Good afternoon. Welcome to Identiv's Presentation of its Third Quarter 2020 Earnings Call. My name is Karen, 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 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 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 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 obligations to update these forward-looking statements, which speak as of today. I will now turn the call over to CEO, Steve Humphreys, for his comments. Sir, please proceed.

Thanks, operator, and thank you all for joining us today. In our preliminary results, we said, we expected to beat the aggressive growth projections we outlined on our second quarter call, including 80% growth in RFID for the full year, 20% sequential growth and physical security from Q2 to Q3, and federal sales up 80% sequentially. With our finalized financial results, we're confirming that we beat each of those expectations. This shows both strong industry trends driving our business and our leadership within the industry. Overall, revenues grew 30% sequentially to $24.9 million, showing strength across the business. We projected our premises business, which is about two-thirds federal to grow 20% sequentially. We actually grew 26% sequentially in premises. Our RFID business grew more than 50% sequentially and over a 100% year-over-year, as on track for 80% full year growth. And our federal revenues grew nearly 90% sequentially. So this has this lined up for a strong fourth quarter and the second half of the year that will be more than 30% higher than our first half. We're seeing business momentum continuing, backlog building, and the pipeline for 2021 becoming stronger. But before we talk too much about the future, let's review the operational and financial results for the third quarter. Now our key focus areas of RFID and our federal business were particularly strong. Within our identity business, which is predominantly RFID, revenue increased sequentially by 33% to $15.4 million, and year-over-year identity in total grew 53% from 10.1 million in Q3 2019 to 15.4 million in Q3 2020. The growth was mainly driven by RFID of course, where we ramped up production volumes for a number of customers. In particular, a major customer whose production started in Q2 came through -- through in Q3 even stronger than we…

As Steve mentioned, our results show the continue delivery of what we committed with a solid trajectory for 2021. Please note that these results are all within the preliminary results announced October 29th prior to market open. The first metric is revenue growth, even with the continued impact of COVID-19; we closed out the third quarter of 2020 with $24.9 million in total revenue, up 30% compared to the second quarter of 2020, and up 8% compared to the third quarter of 2019. Our recurring revenue accounted for 6% of our third quarter revenue, and 8% of our total revenue in the first nine months of 2020. This part of our business remained steady at 8% of our total trailing 12 month revenue. For the third quarter of 2020, our GAAP and non-GAAP adjusted gross profit margins were 40% and 41%, respectively. For the trailing 12-month period, our non-GAAP adjusted gross profit margin was 42%. For the third quarter 2020, our non-GAAP adjusted EBITDA margin was positive 11% with a positive 4% for the trailing 12 month period. Our GAAP net income for the third quarter 2020 was $0.4 million, compared with a loss of $2.7 million in Q2 2020 and net income of $1.1 million in Q3 2019. With the dividends on the Series B preferred, our GAAP net income attributable to stockholders was$ 0.1 million, or net income of $0.01 per share compared with a loss of $0.17 per share in Q2 2020 and positive $0.05 per share in Q3 of 2019. We have provided in the appendix a full conciliation of GAAP to non-GAAP information, which is also included in our earnings release. On our next slide, further analyzing trends by segment, our Premises segment, which includes sales of physical access control, and video products and services…

Thanks, Sandra. As I said earlier, our RFID growth is predictable for two reasons. It's heavily backlog driven. And it's driven by major companies who have incorporated RFID devices into their products. Planning for global products is a yearlong process. So even now we're getting visibility into plans throughout 2021. First backlog, going into the fourth quarter, our total backlog stood at $10.5 million, up 68% from last year and our RFID backlog for shipment in the fourth quarter is up 125% over last year. We've now gotten in orders for about 95% of our expected shipments for the quarter in RFID. And that means, most additional orders either contribute to upside within the quarter, or drive more backlog for 2021. This is a key driver of our growth for 2021 and we expect the RFID portion of our business to grow well over 50% in the first half of 2021 versus the first half of 2020, with a full year growth in the mid 20% range for 2021. And the core driver of our RFID business is the mass market adoption of RFID integrated products. Our customers are leaders in their own industries, incorporating RFID devices into their products, each with volumes of tens or hundreds of millions of units. So this is a huge market that's just beginning to grow. In the third quarter, two strong use cases were launched in the market, one by CVS and the other, of course by Apple. Now we don't generally disclose customers. So these are just industry examples, to be clear. But both are great examples of the RFID market accelerating. They're both basic uses that establish platforms, to then drive multiple products from already big first launches. So the first, some of you saw in the demo session we had…

Thank you. Ladies and gentlemen, we will now take questions. [Operator Instructions] We'll take our first question from Jaeson Schmidt with Lake Street Capital Markets. Please go ahead.

Hey, guys, thanks for taking my questions, Steve, appreciate all the color and sort of why you're feeling so confident in 2021. But curious, if you could talk about sort of the backlog coverage to 2021, and some of this confidence is really just driven by some sizable orders already in hand, or if it's just general confidence, especially on the RFID side that you are just seeing, going to see this big general adoption?

Yeah, thanks for the question, Jaeson. And yes, backlog has been growing nicely. I think we earlier indicated that at the time that was up. It just doubled from what it had been just a couple of months earlier. And I mentioned that we've already got over 95% of our Q4 shipments already covered in backlog. So all the orders coming in are 2021 orders. We actually have orders that go throughout all in 2021. So we've got good visibility, both front ended, you know as I said, we expected the first half of the year already to be 50% growth over the year prior. And obviously, we wouldn't be saying that’s clear numbers. We didn't have a fair amount of visibility in it. And that's really driven by our backlog.

Okay, that's helpful. And in your prepared remarks, you noted about $1 million in business not being able to shift in Q3. Could you just comment on what sort of constraints you're seeing there, and if those constraints have ease now in Q4?

Yeah, also, thanks for picking up on that one. Yes, as I mentioned, in the second quarter call, we've been expanding our capacity rapidly. But when you -- when you look at doubling your capacity and then we talked about in Q4, we've got a backlog day, 125% of that you acquire, that that's indicating, more than double where you were a year ago. We're building out space, and we're putting in more equipment. And some of the devices that we're producing are particularly complicated and high-end, which is great for us, because it's a more differentiated. But they take more machine capacity, because there's multiple processes, multiple passes, versus some of their more straightforward products. And that -- those of course, the more complicated products often go to the more sensitive and high-end customers. So we always want to favor those. And so we did have some that we couldn't ship. We're catching up in this quarter. And we'll have the capacity built out by the end of this quarter. Again, we talked about building capacity you're talking, $100,000 and $150,000 in facilities, build out -- and a few hundred thousand dollars in equipment. It's not a major capital absorption. But we have been catching up through the third quarter, and we'll be all caught up in a good shape going into 2021.

Okay. And then just the last one and I'll jump back in a queue. Obviously, the school and education market could be a little challenging with budgetary pressures and whatnot. But just curious, if you could comment on what your expectations in that market are going forward?

It is choppy as you say, but it's also highly motivated for security. We put out a white paper on remote schooling cyber security, for example, with our FIDO keys that we just launched. One of the dirty secrets that a lot of people haven't focused on is, we've taken all the kids in our country and put them online to go to school. And if anyone thinks that we've actually properly secured their data pipes for their learning, they're being a little optimistic. And so there's opportunities there for example, to cybersecure more of the distance learning environment. And there's also as we go back to school, physical security is as important as ever, and especially physical security infrastructure is now being integrated with health and safety infrastructure. So there's opportunities there. We're seeing a lot of interest in kids. But also, schools are in financial challenges and so some of them are going ahead fast. And some of them are really, frankly, hunkered down. So, I don't know on a month-by-month basis, how it's going to emerge. But from a market opportunity, over the course of the next year, I actually think schools and universities are going to be a very good segment for us, both on the cybersecurity side and on the health and safety physical security side.

Okay. That's really helpful. Thanks a lot.

[Operator Instructions] We'll take our next question from Mike Latimore with Northland Capital Markets. Please go ahead.

Great. Thanks a lot. Great quarter there.

Thanks.

Steve, I couldn't tell -- did you give some guidance on what you thought premises would grow in the fourth quarter? I couldn't tell, if you said that or not.

Specifically, for premises in the fourth quarter, I don’t know that we -- I’m trying to go back and look at that. I know it -- no leave it. I'm sorry. I'm looking at my notes here; we’ve said about 25%, year-over-year for the fourth quarter.

All right. So that's like up sequentially. And is that -- is that driven by non-government or is that government driving that sequential pattern then?

Yeah. Good question. It's across the board. And -- and I -- yeah, both government and non-government that's on the growth, that we think about underneath the numbers, it's probably more commercial than government in terms of increases sequentially.

Okay. Okay. Very good.

We’ve seen -- we have seen a rebound in activity in -- on the premises side, you know you can only defer these things so long. And now a lot of the installers and users are getting out there. They're getting back in line, also customers you know things like videos systems where Microsoft stopped supporting Windows 7 or something, they have to do something. So there's a built-in migration, the growth pattern that we're starting to see come back.

Yes. Okay, got it. And then on the identity, just seems like a ton of opportunity there. I guess how would they verse these, do you see that revenue stream being in terms of customer base over the next year? Is it going to be very diverse or is it going to be a couple big customers really driving the growth?

Are you asking primarily about RFID and Identity?

Yes.

Yeah. So actually I think it's going to be quite diverse. Certainly when some of these global corporations launched, their numbers are big, but there's several of them that are either already launching or in pilots and building in the launch for 2021. And you might've noticed we didn't have any 10% concentration customers disclosed, so -- but certainly some gorillas but a range of them. And the other interesting thing is a range of applications that are not just in one vertical either there's several different use cases that are getting momentum.

Yeah. Okay. And then you have a number of cloud offerings now, I'm sure you're going to be promoting that even more aggressively next year. I mean, what would be -- you know, when you book a cloud deal it doesn't always show up within the quarter or year obviously, but like what would be sort of a good amount of cloud booking for next year, if you're successful? Is it a $1 million, is it $5 million? Like what would be a successful cloud bookings year?

Well I think we're just learning what the profile looks like. But I think you know, that that 6 years, $650,000 VA bank installation that we did is on the high end, but its characters to how those things work. So if you mean, how much would be recognized within the year, probably a couple of few million dollars incremental to the 6% to 8% we're already at. But that would represent this course 5 to 6 times that much in terms of books business.

Yeah. I guess that's more what I was referring to. Okay, great. Yeah. Good. Thanks a lot.

Thanks.

At this time, this concludes our company's question and answer session. If your question was not taken you may contact, Identiv's investor relations team@inveatgatewayir.com. I now like to turn the call back over to Mr. Humphreys for his closing remarks.

All right. And operator, just want to confirm you don't have any other questions in there. That's right.

No further questions in the queue at this time.

Terrific. All right. Thank you very much. Well thank you all for joining us. Very much appreciate it, also please join us at some of the virtual investor events coming up this quarter that we've got Imperial Capital, the first week in December and a Northland the week after that. So look forward to continuing to update you on the business and until then best wishes. Be well and be safe and have a good evening. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. We thank you again for your participation. You may disconnect your lines at this time. Have a great day.