Welcome to the Q4 and Fiscal Year 2016 Identiv Earnings Call. My name is Victoria, 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 Sandra Wallach, 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, you may begin.

I would like to welcome you all to our fourth quarter and full year 2016 business update. But first I'd like to say a special welcome to Sandra Wallach and we'll be hearing from in a few minutes. This is Sandra's first financial results report as our CFO following Steve Finney who have been very ably supporting the company as our interim CFO. So special thanks to Steve for his support and welcome to Sandra. Turning to the business, throughout 2016 our conversations were mostly about our health as a company rather than the market opportunity or the exceptional position of Identive and the strength of our products. Today we're announcing results that include two consecutive quarters of solidly positive adjusted EBITDA totalling about $2.8 million in positive EBITDA in the second half of 2016. We're also showing solid pure year over year double digit growth in the fourth quarter of 2016. Additionally in the first two months of 2017 we announced a refinancing of debt that had been a 2017 obligation and now we have a 3.5 year term loan with strategic banking partners who are aligned with our direction and whom I will talk about later. Now most importantly above all of this we publicly announced a range of product announcements already in the first two months of the year all of which directly drive our growth in 2017 and beyond. I'll go into more details but the perspective to understand about Identive is this. With all the non-operational challenges of 2016 and the operating realities of restructuring and refocusing a company we executed the plan every quarter and moved our business to adjusted EBITDA positive and to clear strong growth. We're going into the rest of 2017 with no meaningful non-business distractions. So as I speak later…

Thank you, Steve for the introduction and for providing the context for our financial results for the fourth quarter and the full financial year of 2016. As we transition to the financial section of the presentation, revenues in the fourth quarter were 14.6 million, a 6% sequential decrease compared to 15.6 million in our seasonally adjusted strongest quarter three and a 12% increase compared with 13.1 in the comparable quarter of 2015. As for the full year we reported revenue within our guidance range of 56.2 million as compared with 60.8 million in 2015, an 8% decrease and I'll walk you through those movements by segment. Our physical access control segment generated 6.8 million of revenue in the fourth quarter of 2016 down 6% sequentially from 7.3 million in the third quarter and up 43% from the 4.8 million recorded in the comparable quarter of 2015. The decline sequentially is primarily a result of the timing of orders from customers in the key U.S. Federal government sector whose businesses has generally remain strong for us as Steve noted. Indeed on a full year basis we saw revenue grow from 20 million in 2015 to 24.7 million in 2016 and we're continuing to focus on our strong customer base and branded products including our new FICAM solution in addition to further developing our commercial offerings through ICPAM to grow revenue in this segment in 2017. Revenue from our identity products primarily smart card readers, reader modules and chipsets was $4 million in the fourth quarter. This represents a sequential increase of 13% from the 3.5 million of revenue in the third quarter of 2016 reflecting stronger sales primarily in the U.S. market and an increase of 34% over the 3 million recorded in quarter four of 2015. For the full year…

All right thanks Sandra. As I briefly mentioned earlier we've got clear drivers to our growth. I want to focus on a few of those and just go down the list that you see here on the slide. I won't spend time on FICAM right now, we'll get into some more detail on that but the rest of these I like to go into with some depth because they are all relevant and they are all either already released or well underway. So the first one, ICPAM MX integration. This is really a bellwether moment for the company because it brings together the Cisco initiative with our Hirsch [ph] strength and so that entire Cisco channel which has been using hedge controllers for deployment now has access to the full range of enterprise ready industrial strength devices and in fact on a per door basis prices drop because you can go to 8, 16, 32 doors with one panel instead of having the limited scalability of edge devices. So we're very excited by the MX release as I mentioned earlier that happened in January of this year and now it's all about driving it through the channel and awareness throughout Cisco but it really is a step function for the capabilities of the Cisco channel and the ICPAM platform. Reciprocally VSM integration is the Cisco video capability that we're integrating into the Hirsch velocity platform. So now we'll have access to all of Cisco's video capabilities which you see on the top right there in the image into our Hirsch enterprise scale infrastructure across the velocity platform. So really starting to bring together but doing it in a step by step fashion this Cisco channel and product positioning with our Hirsch and physical access business. The next logical step in…

[Operator Instructions]. Our first question comes from Mike Latimore from Northland Capital. Please go ahead.

Steve on just the FICAM comment you just made, you talked about $1200 per door I guess you know if you were to upgrade the doors you're already on within the federal government you know what is the addressable market there for you and then second, you mentioned the competitive pricing at $2400 is an upgrade price and I guess if you know what would be a replacement price from what you're seeing?

So let me take the first one first. And I want to caveat this which is the federal government will deploy at the rate that it will deploy. So I don't want to get ahead of ourselves but we're in about 200,000 actively used doors, we have actually sold into more than that number but those were the active doors that we're using and so would a thousand bucks a door you can do the math on what the potential for that is. Now will they all convert and over what period of time you don't know but that's why this is such a meaningful opportunity. Then on your question of 2400 I'd actually direct you to the government website we're trying to be conservative and make sure we do the most generous, comparable we can because you would see something north of $3000 if you really looked at a pure apples, apples same number of doors, same platform because as I said they've got an extra $1000 piece of hardware for every door. So you just put on the math and then you put on some of the fact they don't have the vertical integration and they don't have some of the other parts of the solution they're sourcing and that's where it gets to be a lot more expensive.

And then just as you look to the year to the revenue growth for the year I mean do you expect all your segments to grow this year or would say two out of three kind of get to where you need to go?

So the answer is yes to both. We expect all the sectors segments to grow this year. In fact within that range that we've guided two out of three can get us there.

Okay. And then just with regard to Cisco obviously you've talked about a number of integrations and products related to Cisco as well as certification, those are important drivers. I mean can you help me understand how important are those dynamics versus just Cisco end of life its own product here, the end of life is that kind of a good driver as well as a more really the new product or service?

It is both, so end of life of course will drive current Cisco installations where it accelerates their move over to newer and supported hardware. Things like the EAC certification and MX opens up new markets and so those are Cisco customers so they've got tens of thousands of customers that might not have included access control in their Cisco purchase orders and now they can so it's new customers that are enabled by those and frankly things are moving at a quick enough pace that I couldn't tell you which one is more important to just say they're both good growth and good opportunities.

And just last on the strength and the reader with a reader products, you said I think that was heavily U.S. centric there, can you talk just a little bit about what you think is driving that, is that technology change, is it just more focused on your part or more channels what's driving the strength there?

A couple of things, one is certainly the focus on it. The second is the federal government U.S. federal government with their cat cards are starting to apply more rigor on how Bring Your Own Device is managed and you know other things that they've had is requirements that they have been enforcing and then there have also been some positive competitive events, one of our larger competitors ACS was acquired by a Chinese Company and that's taken some of their focus away as well so I think it's been across the board, I do think there will be the biggest growth driver will be related to the federal government but we're also seeing some international growth picking up as well.

Our next question comes from Saliq Khan from Imperial Capital. Please go ahead.

Few questions on my end, first one being is, you and I have spoken from fairly recently but what I wanted to understand was how much of the 2017 plans were planned head offset or being part of the organization and what changes were made as a result of her and her views on the business strategy.

So it was all as you would expect done before Sandra came on because she came on this year and we started our planning middle of the year prior. So by the time late November comes around 2016-2017 is planned and structured. And I'll let her answer if anything is changed since she came on.

In the last 2.5 weeks I'm very excited to be here. I think it's a tremendous time to be joining the company and I'm still forming my opinion about the plans but I'm comfortable with the guidance based on everything I've learned so far.

Steve, I always thought [indiscernible] because you kind of go over given your current views and success that you had in the recent quarters how are you optimizing the multichannel approach that you have and what are you doing to motivate the targeted channel partners and sell the under-served segments that you have.

Yes actually great question, everybody likes to talk about technology and products and all but channel is the real driver here and the answer is how does the channel make money that's really what they care about is are they going to be able to sell more and make more margin on it and because we have these full platform solutions we can give them an opportunity to do discounts in some areas and make it up in other areas where ever a customer might be more sensitive or less sensitive so it's all about helping the channel make more money, those events that you saw there too the trade shows and events that helps the channel as well we have partners in our booths quite often and so you even if it's a Cisco event we can have channel partners participating in that event and we get leverage out of it. So its mainly about helping them make money and a lot of these things you know the product launches and the price positions we're taking are helping them and frankly just getting the Hirsch brand back out there and getting it credible and solid and committed again that created an uptick as well and them having confidence in our long term durability and strength as a partner because their businesses are depending on our business.

And you know [indiscernible] trade shows and events so if I take a look at the open house that you had done last year roughly November or so at our Arlington office would be government customers, some of the prospects that you had over there as allow. You've another such event that’s coming up next week so how do you quantify the ROI of this event and what are you are doing to make sure that you improve this event from the one that you had back in November.

I can't share with you the metrics but of course we track who is there and what goes into the pipeline and we are expanding our share in the market I think direct I mean it's related to the events we're having the events are really enabled by the fact of the strength of our FICAM solution is it's very easy to deploy so when Agency CIOs and their staff are coming in they can see that they can deploy this thing very cost effectively they're not going to get taken the cleaners from budget perspective and then suddenly it becomes a bonus versus the burden so this next one is oversubscribed again and in fact we're queuing up another one because there's so much demand in the area and also we're doing on site events one of the programs we have is making it very easy, a lot of these agencies have their own demo centers where they bring in the equipment and they test it all there and make it very easy to set up and configure and then and then use our systems as a center of excellence.

Just based on that and this will be my last question, when you talked about the government customers and you talked about FICAM and the success you saw there, specifically within it, so where are you seeing the most success the DOD, U.S. maybe some of the other government organizations that are out there so what is that differentiated targeted approach that you have as you look at the various segments within the government organization?

So I don't want to call out specific agencies because that starts to cite winners and losers and also that you know we don't get in a customer [ph] position with them that way but there definitely are in the federal government there are agencies that are you know more thought leaders, more adoption leaders also somewhat more sensitive used cases so you know the U.S. Marshals have always been at the fairly ahead of the curve in terms of what gets deployed. You know FBI, IRS agencies like that with multiple offices around the country atopic dermatitis very complicated infrastructures you know I've talked before about how the IRS has to bring you know over 100,000 seasonal employees and the FBI of course has field offices that have to be secured at a very high level at all times so there's a lot of them that are thought leaders and by not naming some its not leaving any of them out. We've got some demo sites going into some other agencies that are clearly agencies that other agencies come to and talk to. So I think that's more the way it is there's both a formal and informal structure which agencies have more of the thought leadership in terms of security infrastructure.

And our last question comes from Mark Drucker from B. Riley & Co. Please go ahead.

Steve when do you expect to begin generating cash?

We're I think in the next couple of quarters we will clearly be cash positive, exactly when that -- you know the issue is we've got growth in second and third quarter, third quarter is seasonally our highest quarter and because we have a hardware component of our business it can absorb cash. So, I can't tell you exactly which quarter is going to hit in because of the trade-offs between growth and cash utilization and cash generation but somewhere that timeframe.

One more for me regarding your APL certification, is this a major breakthrough where you certain that you were going to receive this and how would your business fare had you not?

Yes fair question. It is very important because to fully get into bids and have full visibility it's important to be on the APL. In fact we have been doing FICAM related sales in advance of that because as long as you're started the certification process agencies can acquire your products and so it wasn't stopping early sales -- so its just normal cycle but it is a big deal because now we can talk about what we always knew you know for example when I talk about being half the price before you're on the APL it's hard to talk about that because your prices aren't visible ones that you are they are and it becomes you know very much more open playing field.

I'm showing no further questions at this time.

All right. Well thank you all for joining us and Victoria thank you for your help on this and we look forward to seeing you all at other investor events going forward and certainly on our next earnings discussion which will be in May. Thanks again. Have a good day.

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