Identiv, Inc.

Identives presentation of its first quarter 2025 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, Kerstin Newquist, and CFO, Justin Scarpulla. 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 profit, 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, strategies, opportunities, and goals, 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 as well as our first quarter 10-Q once filed. Identif 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 quarter one 2025 earnings call. Strong macro trends continue to drive demand for RFID and next generation technologies like BLE, despite ongoing disruption and uncertainty in the global market. More than ever, companies are benefiting from adding a digital identity to their physical products, unlocking intelligence to address critical industry and business challenges. The rapid expansion of IoT connected devices, increasing regulatory requirements, heightened security and anti-counterfeiting measures, and the growing focus on sustainability are key drivers of this digital transformation. Identif's specialized RFID and BLE tags, inlays, and labels provide for the digital identification of products, enabling physical objects to seamlessly link with the cloud and other digital solutions. This connectivity delivers compelling benefits such as real-time tracking and visibility, enhanced product security, condition monitoring and compliance, and more engaging customer experiences, all especially vital in today's challenging macro environment. While we came in slightly above our quarter one guidance, delivering $5.3 million in net revenue, and our core business remains on track, We anticipate continued market uncertainty and high volatility for the foreseeable future. We are closely monitoring risks related to shifting trade policies and a softening global GDP outlook. Approximately a quarter of our business is exposed to U.S. import tariffs due to our manufacturing footprint in Thailand and Singapore. We are actively pursuing potential tariff exemptions developing a responsible pass-through strategy to protect margins, and preparing for multiple scenarios should reciprocal tariffs resume after the current pause. The potential indirect effect on customer demand, especially in more discretionary segments, is less clear. Justin will speak to this topic in more detail shortly. Now, turning to our first quarter business update. Since the start of the year, we have fully shifted into execution mode of our perform, accelerate, transform, growth strategy, and go-to-market plan. As we've discussed, the objective of PAT is to strengthen and optimize the performance of our core channel business, accelerate our growth through focused key initiatives and high-value applications, and ultimately transform the business into a market leader in specialty IoT solutions. In the first quarter, we welcomed new team members across our sales, marketing, and R&D organizations, adding important capability and energy. We launched our new portfolio of dual-frequency inlays, ID Brain, and advanced several key new product development, NPD, programs, and business development initiatives in support of our Accelerate strategy. We continued strengthening our relationships with our channel customers and partners, transitioning from a traditional supplier approach to a more collaborative partnership model. Operationally, we made solid progress on the transition of production from Singapore to our lower cost facility in Thailand. Following successful quality audits and the completion of required qualifications, we received formal approval to begin production in Thailand for the final three customers still being served from Singapore. We are now focused on completing their remaining orders and expect to conclude Singapore-based production by the end of quarter two or shortly thereafter. In April, we announced the new strategic partnership with Tagintrack, a full-stack IoT platform provider for real-time supply chain visibility and traceability to develop and bring to market specialized IoT solutions for cold chain tracking within the pharmaceutical industry supply chain. The partnership combines our advanced BLE smart labels with Tag&Track's Relativity SaaS platform, offering pharmaceutical customers an integrated IoT solution that delivers item-level visibility and actionable insights from origin to delivery. We are excited to partner with Tag&Track to advance the adoption of BLE solutions in the pharmaceutical industry. Additionally, yesterday I attended the RFID Journal live show in Las Vegas with our partner, Inplay. As you may have seen in our announcement last week, we are collaborating with Inplay on a new portfolio of BLE-enabled smart labels designed for high-value logistics applications. The upcoming smart label portfolio will be powered by Inplay's IN100 nanobeacon, an ultra-low power BLE system on chip, and is expected to be commercially available in late 2025. We will keep you updated on the product launch of this secure, scalable, and smart IoT solution. In summary, despite a challenging macro environment, we believe our customers continue to recognize Identif's strong value proposition. Our specialized IoT tags, inlays, and labels play a critical role in enabling the digital transformation and addressing key industry challenges. Trends that we anticipate will continue irrespective of tariffs. As a standalone, pure-play IoT solutions company, we are executing our PAT strategic framework with the goal to drive future growth. This includes reinforcing the foundation of our core channel business while expanding through new strategic partnerships and the development of next-generation products. I will share more details on these ongoing initiatives following Justin's review of our first quarter financials. Justin.

Thanks, Kirsten. As Kirsten mentioned, our value proposition remains strong. We are working with several new partners, including Tag & Track, and the completion of the transition of RFID production from Singapore to Thailand remains on track. We delivered $5.3 million in revenue in the quarter, slightly above our previously announced guidance compared to 6.7 million in Q1, 2024. The year over year decrease was as expected and due primarily to the exit of low margin business. Gross margin was in line with internal forecasts given the dual manufacturing overhead of our facilities in Singapore and Thailand. First quarter gap and non-gap gross margin was 2.5 and 10.8% respectively compared to gap and non-gap gross margin of 7.3% and 13.4% respectively in Q1 2024. The year-over-year decrease in gross margin was primarily driven by the incremental costs related to the transition of production to Thailand and the dual manufacturing sites required during the transition and decreased utilization due to lower year-over-year revenues. Gap and non-gap operating expenses for the first quarter of 2025, including research and development, sales and marketing, and general and administrative expenses totaled $5.6 million and $4.5 million, respectively, as compared to $5.5 million and $4.1 million, respectively, in Q1 2024. The increase reflects management's targeted investments to support the company's organic growth initiatives, as outlined in the PAT Strategic Framework. First quarter gap net loss from continuing operations was 4.8 million or 21 cents per basic and diluted share compared to gap net loss from continuing operations of 5.4 million or 24 cents per basic and diluted share in the first quarter of 2024. This decrease in net loss was primarily due to strategic review related costs associated with the asset sale of 0.9 million incurred in the first quarter of 2024 that did not reoccur in the first quarter of 2025. Non-GAAP adjusted EBITDA for Q1 2025 was negative 3.9 million compared to negative 3.2 million in the first quarter of 2024. 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. Moving now to the balance sheet, we exited Q1 2025 with $132.7 million in cash, cash equivalents, and restricted cash. In the first quarter of 2025, we used $3.3 million in cash and restricted cash. Our previously stated expected net operating cash usage for the 12 months following September 30, 2024, remains in the range of $14 to $16 million as previously disclosed. In the first quarter of 2025, our stock repurchase program was paused due to the elevated macroeconomic uncertainty, and no repurchases were made under the program. Our working capital exiting Q1 was $141.5 million. Our balance sheet position remains strong, enabling us to pursue our organic and inorganic growth initiatives within the PAT framework. 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. In April 2025, the US government announced broad tariffs on product imports from most countries, along with elevated country-specific tariffs targeting certain others. While the tariffs are not expected to have a material impact on our supply of raw materials and components going into our production facilities in Thailand and Singapore, approximately 25% of our finished goods are imported into the U.S., either by us or our customers. We expect to pass along the tariffs that we incur on goods that are imported to our customers as a surcharge. We have developed financial models for a variety of tariff scenarios on shipments from Thailand to the U.S. The situation remains highly fluid, and we are preparing for a variety of possible outcomes. As of today's call for Q2 2025, we currently expect net revenue in the range of $4.9 million to $5.3 million. This concludes the financial discussion. I'll now pass the call back to Kirsten.