Good afternoon, welcome to I.D. Systems' Third Quarter 2015 Conference Call. My name is Bridget, and I will be your operator for today's call. Joining us for today's presentation is the Company's CEO Ken Ehrman; CFO, Ned Mavrommatis and COO Norm Ellis. Following their remarks we will open up the call for your questions. Before we begin the call, I would like to I.D. Systems' Safe Harbor statement that includes cautions regarding forward-looking statements made during this call. During the call, there will be forward-looking statements made regarding future events including I.D. Systems' future financial performance. All statements other than present and historical facts which include any statements regarding the Company's plans for future operations, anticipated future financial position, anticipated results of operations, business strategy, competitive position, Company's expectations regarding the opportunities for growth, demand for the Company's product offering and other industry trends are considered forward-looking statements. Such statements include, but are not limited to the Company's financial expectations for the remainder of 2015 and beyond. All such forward-looking statements involve risks, uncertainties and contingencies, many of which are beyond the company's control. The company's actual results, performance or achievements may differ materially from those projected or assumed in any forward-looking statements. Factors that could cause actual results to differ materially, could include amongst others, SEC filings, overall economic and business conditions, demand for our products and services, competitive factors, emergence of new technologies and the Company's cash position. We do not intend to undertake any duty to update any forward-looking statements to reflect future events or circumstances. I would like to remind everyone that this call will be recorded and made available for replay via a link available on the Investor Relations section of the Company's website at www.id-systems.com. Now, I would like to turn the call over to I.D. Systems' CEO, Mr. Ken Ehrman. Sir, please proceed.

Welcome everyone and thank you for joining us today. After the market closed, we issued our results for the third quarter ended September 30, 2015 in a press release, a copy of which is available in the Investors' section of our website. I am very encouraged by our performance in the third quarter highlighted by a sequential improvement in both our top and bottom line. The reductions we made in both our full time employee count and the elimination of consultants resulted in a leaner, more nimble organization that leveraged the many automation tools we created during our 2.0 phase. In addition, we are seeing traction with our new go-to-market sales strategy focused on global organizations. We achieved several key wins with major enterprises such as Knight Transportation. During the quarter, we secured a multiyear, multimillion dollar renewal and expansion contract with Knight for our new cellular based VeriWise systems. This order helped drive a 69% sequential increase in transportation asset management units sold to a record 10,300 during Q3. To put this achievement into perspective that was nearly 10% of our total TAM installed base in the third quarter alone. The investments we have made and product quality industry-leading sensors are proving to be exactly what the markets require. Also in Q3 we completed the necessary enhancements to our new VAC4 Industrial Vehicle Management system. The feedback and response from existing and prospective customers has been positive and our sales and service teams are now focused on upgrading the previous deployments of VAC4 and targeting large sales opportunities from both new and existing customers. While it was definitely a challenge working through the open VAC4 issues we are very confident that they are now behind us. Now before I comment further, I would like to turn the call over to our CFO, Ned Mavrommatis, who will take us through the financial details for the quarter. Then Norm Ellis, our COO will provide an update on our products and customer pipeline. Finally, I will return to discuss our strategic initiatives and outlook. Ned?

Thank you, Ken and good afternoon everyone. Now, to our financial results for the third quarter end of September 30, 2015. Our revenue increased 7% to $10.6 million from $9.9 million in the prior quarter and decreased 10% from $11.7 million in the third quarter of 2014. The year-over-year decrease was primarily due to a 35% decrease in VMS revenue as we transitioned sales and deployments to our new VAC4 product and pricing model. Our recurrent revenue increased 5% to $4.6 million or 44% of total revenue compared to $4.4 million or 37% of total revenue in Q3 2014. The transition to VMS Solutions based on a recurring revenue model is expected to continue to drive recurring revenue. Our gross margin was 41.2% compared to 46.6% in Q3 2014. The decrease was primarily due to the VAC4 SaaS based pricing model that has lower upfront price but higher service margin. We expect gross margin to improve as unit sales increase and customers sign long-term higher-margin service contracts. Turning to our expenses for the third quarter of 2015, SG&A expenses decreased 17% to $5.2 million from $6.3 million in the third quarter of 2014. The decrease was primarily due to headcount reductions and other cost-cutting measures. We expect SG&A to decrease further going forward as we realize the benefits of our cost reductions as well as the return on investment from our 2.0 investments in technology and process improvements. This has also lowered our non-GAAP quarterly breakeven revenue run rate to $11.5 million. Our R&D expenses decreased 37% to $1.1 million from $1.8 million in the third quarter of 2014. The decrease was primarily due to the completion of several product development projects related to our 2.0 initiative. We expect R&D expenses to remain flat in the fourth quarter. Our GAAP net loss for the third quarter of 2015 improved to $1.9 million or $0.15 per basic and diluted share from a net loss of $2.4 million or $0.20 per basic and diluted share in the same period last year. Now turning to our non-GAAP results which excludes stock based compensation, depreciation and amortization and other nonrecurring items our non-GAAP net loss totaled $1.3 million or $0.10 per basic and diluted share an improvement from our non-GAAP net loss of $1.6 million or $0.13 per basic and diluted share in the same period a year ago. For more detail on our GAAP and non-GAAP metrics please see our reconciliation to GAAP terms in the supplementary table of today's earnings release. Now, turning to the balance sheet, as of September 30, 2015 we had $6.2 million in cash, cash equivalents and marketable securities and no debt. While cash is down slightly from the previous quarter we continue to expect cash to stabilize as we drive sales and leverage our leaner cost structure. This completes my financial summary. For a more detailed analysis of our financial results, please reference our Form 10-Q which we plan to file before November 16. Norm?

Thank you, Ned. In addition to refining our sales approach and general strategy due in Q3 we also recognize, reorganized our engineering and quality teams to enhance processes and better align our products with customer need. As I mentioned on the last call, both divisions now report directly to me and I'm very encouraged by the progress to date. In response to the issues with VAC4 during Q2 our engineering and quality teams acted decisively to correct the product in order to meet our customers' diverse requirement. Our service team is now focused on upgrading previous VAC4 deployments while our sales teams have returned to – large scale opportunities with both new and existing customers. Despite distractions with VAC4 we were able to achieve a 13% increase in VMS units sold in Q3 to 1700. The sequential improvement was driven by repeat business from core end user customers as well as wins with major corporations, including multiple purchase orders from our leading consumer goods company to supply our PowerFleet system. In addition to contributing to revenue in Q3 these orders demonstrate our progress in expanding customer adoption of our leading wireless solutions. Since 2009, this consumer goods customer has harnessed our VMS technology as the best practice for improving its fleet safety and compliance, reducing material handling cost and increasing supply chain productivity. We are working closely with them to establish our technology as the leading standard across all of the distribution centers in North and South America. Complementing our relationship with Ford Motor Company during the third quarter we were selected by another large U.S. based automotive manufacturer to become its exclusive North American telemetry provider. Following a successful test pilot and a competitive process, we were selected to integrate PowerFleet into the customer's U.S. fleet of industrial trucks…

Thanks Norm. We continue to see a number of trends creating significant growth opportunities for our Industrial Asset Management solutions. Specifically, the recent declines in wireless communication cost to all-time lows as well as the coverage that is now at all-time greater level than we've ever seen. Today the mobile and satellite networks provide ubiquitous online connectivity at a reasonable cost and mobile computing and sensor technologies deliver high performance as well as excellent usability and battery life, so a declining wireless cost, coupled with more reliable and affordable hardware cost, have been key drivers for our Transportation Asset Management solutions. In fact, Berg Insight estimates that shipments of remote tracking systems with cellular or satellite communication capabilities will grow at an impressive 29% compounded annual growth rate to 1.5 million units in 2019. They also forecast that the installed base of remote tracking systems is forecasted to grow at a compound annual growth rate of 26.2% to 5.8 million units by 2019. So it is now time to take full advantage of these opportunities with our improved VAC4 and industry-leading TAM products. This has positioned us to better capitalize on the strong industry talent and market opportunity. Our improved financial results in the third quarter reflect the measurable progress made on our key initiatives. This was demonstrated by a significant reduction in operating costs, continued advancement in analytics, refocusing our sales team on enterprise opportunities, investments in VMS partnerships such as Toyota and Raymond and reorganizing our engineering team. Altogether we are much better positioned today than we've ever been to benefit from the increasing demand for Internet of Things technologies. So in summary, our operational progress in 2015 along with our expanding product portfolio, channel partners and pipeline has set the stage for strong finish to the year and an even greater 2016. Now with that, we're ready to open the call for your questions. Operator, please provide the appropriate instructions.

Thank you. [Operator Instructions] Our first question is from Jaeson Schmidt with Lake Street Capital Markets. Your line is open.

Hey guys, thanks for taking my questions. First off I'm wondering if you could share how much of your recurring revenue in Q3 was coming from the VMS segment?

Sure, hey Jaeson this is Ned. The revenue from VMS in the third quarter was $860,000 and that was up 50% compared to the prior year third quarter.

Okay great. And then wondering if you could talk about, now that you're relying more on your channel partners for some of the smaller companies, how you think that's impacting your overall visibility going forward?

Well we are part of their relationship with the OEMs is that every quote goes into an online portal that we've put together, so we have plenty of visibility to how many units are being quoted, by whom and when. So and that number continues to increase and it continues to have us very motivated to make that relationship - those relationships work.

Okay and the last one and then I will jump back into queue. Wondering if you give us an update on your opportunity within the airline industry and how that is progressing?

So that's something that's been unfortunately kind of been on the backseat a little bit because we had to get the VAC4 issues addressed. We've been reengaged. United is still very optimistic about the value. They are using the systems. They've already seen some specific benefits and so basically we expect, unfortunately to be about a year late, but we're going to deliver this quarter and once that's completed, definitely we have really the lead position in the telematics industry on airport vehicle. So, 2016 should be a good year in the airline industry.

All right, thanks a lot guys.

Thank you.

Thank you. Our next question is from Morris Ajzenman with Griffin Securities. Your line is open.

Good afternoon guys.

Good afternoon.

Hi, first question, just help me understand where we are with really focused on handful of these really large customers that your management team has really refocused itself on following the last quarter and where you are on that progression and is something there that could happen near term or is this going to be work in progress taking a number of quarters?

Yes, Morris, [indiscernible], this is Norm. Yes, it is going quite well and you said that handful, it is actually a little bit more than a handful. We've identified about 40 or 50 of those enterprise class customers that Ken, myself and Mark, our Head of Sales for VMS have each taken on about 15 or so which gives you the number 45 or 50. And I have been out meeting with them as well as Ken and Mark and those meetings have been very productive, at least for me, I know for Ken as well. This just became personally I made several calls just in the last couple of weeks and I think it is going to contribute results in this quarter already and I think even more significant results in 2016. But the program was my focus and Ken's focus and Mark, his focus has had an impact already and I'm encouraged by that our – the customers like the executive team to be out there and be visible and I think it helps us stay and two, look at what the requirements are, what their needs are, what might be changing. And it also allows us to really get a much better feel for what the future looks like relative to orders and their needs and sharing our presence with them at different facilities and things like that. So I hope that answered your question.

I'm just trying to, I'm looking at this about half a dozen really large customers with you and a handful of distribution centers and you want to do [indiscernible] materially. Talking about those half a dozen whatever, I understand this will be and you will be on that, would that could be meaningful or not, is that something again is it near term or could it be quarters in the coming?

Well I do think, if you took the top 10 of those, take it down from the 50 that I mentioned earlier, and you take the top five or top 10 some of them are existing customers of course and we have opportunities to expand our presence with those customers and I think we will expand some in this quarter. I think the vast majority of that you will see in 2016 as we have been doing it for six to eight weeks now and it has been off to a good start. So I think there will be some short term impact or I think there will be even greater impact with those larger customers in 2016. Ken do you want to add to that?

The only thing I would add to that is that the reason that Norm and I are getting involved is we are using not just our contacts, but our board members, who have been very, very instrumental and very helpful in bringing our standards to the highest levels of these organizations, so that when we are successful where in the past we were dealing with kind of on a plant level, now we have relationships that we're building at the executive level, which we had been doing in the TAM business. But we really hadn't even risked, I mean I wouldn't say we weren't trying, but we weren't as aggressively focused on that. We were responding to anyone who wanted to buy from us. So now we are creating the plan where leveraging the relationships of board members can provide to explain the value at an enterprise level and with analytics the value becomes abundantly clear. So we are seeing the rollouts. We got one in Q3 that was pretty sizeable. We are expecting more in Q4 as well as very significant ones in 2016. So again, in the past without the 2.0 initiatives we might not have been able to get that sea level attention, now we are and that is the whole thing that we are working on.

Thanks. One more question and I'll get back in queue and this one is probably more for Ned. You had a really big pickup sequentially on the products side, $2 million. On the service side you were $4.9 million last quarter and you probably had about $700,000 incremental in the budget and correct me if I'm wrong in these numbers, but if you took that out you would have been by about $4.2 million last quarter and services this quarter is $3.6 million. First, am I right in my math and secondly if I'm correct, why the decline sequentially in services?

Yes, Morris you are correct on your math. The major reason we saw a decline in services in the previous quarter there were more professional services such as training and technical support compared to this previous quarter, but that's the major reason for the decline.

And is therefore $3.6 million move of a normal run rate going forward, how do we think about that into the fourth quarter and beyond for services?

Well it's going to vary a little bit because we do provide some professional services on the go in the service line. However, when you look at the current quarter there was very little professional services, so it was primarily all recurring revenue. So that’s a base number that is going to continued to grow as we grow recurring revenue, but it could be a little bit higher depending how much professional services is in a specific quarter.

Thank you.

You're welcome.

Thank you. Our next question is from Andrea James the Dougherty and Company. Your line is open.

Thanks for taking my questions. Just more on the service revenue question, can you talk to us a little bit about what you're seeing in that revenue stream and the migration to a SaaS model? I mean is that portion of the service business up if we had an isolated look at it?

Yes Andrea. If you look at just our VMS service revenue in the prior year third quarter it was $574,000. In this year's third quarter it was $860,000. So we saw about 50% increase compared to the prior year third quarter and that primarily has to do with the change in the model where we're converting the VMS into a SaaS model as well.

Okay, that is helpful. And then actually really quickly, would it be up sequentially as well you think?

Yes. Our goal is to continue to grow our revenues. We sell more VAC units and we sign long-term contracts.

Okay and then looks like you had really good cross control on the SG&A line, surprised me even a little bit. Should we expect that level to continue?

We should see further reductions in the SG&A. Probably next quarter we should see SG&A be around $5 million, but our goal is to maintain the SG&A long term around the $5 million mark. The R&D we expect to stay around the $1.1. So as we grow revenue - that's when you start - keeping the expenses flat, that's when you start seeing the leverage in the model.

Okay that’s helpful and then also in terms of your gross margin target is there sort of any sort of new normal there on gross margins. Just kind of curious about what your trajectory is what you guys are thinking?

Next quarter should be similar to this quarter. However, as we go into next year especially as we continue to grow the service revenue we could see the gross margins start to get closer to the 50% level as we go into next years.

Okay. Thank you so much. I appreciate you taking my questions.

Thank you, Andrea.

Our next question is from Josh Nichols with B. Riley. You line is open.

Yes, so looking back at the previous quarters it really seems like Toyota, Walmart, and Raymond are kind of three factors that have usually played a pretty big role with various ebbs and flows. Going forward in Q4 and into 2016 where do you see your big partner relationships?

Norm, you can take that one please.

Yes would be glad to, yes. You know well and I don’t want to confuse that [indiscernible] that you would partner, I mentioned Toyota and Raymond and they I would consider as partners. I would consider Walmart as a partner, but then a user partner not an OEM type partner, this is one more difference on a nomenclature. But I think you will see us grow our business with both Raymond and Toyota. I think the things that we talked about earlier the aftermarket, addition of Toyota is going to be great for us. I think we're making great progress with Raymond as well and we'll see some increased activity with Raymond in Q4. I think we'll be decent. I think it will get better in 2016. But then I think you'll see the impact of the change in our strategic focus on these large customers. And I think you'll see the large U.S. automotive manufacturer that I mentioned that we just recently won have a significant contribution in 2016, 2017 et cetera. And other ones not automotive necessarily although we do have some very nice automotive activity going on outside of the one that I just mentioned. But even other large corporations that we are now focused on I think will have significant impacts for us. I think our medium and small business will continue to be good, but that can be really driven by Raymond and Toyota and we are emphasizing that, but the ones that we have obviously is the most direct leverage on will be the big direct ones that we're going after. And based on what I see in the pipeline not only for this quarter but for 2016 I think you'll see some new names emerge, some new customer names, like the automotive customer that mentioned plus a couple of other big names that we don’t have today that could contribute hundreds if not thousands of units to us in the next couple of years. So I think we get that strategy working like it is. I think it will bode well for a good 2016.

Good and then, yes the last question from me, as I know on the last call, management had talked about the emphasis is to push to profitability and where do you see that now that Q3 is done and mostly through or largely through Q4, where do you see the profitability or flexion point potentially happening?

So, what we've been very focused on is making sure that every deal we take is profitable, because in the past we might have done some significant investments in order to try to win business. Now the mindset is we have a great product that provides a great return on investment. So if people want something customized or people want us to make an investment, we would need that investment understood and well quantified. And so mindset of our sales team is we should be profitable on every deal with our reduced run rate. From an expense side we only need to hit $11.5 million to break even. So we should be able to do that in Q4 but we definitely expect that 2016 be profitable.

Okay, thanks a lot.

Thank you.

Thank you. Our next question is from Dan Weston with WestCap Management. Your line is open.

Yes, hi good afternoon guys. Thanks for taking the questions. A couple have been answered already, but could you, can you talk to us a little bit about your 10% customers in the quarter please?

Yes, Dan it is that we only had, it was a pretty diverse quarter. We only had one customer that was over 10% and that was Walmart. They have contributed about 25% of our revenue. There was no other customer that was over 10%.

Okay, great, thanks. And then on Raymond I know that had a little bit of hiccup more stimulating to the VAC4 use last quarter, but it was nice and I think it was for actual revenue contribution. Can you do the same this quarter?

Yes, Raymond was about $550,000 which is about 5% of revenue during the third quarter.

And in discussions with them since the VAC4 you seem to be resolved now. Do they seem like they may have kind of like a pent up demand or backlog of customers waiting to be implemented?

One minute, I let's decide who is going to answer that one, but I'll answer that one, which is, yes Raymond should definitely be significantly larger than $500,000 in the quarter as well as really we probably had some, the minimal sales from Toyota. But if you look at the pipeline of Toyota that is in our portal [ph] that's deals that are currently quoted, there's over 1000 units, so pretty significant. We expect that obviously they are not going to win every deal, so it's hard for seeing exactly how many units we are going to get this quarter but at least they are quoting our product and that's a good sign and they are learning more about it. And each dealership is learning about Command which is the name of it. And we are beginning the aftermarket launch this month, so we're very – you just layer on Toyota to what we were doing with Raymond and we should definitely see significant increase in revenue.

Great thanks Ken and just to make sure I'm clear there, so you are talking about two different entities here, you say Raymond should be in excess of the $550,000 in sales, but Toyota Industrial themselves autonomously created a little bit of revenue in Q3?

Yes a little bit, about 100 units, so nothing significant.

Got it, and then basically when you are talking with Toyota do they seem that they are on track if you will, in other words are they all geared up as their sales force is ready to sell, you mentioned they got some gills in the pipeline of 1000, I think you said a 1000 units?

1000 units, yes.

In the pipeline and that all is coming from each individual dealer by dealer basis?

Correct, the dealers, when they are selling the trucks if either the customer asks for telematics or they are pushing telematics, because it is a competitive bid where they need to provide it, then we'll see it will come into our portal. Now again, they may not win that truck deal, so we may not get the order. But we are seeing that a number of units that are entering the dealer portal with Toyota is increasing and accelerating. So that's a good sign, but again there is a long way to go, there is a very big opportunity with Toyota and so I'm thinking realistically it is going to be 2016 about that. We'll probably get a few hundred units from them in Q4 and hopefully 2016 they will get a lot more experience in using the products, selling the products to customers that they've sold to. We'll see value, so it is just another channel that's completely additive to our own direct sales force as well as the Raymond channel.

Very good, and then just following up on VAC, I noticed during this quarter kicking to be in the August timeframe a company called CalAmp announced a deal with Toyota Industrial relating to their thematic [ph] mobile application. I'm wondering if you could talk a little bit about if you would mind that relationship that they have and how do you play together if you do and just kind of encapsulating the whole relationship?

Sure, CalAmp offers, if you go on to Toyota's website you can get a lot of information, because you'll see our product on there as well as CalAmp's product. CalAmp product is a cellular device that does hour meter readings and impact sensing. It does not do access control, it does not do [indiscernible] checklist, does not do productivity. So it is really not an enterprise product and it is not necessarily very reliable when it is inside the four walls of a distribution center or manufacturing plant because it utilizes cellular. But on the other hand there is a use case for that which is whey Toyota offers two products, both the product with IT systems which they call Command as well as the product with CalAmp. So CalAmp is actually a supplier to us. We are very close with them, very familiar with what they are doing, where really they are a partner of ours and so it is really, that is pursuing a different type of market. So we don’t necessarily see any overlap there.

I appreciate that Ken. Just a last couple if you don’t mind, the new win with the U.S. auto manufacturer, when do you think you'll be able to announce who that is? And then is there any kind of detail you could give us around the potential size if everything got implemented correctly, the timing is there a set timeframe and a number of units associated with the contract, any additional detail would be helpful?

I don’t think they will every let us release the name because we tried to get them to do it now and they wouldn’t let us do it, because they said all of their major suppliers, their policy is to not allow their suppliers to release their name. So we may never be able to do that unfortunately. But that's second to the primary objective which is to help that customer improve safety, improve their productivity, which those two key points were the major reasons why they selected us. We really help them cut costs, improve productivity and improve their safety and their plants. It was demonstrated over a one-year timeframe. They quantified significant benefits and have put together a rollout plan for 2016 and beyond. So I cannot really get more specific than that. But it is definitely a customer that has tens of thousands of forklifts that has now decided that we are going to be their supplier and that they intend to put the system on all of their trucks because of the benefits that they saw during the one-year pilot.

I appreciate it Ken. And then speaking on that note when you start talking about the magnitude of that potential order coupled with the other ones you've already signed et cetera, I am wondering if you could comment on how your implementation partners are doing and would they be able to handle some of the bottlenecks at the aviation side with United along with rest of the implementations that are going to need to be done with the new partners here?

We actually, the main partner that we picked, which is this company called MME, they did not do a very good job. I mean I'm just being honest with you. They were very ineffective. They caused a lot of issues and we've terminated the relationship with them. On the other hand we have build relationships with significant numbers of forklift dealers around the country who we've had relationships with, but now they are becoming our installation arm and implementation arm. So it was a little bit of a setback if you saw from our financials they cost us a lot of money during the first few quarters, but on the other hand I think the new approach does allow us to meet the demand that we anticipate in 2016.

So if you are doing it on a dealer by dealer basis for the trucks, who exactly will be doing the implementation for let's say United and their ground transport equipment?

Well, in the case of united, they do the installations. So we're certainly going to pushing a lot of our bigger customers to do their own installations because that's important because of the service and ongoing support of the system requires trained people within those operations. It is really when the customer doesn't have the resources that we supplemented now with the local dealers.

Got it. That's all I have. I really appreciate the candor and congrats on the quarter.

Thank you.

Thank you and our next question is from William Meyers with Miller Asset Management. Your line is open.

Thank you and thanks for taking my question. The statement the total lifetime revenue of TAM units sold in Q3 was $5.4 million. Was any of that $5.4 million recognized in the quarter and is here a quarterly run rate from that?

Sure, this is Ned. Very little was recognized in the quarter. If you look at our TAM business even though we sell the hardware upfront and we get paid for it that revenue does not get recognized upfront and actually gets deferred and amortized over the life for the service contract. The $5.4 million includes the cost, the revenue associated with the hardware and the services and they're all going to be recognized over the life of the contracts. Most of the contracts that we signed are over a five-year time period. Now when we say the lifetime value actually is a little bit it underestimates the value of the product because that is the contract that is valued today, however once the contract expires in most cases the customer renews or even a longer-term, so once these units get delivered and implemented they are actually going to have more value than the $5.4 million that was disclosed in the press release.

Okay, thanks. That was very helpful. That's all from me.

Welcome.

Thank you. [Operator Instructions] Our next question is from William Gibson with Roth Capital Partners. Your line is open.

Thank you, my question got asked.

No problem. Thanks Bill.

Thank you and I'm not showing any further questions. I'll now turn the call back over to Mr. Ken Ehrman for closing remarks.

Thank you very much for everyone joining the call today. I especially want to thank our employees, partners and investors for their continued support. We look forward to updating you on our next call. Operator?