Identiv, Inc.

presentation of its third quarter 2024 earnings call. My name is Tom and I will be your operator this afternoon. Joining us for today's presentation are the company's CEO, Kirsten Newquist, CFO, Justin Scarpulla, and Board Chairman, James Ousley. Following management's remarks, we will open the call for questions. Before we begin, please note that during this call, management may be making references to non-GAAP financial measures or guidance, including non-GAAP adjusted EBITDA, non-GAAP gross margin, and non-GAAP operating expenses. In addition, during the call, management will be making forward-looking statements. Any statement that refers to expectations, projections, or other characteristics of future events, including future financial results, future business and market conditions and opportunities, and future plans and prospects is a forward-looking statement. Actual results may differ materially from those expressed in these forward-looking statements. For more information, please refer to the risk factors discussed in documents filed from time to time with the SEC, including the company's latest annual report on Form 10-K and quarterly report on Form 10-Q, as well as our third quarter 10Q once filed. Identiv assumes no obligation to update these forward-looking statements. I will now turn the call over to CEO Kirsten Newquist for her comments. Ms. Newquist, please proceed.

Thanks, Operator, and thank you all for joining our earnings call, my first as CEO of Identiv. On September 6th, we completed the sale of our physical security business to Vita Protect. Identif has now transitioned to focus solely on building our IoT business and developing and supplying specialty RFID and Bluetooth low-energy solutions to our customers. The transaction net proceeds are anticipated to be approximately $135 million after taxes, transaction costs, and other one-time costs. The proceeds significantly strengthen the company's financial position and also allow us to fund future organic and M&A-driven growth of our specialty IoT business. With the closing of the transaction, we made significant progress on the development of our strategic growth plan in the third quarter. We have finalized our strategy and go-to-market plan while we continue to focus on strengthening our relationships with our channel customers and partners in the core business. After I discuss our third quarter results, I will be introducing our strategic framework and the key focus areas for driving long-term growth. Turning to our third quarter results, our quarter three net revenue was $6.5 million, slightly above our previously announced guidance. Pressure on gross margins remained due to the dual manufacturing overhead costs that we are carrying during the transition from Singapore to Thailand. As previously discussed, the transition of RFID and BLE production from Singapore to our state-of-the-art facility in Thailand remains a key near-term priority. Our highly experienced operations team is making great progress toward this objective as we continue to move machines and add headcounts in Thailand. We expect nearly three quarters of our current volume will be transitioned to Thailand by year end. For three of our customers, we expect production will continue in Singapore into the first half of 2025 as additional time is needed for qualification and regulatory requirements before making the transition. Two of those customers are expected to move their production in the first half of 2025. Discussions with the third customer are ongoing. This particular customer represents roughly 10% of our volume, but has historically been one of our lowest margin customers. We continue to assess whether the transfer of those products to Thailand is justifiable from both a business and a long-term margin perspective. We continue to anticipate the non-GAAP gross margin of our core business to almost double, reaching 26% to 28% once all production has been transferred to Thailand and the team achieves full productivity. In the long term, our goal is to achieve a non-GAAP gross margin of 35%. One of the aspects of that identity that is exciting to me is our ability to innovate and design technically sophisticated IoT devices. To that end, our new product development pipeline, NPD, remains robust. We are currently supporting numerous active projects, both customer-driven and internally driven, in response to market needs. In the third quarter, we added new projects, such as highly specialized BOE inlays to support cold chain monitoring for logistics and compliance, NFC smart labels for pharma and medical devices, and UHF sensing inlays for aviation. Additionally, projects that we have previously discussed continue to advance, such as authentication solutions for surgical consumables, smart labels for auto injectors, and smart labels for top shelf liquor brands. An important aspect of growing our core channel business is developing and maintaining strong partner relationships. Many of our partners bring new opportunities, like our chip suppliers, NXP, STM, and EM, and industry groups such as the NFC Forum, Axia Institute, and AIM are driving knowledge and adoption of RFID solutions, and our participation enhances our visibility in the market. We recently announced a new strategic partnership with Inplay, a wireless chip provider, for BLE-based solutions. The initial focus of this collaboration will be cold chain monitoring for maintaining temperature compliance in the food and logistics industries. Future applications may expand to industrial automation and healthcare. We see BLE technology as an important next-generation technology, enabling new and more complex IoT applications fueled by the growth in BLE devices. Through our relationships with Williott and now InPlay, we have developed design and production expertise to be a market leader in the BLE category. In summary, the third quarter was transformative for Identiv. We successfully concluded the asset sale transaction and now have a strong cash position to drive future growth. We have a clear vision of where we are driving the business and a strategic plan for how we are going to grow. The transition of production to Thailand is on track, and our NPD pipeline remains strong. I'll now hand over the call to Justin to provide the details of our third quarter financials.

Thanks, Kirsten. As Kirsten mentioned, the third quarter of 2024 was pivotal for Identiv. We were able to complete the sale of our physical security business, providing significant working capital. This is key as it allows management to focus solely on building our IoT business. Concurrently, in Q3, we were able to make significant progress towards our strategic growth plan and the transition of production from Singapore to Thailand. Third quarter 2024 revenue was $6.5 million, $0.4 million above the upper range of our guidance, and a decrease of $5.2 million compared to the prior year period. The decrease in GAAP revenue year over year was primarily the result of lower sales of BLE transponder and mobile products. Third quarter GAAP and non-GAAP gross margin in Q3 2024 was 3.6% and 9.3% respectively compared to GAAP and non-GAAP gross margin of 11.2% and 14% respectively in Q3 2023. The decrease in gross profit margins was primarily attributable to lower sales, as previously discussed, which resulted in the underutilization of our production facilities in Southeast Asia. As Kirsten also mentioned, by focusing our growth efforts on higher margin opportunities in healthcare and other high-value segments, we believe we can achieve a long-term 35% non-gap gross margin. GAAP and non-GAAP operating expenses for the third quarter of 2024, including research and development, sales and marketing, and general and administrative costs, totaled $9.8 million and $5.1 million, respectively, as compared to $4.6 and $4.1 million, respectively, in Q3 2023. Third quarter GAAP operating expenses included $3.6 million in strategic transaction-related costs and $1.1 million in stock-based compensation. Third quarter GAAP net loss from continuing operations was $9.3 million, or $0.40, per basic and diluted share. Compared to GAAP net loss from continuing operations of $3.7 million, or $0.17, per basic and diluted share in the third quarter of 2023, The year-over-year increase in our net loss was primarily related to our strategic review costs and an increase in stock-based compensation costs incurred in Q3 2024. Non-GAAP adjusted EBITDA loss for Q3 2024 was $4.5 million compared to $2.3 million in the third quarter of 2023. The increase was primarily the result of our lower year-over-year IOT revenues which also resulted in the underutilization of our production facilities in Southeast Asia. In the appendix of today's presentation, we have provided a full reconciliation of GAAP to non-GAAP financial information, which is also included in our earnings release. Turning to the balance sheet, we exited Q3 2024 with $145.7 million in cash, cash equivalents, and restricted cash. an increase of $121.4 million since December 31, 2023. In the nine months ended September 30, 2024, the increase in cash was a result of $143.4 million from investing activities, primarily as a result of our strategic transaction, offset in part by $11.7 million used in financing activities, which included 10 million for the repayment of our credit facility and 1.6 million in taxes paid on the settlement of RSU releases and 10.4 million used in operating activities. Our working capital exiting Q3 2024 was $147 million. We strengthened our balance sheet, positioning us to pursue our organic and inorganic growth initiatives, Kirsten will be discussing our overall capital allocation framework, including our $10 million share repurchase program announced today. As of September 30th, our expected net operating cash use over the next 12 months is in the range of $14 to $16 million, excluding an estimated tax payment of $7 million related to our asset sale and any share repurchase activity. In our 10Q filing, we will be providing a full reconciliation of the year-to-date cash flows. For completeness, we have included the full balance sheet in the appendix of today's earnings release. Lastly, our financial outlook. For Q4 2024, we currently expect revenue from our IoT business to be in the range of $6.0 to $6.3 million. This concludes the financial discussion. I'll now pass the call back to Kirsten.