Welcome to the Q1 2014 Identive Earnings Conference Call. My name is Eric, and I will be your operator for today’s call. With me on the call today are Jason Hart, CEO of Identive; and Brian Nelson, CFO. In a moment we will hear remarks from both of them and then we will take questions from sell-side analysts and registered investors. Before we begin, please note that during this call, we will also be making reference to non-GAAP results or projections, including non-GAAP gross margin, operating expenses and adjusted EBITDA. A complete reconciliation between each of these non-GAAP measures and the most directly comparable GAAP financial measure is included in today’s press release, which is available on the website at www.identiv.com. In addition, during our call today, we will be making forward-looking statements. Any statement that refers to expectations, projections or other characterizations 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 the documents file from time-to-time with the SEC, including the annual report on Form 10-K for fiscal year 2013 and our subsequent quarterly reports on Form 10-Q. Identive assumes no obligation to update these forward-looking statements, which speak as of today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note, this conference is being recorded. Now it is my pleasure to turn the call over to Jason Hart. Mr. Hart, you may begin.

Thanks, Eric, and good afternoon, everyone. Simplification, focus, growth, these are being the three themes over the past quarter or two quarters that we’ll use to drive the company. And today I would like to share with you an update on where we are in terms of progress against those three themes. We will provide some analysis on our Q1 results and then provide some more color on our overall annual guidance. I am joined today here in Silicon Valley, California by our senior members of the management team and they will be available for to assist any of the questions we have at the end. Simplification, it’s been an extremely busy period for the management team and the company as we continued to execute on the 12-point plan that I outlined when we had our Q4 earnings call. We have been rationalizing various sub-companies, the group of companies and transforming the 37 businesses into a single Identive, a single technology, security company, delivering on a new vision that I will cover in a moment. We are entering the final phases of the large components of the simplification project, but I do expect that the full integration will take the reminder of 2014, as we further reduce our G&A and other -- and we consolidate the remaining teams, processes and systems. Brian will cover a little bit of that and I believe we have a few questions at the end from interested investors on what that actually means. So we will provide some more commentary on it. Focus and our Q1 general commentary, I am pleased to report that the initial investments and focus that we made in Q4 are beginning to yield some early results in Q1. We have seen a lower cost base as we went into Q1…

Thank you, Jason. As we discussed during our last call, we made the decision during the fourth quarter of 2013 to divest certain businesses that were non-core to our trust solution strategy. Certain of these businesses were divested in that quarter with the additional divesture of RockWest Technology a.k.a. Multicard U.S. occurring in the first quarter of 2014. As a consequence, all of these businesses were accounted for as discontinued operations. And as such, results we are reporting today for the quarter-ended March 31, 2014 as well as our previous periods reflect our continuing operations. Now looking to our financial results. Prior to beginning, a reminder that Q1 of each fiscal year is traditionally the softest quarter of the year for Identive. Revenues in the first quarter of 2014 were $17.2 million, an increase of 8% as compared with $16 million in the first quarter of 2013. Sequentially revenue in the first quarter decreased by 14% from Q4 ‘13, however, it again reflects the seasonality of the Q1 business from Q4. Now some specific segment performance commentary. Approximately 44% of our first quarter 2014 revenue or $7.5 million was derived from sales in our credential segment growing 36% as compared to revenue of $5.5 million in the first quarter of 2013. The growth was primarily a result of increased demand protection inlay as to support electronic gaming, transit ticketing and other internet of things applications. Again the seasonality of the business resulted in sequential decrease of 16% from the $8.9 million achieved in the fourth quarter of 2013. Revenue from our identity products, which include smart card readers, reader modules, and tokens in our cloud-based credential provisioning and management services was $5.0 million in the first quarter of 2014, growing 10% over the first quarter of 2013 revenues of $4.5…

Thanks, Brian. First, I would like to pass on my kudos to Brian and the team for all they have been diligently running the operations of the business and substantially reducing the G&A that has always plagued this company. They have also been managing the peripheral activities of divesting many of the discontinued operations and streamlining our overall efficiency of the business. And as you heard from some of Brian’s commentary, we do foresee the ability to continue to improve our margins, particularly in areas such as our everyday item product lines. So I am extremely pleased with the results as we continue to work on them. We are not internally satisfied and the rest of 2014 will continue to simplify, as we implement the systems processes for being able to manage the business more efficiently, but again I will pass on my kudos publicly to you and the team. I think at this stage really what I would like to do is summarize the key things and then we will open the call up to question and answers. We do reaffirm our guidance and the previously guide in Q4 for the year, the full year at $80 million to $90 million and adjusted EBITDA positivity. With the growth that we saw in the revenue for Q1 and our foresight now into where we think Q2 will be, we are still confident that that number will be met. We do continue to see simplification throughout 2014 and the idea behind that is to have a single business that can be operated and managed from a single point of command control. We do feel that the simplification will yield additional benefits to the business in terms of creating value through improved margins, creating value through stronger relationships. We are focusing our business on delivering our cross-solutions under our new Trust Your World vision. For more information on the Trust Your World vision I invite you all to our website and obviously contact our sales organization. Lastly, growth; growth for me in this business will come from continuing to leverage global OEM, global strategic and our global Fortune 1000 customer base. I continue to be extremely confident that as we move over the next 24 to 36 months that this business will see significant growth. We’ve begun to see early signs, but I stress again that early it’s only been two quarters. So the results internally begin to give us a lot more encouragement that the strategy and the investments we are making are correct. So at this time, I would invite any questions. Operator?

(Operator Instructions) And our first question comes from Bryan Prohm. Please go ahead. Bryan Prohm - Cowen & Company: Hi, good afternoon, Jason and Brian. Thanks for taking my questions.

No problems Bryan. Good to hear from you again. Bryan Prohm - Cowen & Company: So okay with liquidity situation securing and congratulations on that. That seems right into the ongoing integration plan which I think you stated will run through the end of the 2014. So on that bit more simplification here to go, though I really believe it is hard consolidating what did you say 37 businesses into one is heck of lot of ground to cover. How much further then can you reduce expenses this quarter? I know that’s the objective. And then again through year end, given your comments on R&D and investments in increased sales and marketing, that’s going to tick up as you invest in the business, especially into the higher growth areas of the business. And I realized G&A is down meaningfully year-over-year, but how much more costing you really take out there and over what timeframe, what’s the target? Thanks.

Really good question Bryan, thanks for it. I will offer a little bit and then I will pass over to Bryan. In terms of where we are at, we are at the later stages of the big chunks of the simplification plan. We’ve divested as you’ve seen many of the non-core assets. We’ve divested almost all of the discontinued operations. We still have a couple left that we are working on, but they are minor by comparison to the substantial debt that we cleaned up in Q4. So what we did in Q4 is we then focused on the organizational structure and as you know we board in some senior managers from external organizations. We did a reset of the corporate executive structure. We began to collapse the internal businesses and really align the structure around sales, marketing product management so forth. So what that differ us is that allowed us to pull out a bunch of costs where they were duplicated. As we look to the remainder of the year, the cost changes will come we believe from margin improvement by simplification of our factories as Brian mentioned. We previously announced our plans to do some consolidation there. Our internal modeling suggests that continues to be exactly the right decision. We’ve also began to create substantial market leverage with our partners and that showed up at the higher end of our margin revenue with the high margin. So we will continue to invest in that. I think probably the big steps. We do have a number of internal systems that we move to. I saw some of those costs being absorbed in Q1 as operating costs such as moving to global sales, CRM, retooling and retraining our sales people. So we’ve covered a lot of what we think we need for the remainder of the year, but I do stress that simplification now is really going to fall on Brian with a lot of the internal legal entities that are collapsing underneath all being shutdown the accounting activities, the previously announced relocations of corporate headquarters from Germany to the U.S., addressing of a number of management and order identified issues, all of these things now Brian has got some extreme focus on. And I will hand it. Do you have any additional comments you want for Brian?

I think you gave Bryan the full compliment, but Bryan thanks for your question. While I am not in a position today to quote you a percentage that we are targeting this quarter or for the remainder of the year nor a dollar amount. Just a reiteration that we’re keenly focused on the consolidation of activities on a global basis and outsourcing were applicable so that we have what I’d call a variable level. As I mentioned in my earlier commentary, continuing to evaluate the worldwide headcount, all are related infrastructure. Looking at the facilities we hold worldwide to see redundancy, space savings, et cetera. All of these actions will help us streamline and reduce our operating expense base further.

We’ve gone from 460 people approximately 325 thereabout. And as Brian said, with the consolidation activities, we do expect that there will be some changes there, but there are also add backs. As you said, we can't continue to cut, cut, cut and not have growth. We -- Brian and I kind of [Ying Yang] (ph) he is the perfect CFO for being able to get the cost out of the business and be able to restructure. And my role predominately has been that to establish the partnerships and get the growth and it’s worked very well for the last couple of quarters. Bryan Prohm - Cowen & Company: Okay. But would say the German headquarters moving or rather for instance consolidating in the valley, there is still something taken us to move on there. One follow-up question rather related question on the P&L, sorry if I had missed it. Is there a one timer in this quarter’s interest expense line that number was what 2.1?

Yeah. It’s Brian. It’s about $1.6 million of non-cash associated with the payoff of the Hercules loan. Recall that their associated charges that were on the balance sheet that would be amortized over the period, the loan has been paid back. So once that loans paid back, they all get flushed out, but the good news is it’s non-cash charge, nonrecurring, etcetera. Bryan Prohm - Cowen & Company: Okay. All right.

We think that for our savvy investors, they look at these numbers and actually realize that the non-cash expense needed to come obviously to come out. So again, I just want to highlight the Opus transaction should not be understated. It was given the state of where the business was and it’s historical and the changes that we have made in Q4 gave the bank enough confident to be able to invest with us on commercial terms. So I think, actually Brain you asked me the question on the last call and I apologize at the time I couldn’t disclose to you. But we were very, very close to having all that locked up and as I said very pleased with what happened. Bryan Prohm - Cowen & Company: Okay. Good. I’m mapping out the revenue guidance, what you’re reiterating $80 million to $90 million and your adjusted EBITDA positive guidance for year-end, which you’re also reiterating. Now given what your comments were Jason around the premises business that the time really going to fully recover until next year. Is that a change from last quarter, so initially, the shape of the revenue and return to EBITDA positive, adjusted EBITDA positive. Is that going to happen largely without a recovery in that high-margin business?

Yeah, I think we should be cautious to provide too much guidance on the premises business because some of the things we enacted in Q4, didn’t take effect until the end of Q1, particularly, the release of our uTrust product line. I personally just completed a range of field visits with almost strategic government customers, which is way predominantly that business is. And the feedback that I’m getting from both our customers and our team is that it’s positive. We have seen some early science of recovery and we’ve seen -- again just very positive feedback in the section to what we’re doing in that area. So it is an area that we want to continue to invest in. We think there is substantial potential for that business beyond what that business has been which is why we kept it. And we forward it into the overall Identive strategy. So I'm excited about it but we’ve got to be patient with it. Bryan Prohm - Cowen & Company: Understood. So does that mean that the current backlog in this is more heavily everyday weighted. I mean, it sounds like some of the inventory related comments and balance sheet commentary suggested that’s what’s really going to drive 2Q?

Yeah. So a great, great observation Brian, one of the things about our premises business is that we can react quickly with inventory and supplying our customers based on a relationship with our contract manufacturer. So the buildup is primarily in credential business as I mentioned. But that shouldn't be taken as a commentary on what we’d expect in anyone quarter for the premises business because again it traditionally doesn't need to have a lot of backlog to build inventory because we can react quickly. Bryan Prohm - Cowen & Company: Okay. Very good. Hey, so Jason, what’s the current status of the gaming market? As some of these connected toys start to really proliferate in homes. Are you starting to get calls from other interested parties? Is that where the significant growth is going to come from down the road to the end -- between now and end of the year?

Yeah. Actually, it is interesting. I think it is a market that is driving. Our challenge continues to be to become more integrated and trusted with the community at large there. So, we have enacted a range of internal programs, decoration of the product management group to focus on some of the more leading-edge technologies, as those customers are wanting to integrate with mobility, particularly, not just a toy on a console, but how do they use the toy with the mobile phone, how they use it with the cloud, how do they use it with other properties that they may have. That is an area of growth. But again, I don’t want to over highlight that just say, our premises or our identity businesses. The identity business is doing well and we expect that to grow. And the premises businesses as I said, we do expect that to recover. But yes, the everyday items and the Ethernet of things has just been an incredible boom for us. We are seeing really good growth and continue to expect to see that over the next month very easy. Bryan Prohm - Cowen & Company: All right. Great. Thanks for answering my questions, gentlemen. And I’ll pass it on to the next persons and good luck. Talk to you soon.

Thanks Brian. Appreciate it.

I appreciate it as always. So, I think at this point, we had some email questions and I’ll cover those quickly and I encourage anyone -- anyone else has question -- must answer at this time to send us an email to ir@identiv.com. The first question I have and I won’t mention the person’s name because I don’t have permission to. You should -- you are but does management intend to invert a reverse split? The answer is yes. At the upcoming Annual General Meeting of Shareholders of record, we've asked that the shareholders approve, provide or approve the change to the by-laws of the company that would allow the Board of Directors to enact a split that would bring us into compliance over a 10-day period with the NASDAQ $1 bid requirement. Again, I encourage every shareholder of record, if you have not received your proxy information if you project you are broker and if you are broker then able to provide the information, please reach out to IR at identive.com to provide assistance but we would like to see as many of you having say its possible. Second question, concerning to individual, what does management intend to do a better potential de-listing. As I mentioned for number of reasons, Identive believe it’s more favorable to remain listed on the NASDAQ capital market. In particular maintaining the NASDAQ listing helps support the stock liquidity, but also provide recognition to the company and the company shareholders. It’s an important activity. We are very focused on it and again, at that time, please vote. The third question, recently a Shelf was filed, what does this mean for investors? Brian would you like to take that question?

Happy too. Shelf Registration is essentially a renewal the previous registration that was filed in May of 2011 and it had a three-year term. So it came up for expiration, better part of 10 days ago. So this filing was a renewal of that. And having the Shelf available allows the company to continue issuing registered shares under agreement such as our purchase agreement with Lincoln Park Capital. The original Shelf allowed us to self-securities up to $100 million in the aggregate. This Shelf was reduced to allow us to sell $50 million in the aggregate.

Right. Thanks, Brian. And we have time for just one last question and all other questions we will be happy to take offline and/or the next call. But congratulations on the new financing, how is the Opus facility better than the one that was retired? Brian, would you cover that?

I would be happy to take that one as well. As we mentioned, during the body of the call, Opus provided a larger facility of $20 million, one of which was a term loan, the other one was a revolving loan. So it gives us a variable option. The interest rate is more favorable then our previous facilities, 6% versus 11%, as well as providing principal repayment deferred for 12 months. So it lowers our debt service requirement in the near-term.

Right. Thanks Brian. Well, we have reached the end of our time. And again, I appreciate the support of the Board, the support of our shareholders and management team, staff and customers. And look forward to providing a further update at our next earnings call. Stay tune for the customer Annual General Meeting, which will be next week, I mean, next Thursday. And again, full time, please vote. With that, I’d like to close the call, Operator.