DMRC - Earnings call transcript Q4 2017

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Operator

Good afternoon. And thank you for participating in today's conference call.

Now I would like to turn the call over to Bruce Davis, Chairman and CEO of Digimarc. Mr. Davis, please proceed.

Bruce Davis

you. Thank afternoon. Good Conference our Welcome Call. to Charles Beck, me. is CFO, with our

an those and we'll financial we business and regarding On Investor of investments, will Relations provide Please in today, call, our that customers, this revenue QX We'll channel matters, to potential statements, be their market activities. or on fiscal making and operations, archive strategy. on and certain us customers section developments actual results the also time-to-time business call this trends initiatives, industry the business including during review perspectives We'll discuss partners, the forward-looking XXXX prospects, webcast of of by strategies. execution significant results, information conditions website. of and about recognition update note growth discuss partners from provided course

any by represent statements. materially from the of to reflect statements are we implied was may this statements nor that for it arise future in such We information. a not We assumptions circumstances uncertainties estimate. may vary circumstances. assumptions, in are expressed and assumptions, represented this performance or changes risks, about to after or date expressly other the point partners results those update revise as understand forward-looking statements time Actual forward-looking obligation verify conference disclaim any or information We do subject to to vouch about Any providing such projections Such many share and customers we us. events and call. or

that expect results. market on by filings conditions developments, the expectations, will strategy. Charles that differ with Charles? to of please company's execution business discuss file may the I'll commenting For cause we more shortly. XX-K significant actual from factors including financial information the Form and SEC, our then to about see risk begin results

Charles Beck

we for lower Revenue quarter quarter license of million, last year for Good is any accounts the growth to which fourth the fields down royalty due In into Thanks, existing a to for this for quarter, fee, licensed and the decrease QX of flat. we license a of million. and in Service third from last of fourth of licensee one-year million of onetime Barcode obligations quarter, $X.X $X.X license the revenue the quarter extension for paid-up bookings million in bookings upfront year-over-year. the everyone. future entered $X.X a waived use were of due revenue $X.X one fee an licensee, revenue. were Digimarc contract. $XXX,XXX. double exchange in the license subscription existing Bruce. Discover In The largely during bookings our year from was essentially afternoon, from an fully

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

loss diluted fourth market for to quarter Barcode bookings Operating increases in fourth year, due was in in of per the and delivering loss higher was in for expect year. $X.XX retailers and or per the and and diluted than operations Net quarter, expenses our noted million versus the last quarterly to sales, increase to last in share million continue staffing the early QX a selling expand the stages $X.X million share Gross lower previously lumpiness the $X.X margin provisions reflects of varying of primarily timing $X.X We down development XX% quarter of points to in Digimarc impact the $X.XX The or from same X marketing, brands. capabilities affecting license last were reflecting revenue. year. engineering quarter net fourth bookings.

and X-month high-quality, offering. new to in in usage capital cash $X a offer $X response price long-term for common invested We marketable was closing $XX sale. $X unsolicited to a to through registered shares raised There we capital first transaction working costs expenditures. market the the on XXX,XXX million quarter, million between stock of the using and We XXXX including quarter included an $XX.XX financing, discount. of on fourth $XX.X the sold $X.X in of during million restriction of date of direct sold August premium share be bogus shares XX% from or no the million During Terms million anticipate over were the shares. $XX,XXX. the lending calculated price, in $X.X [ph] million was We sale Total QX, sale with ended The will our the cash capital securities. quarter. preceding the a operations the fund our million We investor.

the while the marginally, $X.X Subscription $X.XX Our from offset up earned higher $XX.X in than million down was fee Barcode last in million revenue. year, was X from last impact points in we higher Discover remaining Guardian million receipt license were up QX. margin quarter from by in of the Revenue January year higher reflecting lower Digimarc million, QX for million by for was entered in we impact cash staffing. the was license license reflecting revenue. due the revenue, increased XX% the up revenue year, reflecting year, the revenue the revenue and expenses patent projection Gross into year of higher subscription XXXX. marginally. Operating Service onetime a of impacted was $X for $XX.X XX% license of revenue to third factors XXXX

and was $XX.X Barcode. employees diluted staff We year, capital and minimal $X $X.XX the with X $XX.X million last to under shares capital We during million new operations positions year direct Our capital fund working to including $XX.X invested Net where the of year of during full-time on cost. separate the year. we of million offerings, no delivery the $X.XX share professional focused raised registered year, from diluted for expenditures. sold transaction increased Discover share million discount per per versus XXX and sale most with for loss XXX during Digimarc and

the appreciated group. price peer in share us XXrd our rating our of percentile XXXX, XX%, During

For to on will expect file XX-K further financial see prospects significant our provide Bruce conditions business risks comments business, discussion and our please and market developments, that for shortly. results strategy. we and of our of execution Form now

Bruce Davis

our example for a and there an ecosystem, of of accounts, My on customer Charles. Retail York on update retail Conference to in of XX, New "BIG Show". the Digimarc was day within financial market and gave Federation's January National comprehensive City to business the scaling the conditions, performance XXXX. our expansion XXXX Growth capital last from review close Emerging the priorities markets at the perspectives the a of outline Needham Thanks, after approach I update of

proceeding development attend provided presentation the strategy month on on focused When expected media, not we with available to elaborating, did The from focus license model and website. and respect hangtags Thus, checkout development we an For and call we'll include will is fees not thermal enhancement the media view from SKU, expected services. option revenues that or enterprise put and the also or based incrementally enhancing packaging shelf volumes information our originally be since to on price labels market engagement. but associated We Needham potentially, assume negotiate applications. revenue are easy for the software and other together, contributions labels, has those software to Revenue Thermal on since webcast, and the noteworthy and of our observations contributor. consumer perhaps offer repeat that service license this there. labels with conference. respect I'll in XXXX who improve and and per passed not growth review, is is a packaging, Only software clients only services. to of other largest and the

licensing model applications theorized SKU to finding delivery Systems licensing numerous awareness has with would that preference to of emerged. down than the Intuitive orchestrate Platform place, have the the in This and XXXX. larger The we license of large-scale media, orchestration. business is that do system sold not $X platform. fundamental akin our was the route to sales now partners our of various access of benefits As Computing the and has and opportunities of led understanding a from have enterprise still IP path rediscovering I ourselves are us integrators but grown, strong delivery, in per much system just for our us ID

customers asking for are way think I we the scale, role. on clients with underlying that in as served our better us The experts to are and us the However, driver's play seat. the this to in technology

store this Although it's role natural along to license a of anticipating improving and price with compliance, proposals familiar leading retailers larger proposals operations private are we enhancements and substantial and Thus, XXXX cashier-assisted initial we the and with ID include better to management is packaging rebuild days, development focused capabilities. IP Systems need generally some dollar services. including our of audits, that value, dynamic application on making consequence will thermal label pricing. through fees shelf software from The inventory self-checkout, brand our during

proof as leader The marketing may continues improve in customer Where to by take displays, operations these partners accounts. hosted we'll Wegmans applications, achieving store lead NRF Digimarc on leading operations an fees applications, some extraordinary for our enhanced labels, benefits adopters. appropriate materials, of applications generously in development perspective, marketing, deliver industry services our of aligned international be among regarded of proposing Thus, have and benefiting be early processes effective teams other range packaging, implementation. tours showcasing ways edge innovation highly other a lead, one Jersey the and services. we products, partner. demonstrate for So goal industry in-store of their within including is shelf develop we sales, and collaborator to and supporting enterprise-wide brand and and/or a serialized an self-audits VIPs and customer media in is client robotic private take scale augmented during and leveraging store to From stores experience. New Barcode. is to Wegmans product label compelling the fresh the a

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on and We continue confidential. a application work with larger suppliers the at scale Details Walmart much of than of Wegmans. the platform diligently working remain its at

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we of a thermal front, are Digimarc Barcode product labels. the On for rollout controlled managing

all software. are of learning processes Seasons. And in some and and our some piloting tuning betas, doing of things We and New we labels are Wegmans as

engagement. mobile enables an of Barcode consumer operations. has proposition soon principal on with enhanced address our consumer their We store with in The marketing leaders FMI engagement others. two are many package has broadly which and their important and changes include commoditization app Impediments get. on pre-sales difficult expect architecture, on consistent easy enhanced mobile-centric store their means more lack products with lack designs. begin to for investment Progress reasons. with increasingly trade struggled development a a to appear diligence major another Thermal aligned benefits phase engagement be on factors for been checkout discovery, These applications: improving return engagement as from consumer layers market available GSX, provides We in application. lack strategies for challenges. retailer more and of platform and applications more GMA, SmartLabel consumer they the industry media focus and engagement the greater amplifies and valuable in the consumer labels each behaviors, packaging In and with to Digimarc increasingly to the and to mobile of and shoppers. these associations, for responses of shopping dealing Industry of including buying undermine and be value in

participating pleased of in note an substantially to XXXX. the We update mobile expect that reading week to Barcode supports Barcode Digimarc of app the activating means I'm connecting iPhone the content. flexibility marketing the Android brands platform for last This SmartLabel first the time. increase from included to will Digimarc and for consumers for in capability that they improved GMA released consumer SmartLabel for to adding engagement, that packets

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the developments with see are operations and that entered of of proposition into and CPGs the leading clearer working enterprise-wide orchestration to are the development, retailers strategy Barcode collaboration to resource There scaling. store effectively product tools determine consumer few stronger implement these support with and we to to have lines, bias how companies. a CPGs agreement among some While Along a change Digimarc on leads applications. value us allocations, supplier toward one in in range who we very a most business encouraging maintain global and and are there process us prominent education

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is conventional to goal barcodes. Our supplant

efforts. retail advance are aid CPG leaders these of and to We enlisting the industry

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requisite providing expanding other Our markets. capital and of balance our institutional in our open sheet's and the the and implementing That's foster indicators software, adoption now and to increasing support in good remarks. services knowledge to questions. of prepared it shape. We're progress making to performance We'll floor progress key bookings, evidence industry for training growing to

Operator

[Operator sir. first and And question from from Cowen you, Thank Company. Stone your comes Rob Instructions]

Rob Stone

the markets to and to address A your growth scale Hi, guys. of up you scaling questions, from year? organization Or we to you rate One, should operating of that respect this couple run the the expense if you more how Are for needed here? about may. I think plans? opportunities, we do of new and expenses with approaching that the need growth support look to these should

Charles Beck

is This Rob. Charles. Hi,

of least likely or have I start plans don't headcount a significant adding for think the in additional we growth here we be but few in, at may headcount XXXX. there

in So in XXXX XXXX. of is reflected I obviously QX in better kind so run our a We that think looking ramp significantly at pretty comparison. up from probably to XXX, and headcount XXX is ramped rate

QX think of better reflection I is that. a So

Rob Stone

the rate? QX increase run Some from

Charles Beck

we not but that increase, the of rate during saw to Some XXXX. increase

Bruce Davis

just Rob, assimilating on of on would of we I a spent as accounts as the - make year trying the significantly. beginning to some and We're add grow employees second time lot focused revenue and in that that, Yes. half them new to the productive XXXX possible. very key this to

without revenue. expense a more lot a have to not trying we're So lot more

with until some here run We the a very still our base improve more not increase holes, that but we're really rate So try is revenue to to we few our have have. goal show to going much growth. productivity we the

Rob Stone

your see you scale - potential relationships as about about a I and down approach sense to ways expect be counting you give a of packages would the as - can technology approach of but you the earned drill early a give think help and to license? early it and have or you rough the little want sort - majority to the to about of more bit under us sideways would site this thing? Can as it's way opposed get preferred cut, of wanted Bruce, I to a maybe adopters comments, converted. And the proceed can deployed know any on that us a in so be So SKUs towards the

Bruce Davis

Yes, yes.

notion we few said then offer try to and to So few really anymore. previously a so so of had flexibility get people that I of a Those to want like, who much want want going could, going. going, the get not get trying there's

say to not for associated work. about enterprise license, but an terms When everything majority, fee that have talk mean price. with I all nearly imply clients, get want of who sort contract, would of So to contracts annual we one for under I the you aren't the do that of the don't the years prospective

of capability and have basket then discovery media built enhancement We applications then capability and a top. on

think do to optional and of of build the to and pre-sales the what required with package is it more what's And price. and implementation their our is development resources begin then engage best so is market, for best determine of what and the we're for as to maturing well as the build in as client in as what's components. materials plan And optimization the ours, we

of price, some over period will applications expect, some media the so based terminal client. and escalate value to And years the of I the by typically, selection on

Rob Stone

contract would from and you're same year? rises size contracts, or the will over within term, So the value that doing for contract be customer a to you year increase saying, average more so

Bruce Davis

The latter.

of Barcode engagement checkout make of remarks course, contemplated through well, which started and remarks, saying, see the And packaging about I inception better we're So to The strategy we when of you what was then, of prepared we Everything. here go as at out, went was the I my see now - now enhancing elaboration is and media, of then intuitive. make since the more consumer talking

fine. Okay,

packets, you labels, and more with do these So the do packaging, all if then time things. can we do do we which done can hope you can do, Well, we that we shelf-ready platform. the can we do means labels, magazines, be do I can be can TV, believe of can can we things POP, strategy, that over there'll do can we we thermal shelf do

you be that you that services, buy then But have So fee SKU for packaging still key was medium and the those business medium. network, with the notion if still services of $XX associated view would integration buy to as and or we things. the that all a to platform of per packaging, and have license you like, software reengineering, solutions process enhancement

supplied increasing us by Some business adoption involvement an of I be partners. and as by which would And business the expect partners. market will some grows, from

to that's so have all an looking they the cost that than to of with be basic license, to What going respect from you SAP just us those once adoption the revenue will clients to and those call, to to us. viewpoint And I'll the the, money And of things then value then others why more be the all buy companies Salesforce, established of and platform. is of understand, on mix are time. the like Oracle paying you're the build for

Rob Stone

anything then retail the is any stage, characterize could barcode NRF packaging. your with on the Digimarc WestRock at a days an The me, well. e-commerce I on packaging? Okay. provide e-commerce technology, early its final from Can supply Clearly, that know thematically, corrugated became to one you as was color - if you round the but corrugated amenable say to to chain we applying play seeing demonstrating more things of in with as were struggle side of and thought these that

Bruce Davis

try we is each Yes, a One R&D. things. Thanks, what we NRF, couple that year as Rob. view to at promising some showcase of

year, So ours. the some too path is in point hopefully, the investment some there a this have and lot corrugated, of that the - on and year Ideal interest so commercialization thermal of with it suppliers it we're strong being corrugated of not commercialization suppliers far And we from major corrugated. was a at that corrugated we the was we're sponsor ago, this customer at a client this done one of the one was that quite partner capital - business business environment. for and labels that the R&D, launched aware is from least some year in for already so is by we're fortunate and

us, demo But we'll the it you point see a opportunity. the merely And at So for things show. go. very market But is how It this cool. significant in pretty was at R&D. time saw

So a black different a in They for to of thermal which food But also by on thermal logistics. the devices, NRF. devices way by are the as are lot labels desktop of equipment used print for along are showing corrugated, it's labels then shelf at there important in-store are using very we white to business of for that Basically, supplied promise. labels labels applied inexpensive apply investors service Disney, markdown see print appreciate circumstances. number and one we the such were that companies and labels mobile also for with that partners, printed - Thermal labels our instance associates. by store and large

akin thermal logistics. of with And so of problems are labels there lots the in to problems retailers

and showed over a to label-less future quite pretty don't labels provide we really leap signaling at through we corrugated, can persuasively contemplate So everyone do but the NRF. print of robust future, the that label-less on want to a I possibility we mechanism

Rob Stone

I'll Thanks, Great. Jump queue. in the Bruce.

Bruce Davis

Rob. Thank you,

Operator

Jim comes & from question from Ricchiuti next your Needham Company. And

Jim Ricchiuti

there's trying for get Hi, sounds that under like one way I'm done the after the think prior announced it's the I'm get to again, a of - early good that it you're what sales time to transition talking year? line what adopters does an might this be wondering, to - to time is sounds customers, And - getting it for enterprise to you this a a going is it begin model. is more of - longer road complex about potentially is in Bruce, this, the - as afternoon. this also fair business, trying Is way like this? this terms than more of customers? already it license line agreements is to further case to or be these where And more cycle. been you've the

Bruce Davis

Yes.

in try I'll order. answer to So the questions

cycle. I hope longer with not So the think and not regard to

should a confidence opposite, I and proposal. to on it depending the deliver persuasive their be think well-articulated

So of that sold of back the ran about Systems. was in my the point that going ID sale we business the then, how we That's part our to back but XXXX all the competence business.

So we - I rebuild would say, institutionally, but we sort there. got we've of capabilities get to it, our

So to assumption be to getting consultants that, high-quality those in to of hope take some lead what about respect and we But the there's by akin appropriate one did value, where we're to In we provision liquidation an quite will one. too of with proposals but and persuasive, I'm a focused to that, period ramp let's that's optimistic putting that encompassed a that would license, them And it together go. that and software us the within see we services, to high-quality and of proposals the naturally some employed long in than faster agreements. doing because IT accounts say, during number era. develop then also going sales ship won't on I

growth beneficial far, with on encouraging that. and an So - I effect revenue timing. is our hoping will experience thus have respect And a that to

that of this and as having during to adoption make we're can much public As as that happen knowledge, and as pedalling getting getting year to fast we as we become can. proposals going those

securities in I'm suggesting we long already, agreements, announce presuming that will not any would but shorter, all impactful. not backlog as numbers, to because we I'm sales announce world we it our extent then longer it desirably agreements to the to can. to confidential all it's if more maybe a of we that And lead virtually according customer so not of sure get need been regulations. that, from And sure disclose do And will more we them, approach I'm perspective. can into provide window a I'm the which leads what cycle, impactful way be to our one. a

So does your answer all Jim? questions, that

Jim Ricchiuti

and you as can't pursue in very the I give this can It's us the I'm be sense wondering, specific. you helpful, a that. you irons have know Bruce. business, you as whether But fire to I enterprise several side? understand

Bruce Davis

be with can't amount. say whole a more. proposals built capability, efficient probably much in should model But that delivery quite larger lot of dollar I we've a which reviving Yes. in

value. and where take play. of performance SIs our a accommodate the new not want at actually small believed carrier So been integration the will that can business X. be of X question advantage we're have be what and X to meaning obviously, in transform we these so the what in over big really And figures. And business updates, they period typical very work, so But I've all people process gotten awareness yet we're a we'll doing, do. the proposal industry scale last and Their I'm sort data of forth. anticipating that's years improvements? of to consulting leaders. A see is would we as system or a wants market be and one do question People And of framed just, over how reengineering, saying the couple to proven

of And a so that's larger what point. manage to is our at I we're these interim maybe to get scale, at stepping long-term what view then helping as role that see - least we're we'll role, at until in projects and happens but sort and role, we that least interim

Jim Ricchiuti

an this thermal, see you're question. in thermal that that of accurate business it a one like sounds had that, characterizing growth labeling, going of Is to area I The And way Okay. the that XXXX. of in be is follow-up you the characterization? sources major

Bruce Davis

do And we've in collaborator package supply and I work develop getting, with processes been, brand intended Yes. globalization. chain for done in global have the global as All capability with And great some brand again, with Wegmans, with blessed a mentioned them we a enhancement. remarks, Walmart. now in to agreement my CPG. obviously leading an a place it I'll and has We've for to private call

brands the Japan So that geography be relatively tends the the be small easier in or they are to private U.S. tend localized for Germany. the a But brands. in brands even sense to global, like chain a or bit supply

hard business get you here, that biggest and global and all Barcode tools Digimarc been it's at of for articulate the impossible implementation chain. we've so in And and demonstrate standards, to like, ad embrace hoc maybe processes place. But the standards, that, in work if building for and the hard the to to players supply the and somewhat

to the need on back players the doing going their And help in wanted getting biggest so doing our And help I team of that. theory that's their in why because market that. development, I'm I

part's it's lines. coming now growth that revenues companies in slow. value with along But So with prop. it's delivering - terms are packaging, going - associated first, And their just our why able It's we to on that's of at we're entire major well. the of been we that is the prop, improving are desire value of the about product that support their dealing the

we're right And so what now. that's working on

Jim Ricchiuti

packagings an with you've labeling with of to areas see as opposed some these customers that enhanced faster you an had been appetite on been pursuing to move appetite them? having working perhaps that the you Do thermal - on

Bruce Davis

packaging explains - I revenues and and that's a that in of Yes, absolutely. have on don't between balance labels view the long-term - thermal And margins. terms

organization parts But you large of the package I to think stages I retailers. I Obviously, resonates development, And packaging companies' large. market have approvals. doesn't participation, well many And much is wish it associated some expose of the could label overhead packaging. encompasses of for both but it with with with the thermal quite addressable monstrous. many many processes be they'll

process. that's lot Labels we think and of and are a terms modification so labels can And can faster introduces making business simpler in with a why of process, go business I going packages. phenomenon than any much we in with

Jim Ricchiuti

Is there just bigger on the for these labeling a incentive retailers side?

Bruce Davis

problems, less well-understood required. are but there's interdepartmental There coordination

the down And then it something go gets you designs a develop package with legal with in and of if So designs. developing is a think brand then that they management road an manufacturing point everybody a approval, then approval And time. design agency, and set, external begins through to the studies, marketing then approved process, host oftentimes entrenched about studies. feature

to design user logistics, like And they is called thermal just retailer, major change generally supplier. the the case supplier in And with so speaking, what's a resource is resides thermal label devices, Systems, subtle through all of a and the ID there design have or in and ID printer printer suppliers of were such Zebra a go our - very Systems. as printer that And the reminder, even labels, my the on software. introduce loops. those retrospective we back supplier the And might a either needs with

much, we any, So the there to isn't you've generally literally days quite involved. if going are But back is old the seen here. simple, and artwork designs design are and created, the

and to it bit little so And through a of go. legal goes goes through then testing approval it's and ready

So it's thermal just for a chain less much complicated shorter, labels. supply than labels packages, for

Jim Ricchiuti

Thank you. Got it.

Operator

And question Josh comes Nichols FBR. your from from Riley next B.

Josh Nichols

you Digimarc going of what And think rate got thinking, last retail over the over year say, some or probably the surprised then the over me the Yeah. - the the adoption how - Hi. the months impact XX encroachment I of do two. last, of you into adoption? just Amazon's next increasing listening comments X over technologies to to regarding ecosystem that's and was to

Bruce Davis

inspire used cable that we of to they're So last call people moving although what television actually Whole faster, acquisition. Amazon say, Amazon of to the doing not committed. a provided them evidence. with building the inspiration you mile here faster, I'll and move, lot is more lots see look, network. the already And They're is appreciate might the Foods of That out, did the business,

and the Amazon subsidizes are Without much shipping. a So they're reasons but customers. Walmart those already big to Amazon of of compete the Prime is closer closer kinds as don't retailers lot Kroger, customers. deal, Amazon the companies nearly get Target, to effectively a part than And is of membership physical And Well, Prime, I a against to trying do. think as perform they set, big for could the membership the to able it. the prime well very

to the X,XXX in U.S. product shipping cost, the costs. the the Well, means to network has is of market out network One that alone, needs Amazon edge globally. nodes things of Walmart lower reduce to those XX,XXX which pushing

haven't Amazon They just them effectively positioned So they're effectively strategy. network way nodes. relation of to ahead and terms in as the in

that's physical to from all anyway going of customers capabilities. more in are, CEO they But public keep the retail. talked expect online statement in already And lot we a the Amazon and about goal has serve Walmart recent invested their the he they the wherever So Walmart, of to want. wanting basically

revolutionizing care. Albertsons the this also proposed you and Aid probably and the saw deal earlier of saw Berkshire So you and in Rite Hathaway health week Amazon with JPMorgan consolidation

kind So have that a a common of these is and what - commerce. ubiquitous of all goal,

is optimally responsive call and a So online ideal off-line to is modern The versus network I consumer wouldn't desires. design here the efficient - to anymore. consumer it create that

of about Digimarc about We're both improving and are operations, engagement. key those efficiency things Intuitive about of premises consumer the Platform. So We're improving and Computing reliability.

we retail into perfectly which we is way fit evolving. So think the in

a this inspiration is from But evolving. now their starting is back the moving it is terrific and in I get side Amazon perspective, think other so how here all And marketplace to to the showing, direction. the other

it's not physical. will online So ever dominate really that

get to quite it's right. But if things they that's physical dominate got do think they've worked more and they've all will clear out. get engaging, then forever got probably to efficient getting more and online I

order than encroachment because more and the was And how with publish, lots second their that of to we those efficient recycle. they're much get and shipping growing think in what they've in much do lots year to everything, serve shop and new far. encouraged consume so So to I physical have But that versatile see going Amazon ways me. for efficient it in efficiency of me have it surprised desires. be to And consumers last And been buy of to fleet they trying more - this retailers the retail, that, research like of in can in wouldn't all them are Amazon's continuing and say they'd airplanes be What you to to got teaches half except well. extraordinary I figure regard out realization. as that in of

say the XXXX for and an me. for industry the quite second I'd of in inspiration Amazon So was half

Josh Nichols

But last and opportunities the about in more about question, little then fits you outlook specifically the what seeing company's year? And that a this could Germany into strategy fiscal you bit you're how talked XXXX. bit for for and elaborate little a the Japan, and

Bruce Davis

Yes. keep I was to things short. trying

So the in about a at it. conference bit I January talked

couple just show, tech of with like visiting people them in were grocery And moving friends there the in there. completed our our over things study trade are So nicely walked Japan, show. seems a group the and it along

support trying We're here still our bit support. of management in in a up our resource to of provide Japan working Europe. and management and struggling have terms to We capital to

a believe general, Japan. that in So there and the respect it reserve have be intend there. leaders And rather figure for will statements delivery number of delivery with other on from we're like them them Europe trying support friends will here's a each like manager because in the in and few build clear and just do in a development or on some trying I for the discussions model Japan and support to the strategy the and able tell we're to out say get bunch some it Europe, we or maybe you and resources. get that, getting the to to we sort of geographies. overburden them to global approach to Germany or commercialization our in frame the facilitate country I'd the process have improving look and small optimized Europe you to should I number, perfecting - organized a U.S. and give how In in to a than a we'd territory. industry in in platform With time I some to of down leaders of the like U.S., there, the of a cases, that to commercialization less board get X, public quarter of narrow of to of it the

fruits that's level, great to those That make to collaboration continue can. then on and in U.S.-based strategy. of try progress geographies if to beyond not venture continue to use is with a the so we that And Japanese to the developing markets, high global leaders, European and the and to

Josh Nichols

Thanks, Perfect. Bruce.

Bruce Davis

Yeah.

Operator

from next Securities. your And comes Grozovsky Ilya National from question

Ilya Grozovsky

Just housekeeping note. a

sold that the customer were If would to license revenues quarter year-ago out growth in the to, you you back the from that what the been? have

Bruce Davis

quarter? or quarter fourth You're talking about third

Ilya Grozovsky

quarter? the fourth In

Bruce Davis

Is in license. about? you're a third what quarter quarter negative the There was fourth that the impact of talking

Ilya Grozovsky

Yes.

- onetime So you so guys took payment, right, right? the

Charles Beck

kind in to at onetime had was QX $XXX,XXX. of were which rate. everything rate. That out, or QX, you our if around fee is then run Yes, basically look million back well QX the $X.X QX as we royalty And as royalty, run normal

had we about million $X.X So QX in that's non-recurring.

Bruce Davis

X... minus then And

Charles Beck

royalties, didn't then And in QX. as there been would royalties. those $XXXk have of any Yes. revenue in earn we QX, waived in theory we additional license But

Ilya Grozovsky

it. Thank Got you. Okay.

Operator

And from from Rhee Van comes question Craig-Hallum. your next Jeff

Jeff Van Rhee

Bruce, what XX through But, firm respect things able ROI in Great. of little working for center the Apologies the like a to a on, to been you looks as to know late. terms theme, where an being store up have on I if been are top numbers grocer? I with these the what looks jumped touched a so top to - trials relates X, whatnot. you've and like, speak in size deal it

Just you this a ROI, deal them? you at about sizes around can any of what the and X point quantification things, put sense if know those

Bruce Davis

Yes.

I and number the they number to you're going they the think up product put that on if negotiate that reasons. our belt, to have major for market for of what contract If that retailer you the you then X from are. But under I they the of we've number you must a a So can't that down one. markets, deals participants I under know good number. gave wrong until thermal, all I expose start problematic gotten then that at out the more of because I capital end somewhere, the going higher do try are to then at, it's that and know starting lot that at economics tell me instead give to to

but... I that untangle Jeff. to I how one, would know don't I So if could,

Jeff Van Rhee

range customer Anything certainly the You Is done about referring the a inverse of spend? they're you've you say, how it, and think that broad you're some of framework then upfront from whatever ROI the this know from a on maybe respect? to, there or ROI paying, testing.

Bruce Davis

of Seasons. with size of on along that and get we're some the move some though grocers we're a also - ROI out the with us to with that it's that with the calculus. Well, little can And figured work the obviously trying return same And is players some lines. who they're relationships they New that's smaller But working with maybe we're a faster little we and research can there are the regional global value more leaders that's informs working But in do larger great we're we're than much doing the a even scale ways. Wegmans what targeting. different some them

magnitudes-level small attractive. So but are in relation call That it's percentage list. our just our proposed understanding that price is value would thermal label from enhancement it conversations what on from some just - extremely to ROI be the pricing, ROI ROI, I not the

there, inform that the it's presumption worth is in to all trying tell that's hard to that going go, helpful. really They it's doesn't but I'm it, like, retailers' we've be this not one's lowest possible not wow, and try very So no to it. a negotiate more mean us get get don't sure to meaningful. yes, don't market the Nobody's get they would lot, price. high. got experience "I But

it going. Let's get

Let's pilot negotiate beta we'll then work, do with and price some you. work, the

Jeff Van Rhee

enough. yes. Yes, Fair

store how has that like, of proven of look you back does thinking are the think point. mentally are your framework of balance, meaningfully, at difficult and bookings as that and what could point, look envelope very you, 'XX again, So things. store? that this to you realizing get sort you respect of At How crudely center at at front? as best this bookings those year than going kinds all of for timing swing the sense scope bookings center But but the the more obviously, because to you do just sort likely look then majority, the 'XX, when X/X, from we in versus 'XX that with very, mix about of the

Bruce Davis

that products current the Our of forecast. assumption is store, the drive fresh perimeter the the

store of the and both perimeter Thermal center support enhancements not majority. minority but - always enhancements store center labels of the forecast, is front support So store. the

is store So goods, packaged the things, of things and perimeter center typically it's the really and fresh. the is of cans boxes

we XXXX. to more So of fresh center than contribute expect store in

Jeff Van Rhee

Yes.

Okay, I got it. reversed those I might have terms.

XX respect me to was what the just I review, will, chance And Can appreciate trailing in had them. registered directs to of caught direct year you there if but again, you reference there. kind that. registered the with just at then the kind last, of be quickly to want sort I So of done numbers in far just that when. look was recap thus to clear for I've

Charles Beck

did and which direct We registered had registered Yes. QX, $XX raising of done $XX November, minimal then at did million, and both discount no costs. transaction under just were million, raising in direct a in a

Jeff Van Rhee

how And the directs of forward? likely going think path we registered should about

Bruce Davis

with us on in I resist. can block hard a it's Jeff. price people and they say to want lock-ups to large of address market The at stock pretty buy call to and that one,

in And these happened cases. both what so that's of

So there is this, and no marketing doing projection program it. there's do no to of

giving and in get cost hand, other us terms of so balance people capital appreciate it's flexibility you'd if about the it, sheet. inspired On attractive in pretty the of more

Jeff Van Rhee

Okay. That's had. all Thank you. I

Bruce Davis

Thanks, right. Jeff. All

Operator

from from comes Prime. question Jeff next Bernstein Cowen your And

Jeff Bernstein

are like frame there's guys. order little a bit going I things of more. little operations have a that sounds a bit and just to happen to of here you It of that wanted kind resetting just of of Hey,

the people rear move expectation of somebody potentially, of that rushing. in past, kind retailers, to once start in you might aversion that's really and characteristic the of So that, might risk talked a the big of see sort these the kind move, you about to bunch

give like an seemed faster. also might just on technology places looking things? You'd those they where we move update on were together, where already you Japan, the are Can into like

Bruce Davis

all, reset at don't frankly. yes. Yes, see I any

to And to So we very ago a do positively, I is opportunity it a what's to don't different that. year that proposals large know larger here is - customers. we're and the quite have position in I prospective make wood frame

than in scale, terms there are point visible the players of there. theory agreements I've If the way think publicly other so that two that would tipping sort trick. of of get And this does to I large be the advanced,

So that will actually work.

I strategy overall pretty think happy to takes, want I be. then very think that in close when And establishing of terms evidence endgame we outlined how execution on including of to thought I long of anything line credibility the I no what had is one we're But we're focusing and be do course, started, with in having what implementation. of close to of would about me. I where

in plan So our here one leaders And we the world's we among obviously largest for we that agreement the largest world's of we are an this with products mentioned of conventional companies. have a carriers. to have engaging remarks consumer retailer. the goal daily with global common And how facilitate succession

company there's So people data for industry think a which small I capital mind I all carrier, common in an to small understood. operating a a move working the with reasons budget improved think us. We're well think to is

going we're much we as it's into way it based So the on and putting going it's that. can, as

So I we're making progress getting think I think good we're close. and pretty

Jeff Bernstein

that its like Japanese before move players more to going guess maybe? it are Okay. does I U.S. sound though the

Bruce Davis

number rather But players than in starting detail to of that on much than a Japanese other forward no. geography you any are Japan there are because No, tried - defer the I'd but I again, No, later. much I faster moving give market strategy anecdotes. a

they not. pass has global it, leaders' or the the others And And style. so the but call in And some with plan. desire do I by don't it a I'll know significant of interest to whether there's Europe, for,

to style, slower? whole them happy great and Let's plan. or I'm that's faster just the us that they very go really, I it, give about Does know. it. And call want button-down news, don't

Jeff Bernstein

you. Got

out? were someone you've to - hand as to Or that contract, was in to someone the the some was of And sign? when thing we is ready et kind of result business talked global partner then, about a interest to system a implementation there going kind happen the ready looking - Do further million-dollar little Bruce, from a still or them consultants past that you're these of that Okay. is and of to with of think piece regard integrators, when you cetera. plenty more contracts

Bruce Davis

I yet, don't Jeff. know

would happened process of little a to transformation, creation of barcode And this nuance, we the it it's is explain is the I the replacement further - have issuance that of is I inventors systems, again, think the this are little doing is platform, - systems, we best out. a of driver what's some issuance system sort in so my I'll try license believe and the because of there's this business system. issuance issuance not history ability, because

customer for yet to things of amount XXX play role fair desire employees, do. we've a and XXX other we're there's some got instead central So us and a employees of we

years years or But ago X ago, X we understand as we're So why the view as I have now. were not they nearly capable they have.

aren't that get we're So the big those with involved, available projects to trying love and I would but of big out. SIs want to some figure tags big yet. price they

while, longer. have So - maybe to maybe I I this for think a do little for like said, we'll

Jeff Bernstein

Got you. And stores. products their then a with you retailer way to on the mentioned large new

how or a a So is that that now? or that relationship would characterize you pilot signed is deal

Bruce Davis

previously large agreement retailer the with. that of a we other That's referred sort master very to services have

in agreement work underway. order services master the first So it's that's the

Jeff Bernstein

- another And deal? Got trying you're you. then one still so there where is to a close

Bruce Davis

been we've there. several that are on There working

Jeff Bernstein

okay. great. That's you, Got Thank you.

Bruce Davis

Okay. Jeff. Thanks,

Operator

Bruce the concludes I now Sir, over this session. our back like call And to time, at to please proceed. turn this question-and-answer would Davis.

Bruce Davis

the we for We'll all All very you you, look thank we're let talking very right. market as quickly possible good-bye and and to you, as me forward for everyone, can your of much, And proceed to board to now. meeting. adoption. again at Thanks increase Thanks much, to doing the end support. quarter's assure this

Operator

us today This for presentation. concludes Thank you, call. for joining our and gentlemen, today's ladies

disconnect. You may now

Digimarc (DMRC) 21 Feb 182017 Q4 Earnings call transcript