Identive Group Announces 2Q 2012 Results

Identive Group, Inc. announced results for the fiscal second quarter (Q2), ended June 30, 2012.

Q2 2012 highlights included:
• Revenues of $23.9 million, up 12% from the first quarter (Q1) of 2012.
• Continued improvement in U.S. government business.
• Launched innovative product and service offerings for emerging NFC and payment markets.
• Impairment of goodwill and intangibles; reduced impact of depreciation and amortization charges on earnings in future periods.

“Our Q2 results were in line with expectations, despite ongoing weakness in the global economic environment. Continued recovery in sales of both ID products and identity management systems in the U.S. government sector helped offset slowdown of citizen ID programs in Europe and continued customer project delays in our transponder sales,” stated Ayman S. Ashour, CEO and chairman of Identive.

“Our ongoing focus on reducing expenses, together with our restructuring program put in place in June, helped drive a sequential decline in base operating expenses, and we expect further savings as we realize the full effect of our restructuring actions later this year,” Ashour added. “We also reinforced our position in both existing and emerging markets with the launch of several important new products that represent the fruits of our investments in new technology. These industry-first offerings included tomPAY cashless payment cards that can be converted into NFC tags for mobile devices; desktop readers for integrated physical and cyber security; and our secure cloud-based, NFC tag management platform.”

As reported in accordance with U.S. generally accepted accounting principles (GAAP), revenues were $23.9 million in Q2 2012, up 12% from $21.2 million in Q1 2012 and down 7% from $25.6 million in Q2 2011. By segment, Identity Management Services and Solutions (Identity Management) revenues were $14.2 million and ID Products revenues were $9.7 million in Q2 2012.

GAAP gross profit margin was 40% in Q2 2012, compared with 41% in Q1 2012 and 40% in Q2 2011. Non-cash impairment charges contributed to a net loss of $(41.9) million, or $(0.70) per share in Q2 2012, compared with a net loss of $(1.6) million, or $(0.03) per share in Q2 2011 and a net loss of $(6.2) million, or $(0.11) per share in Q1 2012. The impairment charges and other non-cash adjustments related to the above referenced review accounted for $(0.66) per share of the net loss per share recorded in Q2 2012.

Non-GAAP gross profit margin was 45% in Q2 2012, up from 44% in Q1 2012, reflecting a higher contribution of systems, software and services sales. Non-GAAP base operating expenses were $11.9 million in Q2 2012, compared with $12.8 million in Q1 2012. Adjusted EBITDA was $(1.2) million in Q2 2012, compared with $(3.5) million in Q1 2012.

“We remain on target to achieve cost reductions of $4.0 million to $5.0 million by the end of 2012, which annualized, are expected to be close to $7.0 million,” David Wear, CFO of Identive added. “At the same time we continue to commit to investment in the future growth of the company. With the reduction in our EBITDA loss in the current quarter and the stabilization of our cash position after the first four months of the year, we believe we can continue to support our operational cash flow requirements through internal means. However, we will also seek to strengthen the balance sheet by a moderate amount to allow us to withstand unexpected or unforeseen market changes.”

Sales and product highlights from the 2012 second quarter include:
• The announcement of an innovative cloud-based, NFC (near field communication) tag management platform that allows advertisers, retailers and organizations in the education, hospitality and other markets to securely manage the delivery of dynamic, targeted content and services to consumers’ NFC-enabled mobile devices.
• Continued expansion of the user base for Identive’s cashless payment products and solutions globally, with new customer wins in India and significant growth in Europe.
• Expanded penetration of transponders into the Japanese market with more than 300,000 inlays supplied for payment and loyalty applications.
• The introduction of tomPay, an innovative convertible contactless payment card / NFC tag that enables consumers to add NFC cashless payment capabilities to their existing mobile phones.
• The introduction of a new line of NFC magnets and dual-sided window stickers that provide retailers with new ways to advertise to and communicate with their customers using NFC technology.
• The launch of a new NFC tag online customization service that allows customers to order NFC tags, stickers and smart posters personalized with their own designs, photos or logos, as well as a URL destination, phone number or other data.

“Identive’s true strength in Secure ID is our core vision of identity as a fundamental industry serving multiple verticals,” Ashour concluded. “Our global presence and our strong position across the many identity markets provide resilience to weather fluctuations in any single sector. These strengths also put us at the head of the pack as the industry prepares to capitalize on emerging opportunities for mass deployments of consumer ID, citizen ID and employee ID solutions. We remain convinced that NFC, cashless payment and cloud-based identity management are emerging mega trends and that Identive is uniquely positioned in these markets. This propels our strategy to provide new ID products, software and services that these potential hyper-growth areas will require. Our cost reduction program and the changes we made in our balance sheet should help improve our financial position as we continue to work to lower our breakeven point.”

Based on its current expectations, management expects revenues of $24.0 million to $27.0 million, non-GAAP, adjusted EBITDA of $(0.7) million to $0.7 million, and non-GAAP EPS of $(0.03) to $(0.02) in the third quarter of 2012.