Q1 2024 Digimarc Corp Earnings Call

Operator: Greetings and welcome to the Digimarc First Quarter 2024 Financial Results Conference call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the <unk> first quarter 2024 financial results Conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star.

Operator: Zero on your telephone keypad.

Operator: A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, George Karamoz, Chief Legal Officer. Thank you, sir.

Operator: As a reminder, this conference is being recorded it is now my pleasure to introduce your host George Campbell Chief Legal officer. Thank you Sir you may begin.

George Karamoz: You may begin. Welcome to our Q1 conference call. Riley McCormack, our CEO, and Charles Beck, our CFO, are with me on the call. On the call today, we'll provide a business update and discuss our Q1 2024 financial results, which will be followed by a question and answer session.

George Karamoz: Welcome to our Q1 conference call, Brian Mccormick, our CEO and Charles Beck, Our CFO are with me on the call on the call today, we will provide a business update and discuss Q1 2024 financial results. This will be followed by a question and answer Forum, we have posted our prepared remarks in the Investor Relations section of our website and will art.

George Karamoz: We have posted our prepared remarks in the Investor Relations section of our website, and we'll archive this webcast there. Before we begin, let me remind everyone that today's discussion contains forward-looking statements that have risks and uncertainties. Please refer to our press release for more information on the specific risk factors that could cause actual results to differ materially. Riley will now provide a business update. Thank you, George. Welcome aboard. Hello, everyone.

Riley: Cai this webcast there.

George Karamoz: Before we begin let me remind everyone that today's discussion contains forward looking statements that have risks and uncertainties. Please refer to our press release for more information on the specific risk factors that could cause actual results could differ materially.

George Karamoz: Ali will now provide a business update.

Riley Young McCormack: Thank you for joining today's call. As our world becomes increasingly digital and companies progress on their digital transformation journey, Digimarc maximizes the ways in which products and multimedia can digitally interact with the various systems that surround them. We excel at the identification and authentication of physical goods and digital assets, often at massive scale, and often where other means of identification or authentication don't work well or don't work at all.

Riley: Thank you George welcome aboard Hello, everyone. Thank you for joining today's call.

Riley Young McCormack: As our world becomes increasingly digital and companies Progressive digital transformation transformation journeys did.

Riley Young McCormack: Did you Mark maximizes the ways in which products and multi media can digitally interact with the various systems that surround them.

Riley Young McCormack: We excel at the identification and authentication of physical goods and digital assets often at massive scale and often where other means of identification or authentication don't work well or don't work at all.

Riley Young McCormack: Our focus is on converting this large total addressable market into substantial free cash flow by positioning ourselves to deliver high and long-lasting top-line growth at world-class operating margins. This starts with us being easy to begin doing business with and excellent at guiding customers along their digital transformation journey, and is aided by four tailwinds we've been very intentional about creating.

Riley Young McCormack: Our focus is on converting this large total addressable market with a substantial free cash flow by positioning ourselves to deliver high long lasting topline growth at world class operating margins.

Riley Young McCormack: It starts without being easy to begin doing business with an extra the guiding customers along their digital transformation journey and.

Riley Young McCormack: And is aided by four tailwind we've been very intentional to create.

Riley Young McCormack: Our incredibly deep and wide modes provide us the ability to offer differentiated products. In turn, our differentiated products allow us the ability to create new markets, as well as disrupt existing ones, all while delivering best-in-class gross margins that will continue to expand as we scale.

Riley Young McCormack: One <unk>.

Riley Young McCormack: Incredibly deep and wide modes provide us the ability to offer it to offer differentiated products in turn our differentiated products allow us the ability to create new markets as well as to disrupt existing ones all while delivering best in class gross margins that will continue to expand as we scale.

Riley Young McCormack: The need to identify or authenticate physical goods and digital assets is universal, and thus almost every entity in the world is a potential Digimarc customer. At the same time, our technology allows us to identify and authenticate things where other solutions don't work well or don't work at all, which means our ecosystem is comprised of companies incentivized to partner with us, as opposed to companies that pose competitive risk. These two truths give us the exciting opportunity to leverage our partner's customer list, pipelines, and go-to-market resources, and specific domain expertise to deliver quickly scalable and high gross profit margin revenue in a way that is also extremely efficient from an operating expenditure perspective.

Riley Young McCormack: Two the need to identify or authenticate physical goods and digital assets is universal and that's almost every entity in the world.

Riley Young McCormack: The potential <unk> customer.

Riley Young McCormack: The same time, our technology allows us to identify and authenticate settings, where other solutions don't work, while they're don't work at all which means our ecosystem is comprised of companies incentivize to partner with us as opposed to companies that pose a competitive risk.

Riley Young McCormack: These two truths provide us an exciting opportunity to leverage our partners' customer list pipelines and go to market go to market resources and specific domain expertise to deliver quickly scalable and high gross profit margin revenue in a way that is also extremely efficient from an operating expenditure perspective.

Riley Young McCormack: Yeah.

Riley Young McCormack: There are many use cases that require companies to identify or authenticate their physical items and digital assets, and there are many ways we can configure our technology to achieve these goals, and therefore, our ability to productize new functionality is open-ended. This means our already prodigious TAM will continue to grow as we either launch new products or add opportunity-unlocking functionality to existing products. Four, we engineer our products to be accretive, which means the more Digimarc products a customer buys, the more value each product delivers. This positions us to harvest the low-hanging and highly profitable fruit of cross-cells and up-cells for years to come.

Riley Young McCormack: Three there are many use cases that require companies to identify or authenticate their physical items and digital assets in many ways. We can configure our technologies to achieve these goals and therefore, our ability to product ties new functionality is open ended.

Riley Young McCormack: This means our already prodigious Tam will continue to grow as we either launch new products or add opportunity unlocking functionality to existing products.

Riley Young McCormack: Sure, we engineer our products to be accretive, which means the more did you mark products, a customer buys the more value each product delivers.

Riley Young McCormack: This positions us to harvest the low hanging in highly profitable through the cross sells and upsells for years to come.

Riley Young McCormack: The combination of these four tailwinds is why we are confident in our ability to deliver high and long-term growth at world-class operating margins and, in so doing, achieve our goal of converting our enormous TAM into massive free cash flow generation. Our first quarter results provide multiple tangible examples I'd like to now share. We signed a multi-year deal with a customer in the collectibles industry that delivered six-figure ARR growth in Q1.

Riley Young McCormack: The combination of these four tailwind is why we are confident in our ability to deliver high long lasting growth at world class operating margins.

Riley Young McCormack: So doing achieve our goal of converting our enormous tam into massive free cash flow generation.

Riley Young McCormack: Our first quarter results provide multiple tangible examples I'd like to now share.

Riley Young McCormack: We signed a multiyear deal with a customer in the collectibles industry that delivered six figure.

Riley Young McCormack: Our growth in Q1.

Riley Young McCormack: Moreover, this deal should see ARR grow to $2 million in year two and into the mid to very high seven figures in year three and beyond. Collectibles is a new industry for us and one we believe is ripe for digital transformation in both how items are identified as well as how they are authenticated.

Riley Young McCormack: Moreover, this deal should see a or are great at $2 million in year, two and into the mid to very high seven figures in year three and beyond.

Riley Young McCormack: Collectibles as a new industry for us and one we believe is right for digital transformation in both how items are identified as well as how they are authenticated.

Riley Young McCormack: To that end, this customer chose to start their journey with two Digimarc products, Digimarc Automate and Digimarc Validate, and we believe that as we work to ensure our valued customers' success, there's even more we could do; we could help them accomplish beyond what is scoped in this initial agreement. Moreover, and unrelated to this deal, we are in discussions with multiple partners, both new and old, regarding opportunities to jointly provide value to other companies in this multi-hundred billion dollar per year industry.

Speaker Change: You bet and this customer chose to start their journey with two did you Mark products did you Mark automate and did you Mark validate and we believe that as we work to ensure our value customer success, there's even more we could do we could help them accomplish beyond what is scope in this initial agreement.

Riley Young McCormack: Moreover, and unrelated to this deal we are in discussions with multiple partners, both new and old regarding opportunities to jointly provide value to other companies in this multi hundred billion dollar per year industry.

Riley Young McCormack: Collectibles is a perfect example of an industry that has been held back by other means of identification and authentication not working well or not working at all, and we are excited to guide this industry along its product digitization journey and, in so doing, accelerate its growth.

Riley Young McCormack: Collectibles as a perfect example of an industry that has been held back by other means of identification and authentication not working while they're not working at all and we are excited to guide this industry a long as product Digitization journey and in so doing accelerate its growth.

Riley Young McCormack: We signed a high-five-figure ARI Digimarc Automate deal with a division of our largest commercial customer that will grow to six figures in the very near term. We believe this new deal is yet another proof point that we are still just scratching the surface of all the transformational value we can provide this uber-valued and tech-forward customer. We remain laser focused on doing just that.

Riley Young McCormack: We signed a high so I figured I'd give you my Academy deal with a division of our largest commercial customer that will grow to six figures in the very near term. We believe this new deal is yet another proof point that we're still just scratching the surface of all the transformational value. We can provide the super valued in tech forward customer.

Riley Young McCormack: We remain laser focused on doing just that.

Riley Young McCormack: We have sold a longstanding Digimarc Validate customer that had historically only been focused on B2B and counterfeit applications but is now keenly interested in expanding the authentication capability of Digimarc Validate to end consumers. This upsell allows our customer to unlock new functionality that we just recently productized, and we believe the opportunity with this customer for B2C validation is enormous. We are excited to prove our value and earn the right to capture the entirety of this opportunity this new functionality allows with this specific customer as well as many, many other companies that will benefit from this newly productized functionality.

Riley Young McCormack: We have sold a longstanding did you mark validate customer that has historically only been focused on <unk> and I cant counterpin applications, but he's now keenly interested in expanding that the authentication capability of did you mark validate to end consumers.

Riley Young McCormack: This upsell allows our customer to unlock new functionality that we just recently product ties and we believe the opportunity with this customer for BDC validation is enormous.

Riley Young McCormack: We are excited to prove our value and earn the right to capture the entirety of this offer the opportunity. This new functionality allows with this specific customer as well as many many other companies that will benefit from this newly prototypes functionality.

Riley Young McCormack: We signed a deal with another customer interested in beginning their journey with two Digimarc products. In this case, an iconic European brand interested in the power of Digimarc Engage and Digimarc Validate. While this initial deal was mid-five figures, this relationship has the potential to grow, to be much larger, even if the customer doesn't expand beyond these two Digimarc products. It is also important to note that this customer understands the creative nature of our products and has already expressed interest in another Digimarc product beyond Digimarc Engage and Digimarc Validate. We signed a Digimarc Validate deal with an existing Digimarc Automate customer and have additional pipeline opportunities for both products with this extremely large CPG.

Riley Young McCormack: We signed a deal with another customer interested in beginning their journey with two generic products. In this case, an iconic European brand interested in the power of ditch American gauge did you Mark validate.

Riley Young McCormack: While this initial deal was my mid five figures. This relationship has the potential to grow to be much larger even if the customer doesn't it doesn't extend beyond these two digit mark products.

Riley Young McCormack: It is also important to note this customer understands the accretive nature of our products and has already expressed interest in another digit mark product beyond did you mark engage in Denmark validate.

Riley Young McCormack: We signed that did you mark validate deal with an existing did you Mark automate customer had an additional type of pipeline opportunities for both products with its extremely large CPG.

Riley Young McCormack: Our focus is on not only proving the value of Digimarc Validate and Digimarc Automate but also proving Digimarc to be a digital transformation partner, as the upside presented by this single customer is enormous, as it is not only a large company but a very viable candidate for our full product suite. We upsold Digimarc Engage to a long-standing Digimarc Validate customer and believe the upside from their planned rollout of Digimarc Engage will see this high five-figure initial deal grow well into the six figures in the not-too-distant future.

Riley Young McCormack: Our focus is on not only proving the value of Denmark validating did you Mark automate, but also did you mark as a digital transformation partner is the upside presented by the single customer is enormous.

Riley Young McCormack: As it is not only a large company, but a very viable candidate for our full product suite.

Riley Young McCormack: We have sold digitally engaged through a long standing did you mark validate customer I believe the upside from their plans rollout of did you Mark can gauge will see this high five figure initial deal we're well into the six figures in the not too distant future.

Riley Young McCormack: Our go-to-market strategies are not just increasing our win rates, however, but also our momentum, as evidenced by other Q1 deals, including a six-figure upsell of Digimarc Engage to an existing customer just over a year after the initial agreement was signed. Additionally, we secured a Digimarc Validate agreement with a new customer within 38 days of our initial discussion, as well as revived a previously inactive relationship by signing a Digimarc Validate deal with another new customer only 45 days after re-engagement.

Riley Young McCormack: Our go to market strategies are not just increasing our win rates. However, but also our momentum as evidenced by their Q1 deals, including a six figure upsell or did your American gauge to an existing customer just over a year. After the initial agreement was signed.

Riley Young McCormack: Additionally, we secured a did you mark validate agreement with a new customer within 30 days of our initial discussion.

Riley Young McCormack: As well as revived the previously inactive relationship by signing a benchmark validate deal with another new customer only 45 days after re engagement.

Riley Young McCormack: These achievements highlight the effectiveness of our refined approach and the strong demand for our solution. The final first quarter wins that I want to highlight today involve the closing of two separate Digimarc Validate deals with divisions of an existing Digimarc customer, one with the division new to our offering and one with the division who churned in 2023. This 2023 churn was a result of our holding firm on key terms during the renewal process, and the rebound signing is a testament to the incredible value Digimarc Validate provides.

Riley Young McCormack: These achievements highlight the effectiveness of our refined approach and strong demand for our solutions.

Riley Young McCormack: The final first quarter wins that I wanted to highlight today involve the closing of two separate did you mark validate deals with divisions of an existing <unk> customer one with the division new to our offering and one with the division who churned in 2023.

Riley Young McCormack: Is 2023 churn was a result of our holding firm on key terms during the renewal process and the rebound signing is a testament to the incredible value did you Mark validate provides.

Riley Young McCormack: Important to note, even during the period during which this division was not a customer, they continued to act as a Digimarc champion in our conversations with other divisions and were key to our closing the new division we signed this quarter, as well as progressing other divisions currently in our pipeline. We are thrilled to have this division back as a customer. While not normally a topic discussed voluntarily in prepared remarks, I do want to spend a few minutes discussing customer churn, as this is yet another area in which we differentiate.

Riley Young McCormack: Important to note even during the period during which this division was not a customer we continue to act as a <unk> champion in our conversation with other divisions and were key to our closing the New Division, we signed this quarter as well as progressing other divisions currently in our pipeline.

Riley Young McCormack: We are thrilled to have this division back of the customer.

Riley Young McCormack: While not normally a topic discussed voluntarily prepared remarks, I do want to spend a few minutes discussing customer churn.

Riley Young McCormack: This is yet another area in which we differentiate.

Riley Young McCormack: First, as this example shows, while we are not immune to churn, I expect our churn will always remain much lower than other SAS companies, as the solutions we provide tend to be mission critical, and Digimarc is unique in being able to provide them.

Riley Young McCormack: First as this example shows while we were not immune to churn I expect our churn will always remain much lower than other SaaS companies as the solutions. We provide tend to be mission critical and did you Mark is unique in being able to provide them.

Riley Young McCormack: Our premium offerings also mean we do more business with established companies, and the overall trends from which we benefit are unlikely to be defunded by companies undergoing organizational change. It is also important to note that not all churn is regrettable, especially for a company that has undergone the transformation that we've executed here. As we have productized functionality previously sold as bespoke offerings and been acting with intentionality to not deviate from our long-term vision, we have been guided by a decision we made at the onset of our transformation and shared with you all in an earnest call in 2021.

Riley Young McCormack: Our premium offerings also mean, we do more business with established companies and the overall trends from which we benefit are unlikely to be funded by companies undergoing organizational change.

Riley Young McCormack: Also important to note that not all churn is regrettable, especially for a company that is undergoing a transformation that we've executed here.

Riley Young McCormack: As we have product ice functionality previously sold is bespoke offerings, and then acting with intentionality to not deviate from our long term vision, we have been guided by a decision we made at the onset of our transformation and shared with you all on an earnings call in 2021.

Riley Young McCormack: We will build a focused, profitable, and sustainable business versus pursuing ARR growth at all costs. Not every dollar of revenue is created equal, and when forced to choose, we will always prioritize the creation of long-term, not short-term, value.

Riley Young McCormack: We will build a focused profitable and sustainable business versus pursuing are our growth at all costs.

Riley Young McCormack: Not every dollar of revenue is created equal and when forced to choose we will always prioritize the creation of long term not short term value.

Riley Young McCormack: While acting as a headwind to our reported net ARR growth since we began our transformation, this headwind of non-regrettable churn is predominantly behind us. And what's more, this discipline will allow us to avoid the distractions that can impede vision realization, as well as maximize our overall profitability by maintaining a focus on the profitability of each customer. But this discipline can also lead to short-term benefits as well.

Riley Young McCormack: While acting as a headwind to our reported net are our growth since we began our transformation. This headwind of non regrettable churn is predominantly behind us and what's more this discipline will allow us to avoid the distractions that can impede vision realization.

Riley Young McCormack: As well as maximize our overall profitability by maintaining a focus on the profitability of each customer.

Riley Young McCormack: But this discipline can also lead to short term benefits as well.

Riley Young McCormack: And in Q1, we recorded a six-figure ARR upsell as a result of a legacy customer choosing to accept our right-size pricing, despite this pricing being significantly higher than their legacy deal. Before I turn the call over to Charles, I want to touch on what we refer to as our ecosystem-driven opportunity: Digimarc Recycle, Digimarc Validate Media, and Digimarc Retail Experience.

Riley Young McCormack: And in Q1, we recorded a six figure are our up sell as a result of a legacy customer choosing to accept a right sized pricing. Despite this pricing being significantly higher than the legacy deal.

Riley Young McCormack: Yeah.

Riley Young McCormack: Before I turn the call over to Charles I wanted to touch on what we refer to as our ecosystem driven opportunities.

Riley Young McCormack: Did you Mark recycle did you Mark validate media and did you Mark retail experience.

Riley Young McCormack: While these opportunities provide game-changing upside that will be extremely fast, profitable, and sticky once they each begin to scale, the ultimate timing of when exactly that happens is tough to predict, as it is ultimately outside of our direct control. These opportunities require the collaboration of multiple parties, and in some cases, may be accelerated by regulatory action. Yet once the spark is lit, they should be extremely sticky and grow exponentially due to well-understood network effects and natural incentives for rapid adoption. Do not read any meaning into what I just said.

Riley Young McCormack: These opportunities provide game changing upside that will be extremely fast profitable and sticky once they each begin to scale.

Riley Young McCormack: The ultimate timing of when exactly that happens is tough to predict as it is ultimately outside of our direct control.

Riley Young McCormack: These opportunities requires the collaboration of multiple parties in some cases may be accelerated by regulatory action.

Riley Young McCormack: Once the spark has led this should be extremely sticky and grow exponentially due to well understood network effects and natural incentives rapid adoption.

Riley Young McCormack: [laughter].

Riley Young McCormack: Do not read any signaling into what I just said it is something we've said before.

Riley Young McCormack: It is something we've said before. And also, let me be very clear in saying that we remain just as excited about these three giant opportunities and just as optimistic about the impact they will each have when they do begin to scale. Instead, I wanted to focus today's prepared remarks on the other pieces of our business that don't receive the attention from investors that we believe they should. While Digimarc Recycle, Digimarc Validate Media, and Digimarc Retail Experience tend to make up the vast majority of investor questions, they don't yet contribute in a meaningful way to the incredibly high and accelerating growth we've been delivering in both ARR and commercial subscription revenue. There are many unique aspects to Digimarc, and this is yet another example.

Riley Young McCormack: And also let me be very clear in saying that we remain just as excited about these three giant opportunities and just as optimistic about the impact they will each have when they do begin to scale.

Riley Young McCormack: Instead I wanted to focus today's prepared remarks on the other pieces of our business, which don't receive the attention from investors that we believe they should.

Riley Young McCormack: Well did you Mark recycle did you Mark validate media and did you Mark retail experience tend to make up the vast majority of investors investor questions. They don't yet contribute in a meaningful way to the incredibly high and accelerating growth we've been delivering in both <unk> and commercial subscription revenue.

Riley Young McCormack: There are many unique aspects to dig your market and this is yet another example.

Riley Young McCormack: We're delivering strong results in the parts of our business that we where we directly assert control, while progressing and growing to untapped opportunities, which will provide stair-step increases in growth and profitability when they do indeed occur. An investment in Digimarc is both an investment in a quickly growing and accelerating software business with best-in-class and expanded gross margins, and an investment in a company that is progressing towards becoming the de facto market standard in some really exciting and massive opportunities, with a third-legged value provided by our work with the World Central Banks that delivers steadily growing revenue and high inflation-protected operating margins while acting as a profitable source of commercial and intellectual property generation.

Riley Young McCormack: We're delivering strong results in the parts of our business that we where we directly assert control, while progressing and growing the untapped opportunities, which were about stair step increases in growth and profitability. So if they do indeed occur.

Riley Young McCormack: And investment in Detroit market as both an investment in a quickly growing and accelerating software business with best in class and expanded gross margins.

Riley Young McCormack: And an investment in a company that is progressing towards becoming the de facto market standard in some really exciting and massive opportunities.

Riley Young McCormack: Third leg value provided by our work with the world Central banks that deliberate steady steadily growing revenue.

Riley Young McCormack: And high inflation protected operating margins.

Riley Young McCormack: The thing is it profitable source of commercial and intellectual property generation.

Riley Young McCormack: Yes.

Riley Young McCormack: We are the sum of these three pillars of shareholder value, and before I gave an update on the ecosystem-driven opportunities, which I fully agree are incredibly exciting components of our future, I wanted to spend the majority of this call on the incredibly exciting components of our business generating ARR today. Digimarc Recycle.

Riley Young McCormack: We are the sum of these three pillars of shareholder value and before I gave an update on the ecosystem driven opportunities that I fully agree are incredibly exciting components of our future I wanted to spend the majority of this call on the incredibly exciting components of our business generating IRR today.

Riley Young McCormack: Yeah.

Riley Young McCormack: Did you Merck recycle.

Riley Young McCormack: As discussed in the last call, we recently launched a new go-to-market avenue for this revolutionary product, and I am happy to share we are in conversations with multiple parties regarding this new avenue, including two parties in the same country. We are also in conversations on two continents about leveraging our Center of Expertise program as a way to bring our partners' considerable heft to bear in opening Digimarc recycle markets. Success on either of these fronts would speed the time to opening the Digimarc recycled markets while, in parallel, reducing the associated costs.

Riley Young McCormack: As discussed in our last call. We recently launched a new go to market Avenue for this revolutionary product and I am happy to share we are in conversations with multiple parties regarding this new avenue, including two parties in the same country.

Riley Young McCormack: We are also in conversations on two continents about leveraging our center of expertise program as a way to bring our partners considerable had to bear and opening did you macrocycle markets.

Riley Young McCormack: Yeah.

Riley Young McCormack: Success on either of these fronts with speed the time to opening up get your macrocycle markets, while in parallel reducing the associated costs success on the ladder front would add the additional benefit of.

Riley Young McCormack: Success on the latter front would add the additional benefit of bringing these partners into our COE program and thus allow for the building of a pipeline for our other products as well. Turning to other important developments for Digimarc Recycle, the European Packaging and Packaging Waste Regulation has been finalized, and we are all awaiting the final full text. Recall that all previous drafts of this regulation mandated digital marking on all packaging as a means to improve waste sortation, which would provide an incredibly strong tailwind for opening Digimarc Recycle Markets in every country in the EU. Moreover, it has already been made public that the PPWR will mandate deposit-return schemes in countries where collections are below a very high bar.

Riley Young McCormack: Bringing these partners into our Coa program and that's allowed for that building a pipeline for our other products as well.

Riley Young McCormack: Yeah.

Riley Young McCormack: Turning to other important developments for <unk> recycle the European packaging and packaging waste regulation has been finalized and we are all awaiting the final full text.

Riley Young McCormack: Recall that all previous draft. So this regulation mandated digital marking an all packaging as a means to improve waste sortation, which would provide an incredibly strong tailwind for opening day macrocycle markets in every country in the EU.

Riley Young McCormack: Moreover, it has already been made public with the P. P. W.

Riley Young McCormack: P. P. W. R will mandate deposit return schemes in countries, where collections are below a very high bar.

Riley Young McCormack: This will provide equally strong tailwinds for our ability, in conjunction with partners, to apply the power of Digimarc Illuminate to power these schemes across the European Union. Recall that Digimarc Illuminate provides a differentiated and lower cost means to provide the product authentication required by a performant DRS. And this use case was a key component in the $32 million deal we signed a few quarters ago. Also in Europe, the Holy Grail trial is in its final phase, and while the step change in proving that digital watermarks will bring to plastic recycling is already widely acknowledged, we are excited to support this wonderful group through the end of this trial, so Digimarc Recycle can claim the powerful validation that will come from receiving an industry-driven tech readiness level nine designation.

Riley Young McCormack: This will provide equally strong tailwind for our ability in conjunction with partners to apply the power of <unk> eliminate the power of these schemes across the European Union.

Riley Young McCormack: Recall that digi, Mark illuminate provides a differentiated and lower cost means to provide the product authentication required by perform at D. R. S.

Riley Young McCormack: And this use case was a key component in the $32 million deal, we signed a few quarters ago.

Riley Young McCormack: Also in Europe, the Holy Grail trial is in its final phase and while the step change improvement with digital watermarks will bring to plastic recycling is already widely acknowledged.

Riley Young McCormack: We are also supporting this group as they optimize their planning for an initial market launch. And while we are unable to speak to any updates on this front, we do want to flag to our investors to be on the lookout for an exciting update on all Holy Grail activities that we are being told will come soon, and Digimarc Validate Media as regulators worldwide endeavor to strike the right balance between protecting and against the harm of generative AI without stifling the incredible advancements it will bring. There is an increasing awareness that tools that can do both, like digital watermarks, must be used.

Riley Young McCormack: We are also supporting this group as they optimize their planning for an initial market launch and while we are unable to speak to any updates on this front, we do want to flag to our investors to be able to look out from an exciting update on all Holy Grail activities that were being told will come soon.

Riley Young McCormack: There is an increasing awareness that tools that can do both like digital watermarks.

Riley Young McCormack: We are actively involved in these conversations, providing our 30 years of expertise in applying digital watermarks to build massive systems of trust and authenticity. In Q1, Digimarc was appointed a founding member of the National Institute of Standards and Technologies, U.S. AI Safety Institute Consortium, and we also announced that, along with Adobe, we are co-chairing the new digital watermark workgroup of the Coalition for Content Provider Authenticity, or CPPA. On the product front, we released the world's first browser extension to turn Chrome into a CTPA validator, and, along with our value partner DataTrails, we put the finishing touches on the industry's first fully integrated content protection solution to fortify digital content using advanced digital watermarks in tandem with cryptographic proofs, a solution we announced in early April.

Riley Young McCormack: We are actively involved in these conversations providing our 30 years of expertise in applying digital watermarks to build massive system of trust and authenticity.

Riley Young McCormack: We are big believers that of all the many benefits Gen AI will bring, perhaps the greatest will be to act as the catalyst to deliver the safer, fairer, and more authentic internet we all deserve. To help deliver this much-needed future, we announced in January that we have made our safe digital watermarking, embedding, and detection tools for digital assets free to large ecosystem partners so that our Digimarc Validate customers will have easy access when they are ready to adopt at scale.

Riley Young McCormack: There is a lot more going on that is not yet ready for broader discussion, but before I close on Digimarc Validate Media, I do want to point everyone to the State of California and Assembly Bill 3211, which is focused on authenticity and watermarking standards and might end up being the catalyst for the Digital Rights Act and, in so doing, build upon California's proud history of leading the world on important issues.

Riley Young McCormack: Realizing that real damage is being done every day and action is delayed, the California Assembly has a marvelously fast time frame in mind, and I was honored to be asked to testify last week on the feasibility of the key provisions in this bill. We are excited to provide our support as this bill continues its fast progress through the California State Assembly and, hopefully, into law. Multiple global regulators are closely watching this bill, and its impact will be felt not just domestically but around the world.

Riley Young McCormack: On Digimarc retail experience, while there is little we can say about this opportunity due to the immense pride we take in being a trusted supplier, I did mention earlier in the call that we signed an Automated Deal with our largest commercial customer, who is also key to the broad adoption of retail experience by the global CBGs. The opportunities presented for digital transformation between the world's leading product digitization company and a company that touches a mind-boggling number of products across multiple touchpoints, both physical and digital, are truly exciting.

Riley Young McCormack: And the two most impactful ways to bring those opportunities to fruition are A, win their business every day through a maniacal focus on delivering excellence, and B, not speaking about their business on their behalf. I will now turn the call over to Charles to discuss our financial results. Thank you, Riley, and good afternoon, everyone.

Charles Beck: Continuing on the positive trends we delivered in the third and fourth quarters last year, we again delivered improved year-over-year financial performance in the first quarter this year. Ending ARR grew to $23.9 million, representing an 85% increase. Commercial subscription revenue increased 52%. Subscription gross profit margin was 87%, a 7.5 percentage point improvement. Operating expenses decreased 10%, and non-GAAP net loss decreased $3.5 million, or 39%.

Charles Beck: I highlight these areas again because they are all critical drivers toward reaching positive free cash flow. Before I begin a deeper review of the quarter, I want to highlight that we've posted a quarterly earnings snapshot presentation to the investor relations section of our website, along with our normal quarterly material. The Cooley Earnings Snapshot is broken into two parts.

Charles Beck: The first part provides an overview of our business and contains, among other things, a deeper dive into our three different commercial go-to-market strategies, as well as key details of the three pillars of shareholder value, which Riley highlighted earlier. The second part provides an overview of the Corporation and presents our financial KPIs with relevant comparative and trended data. As you will see, we have delivered accelerating growth in both the year one and three-year periods for ARR and commercial subscription revenue, as well as a material improvement in our subscription gross profit margin.

Charles Beck: We will continue to refine the material in the quarterly earnings snapshot in the quarters ahead, and we welcome your feedback as we strive to provide investors continued clarity and transparency. ARR increased 85% from $13 million at the end of March last year to $23.9 million at the end of March this year.

Charles Beck: The increase in AR largely reflects the impact of new customer contracts and several important customer upsells. As a reminder, we believe ARR is the best leading indicator for future commercial subscription revenue growth. Revenue growth will lag ARR growth as commercial subscription revenue is generally recognized ruthlessly over a contract term versus ARR, which is calculated upfront upon entering into a contract. You can see this by looking at our Q1 results, as ARR increased 85% year-over-year, while commercial subscription revenue increased 52%.

Charles Beck: Total revenue for the quarter was $9.9 million, an increase of $2.1 million, or 27%, from $7.8 million in Q1 last year, reflecting strong growth and subscription revenue. Subscription revenue, which accounted for 58% of total revenue for the quarter, grew 48% from $3.9 million to $5.8 million.

Charles Beck: Digimarc Corp. The increase reflects subscription revenue recognized on new customer contracts as well as upsells on existing customer contracts. Commercial subscription revenue grew at an even higher rate of 52%, and service revenue increased 6% from $4 million to $4.2 million. The increase primarily reflects the timing of program work with the central bank. Subscription gross profit margin improved from 79.5% in Q1 last year to 87% in Q1 this year, representing a 7.5 percentage point improvement.

Charles Beck: The large increase year-over-year reflects both strong growth in subscription revenue combined with a favorable mix of subscription revenue to our newer products, which have higher gross profit margins than our legacy products. Service gross profit margin was down slightly from 56.7% in Q1 last year to 56% in Q1 this year.

Charles Beck: The large increase year over year reflects both strong growth in subscription revenue combined with a favorable mix in subscription revenue to our newer products, which have higher gross profit margins than our legacy products.

Charles Beck: Service gross profit margin was down slightly from 56, 7% in Q1 last year to 56% in Q1 this year.

Charles Beck: It is not unusual to see some fluctuation in service margins depending on the labor mix for services work. We expect to generate mid 50% service gross profit margins on a normalized basis. Operating expenses for the quarter were $17.1 million compared to $19 million in Q1 last year, a decrease of 10%.

Charles Beck: It is not unusual to see some fluctuation in service margins, depending on labor mix for services work.

Charles Beck: We expect to generate mid 50% service gross profit margins on a normalized basis.

Charles Beck: Operating expenses for the quarter was $17 1 million compared to $19 million in Q1 last year, a decrease of 10%.

Charles Beck: Operating expenses in Q1 last year included $2.1 million of one-time severance costs for organizational changes we made in February 2023. Excluding severance costs, operating expenses were up only $200,000 year-over-year, or 1%, reflecting the impact of annual compensation adjustments for our employees, offset by the warhead count. Company-wide, we continue to focus on ways to maximize our productivity and efficiency as an organization in order to minimize the impact of rising labor and other costs. Known GAAP operating expenses, which excludes non-cash and non-recurring items, were $13.8 million for the quarter, down 11% compared to $15.5 million in Q1 last year.

Charles Beck: Operating expenses in Q1 last year included $2 1 million of onetime severance costs for organizational changes we made in February 2023.

Charles Beck: Companywide, we continue to focus on ways to maximize our productivity and efficiency as an organization in order to minimize the impact of rising labor and other costs.

Charles Beck: Yeah.

Charles Beck: non-GAAP operating expenses, which excludes noncash and nonrecurring items was $13 8 million for the quarter down 11% compared to $15 5 million in Q1 last year.

Charles Beck: Net loss per share for the quarter was $0.50 vs. $0.70 in Q1 last year. And non-GAAP net loss per share was also considerably lower for the quarter at $0.27 vs. $0.45 in Q1 last year. We ended the quarter with $48.9 million in cash and short-term investments after raising $32.5 million of gross proceeds through a registered direct offering that closed in February. Pre-cash flow usage was $8.6 million for the quarter compared to $8.9 million in Q1 last year.

Charles Beck: Net loss per share for the quarter was 50 versus 70% in Q1 last year and.

Charles Beck: non-GAAP net loss per share was also considerably lower for the quarter at 27.

Charles Beck: Versus 45 in Q1 last year.

Charles Beck: We ended the quarter with $48 9 million in cash and short term investments.

Charles Beck: So raising $32 $5 million of gross proceeds through a registered direct offering that closed in February.

Charles Beck: Free cash flow usage was $8 6 million for the quarter compared to $8 9 million in Q1 last year.

Charles Beck: As we foreshadowed on the last earnings call, free cash flow usage in Q1 included annual cash incentive payments to our employees. The company paid $2.9 million in Q1 to our employees for exceeding our 2023 financial targets and strategic goals. Excluding these cash and setup payments, free cash flow would have been $5.7 million.

Charles Beck: Given cash flows can fluctuate quarter to quarter, depending on the timing of cash inflows and outflows, we continue to believe that a good proxy for a normalized level of free cash flow is using non-GAAP loss and adding a small amount of capital expenditures we invest. Our non-GAAP loss was $5.5 million during Q1 this year versus $90 million in Q1 last year, a decrease of 39%.

Charles Beck: Given cash flow can fluctuate quarter to quarter, depending on the timing of cash inflows and outflows.

Charles Beck: We also used an additional $1.8 million of cash in Q1 for share repurchases. For further discussion of our financial results and risks and prospects for our business, please see our Form 10-Q that will be filed with the SEC later this week. I will now turn the call back over to Riley for final remarks. Thanks, Charles. Q1 was another strong quarter for Digimarc.

Riley Young McCormack: Compared to the quarter a year ago, we grew quarter-ending ARR 85%, grew commercial subscription revenue 52%, and expanded subscription gross profit margin seven and a half percentage points to 87%. While investors remain understandably and rightfully excited about what our massive ecosystem-driven opportunities will contribute to our future, I am so proud of what the team is delivering and the massive opportunities in front of us today. Our top line growth has been accelerating from already high levels, our best-in-class gross profit margin continues to expand, and we are positioned to convert an incredibly high percentage of the resulting gross profit dollars to the bottom line by leveraging our partners to further boost our top line in an incredibly OPEX-efficient way.

Riley Young McCormack: There are many things that make Digimarc a unique and generational investment opportunity. The fact we have three very real, tangible, and quantifiable pillars to our shareholder value story is one of the most powerful and, at the same time, perhaps the least understood.

Riley Young McCormack: I encourage you all to review the quarterly earnings snapshot that Charles referenced for more on this front. As always, we remain focused on positioning ourselves to convert our large, total addressable market into substantial free cash flow by delivering high and long-lasting growth at world-class operating margins. Q1 provided multiple tangible examples of our progress against this focus, and we remain excited for what's ahead. We will now open the call up for questions. Operator Thank you.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question and answer session. You may press star 2 if you would like to remove your question from the queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star 2. One moment, please, while we poll for questions. Our first question comes from Joshua Riley of Needham. Please proceed with your question. Yeah, thanks for taking my questions and nice job and congrats on the 85% ARR growth there. I'm curious, what's the initial response you're hearing from customers on the next gen digital watermark upgrade here?

Operator: And how much of a factor was that in some of the deals that you kind of highlighted here in the quarter? Or is that more something that's going to be on the rise as a growth driver in the second half of the year? Thanks, Josh.

Riley Young McCormack: Our first question comes from Joshua Reilly with Needham. Please proceed with your question.

Riley Young McCormack: Yeah, Thanks for taking my questions and nice job and congrats on the 85% <unk> growth there.

Operator: Im curious whats the initial response youre hearing from customers on the Nextgen Nextgen digital watermark upgrade here and how much of a factor was that in some of the deals that you kind of highlighted here in the quarter or is that more something that's going to be on the comm as a growth driver.

Operator: The second half of the year.

Riley Young McCormack: Thanks for dialing in. Yeah, great question. So, off the top of my head, I don't think any of the deals that closed in Q1 took advantage of our next-gen digital watermark, but our pipeline is full of them. As we talked about on the last call, there are a lot of key unlocks from the next-gen digital watermark. One of them is the Apply Now, Activate Later functionality that we can roll out.

Speaker Change: Thanks, Josh.

Speaker Change: Thanks for dialing in and yeah, great question. So.

Riley Young McCormack: Off the top of my head I don't think any of the deals that closed in Q1 took advantage of our Nextgen digital watermark, but our pipeline is full of them as we talked about in the last call. One of the there's a lot of key key unlocks from the next Gen digital watermark one of them is the apply now activate later functionality that we can rollout.

Riley Young McCormack: We talked about how important that was going to be to our COE program, and stay tuned for our Q2 call. We'll give you more details on the initial upramp and success of our COE program, but that's key there. Even with the brands that we're currently doing business with, having the understanding that, hey, they understand they're taking some of the Digimarc products, some of their products today, maybe regionally, but the idea that now they can, during package refresh, apply this Apply Now, Activate Later next-gen digital watermark to all of their packaging, huge, huge, huge unlock. Really excited by the initial reception.

Riley Young McCormack: <unk>.

Riley Young McCormack: We talked about how important that was going to be to our Coa program and so I guess stay tuned for our Q2 call. We'll give you more details on the.

Riley Young McCormack: Initial op ramp and success in our <unk> program.

Riley Young McCormack: But that's T there, but even with the brands that we're currently doing business with having the understanding that hey, you know they understand theyre, taking some of the data mark products.

Riley Young McCormack: Their products today.

Riley Young McCormack: Regionally with the idea that now they can during package refresh apply the supply now activate later Todd next Gen digital watermark to all of their packaging huge huge huge end market.

Riley Young McCormack: No.

Riley Young McCormack: Really excited by the initial reception. It is specifically on the Coa program something that is really driving conversations and getting people that are highest our highest tier because that's the only place. It it's available to our partners, but even with our existing brands and understanding now.

Riley Young McCormack: It is specifically the COE program, something that is really driving conversations and getting people to our highest COE tier because that's the only place it's available to our partners. But even with our existing brands and understanding now that they can future-proof all of their packaging, even if they're not ready to adopt immediately a Digimarc product, huge unlock and an ARR increase.

Riley Young McCormack: They can future proof all of their packaging, even if they're not ready to adopt immediately Oh did you mark product huge unlock and an <unk> increase.

Riley Young McCormack: That's helpful. And then on the Digimarc Engage product, with the upgrade now, are you going to be making any changes to your go-to-market strategy there? And how should we just kind of be thinking about the potential growth for that product in general with the upgrade? Do you mean the upgrade by adding digital functionality?

Speaker Change: Got it that's helpful and then.

Riley Young McCormack: On the DG market engage product.

Riley Young McCormack: With the upgrade now are you going to be making any changes to your go to market there and how should we just kind of be thinking about the potential growth for that product in general but the upgrade.

Riley Young McCormack: You mean, the upgrade by adding the digital functionality.

Riley Young McCormack: Yes.

Riley Young McCormack: Yeah. Yeah, you know, it's it's another differentiator, right? So there are a lot of things that, you know, as you know, Digimarc engages is the one product, or potentially the most competitive in terms of having competitors can offer some of the functionality. This is just another differentiation.

Speaker Change: Yeah, you know, it's it's just another differentiator right. So there's a lot of things.

Riley Young McCormack: As you know did you market engages is the one product.

Riley Young McCormack: Potentially the most competitive in terms of having competitors can offer some of the functionality.

Riley Young McCormack: There's a lot of differentiation we have on the physical side with, you know, our thought leadership and digital link, our best in class redirection engine, the fact that we are a platform, right? And so a lot of consumer engagement offerings are one-stop shops. So the fact that there's so much more with illuminate people can do besides engage the fact that, because of digital link and sunrise 2027, this is becoming more of an IT purchase as opposed to a marketing purchase. So all of those things play in there.

Riley Young McCormack: This is just another differentiation there is a lot of differentiation we have on the physical side with.

Riley Young McCormack: Our thought leadership in digital link are our best in class Redirection engine. The fact that we are a platform right and so a lot of consumer engagement offerings are a one stop shops.

Riley Young McCormack: So the fact that there's so much more with illuminate people can do besides engage.

Riley Young McCormack: The fact that because of digital Lincoln Sunrise 2027, this is becoming more of an it purchase as opposed to a marketing purchase so all of those things playing there. We just opened up another front, where we differentiate from everybody else, which is we can provide all of that amazing functionality in the digital domain and while that itself is exciting both with conversations with end customers would also part.

Riley Young McCormack: We just opened up another front where we differentiate from everybody else, which is that we can provide all that amazing functionality in the digital domain. And while that itself is exciting, both in conversations with customers, but also with partners who are really wrapping their heads around what we can do. Just by itself, that would be exciting, the fact that we could provide a unified view and inform campaigns that are cross-domain. This is rarefied air.

Riley Young McCormack: <unk>, who are really wrapping their head around what we can do.

Riley Young McCormack: Just by itself that would be exciting. The fact that we can provide a unified view and inform campaigns that are.

Riley Young McCormack: Cross domain.

Riley Young McCormack: This is sort of the holy grail of everything that every tech company is trying to do. Yeah, it's interesting to track somebody or to provide people with content in the digital domain. And it's interesting to do that in the analog world. But man, tying those two together, incredible.

Riley Young McCormack: Of of everything that every tech company is trying to do is yes, it's interesting to track somebody or do to provide people content in the digital domain and it's interesting to do that in the analog world, but man tying those two together together incredible unlock and its a differentiator that is resonating.

Charles Beck: And it's a differentiator that's responding. Got it, that's helpful. And then last question from me, I don't think you guided this specifically, but how are you thinking about the cash burn for the balance of the year relative to the recent capital raise and the cash that you have on your balance sheet and kind of just thinking out in terms of capital allocation for the balance of the year? Thanks, guys. Yeah, so, cash can fluctuate quarter to quarter, and we kind of, as I highlighted in my prepared remarks, obviously, Q1 is a lot higher than what we get the normalized level because of the cash payments. And that's why I highlight back to the non-gap loss really being a more normalized level.

Speaker Change: Got it that's helpful. And then last question for me.

Charles Beck: Thank you guide to this specifically, but how are you thinking about the cash burn for the balance of the year relative to the recent capital raise and the cash that you have on your balance sheet and kind of just thinking out in terms of capital allocation for the balance of the year. Thanks guys.

Speaker Change: Yeah. So.

Charles Beck: Cash and cash can fluctuate quarter to quarter as we kind of as I highlighted in my prepared remarks, obviously Q1 is a lot higher than what we think a normalized level is because of the cash payments and that's why I highlight back to the non-GAAP loss really be in a more normalized level and so our focus is continuing to grow the topline and expand our margins reduced <unk>.

Charles Beck: And so, you know, our focus is continuing to grow the top line, expand our margins, reduce costs to continue to decrease our long gap loss, which you can see has been trending down significantly year over year, down 39%. So that's our primary focus. We don't give guidance itself on cash flow.

Charles Beck: Cost to continue.

Charles Beck: And decrease our non-GAAP loss and as you can see has been trending down significantly year over year down 39%. So that's our primary focus we don't give any guidance at cell phone on cash flow part of that is because it's difficult to predict because of the inflows or outflows, but our mission as a company is really focus on driving down that non-GAAP loss, which will directly.

Charles Beck: Part of that's because it's difficult to predict because of the inflows or outflows. But our mission as a company is really focused on driving down that non-gap loss, which will directly translate into improved free cash flow. Got it. That's helpful, guys. Thank you. Thanks, Josh.

Charles Beck: Translated into improved free cash flow.

Speaker Change: Got it that's helpful guys. Thank you.

Speaker Change: Thanks, Josh.

Operator: As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from Jeff Van Ree with Craig Hallam Capital Group. Please proceed with your question. Hey guys, congrats, a couple for me tonight.

Charles Beck: As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Our next question comes from Jeff Van <unk> with Craig Hallum Capital Group. Please proceed with your question.

Jeffrey Lee Van Rhee: So just if I could start on the ARR of 24 million, up from 13 a year ago, you've added 11 million in incremental ARR. As specifically as you're willing to, where has the incremental 11 million in ARR come from with respect to, I'd say the majority of it has come from our platform itself, but it's a combination of new contracts, the majority of it over the last year, but then also significant upsells with our customers, and Riley highlighted several of those in Q1.

Speaker Change: Hey, guys. Congrats a couple for me Tonight.

Jeffrey Lee Van Rhee: Just if I could start on the EUR 24 million up from 13, a year ago, you've added $11 million incrementally IRR.

Jeffrey Lee Van Rhee: Specifically as you're willing to where has the incremental $11 million in IRR come from with respect to use cases.

Jeffrey Lee Van Rhee: We've highlighted some of those in prior periods. So it's a combination of really our platform itself and then Validate and Engage, the two other primary drivers. Okay. Thank you. Let's shift gears to the sales front.

Jeffrey Lee Van Rhee: I'd say the majority of it has come from our platform itself.

Jeffrey Lee Van Rhee: The majority of it over the last year, but then also significant upsells of our customers are really highlighted.

Jeffrey Lee Van Rhee: Several of those in Q1, we've highlighted some of those in prior periods. So it's a combination of really our platform itself and then validate and engage with the two other primary drivers.

Jeffrey Lee Van Rhee: Okay.

Jeffrey Lee Van Rhee:

Speaker Change: Maybe shift gears to the sales front as I think about how the sales team operates I mean I'm just looking at like slide nine in your deck today, which I appreciate.

Riley Young McCormack: As I think about how the sales team operates, I mean, and I'm just looking at slide nine in your deck today, which I appreciate. You know, you've got a ton of end market opportunities, and in thinking through how that sales force is structured, I know you've got, you know, greatly enhanced leadership. You're really doing some good things there. Take a minute and just talk about your sales organization and, in particular, how you go to market, how the reps are tasked, and how it's broken down right now would be helpful.

Riley Young McCormack: You got a ton of end market opportunities and and then thank you through how that sales force is structured I know you've got greatly enhanced leadership, you're really doing some good things that are taking that and just talk about your sales org.

Riley Young McCormack: And then in particular, how the how does the go to market how the reps are tasked how it's broken down right now it would be helpful.

Riley Young McCormack: Yeah, so we have direct sales, people that are calling on accounts of industry focus and geographic focus. And then we have our market development team that is focused on some of the bigger opportunities. We're very specific to call it market development and not business development because business development takes like two to three years.

Speaker Change: Yeah, So we have a direct sales.

Riley Young McCormack: People that are calling on accounts.

Riley Young McCormack: Have industry focused geographic focus and then we have our market development team.

Riley Young McCormack: That are focused on some of the bigger opportunities are at very specific to call. It market development in that business development because business developments like two to three years market development is six to 12 months, maybe let's let's actually develop a market. So we can unlock it and then.

Riley Young McCormack: Market development takes six to 12 months, maybe. Let's actually develop a market so we can unlock it and then, you know, throw a bunch more AEs after that market. And so in market development, some of our bigger opportunities like the, The ecosystem-driven opportunities would fall into some of the bigger one-off deals, but also light up our COE partners, right? And that's the key unlock here to your point.

Riley Young McCormack: Throw a bunch more of aes after that market.

Riley Young McCormack: And so in the market development or some of our bigger opportunities like they.

Riley Young McCormack: There are so many verticals, so many areas that we could be going after where we don't need to go in there and become an expert in every single vertical. And even if we wanted to be an expert, we don't have the 15 years of showing up to the trade shows that people expect vendors, especially vendors in the validate the unaccounted for space, right? Our partners do, and so we have a team focused on opening up the COE partners. The COE partners then act as legitimizers. It's speed to time to market, right? Because they have existing customers, they have a pipeline, they have massive sales forces themselves, but it's also domain expertise.

Riley Young McCormack: Verticals. So many areas that we could be going after where we don't need to go in there and become an expert in every single vertical and even if we wanted to be the expert we don't have the 15 years of showing up to the trade shows that people expect vendors, especially vendors and to validate the anti counterfeiting space right our partners do.

Riley Young McCormack: And so we.

Riley Young McCormack: We have.

Riley Young McCormack: Team focused on opening up the Coa partners. The Coa Partners, then act as legitimize there's a it's a speed the time to market right because they have existing customers. They have pipeline to have massive sales forces themselves, but it's also the domain expertise, it's coming in and saying Hey, we have this incredible anti counterfeit par.

Riley Young McCormack: It's coming in and saying, hey, we have this incredible anti-counterfeit partner that you should meet called Digimarc and making those introductions. And so then when those introductions come in, the direct reps pick them up. So that's really the focus direct as it has been with market development, and the COE openings come under market development. And then any leads that come out of the COE program go back to the direct reps, unless they're at our highest level COE where they can actually, the partners can actually sign deals on their own paper.

Riley Young McCormack: That you should meet call Digi, Mark and making those introductions.

Riley Young McCormack: And so then the windows introductions come in the direct reps pick it up so that that's really the focus direct.

Riley Young McCormack: As it's been.

Riley Young McCormack: With market development and the C. O openings comes under market development and then any leads that come out of the Coa program to go back to the direct reps unless there at our highest level, where they can actually the partners can actually signed deals on their own paper.

Riley Young McCormack: Unknown Attendee, Charles Beck, Riley McCormack, Matthew Collard, Unknown Attendee, Christopher, I'm not clear if the general scope of the increase in the annual pipeline that's expressed here is accurate either. So maybe the question would just be, can you give us a sense of the expansion of late-stage pipeline now versus 6-12, 18 months ago? Anything along those lines would help.

Speaker Change: That's helpful.

Speaker Change: And then one other one for me if I go back to slide nine I know youre, saying here individual color codes are not breaking down the pipe necessarily per se by percentages for each of these opportunities.

Speaker Change: And I'm not clear.

Riley Young McCormack: The general scope of the increase of the annual pipeline.

Riley Young McCormack: Expressed here is accurate either so.

Riley Young McCormack: So maybe the question would just be can you give us a sense. Some quantification of the expansion of late stage pipeline now versus 612 18 months ago anything along those lines would help.

Charles Beck: I would say the expansion of the pipeline is really across all of those key product areas, and I didn't mention Automate earlier. That's a product, too, that's contributed to ARR. So, I mean, it really goes across the gamut here of opportunities we look at in our pipeline. Obviously, COE is a big area of focus.

Speaker Change: I would tell you.

Riley Young McCormack: The expansion of the pipeline is really across all of those key product areas.

Charles Beck: Electric.

Charles Beck: Since they are elected that Didnt mentioned automate earlier thats a productivity contributed to IRR. So I mean, it really goes across the gamut here.

Charles Beck: Opportunity as we look out on our pipeline.

Charles Beck: We're continuing to improve, validate, and engage opportunities there, both upselling to new customers as well as the platform, and then we highlight on here, too, security solutions and deposit return systems. Those are big opportunities in our pipeline as we look forward as well. Yeah, and Jeff, we don't talk about our pipeline, we don't quantify our pipeline, but to answer your question, and I think your overall question, it's a lot bigger, obviously, right? I mean, we need to have the pipeline ahead of the ARR, and so look at what our ARR has done, and the pipeline looking forward has to be there to support it.

Charles Beck: Obviously, a big area of focus and we're continuing to improve validate engage opportunities there, both upsell and with new customers.

Charles Beck: As well as the platform and then highlight on here to security solutions and deposit return systems those are big opportunities.

Speaker Change: Our pipeline as we look forward as well, yes, and Jessica we don't we.

Speaker Change: We don't talk about our pilot at all quantify our pathway, but to answer. Your question. I think you are holistic question, it's a lot bigger obviously right.

Charles Beck: We need to have the pipeline ahead of the IRR and so look at what <unk> done in the pipeline.

Charles Beck: Looking forward it has to be there to support it one of the one of the reasons, we don't quantify pipeline right as we've had this conversation.

Riley Young McCormack: One of the reasons we don't quantify pipeline, right? We've had this conversation. We have massive opportunities in our pipeline, and no matter what percentage we assign, we're going to be wrong.

Riley Young McCormack: It's either going to close, or it's not going to close, right? So it gets really tough, you know, when you're the Transcribed by https://otter.ai Unknown Attendee, Charles Beck, Riley McCormack, Matthew Collard, Unknown Attendee, Charles, that hard; it's impossible to put a percentage on them, because whatever percentage probability we assign, That's not right. It's either going to close, or it's not going to close, either zero or 100 percent.

Riley Young McCormack: We have massive opportunities in our pipeline and no matter what percentage, we assign we're gonna be wrong, it's either going to close are stuck in their clothes right. So it gets really tough.

Riley Young McCormack: Size that we are right. This is a reality, we're always going to have I hope we have these massive boulders in our pipelines, but when they become less relevant.

Riley Young McCormack: Less massive relevant are related to the size of existing it it becomes more noise for us it gets really hard to quantify externally pipeline.

Riley Young McCormack: Because there were some really wonderfully.

Riley Young McCormack: <unk> and doubles type business right.

Riley Young McCormack: Ample as like the deals that we talked I talked about in prepared remarks today, but there's also these giant boulders and it's hard to put it.

Riley Young McCormack: It's impossible to put a percentage on them because whatever percentage probability we assign that.

Riley Young McCormack: That's not right, it's either going to close or it's not going to close either zero or 100%.

Jeffrey Lee Van Rhee: Yep, I got it. Great. Thanks, Riley.

Riley Young McCormack: Yes.

Riley: Thanks, Jeff.

Jeffrey Bernstein: Thanks, Charles. Thanks, Jeff. Our next question comes from Jeff Bernstein with TD Cowen; please proceed with your question. Hey guys, just wanted to ask a little bit more about the deposit return scheme opportunity. There's been a lot written in the last couple of weeks about, you know, in order for these European countries to even sort of get into a position where they could be on track for the plastic reuse and recycling goals that they have, they almost have to get on deposit return schemes.

Jeffrey Lee Van Rhee: Our next question comes from Jeff Bernstein with TV Cowen. Please proceed with your question.

Riley Young McCormack: Can you just flesh that out a little bit and talk a little bit about, you know, what kind of timeframes you think that stuff has to happen? And can you tell us if the one that your partner had ongoing has launched yet or any kind of learnings from that? Yeah. So the reason, Jeff, I'm guessing you've seen a lot of the DRS stuff is because of the, I don't want to call it a leak because it came from the EU, but they haven't released the final text for the PPWR.

Jeffrey Bernstein: Hey, guys just wanted to ask a little bit more about the deposit return scheme opportunity. There's a lot written in the last couple of weeks about.

Riley Young McCormack: In order for these European countries to even sort of get into a positioning where they could be on track.

Riley Young McCormack: For the.

Riley Young McCormack: The.

Riley Young McCormack: Plastic reuse and recycling goals that they have.

Riley Young McCormack: They almost have to get on deposit return schemes.

Riley Young McCormack: And can you tell us if.

Riley Young McCormack: The one that your partner had.

Riley Young McCormack: Ongoing has launched yet or kind of any learnings from that.

Riley Young McCormack: Yeah. So they are the reason, Jeff I'm guessing you've seen a lot of the brs stuff is because it would be I don't want to call. It a leak because it came from the EU, but they havent released the final text for the P. P. W are so a lot of the questions you're asking will be in the final text, but they made very clear that one of the things they have talked about because they released a few of the bigger Paula.

Riley Young McCormack: So a lot of the questions you're asking will be in the final text, but they made very clear that one of the things they have talked about, because they released a few of the bigger policy things, that if for any country where collection is not above an incredibly high bar, and I don't remember exactly, it's like 90%, an incredibly high bar, they're going to have to roll out DRS. And so one of the key parts of a DRS, DRS is a pretty simple concept. You put a deposit on a bottle or a can, and then when you return it, you get your deposit back. So it's not; the systems themselves are pretty easy.

Riley Young McCormack: Yes, I think yes.

Riley Young McCormack: Yeah. So you got to realize the IRS right and so.

Riley Young McCormack: One of the key parts of Drs Drs is a pretty simple concept you put a deposit on a bottle or can and then when you return to your deposit back. So it's not that the systems themselves are pretty easy. The problem is a fraud and there was a million dollars example, there was a.

Riley Young McCormack: The problem is the fraud. And there are a million examples. There was a family in Arizona that's, I don't know what happened, I haven't been following the case, but there's a headline where they made $6 million taking products from Arizona and bringing them to California.

Riley Young McCormack: It's fraud, right? And so what they need is a way to authenticate that the products that are being returned actually were part of the deposit return scheme, that there was a five or 10 cent deposit placed against that product. There are a lot of ways to do product authentication, right? But a lot of them are really expensive.

Riley Young McCormack: Our value that we offer through DigiMark Validate is the same value proposition we offer DRS. And, in general, lowering the cost of a DRS system, because they are expensive, is wonderful. We can also democratize it in so far as in a lot of places, it's not just... The cost; they also don't have 60,000 square foot supermarkets that can have one of these really expensive RVMs, reverse vending machines. People want to use their cell phone at a bodega in the countryside.

Riley Young McCormack: Is wonderful we can also democratize it in so far as in a lot of places it's not just the costs. It's also they don't have.

Riley Young McCormack: So that's where we come in. Just like we offer a differentiated offering with Digimarc Validate for any product authentication, we can do the same thing, which is a key component of DRS. And this is not an area that we want to get into directly ourselves.

Riley Young McCormack: That's where we come in just like we offer a differentiated offering with did you mark validate for endy for any product authentication. We can do the same thing which is a key component of the Drs and it is not an area that we want to get into directly ourselves.

Riley Young McCormack: This is an area we'll go through with our partners, but a really exciting opportunity. We can't wait to see the final text of the PPWR and move forward from there based on all the marching orders. And again, the key thing about the PPWR, right, is that the R stands for regulation, which means it's not negotiable.

Riley Young McCormack: This is an area we will go through our partners.

Riley Young McCormack: Move forward from there based on all of the marching orders and again the key thing about the P. BW are right as they are stands for regulation, which means it's not negotiable, but member states are going to have to adopt whatever's in this final test.

Riley Young McCormack: The member states are going to have to adopt whatever's in this final text. Gotcha. Okay. Anything on your partner's initial win and how that's progressing, and kind of any learnings from that?

Riley Young McCormack: Gotcha, Okay, and then anything on your partners initial win and how that's progressing and kind of any learnings from that.

Riley Young McCormack: Yeah, progressing well. I don't really know if there's any learnings yet today. But you know, we will, just like with our biggest commercial customer, the best way to earn trust every day is to not talk about our customers' business on their behalf. But I, obviously, because this is a national scheme, I would assume it would become very public whenever the country is ready to talk about it. And it's rolling out, I'm sure.

Speaker Change: Yes, progressing well I don't really know if there's any learnings yet to date.

Riley Young McCormack: We'll just like with our biggest commercial customer the best way to.

Riley Young McCormack: Earn their trust every day is to not talk about our customers business on their behalf but.

Riley Young McCormack: Obviously, because this is a national scheme I would assume it would become very public whenever the.

Riley Young McCormack: The country is ready to talk about it and it's rolling out I'm sure. Once we're allowed to amplify It Trust me, Jeff We will yeah I understand.

Riley Young McCormack: Once we're allowed to amplify it, trust me, Jeff; we will. Yeah, I understand. Okay, and then just wanted to make sure I understood "automate." Does "automate" imply that there is some factory automation element to how something's being used, or is that not the right way to think about it?

Riley Young McCormack: Okay, and then just I wanted to make sure I understood on automate.

Riley Young McCormack: Just automate imply that there is some factory automation element to how something is being used or is that not the right way to automatically right.

Riley Young McCormack: No, that's right. It's in fulfillment centers and distribution centers. You know, it's a way to apply digital watermarks in the Illuminate platform during the process of some sort of automation, right? So multiple locations, right, distribution centers, fulfillment centers, where this could be applied, where there's currently automation today, and either one, there actually is an automation, and it's still being done by humans. Other means of identification don't work at all, or there is some automation that doesn't work well, or it's really expensive because other means of identification don't work well.

Riley Young McCormack: In fulfillment centers distribution centers.

Riley Young McCormack: It's a way to apply digital watermarks in the illuminate platform.

Riley Young McCormack: In the process of some sort of automation right. So multiple use cases, sorry, multiple multiple locations right distribution centers performance centers.

Riley Young McCormack: Where this could be applied where theres currently automation today and either one they are actually isn't automation. It is still being done by humans.

Riley Young McCormack: <unk>.

Riley Young McCormack: The other means of identification don't work at all or there is some automation as it doesn't work well or it's really expensive because other means by dedication don't work well and that's the.

Riley Young McCormack: And that's the opportunity. If you see our deck, we will officially launch Automate in the not-too-distant future. Incredible, we haven't even launched this product yet, and we have multiple customers, not just historic, but, you know, if you paid attention to the prepared remarks, there were multiple deals in Q1 just from Automate. But that is an example of having wonderful partners in this space, as well as just a real demand for a high ROI return, which is either we're actually allowing the initial steps of automation where none existed before, or else we're taking an automation that was kind of kludgy or didn't work well and bringing it into the 21st century.

Riley Young McCormack: Opportunity, if you've see in our deck.

Riley Young McCormack: We will officially launch automate the not too distant future.

Riley Young McCormack: Incredible waiver, even launched this product yet and we have multiple customers not just historic but.

Riley Young McCormack: If you paid attention to the prepared remarks, there is multiple deals in Q1 just from automate.

Riley Young McCormack: That is an example of of having wonderful partners in this space as well as just a real demand for our high ROI.

Riley Young McCormack: Return, which is either.

Riley Young McCormack: Actually, allowing the initial steps of automated fish, where none existed before or else. We're taking in automation that was kind of crude you're didn't work well and bringing it into the 20 <unk> century.

Riley Young McCormack: Terrific. And then last question, in terms of that newish ability, because I think you've only started talking about it pretty recently, of tracking consumer interactions, both in the e-commerce world and then in the physical world. It sounds like you're already signing some deals related to that, on the digital side. Yeah, or on the hybrid of, you know, we're going to follow both the e-commerce and the physical world. So nothing has yet been signed.

Speaker Change: Terrific and then last question in terms of that.

Riley Young McCormack: <unk> ability because I think you've only started talking about it pretty recently.

Riley Young McCormack: Tracking consumer.

Riley Young McCormack: Our actions both in the E Commerce World and then in the physical World.

Riley Young McCormack: It sounds like you already are signing some deals related to that.

Riley Young McCormack: On the digital side.

Riley Young McCormack: Yeah.

Riley Young McCormack: On a hybrid of yes, we're going to follow both the e-commerce and physical world Yes.

Riley Young McCormack: We announced this not too long ago. It takes a while for pipeline, but it's an area of interest, not just directly with some existing customers but really from our partners, because this, you know, This is something that they wrestle with. Our partners, right? It's that they're getting asked to do some really difficult things. There's a very big partner of ours that's talking about how they're trying to help customers in the multimedia world, right? And they can offer stuff like content repositories or, you know, creating artwork, not just for physical packages but for e-commerce.

Riley Young McCormack: So nothing yet signed we announced not too long ago. It takes awhile for pipeline, but it's an area of interest.

Riley Young McCormack: Not just directly with some existing customers, but really from our partners.

Riley Young McCormack: Because this.

Riley Young McCormack:

Riley Young McCormack: This is something that they wrestle with our partners <unk> is there getting asked to do some really difficult things theres, a very big partner of ours, it's talking about how they're trying to help customers in the multi media world right and they can offer stuff like content repositories or creating artwork not just for physical packages, but for AECOM.

Riley Young McCormack: That's all really really important really really interesting.

Riley Young McCormack: And that's all really, really important, really, really interesting. The more opportunities we can offer in this hybrid world through our partners, it just makes their conversations easier. It gives them a reason to ping their existing customers, say, hey, I know we haven't talked in a while.

Riley Young McCormack: More opportunities we can offer in this hybrid world through our partners.

Riley Young McCormack: It just makes their conversations easier makes it gives them a reason to ping their existing customers say, hey, no. We haven't talked in a while we have this great new partnership with this company called <unk> I can tell you more.

Riley Young McCormack: We have this great new partnership with this company called Digimarc; I'll tell you more. So I would assume here it's gonna be partner-led only because our partners get this. And you have a conversation.

Riley Young McCormack: So I would assume here, it's going to be partner led only because.

Riley Young McCormack: Partners get this.

Riley Young McCormack: And Conversely.

Riley Young McCormack: This is back to the operating leverage our COEs will give us. You have a conversation with a partner, and that partner's got a thousand salespeople. You can have a thousand conversations with customers through that entity, as opposed to us going back during QBRs with our existing customers and saying, hey, let's look at this new functionality. So I would assume this one in particular, and as we've been talking about in a lot of our business, you know, customer-led.

Riley Young McCormack: A conversation this is back to the operating leverage our Coes will give us.

Riley Young McCormack: You have a conversation with a partner and that partner Scott 1000, salespeople you can have 1000 customers southern conversation with customers through through that entity as opposed to us going back during <unk> with our existing customers Hey, let's say that this new functionality, so I would assume.

Riley Young McCormack: This one in particular.

Riley Young McCormack: And as we've been talking about a lot of our business.

Riley Young McCormack: Customer lab at the.

Riley Young McCormack: Just like I think Josh was asking about the apply now, activate later, the next-gen digital watermark, the COEs get it, they get it immediately, and there's a lot of excitement. Okay, and to illustrate this with kind of a real world example.

Riley Young McCormack: Just like I think Josh was asking about the pie not activate later the Nextgen digital watermark, the coes get it and they get it immediately.

Riley Young McCormack: A lot of excitement.

Riley Young McCormack: So, you could have a packaging VAR who has been discussing, you know, Digimarc watermarked packaging and the interaction that that allows with people who then are going back to say, Oh, and by the way, Digimarc's ability to track all of this in a cloud-based database means that we can now also intercept when somebody has interacted, you know, online relative to some offer that you made, or relative to something on social media, etc, And we can wrap that into a complete view of how the person interacted not just with the package but with your other advertising or promotional message. Kind of, but not really.

Riley Young McCormack: Okay.

Riley Young McCormack: Just.

Riley Young McCormack: Understand from kind of a real World example, so so you could have a packaging <unk> who has been discussing.

Riley Young McCormack: His mark watermark packaging and the interaction that that allows with people who that is going back to say oh and by the way the.

Riley Young McCormack: Digi Mark's ability to track all of this in a cloud based database means that we can now also intercepts when somebody has interacted.

Riley Young McCormack: Online relative to some offer that you made or relative to something on social media etcetera, etcetera, and we can wrap that into a complete view of how the person interactive not just with the package, but with your other.

Riley Young McCormack: Advertising or promotional messages.

Riley Young McCormack: Right.

Riley Young McCormack: So two things, right? The two partners that most get this are the pre-media slash printing partners, right? And this is where customers are coming to them and saying, hey, how do we apply it with Sunrise 2027? You're the packaging expert. Or, hey, we want to put a QR code on our packaging for consumer engagement, right? Until now, they're like, great, we can put a QR code on and do this stuff.

Riley Young McCormack: We can put a QR code on and do this stuff they didn't have the technical backend or the expertise or the technology to say.

Riley Young McCormack: They didn't have the technical backend or the expertise or the technology to say, I'm so glad you asked us about that. Let's talk about how we can apply this, not just to your physical packaging but also to all your own multimedia. Let's have a broader conversation where we're not just talking about packaging, which tends to be a competitive industry, right?

Riley Young McCormack: So glad you asked this about that let's let's talk about how we can apply it is not just to your physical packaging, but also to all your owned multimedia, let's have a broader conversation, where we're not just talking about packaging, which tends to be a competitive industry right.

Riley Young McCormack: For our partners, and say, let us talk about this whole thing we can offer, even in the digital domain. And that makes their end customers a lot stickier, because now they're not just coming to put QR codes on packaging.

Riley Young McCormack: Yeah, I'd say, let us let us talk about this whole thing we can offer even in the digital domain and that that makes their end customers a lot stickier because now they are not just coming to the QR codes and a packing they're coming to them to solve the bigger.

Riley Young McCormack: They're coming to them to solve a bigger problem, to get what they wanted to do with QR codes, was it a direct-to-consumer channel, across both the packaging and also the internet. The other big area of partners are the advertising agencies, right? So these advertising agencies are in charge of coming up with campaigns. And one of the things we can offer is not just stickier customers or a chance to reach out. They can also monetize by building a campaign.

Riley Young McCormack: To get what they wanted to do with QR codes with a direct to consumer channel, but across both the packaging, but also the internet the.

Riley Young McCormack: Other big area partners of their advertising agencies that rate. So these advertising agencies are in charge of coming up with campaigns and absolutely one of the things. We can offer is not just stickier customers or a chance to reach out.

Riley Young McCormack: They also can monetize and building a campaign, we don't want to be in the content creation business of putting together. This inquiry I mean some of these campaigns are.

Riley Young McCormack: We don't want to be in the content creation business of putting together this incredible, some of these campaigns are seven figures because they're incredibly complex and beautiful and detailed, and you've seen the quality of ads like it's Super Bowls, right? That's not an area that we want to get into.

Riley Young McCormack: Seven seven figures because they're incredibly.

Riley Young McCormack: Incredibly complex and beautiful and detailed and you've seen the quality of the ads like it's Super bowls.

Riley Young McCormack: An area that we want to get into but now they as an advertising agency can say, hey, I know we've been talking about a certain campaign can you imagine if we not if we brought your physical products and not just the internet into this or vice versa. If we actually could could bringing the internet to your physical what are you planning to do in the physical world maybe its bus stops maybe it's front of <unk>.

Riley Young McCormack: But now they, as an advertising agency, can say, hey, I know we've been talking about a certain campaign. Can you imagine if we brought your physical products and not just the internet into this, or vice versa, if we could actually bring the internet to your physical world? Maybe it's bus stops.

Riley Young McCormack: It's front of store, point of sale in the store, and not only can you follow the consumer and tell them, as you're rolling out this campaign, you can hit them in both the physical and digital domain, but you can also get the data back. And that is the most powerful point. You know the old adage in advertising is that half your advertising dollars are wasted; you just don't know which half.

Riley Young McCormack: Sure.

Riley Young McCormack: Point of sales in the store.

Riley Young McCormack: Not only can you follow the consumer tells.

Riley Young McCormack: Tell them as Youre Rolling out. This campaign you can hit them in both the physical and digital domain.

Riley Young McCormack: You can also get the data back and that is the most powerful point is that.

Riley Young McCormack: The old adage in advertising is it half of your advertising dollars are wasted you just don't know which half.

Riley Young McCormack: People advertise because they want to get consumers to buy things. That is the reason advertising exists. And now you can actually run campaigns, whether they're email campaigns or internet campaigns, and say, yeah, it wasn't just engagement or open rates. I know which one of these campaigns led to somebody interacting with a physical product within, pick your period of time, 48 hours. It's a holy grail, and it'll, it'll, it can, um... The same way that advertising became so much more effective with the advent of the internet, the next wave is, okay, now that you have the internet, how do you tie online activity to physical behavior?

Riley Young McCormack: Yeah people advertise because they want to get consumers to buy things that is the reason advertising exist and now you can actually run campaigns that are their E mail campaigns their internet campaigns and say, yes. It wasn't just engagement or open rates I know, which one of these campaigns led to somebody interacting with the physical product within pick your period of time to 48 hours.

Jeffrey Bernstein: That's the holy grail. Advertising spends about $2 billion a year. Fantastic. Thanks. Thanks for taking my questions.

Riley Young McCormack: It's the Holy Grail.

Operator: Thanks, Jeff. There are no further questions at this time. I would now like to turn the floor back over to Riley McCormack for closing comments. Well, thank you everybody for joining us today. That's all we have. Have a wonderful rest of your day.

Jeffrey Bernstein: It can.

Operator:

Operator: The same way that advertising became so much more effective with the advent of online. The next wave is okay. Now that you have online how do you tie online activity, that's physical behavior, that's the Holy Grail advertising expenses got together artificially.

Operator: Fantastic. Thanks, Thanks for taking my questions.

Riley Young McCormack: Thanks, Jeff.

Riley Young McCormack: There are no further questions at this time I would now like to turn the floor back over to Robyn.

Riley Young McCormack: For closing comments.

Riley Young McCormack: Well. Thank you everybody for joining us today, that's all we have have a wonderful rest of your day.

Riley Young McCormack: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. , , , , , , © The Ultimate Parody Site! © BF-WATCH TV 2021, , , , , , , , © The Ultimate Parody Site! https://www.youtube.com © BF-WATCH TV 2021, http://www.youtube.com © BF-WATCH TV 2021, [inaudible] © The Ultimate Parody Site! © BF-WATCH TV 2021, , , , , , , ,.

Riley Young McCormack: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Riley Young McCormack: Hum.

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