Q3 2020 Digimarc Corp Earnings Call
Bruce Davis, Sir Please proceed.
Thank you and good afternoon welcome.
Welcome to our conference call Charles Burkert, CFO is with me and also a bump chembio sorry, he VP in charge of sustainability, joining us today broaden update on progress and prospects in this increasingly important use of our platform and plastics recycling.
On the call today, we'll review Q3 financial results discuss significant business developments and market conditions and provide an update on progress in the execution of strategy we.
We are opposed to these prepared remarks on the Investor Relations section of our website and archived this webcast. There before we begin let me remind everyone that today's discussion contains forward looking statements of risk and uncertainties. Please refer to our press release for more information on the risk factors that could cause actual results to differ materially.
Charles.
Thank you Bruce and good afternoon, everyone.
Revenue for the third quarter was 5.8 million essentially flat with Q3 last year.
Service revenue increased 6% from 3.2 million to 3.4 million due to growth in services provided to government customers.
Trips in revenue decreased 10% from 2.7 million to 2.4 million due to the impact of the renegotiated contract with a retail supplier partner in the first quarter of 2020 that were discussed on prior calls.
Revenue from government was up 4% to 3.5 million driven by growth in service revenue.
Revenue from retail was down 15% to 1.4 million, reflecting the impact of the renegotiated contract I referenced a moment ago.
Revenue from media was unchanged at 900000.
Retail bookings, which include store operations supply chain and recycling solutions, well 1.2 million around the same level as Q3 last year.
The most significant factor affecting bookings growth during the quarter was the pandemic effect on the organization of Holy Grail, 2.0, and planning for the Golden thread projects.
We signed some new revenue deals in Q3, but did not contribute significantly to bookings as they were primarily early production aircraft pilot projects. However, we do expect these initial activities will grow into larger revenue streams in coming quarters.
Bookings during Q3 included several notable strategic developments.
We started enhancement the private label packages with Digimarc barcode for a major retailer in Japan.
To date, we have completed more than 70 packages, we expect the transitioning enhancement process to a trusted partner in Japan during Q4.
We also began any customer funded study of the commercial viability of laser engraving serialization with a global brand and its suppliers.
We generated follow on bookings for the variable data printing solution.
I mentioned on our Q2 earnings call.
And we completed the Walmart toy catalog, which began circulating about two weeks ago.
Gross margin for the quarter was 66% down from 67% last year due to a shift in revenue mix to services.
Service margins were 58% up from 55% last year due to a favorable mix in billable expenses with higher labor and lower non labor expenses.
Subscription margins were 78% down from 81% last year, primarily due to lower subscription revenue.
Operating expenses were 12.2 million, an increase of 2% from 11.9 million in Q3 last year.
Operating expenses during the quarter included non recurring severance costs of 800000 relating to the corporate restructuring we announced in July.
Excluding these costs operating expenses would have declined by 5% due to lower travel consulting and other costs.
We expect operating expenses to range from 11.2 million to 11.6 million in the fourth quarter.
Net loss for Q3 was 8.4 million or 68 cents per diluted share versus a net loss of 7.8 million or 65 cents per diluted share in the third quarter last year.
Nonrecurring severance costs of 800000 accounted for seven cents per diluted share of the net loss.
Our balance sheet has been considerably strengthened.
We raised $2.1 billion under the ATM program prior to the TCM investment.
The TCM investment added 53.5 million of cash.
We have no further plans to use the ATM.
We are also shelving the strategic <unk> seen initiative for the time being in light of the substantial increase in working capital.
We ended the quarter with 62.7 million in cash and investments, including 36.5 million of proceeds for common stock issued to tease yeah.
We received the remaining 17 million of proceeds from the investment on October 1st when the convertible preferred stock was issued.
Cash and investments after receipt of the proceeds from the convertible preferred stock issuance was 79.6 million.
We filed for forgiveness of our entire Paycheck protection program alone in mid September the.
The Bank has 60 days to review our application and then the small business administration has 90 days to prove it.
We are working on our operating plan for 2021 and have some preliminary views of planning assumptions to share that are guiding our views on allocation of resources for the next year.
Our government business is functioning well we.
We expect revenue to grow mid single digits and to vary quarter to quarter based on timing of one services are performed.
Slightly more work in the first half of the year than the second half.
We expect revenue from media to be around the same level as 2020.
This area of business has stabilized and does not currently weren't incremental investment.
We have a small yet great team that continues to work on efficiencies to maximize account retention and contribution margin and explore opportunities for growth.
In the primary growth area of the business. We are currently projecting triple digit growth in retail bookings and revenues in 2021.
The growth in retail subscriptions is expected to come primarily from licensing software to partners and end users.
Applications include trace ability brand protection logistics recycling and retail store operations.
Growth in retail services is expected to be fueled by development and consulting projects associated with the plastics recycling initiative in Europe.
We expect subscription revenue to grow at a higher rate than service revenue, leading to an expansion of gross margins as the incremental margin contribution to licensing software is nearly 100%.
Although we expect significant growth in retail revenues a wide range of potential outcomes is possible for this area of the business due to the timing of closing contracts and other factors, including continuing uncertainties about the effects of the pandemic.
We think the most likely outcome is an acceleration in bookings consistent with our momentum theory of market development.
And then how much the rate of bookings growth will accelerate due to tipping points in the market remains hard to predict.
The range of potential outcomes is largely a function of the nature and timing of key account developments and the effect of adoption by market leaders on the rest of the industry.
We are projecting a modest increase in total expenses in 2021 up single digits from 2020 roughly.
Reflecting additional headcount to support a growing opportunities in plastics and sustainability and the impact of routine cost of living adjustments for existing employees.
For further discussion of our financial results and risks and prospects for our business. Please see our form 10-Q that we expect to file shortly.
Recent Bob will now comment on significant business developments market conditions and execution of strategy first.
Thanks Charles.
There have been several very positive developments since our last call most prominent among them as TCM Strategics 53 million dollar investment, it's a game changer.
We have made great progress in building our platform and developing the market now we have more capital to fuel progress on the path to profitability and establishing digimarc. It was a cornerstone of automatic identification of the global supply chain.
More broadly in artificial intelligence machine learning and augmented reality, our platform will redefine relationships between people and things in many aspects of commerce and everyday life.
She seems strategic as well informed ably led by its visionary fund manager Riley Mccormack.
A longtime digimarc shareholder he was elected to the board yesterday, I expect them to be a terrific shareholder representative than an advocate.
Most of our shares are held by less than a dozen high quality long term institutional investors and he is well known and respected by our larger shareholders no knowing rally well I'm personally excited about the opportunity to collaborate with them.
We also elected Alicia syrup to our board.
Well she has a remarkable career in financial markets are accomplishments across many disciplines demonstrate entrepreneurial talent and extraordinary leadership qualities and understanding of financial markets. A track record of that you could see for diversity and a mastery of modern media I expect that she too will be a great contributor.
These directors brings significant new perspectives that experience to our board rounding out its capabilities as we advance into the next stage of platform and market development I.
Not particularly I look forward to the advice and assistance of our new directors and creating a better understanding of the positioning of our business in the capital markets.
So the coverage is limited.
And focused on short term financial performance consistent with small cap public equity market practices.
Filling in my view to communicate the asymmetry of risk and reward over profitable base business extraordinary optionality flowing from the stage of development of enormous target markets on the impressive assets, we have built to expose to explore these opportunities.
In an effort to better communicate our value to the investment community.
And expand awareness and understanding we're planning our region into historically underserved areas of the capital markets, including the rising tide of millennial investors yes.
The U.S.G. funds and European investors.
We expect that these segments will appreciate our important rules in areas like food safety and the circular economy and the improvements of corporate governance, we have implemented this year.
We didnt expansion of Digimarc holdings by European funds to nearly 10% of institutional ownership as reported by NASDAQ.
We will do considerable outreach in Europe, there may be a better understanding of our potential contributions to the circular economy on the importance of these contributions in Europe.
Where there are more decisive.
Societal and governmental actions addressing plastic waste as compared to the U.S.
We expect that to be a great deal of activity in the EU during 2021 involving aim plastic recycling and other sustainability initiatives involving our company that we need to communicate to investors there.
We showed the strategic investment initiative for now in light of the TCM investment aboard developments. The primary drivers of the initiative revolver on access to capital on the optimal use of our limited working capital.
Significant strengthening of our cash position allows us to approach these relationships with a focus on operational leverage rather than capital acquisition.
Explorations with corporate investors have been helpful and constructively influence many aspects of the execution strategy, it's better for the time being to focus on the many opportunities for organic growth that are surfacing amount expansion of our shareholder base.
Opportunities to improve auto identification span consumer product lifecycles from manufacturing to recycling.
The environmental impact of plastic waste of becoming a global crisis last.
Last year, we demonstrated unique relevance to recycling and technical trials. Our platform demonstration showed promise of unprecedented improvements in quantity and quality of sorting of recyclable materials and waste streams that it's also obvious that we can play a much broader role in the circular economy.
Our key capabilities of galvanize the industry global leaders in bold and plastics have gotten together to form an impressive industry initiative known as Holy Grail to dot oak to determine the path to commercialization for digital Watermarking.
We have a central role play on this initiative.
The TCM strategic investment allows us to deploy more resources to address this enormous market opportunity.
Jim This the executive in charge of this area of our business here today to provide an up the an overview on our progress and prospects.
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Well. Thank you Bruce it's my pleasure to join the call into share recent developments in our plans for the recycling and sustainability initiatives.
In previous calls Bruce will discuss the enduring demand for plastic in the global economy, and its resilience as a superior product notwithstanding bolt negative publicity regarding the damage to our oceans waterways and landfills and increasing government scrutiny and involvement across Europe.
And in some states and municipalities here in North America.
Mission, which we've undertaken with other Holy Grail members is to improve the quantity and quality of recycled plastic as the foundation of a more efficient system product design consumer education collection, sortation and processing of the waste streams collectively.
Known as the circular economy.
The goal of the circular economy is keep plastic out of our oceans waterways in landfills and reduce air pollution duty incineration.
This is a massive long term opportunity for the company. Neither Gs one nor suppliers of the products themselves have published aggregate data on the number of plastics based products currently in global Commerce Ben.
Our best estimate suggests that as many as 300 million or more than 30% of the active skus in the market our plastic.
Any reasonable presentation, a premier attrition of that opportunity would lead to an outstanding returns under investment to address this crisis.
The formal launch of Holy Grail to show in September was a very significant development. The initiative now has over 90 members.
Over the past two years, we demonstrated the vital role we can play in addressing the plastics crisis at two Holy Grail demonstrations on high speed sortation equipment.
We became the centerpiece of the formation of the Holy Grail to show, which will test our technology in high speed sortation of mixed waste and scale in industrial waste facilities in at least two countries.
During the past few quarters. Our team is focused on speeding the adoption of Digimarc barcode among brand owners and eating development of a robust ecosystem for both the enhancement in discovery sides of the Digimarc platform.
The pandemic slowed the pace during the first three quarters of this year still initiatives are now accelerating as new projects are being launched and the world is adapting to the new normal of operating in a code that environment.
On the enhancement side, we have made much progress developing a broad and diverse ecosystem that is a necessary prelude to broad adoption. So far we are engaging in support of recycling and sustainability initiatives with 13 of the top 20 growth global brands and four.
Of the top five retailers, who are members of Holy Grail.
We're working with their materials and packaging suppliers mold makers and converters. We are now actively engaged with 24 of the key supply chain members of Holy Grail Tomorrow, and nearly all of the trade associations and academic Influencers, who help shape public perception.
And the legislative and regulatory environment.
Lighting up this ecosystem of suppliers and partners is critical to long term success.
On the detection side, we have completed agreements with an accelerated our assistance to the two largest manufacturers of high speed sortation equipment, who together provide over 80% of the lines in sorting and materials recovery facilities globally.
This work includes the development of a prototype detection systems for use in industrial trials and deployment of commercial units shortly thereafter.
We are in discussion with several additional suppliers that visual systems and components involved in the analysis of waste streams.
And companies exploring use of our mobile software to provide consumer education and engagement test systems for the identity of March packaging and quality assurance.
Plans for launching Golden thread projects in three countries were delayed due to the pandemic, but are now gaining traction as we stated last quarter. These projects are intended to provide commercialization models for brands retailers manufacturers dual systems operate.
Others sorting facilities and other ecosystem players.
They aim to test and develop strategies fit better Recyclability collection, consumer education, sortation and recovery to enable true circularity.
Two of these projects had been scope and budget request submitted we believe that at least one will start during Q4.
Third has been subsumed within Holy Grail to go and we anticipate meaningful progress in planning and funding for that initiative during Q4.
Two other potential golden threads early formative discussions.
A second front is emerging in North America.
Well, the political environment and ecosystem are strikingly different from the E. U several initiatives are gaining momentum.
We are supporting it aligning with key North American trade groups to leverage the learnings from Holy Grail, and with the European government relations initiatives to gain efficiencies and harmonization along the path to globalization.
Our global brand customers and they need such coordination and eventual global standards to reduce operational complexity and compliance risks across their markets.
Globalization is inevitable the Ellen Macarthur Foundation sponsor of the original Holy Grail Project has collaborated with the worldwide fund for nature and the Boston Consulting group in a call for you in treaty on plastic pollution their business case for a treaty cold spring.
Youre correct.
Coordination coordinated investment approaches to support infrastructure development in key markets and innovation in quote.
In summary, all signs are green at this point and we are planning to increase our support for efforts to reduce plastic pollution as we enter 2021 I'll now pass the Mike over to Bruce for closing remarks.
Thank you Bob.
Secular trends in the digital transformation of businesses and increasing evidence of the need to move beyond the PC are evident in the plastics initiatives and growing demand for serialization and an enduring effects expected from the pandemic.
Customer opportunities are in the pipeline and forms of media and industries that I doubt or contemplated by the investment community as its opportunities mature it will become increasingly obvious that our positioning as the barcode of everything is not hyperbole.
The Companys organization continues to evolve with the maturation of execution strategy.
Growth in size breadth and sophistication of the supplier ecosystem and the result of expanding universe of applications being built on the platform.
Organization has changed dramatically as we evolve from an IP licensing company to customer centric software and services supplier I'm.
Im proud of the versatility loyalty and focus on our mission of our employees and leadership team as such changes are challenging we.
We made significant changes in Q3.
The primary goals were to strengthen the relationship between product development and sales improve accountability for customer outcomes accelerated transition to the cloud.
Create better alignment between the organization and changes in demand profiles, we are observing and gain operational efficiencies.
The fundamental building blocks of the platform plays it's time to assess about our customers both partners and end users delivering great value efficiently and effectively across the spectrum of enabled applications.
Our product and platform development are increasingly informed by end users on their suppliers, bringing problems and opportunities to us that they can bleed can be used uniquely addressed by digimarc.
There were many very positive developments since our last call.
Key takeaways include we raised $55 million now the balance sheet is in good shape we.
We added two new directors to the board broadening relevant skills and experience.
Revenues and EPS met or exceeded analyst estimates for the third quarter in a row despite dependent.
We continue to navigate the next of the pandemic well.
Demand for brand owners increased while us retailer progress slowed some European and Japanese retailer seem less affected.
Brand order demand is growing and expanding into new geographies, and new industries, including pharmaceuticals automotive tobacco.
We expect the shift in revenue mix to persist for the foreseeable future.
The key market teams are sustainability supply chain visibility and brand protection.
The recycling initiative is making impressive progress on looks very promising.
See realization is another key area of opportunity.
Our preliminary planning for 2021 indicates substantial growth in bookings and revenues with a small increase in spending leading to higher gross margin and better cash flow.
As we enter 2021 here is what I view as the keys to success.
Begin with obsessing customer success.
Maintaining our excellent report with the central banks, delivering exceptional value and expanding our footprint at Walmart.
Established additional tent pole customers for supply chain solutions.
Make advancements in faster easier enhancement with minimal impact on designs and delivering integrated reliable quality management lower the total cost of ownership for about adoption of the platform.
Meet demand for serialization with interfaces Dionte services, including Chris ability brand protection on supply chain visibility, that's going to be a big theme.
The dress up great opportunities in R&D and techniques for plastic enhancement and thermal form and laser marking.
The speed and industrial trials will aim holy Grail to not own some parallel gold threads to stimulate and accelerate adoption and ecosystem development and encourage the second front in North America for the plastics initiatives.
Expand support and provide more infrastructure.
We're rapidly expanding supplier ecosystems.
Keep our stable highly skilled workforce with unrivaled institutional knowledge of the area of science that we operate in safe healthy engaged and productive productive in the COVID-19 era.
In executing effectively on these initiatives should fuel substantial bookings and revenue growth.
So with long term funding secured new skills and experience on our board formation, Holy Grail to Dato.
Uptick in demand for supply chain solutions and the emergence of many new applications of our platform in the works the future looks brighter than ever.
Thank you for your support for our mission and confidence in our ability to achieve we wish you all the best in these difficult times, that's it for our prepared remarks and now we'll open the floor to questions.
Thank you, ladies and gentlemen, if you have any questions or comments. Please press star then one.
Once again, ladies and gentlemen, if you have any questions or comments. Please press star then one.
Please standby we come back to you on a roster.
And our first question comes from Jeff Van Rhee.
Craig Hallum Capital you May proceed.
Oh. Thank you said back in February up to over 2000, skews and then.
The thermal label rolled out got delayed put on hold because of co that.
It's what's the update there sort of I know you got the toy catalog out, but with respect to labeling the private label products and the thermal labels have things started to pick back up there right where do things stand now.
So we we also began enabling low touch digital.
Experiences in store.
In the last couple of quarters. So we've been expanding the footprint well with respect to the private brand product sets that motoring along doing fine.
And we're discussing means to move beyond the.
The grocery and consumables area, where we've concentrated in our initial work.
We also are.
Exploring.
More mobile applications throughout the store you may have seen our announcement by Walmart, they're embracing of wont mobile centric shopping model and hope to have a couple of hundred stores lit up moving forward I think thats an excellent.
The initiative by Walmart.
Order to provide a safer and yet still engaging inefficient shopping experience for their customers and all the others who are in their stores.
From third parties and store associates shopping for others.
With respect to thermal its.
Still on hold on it and that's on hold because it will have a significant impact on store operations when implemented.
And there's just too much going on in the stores right now and too much uncertainty.
For them to begin rollout in this environment. So so I don't know when it will come back online. It's it's a pretty pretty close to ready to go so I'm, hoping that we can.
Work on developing.
A store or two.
At some point to deploy the system and fully de Bogot, and so forth and prepare for a broad broad rollout, but but.
There was just a presentation yesterday by John Furner as the CEO Walmart you less.
Talking about his priorities.
Environment and they are still.
Unsettled.
And the focus is on things that can have an immediate effect on urgent needs.
And not so much on.
Longer term improvements to the retail operating model.
Got it helpful. You guys talked about.
For them, they are really expecting triple digit bookings growth in 21, obviously bookings.
It impacted because it colgan 20, but but when you think about that double digit bookings growth next year. What are the primary use cases that you've seen the pipe right now that are going to drive that.
So much.
And potentially recycling.
So although the largest growth we'd expect we'll be in those areas as I noted in my remarks, the in retail store operations. The U.S. is.
Is a little.
A bit more disruptive than the other geography does appear to be at this point, but I don't know if you're watching the news today, there's there's more more trouble in Europe.
Causing some shutdowns and so forth. So so it's really hard to predict how retail we will go next year, but I believe that the.
Increase in demand for supply chain solutions is being driven by the pandemic. So so it's a kind of contra indicator that those it's driven by the pandemic as as opposed to being treated by it.
And with respect to plastics.
As the world's got a lot of concerns right now, but but the plastics situation is getting worse not better.
And there seems to be growing awareness.
Of the need to do something.
And growing voice, which will motivate change so so I'm actually very encouraged about the continuing progress on the uptick in recent progress in plastics in the midst of the cobot graces.
Got it and then just to follow on that sort of in your last part there with respect to recycling what are the sort of the near term key objectives and milestones of some these golden thread project.
You mentioned a couple industrial test you guys, obviously cold at night and do that to some extent not sure.
But one of the key milestones and objectives and then also when when do you think some of these pilots it sounds like you're working with a lot of lot of players. When do you think some of those products might turn into meaningful revenue.
Well I have our expert on the call today, just I'll turn over the floor to Bob to answer your questions about the.
Cycling in plastics.
Well a couple of things come to mind immediately the aim Holy Grail project is kind of the mother Lode project.
Purposes.
Supply chain and partner involvement and we're working with the brands the retailers several of the recycling companies sorting equipment providers political organizations and suppliers and plastic producers and affect the supply chain and so we look for that project.
Correct.
To be relatively active next year, we're working with that team in terms of the planning of the project and scheduling.
Because there is so many players it is a little unpredictable Jefferson, so where we're working through some of that and predictability.
Golden threads or less pan European they tend to be focused more in specific countries and in some respects those will be easier to drive forward again. There are some dependencies. We also would for those to start revenue in next year.
Got it and then just lastly, if I could.
You guys, obviously got close to $80 million on the balance sheet now are there any areas, where you you plan to really ramp investments over the next 12 months.
Yes, we'll be increasing our investments.
The circular economy.
In helping to solve the plastics prices.
Got it helpful Thats it.
Okay.
And our next question comes from.
Alan.
[music].
Hi, guys just a couple of questions for you.
First can you talk a little bit more about the laser engraving.
Work that you're doing with CPG, I guess and supply chain members and.
Talk a little bit about the application there.
Not too much because it's a confidential project.
It's just that.
As we talk about serialization.
There are three.
Three primary means to deliver the the serialized data of the the one that had been actually a gating factor was digital presses that has to do with the scale economies of digital presses versus traditional presses.
We had a major technological breakthrough.
During the past year with respect to what's called Mercosur or industrial inkjet overprint, allowing for serialization of traditionally printed.
Packaging. So that's been the big breakthrough that's caused us to be able to scale our business materially in that area.
The third means of doing it is through lasers.
And and that's not yet.
Commercially available it's in R&D, what we wanted to do was to assure that we actually have a.
Very prominent brand on some outstanding suppliers in a collaboration to to see.
If we can get there.
And if we do.
I think it's going to be a tremendous opportunity.
Opportunity.
For.
A change in the world frankly that bring the serialization of scale.
Two products of all kinds, but beginning with product so you might imagine where the substrate.
It would be more relevant on the labels. So so we have the means to do labels were working on the means to do substrates.
When we combine the two weve got really marvelous opportunity for growth and for.
The unique advantage provided by our plan.
That's great and then can you talk a little bit about the synergy if there is any.
Finally in the Holy Grail member.
Members that you've talked about who are obviously also your key customers for trace ability for supply chain et cetera et cetera.
You know is there cross fertilization going on there already or are these kind of silo things still right now.
Once again I'll refer to them.
Colleague Bob.
On that one.
There is a great synergy between the two and particularly within their organizations and so we're working to support really all sides of those.
Brands retailers and others that want to invest in the platform and part of what makes our platform so attractive.
The multiple use cases that can be driven from implementing it and.
For some of these companies recycling alone is a motivator, but for others. They want other use cases, including front of store efficiency or supply chain or food safety or manufacturing all those other things that we can bring to the party. So for somebody to see its closely held firm.
Most it is a an effort that spreads across the company.
Great. Thanks very much.
And once again, ladies and gentlemen, do you have any questions or comments. Please press star then one.
And our next question comes from Tom Kim.
With Oppenheimer and company.
Yes. Thank you for having this and my question is.
The increase in global demand of retail and all the other members that's involved with the Holy Grail Youre do.
Do you ever find yourself for accordingly any business.
So you don't become.
Straight and so you're not spread too thin.
Well again I'm, sorry, so I'll start Oh go ahead.
I'm going to go above two I'm sorry go ahead.
Where we try to focus our resources is on the key.
Individuals or companies that are supporting and investing most clearly in the project and in the technology, but.
Yes look to engage everyone that wants to be involved.
Just prioritize as necessary to make sure that we deliver high quality and and satisfy them.
Customer obsessing on their success.
And more generally Steve.
There are two threads to my answer one is yes, we are.
We will turn away business, where we don't see adequate promise in terms of the scaling of the opportunity beyond the particular need we are increasingly driving product development out of customer needs and customers are increasingly coming to us with problems and opportunities. They think that we can uniquely address with all the.
That said however, the model.
We have this one in which we empower suppliers.
And so as we on power suppliers that application layer.
Gibson hopefully increasingly served by the suppliers will then take on that complexity. So our business doesn't get increasingly complex.
It gets increasingly profitable because and suppliers will take on the application layer understanding and service requirements and we will all gaining.
Gain income from there.
Their growth in their business.
Great sounds good thank you.
And we have a follow up question from Jeff Bernstein with Cowen.
Great.
Great just wanted to hear your thoughts a little bit more on on Japan, I think in the past.
What we read and what you've talked about is that there's a little bit of more of a collective approach to adopting.
New technologies across the supply chain, rather than the kind of individual list. This stuff that goes on the U.S. and at a more consolidated group of suppliers.
So kind of breaking the ice with the first player there maybe as a prelude to a more accelerated adoption, but you tell us.
Well.
Charles actually is our executive.
Provides primary oversight and direction for the Japanese market, So I'll ask Charles to respond to that question.
Yes, so our strategy in Japan as well.
We have not invested heavily on boots on the ground and we have a sales executive there our strategy is really centered around enabling partners.
To deliver to the retailers and brands and we've got a number of projects going on we've got good engagement from our partners. This was kind.
Our first breakthrough.
I mentioned before the challenge that we had in Japan was that some of the hardware just didnt work as well with.
Our technology just in the fact that the hardware it wasn't having the latest optics or CPQ and are those sorts of things so with less than sub sub optimal.
Started to make significant improvements there to where the hardware ecosystem is a lot more supportive of our technology and this was kind of the first.
Since where we had a significant update to scanner software that enables the ability or the retailer to utilize the technology front of store and we're continuing to make progress there and we've got good tail I met with a number of key partners. There that I think will open up the doors for additional opportunities.
Thats great. Thank you.
But.
And we do not have any further questions.
All right terrific well, thank you everyone for participating in.
Look forward to.
Any follow up questions you may have.
To us we continue.
Soon so thanks, very much stay safe and be well.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great goal.
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