Yahoo Finance Identiv Inc (INVE) (Q1 2024) Earnings Call Transcript Highlights: Navigating Challenges and ...
Revenue: Q1 2024 total revenue was $22.5 million, a decrease of $3.5 million from Q1 2023.
GAAP Gross Margin: 37% in Q1 2024, up from 35% in Q1 2023.
Non-GAAP Gross Margin: 40% in Q1 2024, increased from 37% in Q1 2023.
GAAP Net Loss: $4.8 million in Q1 2024, compared to a net loss of $3 million in Q1 2023.
Non-GAAP Adjusted EBITDA: Negative $1.4 million in Q1 2024, compared to negative $0.9 million in Q1 2023.
Operating Expenses: GAAP operating expenses were $12.6 million and non-GAAP adjusted operating expenses were $10.4 million in Q1 2024.
Cash and Equivalents: Ended Q1 2024 with $22.4 million, a decrease of $2 million from Q4 2023.
Working Capital: $45.6 million at the end of Q1 2024, down $3.1 million from Q4 2023.
Q2 Revenue Guidance: Expected to be between $23 million to $25 million.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Identiv Inc (NASDAQ:INVE) successfully divested assets related to security and logical reader products for $145 million, enhancing capital for IoT investment.
Appointment of Kirsten Newquist as the new CEO for the IoT business, bringing extensive industry experience and leadership.
Achieved highest non-GAAP gross margin since Q3 2020 at 40%, indicating strong margin performance.
Software services and recurring revenues grew to 27% of premises revenues, reflecting a positive trend towards recurring business models.
Identiv Inc (NASDAQ:INVE) is on track to close the strategic transaction in Q3, which is expected to fortify the balance sheet and support growth in specialty IoT business.
Negative Points
First-quarter 2024 revenue decreased by $3.5 million compared to Q1 2023, with declines in both premises and identity segments.
The ongoing federal government continuing resolution impacted the premises segment's performance.
GAAP net loss attributable to common shareholders increased to $4.8 million in Q1 2024 from $3 million in Q1 2023.
The transition of RFID production to Thailand and exiting low-margin business are expected to impact revenue and margins into the first half of next year.
Increased GAAP operating expenses as a percentage of revenue, primarily related to strategic review costs.
Q & A Highlights
Q: Can you discuss the factors impacting revenue trends, particularly the shift to recurring revenue and its impact? A (Steven Humphreys - President, CEO, Board Member): Yes, there's a rotation out of lower-margin business and effects from the continuing resolution on the premises side, as well as a shift to recurring revenue. Additionally, the focus of the executive team on the transaction and CEO recruitment has impacted attention and focus. However, the underlying trends on the premises side are expected to revert back to normal.
Q: What were the one-time items affecting gross margins this quarter, and how should we think about OpEx trends going forward? A (Justin Scarpulla - Chief Financial Officer): There were no one-time items boosting margins this quarter. Identity readers returned to healthy margins, which is expected to continue. Strategic review costs are ongoing and included in GAAP numbers but not in non-GAAP. We anticipate slight upward pressure on OpEx due to new leadership and consultants.
Q: Can you elaborate on the strategy for exiting lower-margin business and its impact on the medical business? A (Kirsten Newquist - President - IoT Solutions): The focus is on exiting very low-margin business that doesn't justify the move to Thailand or sustain long-term operations. This does not include any of the medical business. The medical sector offers significant potential, although it's hard to quantify exactly where it could go in the next three to five years.
Q: How will the IoT business achieve a gross margin in excess of 35%? A (Justin Scarpulla - Chief Financial Officer): The increase will come from a mix shift towards healthcare and moving production from Singapore to Thailand. Healthcare projects are expected to go to production level, and the shift to Thailand should significantly reduce overhead and labor costs, contributing to margin improvement.
Q: What are the cash deployment expectations and areas of organic investment for the IoT business? A (Kirsten Newquist - President - IoT Solutions): The focus is on ensuring strong business excellence and strategic clarity. Initial priorities include developing a detailed growth and go-to-market plan, particularly in healthcare, and optimizing strategic opportunities beyond the inlay. M&A is not a priority at the moment.
Q: Will new programs in the identity segment need to meet a specific gross margin hurdle? A (Kirsten Newquist - President - IoT Solutions): Yes, new programs will need to meet gross margin hurdles, which will vary depending on the maturity and competitiveness of the industry. Higher margins will be targeted for products requiring significant customization and investment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
