Identiv, Inc.

Identive Group, a provider of products, services and solutions for the identification, security and RFID industries, today announced results for the first quarter (Q1) ended March 31, 2013.

Q1 2013 Highlights:

- 18% growth in ID Products sales year over year
- First commercial deployments of Tagtrail? NFC platform to major mobile network operators
- Growth in NFC, payment and other products drive margin improvements in Transponders
- 18% reduction year over year in base operating expenses
- Record $19 million order backlog for NFC and reader products as well as payment and cloud-based systems over next 12 months, plus additional $3 million for longer-term payment system contract

“ID Products sales were up 18% year over year in Q1, reflecting growing demand for our smart card readers as well as NFC and RFID transponder products. This growth was offset by a sharp decline in our U.S. Government business related to the Federal budget sequester. The growth in ID Products and our recurring service base, coupled with reductions in our operating expenses, helped drive significant improvement in our bottom line year over year, including a $1.2 million improvement in adjusted EBITDA,” stated Ayman S. Ashour, CEO and chairman of Identive. “We enter Q2 with a strong order book of over $22 million, of which a record $19 million is scheduled for billing within 12 months. We are seeing significant buildup in demand for our NFC and payment tags, our SmartCore? smart card technology, our new reader products and our payment systems validating the significant investment we have made in these growth markets. Our cloud-based offerings, including our idOnDemand? identity management service and our Tagtrail NFC mobile services delivery platform are gaining momentum and will make meaningful contribution in Q2. While there continues to be significant weakness in the U.S. Government sector and uncertainty regarding near-term budget issues, we remain confident that we are well positioned to benefit from the various Federal Government mandates related to identity management and access control.”

Q1 Results
As reported in accordance with U.S. generally accepted accounting principles (GAAP), Q1 2013 revenues were $21.1 million, relatively unchanged from $21.2 million in Q1 2012. By segment, Identity Management Services and Solutions (Identity Management) revenues were $11.1 million and ID Products revenues were $10.0 million in Q1 2013.

GAAP gross profit margin was 39% in Q1 2013, compared with 41% in Q1 2012, reflecting lower sales of Identity Management systems and services and higher ID Products sales. With the exception of a temporary reduction in smart card reader margins due to a single large project, most other areas of the Company saw margin improvement both quarter on quarter and year on year. Total base operating expenses (consisting of research and development, sales and marketing, and general and administrative expenses) were $12.3 million in Q1 2013, down 18% from $15.0 million in Q1 2012 as a result of cost reductions implemented under the restructuring plan the Company initiated in June 2012 and from ongoing initiatives to improve the efficiency of the business. The Company recorded GAAP net loss of $(4.8) million, or $(0.08) per share in Q1 2013, compared with net loss of $(6.2) million, or $(0.11) per share in Q1 2012.

On a non-GAAP basis, gross profit margin was 41% in Q1 2013, compared with 44% in Q1 2012. Adjusted EBITDA was $(2.3) million in Q1 2013, compared with $(3.5) million in Q1 2012. Non-GAAP net loss was $(4.3) million, or $(0.07) per share in Q1 2013, compared with non-GAAP net loss of $(4.9) million, or $(0.08) per share in Q1 2012.

Non-GAAP gross profit margin, adjusted EBITDA and non-GAAP net loss and net loss per share all exclude various items that are detailed in the financial table and accompanying footnotes reconciling GAAP to non-GAAP results contained in this release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

Cash and cash equivalents were $5.5 million at March 31, 2013 compared with $7.4 million at December 31, 2012. Net decrease in cash was $1.9 million reflecting a small amount of cash provided by operations, $1.1 million used for capital expenditures and $1.0 million used for payment of financial liabilities. In anticipation of a stronger Q2, inventory built of $1.8 million was a significant part of the cash used in operations.

David Wear, chief financial officer of Identive stated, “Our recent addition of an equity line brings growth capital into the Company and allows us to control the timing and amount of new stock we issue while meeting our goal of minimizing dilution for our shareholders. The equity line enables us to optimize our production capacity and provides additional working capital to address growing demand for our ID Products. Furthermore this new capital will allow us to maintain necessary levels of time-sensitive investment in our products and solutions in emergent areas such as NFC and Identity as a Service, where market demand is building.”

Outlook for Q2 2013
Based on its current expectations and the continued uncertainty associated with the U.S. Government business, management expects revenues of $22.0 million to $26.0 million for the second quarter of 2013, and further expects adjusted EBITDA of $(0.5) million to $0.5 million. For full year 2013, management expects revenues of $105.0 million to $110.0 million and adjusted EBITDA of $2.0 million to $6.0 million.