Identiv Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 5, 2025

There are 6 speakers on the call.

Operator

Good afternoon. Welcome to Adentive's presentation of its Fourth Quarter and Fiscal Year twenty twenty four 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, Justin Scarpulla. Following management's remarks, we will open the call for questions.

Operator

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 margin and non GAAP operating expenses. In addition, during the call, management will be making forward looking statements. Any statement that refers to expectations, projections or other characteristics of future events, including future financial results, future business and market conditions and opportunities, and future plans, strategies, opportunities and goals is a forward looking statement. Actual results may differ materially from those expressed in these forward looking statements. For more information, please refer to the risk factors discussed in documents filed from time to time with the SEC, including the company's latest annual report on Form 10 K and quarterly report on Form 10 Q as well as our third quarter '10 Q once filed.

Operator

Identify 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.

Speaker 1

Thanks, operator, and thank you all for joining our quarter four and fiscal year twenty twenty four earnings call. Quarter four marked our first full quarter following the sale of our Physical Security business, allowing us to focus on becoming a leading pure play provider of specialty RFID and Bluetooth Low Energy, BLE, solutions. The proceeds from the sale significantly strengthened our financial position and enable us to fund future organic and M and A driven growth of our specialty IoT solutions business. During our last earnings call, we unveiled our perform, accelerate, transform growth strategy and go to market plan. And I'm happy to share that we have fully shifted into execution mode.

Speaker 1

We have made progress building our team, moving several key initiatives forward and ensuring we have plans in place to drive operational excellence. As we've discussed, the objective of the PAT framework is to strengthen and optimize the performance of our core channel business, accelerate our growth through focused key initiatives and ultimately transform the business into a market leader in specialty IoT solutions. To drive the commercial aspects of the plan, we are excited to have accomplished business leader, Kim Macaulay join Identiv as the new Head of our commercial organization. Kim will be integral to driving sales expansion in our core channel business within the Perform pillar and leading our business development initiatives in the Accelerate pillar. She has over thirty years of experience developing and implementing successful go to market strategies as well as creating and managing high performing sales teams.

Speaker 1

Kim knows how to successfully scale the growth business having previously managed commercial sales of $650,000,000 at Avery Dennison including supporting the launch of RFID. Her initial focus will be on strengthening the sales organization and implementing the tools needed to streamline communication and proactively manage our sales pipeline, positioning us to scale the business effectively. Another key aspect of our plan is the transition of RFID production from Singapore to our low cost facility in Thailand, which remains a top priority and continues to progress very well. In December, we achieved our year end milestone of transitioning roughly 75% of our current volume to Thailand. Of the four remaining customers in Singapore, One will be discontinued and the other three are expected to be transferred to Thailand by the end of quarter two.

Speaker 1

The customer who we decided to discontinue is one of our lowest margin customers. Once all production has been transferred and the Thailand team achieves productivity on par with Singapore, we expected to deliver a non GAAP gross margin in the previously stated range of 26% to 28%. Our long term non GAAP gross margin target remains 35%. Our new product development, NPD pipeline plays a key role in driving our business growth. We are working on numerous active projects, both customer driven and internally driven in response to evolving market needs.

Speaker 1

In the past quarter, we added several new customer driven projects, including a new smart label for the authentication of consumables for home appliances, a rugged, will yet based BLE device for use on metal and industrial applications, and in play based BOE smart label for use in the pharmaceutical cold chain and the new BOE design for integration into reusable plastic containers for transporting food. These new projects represent high value applications. Last week, we announced a new strategic partnership with Novanta, a technology solutions provider focused on the healthcare industry. This collaboration brings together Novanta's reader modules and APIs with Identiv's inlay portfolio, streamlining the development process for OEMs to incorporate smart technology into their medical devices. It also allows us to offer a comprehensive consumable authentication solution to medical device and diagnostic OEMs.

Speaker 1

Our combined technologies are intended to help ensure that the correct consumables are used, properly calibrated and correctly assembled into medical devices and diagnostic equipment, promoting accurate use and enhancing patient safety. In summary, 2024 was a transformative year for Identiv with quarter four marking the beginning of the new streamlined iDentive. As a standalone pure play IoT solutions company, we have established a clear strategic plan to drive future growth, continuing to build a solid foundation as we actively strengthen our team with experienced professionals. I will share more details on these ongoing initiatives following Justin's review of our fourth quarter and fiscal year financials. Justin?

Speaker 2

Thanks, Kirsten. As Kirsten mentioned, 2024 was transformative for Identiv. Now a pure play RFID company focused solely on IoT solutions, we've begun to execute our PAT strategic growth plan and are making good progress transitioning inlay production from Singapore to Thailand. Fourth Quarter Twenty Twenty Four revenue was $6,700,000 exceeding the midpoint of our previously announced outlook by approximately $600,000 Q4 outperformance versus this revenue guidance was primarily due to one of our customers accelerating their delivery schedule from Q1 of twenty twenty five to Q4 as a precaution ahead of transferring their production to Thailand. Although we do not anticipate any delays with our Thailand transition, this customer wanted to ensure that they had enough inventory on hand to mitigate any scale up risk in Thailand.

Speaker 2

Fourth Quarter GAAP and non GAAP gross margin was negative 14.9 and negative 5.2% respectively compared to GAAP and non GAAP positive gross margin of 16.219.5% respectively in Q4 twenty twenty three. Factors impacting the decrease in gross margin included decreased utilization, the ramp up of our Thailand facility ahead of the transition out of Singapore and the customer that phased out their legacy program earlier than expected. The customer program resulted in a non cash inventory adjustment of $800,000 and an additional $200,000 attributable to the disposal of specific manufacturing equipment that cannot be repurposed for other customer orders. As we have previously communicated, completing the transition of RFID and DLE production from Singapore to Thailand remains a key priority for 2025. We have transitioned the vast majority of the customers and are making good progress on qualifying the last three customers to be transferred to Thailand.

Speaker 2

After multiple discussions with a low margin legacy customer, we determined that continuing to support their business in Thailand is not aligned with our PAT growth strategy. By focusing our commercial and R and D efforts on higher margin opportunities in healthcare and other high value segments, along with the full production in Thailand, we believe we can deliver a long term target non GAAP gross margin of 35%. GAAP and non GAAP operating expenses for the fourth quarter of twenty twenty four, including research and development, sales and marketing, and general and administrative expenses totaled $5,600,000 and $4,100,000 respectively, as compared to $5,200,000 and $4,100,000 respectively in Q4 twenty twenty three. The year over year change in our GAAP and non GAAP operating expenses continue to reflect our focus on maintaining tight control over operating expenses. Fourth quarter GAAP net loss from continuing operations was $4,300,000 or $0.19 per basic and diluted share compared to GAAP net loss from continuing operations of 3,300,000 or $0.16 per basic and diluted share in the fourth quarter of twenty twenty three.

Speaker 2

Non GAAP adjusted EBITDA for Q4 twenty twenty four was negative $4,500,000 compared to negative $1,900,000 in the fourth quarter of twenty twenty three. The year over year changes in GAAP net loss and EBITDA were primarily the result of lower year over year revenues, which resulted in the underutilization of our production facilities in Southeast Asia and the costs associated with the phase out of our legacy low margin customer project. 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 to fiscal year twenty twenty four financials. Fiscal year twenty twenty four revenue was $26,600,000 a decrease of $16,800,000 compared to the prior year period, primarily the result of lower sales of BLE transponder and mobile products.

Speaker 2

Fiscal year twenty twenty four GAAP and non GAAP gross margin was 1.38% respectively compared to GAAP and non GAAP gross margin of 13.816.6%, respectively, in fiscal year twenty twenty three. The decline in gross margins is largely due to the production transition to Thailand. For all of fiscal twenty twenty four, we had operations running in both Singapore and Thailand versus both sites running in the second half of twenty twenty three. Additionally, we had to allocate significant resources in 2024 to Thailand ahead of this manufacturing transition out of Singapore. GAAP and non GAAP operating expenses for fiscal year twenty twenty four, including research and development, sales and marketing, and general administrative expenses totaled $28,300,000 and $17,900,000 respectively as compared to $19,500,000 and $16,700,000 respectively in fiscal year twenty twenty three.

Speaker 2

Included in the fiscal year GAAP operating expenses were $6,200,000 in strategic transaction related costs and $3,500,000 in stock based compensation. Fiscal year GAAP net loss from continuing operations was $25,900,000 or $1.14 per basic and diluted share compared to GAAP net loss from continuing operations of $13,900,000 or $0.66 per basic and diluted share in fiscal year twenty twenty three. Non GAAP adjusted EBITDA for fiscal year twenty twenty four was negative $15,800,000 compared to negative 9,500,000 in fiscal year twenty twenty three. The decrease was primarily the result of our lower year over year revenues and other factors as previously noted. Now moving to the balance sheet.

Speaker 2

We exited Q4 twenty twenty four with $135,900,000 in cash and cash equivalents and restricted cash, an increase of $111,000,000 since 12/31/2023. In the fiscal year ending 12/31/2024, the $141,500,000 net increase in cash from our investing activities was primarily attributable to the strategic transaction proceeds. This was offset in part by $13,600,000 used in financing activities for the repayment of our credit facility, repurchases of our common stock and taxes paid on the settlement of RSU releases and 15,400,000 used in operating activities. In the fourth quarter of twenty twenty four, we used $9,800,000 in cash and restricted cash, of which $3,500,000 related to tax payments related to our strategic transaction, $2,200,000 in strategic transaction related payments and $1,900,000 in share repurchases. This was offset by $1,300,000 in interest income.

Speaker 2

Excluding payments made related to our strategic transaction and the repurchases of common stock and interest income, our Q4 operating cash usage was $3,500,000 Our previously stated expected net operating cash usage for the twelve months following the end of Q3 twenty twenty four remains in the range of $14,000,000 to $16,000,000 as previously disclosed. Our working capital exiting Q4 was $142,800,000 Our balance sheet remains strong, enabling us to pursue our organic and inorganic growth initiatives within the PAT framework. In our 10 Q filing, we will be providing a full reconciliation of the year to date cash flows. For completeness, we have included the full balance sheet in the appendix of today's earnings release. As we discussed last November, our capital allocation plan prioritizes organic growth with a target allocation of 25% to 30% of net proceeds, strategic M and A, a 35% to 40% target allocation and working capital, a 25% to 30% target allocation, in line with our PAT framework with $10,000,000 allocated to a stock repurchase program.

Speaker 2

In the fourth quarter of twenty twenty four, we utilized $1,900,000 from our stock repurchase program to repurchase approximately 464,000 shares of stock. Lastly, our financial outlook. For Q1 twenty twenty five, we currently expect net revenue in the range of $4,800,000 to $5,100,000 Our Q1 twenty twenty five forecast was impacted by the previously disclosed customer pull in out of Q1 twenty twenty five and into Q4 twenty twenty four. This concludes the financial discussion. I'll now pass the call back to Kirsten.

Speaker 1

Thanks, Justin. So with that financial context, I'd like to provide an update on the progress we are making under our Perform, Accelerate, Transform strategic framework. Our PAT framework is anchored in several strong macro trends driving demand for digital identification, including RFID and next generation technologies like BLE. Key drivers include the expansion of digitization and IoT, heightened security and anti counterfeiting measures, regulatory compliance and safety requirements and the increasing focus on sustainability and the circular economy. RFID and BLE inlays provide for the digital identification of products, enabling physical assets to seamlessly link with the cloud and other digital solutions.

Speaker 1

This connectivity delivers compelling benefits such as real time tracking and visibility, enhanced product security and authentication, condition monitoring and compliance, and more engaging customer experiences. Additionally, the data generated by RFID and BOE enabled devices can feed into advanced machine learning and AI models, improving operational efficiency and decision making in nearly every industry, further strengthening RFID's value proposition. As the adoption of RFID based solutions accelerates, new applications often require more advanced and complex solutions to ensure successful implementation and widespread market adoption. Identis engineering excellence, rapid prototyping capabilities and agile manufacturing processes strengthen its position as a preferred partner to support these types of complex requirements. By executing our PAT strategic framework across several key verticals, we aim to drive revenue growth and expand gross margins and EBITDA.

Speaker 1

I'll now provide a brief overview of the three pillars of the PAT framework, highlight the work underway and then introduce how we plan to measure our progress moving forward. First is Perform, which is focused on strengthening and growing our core channel business. To achieve this, we are prioritizing higher margin opportunities with existing customers and channel partners, expanding gross margins by completing the transition to Thailand and focusing on executing our MPD pipeline with discipline. Our goal is to consistently exceed customer expectations through exceptional support and reliable on time delivery. Kim Macaulay, our new commercial leader brings a strong customer centric approach and recognizes the importance of building and maintaining strong relationships in our industry, knowing that outstanding service paves the way for future projects and growth.

Speaker 1

Our channel business thrives on strong industry partnerships as it takes multiple companies working together to develop opportunities for RFID solutions. Given the strategic importance of these relationships, we are enhancing our partner marketing program to increase awareness of our capabilities across the industry and develop new opportunities. While we have always worked closely with our partners to market our products, you should expect to see an expanded set of activities as the year progresses. We are pleased to have recently added two veteran Fortune 500 marketing leaders to our team who will be driving these partner activities as well as building a strong brand and market presence for our IoT solutions business. We continue to advance the development of our NPD pipeline and implement our stage gate evaluation process with new projects.

Speaker 1

In addition to the quarter '4 projects we highlighted earlier, projects such as authentication solutions for surgical consumables, fill level sensing for drug delivery with auto injectors and smart labels for top shelf liquor brands continue to advance through the development stages. Additionally, two new HF product families were launched in December, iD Safe and iD Tune, both featuring NXP's new iCode three IC. These new inlays are available in three different form factors and offer an enhanced NFC user interface, faster memory data read rates, streamlined programming capabilities and strong anti tamper functionality. Designed to support a wide range of use cases and applications from healthcare and smart packaging to luxury goods and smart home devices, these product launches underscore our commitment to continuous innovation. We remain focused on delivering cutting edge technology and advanced features to ensure the highest performance for our customers.

Speaker 1

Moving to the second pillar of our PAT framework, Accelerate. We have identified three specific initiatives to drive and accelerate our growth. The first initiative is focused on driving growth in three high value and high volume healthcare applications with a dedicated business development team reaching out directly to the OEMs who may benefit from these solutions. The healthcare team is pursuing three priority applications: medication adherence and drug delivery at home, consumable authentication for medical device and diagnostic test equipment and temperature, humidity and location monitoring for pharmaceuticals, clinical trials and clinical specimens. We are pleased to have my former colleague, Deepak Prakash, recently joined Identiv to lead our healthcare business development efforts and as evidenced by a recent Novanta announcement, he has already hit the ground running.

Speaker 1

He is attending the HIMSS trade show this week in Las Vegas, meeting with potential partners and customers. Deepak was a member of my leadership team at Avery Dennison's medical business. He has spent his entire career in the medical device and healthcare industry, leading the successful launch and commercialization of many new products and more recently has focused on leading digital transformation efforts. He is excited to drive our efforts within our healthcare vertical forward. The second growth initiative within Accelerate is focused on high value consumer and logistics applications initially targeting three specific use cases: inventory management for plastic pallets and bins to support retailer mandated recycling programs smart packaging for luxury products to reduce counterfeiting and enhance user experience and home device consumable authentication to reduce counterfeiting and ensure proper assembly and use.

Speaker 1

Like the healthcare initiative, a dedicated business development team is being assembled to pursue these opportunities directly with OEMs. We are making solid progress with this initiative having recently signed an LOI with a global leader in the grocery logistics industry to develop and deploy BLE enabled devices that monitor both location and temperature conditions during the transportation of produce and other food products through the supply chain. These devices will incorporate in place IC and be integrated into their recyclable plastic containers, a pool numbering in the hundreds of millions. The BOE devices will be designed to withstand harsh handling, challenging environmental conditions as well as rigorous cleaning processes. The demand for this solution is driven by large retailers mandating the use of reusable and recyclable plastic pallets and containers.

Speaker 1

We are excited about the significant buying potential and look forward to sharing more updates as we advance the development of this innovative device. The third growth initiative in Accelerate is the expansion of our BOE and multi component technology platform. BOE is a next generation technology for IoT providing significant benefits for applications that are challenging to address with traditional RFID technologies. These benefits include lower cost reader infrastructure, ease of incorporating sensors for condition monitoring, secure data communication and the omnipresence of Bluetooth enabled devices like smartphones. We intend to continue expanding our BLE capabilities and technologies through our current MPD projects and partnerships with BLE IC partners, in play, Williot and other chip suppliers who are expanding into BLE.

Speaker 1

As you have heard, we have recently added several BLE opportunities to our MPD pipeline and are seeing growing interest across multiple market segments for solutions that will benefit from BLE. We are excited to welcome a new product manager and a new engineer to the team who will be supporting the critical work in this area. The third part of our strategic framework is transform. This pillar focuses on driving significant business expansion and capability growth through M and A, which is intended to add scale and technical capabilities while expediting achieving EBITDA breakeven. Since our last earnings call, we have conducted a rigorous evaluation process assessing over 100 potential M and A target companies.

Speaker 1

We have now refined our list to a select group of targets. Working closely with our financial advisor and our internal M and A committee, we are actively assessing and prioritizing the opportunities that best fit our growth strategy and acquisition guidelines and are financially accretive. Adding scale, expanding our product portfolio and increasing utilization of our Thailand facility are our top near term priorities. To monitor our progress across these three strategic pillars, we have developed several metrics which we will be reporting on quarterly, beginning with our quarter one twenty twenty five earnings call in May. We will be refining our learning as the year progresses, developing our baseline and will establish targets for these metrics in 2026.

Speaker 1

The key metrics we will be measuring are: one, sales pipeline. This metric covers the number of opportunities in our sales pipeline and the corresponding conversion rate. The sales pipeline focuses on opportunities for our standard products and straightforward customizations, explicitly excluding NPD opportunities. Two, NPD projects. We will track the number of NPD projects segmented by customer driven and internally driven initiatives, target markets and the use of RFID and BOE technologies.

Speaker 1

The MPD pipeline encompasses projects involving the design of specialty RFID or BOE devices that are not addressed within our standard product portfolio. And three, NPD project completion. This metric captures the number of NPD projects completed within the quarter that will be moving into commercialization. We will continue to provide quarterly revenue guidance and we'll be updating you quarterly on our progress towards reaching our year end gross margin target of 26% to 28% and our expected operational cash use of $14,000,000 to $16,000,000 for the four quarters from quarter four twenty twenty four through quarter three twenty twenty five. In summary, the long term secular trends that are driving demand for RFID and next generation technologies remain strong.

Speaker 1

We believe Identiv is well equipped with the right capabilities and RFID related technology to capitalize on this growing demand. The transformative transaction in 2024 has provided the financial resources to support the execution of our perform, accelerate, transform strategic framework positioning us to drive meaningful returns and enhance shareholder value. As we continue to advance the implementation of our PAT strategy, we remain confident in Identiv's advantageous position to seize the exciting growth opportunities that lie ahead. With that, I'd like to open the call for your questions. Operator, please open the question

Operator

queue. You. The first question comes from Anthony Stoss with Craig Hallum. Please proceed.

Speaker 3

Thanks, Kirsten, Justin and Sophie. Great detail on the prepared remarks. I liked it a lot. Question for you related to Nevada. Maybe can you expand a little bit on when you think you'll have your first revenues through that partnership?

Speaker 3

And maybe a broader question, when you look at these partnerships, is there a gross margin target range that you have in mind? Or is it more focused on revenue for scale? I'd just love to hear that. Then I had a couple of follow ups.

Speaker 1

Yes, yes. So first of all, our partnership with Novanta is really a technology and business development partnership. So they have a piece of the technology that's required to incorporate smart technology into medical devices and we have another part. So we're combining together to bundle our technology and then go out and sell that to medical device OEMs and diagnostic test equipment OEMs to really streamline the process for incorporating this into their products. So there's not necessarily a revenue associated with Novanta, but it's a really great complementary partnership of our technology that allows us and they are pretty much solely focused on the healthcare medical device market.

Speaker 1

So really leveraging their channel access as well to go sell these smart technology to their customers and our broad based customers as well. But as we do look at to answer kind of the second part of your question, we're also putting partnerships in place, commercial partnerships in place as well. And certainly as we put commercial partnerships in place to go sell our product, there definitely are revenue targets in place as well as gross margin targets in place. And for medical in particular, it's at the higher end of our margin expectation given the more complexity typically that goes along with healthcare.

Speaker 3

Got it. And then second follow-up would be related to your comments on the grocery store or device opportunity. When do you think that will impact? And then maybe if you wouldn't mind sharing or some kind of color related to the ASP. Is it above your normal corporate range ASP?

Speaker 3

Or what do you think the impacts will be from that device when it's launched?

Speaker 1

Yes. So we're really excited about that potential opportunity. So it is a BLE device. It's definitely a higher price point than our typical average portfolio product. We are working very, very hard to get the device designed in partnership with our customer.

Speaker 1

They're eager as soon as we can get this developed and get it scaled up. They have, as we had mentioned, hundreds of millions of these plastic pallets that they would like to ultimately incorporate a BLE device into. So they're eager to get going. So it's really about the development of the product. It is an iterative product.

Speaker 1

It's a very harsh environment that these inlays will be incorporated into. So it's taking it takes a lot of work to get the right device design that can withstand the environmental conditions that it's in and has the performance that's required. And then of course there's the scale if that's required. But our hope is towards the end of this year or early next year that we get some early volumes launched there.

Speaker 3

Got it. And then also sorry for all the questions, but following up on that, are they using a different competitor's device now or is this greenfield where they've never done anything on the temperature side?

Speaker 1

This is relatively greenfield. They've used other types of technology, but not BLE technology. So relatively for this solution and this is the BLE device that we're designing is a really good fit for this application. So new for this particular type of technology.

Speaker 3

Okay, got it. And then one for Justin or a two parter. Just to confirm, you expect your December 2025 gross margins to be in the range of 26% to 28% if not the full year would amount to that? And then what do you any thoughts on just OpEx going forward? Is it going to be kind of flat from where you're at in the December?

Speaker 3

Any thoughts would be helpful.

Speaker 2

Sure. That is a Q4 margin estimate. We don't formally put it out as a target. It's a target at this point versus guidance. But yes, that's our Q4 target 2025 margin.

Speaker 2

And then on the OpEx, are you talking GAAP, non GAAP, both?

Speaker 3

Yes, non GAAP. We're just if you think it's going to be kind of flattish with what you put up in Q4?

Speaker 2

Yes, I think it will go up a little bit. We'll have our normal merit increases here in April for the employees that are that have been with us for a year. So there'll be some slight uptick in 2025 from 2024. And also I think as Kirsten has mentioned, we have brought in a number of key hires in December and January and March within R and D, very strategic sales, biz dev and some R and D. Not a big jump, but a little bit of a jump for 2025.

Speaker 3

Thanks a lot folks. Thanks for the detail.

Speaker 2

Thank you.

Operator

The next question is from Jason Schmidt with Lake Street. Jason, please proceed.

Speaker 4

Yes. Thanks for taking my questions. Just want to start with that pull in order. Can you quantify how big that was in Q4?

Speaker 2

We don't give that level of granularity, but I did indicate that it's largely responsible for the uptick versus consensus that we had given. Does that make sense, Jason? Hopefully that helps. So we beat by about $600,000 and it was largely due to that customer pull in. And then I think publicly we have guided Q1 to last quarter we have not guided, we don't guide ahead, sorry.

Speaker 2

But the consensus for Q1 was around 5.3 and then the guide we gave for Q1 is in the 4.8 to 5.1 range. So hopefully you can triangulate between those two.

Speaker 4

Okay. No, that's helpful. And then thinking about gross margin, I mean obviously you noted sort of that kind of mid to high 20% in Q4, but thinking about the three customers that still need to transition, how should we think about cadence of gross margin throughout the year?

Speaker 2

Yes, I think I've taken a look at the we don't typically give too much guidance past one quarter, especially with revenue, that's our formal guide. I have looked at consensus and what the consensus looks like on margin and I think it's we're directionally in the ballpark there.

Speaker 4

Got you. And then the last one from me and I'll jump back into queue. I know this upcoming call you'll be providing some more metrics on kind of pipeline etcetera. But I think just at a high level, just given what you currently have and the traction you're seeing with some of these new engagements, do you expect 2025 to be a growth year?

Speaker 1

I don't think we can guide too much on that, but I will say we're excited about the projects that are coming our way. They largely will take some development in 2025, but we expect more of the growth associated with them towards 2026.

Speaker 4

Understood. Thanks a lot guys.

Operator

The next question comes from Craig Ellis with B. Riley. Please proceed.

Speaker 5

Hi guys. This is Stacy Cheung on for Craig Ellis. Thank you so much, Kristen and Justin, for such a detailed level of breakdown. It's very great to see so much progress that you've made. And can I just give some more detail maybe on if we still see like an EBITDA breakeven like in the next two years and whether there's like a potential tariff risk or if there's any headwind that's coming in future quarters?

Speaker 5

Thank you.

Speaker 2

Sure. I think we have not given an EBITDA breakeven timeline formally. So we wouldn't put out a two year EBITDA breakeven. So we'll have to take that as it comes. And then on the tariff side, being in Thailand and we've checked with a lot of our vendors and material suppliers and we think we are in a pretty good spot as far as it goes for tariffs.

Speaker 5

Got it. Got it. Thank you. And as a follow-up, so you mentioned about the three customers that have been transferred from Singapore to Thailand successfully. Do we expect them to be starting in bringing on revenue starting this quarter?

Speaker 5

And if they are, are they on the lower margin side, I believe that's what you said?

Speaker 2

Sure. I can a couple of clarifications there. The revenue for these customers that are transitioning to highlight is it hasn't gone away. So the revenue profile is consistent from 2024 to 2025. It's more just where we are manufacturing that revenue from whether it's Singapore or Thailand.

Speaker 2

So we do anticipate a smooth transition without a disruption into revenue on a quarter over quarter basis for any of the three customers that are transferring over. So really we're trying to provide color to the team that we are currently in Singapore, we're almost done. Next six months, we expect to get these last 3100% manufactured out of Thailand, which will then put us in a beneficial spot for gross margins going forward. But the impact to revenue, there isn't a stop start on revenue from 2024 to 2025.

Speaker 5

Yes, yes, I get that. Thank you. I guess my question is more of for the three customers

Speaker 1

that have been left.

Speaker 5

Are they on the lower gross margin side comparing to the other customers?

Speaker 2

No, they are not.

Speaker 5

Okay, got it. Thank you.

Operator

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

Speaker 1

Thanks, operator, and thank you all again for joining us today. We appreciate the continued support of our customers, partners, shareholders and employees. Please reach out to IR if you have any questions, and we will definitely keep you informed of any upcoming IR events. With that, I want to thank you again for joining us and have a good afternoon and evening.

Operator

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

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Earnings Conference Call
Identiv Q4 2024
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