Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Identiv Inc (INVE, Financial) exceeded consensus revenue estimates for the second quarter of 2024, demonstrating strong execution despite being in a pre-closing state.
- The company is on track to close a strategic transaction that will add approximately $130 million in net cash after taxes, fees, and costs.
- The transition of RFID production from Singapore to Thailand is progressing well, with significant milestones achieved, including ISO certifications.
- Identiv Inc (INVE) is implementing a stage-gate process to ensure disciplined evaluation of new product development opportunities, focusing on high-margin segments.
- The company is exploring strategic options such as mergers, partnerships, and acquisitions to accelerate growth and achieve EBITDA breakeven at $60 million to $70 million in annual sales.
Negative Points
- Identiv Inc (INVE) reported a decrease in GAAP revenue for its IoT business, primarily due to lower sales of transponder products to a key customer.
- The company experienced gross margin pressure due to mix in the security business and lower overhead absorption during the transition to Thailand.
- GAAP net loss from the IoT business increased to $6.9 million in Q2 2024, compared to a $3.5 million loss in the same quarter of 2023.
- The aggregated non-GAAP net loss for the second quarter of 2024 was $6.2 million, compared to a net loss of $1.1 million in the second quarter of 2023.
- Identiv Inc (INVE) anticipates continued cash burn over the next 12 months, with expected net cash use in the range of $14 million to $16 million.
Q & A Highlights
Q: You noted phasing out 10% of this year's volume related to low margin business. Are there any projects within the current pipeline that you deem as low probability and don't meet the newly implemented criteria?
A: We continuously assess the new product development pipeline. Some projects may initially seem promising but may not meet criteria as they progress. We aim to be disciplined and discontinue projects that don't meet our criteria to avoid resource wastage.
Q: Regarding the $60 million to $70 million EBITDA break-even target, does that assume a gross margin in the 26% to 28% range, or does it assume you can get above 30%?
A: The target assumes getting close to a 30% gross margin.
Q: Can you break down your plans for OpEx regarding the Thailand facility and headcount? Do we expect an increase in the second half of the year?
A: We are ramping up in Thailand, training staff, and increasing headcount. This will continue for a few quarters until the transition is complete. We expect a reduction in overhead once the transition is finalized by the end of the year.
Q: How do you plan to manage cash burn in the short, medium, and long term? Will you need more cash to run the business?
A: We have provided a guidance range of $14 million to $16 million for cash use over the next 12 months, which will be spread evenly. We have sharpened our estimates to ensure efficient cash management.
Q: How should we think about sequential growth and seasonality for Identiv and premises going forward?
A: With the physical security business transitioning to a separate company, the seasonality seen in the past will change. The Q3 revenue guidance reflects this shift, and the historical seasonality spike in Q3 due to federal year-end will no longer apply.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
