Identiv, Inc. Aktie

Good afternoon. Welcome to Identiv's discussion of the recently announced transaction with Trackonomy. My name is John, and I will be your operator this afternoon. On the call today are James Ousley, Board Chairman of Identiv; Kirsten Newquist, CEO of Identiv; Ed Kirnbauer, CFO of Identiv; and Dr. Erik Volkerink, Co-Founder and CEO of Trackonomy.

In addition, during the call, speakers will be making forward-looking statements, which refers to expectations, synergies, opportunities or other characteristics of future events, including the transaction with Trackonomy, go-forward business, future business, strategic partnerships and collaborations and any related benefits and attributes of future plans, strategies, opportunities and goals. Actual results may differ materially from those expressed in these forward-looking statements. In a moment, speakers will present their prepared remarks with a question-and-answer session to follow. This call is being recorded, and a replay will be made available on Identiv's website following the call. I will now turn the call over to Kirsten to begin.

Thank you, operator, and thank you all for joining us today to discuss the transaction with Trackonomy and our plans for Identiv on a go-forward basis. Since my appointment to CEO in September 2024, we have made meaningful progress across each of our pillars: perform, accelerate and transform. Under the Perform and Accelerate pillars, we have transitioned production to our new state-of-the-art manufacturing facility in Thailand, made advancements in our specialized Bluetooth Low Energy platform, grew our new opportunity pipeline and signed a significant multiyear agreement with IFCO. I'm also pleased to say that this transaction represents significant progress under the transform pillar as well as a complete strategic transformation of our company.

As part of this transformation, the company will sell its IoT operating assets and contribute $25 million to Trackonomy in exchange for $50 million in preferred equity. We have also entered into a strategic partnership framework agreement with Trackonomy with the goal of finalizing a definitive partnership agreement at transaction close. Going forward, Identiv's strategy will focus on targeted SaaS acquisition opportunities that are synergistic with Trackonomy's AI-based platform, which is expected to drive incremental growth for our acquired SaaS businesses.

Additionally, Identiv has been performing well against its key milestones and metrics. Our recent progress has positioned the company well for this value-enhancing transaction with Trackonomy and for what we see as a vision for Identiv's future. I will now pass the call to Dr. Erik Volkerink, CEO of Trackonomy, to introduce himself and his company.

Hi, everyone. I'm excited to be here and speak to you all today. A little background about myself. Over the past 20 years, I've held C-level positions at various publicly traded companies. Most recently, I was the Chief Technology Officer of Flextronics, but I've also served as the Chief Business Officer of Heptagon and CEOs of both RF Digital and Liquid Interface Technology, among other private companies.

I founded Trackonomy in 2017. Trackonomy is a pioneer in battery powered smart labels and a global leader in physical AI. And over the past 8 years, we've raised more than $250 million from various VC firms, including 8VC, Kleiner Perkins, Koch Disruptive Technologies, among others. And at Trackonomy, we are pioneering the next generation of enterprise resource planning for logistics, supply chain and other verticals, bringing AI-based real-time intelligence and automation from the shop floor to the top floor. And our network of interconnected assets transforms objects into smart, self-optimizing systems that enhance efficiency, security and operational control.

We're serving major global enterprises across health care, airlines, logistics and manufacturing markets as well as governments. And some of the brands I can talk about publicly are UPS, Delta, Georgia-Pacific and Coke. And our customers leverage our platform, which uses low-cost cloud-connected sensors as well as an AI middleware layer that runs on top of traditional ERP, but below AI applications to provide real-time visibility and intelligence to physical goods and assets and really provide tentacles in the real world as opposed to garbage in, garbage out solutions.

I came to know Identiv well through our acquisition of InPlay, which we did in September 2025. And InPlay is the leading Bluetooth chip supplier for smart labels and a partner that has been collaborating with Identiv on several important programs. And I was very impressed by Identiv's leading work in BLE and the strength of its specialized RFID portfolio, and its mission to create a more connected, transparent and sustainable world closely aligns with our mission. So I'm very excited about the transaction and the future strategic partnership with Identiv. And the asset sale will really create immediate strategic benefits for Trackonomy while also expanding the future potential of the go-forward Identiv business, and it will really be to the benefit of all our customers, both Identiv as well as Trackonomy.

Through our partnership, the 2 companies will be exceptionally well positioned to capitalize on the rapid growth of physical AI solutions and the increasing demand for real-time intelligence across supply chains and other verticals. So I'm very much looking forward to what we can accomplish together in the years ahead. And I'll pass the call back to Kirsten for final comments before we open the floor to Q&A.

Thanks, Erik. Under the definitive agreement we announced earlier this afternoon, Identiv will sell its IoT operating assets, including our German R&D center and our Thai subsidiary to Trackonomy. We will also contribute $25 million in cash. In return, Identiv will receive $50 million of Trackonomy preferred equity. Our cash contribution is intended to support integration efforts and fund incremental capital expenditures, including the scale-up of high-volume opportunities from Identiv. We believe the transaction will create substantial long-term value for our stockholders on multiple fronts, including for Identiv's ownership interest in Trackonomy's equity, participation in Identiv go-forward strategy, which I will discuss in a moment, and a $40 million stock repurchase program that we intend to execute following the transaction's close.

Additionally, Identiv intends to significantly streamline its overhead post closing to preserve a higher percentage of remaining cash for stockholder benefit. The asset sale will bring together highly complementary products and capabilities to create compelling strategic and operational synergies for Trackonomy. Trackonomy's deep expertise in large-scale deployments is intended to support strong execution across various strategic programs from Identiv. Further, Trackonomy is expected to leverage our state-of-the-art Thailand manufacturing facility to support its growing demand for production capacity and generating cost efficiencies.

We believe these synergies will contribute to revenue growth and margin expansion at Trackonomy, which we believe will benefit Identiv's equity ownership and support our long-term strategic objectives. As I mentioned earlier, we have also signed a strategic partnership framework agreement, essentially a letter of intent with Trackonomy to enter into a definitive agreement intended to support future collaboration on new software acquisition opportunities that are intended to leverage Trackonomy's physical AI platform. Subject to negotiating and entering into a definitive agreement, we anticipate the strategic partnership will create meaningful value for both of our companies.

Following transaction close, the streamlined Identiv will transition to a SaaS and physical AI-focused business model with a strategy focused on acquiring and consolidating targeted smaller compliance SaaS companies that can benefit from the integration into Trackonomy's AI-driven platform. We believe these acquisitions can create significant value by combining traditional compliance software with real-time physical world data and AI-enabled verification capabilities.

The compliance software industry is undergoing a structural shift. Historically, compliance platforms have been designed to manage workloads, workflows and documentation, but not to verify compliance in real time. As AI rapidly commoditizes workflow-based software, many traditional SaaS products are experiencing reduced differentiation and increasing pressure on valuation multiples. At the same time, regulators are demanding greater transparency, real-time visibility and verifiable evidence of compliance. Under this strategy, Identiv plans to pursue attractively valued compliance SaaS acquisitions in highly regulated industries, specifically targeting companies in the $3 million to $15 million annual recurring revenue range.

Our vision is to integrate the software from these acquisitions into Trackonomy's physical AI data platform, enhancing these SaaS products with a BLE and RFID generated physical AI data and infrastructure layer, delivering verified compliance data. This approach leverages our core expertise in RFID and BLE technologies together with our strategic partnership with Trackonomy.

This integration is intended to transform traditional workflow-based software into premium data-driven platforms powered by continuous physical world data collection and real-time monitoring. We believe that by moving beyond self-reported compliance to delivering real-time verification data, we will expand the SaaS company's ability to deliver new services while increasing customer retention, pricing power and creating a more defensible platform.

These SaaS business acquisitions are expected to benefit from new revenue opportunities, including premium pricing tiers, licensing arrangements with Trackonomy and broader access to Trackonomy's customer and partner network. We believe this strategy is well aligned with the total global addressable market for regulatory compliance software, which is estimated at approximately $40 billion for 2026 and growing at approximately a 10% CAGR.

Identiv is actively evaluating potential acquisition opportunities and intends to announce its first SaaS acquisition after this transaction closes. Now let me pass the call to Identiv's Chairman of the Board, Jim Ousley.

Thank you, Kirsten. I'm very pleased with this transaction we're announcing today. This decision follows a significant and extensive review of our strategic options over the last 18 months, and I am confident that we have identified the optimal path forward. Our confidence in this strategy is underscored by our commitment to return capital directly to our shareholders. We have increased our stock repurchase program to $40 million, which adds approximately $32 million to the roughly $8 million currently available under our program. We intend to repurchase our stock after transaction close, a move that reflects our belief in the company's intrinsic value and our priority of delivering tangible returns to our shareholders.

We believe that the repurchase program is an attractive and efficient means of returning capital and enhancing stockholder value. The transaction is expected to close in the third or early fourth quarter of this year, subject to customary closing conditions, including approval by our stockholders. I am pleased that our Board unanimously supports this transaction as does our largest shareholder, Bleichroeder, who has entered into a voting agreement with the company and Trackonomy. After closing, Identiv intends to remain a publicly listed on the NASDAQ Stock Exchange under the same ticker symbol. However, the name of the company will change. The Identiv name and brand will be included in the sale of the IoT operating business assets.

Now moving forward to the leadership and governance. The Identiv Board intends to significantly streamline the company's go-forward organizational structure into a highly focused cross-functional team dedicated to driving new SaaS and physical AI strategy. Post close, the Board intends to add senior leadership with extensive experience in SaaS and M&A integration to lead the organization and successfully execute this next chapter of growth.

On the Board level, upon the close of the transaction, Dr. Erik Volkerink will become an observer of the Identiv Board, and I will be appointed as an observer of the Trackonomy Board. These appointments will help facilitate strategic alignment, continuity, oversight and direct insight into the 2 company strategies and execution. The Board expects the synergies between both companies to scale quickly, fostering a collaborative, mutually beneficial strategic partnership. We look forward to working more closely with Erik and his team after the transaction closes.

This announcement is the culmination of the Board's comprehensive review of strategic alternatives. On behalf of the entire Board, I believe that this transaction will provide significant value to our stakeholders, including our shareholders, employees, customers, suppliers and partners. I'll now pass the call back to Kirsten for final comments before we open the floor to Q&A.

Thank you, Jim. I'm incredibly proud that Trackonomy recognizes our team's achievements in cutting-edge technology. I'm excited for what's to come. This transaction marks an important milestone for both of our companies and provides the potential for significant upside to our shareholders through Identiv's go-forward physical AI strategy and participation in Trackonomy's growth through our investment. I'll now pass the call to the operator to begin the question-and-answer session. Thank you.

[Operator Instructions] The first question comes from Jaeson Schmidt with Lake Street Capital.

I just want to clarify, I know you guys are -- have been aware of each other in the market, but curious if you have previously collaborated or worked together on anything?

Yes. So how Erik and I got to know each other and our 2 organizations got to know each other was through InPlay. So Trackonomy acquired InPlay, which is the BLE chip provider that we have been working with for a couple of years. So we have several different of our BLE smart label programs that we are working with InPlay. And as that relationship developed and then Trackonomy acquired InPlay, we have started working on new opportunities with Trackonomy as well. And maybe, Erik, if you have anything to add to that?

Yes, totally. I mean as a pioneer in Bluetooth Labels, we've been deep into ramping up these kind of products. And so as we work closer with Identiv, we were super impressed by the capabilities of the team, and also more and more saw how one plus one is three in the context of having semiconductor chips, process technology and our experience that under the same roof, how that benefits our customers. And we have a bunch of customers that are shared customers.

Got you. And then just as a follow-up, with this focus on compliance SaaS post the close of the transaction, just curious if the pipeline of potential targets has already been building over the past few months or if it's sort of you've identified the sandbox and now we'll start to kind of build out that list of targets?

Yes. So we've identified the sandbox, and we have a list of targets. And we'll continue to refine that list of targets and as we go out and really proactively have these discussions. But the targets are identified. And obviously, we'll continue to add to the target list.

The next question comes from Anthony Stoss with Craig-Hallum.

Kirsten, I'm just going to summarize some of the e-mails I received from shareholders post the announcement of this transaction. Why not just shut down everything and return all cash to shareholders is one. I think people are wondering, you spent 2 years looking for acquisitions. Now you're paying Trackonomy to take away your business. You have less cash used for acquisitions, and you haven't been able to make any. So why not just shut down and return all remaining cash to shareholders?

Yes. Look, I mean, so this is the culmination of a 2-year strategic review process that the Board and I have gone through. We're excited about this potential combination. We're excited about the partnership with Trackonomy. We believe that there's significant value in the equity by combining the Identiv business with Trackonomy. And we're actually excited about the go-forward strategy. And we believe strongly that, that is the best opportunity for the shareholders. And certainly, we are committed to returning capital as well, as you can see with the $40 million buyback.

And this is Jim. I would add to that, that we have been exploring both mergers and acquisitions extensively. So this, we truly believe has the opportunity to create more value. And the shutdown of a complex business like we had would be very expensive and with a lot of complications, both legally, et cetera. So the wind down and just distribute cash did not make sense to us, given we had a better alternative in our mind.

Okay. I have a question for Erik, if I could. We don't know much about your business. How large are you? How close might you be to an IPO? So the $50 million of preferred stock would ultimately be monetized for Identiv shareholders.

Yes. I think in the proxy statement, there will be a disclosure of the financials of Trackonomy as well. So I think that will have the details.

Our next question comes from Craig Ellis with B. Riley.

Kirsten, I'll start with you. As we think about getting to the transaction close, can you just go into more detail on what specific regulatory approvals are needed along with the shareholder approval you mentioned?

Yes. So I think the SEC obviously will review the transaction, and we expect there'll be a bit of a process there. But I think outside of that, that's the only additional regulatory approval that would be required.

And then the second question, it's clear that the post-close focus is on regulatory and compliance SaaS. But the question is, what else did you look at before coming to the conclusion that, that would be the best opportunity for shareholders? And what is it about that opportunity that leaves you and the Trackonomy team feeling like you're really advantaged there?

Yes. So I mean, look, we've looked at a whole bunch of different options. And we really believe in the whole physical AI space. We believe in the BLE smart label and the capabilities there. And this particular industry, so this kind of in this compliance industry and highly regulated fields, it is an industry that absolutely could benefit from real-world kind of verifiable data.

Today, a lot of these small SaaS software companies, they literally are just checklist, kind of, automated checklist, automated reporting, and they are under a ton of pressure from AI. So there's actually quite attractive valuations. And they can absolutely benefit from the physical AI, the BLE generated, the RFID generated data to actually automate the data collection for these software companies and also provide real verifiable data into these software companies, which will immediately differentiate them and actually add an additional set of revenue streams and really grow these businesses.

So we're pretty excited about this opportunity. It's obviously one that we'll do in close partnership with Trackonomy obviously, Identiv, we're having the capability around the BLE label, but the Trackonomy solution is a fully already existing automated AI-generated solution that can immediately be able to add this verifiable data to the software companies.

Got it. And then with regards to the post-close acquisition strategy, can you talk about how you and the team are thinking about sizing potential acquisitions? And to what extent is the acquisition strategy a larger deal or 2 versus going after much smaller businesses and really trying to roll up a lot of smaller entities.

Yes. So I think what we've, I think, put in the press release is we're looking for smaller companies initially. So -- and, one, to get a couple of acquisitions done relatively quickly, so kind of in the $3 million to $15 million range and really build up this collective portfolio of SaaS companies that can benefit from the physical AI platform and really be complementary to Trackonomy's physical AI platform.

We have reached the end of the question-and-answer session. And I will now turn the call over to Kirsten for closing remarks.

Thank you. Yes. So thank you all for joining us today. I know there are going to be a lot of questions as we move forward. So I'm looking forward to the discussions and really sharing why we're excited about this transaction. So thank you all for joining.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Good afternoon. Welcome to Identiv's presentation of its First Quarter 2026 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, Ed Kirnbauer.

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, 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 in documents filed from time to time with the SEC, including the company's 2025 annual report on Form 10-K as amended and the first quarter 2026 Form 10-Q, which will be filed with the SEC in the future. 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.

Thank you, operator, and thank you all for joining us for our first quarter 2026 earnings conference call. I will begin with a few highlights from the first quarter as we continue to build strong momentum executing against our Perform, Accelerate and Transform strategy.

As discussed on our last call, we achieved a significant milestone by signing a long-term agreement with IFCO to exclusively supply BLE smart labels for use on their pool of more than 400 million reusable plastic containers. Since then, we have been focused on development activities and expect to begin production for over 0.5 million pilot units shortly with mass production anticipated to start in the fourth quarter of this year.

We also made meaningful progress at our Thailand manufacturing facility, which is now fully transitioned from Singapore. This facility is increasing our ability to serve our customers more efficiently and at lower costs while continuing to deliver high levels of product quality and service, reflected in the positive feedback we are receiving from customers.

In addition, we are continuing to grow our opportunity pipeline, particularly for ID Blue, our portfolio of BLE smart labels for asset tracking and logistics applications. We are seeing strong and growing interest across multiple industries, including global logistics, pharmaceuticals and food distributors, and we remain on track to make these products commercially available later in the year.

Turning to our first quarter financial performance. I'm pleased to report that first quarter sales of $7.4 million exceeded our guidance with other key financial metrics coming in as expected. As anticipated, we saw a slight decline in gross margin versus the fourth quarter given the product mix and some additional scale-up costs for a new customer. We expect to see some margin improvement throughout the year as our operations become more efficient, but we will also have some offsetting costs in the second half due to the scale-up of IFCO.

We are starting to see some impact from the current macroeconomic environment, primarily in our consumer-facing applications where demand for higher-end products has softened. At the same time, certain suppliers have implemented price increases. We are assessing and will be taking pricing actions to offset these costs while continuing to focus on delivering value to our customers and maintaining our margin profile. Our CFO, Ed Kirnbauer, will now provide a detailed review of our first quarter financial performance. And afterwards, I'll share more on our progress across our strategic initiatives.

Thanks, Kirsten. In the first quarter of 2026, we delivered $7.4 million in revenue, which exceeded our previously announced guidance range compared to $5.3 million in Q1 2025.

The year-over-year increase was as expected and included strong demand from current customers, the conversion of new customers and the benefit of one of our larger customers ordering their full year 2026 sales volume in Q1. First quarter GAAP and non-GAAP gross margins were 17.4% and 23.8%, respectively, compared to GAAP and non-GAAP gross margins of 2.5% and 10.8%, respectively, in Q1 2025.

The primary factor driving the improvement in gross margin was the transition of production to our state-of-the-art Thailand production facility. This included cost savings and efficiencies achieved in procurement and production, improved facility utilization and the elimination of manufacturing production costs from our Singapore operation in Q1 of 2025.

In addition, the gross margin improvement year-over-year also reflected the benefit from charges recorded in the first quarter of 2025 to cost of revenue related to the write-down of obsolete inventory at our Singapore facility of $0.3 million and a warranty claim from one of our customers of $0.2 million. GAAP and non-GAAP operating expenses for the first quarter of 2026, including research and development, sales and marketing, general and administrative expenses and restructuring and severance totaled $5.5 million and $4.4 million, respectively, as compared to $5.6 million and $4.5 million, respectively, in Q1 2025.

The year-over-year decrease in GAAP operating expenses was driven primarily by lower restructuring and severance expenses, partially offset by higher strategic review-related costs incurred in Q1 of 2026 compared to the first quarter of 2025. Non-GAAP operating expenses in Q1 2026 were comparable to the prior year period, demonstrating our continued disciplined allocation of operating expenses as we execute on our PAT strategic initiatives. First quarter GAAP net loss was $3.4 million or $0.15 per basic and diluted share compared to GAAP net loss of $4.8 million or $0.21 per basic and diluted share in the first quarter of 2025.

This improvement in net loss was primarily due to the increase in sales volume in Q1 2026, lower restructuring and severance costs and as mentioned, the impact of charges to cost of revenue of approximately $0.5 million in the first quarter of 2025. Non-GAAP adjusted EBITDA loss for Q1 2026 was $2.7 million compared to $3.9 million in the first quarter of 2025. As mentioned, the decreased loss was the result of production efficiencies achieved at our Thailand facility, charges to cost of revenue in Q1 of 2025 and the disciplined spending of operating expenses as we continue to 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 Q1 2026 with $124.8 million in cash, cash equivalents and restricted cash. Our balance sheet position remains strong with working capital exiting Q1 of $129.6 million. In our 10-Q filing, we will be providing a full reconciliation of year-to-date cash flows. For completeness, we've included the full balance sheet in the appendix of today's earnings release.

Finally, I would like to discuss our financial outlook for the second quarter of 2026. We anticipate sales of $5.4 million to $6.0 million. As discussed, Q1 sales demonstrated strong growth, driven in part by significant full year 2026 customer order placed early to secure product availability. As such, our Q2 sales guidance reflects the pull forward of this volume into Q1. Additionally, the projection incorporates some uncertainty related to softening demand trends among certain consumer-facing customers.

As mentioned on our March call, we do expect to see margin improvement throughout 2026 as our operations become more efficient. We do, however, expect some variability in gross margins as we continue scaling production for the IFCO program, which reflects the typical dynamics of ramping production for large programs. Again, it is 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 support attractive long-term margin performance. From a cash usage perspective, we continue to expect to utilize $14 million 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 IFCO production, a $1 million increase in working capital to support growth and $1.5 million to purchase chips, locking in favorable pricing required to fulfill customer orders, which extend past 2026. This concludes the financial discussion. I'll now pass the call back to Kirsten.

Thanks, Ed. I'm pleased with the progress that we have made while recognizing there is still more work ahead to achieve our financial goals. Our efforts are delivering results as we continue to execute our Perform, Accelerate and Transform strategy.

Our Perform pillar is focused on strengthening and scaling our core business while driving operational efficiency and margin expansion to create long-term value for both shareholders and customers. As discussed earlier, we have officially completed the 2-year manufacturing transition to our Thailand facility. This has enabled us to deliver our products to customers faster, decrease costs, improve efficiency and expand margins. Since we last spoke, our Thailand facility has continued to make strong progress in training our employees to operate safely and efficiently while maintaining our high-quality production controls.

At the beginning of the year, we implemented new CRM and MRP enterprise systems to better integrate sales, demand planning and operations. We have also introduced quarterly sales and operations planning processes to align our commercial operations and supply chain teams around a unified demand plan and disciplined production execution.

Simply put, these new systems enhance our ability to respond to customer needs with greater speed and accuracy while providing improved visibility across our operations and inventory. We remain focused on developing and maintaining strong customer relationships and are encouraged by our progress. In the first quarter, 2 of our 3 top customers extended their supply agreements, reflecting confidence in our performance and service.

Overall, customers are responding positively to our continued improvements and commitment to operational excellence. On the marketing front, we are committed to ensuring that our customers, prospects and channel partners fully understand the breadth of our product portfolio and capabilities and how we help solve critical business challenges. In support of this, we launched our new corporate website designed to provide clear, accessible product information, application insights, case studies and an enhanced Investor Relations section.

Since our launch in January, we have continued to see increased website visits and click-through rates and a growing number of requests for information via our website contact form. We also continue to strengthen Identiv's thought leadership position through 20 published articles discussing important topics for our customers in the industry, including how NFC is restoring trust for consumers, clinical trials are getting smarter and supply chains and AI.

We participated in an AIPIA connected packaging webinar that featured 8 subject matter experts and focused on smart packaging trends driving demand for IoT technologies.

Shifting now to our Accelerate pillar. Our focus here is on driving growth in high-value segments through innovation, particularly in BLE technology and advanced multicomponent manufacturing. We are excited about our long-term strategic partnership with IFCO, where our team is making good progress across both product and manufacturing development. We are in the final stages of production site renovations to support the custom manufacturing equipment required for this next-generation BLE label.

As noted earlier, we expect to begin production of more than 0.5 million pilot units shortly with mass production planned for the fourth quarter. Development of our proprietary BLE smart label portfolio, ID Blue, is also well underway. We are seeing significant early interest in these solutions, which target logistics, cold chain and asset tracking applications.

We remain on track to commercialize this portfolio later this year. We also successfully completed the BLE ambientChat.ai demonstration highlighted on our last call.

This showcased the potential of physical AI, demonstrating how connected products can bridge the physical and digital worlds to deliver real-time intelligent insights. Our innovation efforts continue to gain external recognition. During the quarter, we were honored with the IoT Connected Retail Application of the Year Award in the 10th Annual IoT Breakthrough Awards program, underscoring the strength of our technology and market positioning.

More broadly, we are seeing tangible results from our innovation pipeline. In April, we launched our expanded ID-Safe inlay portfolio, which enables product authentication, tamper detection and end-to-end traceability across a range of industries, including pharmaceuticals, health care, retail, food and beverage, electronics and smart packaging.

We are seeing growing interest for solutions that can verify product authenticity, confirm package integrity and provide visibility across the product life cycle and our ID-Safe product family addresses all of these challenges.

Please see the press release about our ID-Safe innate portfolio issued on April 20 on our website.

Turning now to our third pillar, Transform. This pillar is focused on expanding the business through strategic M&A to accelerate our path to EBITDA breakeven while broadening our product portfolio and enhancing our technical capabilities. Our Board continues to work closely with our financial adviser, Raymond James, and our legal advisers on strategic alternatives. Before I turn the call over for Q&A, I'd like to update everyone on the new reporting metrics we introduced in 2025 and the results we achieved in quarter 1.

First, our new sales pipeline and conversion metric tracks opportunities with new customers or those we have not served in over 2 years. For 2026, our goal is to build a pipeline of 125 opportunities and convert at least 35 into sales by year-end. We exited last year with 101 opportunities. And as of the end of first quarter, our pipeline has grown to 124 opportunities with 8 opportunities converted to sales during quarter 1.

Next, our new product development metric tracks the number of our active NPD initiatives. These projects involve the development of entirely new RFID or BLE tags, inlays or labels. At the end of first quarter, we had 18 active NPD projects underway with 3 successfully completed during the quarter, all within high-value segments, including cold chain and consumable authentication.

Our NPD completion metric tracks the number of projects delivered within the period. For 2026, we are targeting 7 completed projects by year-end. With 3 projects already completed in the first quarter, we are well on the track to meet this objective.

Overall, we are making progress against our key metrics, supported by continued positive momentum across the business. I look forward to updating you on our continued execution throughout the year.

Our mission remains clear: to provide digital identities for billions of fiscal objects, enabling real-time intelligence for the world's most demanding industries. Thank you to all of our employees, customers, partners and shareholders for your continued support of Identiv.

With that, I'd like to open the call to answer your questions. Operator, please open the question queue.

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

Three questions actually. The first 2 for you, Kirsten. What percentage of the opportunities are health care related or maybe any detail you can give us on the other industries? I think you've given that in the past. And also for you, Kirsten, with IFCO and you're really getting set up to ramp big time in Q4, do you have the resources necessary to be able to handle any kind of new requests from new customers coming online late in the year?

Yes. Well, thank you. Good question. So I'll start with the health care one. So we have our 2 different pipelines that we're monitoring. So one is our NPD pipeline, so our new product development pipeline. In that pipeline, we have roughly 1/3 of the projects in the pipeline are health care related. As we move over and look at the new opportunity pipeline, which is a combination of some new product development, but more opportunities for standard product or a product that has just some minor customization.

And I'd say that's a little bit lower in terms of the health care percentage. That's probably more about 20% health care. So in general, we're kind of overall, I'd say, when we look broadly at our opportunities, probably about 1/4 of them between the NPD pipeline and the sales opportunity pipeline are related to health care.

And then your second question...

Sorry, go ahead.

I was going to say the resources, do you have enough resources to handle new customers when you're ramping IFCO?

Yes. So obviously, IFCO, it is a massive program. And at the moment, it is taking a fair amount of our engineering resources as we're finalizing the design and finalizing the manufacturing process.

But as that work as we go through the next couple of quarters and we get to finalize the product spec and the product design, engineering will open up and have a little bit more ability to take on more projects. And really then the effort as we get into the fourth quarter is more on the manufacturing side. So obviously, we'll be hiring in particular, operators to man the production equipment.

But outside of hiring new operators to man the production equipment, we actually have all the resources in-house at this point from an engineering perspective.

Got you. And if I could ask a question on gross margins. Where do you see gross margins or a range for Q2 and maybe what you expect Q3, Q4?

Yes. Thank you. As far as -- we don't give guidance out more than a quarter out. But what I can say is that we had a good quarter sales-wise.

We did have the benefit of that pull forward from that customer who ordered the full year supply in the first quarter. But from a margin perspective, I would expect margins to continue to improve on our core business, on our core customers with all the benefits that we're receiving from the transition of Thailand and other things.

So I would expect margins to continuing to improve. But at the same time, we are scaling for the IFCO project. So I would expect -- we definitely will expect some offset to those benefits as we move into the next quarter and the rest of the year as well.

Your next question is coming from Craig Ellis from B. Riley.

Kirsten, I wanted to start with just a clarification. We knew that there would be a benefit in the first quarter as we [indiscernible] material that would be used through the year, but it seemed either that or something else was a little bit greater than at least what I was expecting. Can you look back at the first quarter and help us with what it was that drove revenues a little bit better than I think some of us were expecting?

Yes, yes. No. So we were pleased with the sales in first quarter. So as we had previously mentioned and given some guidance last quarter, we did get the benefit of one of our larger customers purchasing their full year in the first quarter.

But we also just saw overall strong demand at the beginning of the year. So we had several of our customers come in with slightly higher orders than had been forecast, and we're happy to see that. But at the same time, we are seeing a little bit of softness now with some of the current global economic situations going on, a little bit of where things started off with some nice good orders coming in, in the first quarter. We're seeing a little bit, especially with some of our consumer-facing customers, a little bit of a slowdown potentially in the second half.

And on that point, Kirsten, because that was going to be my second question, is there a regional dynamic to that? Or is it in any particular part of the consumer-facing businesses that you have? Just help us understand how broadly that's being observed within the consumer-facing businesses.

Yes. So we've seen some softening forecasting from several of our customers who are specifically consumer-facing and specifically in higher-end appliances or devices, so higher-end products.

So I think it's a little bit around kind of consumer confidence. I think some of these customers of ours, the OEMs, just making sure they're managing their inventory levels and being cautious as we're in this world with perhaps higher inflation than we would like and some of the uncertainty with the geopolitical situation, et cetera.

And I think some of the concern around consumer confidence. And I would say kind of these consumer applications that we've seen a little bit of softness, I'd say that's roughly 25% to 30%, 25% of our overall customer base.

That's really helpful. And I don't think any of us are totally surprised with that because it does seem to be an artifact of what happens in an uncertain macro. My last question before I get back in the queue. Thanks for giving us some of the new metrics. I wanted to understand them a little bit better. I'll start with target 2026 conversion opportunity.

So we've converted 8. We have an ambition for 35. Help us understand the visibility you have in getting from 8 to 35. And if you could provide any color on how we should think about the revenue implications of that potential success, it would be helpful.

Yes. No, thank you for the question. So we have the total number in the opportunity pipeline are roughly 124 opportunities. And so our goal -- and obviously, as we convert them, they come off, sometimes we win them, sometimes we lose them. So that number does fluctuate quite a bit.

But our ultimate goal is to convert 35 new, and these are brand-new customers, the ones that we haven't sold to before or if we sold to them before, it's been over 2 years. And so we're looking to convert 35 of those by the end of the year. So that's our target for the full year. And those opportunities in our sales pipeline, they really do vary in terms of average size. If it's a standard product that we keep on inventory, it can be as small as $5,000 or $10,000, but it also can represent a custom product of a new customer who is looking to scale in a global way, and those opportunities can be worth [ $500,000 ], a $1 million worth of product within the first 12 months of sales.

So it really does vary. And I -- so even an average order price doesn't give you a lot of information, but it really does vary from small to very big. And so ultimately, we're looking to convert sales 10% to 15% of our overall sales value should be coming from some of these new conversions. And obviously, the software does include IFCO. That would be a separate category altogether.

Sure. Regarding the bigger ones, do you feel like you have line of sight on anything that convert -- that could convert in the large size?

So we certainly are working on larger sized ones. I'd say the majority of the larger sized ones are more on the BLE side. And some of the ones on the BLE side also do need us to get to the commercialization of the ID Blue, which is the portfolio of BLE smart labels that we're working on that we'll be commercializing on later this year.

So we definitely are working them. We're in conversation. We're in sampling mode. But it's -- until those go through the whole development proof of concept, we don't have a definitive answer on exactly what the timing will be or what the initial first quarter or 2 volume will be.

Your next question is coming from Jaeson Schmidt from Lake Street.

I just want to follow up on the commentary surrounding kind of macro concerns, understanding maybe demand forecasts are a little softer than anticipated. But are you seeing any cancellations within your pipeline?

We're not seeing cancellations. I'd say what we're seeing is, as you just mentioned, softening forecasts or interest in perhaps pushing some volume -- some orders out.

So that's more what we are seeing as opposed to just outright cancellations.

Got you. And then just as a follow-up, understanding with the ramp of IFCO, there could be some incremental expenses. But how should we think at a high level of OpEx trending this year?

Yes, I'll take that question. I would expect OpEx would -- it's relatively consistent with what it had been last year. And we have -- with the cost structure that we have in place, we don't expect to see any significant increases in OpEx in the next quarter or for the rest of the year.

Pretty much flat.

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

Well, I want to just thank everyone for joining. We appreciate you spending the time with us this evening, and we're looking forward to another good quarter in quarter 2. So thank you for joining us.

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

Good afternoon. Welcome to Identiv'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 Kirnbauer. 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, 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 in 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. 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.

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 multiyear agreement with IFCO to manufacture and supply the specialized next-generation BLE smart labels. This agreement represents a major milestone in our high-growth BLE strategy and reinforces Identiv'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 multiyear agreement, Identiv will serve as exclusive supplier for committed manufacturing volumes.

Following the development phase, IFCO 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 4 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 gross profit margin, reflecting the successful completion of our 2-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 Kirnbauer, will now provide a detailed review of our quarter 4 financial performance, and I'll return afterwards to share more on how we're progressing across our strategic initiatives.

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 GAAP and non-GAAP gross margins were 18.1% and 25.6%, respectively, compared to GAAP and non-GAAP gross margins of negative 14.9% and negative 5.2%, respectively, in Q4 2024. Factors driving the expansion in 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 31, 2025, it's now complete.

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

Fourth quarter GAAP net loss from continuing operations was $3.7 million or $0.16 per basic and diluted share compared to GAAP 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 phase 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 P-A-T 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 GAAP and non-GAAP gross margin was 6.1% and 14.3%, respectively, compared to GAAP and non-GAAP 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.

GAAP and non-GAAP 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 $0.79 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 P-A-T 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 million 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 million 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 IFCO 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.

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 enhance the value we deliver. First, we completed a major 2-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 Vitaprotech 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 the 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 improved 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 IFCO 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 2 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 pipeline. We advanced our BLE 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 Wiliot's next-generation Pixel. In addition, we completed 5 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, Tag-N-Trac, Novanta, Narravero, IFCO and Wiliot. 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 road maps 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 IFCO 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 multicomponent 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 BLE 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 BLE road map will advance this year, focusing on high-value applications across health care, industrial and logistics markets. In particular, we expect to commercialize our ID-BLU 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 breakeven, broadens our product portfolio, enhances technical capabilities and seeks to increase shareholder value. We have a dedicated team working with our financial adviser, Raymond James, to evaluate our strategic alternatives. 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 2 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 4, there were 18 active NPD projects, 10 customer-driven and 8 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 multimillion volumes needed by IFCO.

Third, NPD project completion. This metric captures the number of NPD projects completed within the quarter. In quarter 4, we completed one customer-driven project, bringing us to a total of 5 for the full year. The project completed in quarter 4 is for mass transit application. Our target for 2026 is to complete 5 to 7 NPD 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 improvements, 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 IFCO, 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.

[Operator Instructions] The first question comes from Jaeson Schmidt with Lake Street.

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?

Yes, 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% 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 $0.15. 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 $1. So somewhere in that range.

And obviously, gross margins, it is a true partnership with IFCO. They are investing CapEx along with us to scale up. They are committing to a certain volume. And so with that, we are -- the gross margin will be less than our target gross margin of 30%, but still a very, very great opportunity for us.

Got you. That's helpful. And just to clarify, are you guys sole sourced here? How many potential suppliers are there?

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.

Okay. Perfect. And then just the last one for me, and I'll jump back in the queue. 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?

Yes. 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 health care. I would say another probably 25% for logistics, probably another 25% for food and beverage and then the rest is a variety of applications.

The next question comes from Tony Stoss with Craig-Hallum.

It's Rian on for Tony Stoss. Just following up on the last question about your pipeline. I think last quarter, you said about 2/3 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?

So anything that's in our NPD pipeline, those are being developed. So there would be nothing in our quarter 4 that is in our NPD pipeline. Those are new product development, they're in process. And I would still say that roughly 2/3 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.

Okay. Got it. And then one more on the IFCO deal. It was nice to see that supply agreement come in. It said there was a development phase that needed completion. I'm curious what kind of that looks like throughout the year. And it seems like the plan is still to ramp towards the end of the year towards the larger volumes.

Yes. So we will be -- 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 4.

The next question comes from [ Rebecca Rozanski ] with B. Riley Securities.

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 [indiscernible], and yield improvements, NPD mix shift and the IFCO ramp?

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?

Yes. Like could you just like provide some color on the relative contribution of the gross margin drivers?

So you're asking about what we're expecting from a gross margin perspective as we move into 2026 as compared to...

Yes.

Okay. Okay. Yes. So as we mentioned earlier on the call, 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 IFCO project and as well as we have -- we're onboarding a new customer in Q1. So that will -- in the near term, we're expecting some variability. But if you look at -- and 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.

I'd like to turn the floor back to Kirsten Newquist for closing remarks.

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.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Good afternoon. Welcome to Identiv's presentation of its Third Quarter 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 Kirnbauer. 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, 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 in documents filed from time to time with SEC including the company's latest annual report on Form 10-K as well as our third 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 3 2025 Earnings Call.

As we review this quarter's results, I want to highlight that our Perform, Accelerate and Transform strategy continues to guide everything we do, from serving our customers and building our pipeline to driving innovation and commercial momentum in our high-value segments and delivering on our financial commitments. This strategy remains central to transforming the organization and creating lasting value for our shareholders.

I'm pleased to report that in quarter 3, sales were in line with guidance with all other key financial metrics exceeding expectations. This quarter is particularly notable for our improved gross profit margin, which reflects the initial benefits of completing our 2-year transition of production from Singapore to our new state-of-the-art manufacturing facility in Thailand.

This is the first quarter in which all of our productions have been done in Thailand. A significant milestone that has meaningfully lowered our cost structure, enhanced efficiency and scalability and positions us well for continued margin growth. We expect further margin expansion over the next few quarters as we complete the Singapore site shutdown by year-end, and the Thailand team reaches full productivity.

Our CFO, Ed Kirnbauer, will now provide a detailed review of our quarter 3 financial performance, and I'll return afterwards to share more on how we're dressing across our strategic initiatives.

Thanks, Kirsten. In the third quarter of 2025, we delivered $5.0 million in revenue, which was within our previously announced guidance range compared to $6.5 million in Q3 2024. This year-over-year decrease was as expected and due to lower sales as 2we exited lower-margin business earlier in the year.

Third quarter GAAP and non-GAAP gross margins were 10.7% and 19.1%, respectively, compared to GAAP and non-GAAP gross margins of 3.6% and 9.3%, respectively, in Q3 2024. Factors impacting the increase in gross margin included the reduction in fixed manufacturing 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. Facility shutdown activities in Singapore continued to progress as planned and are expected to be substantially completed by year-end. GAAP and non-GAAP 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 P-A-T strategic framework. Third quarter GAAP net loss from continuing operations was $3.5 million or $0.15 per basic and diluted share compared to GAAP net loss from continuing operations of $9.3 million or $0.40 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 $0.4 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 production facility in Thailand, as well as management's continued careful allocation of operating expenses as we execute on our P-A-T 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 million to $15 million.

Our working capital exited Q3 was $135.4 million. Our balance sheet position remains strong. In our 10-Q 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.

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 is 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 stronger 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, expanding gross margins through 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 2-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 3 sales, with additional growth expected as this new business scale.

In marketing, following the completion of the transition services agreement, TSA, with Vitaprotech, we are rebuilding keycapabilities, implementing Hubspot to enhance lead generation and visibility and preparing to launch our new corporate website by year-end. We also maintained a strong presence at major industry events, including WIoT Tomorrow in Wiesbaden in Germany and Labelexpo in Barcelona, Spain. Both generating meaningful customer engagement and reinforcing strategic partnerships.

At Labelexpo, our own VP of Business Development, Klaus Simonmeyer; and Narravero CEO, Thomas Rödding, shared insights on DPP compliance during a dynamic NFC RFID panel at the smart labeling seminar 2025, further strengthening Identiv's position as an innovation leader.

Finally, the TSA transition with Vitaprotech is now substantially complete, and we are fully separated from the physical security business we sold 1 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 P-A-T framework, accelerate, we are advancing 3 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 3 health care high-value applications. And three, further driving growth in 3 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's 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 IFCO BLE prototypes and Wiliot's next-generation pixels. Key milestones in the development and commercialization of 2 important customer-driven BLE program. 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 Wiliot to scale up and commercialize next-generation pixels. Wiliot 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 application.

In health care 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-N-Trac for pharmaceutical cold chain management. Additionally, we announced a new commercial partnership with TUK, bringing our secure NFC technology to children's books. Each book integrates seamlessly with TUK's speakers through customizable NFC tags. Activating guided audio without screened, WiFi or extra devices.

Designed for durability and security, this solution is built to scale across classrooms, libraries and home. 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, ZATAP 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 road maps 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 NPD programs will begin in the next quarter.

Transform create 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 breakeven and broadens our product portfolio and enhances our technical capabilities. We continue to work with our financial adviser, 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 3 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 2 years. At the end of quarter 3, we had 118 new opportunities in our pipeline. We added 46 closed 28 and converted 7 to sales, leading to a net increase of 18% over quarter 2. We had 100 new opportunities in our pipeline at the end of the quarter 2 and 75 in quarter 1, 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 a 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 3, there were 17 active NPD projects, 11 customer-driven and 6 internally driven. 4 of the customer-driven projects target health care applications and 4 utilized 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 3, we completed 3 customer-driven projects, 2 of which are moving into commercialization. Both projects were for anti-counterfeiting initiatives in the high-end spirits and wine market, 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 Identiv'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 Instructions] Our first question comes from Craig Ellis with B. Riley.

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?

Yes. No, thank you. Let's see. So definitely, we are seeing 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.

And just speaking of BLE, in the prepared remarks, you talked about progress with IFCO and Wiliot. Can we conclude that IFCO is on track for volume shipments in the second half of next year? And Wiliot 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 Wiliot next year?

Yes. Well, to start with the IFCO question. Yes, we are making progress. So product development is well underway. As we mentioned, we shipped out production made prototypes that are now being used in proof of concept 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 design. So that's progressing well.

And in terms of Wiliot, we've been working very hard over the last 6 months to qualify their next-generation product. So that's underway. And this quarter -- and even last quarter, last quarter was beginning in this quarter, we will be shipping those next-generation products to the field.

So both of them are nice opportunities. 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 helps to support all the different Wiliot customers as they look commercialize the Wiliot solution.

Great. 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 that higher-quality revenue basket that the company has 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.

Thanks, Craig. 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 are -- 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.

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?

I'll let Kirsten talk about that. But I do want to say, in addition, to that we have the -- we will continue to improve margins with improving the utilization of our Thailand facility. But as far as mix?

Yes, yes. So I think what we'll see in quarter 4, there's 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 cost of Singapore related costs in quarter 4.

In terms of the mix, we definitely have some of our kind of NPV projects starting to ramp. Those are still a little bit in the ramp-up phase. So we still have a little bit of ramp-up costs until we get the full productivity of those projects but we do see kind of a slight increase in mix overall going into quarter 4.

The next question comes from Anthony Stoss with Craig-Hallum.

Congrats on the move to Thailand, getting it complete. Kirsten, I'll leave 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?

Yes. 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 pipeline and that represented in the third quarter roughly 10% of our sales. So those will definitely continue to scale and grow as we go into 2026. But yes, no, we were happy to -- year-to-date, we've converted roughly 18% of our total new opportunity pipeline.

Roughly what percentage are at your 28% gross margin goal?

Yes. So of the new opportunity of the new opportunities that converted, I think roughly 2/3 of them were on the higher value side, so higher than 30% gross margin and probably 1/3 of them were slightly lower than that. But 2/3 of them were what we would consider on the high-value side.

Got it. Good to hear. And then if you could frame the size the new opportunity with Wiliot and also a similar question, what kind of gross margins would you expect to generate?

Yes. So I mean we're not talking about kind of ultimate sales volume potential with the Wiliot, and that's still progressing. Margins, the opportunity is large. We're scaling up the next generation, we definitely anticipate margins to be quite a bit significantly higher than where they were 2 years ago, but we're still working to increase those over the next probably 3 to 4 quarters and definitely higher -- much higher than where they were back in 2023 and early 2024.

Got it. And the last question for me, Kirsten, with your background in this industry in the health care side. I know in quarters past, you spoke a lot about your health care opportunities. I 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 health care side?

Yes. We certainly still see a nice opportunity in health care, and we see kind of the interest from some of the medical device and the pharmaceutical companies and 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 1/3 of them are health care 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 health care projects that we're working on.

We have reached the end of the question-and-answer session, and I will now turn the call over to Kirsten for closing remarks.

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.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.