Q3 2024 Digimarc Corp Earnings Call
Thank you for watching!
Speaker Change: Greetings, and welcome to the DigiMark Corporation 3rd Quarter 2024 Earnings Conference Call.
At this time, all participants will be in listen-only mode.
Speaker Change: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star then zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, George Karamanos. Please go ahead, sir.
George Karamanos: Welcome everyone to our Q3 conference call. Riley McCormack, our CEO, and Charles Beck, our CFO, are with me on the call.
George Karamanos: On the call today, we'll provide a business update and discuss Q3 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 we'll archive this webcast there.
George Karamanos: 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, and hello, everyone.
Riley McCormack: Looking forward, Q3 was the most significant quarter I've witnessed since I joined the company. Invention and market development are the twin pillars upon which all future opportunities are built. In both of these critical areas, we not only made significant progress on things underway, we also opened new areas of opportunity we previously didn't believe addressable in the near term.
Riley McCormack: Looking back, we acknowledge Q3 revenue doesn't reflect the reality just described. The gap between what lies ahead and what lies behind has never been this large.
Riley McCormack: As noted in the 10-Q that we published today, our third quarter results were impacted by the delayed renewal of a commercial contract.
Riley McCormack: The financial component of this deal is meaningful, as it represents a significant upsell.
Riley McCormack: The strategic component will prove transformational, not only to our company, but also to the massive industry it will revolutionize.
Riley McCormack: In fact, it is exactly this broad industry impact that has led to this deal taking longer to close than all involved originally believed.
Riley McCormack: Trading time to close for strategic scope is an outcome I unequivocally support. We run our business to maximize long-term value and we expect our current path to do exactly that.
Riley McCormack: In addition, our decision to invest a large amount of company resources in Q3 to support this deal versus other opportunities is another decision behind which I unequivocally stand, even knowing, as we do now, that the expenditure of those resources wouldn't fall in the same quarter in which the deal was signed.
Riley McCormack: Because of the transformational nature of this deal from both a financial and strategic perspective, if it closes before our next scheduled call, as we currently believe is likely, we will hold an interim call.
Riley McCormack: On any such call, we will provide more details on the specific deal, as well as a more complete discussion of what lies ahead, providing the context we know we owe you as to why we believe the gap between looking forward and looking backward has never been this large.
Riley McCormack: For reasons that will be clear, our ability to provide the full picture today is impacted by our inability to discuss the specifics of this deal.
Riley McCormack: Instead of providing a partial picture by discussing the other important developments I noted earlier, I will reserve the rest of my prepared remarks for this interim call. I will now turn the call over to Charles to discuss our Q3 financial results.
Subs by www.zeoranger.co.uk
Thank you, Riley, and hello, everyone.
Speaker Change: I normally begin my discussion of our financial results by providing a snapshot of our key financial metrics, because I believe this overview provides useful context ahead of discussing each metric in turn.
Speaker Change: As a result of the significance of the delayed contract Riley just referenced, today I'm going to forego providing that snapshot because Q3 results are not a true representation of the state of our business.
Speaker Change: In addition to having an outsized impact on ending ARR, the delay in resigning resulted in no revenue being recognized or cash collected from this contractor in Q3.
Speaker Change: By significantly impacting some of our most important financial metrics, this delay means quarterly financial results are not reflective of our expected go-forward performance, even before considering this contract renewal is expected to include a large upsell.
Speaker Change: Ending ARR was $18.7 million compared to $19.6 million at the end of September last year.
Speaker Change: ARR decreased $900,000, which reflects a $5.8 million decrease due to the delayed contract I just referenced, as the original contract has expired and is therefore excluded from ending ARR.
Speaker Change: The decrease in ARR from this contract is partially offset by new net additions to ARR.
Speaker Change: While some companies include forecast renewals in their ARR metric, we take a more conservative approach by only including contracts that are booked in ARR.
Speaker Change: Total revenue for the quarter was $9.4 million, an increase of $500,000, or 5% from $9 million in Q3 last year.
Speaker Change: Subscription revenue, which accounted for 56% of total revenue for the quarter, grew 9% from $4.8 million to $5.3 million year-over-year.
Speaker Change: The increase reflects a chip in revenue recognized on new customer contracts as well as upsells on existing customer contracts, offset by no revenue being recognized from the impacted contract as I mentioned earlier.
Speaker Change: Subscription revenue growth would have been significantly higher if the delayed contract had closed within Q3 as we originally expected.
Speaker Change: Service revenue was flat at $4.2 million year-over-year, reflecting higher commercial service revenue from Holy Grail recycling projects, partially offset by lower government service revenue due to timing.
Speaker Change: Subscription gross profit margin improved slightly to 86% in Q3 this year compared to 85% in Q3 last year and 89% in the prior quarter.
Speaker Change: The sequential drop in subscription gross profit margin is due to the absorption of fixed costs over a lower subscription revenue number.
Speaker Change: This metric would have been significantly higher on both a year-over-year and sequential basis if the aforementioned contract had closed in Q3.
Speaker Change: Service Gross Profit Margin improved from 54% in Q3 last year to 61% in Q3 this year, reflecting a favorable change in labor mix.
Speaker Change: We expect to generate mid 50% service gross profit margins on a normalized basis with some fluctuation quarter to quarter.
Speaker Change: Operating expenses for the quarter were $17.3 million compared to $16.4 million in Q3 last year, an increase of 5%.
Speaker Change: Included in the Q3 operating expenses this quarter though was $600,000 of one-time cash severance costs for organizational changes made during the quarter to better align our operations.
Speaker Change: Additionally, operating expenses were $400,000 higher due to lower labor costs allocated to cost of revenue due to the amount and mix of billable labor hours incurred during the quarter.
Speaker Change: Total expenses, which excludes the impact of allocations, were flat year over year when removing the $600,000 of one-time severance costs.
Speaker Change: Non-GAAP operating expenses, which excludes non-cash and non-occurring items, were $14.1 million for the quarter, up 7% compared to $13.2 million in Q3 last year.
Speaker Change: The increase in non-GAAP operating expenses closely mirrors the increase in GAAP operating expenses that I just explained. And like total GAAP expenses, total non-GAAP expenses were flat when excluding 1x7s costs and the impact of allocations.
Speaker Change: Non-gap net loss per share was 29 cents in both periods.
Speaker Change: We ended the quarter with $33.7 million in cash and short-term investments.
Speaker Change: Free cash flow usage was $7.3 million to the quarter, compared to $400,000 in Q3 last year.
Speaker Change: The variation year-over-year is primarily due to the timing of cash receipts from the contract we've been referencing throughout our prepared remarks.
Speaker Change: If this contract, as currently drafted, had been executed and paid within the third quarter, free cash flow would have been positive in Q3.
Speaker Change: While we are working diligently to finalize this contract in Q4, the receipt of payment will lag contract execution by standard payment terms.
Speaker Change: Even if we do not receive payment from this contract before the end of the year, we expect Q4 free cash flow usage to be significantly improved from Q3.
Speaker Change: If we do receive payment before the end of the year, we expect Q4 free cash flow to be significantly positive.
Speaker Change: For further discussion of our financial results and risks and prospects for our business, please see our Form 10-Q that has been filed with the SEC.
Riley McCormack: I will now turn the call back over to Riley for final remarks.
Riley McCormack: Thank you, Charles. I will keep my closing remarks as brief as my opening remarks.
Speaker Change: Q3 was the most significant quarter I have witnessed since I joined the company. What lies ahead looks much different than what can be seen in any lagging indicator.
Speaker Change: We look forward to closing this gap as soon as we are able. We will now open the call up for questions.
Speaker Change: Thank you, sir. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Again, if you would like to ask a question, please press star and then 1 now.
Speaker Change: The first question that we have comes from Joshua Reilly of Needham & Co. Please go ahead.
Speaker Change: Alright, well thank you for taking my questions. Maybe just starting off here, you know, what are the risks that we should be considering in terms of this large commercial deal closing that's been delayed and maybe what's your level of confidence in ultimately getting this deal closed?
Speaker Change: Thanks, Josh. Let me start off by reiterating a few things I said in my prepared remarks.
Speaker Change: This deal has taken longer to close than everyone involved expected.
Speaker Change: and that it's happening for a good reason, it will transform a massive industry.
Speaker Change: And we are always going to be willing to trade time to close for scope. It's the best thing to do for the long term. So the reason I highlighted this, and I will answer your question more specifically.
Speaker Change: But the reason I wanted to highlight this is I think it's important to remember that deadlines can extend for many reasons, and not all of them are bad or concerning. But like I said, I understand why you're asking, so let me provide you some more details.
Speaker Change: We are not only key to one of this value customers top long-term strategic initiatives, we are also key to helping them achieve an important shorter term KPI as well and the fact that we are instrumental to their achieving both short-term and long-term results is important to note.
Speaker Change: Moreover, I'm confident that this customer not only recognizes the critical role we play in allowing them to achieve these results, but that we are unique.
and be able to play this role.
Speaker Change: Outside of very normal and very healthy paranoia that nothing is 100% until the ink is dry, I'm not worried on the if, at least from the customer perspective, but in the, you know,
Speaker Change: To fully answer your question, the biggest risk on the Earth actually relates to how I started this call, which is, there are many exciting developments in Q3, in which we could be investing our resources, and this opportunity, while itself really, really exciting, is but just one of them.
Speaker Change: We do take our responsibility of ensuring that the company resources are always deployed in pursuit of maximizing long-term value very seriously. In fact, I would say that the allocation of company resources might be the single biggest conversation we have internally across the business. And while we fully appreciate the visibility we have in our valued customers business, and I fully understand the reason this has taken longer to close anyone involved,
Speaker Change: And assigning these valuable resources to unlock other opportunities is a decision that while, to be clear, again, not one I expect we will need to make, it is also not one we would be afraid to make if the situation warranted. Our true north is, and always will be, how we can create the greatest long-term value.
Speaker Change: Got it, that's helpful. And then wanted to get an update on the gift card opportunity. I know you had some momentum there with trade shows in the quarter. Are there any updates you can provide in terms of when investors could expect some ARR and revenue from this opportunity?
Riley McCormack: Yeah, well actually we recorded some gift card revenue in Q3, we expect more in Q4 and we expect gift cards to be a significant contributor to our 2025, but Josh, as I said in my prepared remarks, we will provide you a full rundown on everything as soon as reasonably possible because as exciting as these data points are in isolation, we're more excited about how they all tie together.
Got it. And then maybe just one more.
Speaker Change: You know, last quarter, you noted that there were some changes to some of the partner relationships and the way the contracts were structured in terms of minimum ARR amounts. Just curious if that had any impact in the Q3 ending ARR number that investors should be considering and any successes you want to highlight in terms of the new structure with the Center of Excellence for the partners. Thanks.
Speaker Change: Yeah, so the transition, no impact, although I do again want to reiterate some of their remarks.
Speaker Change: The work on this deal has required significant resources, not just across the company, but specifically in RevTeam. And as an investment, I stand behind, even if the work didn't coincide with the deal closing in the same quarter that that work came. This is something I'm happy to revisit if you still have questions when we can describe what this deal entails, although I imagine when you see it, you will understand what I'm saying completely. And then in terms of other areas I'd love to highlight, yeah, there are a ton, but again,
Speaker Change: I think it will become clear when we can talk more about this deal and everything else that transpired in the quarter. It was a significant quarter in many ways. I just want to deliver all of it at the same time so you all can understand how this all ties together.
Got it. Thank you. I'll pass the cue.
Thanks, Josh.
. . .
Speaker Change: Thank you. The next question we have comes from Jeff Hunry of...
Craig Hallam Capital Group
Let's go ahead.
Speaker Change: That sounds good. Great, thanks. A couple for me. Riley, on the large customer, they've got a gap, I guess, here in the existing contract. I think you had a couple contracts, but this one in particular was going to renew here, and it looks like it didn't. How do they operate in this gap if the contract isn't renewed? Are they still using the platform? Just how does that work? And then, was there not a scenario where they could have just renewed or extended the old contract, at least for this interim period?
Speaker Change: Yeah, Jeff, both great questions. I get really uncomfortable talking about any individual customer. I would tell you that
Speaker Change: You know, we do have customers that have multiple contracts with us, and it can be for very different things. And so, if there is a gap in the contract, they lose access. In between doesn't mean that there's access to everything, it would just be whatever that contract covers. So, I think that was the best I can answer your first question. And what was your second question? Is there not like a shorter-term renewal, I guess? Yeah, just an opportunity just to do an extension or some sort of short-term renewal until the
Speaker Change: Yeah, Jeff, this is exactly what I was saying earlier in my pair of remarks. I will always trade time to close for better scope, and I would rather get a really good deal that accomplishes what we're trying to accomplish over the next multiple years together as opposed to a quick band-aid, I guess. We're focused on the long term, Jeff, I think you know that.
Speaker Change: I'm not afraid to take time to scope for a tough time to close for for broader studies
fully support our execution.
Speaker Change: Got it. Recycling Europe, I know you had some aspirations second half year, just any updates on the recycling and timing on large deals in Europe?
Yeah, absolutely. And again,
Speaker Change: You know, there was an email that I know that AIM sent out to some webinar participants that referenced a Q4 signing with us. I don't know if that's what you're referring to, but I know that was emailed around.
Riley McCormack: We're thankful for the industry's work, not just in Belgium, but also Germany, and there seems to be a genuine intent to make a real difference to fight plastic pollution. It's a noticeable change, and whether it's driven by upcoming regulation or an understanding of the massive ROI that could be unlocked or a sense of inevitability or maybe all three, it's hard to know. But it's encouraging. It's appreciated. But again, Jeff, not to sound like a broken record, but as I said in my prepared remarks,
Um...
Riley McCormack: Can't wait to provide a comprehensive update on everything because as exciting as these data points might be in isolation, we're more excited how they all tie together.
Speaker Change: Got it. Okay, and and I guess in that scope then given there's not a lot you can say about the key key things We've been talking about other quarters It is notable to me the government business which gives you a good underpinning throws a lot of cash Not really the growth engine and not why most are here, but it does give you a good floor down four down five percent Year-over-year, I know there was some some reference to timing That was a bigger year-over-year decline than we've seen in a while just any wiggles there of note that are worth talking about
Speaker Change: Yeah, I'll let Charles answer that in a minute, Jeff. I just want to, um...
Speaker Change: Thanks, Jeff.
Speaker Change: Yeah.
Speaker Change: The next question, we have comes from Robin Knipp with Janney Montgomery Scott. Please go ahead.
Robin Knipp: Thanks, very much my question has already been answered.
Speaker Change: Yeah.
Thanks, Rob.
Speaker Change: Thank you.
Speaker Change: Next question, we have comes from Jeff Bernstein of Silver Doug Braunstein Capitals. Please go ahead.
Speaker Change: Hi, guys.
Speaker Change: So I wanted to just go back on that that email that so the European brands Association and a I am you know sent.
Speaker Change: Sent out an email to the people who were on their webinar about this flexible.
Speaker Change: Packaging.
Speaker Change: Commercial scale circularity trial, they're doing in Belgium, and in it. They basically said we have three participating cpg's Pepsico model S and Ferrero candies.
Speaker Change: And that they were signing a contract with did you Mark in Q4. So so in this case you guys don't have to talk about a customer who hasn't announced Ah Yeah. I guess, it's been announced for you, but can you give us any kind of details on this and I realize this is a this is a demo program, but it sound commercial scale sounds like it's actually.
Speaker Change: <unk> a fair amount of volume so anything you could see you could say around that and then I had a couple of follow ups.
Speaker Change: Yes.
Speaker Change: And then you don't need a pretty good.
Speaker Change: Run down and I know theres been webinars, they've been talking about this at the beginning of the rollout.
Speaker Change: I know that our aim is and has also talked about Germany.
Okay.
Speaker Change: In response to the other jeffs question about.
Speaker Change: Recycled.
Speaker Change: There seems to be a real genuine attacks can make a difference in the change as possible.
Speaker Change: Again, whether it's from a regulation or finally industry. The rois are sensitive.
Speaker Change: Inevitability.
Speaker Change: It's all wonderful so truly appreciative of.
Speaker Change: The industry.
Speaker Change: Obviously, the European organization. So they are really focused on the aerospace other great things going on.
Speaker Change: Appreciative of all the hard work and.
Speaker Change: Thank you.
Speaker Change: To solve this problem because yeah, it's great for us as a company, we don't get me wrong, but it's great for the planet and services is a wonderful to see.
Speaker Change: Alright, and then could you is there anything more that you can say because there's a fair amount of flow of news on recycling in Europe can you just synopsize a little bit of of you know any milestones that are expected.
Speaker Change: Or mandates or anything we should be paying attention to.
Speaker Change: In Europe.
Speaker Change: And again I don't want to sound like a broken record, but maybe kind of it.
Speaker Change: All of these data points are great right and this is very exciting in isolation, they're all exciting we can tie this altogether and so.
Speaker Change:
Speaker Change: I would prefer to really give a full rundown.
Speaker Change: When we're able to and willing to talk about this deal and give them a fuller broader description of everything going on but I think there are over.
Speaker Change: I know that it's not really quite satisfactory, that's looking to answer so I think all over I mean in and.
Speaker Change: The mines to end plastic waste.
Speaker Change: Being very transparent.
Speaker Change: About the works in Belgium, and the work in Germany.
Speaker Change: Those are great avenues to stay abreast of as it continues indefinitely.
Speaker Change: And okay, well will be supportive of them sharing all of that I mean, this is wonderful as their initiatives.
Speaker Change: Just the supplier and doing them and so we're happy to do that I, just would rather talk about what it means to us when we can talk more broadly about everything going on across services.
Yeah, No that's fine.
Speaker Change: And then just wondering on you had the reseller.
Speaker Change: Several quarters ago, who had won a deal with precious metals are marking and and a deposit return scheme and just kind of wondering if if there was any.
Speaker Change: You know progress report you can give there and as part of that I think you mentioned in the press release that there was some subscription revenue growth from existing contracts and just sort of wondering if you could give any color on that.
Speaker Change: Yes, I'll, let Charles answer the second one in terms of our partner there and they're wonderful.
Speaker Change: The.
There is an opportunity to expand our relationship with them once we're looking forward to it.
Speaker Change: We're going to be wonderful partner.
Speaker Change: And we just like to split our partners and nothing nothing I think is better validation for us as a trusted supplier and when people say things are going great. How can we extend our relationship and so that's what really what we're focused on with that in fact customers, who is adding more value to them.
Spansion of what we're doing with them Charles do you want to talk about the.
Charles Beck: Yeah. So I mean, yes, so I mean growth is really a function of new customers and upsell of existing customers and there've been several quarters, where we've had really nice upsells from existing customers and that's a big focus with.
Speaker Change: Several of our customers who were in the early stages, we have a lot of runway to continue to grow those relationships and so we're continuing to try and find more and more ways to.
Speaker Change: Drive more revenue from our existing customers, obviously, a lot easier to sell the existing customer that a new customer. So it's really a function of the growth is really a function of both.
Speaker Change: Sure.
Speaker Change: Understand.
Speaker Change: Alright.
Speaker Change: Yeah that was going to say one thing that John said is we our nation and a lot of our customers what we could be like a real time example.
Speaker Change: There was an internal call or the call.
Speaker Change: Some of the some.
Speaker Change: Some of our teammates had with a customer that were really intent on growing.
The call started off with a senior person in this company starting off with followed by saying we are the best technology vendor to work with.
Speaker Change: As part of its part of our conference scheduled to how we can expand that relationship that's.
Speaker Change: That's incredible and that's the kind of thinking yes, we absolutely one brand new logos and we are grabbing new logos and expanding but it's that kind of stuff there.
Speaker Change: Every quarter, we have an upsell and expansion of our relationship.
Speaker Change: Allegation of of of the key here and the technology because you've got a good every day and so that's a good.
One of the things I've heard in the last week was how that last I'll start I just want to share here in a public forum for those of my teammates who are listening who were part of that contract.
Speaker Change: Relationship. Thank you for that.
Speaker Change: I appreciate that.
Speaker Change: And then so should we understand that this wasn't a subscription is signed there's sort of some amount of volume that's that can be implied and so you know for example, when a precious metal thing.
Speaker Change: Hum.
They're there doesn't necessarily there isn't necessarily a growth in revenue on a growth in volume.
That'll kind of already be wrapped in to the subscription or or or how does that work.
Speaker Change: So all of our contracts.
Speaker Change: A lot of our contracts in this one in particular is if there is a capacity they have if they're going to go above that.
Speaker Change: The overage just like any platform.
Speaker Change: With the reference when I was talking to you about about opportunity, but we feel pretty good about for next year.
A brand new program, but it's a breeding program we earn because we've been working for the last couple of years, unless theres something else, we'd love to bring you guys into it and this is valid and it is.
Speaker Change: It's wonderful validation is a reflection of incentives.
Incredible teammates I have them, we have here and our technology because that's how you win expansion deals.
Speaker Change: You you earn them every day.
Speaker Change: And then lastly, and then I'll, let somebody else ask.
Speaker Change: Watermark in legislation in California didn't get through at the end of the legislative session in the summer Ah I guess kind of bundled along with the other AI stuff that maybe some people had.
Speaker Change: Greater issues with.
Speaker Change: You know kind of status check and generally on AI water, marking and and how you see that.
Speaker Change: Proceeding or not proceeding.
Speaker Change: Yeah. So so obviously, we were disappointed to California Senate decided to move forward with another bill.
Speaker Change: They did have the opportunity to lead the way forward for safer and more off anything or not we all deserve and.
Speaker Change: We also believe Adobe decided a progression because the solution for scratch will not work period.
Speaker Change: No.
Speaker Change: We believe that was a bad decision we are Super Appreciate Assembly member, which he was the original sponsor 32 11 she guesses.
Speaker Change: She understands the reality Oh.
Speaker Change: She stated that she plans and bringing 32 11 or the same contents 32 of them I don't know if I have the same bill number which has been a pretty forward again next year.
Speaker Change: But California progressed it doesn't work anymore.
Speaker Change: And tying watermarks to generic curated content isn't going to work there is not a single.
Authentication program in the world that revise on identifying.
Speaker Change: In authentic content.
Speaker Change: There's just too many problems with that right.
Speaker Change: It's the opposite that works and this is in our view. This is the view of.
Speaker Change: 2000 years of fighting counterfeits.
Speaker Change: So disappointed with the outcome.
Speaker Change: We take a very long term view on a lot of things in India.
Speaker Change: Folks like Assembly number works it gets it and saying well do it again next year, it's wonderful.
Speaker Change: Okay. That's great. Thank you.
Speaker Change: Thank you.
Ladies and gentlemen, just a reminder, if he would like to ask a question. Please press star and then one no.
Speaker Change: The next question we have comes from Janney.
Speaker Change: <unk>.
Speaker Change: Oh tight capital. Please go ahead.
Speaker Change: Hey, Robyn Charles.
Speaker Change: I was wondering about the gift card opportunity.
We had a chance to attend to the retail gift Card Association conference last month, and there was a lot of discussion around the prevalence of gift card fraud, and a level of regulatory pressure at that the gift card industry is facing.
Speaker Change: In addition to that there was a lot of buzz around the potential for digital watermarks to address this issue on an industry wide level.
Speaker Change: I was curious to get your thoughts on the potential for digital work to become that industry wide solution.
Speaker Change: That's my first question and my second question is could you talk more about your partnership with Blackhawk network.
Speaker Change: Yeah. So on the latter part we haven't announced any partnerships I mean, obviously there is some 800 down the roads.
Speaker Change: In the industry and Black Hawk.
Speaker Change: Others are longer.
Speaker Change: <unk> you.
Speaker Change: You might be referencing of the show there was some signage with US I mean, there are wonderful and our reception in this industry has been phenomenal. This is an industry that has been super Super growth and is starting to run into at substantial concerns.
Impacting the growth because that's wrong.
Speaker Change: We have a really really powerful solution the.
Speaker Change: The industry is desperately searching or eager to find them.
Speaker Change: Novel solutions, because there is a lot of.
Speaker Change: Bad actors focused on this industry, it's a basically a trillion dollar.
Pam or nap I guess.
Speaker Change: Uh huh.
Speaker Change: The value of gift cards as a trillion dollars.
Speaker Change: And so it's an area of the bigger you get the worst and the more organized and the smarter the bad guys arent clear.
Speaker Change: I mentioned.
Speaker Change: In response to I think it was Josh <unk> question, we got we actually get that revenue in Q3, we expect more in Q4, and we expect it will be difficult contract either contributor to our 2025 numbers.
Speaker Change: But again these exciting and those data points Sanjay I'd love to update everybody on everything when we can we can congress altogether, but yes definitely an area that we're excited.
Speaker Change: It's definitely an area where the industry is it is looking for a solution.
Speaker Change: As regulation driving this as well.
Speaker Change: EHS is.
Speaker Change: He is involved in governments are involved because of the sophistication of these bad actors, they're doing really bad things with the proceeds of these of this problem. So we're happy to join the fight them up against our industry always we obviously have a long history of protecting Brinci on justice is another type of currency, it's stored value gift cards.
Great. Thank you guys.
Thanks, Jonathan.
Speaker Change: Thank you.
Speaker Change: Last question, we have comes from enough to call. It of PCB Advisory. Please go ahead.
Charles Beck: Yeah, Hey, Charles Thanks for taking my call here at the end.
Speaker Change: As I I'm walking the fine line of asking about the contract but not.
Speaker Change: Not putting in a position where you have to give me the the standard answer but it would be prepare for the closing of this deal hopefully and how should we think about the up sell opportunity of it you you you referenced or use the term transformational in your prepared remarks is this.
Speaker Change: You should or should we be thinking about it in terms of the evolution of the flywheel effect that's been referenced in the past in terms of setting our expectations.
Yes again.
Speaker Change: Rent negotiations right. So I don't want to where we got to be careful what we say.
Speaker Change: I don't throw it around the world transformational lightly.
Charles Beck: Charles gave some some scenarios for quarterly.
Charles Beck: Quarterly cash flow you could take a look at them, but we got to get this deal across the finish line in.
Speaker Change: Can't wait to when we do that.
Charles Beck: Meet again.
Charles Beck: Fair enough.
Charles Beck: Thank you Sam.
Speaker Change: Ladies and gentlemen, we have reached the end of our question and answer session and I would like to turn the call back to Randy Mccormack for closing remarks. Please go ahead Sir.
Randy Mccormack: Thanks, again, and thanks, everybody for joining us on this call today, we hope you have a great rest of your day.
Speaker Change: Thank you, ladies and gentlemen, Dustin computes today's conference. Thank you for joining US you may now disconnect your lines.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Hum.
Yeah.
Speaker Change: Yes.