Steven Humphreys - CEO Steven Finney - CFO.

Saliq Khan - Imperial Capital.

Welcome to the Q4 and Fiscal Year 2015 Identiv Earnings Call. My name is Adriane and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we’ll conduct a question-and-answer session. Please note this conference is being recorded.

With the call me today are Steven Humphreys, CEO of Identiv and Steven Finney, CFO. In a moment, you’ll hear remarks from both of them, and then we’ll take questions from sell-side and 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 2014. Identiv assumes no obligation to update these forward-looking statements, which speaks as of today. I now turn the call over to Steven Humphreys for his comments.

Steven?.

Thank you, Adriane, and thank you all for joining us today. About six weeks ago, on February 2nd, we announced the set of expense reduction and organizational actions that we took in January to realign the business and to focus on our core strengths. Today’s detailed results are [ph] a couple of percent consistent with what we indicated at that time.

And as we saw then, we had a very hard 2015. Our actions in the first month of the year indicated the urgency we feel but also the confidence of the team about what needs to be done and how to reestablish the strong business with that our core. We’ve taken decisive steps and are already seeing positive progress.

Today, we’d like to take you through the results, discuss the root causes, and lay out the path forward. Despite last year’s challenges, we’re confident in the great business opportunity and think we’ve taken the very hard steps needed to have a strong future from here forward.

So looking at our agenda, today, we’ll go through some opening remarks, putting the year in context and looking at some of the root causes; then, we’ll move to Steve Finney, our CFO, to go through the financial review; and then back to the business status, why we think we’ve now built a very strong platform for sustained profitable growth and shareholder value creation; and then guidance for the business going forward.

So with that, let’s look at 2015 in context. They were very difficult results for a number of reasons, but we do know the causes. First, we experienced the late adoption of our new technology. The early adopters that we had brought on board were slow to deploy and the wider market hasn’t followed.

This is a business situation we’ve all seen before, characterized often as crossing the chasm, very good technology, the right vision but the market wasn’t ready. And as a business, we invested too much too far ahead of demand. In any new segments like this, there is lower predictability.

That kind of aggressive approach is okay for private companies but for a small public company with the exposure we have to variations in our results, we got ahead of ourselves in terms of investments and betting on when the market and when the customers were going to emerge. That’s really what hit us in our identity and information security segment.

In the transponders segments, we were exposed to substantial customer concentration. Our largest customers reduced their repeat rates. Even while we had good end-user results for the end user customers, the supply chain variations that they had as they were fulfilling that demand, whipsawed us.

And again, as a small company, we allowed ourselves to be too exposed to that customer concentration. Even while other customers were adopting and deploying, their volume was insufficient to offset the volumes and the sequential changes within a small number of customers. We also took our eye off the ball in terms of focus.

Our core premises business which has been very strong, stable and growing throughout with some of the other initiatives we defocused on. Even with that, as you’ll see in the numbers, reasonable growth and gross margins were achieved in this category.

And it was really due to the strong efforts of a number of people in the context of a lot of things going on, the channel we’ve got, the partnerships we’ve built, the government strength that we’ve got. Now, this is exactly where we’re focusing going forward.

And to have seen growth even while we are not focused really shows the progress and the deep carrying that there is in the business. So, on top of these execution challenges, we of course had to deal with compliance issues. This isn’t blaming compliance for the results in the business.

The core business issues are the main factors that have affected the results we’re seeing today. But certainly the dollar costs themselves with some of our compliance issues, which hit our bottom line and our cash and the focus impact is meaningful.

We had delayed SEC filings and a failure to meet NASDAQ rules due to our internal special committee process, which we’ll discuss in more in a couple of slides. As a result, we incurred significant non-business costs and management endured a lot of disruption around it; our costs but also something that affected the business.

We have though since then implemented much strengthened processes and polices, and again we’ll talk about in more detail in a couple of pages. But fundamentally, we need to discipline as a public company to adhere to acceptable risk bases. And that is not market and individual customer risks.

That kind of predictability doesn’t put us in a position for predictable results, which the investor community and the owners of our business expect. We should be taking on execution and competitive risks, that’s our job. Take on the competition, execute aggressively and effectively. And that’s what we intend to be focused on in 2016 and going forward.

So, along the lines of our business job to act quickly, decisively and professionally, we’ve taken operational actions, as I mentioned. The business focus and expense alignment we implemented was discussed in a fair amount of detail in our February 2nd release.

Just to recap that, we had approximately 25% reduction in non-manufacturing employees, about a 40% reduction in operating expenses will result from this. And out of these adjustments, as we look at our pipeline and customer base, only about 5% of revenues were affected. So, this really indicates the level of investment we had going on.

When you can do a 40% OpEx reduction and you’re only impacting 5% or so of your revenues, we think we’re taking an opportunity to align more properly with current expenses and current revenues.

Also, when you look at that headcount ratio, when you take out 25% of your headcount but you’re taking out 40% of your OpEx that’s indicative that what we’re doing is taking out more at the higher compensated executive and management level.

We de-layered substantially and simplified the organization, which in my experience that’s exactly what we should be doing to get healthy and to be focused properly.

And we do believe that by bringing our quarterly OpEx run rate down below $6 million, we’ll be in a position for EBITDA positive in the second half of this year, of course, excluding the professional fees due to some of the non-core business activities. And again, I’ll touch on that status in a couple of pages.

We do believe cost [ph] reduction and we announced this previously as well. We will have somewhere between $1.5 million and $2 million restructuring fee in the first quarter, as disclosed on our Form 8-K. But out of all of that, taking these actions quickly and fairly intensively, we really have strengthened the core business segments.

We have reallocated overhead roles and direct business activities, for example our CTO is now running one of our business lines, moving from a development staff role into a drive revenue and deliver products on time role.

We’ve eliminated management executive roles, as I mentioned we’ll go into that in a little more detail, focused our product lines, and as I said without substantially impacting revenues and really getting back at building on our proven strengths, investing in areas where we know there is customers with current demand with current product and immediate next generation capabilities.

So, from this base, we also see a straight line path to maximizing our growth opportunities. We’re focusing on our strongest markets, on improved performance, and really operating as a profitable business. And demanding customers who are going to pay fair value for your products puts us in a better growth position rather than a weaker growth position.

So, looking at those strengths, as we go into 2016, the base we’re building, what’s important is the causes of the challenges in 2015 are not fundamental to the core business. We have solid customers, solid brands, solid products, great confidence in our core strengths and value in business.

The team is very experienced, I’m going to focus on this a bit later in the conversation, but they’re very experienced. And that permitted us to take rapid and decisive actions. This is only possible, you can only do a big headcount cut and a big OpEx cut, that pick with just a few months in my tenure as CEO.

You can only do that if you have a team that’s already experienced, and we know where we can reduce and where we can refocus versus where we need to be careful about. So, we’re strengthening the base and growing and not doing that.

So, many of you know that in addition to the team strength, I was one of the co-founders of this company and the CEO at the time of its IPO. And so, I do know the team, the customers and the business.

We could take radical actions very quickly and be quite confident that we haven’t damaged the core of the business at all; in fact we’ve strengthened it. Out of that, again as any of you who’ve been through organizational changes like this, know the cultural and focused realignment really disseminates very quickly.

The reductions because they were the executive level, people see that we’re strengthening the front line and reducing the overhead there. Now that said, even with this kind of team and this kind of cultural response, there are still some realignment effects for the next few months.

We won’t have a year like in 2015 where you are going to cut OpEx from $9.5 million to less than $6 million without some sort of effect. So, we have to be realistic about that. But truly from a day-to-day perspective, I can tell you, it feels like we’ve moved on very well and very fast.

So, we’re pretty optimistic that there will be limited lingering effects. Well, we have to expect some while you’ve taken actions as deeply as this.

That said, the de-layering that we’ve done actually helps the situation; it improves the speed; it improve the communication and the focus and the efficiency where I for example with nine direct reports, that’s not a negative, that’s a positive. It means I have straight line of sight to the vast majority of what’s going on in our organization.

We can address where people are feeling concerns and we can focus where those -- that needs to be addressed. It also helps that the business’s core strength and core value are intact. Our customers are absolutely blue chip, the top of the commercial and federal marketplace, and very committed.

Through all of the challenges of 2015, we had no major losses of customers. We had some conversations with them; we had to make some commitments to them about our commitment to this business but the customers have stayed with us and in fact going into this year, they are growing at a very healthy base.

And that’s because the close relationships we’ve built. The technology in fact has always been a strength of the business, even as we’ve reduced expenses, by focusing, we have not at all undermined the strength of our technology; in fact, we’ve increased it where it needs to be.

Our brands, Hirsch, first HCM [ph] and others are strong and they also have remained strong through the cycle there. And as we reiterated, our commitment to those brands, we’ve had a great reception for it.

And then through all of this, underpinning all of these characteristics, the quality and the customer intimacy, the connection we have with our customers and our determination to deliver quality products is really what has brought us to bounce back so quickly from the situation we’ve been in.

And then, as I mentioned, the growth opportunity is stronger, both because of the actions in line as we’ve taken and because it’s built on our core strength. So, we will go into more details later. But just as a preview, our confidence in the business health is based on tangible milestones.

As I said in our last earnings release, we’re very much about transparency, visibility and metrics. And so, when we talk about growth, the very specific in market activities that are accelerating, our ISE West Show with Cisco in a week and a half is going to be a very strong event. Our FICAM solution is deployed in our demo center in Washington D.C.

and getting great traction. Our international pipeline and sales growth is picking up. Our OEM partner sales have had some near term wins already. Our channels strengthening and our smart card reader customers are renewing.

So, we’ll go into more detail about that but I wanted to give you some tangibles around that as we talk about positive belief in 2016. So, the business base is largely reestablished. But our reality is we also had to address and resolve a number of governance and compliance actions. And that’s what we had to address in 2015, particularly.

As most of you on this call know who are familiar with the company, we had a special committee of the board active for much of the year. That committee is done; its work is completed; its reported to the full board; its report is expected unequivocally. Policies have been implemented.

Management training and others responses have been implemented and completed. So, it was a very major activity and it’s gone throughout the year but now completed and wrapped up. In late January, we went in front of a NASDAQ review panel and received a NASDAQ continuance for regaining compliance.

Again, this was disclosed in the press release on January 27th. In that compliance agreement, we agreed that by March 30th, we would be on schedule for our financial filings and will have been done by March 30th and we are on track for that to occur.

Today’s earnings release of course is a major milestone in that path but we are confident we are going to make that commitment. We also had in that commitment a mid-May annual meeting and we are also on track for our May 12th AGM, as we’ve announced.

In terms of corporate governance, we’ve implemented best practices wherever we can find them to implement. We have a split CEO and Chairman, as you all know. We have an independent director as our Chairman. Four out of our five board members are independent directors and one management representative, which is me.

So, a good balance on the board that it is predominantly driven by the independent directors and independent prospectus. Additionally, our CFO reporting structure is aligned, so that he reports directly to the audit chairman for a variety of oversight matters. But this again is a best practice in corporate governance, as we’ve explored it.

Regarding the legal actions, many of which occur in circumstances like ours, the U.S. legal process does have to run its course but it is proceeding as is required; a number of the actions are in arbitration and/or our insurance carrier participation has been engaged.

So, we really do believe that there would be reduced management distraction going forward. And because of the insurance coverage for certain matters, we do think the non-core business expenditures will be substantially reduced in 2016 and then reduce further as these matters resolve themselves.

So, a lot of action on the governments and compliance actions; I must prefer to focus on the business actions we talked about earlier, but we have to take care of these compliance actions.

And as you can hear here, we’ve gotten a number of them behind us and the ones that are still with us, we think are being managed in a responsible way, at cost effective way, and also in a way that will reduce our management distraction and let us focus on the business.

So, I apologize for this preamble being longer than usual but we’ve had a lot going on, and it’s a lot for shareholders to follow. So, we wanted to give a fairly thorough update. So with that I’d like to turn it over to Steve Finney, he’ll go through the financial results, and then we’ll come back to the business discussion going forward.

Steve?.

Thank you, Steve for providing the context for our financial results for the fourth quarter and full financial year.

Revenues in the fourth quarter were $13.1 million, as compared with $17.2 million in the prior quarter, an approximate 24% sequential decrease and compared to revenues of $19.4 million in the comparable quarter of 2014, a decrease of 32%. For the full year, we recorded revenue of $60.8 million as compared to $81.2 million in 2014, a 25% decrease.

I’ll talk to these movements by segment. Our premises segment provided $4.8 million of revenue in the fourth quarter of 2015, down 21% sequentially from $6 million in the third quarter 2015 and also down 21% to approximately $1.2 million from the $6 million recorded in the comparable quarter of 2014.

The decline sequentially and year-over-year is primarily a result of the timing of orders from customers in the key U.S. federal government sector, which business has generally remained strong for us, as Steve noted. Indeed on a full year basis, we saw revenue growth from $19.0 million in 2014 to $20 million in 2015.

And we’re continuing to focus on our strong Hirsch customer base and branded products to grow revenue in this segment in 2016.

Revenue from our identity products including smartcard readers, reader modules and tokens, was $3 million in the fourth quarter of 2015, a sequential decrease of 4% from the $3.1 million revenue in the third quarter of 2015 and a decrease of 34% over the fourth quarter 2014 revenues of $4.5 million.

For the full year, our identity segment revenues amounted to $12 million, down 30% from the $17 million achieved in 2014. These changes continue to reflect the weaker demand for these products, primarily in our international markets.

As Steve said, we haven’t lost any of our key customers; again, it’s a matter of timing of orders from larger customers.

Approximately, 38% of our fourth quarter 2015 revenue of $5 million was derived from sales in our credential segment, that’s a sequential decrease of approximately 36% from the $7.8 million revenue achieved in the third quarter of 2015 and the 40% decline from the $8.4 million delivered in the fourth quarter of 2014.

For the full year, credential’s revenue declined $14.2 million or 34% from $41.6 million in 2014 to $27.3 million in 2015, still representing 45% of our total revenue.

The changes are primarily due again to the timing of orders worldwide for transponder products in the electronic gaming toy applications and other Internet of Secure Thing applications.

As noted last quarter and as I will discuss later in my review of the balance sheet, we’ve built up significant inventories in anticipation of fulfilling backlog and future orders, and we expect this segment to strengthen again later in 2016.

Revenue in the quarter for our all other segment, which is historically represented sales of our digital media and CHIPDRIVE products was $0.3 million, in line with the third quarter revenue of $0.3 million and down from $0.5 million in the comparable quarter of 2014.

Revenue for the full year amounted to $1.5 million, down 57% from $3.6 million in the prior year. These changes are primarily due to the phasing out of our digital media product lines and softness in demand for our CHIPDRIVE products.

During fourth quarter, we undertook a restructuring within our European operations, and this included the decision to seize the sale of products in our CHIPDRIVE pipeline at the end of the current quarter. I’ll move now to our gross margins.

Our non-GAAP gross profit margin was 25% in fourth quarter 2015 that compares to 46% in our third quarter and 44% in the fourth quarter of 2014.

The decline in the quarter sequentially and competitively is primarily a result of recorded inventory reserves in relation to excess transponder inventory we do not expect to sell in 2016, and to lesser degree inventory reserves and write-offs relating to our CHIPDRIVE product line and certain other products, in the course of executing on our current restructuring plan.

Full year non-GAAP gross margin was 41% in 2015 versus 43% in 2014. And if we exclude the effect of the inventory reserve in the quarter, our non-GAAP gross profit becomes 43% for the quarter and 44% for full year.

Turning now to our operating expenses, non-GAAP operating expenses in the fourth quarter were $9.9 million as compared with $12.1 million in the prior quarter and $8.3 million in the comparable quarter of 2014. For the full year, these expenses amounted to $42.2 million, up 16% from $36.3 million in 2014.

That delta of nearly $6 million is primarily due to the legal and professional fees related to non-core business activities incurred since Q2 of this year, including $1.4 million in fourth quarter. If we exclude these expenses, our operating expenses would have been down sequentially by approximately 9% and up comparably by approximately 3%.

Our R&D cost of $2 million in both the quarter ended December 31, 2015 and the quarter ended September 30, 2015, representing 15% and 12% of revenue respectively. This is an increase of $300,000 or 18% compared to the $1.7 million in the same quarter of 2014.

Full year spend was $8.1 million versus $6.4 million in 2014, reflecting a significant investment in development activities. However, as part of our announced Q1 restructuring efforts, we’ve now reassessed our strategic direction and have reduced our R&D resources to focus on those activities anticipated to generate near-term revenue opportunities.

Sales and marketing expenses were $4 million or 31% of revenue in the fourth quarter, a decrease of $600,000, sequentially and decrease of $400,000 over the fourth quarter of 2014. For the full year, we incurred sales and marketing expenses of $18 million, a 7% reduction compared with $19.3 million in 2014.

These changes primarily reflect the timing of certain marketing programs as well as lower variable compensation for sales employees based on the revenue decline in certain period.

G&A expenses include the previously mentioned legal and professional fees related to non-core business activities and were $3.8 million in the fourth quarter compared to $5.4 million in third quarter and $2.2 million in the final quarter of 2014.

Excluding non-core spending, G&A expenses would have been $2.4 million in the current quarter and $2.7 million in the prior quarter, approximately 19% and 16% of revenues, respectively.

Our non-GAAP operating expenses exclude charges for restructuring activities, in addition to other items, normally excluded from our non-GAAP results, such as stock-based comp and interest expense. I’ll touch on these in a moment. Note that our earnings release does include the full reconciliation of GAAP to non-GAAP information.

Our adjusted EBITDA loss was approximately $6.6 million for the final quarter of 2015, compared to an adjusted EBITDA loss of $4.2 million in the third quarter. And for the full year, our adjusted EBITDA loss was $17.6 million as compared to an adjusted EBITDA loss of $1.3 million in 2014.

Our adjusted EBITDA loss excluding the legal and professional fees related to non-core business activities would have been $5.2 million in the fourth quarter and $11.9 million for the full year, driven predominantly by the revenue decline, both quarter-over-quarter and year-over-year.

The restructuring plan we announced in Q1 2016 is focused on aligning our resources and our cost structure to current revenue levels. Touching on just a few other items on the income statement, in Q4, we recorded a non-cash goodwill impairment charge of $7.8 million relating to our premises segment.

As I noted earlier, this business has seen sequential and comparable increases in revenue. However, after a thorough review of the carrying value of net assets compared to our estimated fair value, we have determined the impairment charge as appropriate based [ph] asset position. Restructuring charges recorded in fourth quarter 2015 were $0.9 million.

These charges relate to our European operations and comprised primarily of cost associated with the termination of employees. For the full year 2015, we recorded restructuring charges of $1.3 million as compared with charges of $4.5 million in the year ended December 2014.

Our interest expense was approximately $540,000 for the quarter and $1.9 million for the full year, primarily relates to our outstanding debt under the Opus facility, both cash and amortization debt issuance costs and to a less degree interest and other financial liabilities.

Non-cash stock-based compensation is $0.9 million in the quarter and $4.6 million for the full year compared to $1.2 million in the third quarter of 2015 and $1.1 million in the comparable quarter of 2014; $2.1 for the full year of 2014. The increase year-over-year is a function of broad move for employees from cash base to [Indiscernible].

As I turn to the balance sheet and compare our position at December 2015 to December 2014, I’ll start with our reported cash, which was $16.7 million at December 31, 2015, compared to $36.5 million at December 2014, a decrease of approximately $20 million.

The cash outflow was driven of course by our operating loss with changes in operating assets and liabilities absorbing further $1 million. Primarily this reflects an increase in our inventory cash flow impact of $5.9 million, which is largely offset by a reduction in accounts receivable.

We define working capital as accounts receivable plus inventory less accounts payable. This totaled $18 million in December 2015, as compared to $14.5 million December 31, 2014.

In addition to the inventory and accounts receivable movements, there was a $2.1 million decrease in accounts payable due to the lower business activity and timing of periodic payments. About cash flow movements, reflected $1 million spend on capital equipment and we generated $2 million net from financing activity.

A couple of notable working capitals metrics are day sales outstanding improved to 54 days in the fourth quarter from 63 days at the end of 2014 due to improved collection efforts. Our inventories as we noted increased quite significantly by $5.5 million to $14.7 million at December 31st from $9.3 million in December 2014.

Our adjusted turnover consequently has decreased and was approximately 2.8 for the final quarter of 2015 compare to 5 the quarter ended December 2014. As noted previously, we have built up significant transponder inventory in our credential segment, which has satisfied, both current backlog and in anticipation of certain customer orders.

Some of the other noteworthy line items in the balance sheet, accrued compensation fell slightly from $2.1 million to $1.9 million, reflecting net savings, restructuring liabilities and the lower variable compensation accruals.

Our other accrued expenses and liabilities increased from $4.5 million at December 2014 to $5.8 million at December 2015, partly related to the accrual of legal and professional fees associated with nonaccrual business activities.

Our long-term payment obligation decreased from $5.5 million to $4.9 million, reflecting the continuing quarterly payments made, partially offset by the accretion of interest.

And our long-term financial liabilities increased from $13.9 million to $18.1 million, reflecting a drawdown of $4 million in the first half of 2015 under our facility of Opus, the 10 million term loan matures in March 2017 and [indiscernible] revolving credit line mature in November 2017. Steve talks to the business moving forward in just a moment.

The company is providing revenue guidance for fiscal 2016 of $56 million to $60 million. This reflects the trends in the business we experienced in 2015, as adjusted for the revenue decline associated with restructuring activities in the final quarter of 2015 and the first quarter of 2016. That concludes the financial discussion.

I’ll pass the call back to Steve..

Alright. Thanks, Steve; thanks for powering through with the voice there. We all know how that can be. That’s probably indicative of how hard the team here is working. So, I’ll try to go through this quickly.

And the presentation will be up on the website, so you can refer to it then as well, because we’re long into the call, as I said we wanted to go into a fair amount of detail with all the activities in the company; it’s only appropriate to try to give as much transparency to it.

So, as mentioned previously, we’re on track to regain our compliance status, as the NASDAQ comment here reiterates. We went through the root causes of the business and compliance issues and status of legal issues for the company and discussed a little bit of that in the introduction.

So, now, I’d like to go through a little bit more over the strategy and execution, and why we have confidence in the growth that we think will be delivered in the business and especially the profitable growth. The components of it are very straightforward; we’ve reduced our OpEx levels, so we’re control of our own destiny.

Rather than running at an expense rate that we had to grow into, we are at expense rate that now we can sustain and with the business that we have we could be profitable and we can then grow and throw that growth to the bottom line.

We also have confidence about this because we’re focused on our core areas, physical access systems, government and transponders. And from that base, we know the specific programs that some of which I mentioned, FICAM, some of the mobile credentials, transponder verticals and then ultimately the Internet of Things which should drive our growth.

So, with that base, I’d like to discuss where we see the business going and why we think we’ve got good visibility into the great opportunity that we see already developing this year. So, our positioning is unchanged.

We simply emphasize our physical access and RFID core strengths, but the core of the business is unchanged and the opportunity and market position is unchanged. But from our hard experience in this market, we really believe this is the most solid beachhead platform for the Internet of Everything.

We also think our business has a good balance, a healthy balance geographically. As you can see, the U.S.

strength is there, but also good international scale, and then breadth across Europe, Middle East, Africa and Asia; so, very good balance there; and then looking at our markets as well, transponders and physical access contributing comparable scope to our business model. So, we think we’ve got balance across geographies and across the business areas.

And with that balance and focus, we think we’ve got a strong business base for 2016. We’re an established quality technology leader in physical access control systems and transponder markets. We have proven products, a solid customer base in the U.S. government and our RFID products. We have deep technology.

And as I mentioned, the customer intimacy, having that combination, so when we bring out new products, we bring them to customers who trust that what we deliver is going to work and what we’re delivering is close to what they need immediately today.

You always have to satisfy today’s needs and over-perform on those and then you have the opportunity to deliver tomorrow’s capabilities, but you can’t do the tomorrow without doing today and that’s where we have the opportunity with our technology and our customers. That’s how we’re going to lead disruptive growth.

So, we think that we’re going to get into a high growth space, as we get into broader access across infrastructures and facilities, and as the physical access market really becomes some of the platform for the Internet of Everything.

And it’s our RFID technology which I’ll go into a little more deeply in a couple of slides that enables all of our platforms. So, I won’t reiterate the physical access systems, the readers and transponders more but the base is very, very solid, and it’s stronger than ever with the focus and commitment that we very clearly implemented.

Now, across all of my comments, I keep saying we, and I want to share a little bit of the team that’s making this happen, especially in a business like this and the status that we’re in. Our success is fundamentally built around our people, both the leadership team and the people throughout the organization.

And as I mentioned, one of the reasons that just a few months ago, in just a few months into my role, we were able to dramatically resize the business, the reasons that we were able to do that with minimal loss momentum despite major adjustments is this team. So, you’ll note that these are all leaders who were within the company.

So, there’s no instability due to a new CEO bringing in his team, this is counting on the team that’s there, empowering them to do and us all together to do what we know we could do which is take advantage of business opportunity. So, just going through them a little bit briefly because it’s worth that and supporting the business.

Tom’s began running our business development, he then expanded into U.S. sales and now into global sales. So someone who’s was earned by results the role that he’s got right now. Steve, as many of you know, was our VP of Finance; he stepped into CFO.

And as you heard about all of the compliance and accounting issues and the timeline that we’ve been on, he’s been managing a tremendous ability to deliver in addition to a great team player. Over on the right in our business areas, Mark has been one of the earliest parents of Hirsch and our physical access control business.

And that reputation of quality and customers who absolutely trust you from top to bottom is really built around the character and the intensity that Mark has always brought to this and the team that he has built and the team that he is leading is ready to drive it forward.

And again that’s why we have confidence, as we look at the projections going forward. Matt, as I mentioned, our CTO, is now driving some of the business areas. And Matt has been our CTO, knows the technology up and down, now is engaged in delivering the business itself as well as knowing the technology and working goes.

So when we talk about the fact that we’re continuing our technology investment, we are not abandoning anything with near term value. Matt is right there owning our numbers and revenues in part of the business at same time as the technology platform that is all built on. So, we really believe we can optimize this.

And Manfred has been with the company in a number of roles, was as our COO and now he has taken on the transponder business which as you saw a couple of slides earlier is half of the company’s revenues, also very confident, very acknowledgeable of the team and the customer base.

And so with this team, this is why I think we’ve been able to make some very dramatic changes very quickly and not lose continuity and not lose speed. So, I’m sorry to dwell on this a bit.

But when you look at what we are doing in terms of the resume strength and confidence in the future, your confidence as investors can come from the fact that this is a credible proven team with strong professional working relationships, both in our own areas and working together; there is a lot of strength there, and that’s really what all the numbers that we talk about are built on.

So, our other core strength that meets this together and provides the solid business base is our core technology.

Again, I won’t dwell on this too long, but just to go through quickly, if you look at our transponders, on the right of where it say transponders there, it’s fundamentally antennas, the communication path, and the chips where the information reside.

The smartphone readers, whether they are on their own or integrated into an OEM product are basically antennas for communication and chips whether their devices or modules. Even our access cards, key fob, wristbands fundamentally it’s an antenna and a chip with data that’s communicating. Our door readers is the exact same thing.

And then our PACS systems, physical access control systems are the ultimate instantiation of the full technology set. And the base then for expansion as we talk about mobile, wireless doors and other growth accelerators, it all comes together in the PACS systems. But it’s -- in a technology company.

It’s sometimes easy to be looking outwards all the time and looking at the markets. It’s important to see the continuity that’s all built on from a technology perspective, and this is really one of our core strengths. Now, the next slide will see if it actually works; it’s a video which is a demo of our FICAM solution.

And I’m not sure if it works online here as it does. But when it up on our website, you should be able to touch it. What we do is we demonstrate our products on the right and a competitive product on the left in a very key area where the federal government is trying to deploy more secure technology.

They actually tried to deploy it initially and ran into some technical problems because of the architecture whereby this taking several seconds for people to get into a door. Our implementation which as video shows and there is no doctoring or anything else; in fact, there is some advantage to other, to the competitors product.

When the card touches ours and theirs, it’s 50% faster for ours to actuate the door. And it might sound like a small change between 2 and 3.5 seconds but when you are standing at a door, you’re holding card next to it, you can tolerate a couple of seconds. When you get into three seconds plus, you take it off, you look at it and think it’s busted.

Then the next person tries it, they’re even more focused on it, they put it on and after second and half, they take it off and suddenly you have a traffic jam, which is exactly what happens. When you are down sub-two seconds, you can get people through the door and it works.

And additionally, our solution because of the way it’s architected is less than half the cost of the competitive solutions. So, our commitment is, as we talk to you about the advantages in our business and our growth will always tie at the quantification of why we are going to win.

And in my business experience, faster and cheaper is always the most reliable competitive advantage. In this case 50% faster, less than half the price that’s how you win. And even though this is a government market, you have to compliant. The government also cares about speed and cost. And so, we think we are going to have a major opportunity here.

And sorry, the video demo won’t work for the technology platform we’ve got here but hopefully we are going to stuff on the on the website; you can click on it and you could see it happening real time.

So, moving on and a bit mindful of time because we are almost 45 minutes past the hour, I’m going to skip over our vision slide with the Internet of Physical Things just important and it’s score to our strategy, but you can look that in more detail on the website.

But the slide after that I do want to pause on, which is around our credibility related to the growth that we are projecting. And this is very important because our approach isn’t to make a general statement or a broad market comment about growth.

We have three specific growth components, our base business; our ….growth initiatives and breakout areas that we’re specifically executing against. As you’ve heard the base growth, even without a lot of focus and attention, our core physical access systems business grew over 5%.

And so with the right focus and the right attention on that, our base business clearly has 10% growth capability in it.

Then there are very specific growth initiatives that we’re driving, mobile access I’ve talked about; wireless infrastructure such as; the transponder verticals that give us line of sight to an additional 10% to 15% growth on top of our base growth of 10%.

And in addition to that, we’re continuing to invest in our partnerships, strategic relationships, some of the other infrastructure and technology platforms that are positioning us to have the inside track to Internet of Things growth, which can of course drive things substantially faster.

Now that said, we want to be very responsible in terms of our timing expectations. We can’t anticipate quarter-over-quarter or year-over-year when breakout actions like the IoT occur but we can anticipate our base growth and the growth initiatives because that’s line of sight to our current customers and our current products.

And so, our focus, both in our execution and in our projections has to be very well-managed and particularly investments we have to be sure that we’re managing in such a way that definitely impacts our P&L and we can sustain it in the long-term, so that when the breakout opportunities occur, we’re there and we’re strong.

So turning into our outlook and guidance, built on everything we’ve talked about here in terms of the business growth and the organization and the actions we’ve taken. As Steve has covered, in 2015, our revenue was little north of $60 million. We exited business activities that represented about 5%.

So, it’s a $58 million business on a go forward base line. As we look at everything I’ve described about the business and the core, the 2016 revenues, again as Steve mentioned, is in the $56 million to $60 million range. We are confident in the EBITDA positive structure that we’ve built in the second half of this year.

And we do think we’re on track with the organization stabilizing, the pipeline building and return to growth. So with that basis, we also believe going into fiscal year 2017, we’ll see a growth run rate in the 15% to 20% year over the year prior quarter and accelerating growth out of that.

So, again this is the base line, the two growth categories without looking at the breakout. We’re not projecting the timing on that but we are confident that we can execute against these targets here for 2016 and going into ‘17.

So, the strategy and position for growth, as I said is a base and the base growth and the initiatives which we won’t let go of but we won’t let undermine our core business. So, next to the graphics at the bottom, you can see some of the specific programs and initiatives.

The near-term executables for growth are our federal ID card and access management system, enhancing our reader and card offering, very carefully figuring out how we’re going to deploy mobile in an easy to adopt and revenue generating way, looking at our partnerships, which are taking off, both domestically and internationally, and Cisco in particular, you will see a common presence at ISC West that will be unmistakable by any in the industry.

And it is very much a partnership; it’s not a junior partner role that you will see there with us and that we’re leveraging; and then the verticals and transponders; and then the breakout growth initiatives as we’ve talked about, and I won’t lose more of our time by reiterating here.

So, in summary for 2016, very solid base, rebuilding the growth and positive EBITDA in the second half and accelerating into 2017 and remaining even as growing profitably positioning for this physical world Internet of Everything with the strong RFID technology, the Hirsch brand and the PACS platform, the solid base and the core growth, we think we have a great opportunity there.

So, as we’ve done here, although perhaps that’s exhaustively, we’ll continue with our frequent investor updates on the mission at investor conferences throughout the year.

And wherever there is too much of a low frankly in between investor conferences, we’ll hold shareholder conference calls where we could get access because we are being very rigorous about Reg FD and about external communications that would be in open forms like this at all times and in between of course any material information isn’t communicated outside the business, we’re going to be focused on driving the business forward and creating the shareholder value that everybody expects.

So, with that, thank you. Sorry, this has run a little bit long but hopefully the content is worthwhile.

And we’ll turn it over to Adriane, if you could open it up for questions?.

Thank you. We’ll now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Saliq Khan from Imperial Capital. Please go ahead..

In regards to NASDAQ, you’ve until the end of March to get all filings in.

What could prevent you from getting the filings in? And what happens, if that doesn’t happen?.

In terms of preventing us, we’re -- as you expect at this point, close to having it all done, so we don’t expect anything to get in the way of that. We do have to finish all of the actions and all of the compliance steps properly, but obviously at this point, we’re pretty close to line of sight on that.

And then, should it not happen, we’d have another discussion with the NASDAQ, if it’s a matter of couple of days, I certainly don’t want to second guess NASDAQ but they’ve been very supportive, as we presented the business to them. And I think, they we’re the kind of company that belongs on NASDAQ.

So, they’ve been very helpful in working with us on that. But we’re working hard and we expect not to have any of those contingencies to hit. We expect to get on file before the 30th..

And then my follow-up is, if I take a look at Identiv, you guys have been in May, and this is even before you -- transformation process over the last couple of years, however, as I take a look at your 2016 guidance, that’s a little bit below the consensus estimates.

How do you intend to expand your customer base, increased your overall sales, so by the time 2017 rolls around, you guys are able to go ahead and outpace whatever the revised estimate come out to before 2017?.

Yes, so, I’ve talked about some of the customers which I am out visiting personally a lot. It’s a question of how quickly we’re going to turn and turn the growth and what we set as a commitment because as far as we’re concerned, when we put information out there, it needs to be a commitment to execute unless something unexpected happens.

But, in terms of the opportunity, when I was last CEO of this company, we closed out $185 million a year. The business can clearly sustain the scale and the growth that we’re projecting. But we’ll just keep you posted, month by month and quarter by quarter as we establish more customers and as we grow.

And as I said, the organization might be stabilized and solid faster than any one of us expect. But we want to build the company solidly and build the customer base solidly. And then you’ll see accelerating growth. And that’s why we indicated, in 2017, we certainly see accelerating growth coming in there.

The timing of the growth in 2016, we want to make sure, we can achieve..

[Operator Instructions] We have no further questions at this time. I’ll turn it back for final comments..

Okay, thanks very much Adriane. There were some questions that we had that came into the IR site, that we have had asked some questions. I believe we’ve tried to address them.

They were around the status of the special committee, which I think we’ve addressed; the lawsuits, we’ve addressed as much as we can in terms of where they are in the arbitration and in insurance coverage and other things. There was one question around how much more in terms of non-core expense we should expect.

We do have some deductibles from insurance perspective that are of the order of a few hundred thousand dollars but that should be the extent of that. And then I think the rest of the questions that we had in site, we’ve already addressed as well. So, with that I’d like to thank you all for joining us. Again, apologies, it was slightly lengthy.

But I think we had a lot we wanted to cover and hopefully it was worthwhile. Recording of this and the presentation itself will be available up on the website as we mentioned. So, thank you all for joining us and we look forward to continuing to build the business together. Thanks..

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