Identiv (INVE 2.86%), a provider of specialty radio frequency identification (RFID) and Bluetooth Low Energy (BLE) solutions for the Internet of Things (IoT), released its second quarter 2025 earnings on August 7, 2025. The most significant news from the release was a 25.4% decrease in GAAP revenue compared to Q2 2024, missing analyst expectations by $0.1 million (GAAP). Gross margin (GAAP) turned negative due to manufacturing transition costs, and Non-GAAP adjusted EBITDA losses widened. Despite ongoing operational changes and new strategic partnerships, the period showed continued losses and weak short-term revenue growth, reflecting Identiv’s ongoing transition strategy and operational challenges.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

About Identiv: Business Model and Strategy

Identiv makes RFID and BLE-enabled tags, inlays, and labels for secure digital identification of physical products. These solutions help customers digitally link their products to the cloud, track assets, monitor conditions, and combat counterfeiting.

The company’s growth model, called “Perform, Accelerate, Transform” (P‑A‑T), focuses on improving core operations, targeting higher-margin business, and expanding both through partnerships and new product innovation. It recently prioritized moving manufacturing from Singapore to Thailand to cut costs, while concentrating on expanding in high-value sectors using its specialized IoT technology.

Key Developments in the Quarter

During the period, Identiv completed the transfer of most production to its Thailand facility, marking the end of its Singapore manufacturing. This shift aimed to lower long-term costs, but the transition period brought additional expenses—such as running dual facilities, underutilized capacity, and one-time inventory write-downs—leading to a negative GAAP gross margin.

GAAP revenue fell by 25.4% compared to Q2 2024, mainly due to the planned exit of lower-margin business and reduced sales to the company’s largest customer, as that customer used up inventory built in anticipation of the production shift. As management noted, “This year-over-year decrease was as expected and due to lower sales as we continue to exit lower-margin business, as well as reduced sales to our largest customer, who is working through safety stock they built up in 2024 in anticipation of transitioning production to Thailand.” (Q2 2025) Cost-cutting helped reduce non-GAAP operating expenses by 3.1%, but deeper losses in non-GAAP adjusted EBITDA indicate that transitional costs outweighed immediate savings for now.

Strategic partnerships took center stage. Identiv announced major collaborations with IFCO to digitize supply chains and with Narravero to support compliance with the European Union’s Digital Product Passport, which is set to drive demand for authenticated, traceable products. These deals are intended to strengthen Identiv’s presence in key segments such as logistics and regulated industries. However, management did not provide data on new revenue or customer wins from these initiatives, and previous guidance on tracking pipeline conversion (e.g, a 10% conversion from 74 new opportunities as of Q1 2025) was not updated.

Research and development (R&D) spending (GAAP) remained under tight control at $0.89 million, down slightly from the previous year. Projects include advancing innovations for medication tracking, consumable authentication, and luxury product verification.

The inventory balance (GAAP) dropped to $6.1 million as of June 30, 2025, down from $7.5 million at December 31, 2024. Management noted that approximately 25% of finished goods shipped to the U.S. are exposed to tariffs. No material effects from recent U.S.-China tariff changes were cited during the quarter, but management remains cautious about future implications.

The company’s cash position stayed strong, with $129.3 million in cash and $146.4 million in stockholders’ equity at quarter-end. This cash balance provides some cushion during the operational transition period, as current cash burn levels have not yet pressured liquidity.

Looking Ahead: Financial Outlook and Key Watch Areas

Management expects GAAP revenue in Q3 FY2025 to be in the range of $4.8 million to $5.2 million. This guidance signals that management sees little immediate revenue acceleration as the company moves past the transition period, with net revenue for Q2 FY2025 expected in the range of $4.9 million to $5.3 million. No gross margin or profit guidance was provided, aligning with prior comments that forward margin guidance will resume only once tariff policy risk stabilizes. The company also noted a Chief Financial Officer transition following the appointment of Ed Kirnbauer in August.

INVE does not currently pay a dividend.

For the next few quarters, the top issues for investors to monitor include progress on restoring positive gross margins after the Thailand transition (GAAP gross margin was (9.4%) and non-GAAP gross margin was (0.8%) for Q2 2025; GAAP gross margin was 2.5% and non-GAAP gross margin was 10.8% for Q1 2025), the speed at which new partnerships and specialized products drive higher-margin sales, and any updates on the conversion of pipeline opportunities into meaningful revenue. Transparency on these metrics will be important for tracking whether Identiv’s operational overhaul is beginning to yield improved financials or if challenges persist as global supply chains and regulatory landscapes evolve.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.