Identive Group Announces 4Q Fiscal 2012 Results

Identive Group, Inc., a provider of products, services and solutions for the identification, security and RFID industries, announced results for the fourth quarter (Q4) and year ended December 31, 2012.

Q4 2012 highlights included a record quarter for NFC and RFID transponder sales; improved smart card reader market in Europe and strong demand in Asia; 22% reduction in base operating expenses compared to fourth quarter 2011, further lowering the break-even point; return to profitability on adjusted EBITDA basis – year over year improvement of $1.0 million; and cash of $7.4 million at year end.

“The strengthening trend we saw beginning late in Q3 continued through Q4 with increased order flow and improved traction in much of our business. Pent up demand following the resumption of delayed customer projects, plus several new orders, drove NFC and RFID transponder sales in Q4 to more than double from the previous quarter and grow 34% year over year. It was particularly good to see improved order activity in Europe after several difficult quarters, and we also saw strong demand from a variety of our markets in Asia. Our U.S. Government sales remained stable and we have seen an increase in program activity at the state level,” stated Ayman S. Ashour, CEO and chairman of Identive. “Our improved revenue performance combined with further reductions in base operating expenses allowed us to return to profitability on an adjusted EBITDA basis in Q4, and at a higher level than in the past.”

As reported in accordance with U.S. generally accepted accounting principles (GAAP), Q4 2012 revenues were $26.6 million, down 5% from $27.9 million in Q4 2011. By segment, Identity Management Services and Solutions (Identity Management) revenues were $13.4 million and ID Products revenues were $13.2 million in Q4 2012.

GAAP gross profit margin was 39% in Q4 2012, compared with 41% in Q4 2011, reflecting a higher mix of product revenues versus systems and services. Total base operating expenses (consisting of research and development, sales and marketing, and general and administrative expenses) were $10.5 million in Q4 2012, down 22% from $13.4 million in Q4 2011 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.

In Q4 2012, Identive recorded GAAP net income of $0.2 million, or $0.00 per share in Q4 2012, compared with net loss of $(2.6) million, or $(0.05) per share in Q4 2011. Net income in Q4 2012 includes a $1.4 million benefit for income taxes mainly related to impairment charges taken earlier in the year.

On a non-GAAP basis, gross profit margin was 41% in Q4 2012, compared with 43% in Q4 2011. Non-GAAP net income was $0.6 million, or $0.01 per share in Q4 2012, compared with non-GAAP net loss of $(1.2) million, or $(0.02) per share in Q4 2011. Adjusted EBITDA was $1.2 million in Q4 2012, compared with $0.2 million in Q4 2011.

Cash and cash equivalents were $7.4 million at December 31, 2012 and reflected proceeds of $6.9 million from a secured loan facility and a $3.6 million increase in working capital during the quarter. This compares with $6.3 million of cash and cash equivalents (net of restricted cash) at September 30, 2012.

Commenting on management’s outlook, Ashour said, “The positive demand trends we saw in Q4 are continuing, setting the stage for a favorable outlook for 2013. Our transponder production is booked at full capacity through the middle of Q2 and new sales activity remains strong for NFC tags, SmartCore card technology and RFID products for electronic payment, ticketing, M2M and ID applications. We continue to extend our activities in the payment sector with new customer contracts and additional applications. The U.S. budget sequestration introduces uncertainty and potential disruption into our otherwise stable U.S. government business, but we believe any effects would be confined to the near term as the majority of programs we address are mandate-driven and tied to security initiatives.”

Based on its current expectations, management expects revenues of $22.0 million to $24.0 million in the first quarter of 2013, which is seasonally the weakest of the year, and further expects non-GAAP, adjusted EBITDA of $ (1.5) million to (0.75) million. For full year 2013, management expects revenues of $105.0 million to $115.0 million and non-GAAP, adjusted EBITDA of $4.0 million to $6.0 million.

Commenting on 2012 full year results, Identive’s CFO, David Wear said, “2012 was a challenging year as economic austerity measures impacted Citizen ID programs in Europe and contributed to a 25% drop in sales in the region. Customer project deferrals also impacted sales of our transponder products for the first three quarters. We took action in June to accelerate expense reduction and lowered our breakeven point by taking out more than $6 million in costs. At the same time, we increased our R&D investment and made significant progress in the development of core identification technologies as well as new and enhanced offerings to drive future sales. We entered 2013 with a leaner operating model and a stronger portfolio of products and solutions for Secure ID.”

Revenue for the full year 2012 was $94.6 million, down 8% from $102.7 million in 2011. Revenue from Identive’s Identity Management services and solutions segment was $54.1 million in 2012, down 4% from $56.5 million in 2011 primarily as a result of the completion of a large European Citizen ID program in the previous year, for which there were no new orders in 2012. Revenue from the Company’s ID Product segment was $40.4 million, down 13% from $46.2 million in 2011 as a result of weaker demand for the Company’s smart card readers for Citizen ID programs in Europe and deferrals of transponder product orders. These factors were partially offset by stronger sales of smart card readers to the U.S. government market to enable cyber security programs in 2012.

Including the effect of significant non-cash impairment charges and associated adjustments recorded in the second and third quarters of the year, GAAP net loss in 2012 was $(50.3) million, or $(0.84) per share, of which $(0.76) per share related to impairment. This compares with net loss of $(9.8) million, or $(0.18) per share in 2011.