Welcome to the Third Quarter 2016 Identiv Earnings Call. My name is Danielle, and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. On the call with me today are Steven Humphreys, CEO of Identiv; and Steven Finney, CFO. In a moment, you will hear remarks from both of them, and then we’ll take questions from sell-side 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 will now turn the call over to Steven Humphreys for his comments. Steven?

Thanks, Danielle. And thank you all for joining us today. Especially on this day when there are big changes effecting us all, we appreciate you taking the time to join this discussion. Despite all the events around us, this is also a big day for Identiv. As I’ve spoken with investors, customers, partners and other stakeholders all year, our conversations have been mostly about our health as a company rather than the amazing market opportunity we have or the exceptional position and strength of our products. Now, these questions are very reasonable when you are coming from the position we were less than a year ago; quarterly expenses over $12 million, very tough to support as a sub-$20 million quarterly revenue company; quarterly adjusted EBITDA loses over $4.5 million and using cash sometimes at a rate of $6 million a quarter. Even though, we’ve known the strength of our products and the opportunity in the market, our focus of course had to be fixing our core business fast. That’s what the investment community, and even our customers and partners wanted to hear about. When you are spending money at that rate without solid growth in the core business, we clearly needed to demonstrate our health and strength before spending time communicating our business opportunity. Now today, 10 months since our decisive business refocus in January. The hard work we put in has come through in our financial results. We’ve stabilized cash all year, since completing our restructuring in the first quarter. Our quarterly operating expenses are down below $6 million from the over $12 million level in the third quarter a year ago. Our adjusted EBITDA is a positive $1.7 million, the positive swing of over $6 million from the negative $4.5 million adjusted EBITDA in the third quarter of…

Thank you, Steve, and hello everyone. All endeavor to fill in some of the financial details for the third quarter behind the business highlights Steve just introduced. Beginning with revenues and margins, as per the first financial slides for those following along on the presentation deck, revenues in the third quarter were $15.6 million, a 15% sequential increase compared with $13.5 million in quarter two, and a 10% decrease compared with $17.2 million in the comparable quarter of 2015. However, as Steve alluded to this latter period included the last substantial sales to our then largest customer in the electronic gaming space, and on a like-for-like basis our revenues were up 13% over quarter three of last year. As usual, I’ll break this down by segments. Our Physical Access Control segment represents approximately 47% of third quarter revenue, compared with 41% in the first half year and 33% in full year 2015. This is a telling reflection of our growing strength in this business segment, and helps our overall margin. We generated $7.3 million in the quarter in this segment, up 31% sequentially from $5.5 million in the second quarter of 2016, and also up 21% from the $6 million recorded in the comparable quarter of 2015. The continuing increases both sequentially and year-over-year are again primarily a result of higher sales of Physical Access Control solutions, including an increase in professional services engagements in the U.S., much of this related to end customers in the federal government sector for whom September is the fiscal year end. As mentioned in previous releases and discussed to great length by Steve, we’re continuing to focus on the strong and valued Hirsch customer base, including our new FICAM solution and in addition further developing our commercial offerings through ICPAM, and we expect continuing…

All right. Thanks, Steve. I think we’ve talked about the progress on expenses and cash stability already. So suffice it to say, we’re continuing to drive efficiency, resource focus, working capital management, and gross margins as you’d expect that’ll never stop. Now we’ll - while keeping this discipline, as I mentioned earlier, we’re also driving solid growth across the board. Even though Q3 is seasonally our strongest quarter, our core growth has been strong every quarter this year as well as year-over-year and across all parts of our business. So let’s get into a little bit more tactical look at the events that drove these results. In the physical access space, our FICAM solution is under evaluation at over a dozen federal agencies now. Also more generally, our Hirsch brand has been successfully relaunched with great market reception. If you’re following the webcast and the picture on the right, you can see our booth at the largest trade show for physical security as is, which the center piece of which is a building with the Hirsch name on top. You kind of can’t see the Hirsch name because the lights are so bright, but it was very well received. And probably the main thing is, as you can see the booth is mobbed. At that booth, we were showing our FICAM solution, our commercial Velocity solution, as well as our Cisco and ICPAM platform. If you look closely, you can also see video cameras on the building. And this is a concept that’s going to remain with us as we add sensors, partner integrations, all around interaction with the building, and extending within the building we can take this concept and expand it right into our booths at all of our trade and marketing events. Now below that picture you…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Mark Drucker of B. Riley. Go ahead, Mark, your line is open.

Hi, Steve, thank you for taking my question. So with respect to restructuring, the balance sheet improved, operating expenses went down. How much more improvement are you looking for?

From an OpEx perspective or a balance sheet perspective?

I guess if you could touch on both.

So fundamentally we’re in the operating range we expect to sustain from an operating expense perspective. We do think we can grow substantially on the base that we got. We don’t expect to expand our operating expense base if we grow our top line. We’ll keep tightening everywhere we can, but that would be 5% adjustments here and there, not a major move on that front. And as you know, we tried to do all the actions in the first quarter and really it’s just been carry them out over the balance of this year, but it’s not something that we expect to do on an ongoing basis continuing to whack. We’re stabilizing, optimizing and growing at this point.

So just to make sure, Hirsch revenue was $7.2 million in the quarter?

Yes, that’s correct, $7.3 million physical access revenue.

Okay. Thank you. And how much were investments in property planning equipment for the first nine months of the year?

It’s not a big number. I’m sorry, I should have that at hand, but I don’t. The CapEx in the third quarter was just under $100,000. And we haven’t had significant spend at any point through the year.

Okay, that’s helpful. So last question - back on the balance sheet, how do you see - how do you see debt - your debt levels, maybe a year from now, or a couple of years from now? Paying $500,000 in interest expense, it’s not that significant to come - it’s actually come down significantly, but just wanted to touch on that, if you’re happy with where the balance sheet stands or you do want to continue paying down debt and in terms of time frame if you have any color on that as well?

I’ll take a whack at that, right, because it’s as much an operating question as a financial question. We are EBITDA positive. We don’t expect to be using cash in the growth of our business on an ongoing basis. We’re not a heavy cash user. So it’s really a question of what the optimal financial engineering for our business is. How much we carry this debt, how much we do equity raises and drive liquidity in the market place that way. We do expect to be growing very aggressively and so we could look at - again this is something we didn’t have the right to talk about a few months ago, and it will certainly keep out feet under us for the next few quarters. But when you are talking two years out, we could be consolidating the marketplace we could be driving pretty aggressively in a number of directions. But, if we have not better use for our cash, we’ll be paying down the debt, and letting the cash flow drive that. We don’t need it for our core operations.

That’s helpful. Thank you.

And just to close on the question you asked about CapEx, our spend through the nine months is a little over $400,000.

And our next question comes from Mike Latimore of Northland Capital. Go ahead, Mike, you line is now open.

Okay, thanks, great quarter there guys.

Thanks, Mike.

On the - I think you had some products going through FICAM certification, can I get a quick update on if that certification has occurred. And then, you talked about being evaluated, I guess at 12 agencies, but I saw that you already had seen some orders, so maybe clarify - maybe the pace of business there or the traction you are already getting there?

Yeah, it’s a nonlinear process that the government goes through. You would think complete certification is a prerequisite to shipping and installation, and it’s not because FICAM is a complex standard. So we’ve passed all of the qualifications, and now there is a final testing process that goes on in the labs, however agencies are allowed to buy and order - actually as soon as you submit to the APL, the approved product list. And, they are certainly comfortable ordering having completed the certifications. And so, it’s almost a pro forma event when you are formally completely through their process. So we actually had a federal government open house, we had over a dozen agencies in our offices in Arlington, we kind of did a new relaunch of our D.C. location. And a lot of agencies, that aren’t even amongst us, are mentioning in evaluation that we are sitting down, rolling up sleeves and understanding how implementation can be done. Because we do have the end to end technology ownership, we could really advise them on all the - the tricks and stumbling blocks and issues for each of their environments that they might run into based on what panels they’ve got, what reader’s they’ve got, what kinds of cards they have, et cetera. So it’s very active, and you never want to project too much in terms of specific timing with federal government. But we really do seem to be building a position as a trusted advisor there and we really do have a solution, which is faster and less expensive than any of the competition.

Yes. Okay, got it. And then with also related to the Cisco partnership, I know you are enhancing some of your products relative to that. When do you think those kind of key product enhancements will be ready in this year or the next year sometime?

Yes, yes, so one of the things you’ll find from us is when we talk about things it’s usually pretty near term. So the Cisco video integration with Velocity and the ICPAM - especially the ICPAM integration with our MX boards, that’s already on a Cisco price list and we are taking orders on it, and we’ll be shipping in the next couple of months. Similarly, either by the end of the year or early in January, the full integrations will be shipping. So these are all two month kind of windows that we are talking about.

Got it. It sounds like on the RFIDs you said, I think sounds like your - on the pipeline or the bidding activity is fairly active there. I guess, is that a category that you think can grow in 2017?

Yes, very much so. As we mentioned it’s growing already at about a 10% clip, and that’s coming off some repositioning as we had a big customer change there. There’s some - the applications that we’re talking about here, virtual reality, some of the others that I mentioned, home automation, it really becomes part of that enabling technology that makes the user experience just seamless. So we do think it’s going to be a part of the infrastructure and part of the growth of IoT and therefore, yes, we do think it’s going to be an increasing growth rate, above what you’re already seeing from us.

And then just sort of a current topic, the new president here, any general view on what that means for your federal government assistance?

One thing that changing administrations don’t tend to mess with is security. We secure all of the field offices of the FBI and the IRS. No one is going to say, hey, cut some corners on keeping the doors safe there. So we don’t see any at all there and with change sometimes there is new initiatives that get looked at. So there may be some opportunities there, but certainly we don’t see any threat to the current programs.

Okay. Thanks.

Thanks, Mike.

And I am showing no further questions at this time.

Alright, thank you operator - Danielle, sorry. And thank you all for joining us, and have a great day, and look forward to further updating you at our next investor conferences and investor events going forward. Thank again, have a good day.

Thanks everyone.

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