of INVE Technologies' call, and you're free to hang up your lines now. Thanks for joining us.