Identive Group, a secure ID, NFC tag and reader maker, turned a profit in the fourth quarter–albeit a small one–its first time in the black for several consecutive quarters, helped by what CEO Ayman S. Ashour described as “a record quarter for NFC.”
Identive reported 34% growth in sales of NFC and RFID transponders year-over-year compared with the fourth quarter of 2011 and roughly doubled sales from the previous quarter. It didn't break out its NFC revenue.
"This was a record quarter for NFC in particular and RFID products in general,” Ashour said in a conference call following the release Thursday.
The Germany- and U.S.-based company reported net income of $177,000 for the fourth quarter of 2012, which included a $1.4 million income tax benefit for impairment charges earlier in the year. The company had operated at a loss for several consecutive quarters–dating at least back to 2008, and worsening losses in the first half of 2012 prompted restructuring and cost-cutting measure in June 2012.
For all of 2012, Indentive reported losing $50.3 million, most because of charges from write-offs. That compares with a loss of $9.8 million in 2011.
Earlier the year, an Identive spokeswoman told NFC Times that part of the 2012 losses were the result of “market timing issues,” namely delayed transponder orders. The delayed orders resumed in the fourth quarter of 2012, according to Identive.
“On the transponder manufacturing side, we've had to move from 60 some percent capacity utilization for the first three quarters into being a hundred percent full and we continue to operate at full capacity right now,” said Ashour during the conference call.
Tags for Machine-to-Machine Applications
The recovery in transponder orders was fueled in large part by record NFC shipments, Ashour said. Identive shipped 15 million NFC tags in the fourth quarter, with many intended for so-called machine-to-machine NFC applications.
In January, an Identive spokeswoman told NFC Times that Identive had received orders for 8 million tags for machine-to-machine NFC applications to be shipped during the first quarter of 2013 as follow-ons to orders from the fourth quarter of 2012. All 8 million of those tags were NFC Forum compliant tag types, according to Identive.
“The adoption of NFC in machine-to-machine application is now leading the charge,” said Ashour in the conference call, citing “electronic games with game pieces having embedded NFC in them.”
Earlier in 2013, Identive declined to comment on whether the company has any involvement with Activision’s popular Skylanders series, the first high-profile video game to incorporate NFC-enabled toys, or with Disney’s recently announced Disney Infinity video game.
In both games, players place the toys on an NFC reader, which reads the chip and brings a digital version of the character into the video game. The reader can also write data to the chips in the figures, so the toys can store a record of each character’s accumulated points or levels. To date, these are the only mainstream examples of video games using NFC-enabled, real-world pieces.
Other markets driving Identive’s NFC orders included medical monitoring devices, with NFC-enabled Bluetooth pairing; as well as “tag-in a box” applications for mobile operators, and transit and event ticketing.
Direct-to-Consumer Trials for Marketing Platform
Identive’s NFC marketing platform Tagtrail, launched late in 2012, is making progress in the market, said Ashour. Following demonstrations at the Mobile World Congress in Barcelona last month, the company said it expects direct-to-consumer trials of Tagtrail with mobile operators in several countries during the first quarter of 2013.
In addition to NFC, Tagtrail supports QR codes and bar codes. Ashour said the QR and bar codes offered a way to reach consumers who did not yet have NFC-capable smartphones. “This allows our partners to build a user base over the years as NFC adoption in smartphones grows further,” he said during the conference call.
Political and Economic Factors
Identive warned that the sequestration–or forced cuts– to the U.S. federal budget “introduces uncertainly and potential disruption” into Identive’s non-NFC business with the U.S. government, but the company expects the disruption to be limited to the near term.
Identive’s U.S. federal contracts mostly involve security projects such as identification and access control for U.S. government employees and contractors. The company says these projects are tied to security mandates that should be mostly isolated from the effects of sequestration. U.S. federal agencies, beginning with the Department of Homeland Security, are in the process of moving to Personal Identity Verification, or PIV, cards for building access and computer log-ins.
Identive blamed austerity measures and budget concerns In Europe for affecting Identive’s business through the third quarter of 2012, including slowing orders for contactless readers for the German government’s electronic ID program. Austerity measures led to a 25% drop in sales in the region, according to CFO David Wear.
Ashour said European business was showing signs of a recovery in the fourth quarter.
By the Numbers
Identive reported revenue of $26.6 million for the fourth quarter, up 16% from the previous quarter and down 5% from the fourth quarter of 2011.
The net income of $177,000 for the fourth quarter increased from a net loss of $7.9 million in the previous quarter and a net loss $2.6 million in the fourth quarter of 2011. That change was likely due in part to a 22% reduction in operating expenses year-over-year.
Identive reported $94.6 million in full-year 2012 revenue, down from $102.7 million in 2011. The company’s ID Product segment, which includes NFC, earned revenue of $40.4 million, although Identive does not break out NFC-related revenue in its financial statements.
In 2013, Identive expects revenue of $22 million to $24 million for the first quarter and $105 million to $115 million for the full year.