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Digital identity and security company Identiv (NASDAQCM:INVE) missed analysts' expectations in Q2 CY2024, with revenue down 77.2% year on year to $6.74 million. Next quarter's revenue guidance of $5.95 million also underwhelmed, coming in 74% below analysts' estimates. It made a GAAP loss of $0.27 per share, down from its loss of $0.06 per share in the same quarter last year.
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Identiv (INVE) Q2 CY2024 Highlights:
- Revenue: $6.74 million vs analyst estimates of $24 million (71.9% miss)
- EPS: -$0.27 vs analyst expectations of -$0.19 (44.6% miss)
- Revenue Guidance for Q3 CY2024 is $5.95 million at the midpoint, below analyst estimates of $22.87 million
- Gross Margin (GAAP): 9.1%, down from 36.7% in the same quarter last year
- EBITDA Margin: -54.7%, down from -2.9% in the same quarter last year
- Market Capitalization: $84.18 million
Emerging from bankruptcy and rebranding in 2013, Identiv (NASDAQCM:INVE) provides digital identity and security solutions for various industries.
Electrical SystemsLike many equipment and component manufacturers, electrical systems companies are buoyed by secular trends such as connectivity and industrial automation. More specific pockets of strong demand include Internet of Things (IoT) connectivity and the 5G telecom upgrade cycle, which can benefit companies whose cables and conduits fit those needs. But like the broader industrials sector, these companies are also at the whim of economic cycles. Interest rates, for example, can greatly impact projects that drive demand for these products.
Sales GrowthA company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Identiv struggled to generate demand over the last five years as its sales dropped by 1.6% annually, a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Identiv's recent history shows its demand has stayed suppressed as its revenue has declined by 9.7% annually over the last two years.
This quarter, Identiv missed Wall Street's estimates and reported a rather uninspiring 77.2% year-on-year revenue decline, generating $6.74 million of revenue. The company is guiding for a 81.3% year-on-year revenue decline next quarter to $5.95 million, a reversal from the 2.7% year-on-year increase it recorded in the same quarter last year. Looking ahead, Wall Street expects revenue to decline 11.3% over the next 12 months.
Operating MarginOperating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling them, and, most importantly, keeping them relevant through research and development.
Unprofitable industrials companies require extra attention because they could get caught swimming naked if the tide goes out. It's hard to trust that Identiv can endure a full cycle as its high expenses have contributed to an average operating margin of negative 3.6% over the last five years. This result is surprising given its high gross margin as a starting point.
Looking at the trend in its profitability, Identiv's annual operating margin decreased by 9.5 percentage points over the last five years. The company's performance was poor no matter how you look at it. It shows operating expenses were rising and it couldn't pass those costs onto its customers.
This quarter, Identiv generated an operating profit margin of negative 99.7%, down 96.5 percentage points year on year. Since Identiv's operating margin decreased more than its gross margin, we can assume the company was recently less efficient because expenses such as sales, marketing, R&D, and administrative overhead increased.
EPSWe track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Identiv's earnings losses deepened over the last five years as its EPS dropped 52.7% annually. We tend to steer our readers away from companies with falling EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Identiv's low margin of safety could leave its stock price susceptible to large downswings.
In Q2, Identiv reported EPS at negative $0.27, down from negative $0.06 in the same quarter last year. This print missed analysts' estimates. Over the next 12 months, Wall Street expects Identiv to perform poorly. Analysts are projecting its EPS of negative $0.58 in the last year to tumble to negative $0.59.
Key Takeaways from Identiv's Q2 Results We struggled to find many strong positives in these results. Its revenue guidance for next quarter missed and its revenue fell short of Wall Street's estimates. Overall, this was a mixed but overall mediocre quarter for Identiv. The stock traded down 7.7% to $3.36 immediately after reporting.
