Q1 2021 Identiv Inc Earnings Call
[music].
In addition, during the call management will be making forward looking statements.
Any statement that refers to expectations projections or other characteristics of future events, including financial projections and future market conditions is a forward looking statement.
Actual results may differ materially from those expressed in these forward looking statements for more information. Please refer to the risk factors discussed in documents filed from time to time with the sick.
Including the company's latest annual report on form 10-K, Identive assumes no obligation to update these forward looking statements, which speak as of today I will now turn the call over to C. E O Steve Humphreys for his comments Sir.
[noise] proceed.
Thanks, operator, and thank you all for joining us.
And the first quarter of 2021, our momentum continued to grow, especially in a RFID business overall on revenues grew 22% year over year, our identity business grew 38% in total led by over 59% growth RFID business.
Our other key growth and profitability matrix also made strong progress we.
We shipped 40 million RFID units in Q1 versus 26 million units in queue on 2020 and increase in units of 53%.
Total backlog at the end of Q1 2021 grew 50 per cent versus the end of Q on 2020 and on orders booked quarter. The date. The first month of Q2 are up 40.
45% from the year prior.
We also showed more leverage on our business model expenses on the first quarter were down 6% from Q1 2020, while revenues were up 22% clearly showing leverage from a operating expenses as we scale.
Now our core growth strategies of getting new customers with new design wins moving customers through the production cycle, expanding new and more complicated designs and bringing second and third generation design and production all made progress on the first quarter.
So here's some of the specifics in each of these growth drivers in the first quarter.
Starting with customer lunches and expansions.
Several of our existing customers expanded the number of designs, we've done for them and know who committed to volume orders for the second half of this year on the new designs for.
For example, we doubled the number of designs for one major mobile device provider from four designs to eight.
We started production on the first floor designs last year too.
Two more are now under contract with committed volumes to ramp the second half of this year two more are nearly complete and another designs already under discussion actually.
We've also been introduced to other product groups within the customer with completely different use cases.
So with these expansion trends, we expect revenue from this customer to keep growing in upcoming years.
Another customer use case, that's completed design is in drug self test kit.
With self testing a test has to work only with the right chemicals and the data it has to be secured an encrypted. So there's no false results in the day that can't be changed but it kept private which are devices do for a product is planning to launch soon.
A third one is prescriptions for the visually impaired where another pharmacy chain is now in mass market pilot for RFID enabled prescriptions.
And Ah related update in this category one of our early customers Cvs tells us anecdotally that pharmacists are finding their RFID programming process is really easy for them and also that the acceptance among visually impaired customers is going well.
Now, we can't disclose numbers of course, but the customer and market feedbacks positive for it can become a half billion unit use case across all prescriptions for visually impaired people.
A fourth customer use case is in consumables for high end appliances.
This is a design we've had running but volumes are growing because as we've all stayed at home a lot of people have bought new high end appliances.
Now these are all very different use cases, but that's the point.
We have opportunities across lots of buckets, each of which can drive our growth as they scale.
We're seeing continued growth in new customer lunches and expansion in volume and designs.
So now let's look a design wins in the first quarter here again, the pipeline strong. So I'll just describe a couple with good volume potential higher price points or more complicated technology the.
The first is an wristbands per theme parks and other event venues. These are actually starting to reopen but with lower density the need to make the most possible revenues from each visitors more critical whenever so a multi function wearable RFID device is a low friction way to make this happen.
As a result, we're working through a range of design options with different features.
Another design when in Q1 was for consumables for robotic floor cleaners.
A third and one of the most exciting design wins is in high end syringes.
Now these are super precise auto injectors for cancer auto immune and other treatments that have to be dispensed an exact amounts at the right temperature the right dispense right in exactly the right needle insertion.
And this design, we're incorporating multi sensor features including temperature and fluid dispensing measurements as well as authenticity and data protection.
Now all this means on RFID device that it'll be in the dollar to dollar 50 range.
It'll take a while to get to production since you're talking about FDA approved devices, but the customer projects volumes of 100 million units. So whenever it hits the business opportunity is major.
Switching cost will be very high so we expect will be able to grow with the customer for the foreseeable future.
Also others in the industry will have to respond with similar features which means more opportunities for us.
So with designs like this we see continuing expansion in <unk> gross margin expansion and a strong competitive position for us as devices get more complicated like this example.
And we also continued on new technology launches developing a radiation proof RFID device for medical applications in X ray environments, including C. T scanners, pet scanners X ray and devices that need to operate around these systems for a couple of specific customer use cases.
Now beyond our high growth Rfid's segment, our premises segments started a growth cycled towards the end of the first quarter.
I'll go into more details on our forward looking comments, but remember the first quarter of 2020 was pre COVID-19 for almost the entire quarter.
In Q1, 2021 premises grew about 3% year over year, which means premises is now back above pre COVID-19 levels. We.
We saw momentum billed as we exited the first quarter, leading us now to expect premises growth in the second quarter of around 30% year over year.
This is coming from the strength and the federal government commercial business is starting to make up for deployments that were delayed last year and our own new product launches.
This will put US ahead of the growth, we've been projecting and premises for 2021.
Our third strategic focus is on revenue repeatability and predictability.
In RFID predictability is driven by customer retention and a focus on consumable products and.
Q1, we kept our track record of 100 per cent customer retention and RFID.
We also kept expanding the use of consumables is you can hear in the appliances syringes prescriptions without the use cases.
And premises predictability is driven by software services and recurring revenues and Q1. We grew this category of software servicing recurring revenue to 24% of our premises revenues.
So in Q1, our growth showed strength, even in our seasonally lowest growth quarter.
Just as important we got a wide range of customer launches in expansions design wins and technology lunches supporting a strong 2021 and beyond.
Theories of RFID leadership and growth the federal market and recurring revenues and customer attention remain our focus and these are all made great progress on Q1.
So before getting into the next quarter and the rest of this year I'll turn on the call over to standard hit the financial highlights for the first quarter <unk>.
Andrew.
As Steve mentioned, our financial results reflect our business strength exiting the first quarter and have us on track for double digit growth and the remainder of 2021 and beyond we closed out the first quarter of 2021 with $22.2 million in revenue up 22 per cent compared to the first quarter of 22.
20, and down 11 per cent compared to the fourth quarter of 2020 or.
Our first quarter growth year over year was driven by a 59% increase in our RFID devices like over 40 million units shipped the customers and at 3% growth in our premises business powered by 30% growth on our federal business, partially offset by the continuing impact of COVID-19 on certain select vertical from.
During 2021 Q1 versus large like crate COVID-19 Q1 2020.
A recurring revenue remain stable at 6% for both our first quarter and trailing 12 months.
For the first quarter of 2021, or GAAP and non-GAAP adjusted gross profit margins, where 35, and 36% respectively compared to 35 and 36 per cent in the fourth quarter of 2020, and 41 and 43% in the first quarter of 2020.
Cause the trailing 12 month period are GAAP and non-GAAP, adjusted gross profit margin or 37, and 39% respectively.
Gross margin changes resulted primarily from Mexico Cross and within our segment as we continue to expect margin to revert to historical levels within 2021.
Are non-GAAP adjusted EBITDA margin with positive two per cent in the first quarter, reflecting results of 0.4 million compared with negative 2% in Q1 of 2020 and positive 6% in queue for 2020.
The trailing 12 month period are non-GAAP adjusted EBITDA on March hated was positive 6%.
R Q1, GAAP net loss with 1.5 million or a loss of nine cents per share compared with a loss of 2 million or a loss of 13 cents per share in queue on 2020, and the loss of 0.7 million or a loss of five cents per share in Q4 2020. So.
So on summary, we met and exceeded expectations on the top line saw that continued impact a segment next with the over waiting of growth of our RFID devices managed cost and deliver two tenths better on the EPS line versus external expectations.
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We have provided the in the appendix today, a flow reconciliation of GAAP to non-GAAP information, which is also included in our earnings release.
Our next slide further analyze this trend is by segment beginning with identity revenue from our identity products total 13.7 million or 62% of our total revenue in Q1, 2021 wishes and integrate the 38% from Q1 2020, and a 14% decrease from Q4.
2020.
The sequential increase was primarily turned on by normal seasonality of lower sales, if arafat E transponder products and access card fails, partially offset.
By higher sales of smart card readers compare taking for 2020.
The year over year increase was primarily driven by higher south of horrified day transponder products as well as higher south of smart card readers and access cards.
Q1, 2021 identity segment Gaff margin increased to 25 per cent compared to 22 per cent in Q4 2020, as we continue to grow into our investment in capacity and lower than Q1 2020 at 30 per cent due to the very rapid growth from customers at the earliest.
Stages of their R. F. I D deployment strategies, which are trying to driving a higher proportion of RFID revenues.
Turning to the premises segment the segment accounted for 8.5 million or 38 per cent of our total revenue representing an increase of 3% from Q1 2020, and the decreases takes per cent compared with Q4 2020.
Yeah over here increase in revenues from the premises segment reflects the continued strength of our federal business and select recovery and other vertical sequential change in revenue, let's do two normal seasonality.
Margin for premises from the first quarter or 51% compared to 56 per cent on the fourth quarter of 2020 and 55 per cent in Q1 of 2022 does the next day products within the segment.
I'm moving to our operating expense management art GAAP operating expenses for the first quarter, where $8 9 million.
Compared with Q4 of 2020 and down zero point $4 million compared to the first quarter of 2020 or non-GAAP operating expenses adjusted to exclude restructuring in separate cost and certain non-cash charges normally excluded from our non-GAAP results such as stock based compensation and depreciation in the amateur.
Asian total 7.6 million in the first quarter of 2021. This compares to 7.5 million in Q4 of 2020 at 8.1 million in Q1 of 2023.
No momentum exiting the first quarter of 2021 today, we're confident with our previous guidance with a lower and a full year of 2021 at 100 million, we will share metrics as we continue on this journey of growth exiting Q1 2021 at March 31st our queue to backlog was 10 million as.
Customers finalize your schedules as of April 30th we have seen our queue to backlog for shipments increased over 30 per cent from the same period in the prior year are total new orders book second quarter to date is 9.8 million up 45 per cent over the same period prior year.
Normal seasonality is expected to continue with momentum building quarter over quarter, and we continue to have strong confidence in our guidance for 20 to 25 per cent revenue growth in the first half of 2021 over the first half of 2020.
As we continue to monitor the second half of the year will be able to more accurately assess that number and we will provide updated guidance as appropriate. This concludes the financial discussion and I'll pass it back to Steve.
Thanks, Sandra is on financial show, we're on track for 2021, just as we hit our goals and G. One we think we're in a strong position for the second quarter and the rest of the year with upsides, both near term and for the second half an.
R F I D. A growth drivers of customer lunches design wins and new technologies, we're strong on the first quarter and indications are they'll keep getting stronger.
In addition to our core competitive advantages, we've got several initiatives to drive growth.
I'll focus on two of these that we're launching this quarter and talk about others on our future calls.
The one that Relaunching. This quarter is our RFID developer's kit, which will include RFID devices with several different chips and features demo code simple NFC enabled mobile apps and direct support from our customer engineering team.
We want to be the Goto solution provider for every engineer the thinking about integrating high end RFID into their products. We're building a community of developers with direct support from our own RFID experts.
Since we're one of the few in the industry that does small prototyping production runs we're going to leverage that to let engineers actually get samples of their designs.
And we can't know Who's Gonna have the next $100 million unit application, we want to be in front of them. All so whoever has the big hit worthy RFID partner that helped them get there with the deepest expertise and why it is designed range.
Because we go from protostar to pilot to production, we think will be able to keep them through the product cycle and then keep them as they improve their designs and launch new and bigger products are.
Ah developer's kit and the community around it is one of the key strategies were using to expand our funnel and grab wide market leadership right now while the field is open.
Another investment, we're making to accelerate our growth is on our production technology.
RFID devices are complicated because they're mixed analog and digital systems as we add sensors for temperature humidity acceleration. Obviously those are analog devices. They have to be integrated into a product and then convert their analog censor values into the digital system.
We want to enable more analog sensors should be integrated with our RFID devices. This drives up average prices and margins strengthens customer retention and increases the rate of adoption of multi sensor rfid's subsystems.
And we've always plan to incorporate production equipment and automation software and designs to support multicomponent and multi device systems I talked on our prior earnings call about the sensor capabilities, we launched last year and some of the use cases, where pressure sensors and bike wheels, others, using our capacity to fill sensors and those who is using temperature sensors.
With a small part of the capital we raised last month, we've accelerated this program.
We're starting the process to specify developing customize automated system to deliver them.
Now it will take some months to get up and running but we can start marketing selling and designing systems now.
As long as our customers know private prototypes are only a few months out and especially if they can see the production capabilities already in place. They are likely to start designing now we've been doing systems like this but they take multi passes they're harder to scale and especially hard to do small prototype a pilot runs it was ready to go customers are much more likely to try.
Complicated design sooner.
Bike and scooter tire sensors, syringes and running shoes with accelerometers are all use cases that need multicenter devices and have the potential to scale to hundreds of millions of units getting a headstart on high volume capabilities for devices. Like these creates another competitive mode for us early in the market is <unk>.
Element.
Now to be clear, even starting customer project soon to use multicomponent RFID designs it'll take a few months Deb the system up and running get through the design cycle and then there's the usual six to eight months cycle from a designed to production.
But being able to start now means we have a longer lead on competition and we get deeper design lock ins with customers.
So RFID developers kits and multi device automation are two strategic drivers, we think will give us upside over our baseline 2021, and especially our 2022 outlook.
Now I focused on RFID, because that's our core growth driver or premises part of our business is also lined up for strong growth in the near term and.
In particular federal state and local government sales with strong as do our recurring revenue products.
With a focus on physical security in both the federal government and at the state and local level, we're seeing great demand strength.
Even states that we thought were going to be financially week from the pandemic are doing well.
Combined the need for improved physical security expanding federal spending physical health at the state level and infrastructure investments and we see lots of drivers of growth and market share.
As I mentioned in my opening comments for the second quarter, we're trending towards 30% year over year growth and premises. This supports overall growth that can be even more than the 20% to 25% that we projected for the first half.
And it carries higher gross margins driving expanded EBITDA margins.
So the foundations of our strategy were strengthened in the first quarter and the trends for the year looking better than we expected.
Some of the major use cases, we've mentioned before Ah continuing to progress.
These include a major national cannabis program, where we've now deliberate sample volumes.
And the syringe and prescription bottle use cases, I mentioned before the.
The cannabis program is projected to be over 1 billion units syringes for just one vendor are over 100 million units at a high price point and prescription bottles represented a half a billion unit opportunity just for the visually impaired.
We think will keep leading because in this market of thousands of designs and hundreds of billions of units potentially they're huge first mover advantages.
We're adding to these advantages with developers kit and the multi sensor automation platform I mentioned earlier moving higher barriers to any competitors.
Now in addition to our core technology strengths as you know we had a successful capital raised last month.
It was important for three reasons the.
The first was to give us the financial strength to invest in things like the multi technology automation I mentioned earlier.
We were able to operate with our prior balance sheet, but we were in a reactive mode getting customer contracts to fund investments were now taking more aggressive steps to build an even bigger competitive lead.
This comes from putting in place capabilities in advance of immediate needs, which accelerates customers adoption because they see immediately that we're ready to go.
We're also being more aggressive with inventory investment again to encourage customers to launch an scale faster than they would and of course to insulate ourselves from new parts shortages that are hitting so many companies.
Lastly, there's one use case in particular that could drive demand for up to 1 billion units and will need in country production in Canada or the US with this capital we're able to plan for an expansion as soon as as needed.
Because of all these factors, we think the capital raised will help us grow faster this year and especially in 2022 and 2023.
The second reason for the raise was to increase the visibility of our business opportunity. In this also seems to have worked by presenting our business opportunity to the investment community. We found demand for almost 10 times the equity raising.
So we upsize the amount from a 25 million dollar raise to $35 million and we're incredibly grateful for the show support that we got from you guys from community.
It also raises our visibility in the industry makes it easier to hire great talent builds confidence with customers and puts competitors on notice that we're going to be even more aggressive.
Now's the time to submit leadership in our market. The capital we've raised really puts us in a position to jump even further ahead.
So thank you to all who participated we're working hard to generate major returns on those investments.
So to wrap up here's some growth indicators from just the last few weeks.
Is Sandra mentioned, we're now over $9 million in new bookings quarter to date for the second quarter up 45% versus the same time last year.
We have designs underway or one with over a dozen more RFID customers several with multimillion unit up to 100 million unit potential.
We're launching crossed industry marketing programs to replicate solutions in medical devices prescriptions bicycles on personal transportation controlled substances like alcohol on cannabis on others.
Federal spending is clearly growing fast and our revenue predictability is strengthening from the expansion of consumable use cases, returning customers and recurring revenue.
We see the second quarter and the rest of 2021, continuing these trends putting instead of position to project higher growth rates as we get visibility into the balance of 2021 and into 2022.
So with that I'll open to your questions and discussions, but let me first mentioned also that we have on the line with me Dr men from Mueller, who runs on RFID business. So if there are if it'd be related questions. We can cover them in whatever depths, we need and directly from from the Guy who's driving the business. So operator, please open the lines for the day.
Gotcha.
Thank you we will now take questions. If you have any questions or comments. Please press star one on your touched on from at this time.
Pressing star to remove you from the cute should your question be answered and lastly, what goes on your question. Please pick up your handset up listening on speaker phone to provide optimum sound quality. Please hold while we pull for questions.
And your first question is coming from a Jason Schmidt from Lake Street, Jason Your line is life. Please proceed.
Hey, guys. Thanks for taking my questions I, just wanted to start with guidance and just want to make sure I fully understand that I mean, the previous range was for 100 to one O. Two and you feel confident about that 100 million dollar figure when we shouldn't take that.
I mean, there is finished sorted downshift and expectations, though correct.
No the no on the opposite.
In fact.
What we what we said in our prior guidance with we were.
Moving up at the bottom of the range. It had been 96 to one O two and we said the bottom where confidence is not gonna be below 100, and we'll update the top of the range as we get more visibility into it. So we're confident about 100, the bottom and we you know.
From from right here do we believe there's room beyond that one or two of course, but is it important that we get you.
You're very clear visibility when you're microcap and small deals can move you one direction or another we want to be careful about when we yeah. When we raised that specific upper and does that does that clarify what you're asking.
Yeah, that's very helpful. Thank you.
And then just moving to that potential 1 billion unit opportunity any additional colored or you can book fried there from a timeline perspective of potential and market.
So uhm I that that I eh, yeah, I think that the candidates when you're referring to which is which is in the public domain that there's a big.
Opportunity out there and we mentioned that we've provided sample roles to them sample products. It's it's very far along but it's the government program you would think they'd want to drive it as fast as possible because it's going to increase their tax collection capability and uncertainty but yeah.
Government programs go with the at the pace. They go so it it should be hitting I in the relatively near term, but again you know we thought if we say it's gonna fall in the third quarter or fourth quarter per se and then it pushes out that can change expectation. So it's on track and work.
Comfortable with the physician, we're in there minutes, moving along and they're taking samples and die at assessing it but exactly when it becomes mandated is is not certain give or take three to six months.
Okay, and then just the last one from me and I'll jump back into Q in the business I know, it's going to vary depending on the product or customer, but just given the well known supply constraints out there are you seeing increasing inbound interest in picking up when simply because of your ability to supply is.
That becoming a bigger priority for customers over sort of performance and other applications.
Yes, it it absolutely is and where we're we're taking advantage of that in a couple of parts of our business I as I mentioned, we're we're doing inventory investment. So we can be the ones to supply.
There are some companies that are either either in difficult financial situations or at a private equity own quite frankly, and and very tight on working capital competitors I mean.
And and they aren't taking those positions on inventory. So, we're we're being pretty proactive and aggressive on it and our customers appreciate that because most of our products our our mandatory for them to continue their production and so our supply is is critical Blair on production on the.
Fact that we're able to keep them going when you know a lot of what they ear round on me to see from some some other suppliers is.
Is uncertainty or even inability to fulfill so it's it's a good opportunity to build trust as well as to drive the revenues.
Okay I appreciate the caller thanks guys.
[noise] like Jason.
Once again, if you have a question or comment. Please indicate so now by pressing star one on your Touchtone phone once again, that's star one if you have a question or comment.
And your next question is coming from Mike Atlanta, more from Northland Capital markets. Mike. Please proceed.
Alright, thanks, and congratulations on it looks great corner great outlook.
I think I should just two clarification from one is the so so you are basically basically reiterating 100 on $102 million, then you're saying that you're carpeting on 100.
Sort of extra copper and 100 bottoms, that's the way to think about it.
Yeah, that's for sure and and again, even the one O. Two what we said is that we're we're not bounding the top of the guidance. We're just not setting another new number on the top of it yet until we have some clarity on that so so it's it's 100 and up is the way to think about it and will refine that number it says we.
Get in there because his fingers were you with it.
Having a range of plus or minus $2 million at this point, obviously with the growth rates, we've got going on is.
They'll likely characterization of the future.
Okay got it and.
And then I got back on this [noise].
Cannabis 1 billion unit opportunity it almost sounds like you sort of one the technology to make out there is that fair characterization or is that still going on.
In terms of.
Compliance and ability you set so the short answer is yes, but to be clear being a government program. It won't be sole source are we pretty well I wanted to not overstate anything.
[noise], because nothing's been awarded but we're certainly.
At the forefront of those who more than comply you're completely satisfy everything and they were looking for.
Got it okay.
And.
[noise] I mean, you're winning a lot of very large.
Deals and you have large ones on the pipeline I guess.
What day, what is your when right on some of these deals.
Fairly high but.
Like when rates.
[noise], we we do it's up there there's a range whenever you have a complicated device like the the you know the auto injector syringe or or some of the mobile devices. The wind right. It is it is very high I won't put a number on it but but it's rare that we that we.
Don't win when you get more I won't say commoditize, but you know more low end and then certainly in yet commoditize.
Then then it can be a lower win right, but frankly more and more we're actually just.
Trying to not be bidding in those categories, but it's not differentiation. So when ready. It's it's it's it's pretty high we noted.
Yeah Ah released one of the bullets was it where we're expanding our technical team and that's mostly on the field application Engineers program managers.
To manage some of these programs because.
We're we're filling up with design and and quote.
And we want to be sure we're not bottlenecking Watson and in fact, we gave some metric there we're going to increase our team by 50% by June 1st is the mandate that Doctor Mueller has on the phone here.
And.
And that'll give you a sense of of.
Some of the pipeline scale, we're dealing with.
Remember do you want to add anything to that about the the nature of wind rates and the team we're adding.
[laughter] yeah.
As you already rightfully said and and and and Hi, Mike by the way, it's been a little while that you and I talked to is indeed, a a fairly decent number in terms of deals that'd be on winning the the design E time is fairly long and particularly with regard to many of those medical farmer.
<unk> and.
And those when they finally breakthrough we're we're getting there and the the beauty also is that for most of these we tried to focus on the ones, where we have a high hurdle of entry, where we were bringing in a lot of our own I P, which kind of excludes too many parties.
From from from from the total project and that's why the attach range is helped to book is high and we we simply need to make sure that when it comes to the volume that'd be remain and maintain that relationship and then also supply mess mess mess volume when the project for the.
Proceed.
Yeah that makes sense [noise].
Okay great.
[noise].
And then I guess on the gross margin for identity.
I think he said he expected to kind of get back to normal level. I guess can you can you say that like third fourth quarter and then.
Is that about 30 per cent, how should we think about that.
[noise] Sandra you on it.
Okay.
I'm happy to do it so what we said asthma C. R. A consolidated gross margins returned to their historical levels. So what you expect them to return to the 40 40 per cent low 40 per cent range in the second half of this year.
[noise] got at 10 [noise].
And I would imagine a lot of that comes from I D or identity or.
Done any improving as well.
It's gonna be a combination of we saw some improvement in coupon as we grew into our capacity investments and we'll also see the benefit of the federal government ear, and and third quarter spending and premises, which drives aircrafts margin stuff on that corner. So it'll be a combination of the both.
Alright, great.
Yeah.
Thanks, Mike.
Okay. Your next.
Question is coming from Craig Ellis from B Riley Securities Craig. Please proceed.
Thanks for taking my question and came thanks for all the information so far I just wanted to follow up on some of the earlier comment so Steve it's clear that the the team is cause executing really brown going out and engaging with customers to get those next arch programs, we talked a lot about.
Cannabis immature and I wanted to go back some of your early comments on smart from programs and see if you can just around that out with a little bit more color and and help us understand what the unit volume opportunity in that area might look like US. We go through 21 an inch 22.
You bet I'll I'll I'll frame it a little bit and then I'll I'll turn it over to mend predict to come a little bit more but yeah. As we as we said last year, we had done for different designs with the with one major bubbles company in particular now we've got two more designs that are new designs that are going into.
To production I enter under statements work.
For the balance of this year and into next year and the design from last year keep running of course, and then a couple more designs that are in process with them right. Now. So we expect will have up to eight designs going with that customer and we're talking with some other business groups within the customers that are an entirely different.
Use cases different applications and those are in early stages not into the design stage yet.
Volume wise in total you're you're talking about something in the 15 to 20 million unit range I for for that particular range of designs and I don't really go any more granular on that because that that gets to be a little proprietary pretty customer munford do you want to add telecoms.
Area around the the.
The designs and volumes for that.
Yeah, I think another important piece of information probably is that we are managing multiple a contract manufacturers, where we are also eating a few more so these designs the ones from both last year and also the new ones from this year is going to be spread over who on multiple a contract manufacturers, which also require all the net.
<unk> on boarding and then in terms of volume spread it's it's a pretty neat way how the various projects face in and face out. So it gives us some steady flow and in particularly in 2021, we've had a little bit more contribution to the over on volume then.
What we've seen last year, so from that point of view, we really expect that should become some sort of a baseline business going forward.
That's helpful and can so I wanted to ask to follow ups and men could we've never spoken before so it's nice to meet you all I'll be it over the phone I I look forward to meeting you personally is things hoping back up the first question to you and then I'll I'll bounce it back to Steve. So so the question for you goes back to the comments that fit made about the day and development kit multi.
[noise] device capabilities. So you.
You know.
The question there since that is a real important design engineer tool for folks out in the field that could utilize your differentiated technology, how do you plan to get that out to you.
True a distribution network will it be available as it is with most companies via the website or what are the other mechanisms through direct sales I'm sure that you have to get that out and propagate that kept on accelerate uptake of your solution.
Absolutely on this is one of the main topics that we are we have been discussing in order to help us to bring it into into the into the industry. So we won't is to become a feeder type of technology and it's not necessarily supposed to be generating sales in the first hand, it's supposed to be generating interest it's suppose.
Used to be a broadening and expanding the amount of a mobile app developers to include and implement R. F. I D technology, whether it's Janet generic or if a D or whether it's in particularly NFC into their various applications and and give them all the necessary building blocks.
In order to do so so to bake lower the barrier for them as much as possible because we have done it for so many for so many times and in addition to that we will be enabled them and we are making those available today already post on our own website through our existing distribution network. We are also making them available a range of.
Standard sizes, and and foreign factors and chipsets on whatever so that they really can play around with it they need a lot of memory or just a little bit on whether they wanted to put something on metal or whether they want to put something on glass boot or whatever so they really can play around with that and the the the the last item we're just gonna.
The beep getting us to success theories, we will be including hour are in time marketing power in order to basically utilize social media and social networks in order to basically get access to the right community. So like the the make affairs and the make a community. So.
We have some very very good inroads there and that's how we really tried to basically get this out there into the marking trying also a range of unconventional racing on to basically get this accomplished.
That's helpful. Steve maybe going back to the point that you made about some of the the volume dynamics on both smart turned customer when's that you're getting yeah. When I think about the smart turned industry the way it it often works as as one entity will adopt technology.
And that often has a cascading effect through the ecosystem, whether it's a leading Android player the adoption.
Cascades through the Android community or with another player on then it it does something similar and should look at the winter you're getting do you see that potential downstream of of where these current cramps are and if so you know any signs of interest from some of those other customers that are part of <unk> assistant.
Yes, it it it it that that dynamic is always going on and it's going on in this case too.
Cause they're always fighting preparing one-upmanship on anything with differentiate because it's so hard. These days. So we're certainly getting cross platform interest one of the mobility Friday true happens to be you know customer of ours is is really setting the pace and a lot of areas and for the first time I've I've seen.
And the the mobile device industry, the others, you're trying to figure out how to you know keep up and and match that positioning. So there's there's a lot of good conversations going on and you say I think there's there's gonna be some of that at cross pollination in debt and virality happening with it that said.
Yeah, the design cycle for a mobile devices. He was eight months and then it's another in a few months to get into the supply chain. So it takes some time, but they're they're definitely.
No one wants to fall behind and they're all working very hard to keep up.
Got it and then lastly, Sandra a question for you.
You know in the current environment one of the things that we're hearing about is expedites and and some day other things that are unique condition environment and and it is for some of the companies that were covering having an impact on on gross margin, it's not a significant impact, but an impact nonetheless so.
As we think about dynamics from the back half of the year, whether it be some of the the component issues that might exist and uhm.
And premises or or or some of the shipment for other issues that my existing identity can you give us any sense for for whether or not that type of thing might be an issue if you're looking at the way the backlogs going in and some of the the dynamics around to filming and cocks pluses and minuses.
Got it great question, we've actually been working really hard throughout this entire year to get ahead of that and so right now we're not saying anything significant that's impacting us, but there's a lot of planning going on in the background to work the relationships that we have with the chip vendors.
We've got very strong relationships with them or we can help influence putting in longer frame orders for purchase orders to lock up supply and getting are planning window expanded into 2022. So that we can give all of our suppliers much more confidence to act on our behalf.
<unk> and his teeth mentioned, having the addition on working capital helps because we're not as limited by you know contact in hand, we can buy slightly ahead.
In order to be able to make sure that we're ready to pivot when the orders come in so we're watching it but it hasn't impacted us to this to this point.
Got it thank you I'll hop back into the queue. Thanks for everybody.
Okay Creek.
Johnny there.
Hello.
And your next question is coming from Jeff Kessler from Imperial capital, Jeff you like.
Thank you. Thank you for taking my call [laughter] looking at looking at you were looking at the channel that the channels that you serve from.
From my last Hurrah did a survey of some of the of the largest electronic.
Electric electric electronic integrators, both here and in Europe, and in Asia and what's your what's your current plans are it appears that despite the pandemic.
It's court backlogs and particularly pipeline.
For for large or electronic acts, particularly and access and access can be anything from oyster type cars and in England over to Oh, Richard visit or management type cards over here.
This appears to be growing dramatically relative to where we've been last year or or or in fact prepared to prepay endemic Liberals demand is way above pre pandemic levels from my question to you is given what appears to be a very large let's just say.
I want to do stuff [laughter] level of interest on the part of these large on the part of these large integrators some of whom obviously you know work with you have is there is do you think there is ability to both number one.
Take advantage of this in the second half of this year when it seems that some of these projects will be awarded and revenues flow and is there the capability to cross sell to cross. So your your premises some of <unk>. Some of your premises technology is <unk>.
Well.
Sure Yeah, Yeah, I think I think you put your your finger on a trend there that that we're seeing as well is there is there's a resurgence with some of that pent up opportunity and in particular getting people accept and and everybody facilities are changing you know who.
[noise] need to access and under what circumstances, and where I am it's become a lot more dynamics. So we're seeing a lot of interest in more flexible systems in the cloud based systems and and more flexible credentials and then of course, the cross selling has always been a core to our our strategy. So I think we're gonna see.
Yeah more of that across the board, both commercially and and from federal government perspective.
Okay also looking at [noise].
Look look looking at some of the the the areas specifically there's been you know.
Clearly we've seen some very large deals are these are these are obviously valuations based on what what investors or what private equity or but smack investors expect to see happen in two or three years, but we've seen some you know some incredible valuations on.
On companies that are involved in letting people into.
Multifamily and commercial buildings in identifying them going forward to do that it's going to obviously require it's going to require products that can identify and and and clearly post pandemic.
It's gonna be it's gonna, they're gonna need to do more than just identify they're going to have to make sure that.
Not only as a person they are who they say they are but that's if that's put that there well have again the question would it comes back to.
Are you seeing that and some of the discussions that you're having with with customers.
Can you clarify sink what specifically are you asking about yep.
Well as you know as you know there are there are there are there are there are several very high valuations out there on companies involved in in in in access right now that or you know we're we're talking about we're talking on multiples that are that are 70 80 times red.
GNU [laughter] and what I'm getting what I'm getting to is if it is the marketplace. Obviously sees at this point in time that there is the potential for.
Somewhat similar to my first question, there's the potential for a large number of of uses to get into.
Buildings, but the fact remains is that it won't just be access anymore, it's gonna be.
You have.
How well how well is that person is that person who they say they are you may you may have you may need you know the <unk>.
This this this this refers to both hotels commercial buildings I'm just thinking of all the use cases, so that it can that that R. F. I D, particularly particularly N F. C. Can go into at this point again, this and it seems to be very highly it seems to be very highly valued by people in.
The marketplace, we're smarter than I am in what I'm getting too is is is effectively are you talking to again integrators or or end users who are interested in multi multi factor.
Identity that they can use that they can use that they haven't used before they're a very large companies you know obviously over in Sweden places like that and I'm working on this for years and they haven't been able to really crack through yet.
No you're exactly right and it's and it's it taking off with a with a lot of companies that if you say are all around instrument individuals and using I R. I D technologies to take that that profile of the individual and make it useful in the space and that's exactly what our strategy has been you know for a long time in it.
It's really a matter of the industry, becoming a little bit too where we've been building in depth vandalizing for awhile and yeah, you see companies like latch on proxy and per Qaeda.
With with some pretty high valuations, it's because of the value of that infrastructure and that identity.
In a frictionless way is is pretty high.
And I think you're even going to see you know over the next couple of years companies like Apple with their UW be platforms that they're deploying which is much better than Bluetooth on mobile perspective to do things like access control really UW B N N F. C is the right way to do virtual.
Present, and and identity management, so that that's exactly the direction that we think it's going and and I think it's just starting to get adoption. The incumbents are are you know have different business models and so they're pretty slow to go that way as you were talking about you know at the Apple, Yes, yes, but [noise] about any of the.
Yep.
Okay, great. Thank you.
True.
If there are any remaining questions or comments. Please indicate so now by pressing star one on your Touchtone phone. Your next question is coming from Jay Chung.
J alright.
Great Hi, Thank you for what do you need a chance to ask a few questions first again. Thank you for the update on the archive D capacity, what day did a competent to grow your capacity near the 70 per cent from 30 million units last year or two towards appointment this year.
Well you heard right in the in the very yeah. The very first quarter unit wise, we were up 53% a year over year. So as you you know 70 per cent as you pointed out that that's the capacity inquiry, who put an overall that's not even a lot of buffer for for what we're seeing is on.
[noise] baseline demand. So I think I think we also referred to it as a as an initial capacity expansion. So we're we're certainly confident that will be utilizing you know close to that total and and we're certainly prepared to add to that capacity.
As we go forward.
Great and that's it on my next question, which was do you foresee adding incapacity on the second half maybe as.
Tried to get ahead of growth the next year.
Whitney is there there's a there's a good possibility of that yeah.
Yeah, we we we've gotten very good at at adding capacity in a pretty scalable way, we've got the the space, which is always a long pole and so adding the equipment and technology is pretty straightforward, but I certainly wouldn't be surprised if we drop that in but just as a reminder to we're not very capital intensive. So we can we can add you know 50 million.
Units of capacity for for a half a million euros and even that we can finance so it's not.
It's not a big capital hit but of course with a capital raised where where we're not hesitate at all to add that as long as we can be sure we're going to utilize it. So we're not gonna put pressure on our on our cost of goods or operations overhead, but we're we're position to add capacities, we need it and you know simply on a on a <unk>.
Both basis that'll probably be needed later in the year and then there could be something like one of these major programs that comes in that drives a you know a step function in capacity requirement and again, we're we're.
We're doing all the pre planning that we need so we should be able to do it you know as needed by by any demand.
And then H you wanted to or can I D. P's looks like blues and Uhm revenue grew faster than units do you think it pays for the rest of the year will be higher in 2021 and 2020.
Yes, I I do again, and that's exactly exactly what you're seeing in the in the first the first quarter. Good that you know so yeah, I think I think that trend will continue it can it can it can fluctuate you know quarter to quarter.
Some of these products that have substantially higher gross margins can drive it but the trend that we're seeing with the complexity in the devices is is for increasing average unit prices.
And tell you about the higher interest P. The highest event that that's a dollar $1.50 that's pretty amazing.
And you Miss that you mentioned this an annual number or is it like over a contract period.
That what what one sits at at scales for that product and and you know I was going to be careful not to disclose anybody's in for you know proprietary information, but we've done nothing to indicate any any vendor here, but but that's that's actually the low end of the annual range that that they've indicated.
That that they expect.
And then you mentioned that you away from at the approval has been has been submitted already or is it something where based on to get there stuff in order.
That I'd, rather not go into cause that gets pretty close to you. You know if you. If you look at the volumes and you look at the use case and then you can look at approval F. D. E. F. D. A submissions which are public you can get back into it and I you know I want to be very.
You don't want to jeopardize any of our customers, yeah, but not for any of that I totally understand that's very sir the other parts of the I'd be business, you mentioned that both beaters an asset cause Google. So I think last November you gave got in for the <unk> to be about 24 20 to 25 per cent update Ya have they been Chang.
In that regard.
I'd say their their solidly confident in that range probably from upside on it yet okay. And then just on the pensive side, but the economy opening on that day that the pirate questions about it seems like this on it back while coming in here, where do you see.
The ninth at doing business moving you over here.
It's harder to predict because b b, you know because of how the commercial world will open or not open and will be investor not invest we're seeing Ah you know categories that are that are right.
Really catching back up some hidden in you know in in the travel area rental cars for example seemed to be feeling like they're getting very confident about their about their business outlook.
On others are are still figuring it out so it's a it's a huge range you know I I think for commercial you know expecting it still in the kind of 10 percentage range, whereas federal state and local I think it'll be growing a lot faster probably safe, but could be easily be surprised.
That commercial is double that growth rate, yeah, yet easily could could can happen with just a couple of.
You know a couple of factors.
Okay and can I, just make one observation from that of questions doesn't observation, but but I'm hearing is 100 million at the low end of your your guidance and that's about 15% growth, but it seems like on the on that alright, if I decide you expect pretty strong Munich world as one of the things to growth and.
Then on the inside you expect pretty swamped that'll growth, which is a good luck with your business and then of course commercial may come back and let's see let's see if I'm asked me to come in from them. The thing that seems like 15% growth is a very easy target that's all it per se.
Yes I.
I I I agree that the you know again that day to day, that's the that's the bottom of the range. So that's what we said we have great confidence in and we did that day.
A month or two ago, Okay. When we moved it up so completely agreed that the you know the question is when we have yeah. We we don't want to say Oh, Hey, the top of the range is now you know one O. Six it went went in fact, we're thinking it could be you know 112, and and it'd be better to give good clarity when we have some clarity.
[noise] of what that that and police that those are not guidance numbers, but you're saying we want to set a top of the range. When we have a good view of at the top of the range is but we've said is you're absolutely right. The the bottom of the range is is is very safe.
Okay, great. Thank you so much.
Thank you.
At this time. This concludes the companies question and answer session. If your question was not taken you may contact attentive Investor Relations team at I N V E at Gateway I R. Dot com I'd now like to turn the call back over to Mister Humphreys Force closing remarks.
Alright, thanks, Thanks, John and thank you all for joining US. This evening really appreciate the the the support and the engagement. This is obviously a very fast moving industry with new milestones every week. So we'll keep the communication coming whether through grass or other forms of communication out we've got some some fire.
Aside chat setup, we're going to be at a number of investor events going forward and as those get get solidified posted will put them up on the website, but uhm, we'll certainly be doing everything we can to keep transparency and and metrics visible. So I contracted progress on both us and and of course the industry. So thank you again and have a good evening.
Thank you for joining US today, you may now disconnect.