Pete Holst - President and CEO David Clark - Chief Financial Officer.

Josh Nichols - B. Riley.

Good afternoon everyone. Welcome to Glowpoint's Second Quarter 2014 Results Conference Call. Before we begin, I want to remind listeners that this call is being webcast live over the Internet, and the webcast replay will also be available on the company's website at www.glowpoint.com following the call.

Slide two summarizes the company's Safe Harbor statement, the company's partial discussion of its financial results should be read in conjunction with the consolidated financial statements and related notes contained in the company's Form 10-Q for the quarter ending June 30, 2014, filed today with the Securities and Exchange Commission today.

Various remarks about the company's future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

Although the company believes the assumptions upon which preliminary or initial results, financial information and forward-looking statements are based on reasonable as of today's date. These forward-looking statements are not guarantees of future performance, and therefore investors should not place undue reliance on them.

These statements are based on facts known and expected as of the date of this conference call and the company is undertaking no obligation to update these statements to reflect the events or circumstances that may arise after this call.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's annual report on Form 10-K and other filings with the SEC.

In addition, today's call and webcast includes non-GAAP financial measures within the meaning of the SEC Regulation G and a reconciliation of such measures to GAAP measures is contained in the slides. The call is being hosted by Glowpoint's CEO and President, Pete Holst; and CFO, David Clark.

There will be a brief question-and-answer period following the company's prepared remarks. It is now my please to turn the floor over to your host Pete Holst, Glowpoint's CEO and President..

One, we deployed a multitenant management platform for our public room service; two, we completed our first global rollout of a completely converged network Russell Reynolds, a top five customer; three we deployed phase 1 of our new IT service management platform, general availability is scheduled in the December, January time frame later this year; four, we installed and began testing the next generation of our video call control platform, data release is scheduled in early Q4; five, we installed and began testing the next generation of our browser based video service, data release for this product is scheduled in late September; and finally we signed several new channel partners including a global tier 1 system integrator and two global tier 1 communication service providers to become beta customers on our service platform.

We made significant progress in the second quarter, but we clearly have worked to do to build on strong momentum in the IT service management sector. We need to continue to rapidly enhance the Glowpoint service platform to attract more partners, countries and devices.

We do engage with current and future channels to integrate with their service offerings to drive customer adoption for both our high touch and automated services. And most importantly we’re staying focused on the destination while carefully managing the company through an exciting technology shift.

We believe that upon implementation of our service platform later this year coupled with deep domain expertise, the company will be well positioned to provide a distinct and holistic suite of video services to its customers and partners alike.

We are incredibly excited about the new services for coming this year and the opportunity to expand our business beyond its historical boundaries. With that I’ll turn the call over to David to review the financials..

Thanks, Pete. I’ll review our financial results for the second quarter and then provide a summary of our financial guidance for the remainder of 2014. As summarized on slide seven, revenue for the second quarter of 2014 was $8.5 million and increased 6% sequentially from $8 million for the first quarter of this year.

This increase was driven by higher revenue for each of our service offerings as follows; an increase of $270,000 in video collaboration services, an increase of $112,000 in network services and an increase of $105,000 in professional and other services.

Revenue for the second quarter of 2014 was down 3% compared to $8.7 million, for the second quarter of last year. This is mainly due to lower revenue in professional and other services. Turning to the next slide, I’ll review several highlights relating to our financial performance for the quarter.

Our gross margin was 43% for the second quarter which improved from 39% in the first quarter of this year and was fairly level with 44% in the second quarter of last year. We generated income from operations of $357,000 for the second quarter which represents the company's highest quarterly operating income since 2009.

Our income from operations improved from a loss from operations of $478,000 for the first quarter of this year and income from operations of $269,000 for the second quarter of last year.

We also posted net income of $1,000 in the second quarter of 2014, which represents the first quarter that the company has generated net income since the fourth quarter of 2012. The net income for this quarter compares with a net loss of $834,000 for the first quarter of this year and net loss of $150,000 for the second quarter of last year.

Slide nine summarizes the reconciliation of net income or loss to adjusted EBITDA in non-GAAP financial measure. Adjusted EBITDA increased 32% to $1.2 million in the second quarter of 2014 compared with $0.9 million for the first quarter of this year.

This improvement was mainly due to the growth in revenue and gross margin between the first and second quarter. Adjusted EBITDA for the second quarter of 2014 was level with the second quarter of last year on slightly lower revenue this year.

Adjusted EBITDA as a percentage of revenue improved to 14% for the second quarter of 2014 as compared to 11% for the first quarter of this year and 13% in the second quarter of last year. Next, I’ll review key data relating to our cash flow and balance sheet on slide 10.

In the first half of 2014, we generated positive cash flow from operations of $1.2 million, capital expenditures in the first half the year totaled $1.1 million and primarily are related to key investments in our service delivery platform and infrastructure that Pete discussed earlier.

Net cash used in the financing activities for the first half of 2014 was $362,000. Our cash position as of June 30, 2014, was $2.1 million compared to our cash position of $2.3 million at the end of 2013. We ended the second quarter with positive working capital of $1.4 million. Now I'll turn to our financial guidance on slide 11.

Total revenue for the second half of 2014 is expected to be approximate level with the first half of this year. As we work through the market transaction Pete discussed earlier. Total adjusted EBITDA for the second half of 2014 is expected to be approximate level with the first half of 2014.

Capital expenditures for full year 2014 are expected to approximate $2 million and are expected to be funded from positive cash flow from operations for full year 2014. Now I'll turn the call over to the operator to open the call for questions..

Thank you, the floor is now open for questions. (Operator Instructions). And we do have a question from Josh Nichols from B. Railey. Josh, state your question..

Yes hi, it looks like you guys have done a pretty good job keeping OpEx at a minimum level during the transition, I was wondering what you might be expecting once the (inaudible) versus new platform later this year looking a little bit further down the line as far as your OpEx budget is down significantly from the last couple -- from previous years?.

Sure thanks Josh.

In terms of OpEx for the rest of the year, we have given pretty clear guidance at this point that we intend to maintain those expense controls that we put into place in 2013 and with respect to OpEx moving forward, I think a great deal of that comes down to the operating leverage that we believe that going to gain as a result of all the automated functionality on the new platform.

So we are not giving guidance right into 2015, but we do expect OpEx to stay consistent and within the guidelines that we have done so far this year..

Okay.

And any information on how long the beta test space that you guys are working on with a couple customers is just last for?.

Sure, the current beta that’s been deployed right now it will be a two step process actually, because we just deployed ITSM very, very recently. And some of the partners that we have acquired recently are rather large and so it’s an immersive process to get them probably through the general availability.

We’ll do a fairly short beta internally over the next probably 60 to 90 days and do a second phase of that in the fourth quarter, followed GA for our partners in general early in Q1..

Okay, great. And last question was it looks like been pretty good even with the CapEx to cash flow looks okay and it looks like you have been able to maintain pretty well with the cash you have on hand.

Any major changes coming up in the capital structure over the next 6 months to 12 months or you think you are probably pretty good with everything you have?.

No, there is no major changes planned at this point with respect to the capital structure. We will have probably more visibility in terms of our requirements going into 2015, as we go through budgeting cycle.

This year we were successfully able to fund substantial amount more CapEx than the company has spend historically, simply from cash flow from operations as a result of expense controls. I think the company will look to try to expand on its deployment of all of its services here this fall and into the winter.

And should that require additional capital, we believe there are sufficient resources, both internally and externally at our avail when the time arises..

Okay. Thanks very much..

Thanks Josh..

And our next question comes from [Jack Gilbert]. [Jack], please state your question. .

Yes.

On our new partners, are we ever going to get any name now or later?.

Hi, [Jack]. Thanks for checking in. Yes, some of these partners are pretty substantial in size and there are pretty tight disclosure rules, as you might imagine.

And I think once we get through beta and both parties feel like they are comfortable with the scalability and where they can go with the platform internally, we're hopeful that we'll do a broader press release that includes some of those names you are looking for..

Okay. And second part of that question on revenue from these new partners, when do we expect to see, you said that the beta test wouldn't be too long.

So, I would assume during this quarter, do we expect some kind of revenue from any of these three new partners?.

Well actually, I think I said it was a two step data and ….

Yes. I guess I misunderstood. Thank you..

No that’s fine, yes. Not a problem. The two step data that will probably take them through the end of this year, we are likely projecting revenue from them. And again just the nature of how you deploy within some of these organizations can take some time to get the marketable revenue.

But we would expect revenue from them probably in Q1 realistically given the effort we have to put into do integration into their systems..

All right. Thank you..

Sure..

And we have no other phone questions at this time..

Great. Well, thank you [Catherine]. And thanks everyone for joining our call today. And we look forward to speaking to you again in the very near future..

Thank you. This does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time. And have a great day..