Welcome to the Q2 2016 Identiv Earnings Call. My name is Eric, I’ll 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. On 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 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 very much, and thank you all for joining. In the last few updates our quarterly earnings comments and some of the investor open webcast we’ve held, we’ve had some very detailed discussions of our business with restructuring of the legal and regulatory progress we’ve been making. And so today, hopefully we’ll be somewhat shorter than that because we’re really executing on the business direction as planned and as we previously communicated. And so the focus today will be on updates on the growth drivers and on the progress building, the very strong business and positioning ourselves to take advantage of the substantial market opportunity that we believe we’re in a position to lead. So there is lots of work ahead, but our focus would really be on capitalizing aggressively on the market opportunity as this industry grows and transforms. Before Steve Finney elaborates on our financial results, I just like to summarize some of the relevant business dynamics that those numbers represent. Fundamentally they’re delivering on plans we’ve already communicated as I said. So for example, we’ve seen sequential growth in every business line. Our physical access business grew 8% sequentially and 17% in the U.S. Our Smart Card readers which combine – complies the bulk of our identity segment grew 16% sequentially. Our credentials grew 10% sequentially. Now all of these were partly offset by discontinued businesses which we’ve previously communicated, primarily the German Time and Attendance Webshop. As we also announced last quarter, one of our major customers Disney Company discontinued a product line as they announced publicly, and that’s been removed from our business space. We still have great commercial relationships with them and we’re working on other programs but what’s important to us as a business is we very successfully filled the gap created by…

Thank you very much Steve. Hello everybody, I’ll try to fill in some of the detailed financial results beyond what Steve just covered. Our revenues in the second quarter were $13.5 million compared with $12.5 million in the prior quarter, an approximate 8% sequential increase, and compared to revenues of $15.6 million in the comparable quarter of 2015, an overall decrease of 14%. As usual, I'll break this down by segment. Our Physical Access control segment represents approximately 41% of second quarter revenue having generated $5.5 million in the quarter, up 8% sequentially from $5.1 million in the first quarter of 2016 and also up 21% from the $4.6 million recorded in the second quarter of 2015. The increase is both sequentially and year-over-year primarily results of higher sales of physical access control solutions, including an increase in professional services engagements in the United States primarily related to end customers in the federal government sector. As mentioned in previous releases, we’re continuing to focus on our strong and valued Hirsch customer base and branded products, including our new FICAM Solution in addition to further delivering our commercial offerings through ICPAM to continue to grow revenue in this segment through the rest of this year and beyond. Revenue from our Identity products being primarily smart card readers and reader modules and tokens was $2.9 million in the second quarter of 2016. This represents a sequential increase of 16% from the $2.5 million revenue in the first quarter of 2016, primarily as a result of stronger sales in the Asia Pacific region and a decrease of 11% compared to the second quarter of 2015 revenues of $3.3 million. This business nevertheless was above plan in the quarter and has good backlog at present time. Approximately 36% of our second quarter revenue were…

All right, thanks Steve. As I mentioned earlier, our update here is really reiterating the business direction we’ve already laid out, so I’ll go through this pretty quickly. But it’s important to focus on our core position which is really as the quality provider and technology leader across all of our products, physical access, our identity readers, transponders and cards. We believe we’re the most responsive, the most reliable and the most complete solution that any of our customers turn to and that’s the basic we’re building on and it’s going to drive our expanded market share. We’ve got great partners, a discipline sales organization and focus and commitment to this market that creates the base free efficient growth. It’s very much blocking and tackling, but that’s the basic we’re building on. Now the combination of deep technology and the partner reach and customer experience that we’ve got and that we’re immersed in, provides the base not just for the market growth and grabbing share within that market but for disruptive growth. But we think we’re positioned to take advantage of that disruptive growth with pretested ROI because we know the customers, we know the channel, we know the technology, we don’t have to invest way ahead of revenues, but we can drive substantially accelerated growth. So as we deliver our current and transformational solutions through our host dealers, borrowers, integrator Cisco channel at OEM partners, you’ll see that the common theme through that is our quality and technology leadership but very much in a leverage model. We’re not trying to create a market, we’re not trying to circumvent a channel, we’re going to go with it, build on the base, put leverage into everything we do and then realize both growth and margin on the technology and the quality…

Thank you. [Operator Instructions] And the first question comes from Mike Latimore. Please go ahead.

Hi great. Good evening guys. On the reiteration of guidance I guess, should we think about kind of third quarter and fourth quarter being relatively even levels here or is there one ballpark pronounced?

Yeah, good question. Historically third quarter has been strong due to the government fiscal yearend buying period, and fourth quarter has been a little weaker than that but we do have more diversification in our business than before, so having them at fairly comparable ranges is certainly how we’re thinking about them.

Okay, good. And then how about on your FICAM product I believe you were looking to get them approved on this federal list. Can you give an update and the status of that?

Yes, you bet. The development on our side is complete. We have it going to the process of validation to get it on to the federal government of APL, that takes a couple of months and that’s a little bit out of our hands in terms of when actually it’s going to get on there. But it is in their hands. We’re actually already selling components, our secure network interface board for example, is part of the FICAM platform and some of the government buyers are starting to acquire those in order to be position for FICAM deployments as it comes forward. So it’ll be coming into the third quarter and then hitting more aggressively into the fourth quarter, and then it’ll be several years of deployment across literally hundreds of thousands of government doors.

Great. And how about just an update on the Cisco relationship channel development there, how important is that for the second half of the year?

It’s important in terms of relationship in building our strategy. As I mentioned, we’ve diversified our revenue streams quite a bit so we’re not exposed by, in terms of a downside, but it’s – the growth is nice, the channel is very excited and very broad. Our challenge is balancing a broad range of requirements because some of their implementations are deeply and matched in their networking systems as well as their video systems. But that partnership is going very well and you’re going to see if the center piece of our business model going forward.

Got it. And just before – I think in terms of the OpEx on the quarter you said there was about a $1 million of cost I think professional fees – one, is that right and two, do those go away in the third quarter?

That is correct, Mike. Yes, it is about a $1 million. We’re looking to see them go away in the near future through a combination of the ongoing resolution of the matters they relate to and working through the process with our insurance people.

Okay, thanks. And I guess just last question would be, any color around backlog you have at this point and then visibility into the sort of federal government opportunities for the third quarter?

I don’t think we’ve typically given backlog data around that but we – I think in fact of reiterating our guidance is probably the best thing we can do in terms of our confidence in the business. The federal government has it’s buying cycle and this is the end of the federal year – fiscal year. So just from a market perspective, you wouldn’t expect that to be any different from prior years that it’s a fairly good buying cycle.

Okay, great. Thank you.

Thanks, Mike.

The next question comes from Mark [indiscernible]. Please go ahead.

Hi Steve, thanks for taking the time. One question I had is, so it seems like you’re making really good improvement in terms of managing cost and I – it still seems a little cost heavy on the P&L. I guess can you kind of give us insight into what run rate are you looking for in terms of OpEx, and when can you achieve it?

Yeah, so a great question because as much as the teams worked so hard and we made good progress and we aren’t there yet. So, in my comments I indicated in the mid-30s of revenues as an OpEx target and we certainly think that’s achievable that we’ll be driving towards longer term as we look at some of the growth areas in the leverage that we get out of our channel and some of the OEM relationships. We think that can get into the 30% range, but that’s certainly a longer term target.

Okay. And also with respect to debt reduction, do you see cash flow being sufficient and it looks like enough for the year or maybe into 2017 that started paying down debt?

Well, we’re certainly in a position as we become EBITDA positive and work through our working capital situation that we should be beginning to generate cash from operations, yes. As to whether that’s being paying down debt or maintaining debt as a comparable level in order to be able to invest in the business that’s really something we need to look at.

And the inventory you mentioned is that related to Disney, the access and inventory that you have currently?

Yes it is.

Okay, that’s all from me. Thank you.

All right, thanks.

And at this time we have no further questions.

All right, well thank you again for joining us and looking forward to keeping you updated as we continue to drive this business forward. Thanks to everyone who is listening and if anyone who is on the Identiv team who is listening as well, really appreciate all the effort and all the commitment you’ve shown. Thanks everybody. Have a good day.

Thank you ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect.