INVE earnings call analysis

NASDAQ:INVE Q4 2025 Earnings Call Transcript Generated on 6/6/2026 John | Operator: Good afternoon. Welcome to Adena's presentation of its fourth quarter and fiscal year 2025 earnings call. My name is John, and I will be your operator this afternoon. Joining us for today's presentation are the company's CEO, Kirsten Newquist, and CFO, Ed Kernbauer. Following manager'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, strategic partnerships and collaborations, and any related benefits and attributes 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 and documents filed from time to time with the SEC, including the company's 2024 Annual Report on Form 10-K and Second Quarter 2025 Form 10-Q. and the 2025 Annual Report on Form 10-K, which will be filed with the SEC in the future. 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. Kirsten Newquist | CEO: Thank you, Operator, and thank you all for joining our Quarter 4 and Fiscal Year 2025 Earnings Call. During the fourth quarter, we made meaningful progress across each pillar of our perform, accelerate, and transform strategy. Of particular note, we made significant advancements in the development of the specialized Bluetooth Low Energy, BLE, smart label in collaboration with IFCO, a leading global provider of reusable packaging solutions for fresh food. As announced on Tuesday, we signed a multi-year agreement with IFCO to manufacture and supply these specialized next-generation BLE smart labels. This agreement represents a major milestone in our high-growth BLE strategy and reinforces IDENSA's leadership in scalable, BLE-enabled solutions for complex global industries. Our BLE smart label will be a key component of IFCO's digital platform, designed to transform the global fresh grocery supply chain by delivering enhanced visibility, reducing waste, and supporting a more sustainable circular food system. Under the multi-year agreement, Identiv will serve as exclusive supplier for committed manufacturing volumes. Following the development phase, ISCA will maintain exclusivity for these customized BLE labels as they are deployed across its global network of more than 400 million reusable packaging containers. Full-scale mass production is expected to begin later this year, subject to achieving final development milestones. Turning to our quarter four financial performance, I'm pleased to report that fourth quarter sales of $6.2 million exceeded our guidance, with all other key financial metrics also coming in ahead of expectations. We saw continued strength in growth profit margin, reflecting the successful completion of our two-year transition of production from Singapore to our new state-of-the-art manufacturing facility in Thailand. With the Singapore shutdown now complete, we have completed our second full quarter of operations entirely out of Thailand, which has structurally reduced our cost profile while increasing manufacturing efficiency and scalability. Our CFO, Ed Kernbauer, will now provide a detailed review of our quarter four financial performance, and I'll return afterward to share more on how we're progressing across our strategic initiatives. Ed Kernbauer | CFO: Thanks, Kirsten. In the fourth quarter of 2025, we delivered $6.2 million in revenue, which exceeded our previously announced guidance range, compared to $6.7 million in Q4 2024. The year-over-year decrease was as expected, and due to the exit of lower-margin business, which we did not transfer to Thailand. Fourth quarter gap and non-gap gross margins were 18.1% and 25.6% respectively, compared to gap and non-gap gross margins of negative 14.9% and negative 5.2% respectively in Q4 2024. Factors driving the expansion of gross margin included the elimination of direct labor and fixed manufacturing overhead costs associated with our discontinued Singapore operations, and improved utilization of our manufacturing production facility in Thailand. As we mentioned on our November call, we stopped production of RFID inlays and labels in Singapore at the end of Q2 2025. Singapore facility shutdown activities continued through the fourth quarter of 2025, And as of December 31st, 2025, it's now complete. Gap and non-gap operating expenses for the fourth quarter of 2025, including research and development, sales and marketing, general and administrative, and restructuring and severance, totaled $5.8 million and $4.1 million, respectively, as compared to $5.6 million and $4.1 million, respectively, in Q4 2024. The year-over-year increase in GAAP operating expenses was driven primarily by higher strategic review-related costs incurred in Q4 2025 compared to the fourth quarter of 2024. Non-GAAP operating expenses in Q4 2025 were comparable to the prior year period as we continue a careful allocation of operating expenses as we execute on our PAT strategic initiatives. Fourth quarter gap net loss from continuing operations was $3.7 million, or $0.16 per basic and diluted share, compared to gap net loss from continuing operations of $4.3 million, or $0.19 per basic and diluted share, in the fourth quarter of 2024. This reduction in net loss was due to lower direct labor and overhead costs following the shutdown of our Singapore operations. as well as 1.1 million of charges to cost of revenues recorded in the fourth quarter of 2024. These charges were primarily related to inventory written off after a customer phased out a legacy program earlier than expected. These cost improvements were partially offset by strategic review-related expenses incurred in the fourth quarter of 2025. Non-GAAP adjusted EBITDA loss for Q4 2025 was 2.5 million. compared to $4.5 million in the fourth quarter of 2024. The decreased loss was a result from the production transition to our Thailand facility in 2025, the charge to cost of revenue in Q4 2024, and the disciplined spending of operating expenses as we executed on our PAT strategic initiatives as mentioned earlier. 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 now to our fiscal year 2025 financials. Fiscal year 2025 revenue was $21.5 million, a decrease of $5.1 million compared to the prior year period, primarily the result of the intentional exit of certain lower margin legacy business. Fiscal year 2025 gap and non-gap gross margin was 6.1% and 14.3%, respectively, compared to gap and non-gap gross margin of 1.3% and 8%, respectively, in fiscal year 2024. This year-over-year margin expansion reflects a more favorable product mix and significant operational efficiencies following the successful completion of our manufacturing transition to Thailand. Gap and non-gap operating expenses for fiscal year 2025, including research and development, sales and marketing, general and administrative, and restructuring and severance, totaled $23.5 million and $17.6 million, respectively, as compared to $28.3 million and $17.9 million, respectively, in fiscal year 2024. Fiscal year 2024 GAAP operating expenses included 5.3 million of incremental strategic review-related costs compared to 2025. Fiscal year GAAP net loss from continuing operations was 18 million, or 79 cents per basic and diluted share, compared to GAAP net loss from continuing operations of 25.9 million, or $1.14 per basic and diluted share in fiscal year 2024. Non-GAAP adjusted EBITDA loss for fiscal year 2025 was $14.5 million, compared to $15.8 million in fiscal year 2024. This relative stability in adjusted EBITDA, despite lower year-over-year revenues, was primarily driven by the reduction in manufacturing overhead and targeted allocation of operating expenses as we execute on our PAT strategic initiatives. Moving now to the balance sheet. We exited Q4 2025 with 128.9 million in cash, cash equivalents, and restricted cash, which is a sequential increase of 2.3 million over the third quarter of 2025. This increase included an income tax refund of 2.9 million and a prepayment of 2.8 million from a new customer to procure product for their full 2026 projected sales volumes. Excluding these items, Operating cash usage net of interest income for the fourth quarter was approximately 3.4 million. Our working capital exiting Q4 was 133.3 million. Our balance sheet remains strong as we move into 2026. In our 10-K filing, we will be providing a full reconciliation of full-year cash flows. For completeness, we have included the full balance sheet in the appendix of today's earnings release. As we look ahead into 2026, we anticipate Q1 sales of 6.7 to 7.2 million, which includes the benefit of one of our new customers ordering their full year volume in Q1. This would be an anticipated increase of 26% to 35% over the 5.3 million in sales that we reported for Q1 of 2025. Throughout 2026, we do expect some near-term variability in gross margins as we begin scaling production for the IFCO program and for another new customer in Q1. This reflects the typical dynamics of ramping production for large programs. It's important to note that the underlying cost structure improvements from our manufacturing transition remain in place. As these programs mature and volume scale, we believe they will support attractive long-term margin performance. From a cash usage perspective, we expect to use $14 to $16 million in 2026, excluding strategic review-related costs. This includes the cash required to support ongoing operations, plus $3.5 million of capital expenditures primarily related to the IFFCO production, $1 million increase in working capital to support growth, and $1.5 million to purchase chips, locking in favorable pricing required to fulfill orders which extend past 2026. This concludes the financial discussion. I'll now pass the call back to Kirsten. Kirsten Newquist | CEO: Thanks, Ed. As you just heard, we delivered results that exceeded our guidance and expectations, a solid step forward as we continued executing against our perform, accelerate, and transform strategy. Our mission is clear. We provide digital identities for billions of fiscal objects, enabling real-time intelligence for the world's most demanding industries. While there is more work ahead to reach our long-term financial goals, we are encouraged by the tangible progress we made in 2025. Perform. Under the perform pillar, our focus is on strengthening and growing our core business while driving operational efficiency, scalability, and margin expansion to create stronger long-term value for both our customers and our shareholders. In 2025, we achieved several important milestones that directly enhanced the value we deliver. First, we completed a major two-year manufacturing transformation. We moved production of all RFID tags, inlays, and labels to our Thailand facility and fully shut down the Singapore site. This transition has lower costs and improved efficiency, increased margins, and is enabling faster, more reliable product delivery. We also implemented new enterprise software systems, including a CRM platform and an MRP system to better integrate sales, demand planning, and operations. These enhanced capabilities will increase visibility across the business and enable faster responses to customer needs produce more accurate demand forecasting, and generate higher product availability. As a result, we expect more efficient planning of raw materials and production, driving lower operating costs and supporting continued margin expansion. In addition, we completed our transition to a pure-play IoT company, fully separating from the physical security business sold to Vita Protect after a 12-month transition period. This strategic focus allows us to concentrate all of our resources, innovation, and capital on high-value IoT opportunities where we see the strongest long-term growth potential. On the commercial side, we completed the build-out of our team, adding market development and business development capabilities, and reoriented the company around a stronger customer-centric operating mode. Throughout the year, we converted 29 new pipeline opportunities into sales which generated $1.2 million in revenue, with continued growth expected as these customers reach steady state adoption. Our marketing communications function was rebuilt following the separation, culminating in the launch of our new corporate website in January, which more clearly communicates our technology leadership, market positioning, and value proposition. I encourage all of you to check it out if you have not already done so. Looking ahead to 2026, our focus is on translating this stronger operational foundation into profitable growth. We are shifting to a make-to-forecast production model for key customers, supported by predictive demand planning that better aligns inventory with customer demand, lowers raw material costs through higher volume purchasing, and improves factory utilization. Quarterly sales and operations planning sessions will align our sales operations and supply chain teams around a single demand plan and disciplined production execution, enabling better overall service for our customers. These capabilities position us to support large deployment customer programs, such as Cisco, and scale them more rapidly. With improved forecasting, shorter lead times, and a more flexible manufacturing platform, we can respond more quickly to new sales opportunities and bring new products to market more efficiently. This combination of operational discipline and commercial focus enables us not only to operate more efficiently, but also to pursue growth opportunities more aggressively. We will also launch targeted cost reduction initiatives on key products and deepen engagement with key customers through strategic business reviews. Together, these initiatives will strengthen execution and ensure the operational investments of the past two years translate directly into faster growth and long-term value creation. Accelerate. Under the accelerate pillar, our focus is on driving growth in high-value segments through innovation, particularly in BLE technology and multi-component manufacturing. In 2025, we made meaningful progress across our innovation pipelines. We advanced our BOE Smart Label programs, producing the first 30,000 units for IFCO proof of concept trials. These trials provided valuable feedback that is helping us refine the product design ahead of scale-up and mass production. We also shipped our first orders of Williots Next Generation Pixel. In addition, we completed five customer-driven new product development projects that are shifting to commercialization. including applications in wine authentication, medication compliance, and water safety. We expanded our partner ecosystem through strategic agreements, including with InPlay, Tagintrack, Novanta, Naravera, ISCO, and Williott. These partnerships are a key component of our Accelerate strategy, aligning us closely with organizations building complementary elements of IoT-enabled solutions. We also finalized detailed BLE and high-value segment RFID roadmaps to closely align our innovation efforts with market opportunities, our core competencies, and customer priorities. In 2026, we are working to build on this momentum. A major focus will be completing development for the ISCO BLE Smart Label Program and ramping production to support more than 100 million units per year. In partnership with IFCO, we are expanding our capacity in multi-component manufacturing to support these volumes. This program represents a transformational opportunity for both our business and the fresh food logistics industry as IFCO works to bring unprecedented digital visibility to the global fresh food supply chain, reducing waste and supporting a more sustainable circular food system. In terms of artificial intelligence, We are developing a BOE AmbientChat.ai demonstration platform to showcase the value of connecting the physical and digital worlds enhanced by real-time intelligence powered by AI. In addition, several programs from our BOE roadmap will advance this year, focusing on high-value applications across healthcare, industrial, and logistics markets. In particular, we expect to commercialize our ID Blue smart label, utilizing the next generation in Play Chip later this year. Together, these initiatives are designed to accelerate growth in our high-value segments and maximize the commercial impact of our BLE and IoT innovation platforms. Transform. Our third pillar, transform, focuses on expanding the business through strategic M&A that accelerates EBITDA break-even, broadens our product portfolio, enhances technical capabilities, and seeks to increase shareholder value. We have a dedicated team working with our financial advisor, Raymond James, to evaluate our strategic alternative. Transform remains a top priority this year. Our metrics. In 2025, we began reporting several new metrics to monitor our progress against strategic objectives. We learned a lot, made some refinements, and have established targets for 2026. First, new sales pipeline and conversion rate. This metric tracks opportunities with new customers or customers we haven't sold to in over two years. By year end, the pipeline included 101 opportunities, up 35% from the start of the year. As mentioned, throughout the year we converted 29 of the opportunities, totaling $1.2 million in sales. This represents a 28% conversion rate of the current pipeline, or 16% when including opportunities that were lost or removed during the year. Our 2026 goal is to grow the pipeline to 125 opportunities and convert at least 35 by the end of the year. Second, new product development projects. This metric tracks the number of active NPD initiatives. These projects involve the development of entirely new RFID or BLE tags, inlays, or labels. As of the end of quarter four, there were 18 active NPD projects, 10 customer driven and eight internally driven. We will continue to measure our NPD pipeline but will not be setting a 2026 target as our focus will be to ensure enough resources are allocated to producing the multi-million volumes needed by IFCO. Third, NPD project completion. This metric captures the number of NPD projects completed within the quarter. In quarter four, we completed one customer-driven project, bringing us to a total of five for the full year. The project completed in quarter four is for mass transit applications. Our target for 2026 is to complete five to seven MPD projects, including IFCO. We are pleased with the progress we made in 2025 advancing our perform, accelerate, and transform strategy. Our fourth quarter results show encouraging momentum, including gross margin improvement following the completion of our production transition to Singapore. In addition, The advancements that the board has overseen in 2025 are not only related to operational and financial improvement, but it has also taken several shareholder-friendly actions to improve our governance profile over the past 12 months. Such actions include the declassification of the board, with each of the directors now being annually elected, and enhancing the board's collective expertise with the addition of Mick Lopez, a seasoned financial expert and former CFO. As we move into 2026, we are focused on building on the operational foundation established last year, scaling production for ISCO, expanding our customer base, and launching new products. With our strategy in place and strong execution ahead, we believe we are well positioned to capture opportunities in the rapidly growing global IoT market. I want to thank our employees, customers, partners, and shareholders for their continued trust and support. We are encouraged by our progress and excited about the opportunities ahead in the RFID and BLE markets. With that, I'd like to open the call for your questions. Operator, please open the question queue. John | Operator: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. John | Operator: Once again, please press star 1 if you have a question or a comment. The first question comes from Jason Schmidt with Lake Street. John | Operator: Please proceed. Jason Schmidt | Analyst, Lake Street: Hey guys, thanks for taking my questions. Just want to dig in a bit more on the IFCO opportunity. Obviously, it's noted that they have over 400 million units out there and you guys are obviously scaling in anticipation to support a large number. But how should we think about this revenue opportunity from an ASP and gross margin profile standpoint? Kirsten Newquist | CEO: Yeah, sure. So, we're very excited about the IFCO project. We've been working on development for the past year and so very thrilled that we were able to announce the signing of the agreement. We are scaling up to 100 million units of capacity per year, and they do want to tag their full 400 million and growing plus of reusable plastic containers. They also have to replace approximately 10 percent of those per year. So there's the ongoing opportunity to continue to support their full pool of plastic containers. So we aren't talking specifically about the pricing or specific gross margin, but it is a higher price point than our average price per product, which I think we've previously told around 15 cents. And it's also a lower price than we anticipate our standard BLE label, which we've publicly announced is going to be less than a dollar. So somewhere in that range. And obviously, gross margins, it is a true partnership with ISCO. They are investing CapEx along with us to scale up. They are committing to a certain volume. And so with that, we are, you know, the growth margin will be less than our target growth margin of 30%, but still a very, very great opportunity for us. Jason Schmidt | Analyst, Lake Street: Gotcha. That's helpful. And just to clarify, are you guys sole sourced here? How many potential suppliers are there? Kirsten Newquist | CEO: It's an exclusive agreement. So this is an exclusive agreement. We will be developing this product exclusively for them, and then we will be the exclusive supplier for them over the term of the agreement. Jason Schmidt | Analyst, Lake Street: Okay, perfect. And then just the last one from me, and I'll jump back into Q. When you think about your new opportunity pipeline, can you give us a rough sense of sort of how that breaks down by end market? Kirsten Newquist | CEO: Yeah, so kind of in our current pipeline, so the customer-driven opportunities that we have in our pipeline, it's roughly 25% of them are for healthcare. I would say another probably 25% for logistics, probably another 25% for food and beverage, and then the rest is a variety of applications. Jason Schmidt | Analyst, Lake Street: Gotcha. I appreciate that. Thanks a lot. John | Operator: You're welcome. The next question comes from Tony Stoss with Craig Hallam. Please proceed. Tony Stoss | Analyst, Craig Hallum: Hey, it's Ryan on for County Sauce. Thanks for taking my questions. Just following up on the last question about your pipeline, I think last quarter you said about two-thirds is at or above your 30% gross margin target. Any changes there? And if you could, what percentage of revenue in the December quarter were from these new opportunities? Kirsten Newquist | CEO: So anything that's in our NPD pipeline, those are being developed. So there would be nothing in our quarter four that is in our NPD pipeline. Those are new product development, they're in process. And I would still say that roughly two-thirds of the opportunities in the NPD pipeline would be in higher margin targets, because these are more specialized, highly engineered products that we're developing. They're not from our standard product portfolio. So, in order to accept them into the pipeline, we would want to see that margins would be slightly higher than average. Tony Stoss | Analyst, Craig Hallum: Okay. Got it. And then one more on the, uh, if code deal, you know, it was nice to see that by agreement come in. Um, you know, it said there was a, you know, a development phase that needed completion. I'm curious what kind of that looks like throughout the year. And if, you know, it seems like the plan is still the ramp towards the end of the year, towards the larger volumes. Kirsten Newquist | CEO: Yep. So we are still in product development. We are still making final design changes to it. We will continue to be producing in lower volumes throughout the year for pilots and testing and so on, but the significant ramp-up will be at the end of the year, quarter four. Unknown Participant | Analyst: Got it. Thank you. John | Operator: The next question comes from Rebecca Rosetzky with B. Reilly Securities. Please proceed. Rebecca Rosetzky | Analyst, B. Riley Securities: Hello, thank you for taking my question. I'm on for Craig Ellis. Could you provide some color on the relative contribution and the visibility of the gross margin drivers in 2026, whether that be the Singapore cost elimination, silent yield improvement, NPD, Nick Schiff, and the IFCORAMP? Kirsten Newquist | CEO: I'm sorry, so just trying to clarify the question. So are you asking just about our kind of gross margin expectations as we go into 2026? Rebecca Rosetzky | Analyst, B. Riley Securities: Yeah, like could you just like provide some kind of relative contribution of the gross margins either? Ed Kernbauer | CFO: So you're asking about, what we're expecting from a gross margin perspective as we move into 2026? Yes. Okay, thank you. Okay. Yeah, so as we mentioned earlier on the call, you know, we did finish the year at a non-GAAP 25.6% margin. But as we move into 2026, we do anticipate near-term variability as we start scaling for the EFCO project. And as well as we're onboarding a new customer in Q1. So in the near term, we're expecting some variability. But if we look at our current customer base, we're definitely seeing strength and improvement. And we expect expansion of the margin as we progress through 2026 with our current customer base. Unknown Participant | Analyst: Thank you. OK. John | Operator: Okay, I'd like to turn the floor back to Kirsten Newquist for our closing remarks. Kirsten Newquist | CEO: Okay, well, thank you. Thank you, everyone, for joining. We are pleased to share our fourth quarter results and summarize our full year 2025. So thank you for joining us today, and we'll talk to you next quarter. John | Operator: Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. jsPDF 3.0.3 D:20260606090200-00'00'

NASDAQ:INVE Q3 2025 Earnings Call Transcript Generated on 6/6/2026 Ed | Chief Financial Officer: overhead costs, and direct labor costs at our discontinued Singapore operation, improved utilization of our manufacturing production facility in Thailand, and sales of fully reserved inventory of $0.2 million. As we mentioned in our August call, we completed production of RFID inlays and labels in Singapore and the requalification of our customers at our Thailand production facility at the end of Q2 2025. Facilities shutdown activities in Singapore continue to progress as planned and are expected to be substantially completed by year-end. Gap and non-gap operating expenses for the third quarter of 2025, including research and development, sales and marketing, and general and administrative expenses, totaled $6.1 million and $4.5 million, respectively, compared to $9.8 million and $5.1 million, respectively, in Q3 2024. The year-over-year decrease in GAAP operating expenses was driven primarily by a reduction in strategic review-related costs incurred in 2024. The decrease in non-GAAP operating expenses reflects management's targeted resource allocation to support the company's organic growth initiatives as outlined in our PAT strategic framework. Third quarter GAAP net loss from continuing operations was $3.5 million, or $0.15 per basic and diluted share. compared to gap net loss from continuing operations of $9.3 million, or 40 cents per basic and diluted share, in the third quarter of 2024. This decrease in net loss was primarily due to strategic review-related costs of $3.6 million incurred in the third quarter of 2024 compared to $0.3 million in the third quarter of 2025, higher year-over-year interest income of $1.1 million, and an income tax benefit of $0.8 million in the third quarter of 2025 compared to an income tax provision of $0.4 million in the comparable quarter of 2024. Non-GAAP adjusted EBITDA loss for Q3 2025 was $3.6 million compared to $4.5 million in the third quarter of 2024. The decrease in the loss was primarily due to the reduction in fixed manufacturing costs at our Singapore facility, improved utilization of our manufacturing and production facility intent, as well as management's continued careful allocation of operating expenses as we execute on our PAT strategic initiatives. 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 Q3 2025 with $126.6 million in cash, cash equivalents, and restricted cash. In the third quarter of 2025, we used $3.1 million in cash. This brings our total net operating cash use for the 12 months following September 30, 2024, the end of Q3 2024, to $13.4 million, well within our previously announced guidance range of $13 to $15 million. Our working capital exiting Q3 was 135.4 million. Our balance sheet position remains strong. In our 10Q filing, we will be providing a full reconciliation of 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, which is based on current market conditions and expectations, including macroeconomic conditions and customer demand. As of today's call, For Q4 2025, we currently expect net revenue in the range of $5.4 million to $5.9 million. This concludes the financial discussion. I'll now pass the call back to Kirsten. Kirsten | President and CEO: Thanks, Ed. As you just heard, we delivered results that met or exceeded our guidance, a solid step forward as we continue executing against our perform, accelerate, and transform strategy. While we know there's more work ahead to reach our overall financial goals, we're encouraged by the tangible progress we're making. Across each pillar, performing with focus, accelerating across our high value segments, and ultimately transforming our business, we're building a strong foundation for sustained and profitable growth. Let me now share how this progress is unfolding across our organization. Perform. deliver exceptional results for customers, and drive operational excellence. Our first pillar, perform, is focused on strengthening and growing our core channel business. To achieve this, we are prioritizing higher margin opportunities, extending growth margins for our Thailand transition, and executing our new product development, NPD, pipeline with greater discipline. Our goal is to consistently exceed customer expectations through exceptional support, reliable performance, and on-time delivery. As I mentioned in my opening comments, we reached a major milestone in our manufacturing transformation this quarter. 100% of our RFID tags, inlays, and labels are now produced at our new state-of-the-art Thailand facility. The Singapore site shutdown is on track for completion by year-end, marking the end of a successful two-year transition. The Thailand facility has lowered manufacturing costs, improved efficiency, and enhanced scalability, laying a stronger foundation for continued margin growth. To further advance operational excellence, we launched CRM and MRP automation initiatives earlier this year to streamline key sales and operations planning processes. We've made steady progress and expect to have these systems largely implemented by year-end, strengthening our operational foundation and ensuring availability as we grow. On the commercial front, our new opportunity pipeline continues to expand, driven by new sales team members ramping up across their territories and channel partners. So far this year, we've converted 18% of our new opportunity pipeline. representing almost 10% of quarter three sales, with additional growth expected as this new business scales. Implementing HubSpot to enhance lead generation and visibility, and preparing to launch our new corporate website by year end. in Germany and Label Expo in Barcelona, both generating meaningful customer engagement and reinforcing strategic partnerships. At Label Expo, our own VP of Business Development, Klaus Simenmayer, and Nerevero CEO, Thomas Roding, shared insights on DPP compliance during a dynamic NFC RFID panel at the Smart Labeling Seminar 2025, further strengthening Identis' position as an innovation leader. Finally, the TSA transition with Vita Protect is now substantially complete, and we are fully separated from the physical security business we sold one year ago, a key milestone marking our strategic focus and transition to being a pure play in IoT and RFID technology. Accelerate. Accelerate growth in high-value segments and through technology innovation. Moving to the second pillar of our PAT framework, accelerate. We're advancing three specific growth initiatives to build our pipeline and drive long-term revenue and margin expansion. One, expanding our BLE technology platform and multi-component manufacturing capabilities. Two, targeting growth in three healthcare high-value applications. and three, further driving growth in three consumer and logistics high-value applications. This quarter, we made notable progress in R&D and new product development, particularly in our Bluetooth Low Energy, BLE, programs. BLE represents the next generation of IoT technology, offering real-time traceability and condition monitoring capabilities that are difficult to achieve with traditional RFID. We believe the technical complexity of BLE smart label design and manufacturability aligns well with our engineering expertise and gives us a clear competitive advantage. We successfully completed the first production runs of the ISCO BLE prototypes and Williott's Next Generation Pixels, key milestones in the development and commercialization of two important customer-driven BLE programs. These achievements, along with the internal development of our BLE shipping label, expand our product portfolio and further strengthen our expertise in next-generation RFID technology and multi-component manufacturing. We also formalized a partnership agreement and a manufacturing agreement with Williott to scale up and commercialize next-generation pixels. Williott IoT pixels are small, battery-free Bluetooth sensors powered by harvesting ambient radio frequency energy, enabling continuous transmission of data like temperature, motion, and location for smart supply chain and IoT applications. In healthcare innovation, our R&D work with Lilly was recently highlighted in a new white paper that we published in September, demonstrating our leadership in RFID innovation for drug adherence and delivery. This is a compelling example of how our technology is enabling smarter, safer patient experiences. We're also advancing collaborations launched earlier this year including our strategic partnerships with Novanta for medical device applications and Tag & Track for pharmaceutical cold chain management. Additionally, we announced a new commercial partnership with Took, bringing our secure NFC technology to children's books. Each book integrates seamlessly with Took's speakers through customizable NFC tags, activating guided audio without screens, Wi-Fi, or extra devices. Designed for durability and security, this solution is built to scale across classrooms, libraries, and homes, empowering the next generation of young readers. These new interactive books are available for purchase now in Scandinavia with expansion plans into the rest of Europe. We were also honored as a winner of the World Beverage Innovation Awards in 2025, together with our partners Zaytap by CollectID and Genuine Analytics AG for our NFC-powered smart packaging solution that safeguards luxury wine producers and collectors from counterfeiting. This recognition in the Best Technology Innovation category underscores our engineering excellence and collaborative approach to smart packaging. Finally, within our Accelerate initiatives, we completed detailed product roadmaps aligned with our high-value market segments, which is intended to ensure that our innovation and go-to-market efforts are tightly connected to customer needs and strategic priorities. Several of these MPD programs will begin in the next quarter. Transform creates significant business expansion and capability growth through M&A for long-term success. Our third pillar, Transform, focuses on expanding the business through strategic M&A that accelerates EBITDA break-even broadens our product portfolio, and enhances our technical capabilities. We continue to work with our financial advisor, Raymond James, to assess our strategic alternatives. Metrics. This year, we began reporting several new metrics to monitor our progress against strategic objectives. We're continuing to refine these metrics and plan to establish formal targets in 2026. The quarter three results are, for the first metric, new sales pipeline and conversion rate. This metric tracks the number of opportunities with new customers or customers we haven't sold to in over two years. At the end of quarter three, we had 118 new opportunities in our pipeline. We added 46. closed 28, and converted seven to sales, leading to a net increase of 18 over quarter two. We had 100 new opportunities in our pipeline at the end of quarter two, and 75 in quarter one, showing a steady increase over time. So far this year, we have converted 18% of our new opportunities to sales. Second, NPD projects. This metric tracks the number of active NPD initiatives. These projects involve the development of entirely new RFID or BLE tags, inlays or labels. As of the end of quarter three, there were 17 active NPD projects, 11 customer driven and six internally driven. Four of the customer driven projects target healthcare applications and four utilize BLE technology which represents the largest share of potential volume and steady-state revenue. Our third metric, NPD project completion. This metric captures the number of NPD projects completed within the quarter. In quarter three, we completed three customer-driven projects, two of which are moving into commercialization. Both projects were for anti-counterfeiting initiatives in the high-end spirits and wine markets, which will be scaling up in 2026. In closing, this was a quarter of steady financial performance and meaningful operational milestones. We met or exceeded guidance, achieved 100% production of tags, inlays, and labels in Thailand, advanced key R&D and commercialization initiatives, and made continued progress across our perform, accelerate, and transform strategy. We reaffirm Identif's commitment to advancing specialized IoT solutions, expanding our BLE capabilities, and fully leveraging the strategic advantages of our Thailand-based production. By continuing to execute against our perform, accelerate, and transform strategy, we believe we are well-positioned to capture future growth opportunities within the rapidly evolving global IoT market. As we look ahead, our priorities are clear. Complete the Singapore site shutdown by year end. Ensure excellent service to our customers while driving productivity and efficiency in Thailand. Execute our key new product development initiatives with excellence. Expand our commercial and business development pipeline across high value segments. and position the company for sustained growth and stronger financial performance in 2026 and beyond. I want to take a moment to thank our employees, customers, partners, and shareholders for their continued trust and support. We're encouraged by our progress, confident in our strategy, and excited about the opportunities ahead as we continue to lead in the fast-growing RFID and BLE markets. With that, I'd like to open the call for your questions. Operator, please open the question queue. Operator | Conference Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Craig Ellis with B. Riley. Please proceed. Craig Ellis | Analyst, B. Riley & Co.: Yeah, thank you for taking the question, and nice job on the gross margins in the quarter. I wanted to start, though, on the top line. So for the fourth quarter, it looks like we're expecting sales up about 11%. So the question is, as we look across the different vectors of the business, whether it's channel or NPD conversion, what's driving the growth sequentially and what are some of the gives and takes as we think about tailwinds and headwinds as we exit the year? Kirsten | President and CEO: Yeah, no, thank you. Let's see. So definitely we are seeing, you know, some growth from our existing channel customers. But I do think we're also seeing some uptick that's related to some of our BLE projects that we're seeing some additional traction for in the fourth quarter. So it's a nice combination of both kind of our perform customers as well as some of the accelerate initiatives that we're starting to see some traction quarter over quarter. Craig Ellis | Analyst, B. Riley & Co.: Thanks, Kirsten. And just speaking of BLE, in the prepared remarks, you talked about progress with IFCO and Williott. Can we conclude that IFCO is on track for volume shipments in the second half of next year? And Williott had previously been talked about as a potential high-volume customer, certainly not the size of IFCO, but high-volume How do we think about what's possible with Willi at Nexture? Kirsten | President and CEO: Yeah, well, to start with the ISCO question, yes, we are making progress. So, you know, product development is well underway. As we mentioned, we shipped out production-made prototypes that are now being used in proof of concepts in the field. And so that, of course, a lot of learnings will come from that, and we'll take those learnings and use that to continue to optimize the designs. So that's progressing well. And in terms of Williott, we've been working very hard over the last six months to qualify their next generation product. So that's underway. And this quarter and even last quarter, last quarter was beginning and this quarter we will be shipping those next generation products to the field. So, you know, both of them are nice opportunities. You know, we're excited about both of them and working really hard to make sure that we can complete the development of the IFCO product and then really help to support all the different Williott customers as they look to commercialize the Williott solution. Craig Ellis | Analyst, B. Riley & Co.: Great. Thank you. And if I could sneak one in for Ed. Ed Real nice job by the team with gross margin in the third quarter. With the business getting the benefit of the full Singapore shutdown in the fourth quarter and with higher revenues and with some of that coming from the higher quality revenue basket that the company's been prioritizing, can you talk a little bit about what we could expect for gross margins in the fourth quarter? And if there are any headwinds, we need to comprehend. Thank you. Thanks, Greg. Ed | Chief Financial Officer: Yes, our Q3 numbers, we saw significant benefits from the reduction in fixed costs with the discontinuance of our Singapore operations from both an overhead cost perspective and direct labor. Now, we expect that to continue. we will be substantially complete with all shutdown activities in Q4. So we're still working through the remainder there. I don't really expect a full impact on gross margin until we enter Q1 of next year. Craig Ellis | Analyst, B. Riley & Co.: Okay, and then what about other potential benefits such as sales mix and the move to higher margin products as mix goes more towards NPD. Ed | Chief Financial Officer: I'll let Kirsten talk about that, but I do want to say in addition to that, we have the, you know, we will continue to improve margins with improving the utilization of our Thailand facility. But as far as mix, Kirsten | President and CEO: Yeah, yeah. So I think what we'll see in quarter four, so certainly some slight increase in utilization in the Thailand plant, that will help. As Ed mentioned, we aren't completely shut down, have shut down Singapore yet. So we still have some labor that's getting that whole plant now back to its original state and shut down, et cetera. So we have still a little bit of Singapore-related costs in quarter four. In terms of the mix, we definitely have some of our kind of NPD projects starting to ramp. Those are still a little bit in the ramp-up phase, so we still have a little bit of a ramp-up cost until we get the full productivity of those projects. But we do see, you know, kind of a slight increase in mix overall going into quarter four. Craig Ellis | Analyst, B. Riley & Co.: Thanks, Kirsten. Thanks, Ed. Operator | Conference Operator: Thank you. Okay, the next question comes from Anthony Stosz with Craig Hallam. Please proceed. Anthony Stosz | Analyst, Craig Hallam & Co.: Good afternoon, Kirsten and team, and congrats on the move to Thailand, getting it complete. Kirsten, of the roughly 21 opportunities that converted to customers, when will they show up in the P&L? And if you could just ballpark guess, what percentage of those are above your 28% gross margin goal? Kirsten | President and CEO: Yeah, so I think, I'm not sure where you're getting the 21 conversion, but we did convert, we have roughly converted 18% year to date of our new opportunity pipelines. And that represented in third quarter, roughly 10% of our sales. So those will definitely continue to scale and grow as we go into 2026. But yeah, no, we were happy to, year to date, we've converted roughly 18% of our total new opportunity pipelines. Anthony Stosz | Analyst, Craig Hallam & Co.: but roughly what percentage are at your 28% gross margin goal? Kirsten | President and CEO: Yeah, so of the new opportunity, of the new opportunities that converted, I think roughly two-thirds of them were on the higher value side, so higher than 30% gross margin, and probably a third of them were slightly lower than that. But two-thirds of them were what we would consider on the high value side. Anthony Stosz | Analyst, Craig Hallam & Co.: Got it. Good to hear. And then If you could frame the size of the new opportunity with Williott and also similar question, what kind of gross margins would you expect to generate? Kirsten | President and CEO: Yeah. So, I mean, we're not talking about, you know, kind of ultimate sales volume potential with the Williott. And that's, you know, that's still progressing. Margins, you know, the opportunity is large. We're scaling up the next generation of You know, we definitely anticipate margins to be quite a bit significantly higher than where they were two years ago, but we're still working to increase those over the next, you know, probably three to four quarters. And definitely higher, much higher than where they were back in 2023 and early 2024. Got it. Anthony Stosz | Analyst, Craig Hallam & Co.: And the last question for me, Kirsten, with your background in this industry and the healthcare side, I know in quarters past you've spoke a lot about your healthcare opportunities. Didn't hear a lot on this call. Maybe you can just refresh us where you stand and what you think the opportunity set is on the healthcare side. Kirsten | President and CEO: Yeah, we certainly still see a nice opportunity in healthcare, and we see kind of the interest from some of the medical device and the pharmaceutical companies in really engaging in evaluating these types of solutions, but these are also longer-term opportunities. So Of our current NPD new product development pipeline, I think roughly a third of them are healthcare related. They just take longer to get to the commercialization side. So we remain positive about the opportunity space. We remain positive about the projects that we have. But we definitely see some of the ones that are on the logistics side, the consumer product side, getting to market faster than we do with some of the healthcare projects that we're working on. Anthony Stosz | Analyst, Craig Hallam & Co.: Very good. Best of luck. Thank you. Kirsten | President and CEO: Okay, thanks so much. Operator | Conference Operator: We have reached the end of the question and answer session, and I will now turn the call over to Kirsten for closing remarks. Kirsten | President and CEO: Thanks, Operator, and thank you all again for joining us today, and we look forward to speaking with you next quarter. Have a good afternoon. Bye-bye. Operator | Conference Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. jsPDF 3.0.3 D:20260606090201-00'00'

NASDAQ:INVE Q2 2025 Earnings Call Transcript Generated on 6/6/2026 Operator | Conference Operator: filed from time to time with the SEC, including the company's latest annual report on Form 10-K, as well as our second quarter 10-Q once filed. Identificers assume no obligation to update these forward-looking statements. I will now turn the call over to CEO Kirsten Neuquist for her comments. Ms. Neuquist, please proceed. Kirsten Neuquist | Chief Executive Officer: Thanks, Operator, and thank you all for joining our quarter two 2025 earnings call. Before we begin, I'm very pleased to announce that Ed Kernbauer has been officially appointed Chief Financial Officer by the Identis Board of Directors. Ed has been serving as Acting CFO since last month, and today's announcement marks his permanent transition into the role. Ed has been with Identis since 2015, most recently serving as our global corporate controller. He also stepped in as interim CFO in late 2021. Prior to joining Identis, Ed held senior finance positions in the technology and manufacturing sectors and began his career at KPMG. We're excited to welcome him into this leadership position as he continues to bring deep expertise and steady guidance to our finance organization. Now turning to our second quarter business update. We continue to see macro trends driving strong demand for RFID and next generation technologies like BLE, even amidst ongoing global market volatility. Businesses are seeking deeper intelligence into their operations and customer engagement to strengthen their competitive position and better differentiate their offerings. Identiv is enabling that deeper intelligence as we help our customers add digital identities to physical products through RFID. This increased demand is being accelerated by several key factors. The rapid expansion of IoT connected devices, evolving regulatory landscapes, rising anti counterfeiting pressures, and the growing global emphasis on sustainability. RFID and related technologies generate the real world data needed to power digital transformation and increasingly AI. As businesses adopt AI to improve forecasting, logistics, and operations, they need accurate real time data from the physical world. Our products serve as a critical bridge, turning physical items into data generating assets. Identiv is helping to lead this transformation. Our specialized IoT inlays, tags, and labels provide digital IDs that solve real world challenges across sectors. From cold chain logistics to smart packaging to healthcare and consumer electronics. Our devices enable real time tracking, condition monitoring, compliance, security, and more engaging consumer experiences. Financially, our quarter to revenue was $5 million within our previously announced guidance. Our core channel business remains on track, but we are seeing increased competition, particularly within our standard product lines, where several competitors have recently expanded manufacturing capacity. We are also closely monitoring macroeconomic risks, particularly regarding US trade with Thailand. On July 31st, the White House announced a 19% tariff on imports from Thailand. This was generally seen as a positive for electronics manufacturers based in Thailand, as it is a significant reduction from the previously announced 36% rate and positions Thailand as a reliable manufacturing alternative to China. However, the requirements around the amount of Thailand-made components needed to obtain a Thailand certificate of origin is still a source of uncertainty, particularly with new US measures aimed at preventing transshipment. As we noted on our May call, approximately a quarter of our business is exposed to US import tariffs due to our manufacturing footprint in Thailand. We developed a responsible pass-through strategy to protect margins, and to date, all affected customers have agreed to absorb the additional costs. The potential indirect effect on customer demand, especially in more discretionary segments, is less clear. A key highlight this quarter. Earlier this week, we announced a strategic partnership with grocery logistics leader, ISCO, to enhance traceability, efficiency, and sustainability across the fresh grocery supply chain. ISCO is the world's leading provider of reusable packaging solutions for grocery products, and we have been closely collaborating with the ISCO team for several months to develop and launch a BLE smart label that will enable real-time tracking and temperature monitoring of ISCO's extensive global pool of reusable packaging containers, RPCs. With over 400 million RPCs in circulation, the value expected to be provided by our smart label in reducing the waste of fresh produce is significant. The goal is to tag the entire pool of 400 million-plus RPCs over the next four to five years, representing a major volume opportunity. This initiative is a top strategic priority as we are currently producing prototypes for pilot-scale runs and expect to begin mass production in 2026. Operationally, we achieved a major milestone in quarter two by completing the transfer of production from Singapore to our lower-cost facility in Thailand. All customers have been successfully re-qualified, and the Thailand team is progressing well toward full productivity by early next year. A small transition team remains in Singapore to manage the site closure and support continued training in Thailand. Strategically, we are now six months into executing our Perform, Accelerate, Transform, PAT strategy. The key objectives of PAT are 1. To strengthen and optimize the performance of our core channel business, 2. Accelerate our growth through high-value applications, and 3. Ultimately transform identities into a market leader of specialty IoT solutions. We've made measurable progress across all three pillars this quarter, and I will provide more detail after Ed reviews the financials. In closing, despite a challenging macro backdrop, we believe our customers clearly see the value Identiv provides. Our specialized IoT tags, inlays, and labels are not only enabling digital transformation, but are solving real-world industry challenges. These long-term trends not only remain intact and in many ways are accelerating. As a focused, pure-play IoT solutions company, we are executing our PAT strategy with discipline, and we believe this positions us well for sustainable long-term growth. Ed, over to you. Ed Kernbauer | Chief Financial Officer: Thanks, Kirsten. Having been with Identiv for nearly 10 years, I'm excited to move into the CFO role at this transformative time in our company's history. I look forward to meeting with the investment community in the upcoming months. In the second quarter of 2025, we delivered $5.0 million in revenue, which was within our previously announced guidance range, compared to $6.7 million in Q2 2024. This -over-year decrease was due to lower sales of RFID transponder products as we continue to exit lower margin business and reduce sales to our largest customer who is working through inventory they built up in 2024 in anticipation of transitioning production to Thailand. Second quarter gap and non-gap gross margin was negative .4% and negative .8% respectively, compared to gap and non-gap gross margin of .1% and .6% respectively in Q2 2024. Factors impacting the decrease in gross margin included incremental costs related to the transition of production to Thailand and the dual manufacturing sites required during that transition, as well as decreased utilization due to lower -over-year revenues. In addition, we recorded adjustments, which included approximately 0.6 million associated with obsolete inventory at our single-part facility. As Kirsten mentioned, we have completed production of RFID devices in Singapore and requalified our customers in our Thailand production facility. Facility shutdown activities in Singapore are progressing as planned and are expected to be substantially completed by year end. Gap and non-gap operating expenses for the second quarter of 2025, including research and development, sales and marketing, and general and administrative expenses totaled $5.9 million and $4.5 million respectively, as compared to $7.3 million and $4.7 million respectively in Q2 2024. The -over-year decrease in gap operating expenses was driven primarily by a reduction in one-time strategic review related costs. The decrease in non-gap operating expenses reflects management's targeted resource allocation to support the company's organic growth initiatives as outlined in the PAT strategic framework. Second quarter gap loss from continuing operations was $6.0 million or $0.26 per basic and diluted share, compared to gap net loss from continuing operations of $6.9 million or $0.31 per basic and diluted share in the second quarter of 2024. This decrease in net loss was primarily due to strategic review related costs of $1.6 million incurred in the second quarter of 2024 that did not occur in the second quarter of 2025. And unrealized foreign currency losses of $0.9 million, partially offset by interest income of $1.3 million. Non-gap adjusted EBITDA loss for Q2 2025 was $4.6 million, compared to $3.7 million in the second quarter of 2024. The decrease was primarily due to Thailand transition costs and adjustments for obsolete inventory at our Singapore production facility. In the appendix of today's presentation, we have provided a full reconciliation of gap to non-gap financial information, which is also included in our earnings release. Moving now to the balance sheet. We exited Q2 2025 with $129.6 million in cash, cash equivalents, and restricted cash. In the second quarter of 2025, we use $3 million in cash. This brings our total net operating cash use for the nine months following September 30, 2024 to $10.3 million. Previously, we expected net operating cash used for the 12 month period following September 30, 2024 to be in the range of $14 million to $16 million. Given our cash usage through Q2 2025 and current expectations for Q3, we are revising this range to $13 million to $15 million for the period ending September 30, 2025. Our working capital exiting Q2 was $137.5 million. Our balance sheet position remains strong, enabling us to pursue our organic and inorganic growth initiatives within the PAT strategic 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. We're continuing to monitor macroeconomic risks, particularly those related to US trade with Thailand, as Kirsten mentioned. We're also looking at any indirect impacts these risks could have on customer demand and project timelines. In addition to these risks, we are also mindful of the ongoing competitive pressures on our standard product lines, which have been impacted by increased manufacturing capacity from some of our key competitors. This is causing some headwinds in the shorter term with standard product opportunities. As the macroeconomic environment evolves and we gain more visibility, we're prepared for a variety of possible outcomes. As we continue to exit lower margin business, we anticipate our largest customer will continue to reduce their inventory position. Based on this outlook, as of today's call for Q3 2025, we currently expect net revenue in the range of $4.8 million to $5.2 million. This concludes the financial discussion. I'll now pass the call back to Kirsten. Kirsten Neuquist | Chief Executive Officer: Thanks, Ed. With that financial context in mind, I'd like to share an update on the progress we are making under our Perform, Accelerate, Transform strategic framework. Our first pillar, Perform, is focused on strengthening and growing our core channel business. To achieve this, we are prioritizing higher margin opportunities with existing customers and channel partners, expanding gross margins by completing the transition to Thailand, and focusing on executing our new product development, or NPD, pipeline, with discipline. Our goal is to consistently exceed customer expectations through exceptional support and reliable on-time delivery. As we execute this strategy, we're building a solid operational foundation to ensure a competitive cost structure, adding key customer-facing roles, and putting in place the processes needed to drive NPD. This work is already showing results. Our commercial team is fully in place, and sales momentum is building, with a 33% increase in new opportunities in our sales pipeline this quarter compared to last quarter. Our commercial efforts are strongly supported by our new marketing team. Through their dedicated work, this past quarter we have successfully completed 22 marketing initiatives in collaboration with 10 strategic partners, including webinars, white papers, press releases, and joint trade shows, driving a remarkable 300% increase in requests for information from our website compared to the second quarter of last year. We believe this surge of customer interest is directly contributing to a stronger pipeline of new opportunities and will result in growing momentum for our business. As I mentioned earlier, we have completed all production in Singapore, and the site shutdown is progressing as planned. This transition to Thailand is key to expanding our gross margins. To support continuous improvement in our Thailand operations, we have launched CRM and MRP initiatives designed to automate our key processes, strengthen our operational foundation, and ensure the business is scalable. Moving to the second pillar of our PAT framework, Accelerate. We are advancing three specific growth initiatives to build our pipeline and drive long-term revenue and margin expansion. One, expanding our BLE technology platform and multi-component MCL manufacturing capabilities. Two, targeting growth in three healthcare high-value applications. And three, further driving growth in three consumer and logistics high-value applications. Beginning with BLE expansion, we are making meaningful progress. As we've discussed, BLE is a next-generation technology for IoT, providing significant benefits for applications that require real-time traceability or condition monitoring, which are challenging to address with traditional RFID technologies. Over the past several months, we have seen increasing interest in specialized BLE labels, spanning logistics, pharmaceuticals, and asset tracking applications. These BLE-enabled solutions not only provide real-time visibility, but also generate high-frequency data streams that can be used to power AI models, unlocking predictive insights, operational optimization, and automated decision making. We have several significant BLE projects in our MPD pipeline, including the food logistics project I mentioned earlier, and an industrial track and trace application, all with the potential to improve business efficiency and reduce waste through the analytics they generate. The technical demands of BLE smart label design and manufacturing play to our engineering strengths and offer a clear competitive edge. Over the past six months, we invested in new MCL manufacturing equipment at our Munich, Germany R&D Center, expanded our engineering team with RF and software engineers, and strengthened product management capability dedicated to BLE innovation. In May, we introduced our new BLE smart labels at RFID Journal Live, marking an important step toward commercialization. We are collaborating with Inplay on a new portfolio of BLE-enabled battery-powered smart labels designed for high-value logistics applications. The upcoming smart label portfolio will be powered by Inplay's IN100 NanoBeacon, an -low-power BLE system on a chip, and is expected to be available late this year. A full launch of this secure, scalable BLE portfolio is targeted for early 2026. We continue to work closely with Williat on the production of their next-generation IoT pixels. Our teams have been actively collaborating to ensure we are prepared to support volume production for Williat's customers and partners in the coming months. Williat IoT pixels are small, battery-free Bluetooth sensors powered by harvesting ambient radiofrequency energy, enabling continuous transmission of data like temperature, motion, and location for smart supply chain and IoT applications. We are highly encouraged by the momentum building in BLE and the increasing interest from the market. The second and third Accelerate initiatives focus on driving growth across six high-value, high-volume applications, three in healthcare, two in consumer, and one in logistics. To support these initiatives, we've expanded our business development and product management teams to drive market engagement through strategic partnerships and direct OEM relationships, and to ensure our product roadmaps are aligned with the specific requirements of each target application. Strategic partnerships are essential to the development and deployment of solutions in these key markets. While Identiv delivers a critical component of any IoT solution, our inlays, tags, and labels, customers also require robust application-specific data analytics to generate meaningful insights. Over the past six months, we've prioritized building relationships that complement our technology and will continue pursuing partnerships where strong strategic alignment exists. In addition to IFCO, we also announced a strategic partnership with Naravero, a global SaaS platform for digital product passports, or DPPs, and supply chain transparency. The collaboration comes in anticipation of new EU regulations requiring DPPs, which are scheduled to go into effect starting in 2027. A DPP is a digital record that contains detailed information about a product's materials, origin, environmental impact, and lifecycle, enabling greater transparency and sustainability across the supply chain. By combining Identiv's NFC inlays for dynamic product data with Naravero's robust data management platform, this collaboration is intended to offer a comprehensive, integrated solution that streamlines DPP deployment for companies. Based on current projections and regulatory scope, we estimate the EU's DPP framework could apply to more than 3 billion products annually across categories such as apparel, electronics, and industrial goods. We believe this positions our collaboration with Naravero as a high-volume opportunity, potentially enabling Identiv to deliver millions of NFC inlays per year as DPP regulations roll out over time across multiple product categories. We're also advancing collaborations launched earlier this year, including our strategic partnerships with Novanta for medical device applications and Tag and Track for Pharmaceutical Coal Chain Management. Last week in Chicago, we joined our partner Novanta for the ADLM Diagnostics Industry Trade Show. At their booth, we showcase our combined solution for advanced diagnostics, demonstrating how Identiv's RFID tags and Novanta's STING Magic Reader technology can be integrated into diagnostic test equipment. This innovative solution allows for the seamless monitoring of test samples and medical consumables, which helps ensure accurate test results and enhances patient safety. Our strategic partnership with Tag and Track combines our advanced BLE smart labels with Tag and Track's Relativity SaaS platform and is intended to offer pharma customers an integrated IoT solution that delivers item-level visibility and actionable insights for coal chain tracking within the pharmaceutical industry supply chain. In June, we co-hosted a keynote session with Tag and Track at the AI PIA and AWA Smart Packaging World Congress 2025 in Amsterdam and were enthusiastic about the potential opportunities in the pipeline. Turning now to the third part of our strategic framework, Transform. This pillar focuses on driving business expansion and capability growth through M&A. Our objective is to accelerate reaching EBITDA breakeven by gaining scale, broadening our product portfolio, and enhancing our technical capabilities through strategic acquisition. We continue to evaluate, with our financial advisor Raymond James, our strategic alternatives. We have also strengthened our board and standing M&A committee with the addition of our newest board member Mick Lopez. As a former public company CFO, Mick brings deep expertise in M&A and corporate finance, along with a strong shareholder-focused perspective that is already proving valuable to our strategic decision-making. Starting last quarter, we began reporting several metrics to monitor our progress across our strategic objectives. Throughout this year, we will be developing our baseline and will be refining our learning. Based on our findings, we intend to establish targets for these metrics in 2026. The new metrics are 1. New sales pipeline and conversion rate. This metric tracks the number of opportunities with new customers, or customers we have not sold to in over two years. At the end of quarter two, we had 100 new opportunities in our pipeline. This is an increase from the 75 we had at the end of quarter one. We have converted 14% of our new opportunities to sales in the first half of the year. NPD, new product development projects. This metric tracks the number of active NPD initiatives. These projects involve the development of entirely new RFID or BLE tags, inlays, or labels. As of the end of quarter two, there were 19 active NPD projects, 12 customer-driven, and seven internally driven. Four of the customer-driven projects target healthcare applications, and five utilize BLE technology, which represent the largest share of potential volume and steady-state revenue. Three, NPD project completion. This metric captures the number of NPD projects completed within the quarter. In quarter two, we completed one internally driven project, the specialized new conductive adhesive that forms the critical connection between the chip and the antenna on the inlay. Finally, I would like to provide an update on our corporate governance. At the 2025 annual meeting held on June 10th, stockholders approved the proposal to amend the company's charter to declassify the board. Therefore, the class two director nominees were re-elected for one-year terms, and the board's classified structure will end at the end of 2026 annual meeting of stockholders, at which time all nominees for election as director will stand for one-year terms. As a reminder, the board previously announced plans to declassify its structure as part of its ongoing corporate governance review, which aims to better align the company's governance with best practices and enhance accountability to shareholders. In closing, while we expect the global macroeconomic uncertainty to continue, Identus' 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 PAT strategic framework. By reinforcing our core channel strengths, expanding through new strategic partnerships and innovative product development, and working expeditiously through our transform process with our financial advisor, we believe we can create 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 | Conference Operator: Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press star 1 on your phone. Your first question is coming from Jason Smith from Lake Street. Your line is live. Jason Smith | Analyst, Lake Street: Thanks for telling my questions. I just want to start with your announcement this week and thinking about this opportunity in the grocery space, understanding that it's pilot testing here in 2025 and then full scale deployment in 2026. Can you help us get a sense of the size of this opportunity longer term and when it can be impactful to the model? Kirsten Neuquist | Chief Executive Officer: Well, yes, certainly. We're really excited and pleased about this partnership, and it is a significant potential volume opportunity for us. So, if they have over 400 million plastic containers that they ultimately want to get tagged, the goal is to to tag all of them over the next four to five years. And then there's an ongoing opportunity because there's roughly 10% or more of those plastic containers that need to get replenished every single year. So excited about the opportunity. It is still very much an active development program. And so the goal is to be able to launch mass production in 2026. But there is always a little bit of uncertainty when you're doing a development program. It is a very innovative product. It's using the next generation chip. There's some kind of real interesting innovation related to the manufacturing process. So all that still is being developed. But the goal will be to start mass production in 2026. Jason Smith | Analyst, Lake Street: Gotcha. And then just curious if you had to talk about sort of order patterns so far here in the first six weeks of the quarter. Kirsten Neuquist | Chief Executive Officer: Sir, are you saying specifically for the third quarter? Jason Smith | Analyst, Lake Street: Yes. Kirsten Neuquist | Chief Executive Officer: Yeah, I mean, I think the order patterns seem to be on track with the guidance that we have provided. Jason Smith | Analyst, Lake Street: Gotcha. And then last one for me and I'll jump back into Q. How should we think about gross margin? I know there were some dynamics impacting it in Q2, but looking here in Q3 and Q4, how should we think about sort of the general level? Kirsten Neuquist | Chief Executive Officer: Yeah, so definitely and Ed can weigh in on this as well. But we definitely in the first half of the year, we were significantly impacted in our gross margin with our dual manufacturing sites, both Thailand and Singapore. And then also just some additional transition costs that we had in terms of, you know, doubling up with training and so on and so forth. So we were really happy to hit our goal. There are milestones of completing production in Singapore in Q2 and that has been achieved. So that is done. At this point, we have a very small skeleton crew that remains to really support the shutdown. You know, we have to pack up the final equipment and ship it off and we have to shut down the site. But we definitely expect to see a benefit for sure in the second half as we close down the site. And then maybe, Ed, any other color? Ed Kernbauer | Chief Financial Officer: I would agree with that. With the closing of production in Singapore, we will definitely see a positive impact of margin as we go forward. So Q3 as well as Q4. Jason Smith | Analyst, Lake Street: Okay, perfect. Thanks a lot, Kirsten Neuquist | Chief Executive Officer: guys. Thank you. Operator | Conference Operator: Thank you. And once again, everyone, if you have any questions or comments, please press star then one on your phone. Please hold while we poll for questions. Thank you. That concludes our Q&A session. I'll now hand the conference back to CEO Kirsten Newquist for closing remarks. Please go ahead. Kirsten Neuquist | Chief Executive Officer: Thanks, operator. And thank you all again for joining us today. We appreciate the continued support of our customers, partners, shareholders, and employees. In terms of investor outreach, we'll be attending the B. Riley CMC Conference in New York on Wednesday, September 10th. And Lake Street will be hosting a virtual NDR on Tuesday, September 16th. So thank you again for joining us this afternoon and evening. And have a nice night. Bye bye. Operator | Conference Operator: Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation. jsPDF 3.0.3 D:20260606090202-00'00'