Steven Humphreys - CEO and Director Sandra Wallach - CFO and Secretary

Michael Latimore - Northland Capital Markets

Thanks, Karen and thank you all for joining us. This is one of the most gratifying business updates we've had the opportunity to discuss because we're seeing organic year-over-year growth across all 3 of our business segments.

As a small technology company, the growth can be exciting, but as a public company consistency and visibility is also mandatory. When we started the company even in its prepublic days, we committed to a 3-legged strategy, because this is always more stable than a single leg or even 2.

Now the key to taking advantage of this is to focus on diverse but very complementary segments, so our business investments and expense base is very cross leverageable. This quarter we've had solid growth in our Credentials segment at 11%, led by our core RFID transponder business which is growing at over 40%.

Our physical access segment growing at over 5% with strong progress in our federal government and fiscal relationship. And our smart card reader identity segment growing at over 20%.

I will go into more details of the segment growth in a couple of slides. But the most important observation is that the underlying strengths of our position in each segment and the overall momentum of our market itself is strong so we expect this growth to continue and to expand.

Additionally, up to now we've often had to adjust for discontinued products, onetime customer events and other onetime events in these business discussions. Now this is pure year-over-year growth in all segments.

Now while driving this growth, we've held stable operating expense levels resulting in consistently positive adjusted EBITDA for the third consecutive quarter. This confirms our business model and the leverage we're able to drive across our business segments.

Now those of you who are familiar with our industry know the first quarter always is seasonally the toughest quarter. So these strong results, positive EBITDA and the underlying momentum gives us confidence that our growth expectations and the capacity to leverage our operating base are on track.

Also in the period we did use cash. As discussed, when we announced our debt refinancing earlier in the quarter, we used some of our cash in extinguishment of the prior debt.

We also allocated some cash to working capital in support of our growth. Sandra will get into more details on this, but as part of our business leverage working capital management is getting intense focus to keep stable as we drive growth just as we're leveraging current operating levels even as we drive growth.

Okay. With our business base established, let's turn to our core focus which is growth.

As you can see, across our segments, we've seen year-over-year growth and gross margin expansion in the physical access and Credentials segments even while growing revenues. Now I'll get into details on the next slide, but I just wanted to pause and look at this across the segments where it's clear that the underlying RFID technology, the secured transactions and events that we enable and the interaction with the physical world are the consistent technologies we leverage and the benefits we deliver across all of our segments.

This is where we get our competitive advantage with any segment and why we think we're positioned to benefit as the world interconnects. Now I wanted to the comment on our growth approach which you'll see in our discussions going forward.

We manage our growth in 3 tiers. The first tier is our base business growth which drives our projections and execution plans.

There's plenty of excitement and opportunity here and is always job won. In parallel though, our team thrives on finding the upside, the solutions we bring that others can't.

We plan for these, we support and invest in them, so we can leverage our technology, channel, customer relations, global presence and our unique skills wherever accelerated growth can happen. Now we'll talk about these Tier 2 growth areas, but we always want to be careful not to over extend our expectations when we're talking about them.

And beyond this, thirdly, we're positioned for some disruptive and transformational solutions and we think we're unique in our ability to identify them, deliver them and bring customer adoption to drive them into the marketplace. Now these are black swan events, unpredictable exactly when they'll hit.

So we don't project them into our financial plans, but they are absolutely in our aspirations. There's not much point in being a technology business, if you're not aspiring to moon shots, but we'll always do so while keeping our operating base discipline using others' investments, open source and other characteristics of today's platforms that allow extraordinary accomplishments with lean incremental resources.

Okay. Turning to specific growth in our segments.

In physical access, we had a range of product launches and events in which we brought Hirsch Mx panel capabilities into the Cisco-related ICPAM platform. We announced certifications to sell our products into Russia, Ukraine and the CIS.

We received full APL approval for our total FICAM solution. Most importantly, the visibility and the momentum in the channels across the Hirsch dealer channel, the Federal integrators and the Cisco channel has been terrific.

I'll go through some of our outward-looking events on the next slide. But ISC West the main industry and customer event for physical access was the most dynamic and exciting one that I've ever attended.

It's the result of all the groundwork our teams have laid, but the level of active leads, partner and dealer response and industry momentum is really reflective of why we're so positive about our position in the market. Now these are only a few of our physical access milestones last quarter.

But let's turn to our identity segment where our smart card readers and modules really are considered best-in-class. When OEMs or large customers wanted excellent, high-performance, high-quality solution at a great price, they come to us.

Specifically, we've seen strong demand in the federal government, strong demand from foreign governments and some emerging horizontal applications. Here we have some clear breakout opportunities as well which we'll discuss later, but to be clear, it's always connected to our OEM strategy and our close-partner strategy where we look to support a teaching customer who's going to show us where the opportunities are, we bring the technology, deliver those opportunities and then we grow forward together.

So on the Credentials side, as I mentioned earlier, our RFID transponder products are growing strongly with the range of applications that we believe are just beginning to deploy widely and are delivering data-centric benefits to customers that are really core to the Big Data, machine learning competitive advantages that every industry is looking for. As you can see here, our solutions are established in brand authenticity, pharma, clothing and a range of data-centric applications.

We've launched into the UHF category which brings a whole new range of capabilities, but more importantly, customer-enabling solutions that give you the broad range and the low power consumption of UHF. We've also got some very exciting initiatives in the active sensors space which I'll talk a good deal about more later.

But really what's underpinning the success we're having in RFID and transponders is the team which is possibly the best in the industry and part of that is because of the approach that we take to the marketplace. We aren’t looking to run-and-gun and take a high volume low margin solution and just blow it out through the manufacturing side.

We're looking for customers that have innovative, value-delivering solutions into their industry that we can then tailor to and because of our approach to solution development which I'll talk about later, we can tailor and then scale up as both value-add and as low price and low cost as we do scale up. So I'll talk about that in more detail and as you can tell there's fair amount of excitement around the progress we have there.

Now in our access cards products which is also in the Credentials sector, the launch of our TS Cards this quarter which is our advanced technology for secure identities, brings to every customer that type of security which typically they thought isn't accessible to them because it's too complicated or too high cost. What we've done is brought them a solution which has the low-end proximity capability as well as the high-frequency, high-end security capability, all for lower costs than the basic proximity cards that most customers use.

So you can see a number of initiatives that we're driving here leveraging our technology base, our supply chain to be cost-effective and a cost leader, but also a solution leader. We'll talk about all these later.

But I just want to share a snapshot of the growth initiatives we've already got in place across the business. So lastly, before we go into the financials, I wanted to share one more perspective.

We often drive and discuss our business from the inside out and we're also making sure we're visible and leveraging everything we do from the outside view as well. Now this is just an extract from all the external events and activities we've got going on.

I mentioned ISC West and a number of these pictures here are from that event. But this week also we've got both the RFID Show in Phoenix and the ISG's spring event in Orlando.

Also, you can see we're leveraging partners such as Cisco and OtterBox. We're active worldwide and across all our business segments whether the payment summit for smart card readers, ISC or RAS is for physical access or RFID Journal or ISD for credentials.

Even though we're very active and we're making sure our markets are well aware of our great solutions, we're doing this very intelligently and by leveraging the activities others and our partners, so we can do it cost-effectively within our base, but we want to be sure that every investment that our team makes in technology product and channel gets exposed to the world and leveraged by every possible corner where we can drive some revenues and growth for our company. So with that, I'll turn over to Sandra for our financial results and analysis.

Okay. Thank you, Steve, for providing the context for our financial results for the first quarter of fiscal year 2017.

Revenues in the first quarter which is our seasonally lowest quarter, were $13.4 million, a 9% sequential decrease compared to $14.6 million in quarter 4, 2016 and a 7% increase compared with $12.5 million in the comparable quarter of 2016. Our physical access control segment generated $5.4 million of revenue in the first quarter of 2017, down 21% sequentially from $6.8 million in the fourth quarter of 2016 and up 5% from the $5.1 million recorded in the comparable quarter of 2016.

The decline sequentially is primarily a result of the timing of orders from customers in the key U.S. federal government sector, this business has generally remained strong for us.

Revenue from our identity products, primarily smart card readers, reader modules and chipsets, was $3.1 million in the first quarter. This represents a sequential decrease of 22% from the $4 million of revenue in the fourth quarter of 2016, reflecting lower sales primarily in the U.S.

market and an increase of 23% over $2.5 million recorded in quarter 1 of 2016. Approximately 37% of our first quarter revenue or $4.9 million was derived from sales in our Credentials segment which comprises both access control credentials and our broader Internet of Things transponder products.

This revenue performance represents a sequential increase of approximately 27% from the $3.9 million revenue achieved in the fourth quarter of 2016 and an 11% increase from the $4.4 million delivered in the first quarter of 2016. As previously anticipated and disclosed, we have no revenue in our all other segment in the first quarter of 2017.

This change is primarily due to the phasing out of our digital media product line and the discontinuation of our CHIPDRIVE product line. Now turning to our gross margins.

Our GAAP gross profit margin was 43% in the first quarter of 2017 and fourth quarter of 2016 and 42% in the first quarter of 2016. On a non-GAAP basis, excluding certain noncash items, our non-GAAP gross profit margin remains consistent at 45% for the first quarter of 2017, fourth quarter of 2016 and comparable first quarter of 2016.

Now moving to our operating expense which is the next graphic on the webcast presentation. GAAP operating expenses totaled $6.6 million in the first quarter compared to $6.4 million in fourth quarter 2016 and $13.6 million in the comparable quarter of 2016.

Adjusted, on a consistent basis to exclude restructuring and severance and certain noncash charges normally excluded from our on GAAP results such as stock-based compensation, depreciation and amortization and impairment charges, our non-GAAP operating expenses in the first quarter were $5.7 million as compared with $5.4 million in the prior quarter and $9.4 million in the first quarter of 2016. The comparative decrease is primarily due to the positive impact of the restructuring activities undertaken in the first quarter of 2016 and continuing cost focus across the business.

Our R&D expenses of $1.3 million in the first quarter of 2017 and in the fourth quarter of 2016 represent 10% and 9% of our total revenue, respectively, compared to $1.7 million or 14% of our revenue in the first quarter of 2016. Sales and marketing expenses were $3 million or 22% of revenue in the first quarter, an increase of $0.2 million sequentially and a decrease of $0.8 million over the first quarter of 2016.

G&A expenses in the first quarter were $1.4 million compared to $1.3 million in the fourth quarter 2016 and $3.9 million in the first quarter of 2016, reflecting the reduction in noncore legal expenses in addition to the benefits of restructuring. We now look at our full income statement per the earnings release.

Our GAAP net loss for the first quarter of 2017 was $0.7 million compared to a loss of $1.1 million in the fourth quarter 2016 and a loss of $8.9 million in the first quarter of 2016. While our non-GAAP adjusted EBITDA gain was approximately $0.3 million in the first quarter of 2017 and $1.1 million in the fourth quarter of 2016 compared to a $3.8 million non-GAAP adjusted EBITDA loss in the first quarter of 2016.

We have provided here a full reconciliation of GAAP to non-GAAP information which is also included in our earnings release. There are few items worth noting at this point.

Interest expense was approximately $0.7 million for the quarter is comparable with $0.6 million recorded in quarter 4 of 2016 and $0.8 million in the first quarter of 2016. Noncash stock-based compensation was $0.6 million in the first quarter of 2017 and the fourth quarter of 2016 compared to $0.9 million in the first quarter of 2016.

There were no restructuring charges recorded in the first quarter and we do not expect to incur further charges in connection with the implementation of the quarter 1 2016 plan. Now if I could turn to the balance sheet, I will be comparing our position at March 2017 to the position at financial year ended December 2016.

Cash at March 2017 was $7.9 million compared to $9.1 million at December of 2016. The $1.2 million net decrease in cash for the quarter is comprised of a decrease of $0.1 million related to net loss excluding noncash items, a reduction of $0.7 million net change in operating assets and liabilities.

There was a $0.5 million usage of cash in financing activities and small effects of exchange rates on cash. Our last slide is a full balance sheet per the table in the earnings release.

We define working capital simply as accounts receivable plus inventory less accounts payable. This was $13.9 million in March 2017 as compared to $15 million at December 2016, with the net reduction driven by a decrease in accounts receivable of $0.7 million and an increase of inventory of $1 million, offset by an increase in accounts payable of $1.4 million.

With respect to accounts receivable, our day sales outstanding decreased to 49 days in the first quarter from 55 days at the end of the fourth quarter 2016, driven by higher percentages of collections in the current quarter and collections of the quarterly revenue build in the last months of the previous quarter. Inventories net of reserves increased to $12.6 million at March 2017 from $11.6 million at December 2016.

Our adjusted inventory turnover was approximately 3.5 for the first quarter of 2017 compared to 3.3 for the quarter ending December of 2016. Accounts payable increased by $1.4 million from $6 million at December 2016 due to an increase of $1.2 million in current -- all in current payables.

A couple of other noteworthy items on the balance sheet. Accrued expenses and liabilities are comprised as employee compensation, legal and other professional fees, restructuring and other items amounting to a total of $5.8 million as of March 2017 and $6.5 million as of December '16.

The decrease of $0.7 million was primarily driven by reductions of $0.3 million in inventory and transit and $0.2 million in accrued legal fees including insurance recoveries. In addition, our long term payment obligation decreased from $4 million at December 2016 to $3.8 million at March 2017, reflecting the continuing quarterly payments made and partially offset by the accretion of interest.

Our long term financial liabilities decreased from $9.8 million at December 2016 to $7.6 million at March of 2017 as a result of the impact of the debt discount and debt issuance costs related to our refinancing in excess of unamortized costs associated with the previous debt. We're confirming the previously announced guidance for fiscal year 2017 of revenue between $64 million and $68 million and positive adjusted EBITDA between $4 million and $7 million.

With that, I will conclude the financial portion and turn it back to Steve.

All right. Thanks, Sandra.

I'll go through rest of this as quickly as I can. But we'd like to focus on some highlights of our core business.

And also show how we're realizing the integrated benefits of our platforms, go into a bit more detail about the dynamics in our RFID and smart card reader segments and then open up for questions. As this image -- by the way, as you can see is from ISC West and it was just the indicative of the flow we had throughout that entire show and the position the company has, frankly, reattained in the marketplace.

So first and foremost we've discussed our FICAM offering in the past, but now that we're formally on the government APL, approved product list which is all public domain, our pricing can be openly compared and we thought it's relevant just to share here because it really is a pretty graphic. Vendors were often reluctant to compare their prices because it's hard to validate, but in this case it's wide open.

So as you can see, you've got the stacks on the right there of competitive companies. And actually you can go right to the APL and you can get the names that they go with but we're little reluctant to go that far.

But you can see one price is if you built, putting in an entirely new system that's the higher stack. The other price is if you're upgrading the system.

FICAM represents an opportunity for us because at the moment you could put in a brand-new Hirsch FICAM system for lower than the costs of upgrading the systems that you've already got in place. And this is what drove, as I mentioned earlier, we already got a couple of new federal agencies that had not been our customers before, new federal system integrators that are adopting our products and bring them to market because there's a very compelling economic calculation.

Additionally, we have said very accurately and openly that our systems are substantially faster and higher performance and better integrated than the competitors. That's a little hard -- a little harder to validate objectively, but the prices are very objective.

So frankly, my challenge to our federal team is why wouldn't every single agency have this? The reality, of course, is our government sometimes makes buying decisions for reasons other than price and superiority of products and we can't get entirely around that.

But it's a big opportunity. That said, the sales cycle in the government is long and so it will be emerging over the next few years for sure.

Now in the past, we've gone into the details of the advantages of our products and their pure technologies. But since most of you on this call are aware of those facts, today I'd like to focus a little bit more on the centrality of our access platforms because it really begins to show the potential of the position we've built in the infrastructure of commercial facilities.

So if you look at this animation, it's a pretty well-known context. You've got video and intrusion events, integrating with the access system, it drives alerts and events.

It's very straightforward. But when you generalize the solution, you begin to see how we're in the leverage position in the physical environment in all commercial spaces to get more integrated instrumented and intelligent.

Now on the second example here which is really just an expansion of the first one, this is a reality today. These infrastructures already exists in some facilities with integrations that connect the secure access system to a wide range of commercial infrastructure.

So this shows really, when you look at this animation playing through, this shows our mission to make the entire commercial infrastructure secure, but also to make your environment comfortable, convenient and responsive. So if you look across all of our platforms, you'll see there is a wide range of integrations already here.

This is the vision that we're driving our solutions to and this is why we're so excited about the potential. We have to fight in the trenches and win in place -- in things like FICAM and in straight access control, but the platform we're building is absolutely integrated into fire and security, visitor management, phones, video, readers, IT systems, all of the above and we're in that position then to bring the benefits of responsiveness, convenience and comfort to the users.

So moving beyond the physical access systems. This also relates to the environment which our RFID transponders are already enabling.

To be clear, we're driving our business level and growth with great technology, quality and scale directly in the transponder space. And our position is really unique.

I alluded to this a little bit earlier related to the team, but we bring scale economies to optimize solutions much like ASICs do in the semiconductor space. We got over 200 antenna designs, a range of microprocessors with different capabilities, technologies that goes across low frequency, high frequency in UHF and already established scale and solutions in a range of verticals and applications.

In addition to our base which is already growing strongly, we've expanded into active sensor-enabled transponders like our uTrust Sense. Now when you think about uTrust Sense, it's actually, the prototypical implementation of a broad set of capabilities, a broad sensor-enabled RFID platform because what we do is we take a flexible battery, connected with in this case, the temperature platform, put in the antenna and microprocessor to manage the communications in the data.

And you have something, it's an important factor, a credit card slides right into your wallet and yet it's replacing something that cost typically $400 or $500, it's a box which is the temperature sensor, tracks along with the cold chain device, you ship it and then when the shipment gets done, the sensor is shipped back, because it's so expensive it gets reuse. Our devices are less than 1/10th of the cost and as you can tell able to expand in a range of sensors.

So this is the kind of enablement which we think is going to become pervasive as people need to have data sources throughout all of their items. And this is a great indication of how we've gone from our core HF technology and NFC that we started with expanding it into active sensors and then as we add in other cases UHF.

So I could go into a range of these, but you've got a couple of them right here. But ultimately this is the platform that is going to drive the IoT and as we look at pervasive physical spaces, these are the devices that are going to instrument them so that they can leverage all the Big Data and all the machine learning capabilities that we're aware growing out there.

So I also mentioned down here real-time location services. I want to be clear this is in that Tier 3 category where some of our customers are schools, for example and they're trying to track kids around.

The predominant solution for real-time location services is Bluetooth beacons. Now those are very expensive.

Anyone who knows anything about the Bluetooth technology knows it was never intended to be real-time location, too much power, too much expense and not very good at it. UHF which was originally developed for asset tracking in very high warehouse environments, is perfect for that use case.

Now it actually also turns out that kids in school for the most part keep their Bluetooth off because they don't want it to drain their batteries. A UHF tag very inexpensive, that could be just on the backpack, can track them around.

Now to be will be clear. This is futures, but this is the kind of capability we have and that we're in discussions with verticals and customers we already have, those happened to be access control customers that are looking for solutions like this and that our transponders are growing into.

And because our approach of this high-value ASIC solution, you tell us your need we'll develop the ultimate use case for it. We're getting into some of the earliest and highest value-add data driving platforms of the Internet of Things.

Most of those we won't be able to talk about from a corporate perspective because these obviously are leading-edge developments that pretty sensitive tech companies are deploying, but we'll keep you posted as we see things emerge and as they're indicators in the marketplace. Now similarly exciting is our smart card reader identity segment.

Now our base here has been very solid since we started the company and our reputation as the leader is stronger than it's ever been. We've increased our capabilities across both our technology and channel teams to expand our leadership further, but the real potential is just starting to emerge.

Growth acceleration could come from mobile applications such as our partnership with OtterBox or from home banking applications across the developing world or through leveraging the smart card-based chip. Right now, as I mentioned, government deployments are driving a lot of our growth and get -- and driving a lot of visibility as well as OEM design ins that are in there and we get a reasonable viewpoint into where shipments are going to go because we're part of our customers supply chains.

But in any of these cases, however, the smart card ultimately is used, is going to be a key part of convenient secure access to data and physical resources wherever we're. And as the costs have gone down, the need for security has gone up and by the way, as we in States 18 months ago, didn't have smart cards anywhere in our wheelhouse and now all of us have them, several of them, typically in our own wallets.

Things are changing that are creating opportunity in the space that are greater frankly, than when I was initially involved in the company when we started it. So just to put this together in our segment.

You can see the source of the vision that we've always been sharing. Our commercial facilities will be secure, responsive and instrumented, certainly at every doorway and eventually everywhere.

And I won't dwell on this because it's not driving our numbers this year, but this is clearly where we're going and you can see where our products and our capabilities put us at the forefront of it. Now this is more relevant from an investor perspective, the market perspective.

Each of our segments today already is a global substantial growing and a healthy equipment market and we have a clear defensible niche within each. And as it says in the bottom right, we with our access control platform, have the opportunity to be a key component of the consolidation platform.

Okay. We've already taken too much of your time already, but I just want to wrap up with 2 closing perspectives.

One which I always share because it, again, is indicative of the balance of the company. You see our business segments that are getting better and better balance across the market segments and better and better balance across the geographies.

So as we bring products to market, we have the infrastructure to go worldwide and leverage them to the maximum. And this balance is just getting stronger as I mentioned.

So as a result, we think we've demonstrated that our leverageable business model already in the second half of last year, showing that we've hit our midterm target. And also even in the seasonally toughest quarter of the year, in our first quarter, we're still staying within the range that we want to be aiming towards.

We think this is delivering across the board growth and we've laid deep groundwork for expanding the growth in the foreseeable future. So on the last slide here, as we always do, we'll assure you that we'll keep you updated as we move forward.

We hope you'll stay a part of Identiv's growth and the exciting opportunities we've got in the marketplace. And we'll open it up for questions.

Steve, you mentioned the 3 things you look at, the base business growth, areas to the find upside and then areas that might be disruptive. I guess, in terms of your guidance, basically your guidance is based just on the first of the 3-leg there?

Fundamentally, yes. Now the base is never a 100% predictable.

And therefore, the upside gives us a little more coverage and certainty in it. But it's -- think of it as 90-10 base and a little upside.

And then in the upside and sort of disruptive categories. Do those tend to show up in your ID and Credential space or is it across all 3 segments?

It's across all 3 segments. So the integrated environment that we showed in the access control space is just as dynamic as the other 2.

And then also I think as it relates to your physical access commentary, I thought you said that you'd won some new federal agencies. I just wanted to clarify, did you say that or not?

Yes, we did. Did say that and we did do that.

And then is that tied into the FICAM initiative or is that just your kind of presence within the federal environment?

Those 2 that I mentioned were specifically, FICAM. There were other wins and other new agencies as well, but I was just highlighting those because of the relevance to FICAM.

Got it. And then I assume we should have -- we should think about normal seasonality this year, just kind of normal seasonal patterns throughout there.

Yes. We don't see anything changing that fundamentally.

Okay. And then with regard to the Cisco partnership, can you just provide a little more detail there.

You've obviously, had some nice integrations and some new certifications and so forth. Can you talk just a little bit about what you're seeing through that -- the Cisco relationship?

Sure. Actually, those access graphics that we had there were part of the Cisco platform.

You might have seen some of the Cisco devices in there. IP Telephony and other things that they do is part of their industrial automation platform.

So it's continuing to grow nicely. Working with the company is always interesting when you're small, but it's going well.

Okay. And then just last one, can you remind me of what the -- what your NOL is?

I don't know off the top of my head. Sandra?

It's in excess of $150 million just in the last 2 years.

I had a question regarding the filing of your equity offering that I see has gone effective. Can you talk a little bit about what the plans are there?

Sure. We've always said, I mean, we think this marketplace is pretty exciting.

And so we've always said that we'll look at both their organic and inorganic growth. Nothing precipitous for sure, but it's something we always wanted to make sure we got access to.

We had an expiring shelf as well. And so this just keeps the access to that facility.

Okay. So there is nothing immediately actionable?

Like I said, the intention was just to have it there for whenever we think it's -- think it's needed for the business.

Okay. And then I was also going -- and I think I was going to ask you about is most of what you've described are product-based solutions.

I'm wondering as the business migrates into services, if you all have some plans on the board for whether it's cloud, SaaS, access control as a service, recurring revenue type models that you can integrate here or you're partnering with others, your integrators. How do you see that as we go roll forward the next year or so, because that seems to be moving very rapidly in your space?

Yes, good question and a couple of aspects to it. One is the broader topic of service versus product in the industry.

And in fact, the insecurity and access control services is larger than product. And so that's an area that we're expanding carefully.

I don't want to invest ahead of it. But we have more demand than we can fulfill for our professional services, for example and integration services, but we don't want to pay a bunch of bodies ahead of revenue on that, but services will be more and more of our mix.

Specifically, for something -- for SaaS and a cloud solution, you're right, there's growth. But it's also a very small base and what typically we find is companies want a hybrid.

They'll want an on-premise solution for their larger facilities and their core facilities and then maybe a remote offices or something they want to do SaaS. And so we're -- when we go in that direction, we'll be partnering initially and then we'll carefully grow into it.

But we think we've got the customer access that will let us take advantage of it when it gets to be scale. But right now, every company we've seen started in that space either as a very small part of the large companies they can afford the losses or they are already either setting down -- sensing down or consolidating or being absorbed to like the combination with Brivo and Eagle Eye.

All right. Thank you very much, Karen and thank you all for joining us.

And we look forward to continuing to keep you updated on our progress as we go forward and to speak with you on our next earnings call. Thanks, again.