Welcome to the Q1 2017 Identiv Earnings Call. My name is Karen. I will be your operator for today's call. [Operator Instructions]. Please note that this conference is being recorded. On the call with me today are Steven Humphreys, CEO of Identiv; and Sandra Wallach, CFO. In a moment, you will hear remarks from both of them and then we will 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 statements that refers to expectations, projections or other characteristics of future events, including financial projections and future market condition 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 2016. 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, Karen and thank you all for joining us. This is one of the most gratifying business updates we've had the opportunity to discuss because we're seeing organic year-over-year growth across all 3 of our business segments. As a small technology company, the growth can be exciting, but as a public company consistency and visibility is also mandatory. When we started the company even in its prepublic days, we committed to a 3-legged strategy, because this is always more stable than a single leg or even 2. Now the key to taking advantage of this is to focus on diverse but very complementary segments, so our business investments and expense base is very cross leverageable. This quarter we've had solid growth in our Credentials segment at 11%, led by our core RFID transponder business which is growing at over 40%. Our physical access segment growing at over 5% with strong progress in our federal government and fiscal relationship. And our smart card reader identity segment growing at over 20%. I will go into more details of the segment growth in a couple of slides. But the most important observation is that the underlying strengths of our position in each segment and the overall momentum of our market itself is strong so we expect this growth to continue and to expand. Additionally, up to now we've often had to adjust for discontinued products, onetime customer events and other onetime events in these business discussions. Now this is pure year-over-year growth in all segments. Now while driving this growth, we've held stable operating expense levels resulting in consistently positive adjusted EBITDA for the third consecutive quarter. This confirms our business model and the leverage we're able to drive across our business segments. Now those of you who are familiar with our industry…

Okay. Thank you, Steve, for providing the context for our financial results for the first quarter of fiscal year 2017. Revenues in the first quarter which is our seasonally lowest quarter, were $13.4 million, a 9% sequential decrease compared to $14.6 million in quarter 4, 2016 and a 7% increase compared with $12.5 million in the comparable quarter of 2016. Our physical access control segment generated $5.4 million of revenue in the first quarter of 2017, down 21% sequentially from $6.8 million in the fourth quarter of 2016 and up 5% from the $5.1 million recorded in the comparable quarter of 2016. The decline sequentially is primarily a result of the timing of orders from customers in the key U.S. federal government sector, this business has generally remained strong for us. Revenue from our identity products, primarily smart card readers, reader modules and chipsets, was $3.1 million in the first quarter. This represents a sequential decrease of 22% from the $4 million of revenue in the fourth quarter of 2016, reflecting lower sales primarily in the U.S. market and an increase of 23% over $2.5 million recorded in quarter 1 of 2016. Approximately 37% of our first quarter revenue or $4.9 million was derived from sales in our Credentials segment which comprises both access control credentials and our broader Internet of Things transponder products. This revenue performance represents a sequential increase of approximately 27% from the $3.9 million revenue achieved in the fourth quarter of 2016 and an 11% increase from the $4.4 million delivered in the first quarter of 2016. As previously anticipated and disclosed, we have no revenue in our all other segment in the first quarter of 2017. This change is primarily due to the phasing out of our digital media product line and the discontinuation of…

All right. Thanks, Sandra. I'll go through rest of this as quickly as I can. But we'd like to focus on some highlights of our core business. And also show how we're realizing the integrated benefits of our platforms, go into a bit more detail about the dynamics in our RFID and smart card reader segments and then open up for questions. As this image -- by the way, as you can see is from ISC West and it was just the indicative of the flow we had throughout that entire show and the position the company has, frankly, reattained in the marketplace. So first and foremost we've discussed our FICAM offering in the past, but now that we're formally on the government APL, approved product list which is all public domain, our pricing can be openly compared and we thought it's relevant just to share here because it really is a pretty graphic. Vendors were often reluctant to compare their prices because it's hard to validate, but in this case it's wide open. So as you can see, you've got the stacks on the right there of competitive companies. And actually you can go right to the APL and you can get the names that they go with but we're little reluctant to go that far. But you can see one price is if you built, putting in an entirely new system that's the higher stack. The other price is if you're upgrading the system. FICAM represents an opportunity for us because at the moment you could put in a brand-new Hirsch FICAM system for lower than the costs of upgrading the systems that you've already got in place. And this is what drove, as I mentioned earlier, we already got a couple of new federal agencies that had…

[Operator Instructions]. And we have our first question from Mike Latimore from Northland Capital.

Steve, you mentioned the 3 things you look at, the base business growth, areas to the find upside and then areas that might be disruptive. I guess, in terms of your guidance, basically your guidance is based just on the first of the 3-leg there?

Fundamentally, yes. Now the base is never a 100% predictable. And therefore, the upside gives us a little more coverage and certainty in it. But it's -- think of it as 90-10 base and a little upside.

And then in the upside and sort of disruptive categories. Do those tend to show up in your ID and Credential space or is it across all 3 segments?

It's across all 3 segments. So the integrated environment that we showed in the access control space is just as dynamic as the other 2.

And then also I think as it relates to your physical access commentary, I thought you said that you'd won some new federal agencies. I just wanted to clarify, did you say that or not?

Yes, we did. Did say that and we did do that.

And then is that tied into the FICAM initiative or is that just your kind of presence within the federal environment?

Those 2 that I mentioned were specifically, FICAM. There were other wins and other new agencies as well, but I was just highlighting those because of the relevance to FICAM.

Got it. And then I assume we should have -- we should think about normal seasonality this year, just kind of normal seasonal patterns throughout there.

Yes. We don't see anything changing that fundamentally.

Okay. And then with regard to the Cisco partnership, can you just provide a little more detail there. You've obviously, had some nice integrations and some new certifications and so forth. Can you talk just a little bit about what you're seeing through that -- the Cisco relationship?

Sure. Actually, those access graphics that we had there were part of the Cisco platform. You might have seen some of the Cisco devices in there. IP Telephony and other things that they do is part of their industrial automation platform. So it's continuing to grow nicely. Working with the company is always interesting when you're small, but it's going well.

Okay. And then just last one, can you remind me of what the -- what your NOL is?

I don't know off the top of my head. Sandra?

It's in excess of $150 million just in the last 2 years.

And then we do have our next question from [indiscernible].

I had a question regarding the filing of your equity offering that I see has gone effective. Can you talk a little bit about what the plans are there?

Sure. We've always said, I mean, we think this marketplace is pretty exciting. And so we've always said that we'll look at both their organic and inorganic growth. Nothing precipitous for sure, but it's something we always wanted to make sure we got access to. We had an expiring shelf as well. And so this just keeps the access to that facility.

Okay. So there is nothing immediately actionable?

Like I said, the intention was just to have it there for whenever we think it's -- think it's needed for the business.

Okay. And then I was also going -- and I think I was going to ask you about is most of what you've described are product-based solutions. I'm wondering as the business migrates into services, if you all have some plans on the board for whether it's cloud, SaaS, access control as a service, recurring revenue type models that you can integrate here or you're partnering with others, your integrators. How do you see that as we go roll forward the next year or so, because that seems to be moving very rapidly in your space?

Yes, good question and a couple of aspects to it. One is the broader topic of service versus product in the industry. And in fact, the insecurity and access control services is larger than product. And so that's an area that we're expanding carefully. I don't want to invest ahead of it. But we have more demand than we can fulfill for our professional services, for example and integration services, but we don't want to pay a bunch of bodies ahead of revenue on that, but services will be more and more of our mix. Specifically, for something -- for SaaS and a cloud solution, you're right, there's growth. But it's also a very small base and what typically we find is companies want a hybrid. They'll want an on-premise solution for their larger facilities and their core facilities and then maybe a remote offices or something they want to do SaaS. And so we're -- when we go in that direction, we'll be partnering initially and then we'll carefully grow into it. But we think we've got the customer access that will let us take advantage of it when it gets to be scale. But right now, every company we've seen started in that space either as a very small part of the large companies they can afford the losses or they are already either setting down -- sensing down or consolidating or being absorbed to like the combination with Brivo and Eagle Eye.

And it looks like we have no further questions at this time.

All right. Thank you very much, Karen and thank you all for joining us. And we look forward to continuing to keep you updated on our progress as we go forward and to speak with you on our next earnings call. Thanks, again.

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