Q2 2019 Earnings Call

Thank you.

Thank you good afternoon.

Welcome to our conference calls girls back our CFO is with me on our call. Today, We'll review Q2 financial results discuss significant business developments and market conditions and provide an update on execution strategy.

We're supposed to be prepared remarks in the Investor Relations section of our web site and will archive of this webcast there.

Please note that we may make certain forward looking statements in this call and in the prepared remarks, we filed with the FCC posted on our website under the heading safe Harbor statement regarding revenue recognition matters results of operations investments initiatives perspectives on business partners customers prospects industry trends and growth strategies.

We will also discuss from time to time information provided to us by channel partners and actual potential customers about their business activities. We are providing this information as we understand was represented to US we do not verify nor both for such information all such statements and information are subject to many assumptions risks uncertainties and changes in circumstances any assumptions, we share about future performance represent a point in time estimate.

Actual results may vary materially from those expressed or implied by such statements.

Expressively disclaim any obligation to revise or update statements or other information that we provide during this call to reflect events or circumstances that may arise. After the date of this conference call for more information about risk factors that may cause actual results to differ from expectations. Please see the companys filings with the FCC, including the Form 10-Q that we expect to file shortly.

Many links including that in our prepared remarks are provided for general information in context, only the content references not incorporated by reference and you should not considered as part of this presentation, we did not verify nor both for any such information.

Charles will not comment on our financial results, then I'll discuss significant business developments market conditions and execution of strategy Charles.

Thanks, Bruce good afternoon, everyone.

Q2 revenue increased 14% to $6.2 million from $5.4 million in the second quarter of last year.

The increase is largely due to higher subscription revenue, which increased 45%, reflecting the impact of increased discover and barcode bookings over the past four quarters.

Service revenue was up 200000 during the quarter, reflecting timing of program work with the central banks.

License revenue was down 100000, due to lower royalty reporting for licensees.

Discover and barcode bookings during the second quarter were roughly 750% higher coming in at 1.7 million from 200000 in Q2 last year.

Growth in bookings for the quarter included $750000 from our contract with Walmart Simon on April 26.

The Walmart agreement and two other new contracts made up most of the bookings during the quarter.

As a reminder, we define bookings as the non cancelable fixed value of contracts.

We expect to continue to experience a lumpiness in quarterly bookings due to natural variations in timing in provisions of contracts during early market development and expansion into Adjacencies.

Gross margin for the quarter was 65% of 59%.

Up from 59% last year, primarily reflecting the impact of higher subscription revenue.

Operating expenses increased by 5% from Q2 last year, primarily reflecting the impact of routine annual compensation adjustments for our employees.

We have kept headcount relatively flat over the last six quarters.

We plan to make five to 10, new hires in the second half of the year to address growing demand and delivery requirements.

Net loss for Q2 was $7.9 million or 68 cents per diluted share versus a net loss of $8 million or 71 cents per diluted share in the second quarter last year, reflecting higher revenues, partially offset by higher expenses.

Our working capital position improved considerably we raised 19.6 million of net proceeds under our ATM program during the quarter from the sale of 336000 shares at an average price of $60.61.

We incurred commissions and fees of 700000.

There is 9.7 million remaining on the 30 million authorized under the ATM program.

Given the great success in generating more working capital in Q1, Q2 and taken into consideration the current share price and program underway to explore potential investments as sources of capital. We don't plan to resume sales after the quarterly blackout period expires.

We will exercise the customary care in determining the best course of action regarding the remainder of the authorization should a change in relevant circumstances warrant resumption of sales under the program.

We invested 7.1 million of working capital during Q2, which was just above the top end of the range of $6 million to $7 million, we provided on our last call.

Working capital usage was higher than anticipated due to routine repurchases of our common stock in support of our employee restricted stock program at significantly higher prices than in prior quarters due to stock price appreciation during the quarter.

As is common with public company stock plans, we repurchase shares from employees to cover their tax withholding obligations, resulting in a cash outlay by the company and forfeiture shares by the employee.

The higher stock price during the quarter resulted in a larger tax withholding obligation.

Except for the effect of share price appreciation on repurchases cash usage would have been in the lower end of the projected range around $6.2 million.

During the quarter, we used $5.5 million of cash to fund operations and 400000 for capital expenditures, we ended the quarter of $50 million in cash and marketable securities.

We anticipate cash usage will be to being $7 million to $8 million in the third quarter absent a significant increase in share price.

Cash usage is expected to be higher than Q2, largely due to timing of vendor payments and customer receipts, which is consistent with our history, where Q3 is typically the highest quarter of cash usage in the year.

For further discussion of our financial results and risks and prospects for our business. Please see our Form 10-Q that we expect to file shortly.

Bruce will now provide his comments on significant business developments market conditions and execution of strategy.

Thanks Charles.

We had a great quarter among the financial highlights revenues up 14% over last year subscription revenue up 45% service revenue up 6%.

Gross margin up 6% commercial barcode bookings up 750%.

We signed Walmart and the design win and plastics recycling and increased working capital by $20 million through sales of new shares at an average price of $61 all of those in the context of substantial appreciation in share price. So far this year.

We rolled into the quarter on the heels of announcing a multi year contract with Walmart to enhance product flex label approached product labels and private brand packaging and provide enabling infrastructure to enjoy the benefits of our CP with respect to these media.

Prompt high quality implementations of these programs is our top priority.

The focus of the agreement is on fresh product labels, we are making good progress preparing for launch a successful launch of our labels and Walmart U.S stores will include activation of discovery throughout the relevant infrastructure at Walmart revision of business processes, where necessary education of associates and engagement with consumers.

We have a solid plan to accomplish these things.

Walmart another north American retailers are focused on waste and shrink reduction benefit of Digimarc barcode and fresh product labels.

These benefits implicate traditional markdown procedures, necessitating modifications to inventory management, and Pos software and business practices. We are mapping general structural requirements in our work with Walmart and other early adopters.

The benefits of faster more reliable scams in Ireland, better checkout are important nevertheless, domestic retail progresses centering on waste of dust reduction.

We have a great development team, leading the evolution of this important area of store operations modernization.

Success with fresh product labels at Walmart should create a waterfall effect on industry.

Even before we launch with Walmart momentum is building with three pilots in place verbal agreements for pilots with three more retailers in active discussions with several others.

Regarding Walmart private brand packaging, we have done considerable work training and orchestrating suppliers.

Much of our pre production work centered on growth rate.

Our agreement contemplates movement to production in all areas of general merchandise.

In support of this objective Walmart has provided general notification to its private brand suppliers that are wants Digimarc barcode included an all private brand packaging. This is a magic moment for us we've been given the opportunity to perform on the world's largest retail stage literally all the world will be taking notice.

As the world's largest retailer Walmart has an enormous global supply chain.

As we are stepping up to the world stage I think you can appreciate better why I believe that establishing some equity based strategic relationships with much larger IC suppliers make sense at this moment in the evolution of our execution of strategy.

It's a daunting task, but the synergistic effects of mobilized in the supply chain should be pretty amazing.

Globalization of our platform is becoming a reality. This is a really important step in execution of strategy for us.

The third leg of our work with Walmart building pilot programs with leading CPG suppliers is advancing.

There are already some products on shelf and a growing pipeline. The primary interest of participating cpgs is improving on shelf availability.

Digimarc role is to facilitate more timely and accurate information gathering by store associates on robots.

Our initiatives in manufacturing quality assurance and recycling that impetus to the decision by cpgs to begin enhancing products.

There is also continuing interest in fostering better consumer engagement and track and trace solutions.

We and our partners have a couple of supply chain programs being developed to improve efficiency and accountability throughout the supply cycle. The growth in applications builds the case for enhancement over time I expect we will overcome all resistance with compelling demonstrations of the value of modern package designs that incorporated Digimarc barcode.

The penetration of Digimarc barcode and the private brand portfolio for our first major European rail retailer is continuing a pace.

We are proposing that they consider adding fresh product label enhancement in anticipation of the European launch for the labels later this year.

Other European retailers are tracking progress, we're discussing potential pilots when retailers in Germany, Italy, and the UK to begin later this year.

Given limited resources, we are focusing on a few key opportunities in Japan.

One of our strategic partnership objectives is to get help serving that market.

We met with the leadership of our Central Bank customer consortium recently reaffirmed our powerful collaboration to deter the counterfeiting are the world's leading currencies.

As you know, we scored a significant win and technical trials for improving sorting on plastics in Q2.

Digimarc barcode offers the potential to more accurately identify plastics and other recycling by enhancing the substrates labels and shrinks leaves a plastic packaging to contain multi application unique identifiers.

The technical trials were led by a team of industry experts and a three year program known as pioneer project Holy Grail.

Phase one was completed with a report on the technical evaluation.

Holy Grail to was being formed focused exclusively on digital watermarking as the technology of choice, providing unique identity to plastic products number labels.

And for enabling the sorting and recycling ecosystem.

There appears to be strong interest from phase one participants to continue outreach is underway to increase participation to include more cpgs, both global and private brands.

And numerous relevant trade associations approaches to governance being discussed include trade Association leadership into our consortium approach such as what is in place for our bank now counterfeit deterrence program.

In any case, we prefer a long term business model in which an administrator overseas development of global Sanders regulatory frameworks and license administration.

In this model, we would supply access to our platform and development testing compliance and consulting services much as we have done for the last 20 years to deter banknote counterfeits.

Unlike that program, where license rights were liquidated early in the development cycle, while we were a fledgling startup we anticipate ongoing substantial license income from use of our platform and ancillary income from other applications in the demand and supply cycles that are enabled by the package enhancement.

There is considerable regulatory and market pressure to continue to make rapid progress in reducing plastics waste European authorities that led the way in establishing aggressive targets and Bakken number financial penalties for noncompliance.

Industry leaders are responding with promises of progress to forestall or mitigate the effects of increasing regulatory pressures.

Improving plastics recycling as an important new opportunity for users of our intuitive computing platform.

Extending the range of applications to provide benefits throughout the demand and supply chains from birth to rebirth.

In addition to intrinsic benefits of contributing to reduce plastic waste.

This new area of business provides an additional points of engagement brands driven by compelling external pressures.

Each additional application benefiting the product lifecycle increases the motivation to make digimarc barcode a required future product packaging design.

Our current recycling market development activities include seeking funding for R&D to demonstrate industrial capability to support supplier development and testing of solutions synchronizing, our investments with legislative or regulatory waves rising consumer consciousness global commitments by brands and retailers and infrastructure developments assisting in the formation of HD too.

And creation of governance structure for licensing and program management, serving as a technology provider and trusted advisor to the HC two two consortium coordinating closely with the program administrator.

Working with industry to enhance all types of plastics and enabling the waste sorting industry ecosystem.

All the time.

Fielding inquiries and continuing to educate and evangelize to key industry trade groups and regulatory bodies.

Securing funding is our number one priority that funding would allow us to increase the resources that we can dedicate to these projects accelerating the timeline by which the recycling ecosystem can incorporate and deploy the platform.

We are between pursuing many potential sources, including brands from government agencies dual systems operators trade associations and foundations involved in addressing the global Plex plastics crisis HD to members and licensees from early adopters among suppliers and end users.

Once adequate funding unsecured we have dual development Thrace and enhancement and discovery.

Several cpcs are already engaged on the enhancement side, we are engaged in discussions with new numerous plastic packaging suppliers as well.

Tom around the largest ordering equipment supplier in Europe has been a great partner, so far in demonstrating improvements in sorting of waste streams.

The European community has been appointed the spear in addressing.

And improvement of recycling.

Nonetheless, we are encouraged encouraging some retailers and cpgs and their suppliers to develop a parallel initiative in America.

Leveraging the foundational work already done in Europe .

There are some packaging projects in process, where the circular economy goals could be integrated into undisclosed work in progress for other supply chain benefits.

The work we are doing in Europe should translate well into the us market and other geographies.

We are aware of leading indicators of a shift a new us political perspective regarding plastics and recycling.

Members of Congress recently announced their intention to introduce comprehensive legislation to address the plastic waste crisis. They released an outline of the build last week that they intend to introduce in the fall.

Stakeholders are invited to submit comments by August 21, we intend to participate.

While the timing and substance of legal changes are uncertain increase in government activity like this will fuel discussions with affected parties, who will seek to deter or minimize legal intervention to promises of industry self regulation and once we prepared to comply with the new legislation becomes effective.

There is a busy schedule of upcoming industry events that will provide to in our prepared remarks for those who want to continue to monitor developments.

In another area of early market development, there are too ambitious supply chain initiatives underway.

And as you know westrock is engaging prospective customers with Digimarc enhanced plant Stakes and labels. They are now seeking alignment from meeting growers to orchestrate a modernization program from farm to home.

We have been doing R&D with a major produce supplier in this technology providers along similar lines.

We are now seeking funding to advance pilots and production.

These are very interesting and complex problems, where our platform may materially improved supply chain performance.

These applications have not have generally been anticipated or modeled in the public equity market.

If successful moving to the next stage with either or both of these programs, we should be able to provide details regarding total addressable market estimates on business cases soon.

I mentioned in our last call that we are seeing their growing interest in the audio watermarking for authentication.

Advances in technology are undermining the trustworthiness of all media.

Effecting media that are relied upon for decisions of great importance to society and the economy.

Digimarc barcode is uniquely qualified to help.

Digital Watermarking has been proposed by several commentators as a means to mitigate the fake media threats.

Digital Watermarking as specifically mentioned in draft legislation.

We are working with our government relations team to educate policymakers about the technology and the central contributions to mitigating these threats.

Were also engaged in discussions with the concerns source of political news and relevant technology suppliers to assess how our platform might be employed to address their concerns.

We see the fakes as a leading indicator of the need for all media, having a digital identity. It is the dawn will inherently with all media Combi photo shopped undermining credibility in frighteningly pretty pervasive manner.

Momentum is picking up in many different areas of engagement now that we are moving to production with industry leaders.

These predicted indirect group network effects are contributing to the tipping point to great value creation for our business and foreshadow are beginning to realize economies of scale.

Our supplier partners should now begin to assume more responsibility for application development and maintenance and system integration. We must continue to focus most of our investment on improving basic functioning of the platform and the quality of our support for these suppliers.

So key takeaways today include the Walmart contract signaling achievement of one of the key milestones of our strategy. We are making good progress in our programs. Their good work in these areas will lead to more opportunity.

The key supplier programmer represents a proving ground in a non round for CPG adoption of our platform. Our current generation of fresh product labels enables dynamic pricing of physical retail offering to reduce foodways provide unprecedented low prices to value conscious consumers.

And increase profits simultaneously.

The recycling initiative bookends manufacturing quality control and demonstrating the extraordinary full product lifecycle support that our platform can provide the consumer product manufacturers.

We are resource constrained and serving existing demand, we expect demand to increase significantly equity based strategic partnerships are another are attractive as a means to accelerate growth.

On the financial front bookings grew 750% and we raised $20 million of working capital at more than $60 a share.

That's it for our prepared remarks for today now we will open the call to questions.

Thank you Sir if you would like to ask a question at this time and we bought Star then the number one on your telephone keypad to withdraw your question press the pound.

Our first question comes from the line of course ASCII National Security.

Thanks.

Well I just wanted to get a little.

Delving a little.

You guys.

You announced that about three months ago.

So from that time other than the revenues from Walmart, what how many of the Walmart suppliers have come to you and said they want to work with you and integrated into their product. Sir can you give us a little bit of color on kind of the derivative place from the actual Walmart. Thanks.

Thanks Julia.

That's the answer as more complicated than you might think so let me explain why and then tell you what I what I can tell you so.

Yes, as we advance in the execution strategy, we plan for suppliers to take over more of the activities involved in delivery services.

Based on the platform.

So.

Many suppliers and Andy what we call end users or Cpgs in the case of packaging.

Would go to their suppliers.

Of both pre media services.

And so we might not know all of them that are being.

Contacted there was a general notice set out to our private brand suppliers for Walmart recently.

I don't know how many.

There are I would imagine thousands or tens of thousands.

And so the ecosystem is filling up with awareness of the need to learn more about digimarc tends to get on board.

So we've seen a rising I'll call a rising temperature if you like.

Throughout the.

Supplier community associated with getting Goldman on Digimarc barcode.

Because of the size of Walmart the awareness becomes extremely broad but of all of those suppliers supply other customers than Walmart.

And so.

That means that as they become more expert they can provide operating leverage into account acquisition in the rest of the industry. That's why I say as such an epic moment for us.

So I don't have a number and I cant have a solid number for you, but there is a lot of interest a lot of communication going on.

Across the board in the packaging area.

On the.

Fresh.

Legal side of things the community of enabler as is the printer company and we're working with all of the major.

Suppliers in that regard.

So it wouldn't be.

Wave of additional printer showing off was there when we have the industry leaders already engaged.

With respect to the discovery side of things that is the scanner vendors on Pos vendors and so forth again, we're already engaged with.

The the major suppliers midget global suppliers.

We are.

Trying to figure out how to deal with some inquiries from.

Geographies outside of the core geographies that we've targeted so we're we're still struggling a bit with how to deal with those situations, but we found some situations where it looks like we may be able to provide the platform benefits without a substantial direct involvement which again will be consistent with the.

A mature state of the evolution of the model that.

We're I think just getting to the point, where we might be able to accomplish those things.

Okay. Thank you.

Yes.

Our next question comes from the line of Jeff Van Rhee with Craig Hallum.

Got it great. Thank you for taking my questions.

So yes, several from me Bruce just.

I guess, just just sort of a long lines. The prior question, we look at the pipeline and the momentum.

With respect to the largest potential revenue impact.

How where do you see the most momentum I mean, I think you gave a lot of color, but I'm just trying to trying to mentally.

Rank order I mean, you've got got retailers as I would break it down you got your retailers and Cpgs, who may be doing it for their own packaging.

Maybe at Cpgs are trying to do it for production packaging, killing type engagements or recycling seem to be kind of the four core use cases, so I guess to simplify the question. How is the pipeline of those use cases changed in the last six months.

It's down considerably more complicated.

In the past six months or so.

The the growth can come from many different places.

And in all of them out there risk with respect to timing, but.

We clearly now are engaged with.

Industry, leading retail.

And so we expect more retailers to be coming on board.

They can come on board with respect to.

Packaging or labels or both.

And you know the economics of each of those.

Offerings.

We have a couple of supply chain.

Projects in the works that Werent contemplated.

A much longer than six months ago.

Those will have some financial impact we presume.

Our position on recycling right now as we once someone to be putting up some money.

Therefore successful that could have a significant impact as well.

And then the Cpgs are.

Developing.

More interest as I noted here we have those.

Model for the platform license fee associated with the skew of $50 per year, where.

As more and more value gets added to that basic enhancement, the $50 becomes more and more tolerable and the decision to move.

To digimarc.

Easier to make.

And so that will continue continue to accumulate and as it does I don't know what effect. It will have in terms of the speed at which.

These things are were accomplished.

And then we have some areas new areas that are opening up that may involve.

Additional revenue opportunities layered on top of all of that is the.

Ongoing examination of opportunities for equity based strategic relationships and those relationships.

May have income aspects to them.

I expect that.

We would prefer that.

In all cases.

And so that may have another impact and so there is a cumulative effect of all of the growth of the.

Use of the platform here consistent with the notion of network effects.

That is going on this year, so it's a very interesting year, but a creates.

Larger opportunity both but.

Greater ambiguity in terms of sort of where the largest share comes from.

So I hope Thats answering your question adequately Jeff.

Appreciate that.

Just.

I guess sort of pivoting.

You covered a lot of content really quick so at the risk of being redundant can you just go back and revisit the ATM you pause that we use some you still got some remaining and in several cases around the plant stakes in some of the other similar initiatives you mentioned in a number of occasions strategic funding you clearly are emphasizing there, but just kind of revisit.

That that decision to pause the ATM.

Why now is definitely the time around strategics and then you mentioned specifically as it relates to.

The Westrock instance, or others might seek funding for that specific Japan's prison production in that specific instance, like how narrow for the strategic funding be particular use cases, just maybe fill in a few gaps there.

Okay. Those are a lot of questions. So I'll try to keep my answer of cancer manageable.

So were we don't have any plans to.

Resumed the.

ATM.

At this time and it's a combination of circumstances.

The the share price.

The extraordinary success, we had during Q2.

The balance sheet condition, the spend rate that we're operating under and the.

The program to engage strategic investors.

Plus these new initiatives market initiatives, where we're going to going to see how it works everywhere, we've taken the position that show us the money.

And and again this is all if you like a natural.

Development in the evolution of the exclusive strategy because this is a platform that we're providing and so.

As we become more obviously the platform supplier and we engage.

More companies in investing their capital to build on the platform.

We will gain.

A lot more financial leverage.

And.

And so it's a little hard to characterize it.

Just yet, but as I said I think we're getting to a point, where we may be able to model some things better.

Before year end.

And.

We.

We hope to find.

More business with us.

Assisting customers as well.

And that of course is dependent on how well we execute on the business. We have with were very focused on doing.

So.

With all of that contacts them continuing the ATM, just because we have authorization didn't seem appropriate.

We we thought we would just pause for a while year end up and carry on with all of these other opportunities to find.

Capital.

From income sources and the investments sources.

Great. Thanks for taking my question.

Youre welcome.

Our next question comes from the line of Jeff Bernstein with Cowen.

Hey, Bruce a couple of questions for you.

So you guys just did.

Webinars with Adobe about brand image protection and tracking and I was wondering how all of that relationship is or what exactly is going on with with you and Adobe if there's anything formal.

There and then I had a couple of others.

Well, we haven't released from Adobe for ever.

And it's always been a healthy relationship although not at the scale that we think it will be some day.

And so we're we're engaging with them on a number of different activities. The one you saw it had to do with the digital image copyright protection than license management.

And.

And so.

You know that they are very important to us and then there are the foundation of all of our.

Image enhancement tools.

And so we will continue to work hard to engage more closely with them.

And.

But excited about what.

The increased collaboration could mean for us if we can.

Convince them to allocate resources in our direction.

There are there big very successful come I admire their their work quite awesome.

And we want to demonstrate that were up.

We are the partner.

In many aspects of their business. So we think that we have relevance in lots of areas as I indicated in the capitals day. After day presentation. So you can envision that we're continuing to work on developing a broader relationship with them.

Great Great and then can you just give us an update on the hangtags opportunity whats going on with the current customer and anyone else looking at that.

Yeah, we're we're continuing to deliver to to Cosco.

And.

You might imagine, we're suggesting at some other general merchandisers.

So that's about all I can say about about others at this point in time, there is nothing announceable.

Gotcha.

And then to the extent that.

People are able to find.

Non private label products in Walmart that are.

Digimarc labeled are those.

Actually in production or could it be that those are part of the pilots.

Well the pilot production, it's limited production so the way the all of the companies that we deal with them consumer products operate retailers and manufacturers.

Is they sort of three stages.

With.

New.

The technology like ours as the.

If like laboratory testing.

Which can go to some stores in a very limited fashion thats called proof of concept.

And then pilot means limited production. So it's the intermediate step on the way to full production.

The reason that they do a pilot is to determine the effect of scaling on LOE was demonstrated in the proof of concept.

So the products that are in the stores are real products and real production, but just a limited production may be limited in the sense of a particular skew or in some cases, where channel segmentation is common they couldn't be delivered to a particular retailer.

And so a big retailers like target them, Walmart Kroger and.

Costco and so forth some of the products. They have are built specifically for them.

Gotcha. So just because we found a product from CPG you haven't talked about before does not mean that that is a win yet.

That could still just being a pilot.

Well I think we are in the business everyday so I do think we will become routine and.

On standard as we have done most of the areas in which we have operated historically.

So for a while I would say that would be true everywhere.

There could be a reversal, but I think that's unlikely.

Okay, that's great.

Thanks very much.

Youre welcome.

Our next question comes from Robyn net with Janney.

Hey, guys. Thanks for taking the question.

So.

Larry Logan mentioned in his remarks at a conference that the next step of the Holy Grail too.

In total can take six to 12 months.

I know, there's lots of pressure from the industry to increase the recycling rates, but could this really be ready and could we really have products ramping into production by this time next year and then I have one follow up after that.

Okay.

Well, Larry talking as an industry event I think he's trying to encourage everybody to hustle.

I wouldn't take that as a project timeline that you can bank on.

We'll go as fast as we can go the hang up for us is.

Whether we invest your capital in it or someone else that gives us some capital to invest in and my preferences towards B.

So we're we're.

We're not speeding things up right now we're kind of.

Impeding progress as we look for capital and by capital I mean, the primarily income, but it could be income land or investment capital from the recycling industry, but we want them now to say, Okay. You have your design win.

We have a large group of stakeholders of determine that you have relevance. So we're saying, okay fine wares show us the money.

And that will now speed things up.

Until the money is secured.

So.

Again, I wasn't present that larry's presentation, but.

I want you to be.

Conscious of our approach to this particular market opportunity, we think it's a very large one in a very good one.

We have been able to.

Make the progress we have and enjoy the access to capital that we have enjoyed.

Because were prudent.

In the scope of our activities.

Recycling is a big business with lots of players.

And much of the activities in Europe , which is remote and service by a small office of ours. So.

We'll we'll go as quickly as they want to go I guess would be the fairest answer I could give you.

Okay Fair enough and then just as a follow up on that same vein.

I understand there are many many different ways to meet around access to your platform.

As far as the recycling App is concerned but on on the Q1 call. You said that there was no reason to think that the per SKU costs would be less than a $125 does that still hold true at this point.

Yes, the strong man again, we're we're we're open for business and.

Depending on what kind of.

Hello.

I call the governance structure.

Understand where I'm getting.

Yes, our recycling needs global standards and thats populated by their very large companies and I don't think we want to do it as a hobby.

And so we're trying to talk.

Various very large companies.

And trade associations and government agencies into finding some collaborative structure, where we can license our.

Platform and then be a service provider.

I think thats the ideal model, but if they want to give us enough money to grow grow a big head count associated with serving.

Application market fine Im as it's okay. It's just not our preferred approach.

So in that case, and we would enjoy profitable participation very early.

And that could develop a very large income stream without making a large investment. So so that's the that's the preferred approach at this point in time.

Whether thats meter added 125 or $150, a skew or so much per ton or.

A license based on scale of business or recyclable material. There is a whole bunch of other models that could be applied.

But I think as a means of.

Estimating addressable market that's fair.

And that's that's what I intended to say previously and still believe to be true.

That's great. Thanks, Bruce I appreciate the clarity.

You're welcome.

Bye bye.

Our next question comes from the line of Jeff Van Rhee with Craig Hallum.

Great just a just a couple quick follow ups on Bruce just first of all last question just to be clear you said you've taken is do you look for collaborative structure that can license you don't really want to be a service provider just expand on that because I would assume that's what you're doing right licensing the technology when you see be a service provider.

Are you are you talking about actually providing the.

The process help to to get.

Sort of packaging migrated over to the solution or some other variation of service, making just clarify what you mean by service provider.

Yes, yes, there is a there is us.

I'll call it an ambiguous space between.

General licensing of the platform and the specific applications supporting recycling of plastics.

In that space someone needs to.

Determine how them too.

Effectuate the enhancement in moles, okay, because that's how we will get into classes.

Well, we're not experts in mold.

And.

There are.

No probably thousands of providers using them, so who wants to do that work. Okay is an example of what's in that interstitial where I would like someone also.

And then.

We someone needs to build the firmware.

And the I'll call it the module.

That enables the improved sorting of.

No material in waste streams in large recycling facilities.

There are.

At least tens of thousands of recycling facilities in the world and there are major suppliers like Tom wrong.

And the major players like waste management.

Who.

By equipment supplied equipment in that area as well I would prefer not to learn about all of those things I would prefer to have someone developing their requirements, giving them to us having us do some R&D and delivering back.

Basic software development kits.

Into that marketplace as opposed to us building that software.

Yes. So those are those are areas, where theres a busy.

It's like a fairly wide range of involvement that was possible. So we're arguing for.

Minimal involvement in those processes.

And yet what we found in early stages of market development is that the end users. The stakeholders. The primary sources of income wellness a ball because we are the experts and they want to hold us accountable and we want to be involved because we want to ensure high quality.

Over time that should become less.

Relevant.

That is that we shouldn't be able to build great tools for.

The suppliers in all kinds of product markets, and let them adapt them to the requirements of that market. So so thats. The ambiguity right now is who's going to do that that work in the middle there.

Okay, great Yeah that makes sense. So so then just the second back to the bookings number.

I mean, you went through it kind of get the bookings number said yet to other new contracts in the quarter.

Obviously, I know you always protective of names we talk about.

Some incremental detail geography use cases this retailers CPG.

A little little color on the two incrementals.

Yes, I don't think we are ready to do that yet we expect.

To be publicly disclosing information before year round.

In those relationships.

I don't want to start down the path of trying to.

Facilitate guessing.

All of it. So unfortunately, it begins again without talking vendors or size or anything else are you able even just to give a.

At least some sense of what the use cases, whether were talking cpgs are ones that retailer thermal retailer PM from check out I mean anything along those lines.

I think I prefer to wait.

Got it okay.

Thanks.

Okay.

At this time. This concludes our question and answer session I would like to turn the call back over to Bruce Davis, Sir. Please proceed.

All right. Thank you very much everyone. We appreciate your continuing support and confidence in the company and look forward to talking to you again soon.

This concludes today's call. Thank you, ladies and gentlemen for joining us for today's presentation. You may now disconnect.

Okay.