Good afternoon and welcome to Identiv's Presentation of its First quarter 2020 Earnings Call. My name is Jim and I will be the 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 today's call, management may be making references to non-GAAP measures or projections, including adjusted EBITDA and free cash flow. 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 the forward-looking statements. And 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 we speak of today. And now I'm pleased to turn the conference over to our host, CEO, Steve Humphreys, for his comments. Please go ahead, sir.

Thanks, operator, and thank you all for joining us. I'm sure on various earnings announcements, you've heard plenty about COVID-19, but we discussed that for most companies back on our call in late January. So we're not going to focus on that, except where it very specifically affects our business. The one thing we will do differently on this call in response to the less than predictable environment we're in, we're going to give as much data as we possibly can, including some insights into backlog, unshipped revenues, projects going forward and other indicators that normally we might not. We know investors need as much information as possible these days, then you can make your own decisions about what you think the macroeconomic of the future holds. So with that perspective, let me start out with some metrics of our Identity business, which includes smart card readers, Thursby and most importantly, our RFID business, for which today, we also announced project specific financing for short-term working capital to support the very fast growth of a specific project during the second half as well as growth in our overall RFID business. So starting with our smart card readers. Our revenues were on track and then demand accelerated from the sudden work from home demand. As a result, we had over $1 million in extra smart card reader demand in Q1, which we weren't able to ship. Now we met all of our expected demand and the extra demand exceeded our ability to deliver within the quarter. As a result, combined with the orders for second quarter delivery, we went into Q2 with nearly two-thirds of our smart card reader plan for the second quarter already in backlog. We expect elevated demand levels to continue, both because of some of the new…

Thanks, Steve. I'd like to go through the key metrics that we think are important in analyzing the financial progress and performance of our business. The first metric is revenue growth, reflecting the tailwind we carried out of the fourth quarter results in our Premises segment and the increasing demand for our Identity segment, even with the initial impact of COVID-19 and the shelter-in-place that started with our supply chain in February and spread worldwide. We closed out the quarter with $18.1 million in total revenue, which was down only 4% from $19 million in the fourth quarter of 2019 and which compares favorably versus our historical reduction of 8% that we saw from Q1 2019 over Q4 2018. Our top-line results for Q1 2020 were impacted by mix demand changes across our portfolio, including temporal shifts driven by the shelter-in-place orders impacting our Premises business and select verticals, unforecasted spikes in demand in our Identity business driven by work from home actions and sustained growth in our transponder business in which we saw another 60-plus percent increase quarter over comparable quarter. As a result, we entered the second quarter of 2020 with a significant increase in requested shipments for this quarter, which is up 85% in absolute dollars from the same measurement period entering the fourth quarter of 2019 and 100% increase over the same period entering the second quarter of 2019. There are still unknowns that include the ability to close additional business as well as risk factors to deliver whether within the supply chain or logistics that may impact our future quarters. Our standalone software and services business increased to 15% of our total revenue in Q1 2020, an improvement from 13% in Q4 2019 and 14% in Q1 2019. On a trailing 12-month basis, our standalone…

All right. Thanks, Sandra. For Q2 and the rest of the year, we have 3 key business drivers, the emergence of broad-based RFID applications, the federal government and, of course, the overall economy. Now in the opening, I mentioned the drivers of RFID growth and why it's a long-term growth pattern. First, leading companies adopting second-generation applications, signaling sustained growth. Second, our position as the developer of the best high-frequency and NFC RFID devices, which we've established over many years and built defensible IP. And third, favorable market events, including the departure of one of our major competitors as well as the weakening of others. So looking forward because of the design and nature of RFID devices, we've got very good visibility. Our backlog for the second half of 2020 in RFID is already more than two-thirds of our base plan for the entire second half of the year. On top of this, we're preparing to ramp production for a customer we've been working with and design for over a year. Their volumes are ramping throughout the second half, starting in late Q2 and driving a few million dollars of additional volume in each quarter of the second half and into 2021. Now remember, our RFID devices are typically well under $1 in price. So this represents many million units in addition to the growth and volumes I mentioned above. The rapid growth curve and the need to build supply chain now for the production ramp is the reason for the project financing working capital we announced today. It's possible we could have managed the working capital from our operations. But with the economic uncertainty and the need to drive this growth with no impediments, it's responsible to make certain the capital is available with zero risk of interruption. Given…

[Operator Instructions] We'll hear first from the line of Mike Latimore with Northland Capital Markets.

Yes. This is [Pavan] on for Mike Latimore. I have 2 questions. Our SaaS sales affected by the restrictive travel environment...

Sorry to interrupt. You're very echoey, so it's a little hard to understand.

Okay.

Mr. Latimore, [indiscernible] speakerphone. Could I ask you to return to your handset?

I'm sorry for the trouble. Are you able to hear me now properly?

I can barely make out your words, but give it a shot. Let's try.

Our SaaS sales affected by the restrictive travel environment.

I heard you say something related to the restrictive travel environment.

Yes. Our SaaS sales affected by the restrictions in the travel.

Mr. Latimore. This is the conference operator. I do apologize, sir. Are you able to return to a handset or a landline? We're having difficulty hearing you, sir.

Okay. I'll jump back into the queue and then take the questions. I think there is some problem with the network. Thank you. Sorry for the trouble.

No. No. Thank you. Please try to reconnect. We'd like to take all questions possible.

[Operator Instructions]

Jim, that's okay. If we addressed everything, we certainly have some follow-up calls. So that may cover it as well. Are you seeing anyone yet or should we just wrap up?

No, sir. Thank you, Steve. Go ahead with any closing or additional remarks that you have.

All right. Great. Yes. Thank you all for joining us. I know it's an extraordinarily busy earnings season, especially earnings day today. I know there's multiple overlapping calls, so thanks for taking the time to join ours. We will be on the Oppenheimer Virtual Analyst Day doing one-on-ones on Tuesday next week. And also we'll be putting together ongoing updates for the investor and analyst community as we go because in these extraordinary times, we want to keep information flowing as much as possible. We wanted to wait until earnings points and an ability to disclose everything at once, but now as we're in the open, we're happy to provide insights as the business builds and they need the dynamics as everybody tries to get back to work and move towards whatever the new norm will become. So thank you all for joining us again and have a good evening and a good day.

Ladies and gentlemen, this does conclude today's conference and we do thank you all for your participation. You may now disconnect your lines and we hope that you enjoy the rest of your day.