Identiv, a global provider of physical security and secure identification, reported financial results for the second quarter ended June 30, 2018.
Identiv, a global provider of physical security and secure identification, reported financial results for the second quarter ended June 30, 2018.
Recent business highlights
• 37% revenue growth over Q2 2017
• Credentials segment revenue up 66%, Premises up 53% over prior year comparable quarter
• Launched physical access implementation project for a federal customer including hardware, software and Identiv Global Services
• First proof-of-concept (PoC) for integrated video and location tracking deployed in retail stores
• Delivered over 50,000 multi-interface cards (UHF/HF/LF) for combined access and tracking applications
• Transponder growth across current customers and new customers, validating focus on consumer engagement and brand protection applications
• First volume deliveries for iAuthenticate mobile smart card readers
• Strengthened balance sheet through repayment of all remaining term debt
Second quarter 2018 financial results
Revenues for the second quarter of 2018 were $20.3 million, a sequential increase of 23% from $16.5 million in the first quarter of 2018, reflecting sequential growth in all segments and the inclusion of a full quarter of revenue contribution from 3VR Security (3VR) after the acquisition in February 2018. Revenues for the second quarter of 2018 increased 37% compared to $14.8 million in the second quarter of 2017.
Revenues in the Premises segment, which includes the company’s physical access control solutions on the Hirsch Velocity and Cisco ICPAM platforms as well as the 3VR branded video and analytics solutions, grew 18% sequentially and 53% over the prior year comparable quarter. The comparative growth was driven primarily by organic growth, augmented by the contribution from video and analytics solutions.
Revenues in the Credentials segment grew 33% sequentially and 66% over the prior year comparable quarter, both reflecting sales growth in access cards as well as RFID transponders. Revenues in the Identity segment increased 13% sequentially and declined 22% over the prior year comparable quarter due to a large international government project in Q2 last year, partially offset by strong sales of smart card readers to the U.S. government.
GAAP gross margin was 40% in the second quarter of 2018, compared to 39% in the first quarter of 2018 and 38% in the second quarter of 2017. The sequential and comparative gross margin improvement mainly reflects product and channel mix.
GAAP operating expenses were $9.2 million in the second quarter of 2018, compared to $8.3 million in the first quarter of 2018 and $6.9 million in the second quarter of 2017, reflecting a sequential increase of 12% and a comparative increase of 33%. The increase in expenses was primarily due to incorporating a full quarter of 3VR operations and other acquisition-related costs, including transaction costs and restructuring charges.
Non-GAAP operating expenses for the second quarter of 2018 were $7.8 million, compared to $6.6 million in the first quarter of 2018 and $5.8 million in the second quarter of 2017, reflecting a sequential increase of 18% and a comparative increase of 34%. Non-GAAP operating expenses increased mainly due to incorporating a full quarter of 3VR operations.
GAAP net loss totaled $2.7 million, or $(0.18) per share in the second quarter of 2018, compared to $2.3 million, or $(0.15) per share in the first quarter of 2018, and $1.9 million, or $(0.15) per share in the second quarter of 2017. GAAP net loss in the second quarter of 2018 included $1.4 million loss on extinguishment of debt and $0.3 million in restructuring charges in connection with the 3VR acquisition, both of which are non-recurring items.
Non-GAAP adjusted EBITDA for the second quarter of 2018 totaled $0.7 million, compared with $0.2 million in the first quarter of 2018 and $0.2 million in the second quarter of 2017.
Fiscal year 2018 guidance
For the fiscal year ending December 31, 2018, the Company expects revenue to be between $74 million and $78 million, and non-GAAP adjusted EBITDA between $4 million and $6 million, reconfirming its previously issued guidance.
Management Commentary
“Q2 was a strong quarter for our company, with 37% revenue growth over Q2 last year. This reflects a continuing growth trend, with growth of 30% for the first half of the year, compared with the first half of 2017. Importantly, the majority of our growth is organic, from strong results in our core businesses, augmented by inorganic growth. We generated positive adjusted EBITDA for the eighth quarter in a row, demonstrating consistent strength in our business platform,” said Steven Humphreys, Identiv CEO. “We’re grateful for the trust placed in us by our federal customers, resulting in increased traction in the core FICAM-enabling federal markets, with Hirsch being specified in multiple upgrade programs. We also launched a deployment for a federal customer led by our Identiv Global Services offering, substantially increasing our per-site revenues and resulting in increased customer satisfaction. Our expanded video and analytics platform from 3VR is increasing both our new prospect pipeline as well as expanded revenue opportunities from existing customers, as most organizations realize the need for advanced analytics. The 66% organic growth in our Credentials segment is equally encouraging, as existing customers increasingly adopt our RFID solutions across more product lines, and new customers launch new solutions. We believe our pipeline is very strong, building backlog for growth already extending into 2019. The delivery of our new multi-interface cards demonstrated our capacity to rapidly launch innovative use cases, particularly incorporating our expanded focus including UHF solutions.”
“Based on our recent results, we remain on track to achieve our double-digit revenue and adjusted EBITDA growth targets for 2018 and are re-confirming our guidance”, added Sandra Wallach, Identiv CFO. “The completed financing and repayment of all outstanding term-debt in the quarter further improved our balance sheet structure and brings us closer to GAAP profitability in the coming quarters. Looking ahead, we’re focused on continuing to execute our organic and inorganic growth strategy to build a leading, fully-scaled platform that can drive continued, profitable growth moving forward.”