Welcome to the Q1 2016 Identiv Earnings Call. My name is Adriane, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session. Please note this conference is being recorded. With the call with me today are Steven Humphreys, CEO of Identiv; and Steve Finney, CFO. In a moment, you'll hear remarks from both of them, and then we'll take questions from sell-side and analysts. Before we begin, please note that during this call, we will be making references to non-GAAP measures or projections, including the non-GAAP gross margins, operating expenses, and adjusted EBITDA. A complete reconciliation between each of these non-GAAP measures and the most directly comparable financial measures can be found in today's press release, which is available on identiv.com. In addition, during our call today, we 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 SEC, including the Annual Report on Form 10-K for fiscal year 2015. Identiv assumes no obligation to update these forward-looking statements, which speak as of today. I'll now turn the call over to Steven Humphreys for his comments. Steven?

Thanks, Adriane, and thank you all for joining us. As reflected in our earnings release, we've made a lot of progress, focusing, solidifying, and positioning our business for growth after a challenging 2015 on many fronts. As we'll go into today, we've made this progress across all areas, our operational business, restructuring, and legal and compliance. So I'd like to do a short introduction, framing the highlights in each of these areas, and turn it over to Steve Finney to go into the financials in more detail, and then I'll get into a fairly detailed business discussion, expanding on the strategy and execution plan as we laid it out in our last investor update. So looking at the Q1 highlights, again, as we noted in our earnings release, revenues came in on target despite major organization realignment and expense reductions taken right in the midst of the quarter. This reflects the strength of our team, our Hirsch Physical Access Business, our Smart Card Reader business, our Cisco relationship, and our international sales strengths. Hitting our targets also, despite normal sales deal timing puts and takes, and even absorbing U.S. transponder customer changes is a tribute to the resilience of the business position we're building. We also saw above-planned gross margins due to the Physical Access focus that we're driving. Now, we did incur restructuring charges and expenses to implement a pretty far-reaching operational streamlining, as we announced previously. These benefits will be realized in the run rate over the next couple of quarters and carrying over into subsequent years as a more efficient and effective organization. At the organizational level, our customer activity, our product releases have been accelerating consistent with our plan, again in the context of a lot of internal dynamics and customer dynamics. Now, net of all…

Thank you very much Steve. Turning now to our financial report results for the first quarter, revenues in the seasonally weakest first quarter were $12.5 million, as Steve said, as compared with $13.1 million in the prior quarter, an approximate 5% sequential decrease, and compared to revenues of $14.9 million in the comparable quarter of 2015, a decrease of 16%. As usual, I'll talk to this by segment. Our Physical Access segment represents approximately 41% of first quarter revenue having generated $5.1 million. That's up 8% sequentially from $4.8 million in the fourth quarter of 2015 and also up 9% from the $4.7 million recorded in the comparable quarter of 2015. The increase sequentially and year-over-year is primarily a result of higher sales of physical access control solutions, including an increase in professional services engagements in the U.S., primarily related to end customers in the U.S. federal government sector. As mentioned in previous releases and by Steve already today, we'll continue to focus on our strong and valued Hirsch customer base and branded products continue to grow revenue in this segment in 2016. Revenue from our Identity products, including smart card readers and reader modules was $2.5 million in the first quarter of 2016, a sequential decrease of 16% from the $3 million revenue in the fourth quarter of 2015, and a slight decrease of 3% compared to the first quarter 2015 revenues of $2.6 million. Increases in smart card reader sales in the U.S. were more than offset by relatively weaker sales of reader products in some of the international markets. But overall, this business was above plan in the first quarter, and has good backlog in the current quarter. Approximately 36% of our first quarter 2016 revenue or $4.4 million was derived from sales in our Credentials segment,…

Thanks, Steve. So picking up where we left off in the business introduction, so far this year we've made solid progress, while managing our challenges. On the progress front, revenues, especially in the physical access control systems, smart card readers, and cards have been very strong. The sales organization in particular has delivered very well, and proven itself as a core competitive advantage for us to build on. Our PACS positive also strengthened with the federal government, which is a core leverage point for us, and we had significant PACS product progress. Also, as Steve mentioned, and I mentioned earlier, our smart card reader sales have been performing above plan, which is in area we expect to continue to invest in and to grow. We have had our challenges as well though, in the U.S. transponder business, we've been dealing with a large customer, potentially announcing or repositioning an out-boarding of one of their product lines, which we've sold into. But we've managed the revenues in the first quarter despite some of the pressures in the transponder sales in the U.S., and we believe we will continue to do so. Now, of course, the business refocus and organizational changes, while accelerating our product and market execution is a challenge with the team that meets everyday, and it takes a toll. So we have to keep our team building and thriving for the long run, but we also have to recognize that we're putting a lot of pressure on the organization to perform, while also realigning the direction of that organization. So taking a closer look at our progress; the government customers in particular are really embracing re-dedication to Hirsch and our physical access control systems. I already mentioned the strong showing at ISC West, where we shared a 40by40 booth…

Thank you. We'll now begin the question-and-answer session. [Operator Instructions] And our first question comes from Saliq Khan from Imperial Capital. Please go ahead.

Great, thank you. Hi, Steve.

Hi, Saliq.

Yes, Steve, it looks like you and your team has clearly been very, very busy over the last quarter or two. The one question I did have for you was, while your organizational and the restructuring efforts that you've put in place since you've been the CEO, and clearly the headcount reductions helped as well in reducing the overall OpEx, how are you preparing for the potential of your U.S. [ph] responder customer that you talked about earlier, how are you preparing for that customer reducing the overall orders? And does this impact your overall full year guidance?

Yes, thanks for the questions, Saliq. And as I said, we are reiterating our guidance. We don't believe in building a business built on individual customers, and so, as we built the plan, we did have some numbers in there for some substantial customers, but no numbers that we couldn't compensate for. It'll mean, obviously when you get pressure in one area, it gives you less flexibility; if you end up with pressure in a couple of other areas, so there certainly creates some more risk in the ability to execute with certainty, but currently, we think we can deliver around.

Thank you.

Sure.

And your next question comes from Mike Latimore. Please go ahead.

Yes, thanks a lot. On the Physical Access opportunity, what do you see as maybe the top one or two drivers for that business this year? Is it new federal government agency coming onboard or a major upgrade at a current customer or is it Cisco pulling through, pushing through? What are the –- what's the -- like, the one or two big drivers for Physical Access second half of year, I would say?

Okay. If you'll permit me, Mike, I'll give you three, because one is current federal government customers, I mentioned FICAM and SNIB-3 programs that they have mandated and budget for, and we have orders on the books for that are going to drive accelerated growth there. The second is, because that solution, our FICAM solution is literally half the cost and almost twice the speed of the competitive solutions, we've been out talking to other agencies who are not currently Hirsch customers, and we think we're going to bring some of those on as well. And then in the commercial space, as I mentioned, the Cisco partnership, both for the ICPAM platform, and then later in the year we're doing an integration of our Hirsch MX panels into the ICPAM platform. And so you're going to get a hybrid of some of the Hirsch capabilities with the ICPAM software going through the Cisco channel. And we think both the growth we're seeing already, and that capability added on top of it will accelerate it even further. So there's at least three specific touchpoints that are driving growth. I could go into four or five others, but I'll stop at that unless you want more.

Okay. And then just here on the Cisco partnership, Cisco obviously has a broader Internet of Things strategy. The opportunity that you're seeing through Cisco or with Cisco, do they typically -- are they typically, we just want the specific ICPAM product, or is it that's part of a broader Internet of Things deployment that Cisco is doing?

Yes, it's definitely part of a broader Internet of Things deployment. In fact, this is one of the validation points when we talk about the physical environment, and we talk about it in IoT. Cisco completely agrees with that assessment. Their sales people, who are –- they're comped on IoT. Sales of ICPAM is counted towards their IoT target comp. So they agree that this is part of the IoT strategy. And then as I mentioned, they've got their video integration there, and they've got their whole IP infrastructure integration. So for farther down the line, we're actually looking at integrating some of our Physical Access capabilities into some of their industrial control IoT platforms, so you could have the best of both worlds. That's roadmap stuff. That's 2017 stuff, but right now, they definitely see sales for ICPAM platform as part of their IoT strategy.

All right. And, I guess, just last question would be, you mentioned the first quarter was seasonally a weak quarter. I mean, how would you characterize the second quarter or what would be the seasonally strongest quarter of the year given the current product mix?

Seasonal strongest quarter of the year is almost always third quarter, driven by a number of things. The government purchase cycle being one, and also product release cycles. So typically you'll have a lower first and second quarter, fairly on par with one another, then third quarter has typically some sequential growth, and then the fourth quarter is comparable to third quarter.

Okay. Thanks a lot. Good luck.

Thank you.

[Operator Instructions] We have no more questions at this time. I'll turn the call back over to Steve Humphreys for final comments.

All right. Thank you very much, and thank you all for joining us today. As I mentioned, we will be presenting at the B. Riley Conference little bit later this month, for anyone who cares to join us there, and otherwise we look forward to keeping you updated at our Investor Updates as we go forward, and certainly our next quarterly results as well. Thanks again. Have a good day.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating, and you may now disconnect.