Good afternoon. Welcome to Identiv's 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, Kirsten 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 as well as our first quarter 10-Q 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 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.

Identiv'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 US 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 and transform growth strategy and go-to-market plan.

As we've discussed, the objective of P-A-T is to strengthen and optimize the performance of our core channel business, accelerate our growth through focused key initiatives in 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 Tag-N-Trac, 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-N-Trac'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-N-Trac 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 Identiv'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 stand-alone pure play IoT solutions company, we are executing our P-A-T 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-N-Trac 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 GAAP and non-GAAP gross margin was 2.5% and 10.8% respectively compared to GAAP and non-GAAP 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.

GAAP and non-GAAP 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 P-A-T strategic framework.

First quarter GAAP net loss from continuing operations was $4.8 million or $0.21 per basic and diluted share compared to GAAP net loss from continuing operations of $5.4 million or $0.24 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 million 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 them. 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 P-A-T framework.

In our 10-Q 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 US, 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 US. 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..

one, standard products held in inventory; two, standard products requiring minor modifications; and three, NPD products which are included only after development and scale-up are complete and we have a 12 month forecast. At the end of quarter one, we had 74 new opportunities in our pipeline.

We converted 10% of these new opportunities to sales during the quarter. Given typical sales cycles of six to 12 months, we expect this conversion rate to increase steadily each quarter. By year-end, it will establish a baseline for tracking a rolling 12-month conversion rate moving forward. Number two, NPD projects.

This metric tracks the number of active NPD initiatives segmented by customer driven and internally driven efforts as well as by target markets and technologies. These projects involve the development of entirely new RFID or BLE tags, inlays or labels.

Depending on complexity, testing and regulatory requirements, development time lines range from six months to up to three years. As of the end of quarter one, there were 21 active NPD projects, 13 customer driven and eight internally driven. Three of the customer driven projects target healthcare applications.

From a technology perspective, five of the customer driven projects are BLE based. These represent the largest share of potential volume and steady state revenue. Number three, NPD project completion. This metric captures the number of NPD projects completed within the quarter that will be shifting into commercialization.

In quarter one, one project transitioned, a new inlay designed to authenticate consumables for a home water filtration system. In addition to these business metrics, we plan to continue to provide quarterly revenue guidance and quarterly updates on our expected operational cash use.

And finally, I would like to provide an update on our corporate governance. As previously announced on our quarter three 2024 earnings call, the Board is seeking stockholder approval to amend the company's charter to declassify the Board at the annual 2025 Annual Meeting of Stockholders.

If the declassification amendment is approved and affected, the Class II director nominees who are standing for election at the 2025 Annual Meeting will be elected for one year terms, and the Board's classified structure will end at the 2026 Annual Meeting, at which time all nominees for election as director will stand for one year terms.

If the declassification amendment is not approved and affected, the Board will remain classified.

Additionally, as part of its ongoing governance review, the Board has approved an amendment to the company's corporate governance guidelines to provide that if a majority of the votes cast for a director are marked against or withheld in an uncontested election, the director must promptly tender his or her irrevocable resignation for the Board's consideration.

As we continue to shape our Board for the future, we are delighted to welcome Mick Lopez as our newest director. Mick is a public company Board Director and former CFO with decades of strategic and financial governance expertise.

His extensive experience in M&A, coupled with his strong background in corporate governance and leading audit committees, will further strengthen the Board.

With his strong financial background, we believe he will be impactful on the transform element of our strategy and provide insightful expertise as we build the baseline for our new performance metrics. We look forward to working with Mick through this transformative period and beyond.

In closing, while we expect the global macroeconomic uncertainty to continue, Identiv's value proposition remains strong and consistent. The long term secular trends that are driving demand for RFID and BLE enabled solutions remain solid.

As a focused pure play IoT solutions provider, we believe we have the right team in place to execute our P-A-T strategic framework.

By reinforcing our core channel strengths while expanding through new strategic partnerships and innovative product development, we believe we're well positioned to drive long term growth and value for all of our stakeholders. With that, I'd like to open the call for your questions. Operator, please open the question queue..

[Operator Instructions] And the first question today is coming from Rian Bisson from Craig-Hallum..

It's Rian on for Tony Stoss. Thanks for all the information again, Kirsten. So just first, just kind of looking at tariffs. I know you mentioned a 25% direct impact.

I'm curious maybe not quantify but a little more information on what you're seeing, I guess, from some of the customers in your pipeline in terms of caution or just kind of more of an indirect impact that you think from tariffs. Just any more color there would be helpful..

I mean, in terms of indirect impact, we've gotten some concerns from customers, for sure, but we haven't seen outside of just maybe a couple of minor things. We haven't seen any significant impact from customers at this point. But obviously, there's a lot of uncertainty, things are changing all the time.

And so I think there's a little bit of a let's wait and see what actually sticks and what actually happens. But certainly, kind of with the initial set of reciprocal tariffs that were announced that was pretty challenging. And there is definitely a lot of uncertainty and caution in the market at this point..

And then it's nice to say that some more wins come through from the pipeline this quarter, I'm actually looking back to last quarter as well. I just wanted to see if there is maybe any change or hopefully still the same time line on that grocery logistics deal.

I believe it was, I think, trial in Q4 and then maybe mid 2026, it could go live? Is that still tracking?.

That's tracking, that's what -- our customer is definitely pushing for that. It's a complex project. The manufacturing process still is being developed but that is what the strong push is. So end of the year kind of a decent initial order for some trials and proof of concept and then really going live towards the middle of next year..

[Operator Instructions] Your next question today is coming from Craig Ellis from B. Riley..

This is Stacy on for Craig. And Kirsten, I was wondering since last time when we announced about the transition from Singapore to Thailand that there were some smaller volume, a little margin mix out and also some bigger customers with one that we're not bringing over to Thailand.

And where do we stand right now in mixing out that business and how much of both of those are in the future guidance?.

So look, we've already made some of those mix outs as you're saying and some of that is reflected already this quarter, and it's definitely reflected in our quarter two guidance.

And yes, the transition, though, going from Singapore to Thailand is continuing to make really strong progress and we're pushing as hard as we can to get everything done by the end of the quarter..

And maybe with the 75% volume in Thailand, if I'm remembering it correctly, where are we now with Thailand's volume as a percentage of total and then how are you feeling about the yields with production and operations? And how do we feel about the executive to get to the adding 27%-ish of gross margin in 4Q, is that still a good number?.

Well, I'll let Justin speak to the gross margin target. But just to start with the transition, yes, the transition is going very well. We've definitely got over 75% of the volume now transitioned over to Thailand. The team is getting up to speed.

The Singapore resources who've been running the product for many years are spending time over in Thailand to ensure that the team in Thailand is getting up to speed. I think we're generally seeing that kind of the yields and the efficiency is getting very close to what they had after years of experience with Singapore.

So we think it's going very well, I guess, long story short. And we still have the three big customers that we are serving in Singapore. But as I said, we expect, we've gotten all the audits complete now in Thailand. We've done all the qualifications.

And we're really, at this point, doing all the final last orders in Singapore and we expect to have that done by the end of the quarter. And to the margin question, I'll let Justin answer that..

We hold any guidance or indications of margin for the rest of the year, pending the outcome of the tariffs and what's going to happen, because it's under a 90 day review today, that ends in July. So we're going to wait to see where that lands before we give any future guidance on margins for Q4.

But as you said that guidance came out because we were anticipating the transition from Singapore to Thailand and that is on track. So I can say, operationally, we're on track. Giving a margin guide for Q4, I'm going to wait and see where the margins play out..

[Operator Instructions] And your next question today is coming from Jaeson Schmidt from Lake Street..

Just given the macro dynamics, did Q1 benefit from any sort of pull-in orders from any customers?.

No, I don't believe that quarter one benefited from any pull-ins, no. I mean, just because of our lead times and everything else, it's hard -- outside of some stuff that may be already in inventory, no we didn't see any significant benefit..

And just curious if you could comment on what you're seeing from a kind of quoting activity standpoint or bookings so far here in Q2?.

I mean, look, we definitely have heard some concern, of course, from our customers. As I said, I think we've had some very small orders that have been put on hold.

But we're seeing -- we're hearing some caution but I think everyone's really honestly waiting to see what happens within this 90 day pause because, obviously, that's really kind of the critical piece at this point.

We haven't seen, I think, any significant concerns for quarter two and our guidance reflects kind of any slowdown that we're anticipating. But nothing significant..

[Operator Instructions] And it appears there are no further questions in queue at this time. I would now like to pass the floor back to Kirsten Newquist for closing remarks..

Thanks, operator. And thank you all again for joining the call today. We definitely appreciate the continued support of our customers, partners, shareholders and employees. It was great to feel some of that support yesterday at RFID Journal Live where I got to spend some time with our strategic partners, NXP and InPlay. A few upcoming IR events.

We have the B. Riley Conference on May 21st. We have our Annual Meeting of Identiv's stockholders on June 10th. And from a marketing perspective, we have our luxury wine authentication solution webinar on May 28th with our partner ZATAP and Genuine Analytics.

And just as a reminder, we have replays of our previous IoT webinars are available on the Events and Webinars page of our Web site. Thank you all so much again for joining, and have a good evening..

Thank you. This does conclude today's conference call. You may disconnect at this time, and have a wonderful day. Thank you once again for your participation..