Good afternoon. Welcome to Identiv's Q2 2018 Earnings Call. My name is Savvis and I will be your operator this afternoon. Joining us for today's presentation are the company's CEO, Steve Humphreys; and CFO, Sandra Wallach. Following management's remarks, we will open the call for questions. Before we begin, please note that during this call, management may be making references to non-GAAP measures or projections, including adjusted EBITDA. In addition, during the call, management 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 company's latest Annual Report on Form 10-K. Identiv assumes no obligation to update these forward-looking statements, which speak as of today. I would now turn the call over to the CEO, Steven Humphreys for his comments. Sir, please proceed.

Alright. Thank you, operator, and thank you all for joining us this evening. The second quarter was another big milestone of growth and business progress for us. Our second quarter grew 37% over last year, the fastest growth we had in more than six years. This followed our 1% year-over-year growth in the fourth quarter of last year, 23% growth in the first quarter of this year and now 37% growth. For the first six months of the year, we grew 30% compared to the first six months years. We'll be commenting a more detail on what's driving our accelerating growth rates but the numbers really do speak for themselves. Most importantly, this is driven by organic growth in the high-teens low 20% range with inorganic growth adding to it. But in both the recent quarter and the first half more than half our growth was organic. We also feel good about the execution that's delivering these results. Our markets are growing in the high single to low double digits. So it's clear that we are growing faster than the markets and taking share. And we had other important milestone this quarter both business wise and financially. On the business side, we shift our first several thousand units of our new iAuthenticate mobile smart card readers for the iPhone and iPad. These went into mostly depends the partner customers showing our increasing strength in the federal government as well as the mobility space. We also launched our new mini tokens for mobile strong authentication. In this quarter, our USB Type C tokens are coming out. So it's really a strong mobility position we're building. We also shipped over 50,000 units of our brand new triple interface cards. In our last quarter, I mentioned these were coming, a capability combining UHF/HF/LF…

Thanks Steve for providing the context for our financial results for the second quarter of 2018. The revenue in the second quarter was $20.3 million, 37% increase compared with $14.8 million in the second quarter 2017, and a 23% sequential increase compared with $16.5 in the first quarter of 2018. Our Premises segment generated 43% of our revenue or $0.8 million in the second quarter of 2018, up sequentially 18% from the first quarter 2018 and up 53% from the comparable quarter of 2017. These increases were primarily driven by higher physical access control solution product sales, higher sales through our channel partners, higher software sales, as well as sales of video technology and analytics related to 3VR acquisition. Revenue from our Identity products, primarily smart card readers, reader modules, and chipsets were $3.2 million in the second quarter, representing a sequential increase of 13% from the first quarter of 2018 as a result of higher smart card reader sales in both EMEA and APAC, partially offset by lower smart card reader sales in the Americas. Comparably Identity revenue decreased by 22% from quarter two of 2017. This represents higher sales of smart card readers in the prior year for a large bulk government project in the Asia-Pacific region which this year was partially offset by prior smart card reader sales in the Americas. Our second quarter revenue derived from the credential segment which comprises both access control credentials and our broader Internet of Things transponder products was $8.3 million. This revenue performance represents a sequential increase of 33% from the first quarter of 2018 and a comparative increase of 66% from the second quarter of 2017. These changes were primarily due to higher access card product sales in the Americas region and higher RFID and NFC transponder sales in…

All right. Thanks, Sandra. The numbers really do speak for themselves, so let me just keep some insight into the business activities that are driving them and while we take where the position they continue to deliver such good progress. Looking segment by segment. I already highlighted in the opening, the launch and initial volume shipments of our iAuthenticate iOS mobility leader are many token from mobile security and now this quarter USB Type C token, all in the Identity segment. Together this is the wide suite of solution for mobile security particularly for the defense department and other security sensitive federal government customers. Also in our Identity segment, our embedded readers and keyboard continue to be the top solution for desktop from Dell, HP and others. So just as a reminder, adding up embedded keyboard readers and PC connected and mobile readers, we have over 25 million smart card readers out in the field that we've shift over the years. Dispositions of these trend all will give you confident that our Identity segment is on track to deliver the double-digit growth we expected this year and into 2019. And in the Credentials segment, we had really encouraging growth of more than 60%, driven by combination of transponder and access cards. Looking first to transponders, this is where authenticity and consumer engagement and library are the use cases that really continue to drive a lot of the growth. Going forward, our already demonstrated lead in progressive UHF applications are expanding even further. As we implement additional capacity inn technical capabilities later this year, we do have a little cash impact through financing of the equipment that will be deploying these new capabilities and new capacity. Transponders are one of the most promising growth drivers both in terms of growth rates…

Thank you. We will now take questions. [Operator Instructions] Our first question comes from William Gibson with ROTH Capital Partner. Please go ahead.

Thank you. That was certainly a powerful quarter. Does that kind of strength on the repeatability of the multi-interface cards and transponders continue in this quarter?

Yes. Certainly yeah I think - this is Steve by the way. Now 50,000 units say dollar wise not the major drivers but going forward absolutely, it's a great use case. In this case, it's a large utility that one and all of people are in case they have to evacuate the building rather than putting expensive Bluetooth speak and trackers or something on them, realize that UHF readers and capability inside the same Identiv cards, they got in the user track people on facility. So with indication services, there is a lot of interesting use cases that are definitely going to driving it going forward.

And in regards to 3VR, are we done with the restructuring expenses?

In terms of actual changes in the organization or anything, yes. In terms of well into the P&L some of that voice is going on at the beginning of the quarter, so we do think that the run rate operating expense that will be continuing a little bit downward. And Sandra, you want to add to that?

No, I think we may have some very small items but the majority of the onetime charges occurred in the second quarter and we are just continuing to look at every piece of our operating expense to continue to lower the cost going forward for to the second half.

Okay. And are they on target to meet their earn-out?

So, no, they are on target to meet their earn-out, their earn-out was 24 million, they are absolutely on target to make what we mentioned when we set guidance which was to add roughly $10 million to $11 million of top line for the year.

Thank you.

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

Hi, great results there. Excellent to see.

Thank you, Mike.

You guys, you should hire a lot to give to doorstep. That sounds pretty interesting.

The best thing is we didn't spent a dime on it. Hikvision reported, we spent like $150,000, trying to stop it.

That's interesting. So I guess on the Identity part of business, you were down year-over-year in the first half and you expect it's a double-digit growth by year-end. So can you talk a little bit about what would drive the rebound in that business in the second half of year?

Yeah, you bet. It was up sequentially second quarter and first quarter and also second quarter last year had a big transaction from Australian government entity. So the underlying growth we're seeing is very solid. U.S. Federal government, as well as commercial, as well as our offline payment viewers across the board certainly solid and then there is also some upside in gaming and other categories.

Got it. And then, did you basically say that the operating expense should be down as a little bit in the third quarter relative to the second quarter?

Company management never want, they are going to be a big example. Basically there is some actions we already taken and that is going to flow through the P&L. So nothing major event wise ahead. But expense is just naturally would be gone down.

And just last question is and you reiterate guidance for the year, I guess if you hit the midpoint of your guidance, it almost implies that third or fourth quarter would be lower than the second quarter. And I guess is that will be different from historic patterns?

Yeah, that would be different from historic patterns and no, we aren't expecting sequentially down quarters. Now that said we are talked about in every quarters that sometimes there is business that falling apart couple of days literally and order in other quarter. We do have a couple of quarters that are into this quarter that customers really wanted the product shift. And so certainly strong a little bit beyond its standalone base but the plenty of strength going to all the business going forward.

Okay. Great. Congratulations.

Thank you.

[Operator Instructions] Our next question comes from Jack Vander Aarde with Maxim Group. Please proceed.

Hey, guys. Great quarter by the way.

Thank you.

So, I missed to ask the last from the last question about Identiv revenue, it's going to be double-digits for the year but is there any color you can provide on perhaps allocating the remaining Identiv revenue between Q3 and Q4? Is Q4 maybe more lumpy year or Q3, could you just provide color on that, that would be helpful.

They are usually both good quarters in the markets. The federal government certainly drive some year-end buying in the third quarter, so that's always our strongest. But with the pipeline that we see, we expect strength in that quarters with the third probably a little bit stronger.

Okay. That's helpful. And as far the transponder new applications you discussed, those sound like definite new mover, in response to the - in reference of the new waiting technology that you quoted could be a ten to million unit volume type opportunity. Was any of that captured in Q2 to increase revenue and will it captured in the back half of '18?

It will be captured in the back half '18. That was the small part of the Q2 revenue. It is the characteristic of a very common use case that we drive and actually even much a larger consumer products companies that are driving larger volumes. So this whole idea of insuring that some sort of disposable or consumer or usable is matched properly in its authentic is something that we see in healthcare for example and you got consumables and it's got a match with the equipment that is being used your product continue products light weighting and then everything from government we are seeing it happens. So just to be clear it's a bit broad use case.

Okay. Got you. And then in terms of Premises, I don't believe you, is the first quarter of 3VR generating revenue. You commented on some updates on 3VR but can you a sense of 3VR's revenue for the June Q, or if can't, give it exposable in terms of was it on track with you initial expectations heading to the quarter and is it so on track to hit that $10 million to $11 million range that you provided earlier?

Yeah, as I mentioned when the question is asked about the earn-out, in terms of their core business and the guidance we given there is absolutely on track. Do you want?

No.

Comfortable with that. Yeah then I think that's the way we'll continue to address it. But especially the technology integration and the combined platform and the cross selling opportunity I'd say especially saying three or four different item. In the vertical strength, that have a very encouraging in as we brought the business together and we have been finding outside.

Got it. Okay. And then I guess still on the Premises segment, how - can you provide - did you provide a percentage of total Premises revenue for Cisco channels, I think it's been around 10% or north of 10% in the past I am just wondering where that is directionally trending?

Yeah. It is so if I look it up traditional physical access so I will sort of curving out the video piece of it to be comparable to prior periods. We are still the Cisco channels doing an excess of 10% of our physical access sales.

Is that increasing or is it maintaining at that north of 10%?

It's maintaining probably north of 10%.

Great. Okay. And then lastly in terms of the RFPs from the government customers that are expecting [indiscernible] is any sense of incremental new RFPs you could provide in relative to June of last year?

It's highly characterized in terms of number of RFPs because there is about half dozen government purchased vehicles that can affect us, everything BPA, purchase agreement you know IDIQ, RF2 or direct purchase. And they can range anything from a few hundred thousand dollars to tens of millions. So it's all characterized that way what I would say is government contracts are published on government websites, so you can see them go out there, we don't name our direct customers or end customers here but it is information that you have get. But what you would see is there were number of kind of $1 million to sub $10 million of programs are there. Now there several sub $10 million programs and a few multi-tens of millions to dollar programs are there. So that's how you characterize. And I said in my earlier comment too, timing of the government is always tortures. So we were try to do it make sure, we make more money out of each deal and then when timing comes through, if it does comes through faster then that's great that's upside for us.

Okay. Thank you. That's helpful. Great quarter again. I'll turn back to the queue. Thanks.

Thank you.

Our next question comes from Michael Latimore with Northland Securities. Please proceed.

Great. Thanks. I may suspect did you give gross margin by a segment?

No. We did not. But I can give you those numbers.

Okay. Great.

Okay. GAAP gross margin for Premises was 55% for the second of this year versus 53% comparable quarter for year. Identity with 35% versus 32% comparable quarter 2017 and Credentials were 27% compared to 26% comparable quarter 2017. So each of our segments up just five by driving the 2 point increase from 38% in quarter one 2017 to 40% in quarter two of 2018.

Great. And then obviously the third quarter here as well we have access the federal government fiscal year-end. Any kind of general color on the indications you getting from the federal government how is feels sort of this year heading in this quarter relative to this prior third quarters?

At deals it feels normal I should say which is strong as the third quarter in the federal government they have all funds to use it at the end you make a number there that those all continuing their solution going on in January, February and then March and they settled on a budget which was for the full-year. But full-year ending the end of September so they not have fund that instead of having 12 dues knowing exactly with funds out they have had 5 or 6 months to use them. So there is some fiscal year-end activity going on that's said they going to use the appropriate contract vehicles and they all go at the major government phase were we do expect some decent activity for fiscal year-end for the government.

Okay. Thank you.

At this time, this concludes the Company's question-and-answer session. If your question was not taken, you may contact Identiv's Investor Relations team at inve@liolios.com. I'd now like to turn the call back over to Mr. Humphreys for closing remarks. Please proceed.

All right. Thanks again operator. And thank you all for joining us this evening. We'll certainly continue driving forward our business and drive forwards communication with you all in the ongoing events. Early in September, we will have the Wireless Conference in San Francisco and if anyone can come by, will be - have a strong presence of access in Las Vegas at the end of September. So we look forward to containing to update you on our business process. And thank you again for joining us.

Thank you for joining us today. You may now disconnect.