Ladies and gentlemen, greetings and welcome to the Digimarc Corporation fourth quarter and full year 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please signal the operator by pressing star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, George Karamanos. Please go ahead, sir. Thank you. Welcome, everyone, to our Q4 conference call. Riley McCormack, our CEO, and Charles Beck, our CFO, are with me on the call. On the call today, we provide a business update to discuss Q4 and full year 2024 financial results. This will be followed by a question-and-answer forum. We have posted our prepared remarks in the Investor Relations section of our website and will archive this webcast there. Before we begin, let me remind everyone that today's discussion contains forward-looking statements that have risks and uncertainties. Please refer to our press release for more information on the specific risk factors that could cause actual results to differ materially. Riley will now provide a business update. Thank you, George, and hello, everyone. On our last earnings call, we stated that as a result of significant achievements in both invention and market development, the difference between what lies ahead and what lies behind had never been greater. That conviction was driven by our defining not just one, but two compelling paths to near-term profitability while positioning ourselves to deliver dollars of free cash flow per share shortly thereafter. The first path consisted of continuing to pursue market opportunities across both identification and authentication use cases, anchored by the closure of the large deal we discussed on the Q3 call. While this was the path we felt was the most likely as of that call, we were clear to point out that the biggest risk to this deal's closure was not the customer's interest in our offering, but how much time we would be willing to give this customer to commit, as there were many exciting developments in Q3 to which we could instead be allocating our resources. The second path consisted of committing our resources to these many exciting developments, which included not only incredible invention, such as significant breakthroughs in the area of copy detection, copy deterrence, and tamper evidence, but also important market developments anchored by important customer and partner wins across both the physical and digital domains. Of critical importance, these technological and market developments were all in the authentication area. This provided us the opportunity to continue focusing our business by prioritizing market opportunities in a single- use case category as opposed to concurrently pursuing both categories. While there are areas of overlap in the production and support of solutions across identification and authentication use cases, there are also areas of fundamental divergence that require parallel or duplicative work. Thus, the opportunity to apply the greater level of focus was attractive, not only because it would increase the trajectory of achieving meaningful revenue in the chosen area, but also because it would allow us to reorganize the company to act with agility and speed while dramatically reducing our cash burn. Important to stress so there is absolutely no confusion, we did not envision this second path as walking away from our identification use cases, including this large deal. Our identification use cases address problems that are worsening and that we are, and will continue to be, uniquely positioned to best solve. This second path reflected prioritization, not elimination, of opportunities by addressing them sequentially instead of in parallel. In assessing these two paths, we analyzed our various market opportunities using multiple lenses, including opportunity costs, which is the cost of missing important deadlines versus the risk, if any, of permanent opportunity loss from temporary deprioritization, expected revenue across horizons, quantifying time to significant revenue as a heavily weighted overlay to total addressable market, and relative contribution margins. Important in its own right, but also a metric that will impact ultimate value per share as long as we continue to believe that the best use of free cash flow generation is share repurchases. Realizing the importance of getting this analysis right, we retained PwC to conduct an extended and detailed deep-dive engagement with the dual mandate of challenging our every assumption and bringing us heavy voice of market input spanning many participants, industries, and ecosystems. This analysis allowed us to set a deadline to reach a decision on this large deal, which we then partnered with our valued customer to determine the feasibility of meeting. As has been the case during this entire engagement, they were wonderful, working with urgency and over holiday breaks in search of a way forward. They understood our position and offered to alter the scope of the engagement to provide more flexibility. They reaffirmed the expected value they believed we'd bring to their operations. Ultimately, however, it became clear that meeting the deadline was just not feasible, which allowed us to move forward on our second path I outlined a few minutes ago, prioritizing market opportunities in the authentication area. I will have more to say on exactly what this means in a minute. Before I do, I want to highlight that pursuing this second path does not mean that the opportunity to support our valued customer achieve their bold vision is dead. All the details we laid out on the Q3 call about this customer's interest in our offering still stand, as does our understanding as for why they are not currently able to commit. While we were unable to reach agreement by the deadline we set, the process was wonderfully collaborative, and we remain in communication with them about potential next steps. While it is likely that any new agreement would require some descoping from what was originally imagined, this does not mean the dollar value of any new agreement would be less. In fact, there are reasons to believe the opposite could actually be true. I want to spend the rest of this call discussing what's ahead, but before I do, it is important to note that whatever odds one assigns to a new agreement being reached with this customer at some point in 2025 or beyond, it represents free and extremely significant upside to everything we will be discussing from here. Turning now to that path forward, for the time being, we will be focusing the majority of our go-to-market efforts on three areas under the broader authentication umbrella. Each of these three areas contains multiple individual use cases. The first area involves assisting retailers fight shrink. Since the pandemic, retail shrink has exploded, as have the budgets assigned to combat this issue. We are advancing multiple individual use cases within the retail loss prevention area, all of which leverage our detection software already installed on the vast majority of front-of-store scanners today. Within this suite of offerings, the two individual use cases we expect to contribute the most meaningfully to annual recurring revenue in the near term are our work securing gift cards and our work fighting price look-up or PLU fraud. We spoke about our gift card opportunity a couple of calls ago, and since then, we have continued to make great progress. We are currently partnering with the two largest industry players as well as multiple large retailers and large brands, with a focus on catalyzing meaningful adoption this calendar year. As a reminder, we believe our immediate TAM is $900 million-$1.5 billion per year, with multiple drivers that will increase that range over time. There is a real urgency from all stakeholders to solve the exponential growth in fraud as it is causing an existential risk to this $1 trillion market, and our solution not only significantly outperforms existing security measures, it allows for a reduction in total bill of material costs. Despite our work in this area beginning in earnest less than a year ago, this use case contributed initial ARR in Q3, more ARR in Q4, and we expect it to be a meaningful contributor to our 2025 results. Retailers also lose billions of dollars per year to intentional misentry of PLU codes by their customers and, in some cases, their cashiers. Our solution to this problem delivers a deterministic override, ensuring this avenue for theft is closed. We are focused on delighting our initial retail customer and are appreciative that they have recently begun introducing us to other retailers as an evangelist for the value we bring. We are also focused on being a wonderful partner to Piccadilly, as we have just scratched the surface of jointly delighting their large and global installed base. Starting just with salad bars and prepared food, we believe our immediate TAM ranges from $625 million-$1 billion per year, which provides our customers an extremely attractive ROI of two to three months. As with gift cards, there are drivers that should increase that TAM over time. Of course, as attractive as both opportunities are standalone, they are that much better together, and each should act as lead generation for the other as they leverage the same technology stack and bring accretive value to an overlapping stakeholder group. While early days, this thesis is playing out, as our initial PLU fraud retail customer will also be an early distribution partner for our gift card solution. Even with this synergy, we are being conservative in our assumption of the amount of ARR our PLU fraud offering will contribute in 2025 for no other reason than our standalone market development work is not as far along as our gift card efforts. The second broad area of focus is continuing to develop our growing suite of physical anti-counterfeit solutions, including the incorporation of the technological advancements I mentioned earlier in this call. These advancements open greenfield opportunities and provide a powerful and complementary continuation of our current offerings. This broader offering spectrum will enable us to work with customers of all levels of sophistication and provide a comprehensive path as any single customer's needs evolve. Offering the full gamut of solutions differentiates us from competitors today and should allow us to seamlessly bring functionality down market to create even greater differentiation tomorrow. The opening of greenfield opportunities in this space is not only tied to our recent advancements in copy deterrence, copy detection, and tamper evidence, but also to our progress in advancing additional methods of digital watermark application, including our work with some of the world's leading laser companies. Meanwhile, other greenfield opportunities have nothing to do with digital watermarks at all, such as our work utilizing serialized QR codes in Digimarc Illuminate analytics to modernize and secure loyalty and reward programs. These new greenfield opportunities represent a massive TAM, and we are finishing up our work in conjunction with PwC to determine how best to capitalize on these new opportunities. In the meantime, we will continue to advance the work already in flight, which has led to such wins as a customer with whom we signed a Digimarc Validate deal in Q3, five calendar days after we received their inbound, signing an additional deal in Q4 and two more so far in Q1, or a three-year expansion deal we recently signed for our first loyalty and reward customer that now tops out at over $1 million per year, with additional upside possible from there. While we expect our physical anti-counterfeit solutions to be a significant contributor to our 2025 ARR growth, the true impact of the greenfield areas will likely only become obvious in 2026 and beyond. In fact, it was the combination of the materiality of these advancements and the massive market opportunity they unlock that began our internal conversation about prioritizing our authentication use cases. We were, and are, eager to begin harvesting the fruits of these advancements in a very meaningful way. The third area of focus involves applying our platform to combat various methods of digital fraud, including the unauthorized leaks and/or the improper usage of sensitive and valuable digital assets. To be clear, this is separate from our work identifying digital assets in the era of GenAI, which I'll touch on a bit later when we discuss our ecosystem-driven opportunities. Advancements in this third area of focus have been driven as much by market development as by invention and span an exciting array of end markets and individual use cases. For example, in Q4, we closed two deals in this area, one with a Fortune 100 company and the other in the crypto space, with individual use cases as different from one another as their businesses are. While we are finishing our work on how best to capitalize on these advancements, again in partnership with PwC, it is already clear that working in the purely digital domain has multiple, very attractive attributes. We have chosen to be very conservative about this area's contribution to 2025 ARR to remove any risk of making penny-wise, pound-foolish decisions. Thus, this entire area represents only potential upside to our expected 2025 results. While the above three areas will consume the majority of our go-to-market efforts for now, they will not be our only source of 2025 revenue growth. For example, we expect to drive 2025 ARR from the consumer engagement use case we service via Digimarc Engage. We have recently signed what we believe to be two of the largest digital link deals ever signed and expect our thought leadership and enterprise-grade offering will allow us to capitalize on this early lead to capture a fair amount of this market, both directly as well as through our partners. Our partners will also figure heavily in our other identification use cases, such as the factory fulfillment or distribution center automation use cases we service via Digimarc Automate. We believe we have set up an influential ecosystem of both packaging and technology companies capable of fulfilling demand without our needing to be heavily involved in the sales process. Across the board, our current prioritization of authentication use cases does not mean that we are closing the door on other opportunities progressed by our valued and value-add partners, both existing and new. In fact, this was exactly the operating leverage we set out to create with our center of expertise program. I also want to be very clear that our current prioritization of authentication use cases is in no way a signal that we have lost faith in opening the large and lucrative ecosystem-driven opportunities of Digimarc Validate Media, Digimarc Recycle, and Digimarc Retail Experience. Far from these identification opportunities going away, we believe the need to solve them will only increase, and our ability to solve them will remain unmatched. This is not an either/or, but a when. Moreover, focusing on becoming extremely profitable before actively re-engaging these areas might very well allow us to open these markets with fewer shares outstanding than we have today, thereby increasing the impact these opportunities have on the most important metric by which we measure our delivery of shareholder value: value per share. Jensen Huang credits NVIDIA's success not to the fact that they have ever been able to predict when the fruit will fall from the tree, nor to their ability to catalyze it to fall quicker, but instead to the fact that NVIDIA ensures it is positioned under the tree to catch the fruit when it eventually does fall. Looking at each of our ecosystem-driven opportunities, we are comfortable in both the fact that the fruit will fall and that we are and will remain very well positioned to catch it when it does. Let me take each of these in turn. Starting with Digimarc Validate Media, while this was always viewed as the furthest away of our ecosystem-driven opportunities, recent changes in the global political landscape will likely delay any meaningful action even further. In the meantime, the ascension of DeepSeek, which is both open-source and outside the control of Western governments, quite elegantly and powerfully proves what we have consistently said about the folly of a system built upon watermarking GenAI output. This further increases the value of our solution not only as a standalone offering, but also, and importantly, to a strategic. Not only was most of Big Tech's work built on the premise that their solutions would be applied to GenAI-created content, but there are also still many companies that have not advanced a workable solution at all. We believe this is a fruit that will eventually fall, and beyond being ideally positioned when it does, our strategic value has increased in a dramatic way. Turning to Digimarc Recycle, earlier this week, in fact, just a few days ago, we signed a contract to provide a scope-and-SKU- limited license to our central buyer in Belgium. This will allow them to run a market pilot that is shaping up to act as the final showcase for the world. We share the frustration of some of the more enlightened industry participants who worry that the industry is playing a game of chicken with the upcoming implementation of the PPWR, which, if not soon corrected, will lead to a massive last-minute dash to comply. Moreover, there is tremendous value in the novel consumption data our solution unlocks, something made even more valuable in the era of AI-driven analytics. We expect the Belgium pilot will convincingly showcase the value of our solutions on all fronts. Our decision to offer this limited license ensures we keep our prime position under the tree while we focus our efforts on use cases more likely to deliver significant revenue in the near term. We remain confident this fruit will fall, and there is no one else positioned anywhere near as well as we are to catch it. Moreover, as we prove the value of the data our solution unlocks, perhaps this will be the rare case where we can indeed catalyze the fruit to fall quicker around the globe. Interestingly, we have a Deposit Return Scheme opportunity in our pipeline that is larger than the scope -and- SKU- limited Digimarc Recycle license we just signed in Belgium. Keep in mind that, unlike Digimarc Recycle, which is an identification use case, our value-add in DRS is providing item authentication. This DRS opportunity, while also not a full countrywide rollout, came together quickly, our customer was motivated to progress, and our shared success is dependent only on our customer being successful in their bid. It is wonderful being in sales cycles where the prospect has urgency to progress, something we're seeing across the board in the areas in which we are now focused. I highlight this example as it is important to note that a focus on authentication does not mean we are out of all sustainability use cases. Instead, it just might end up meaning that we are prioritizing sustainability use cases that will provide an immediate benefit to our company as well as our planet. As for Digimarc Retail Experience, as mentioned earlier, this might be the quickest of the fruits to fall, and we are ideally positioned to catch it. Focus drives results in today's announcement that we are prioritizing our authentication use cases is just another step in the journey we've been on these past few years. One of the first actions we took at the beginning of this journey was sunsetting Digimarc's "The Barcode of Everything" tagline, because while it is true our technology can do almost everything, we knew that if we did not start with some things, we would accomplish nothing. Unlike some of the areas we have exited these past few years as we have narrowed our focus, such as our piracy intelligence business, which accounted for approximately 25% of our commercial business at the time we made that decision, today's announcement is simply a matter of sequencing, not a permanent exit. This focus will not only increase the size and speed of our top-line success, it has allowed us to reorganize our business to address the opportunities immediately ahead. Earlier today, we announced a corporate reorganization that will ensure we are optimally positioned to pursue our prioritized authentication use cases and will have the added benefit of reducing our cost base by approximately a quarter. Our ability to make this meaningful reduction in cost is predominantly driven by prioritizing a single category of use cases, although it is augmented by our ever-increasing operational efficiency we are driving as we continue our own digital transformation journey. This includes smarter usage of outsourcing in addition to technology adoption. The majority of this cost reduction is the elimination of positions, and saying goodbye to teammates is never easy. However, we fully understand our responsibility to all stakeholders, including our remaining teammates, to continuously ensure we are operating in as healthy and sustainable a manner as possible. For the last 12 years, Digimarc has been operating at a loss, something that was simply not sustainable. With our ability to apply an even tighter focus on some incredibly compelling opportunities, it was also no longer required. This reorganization will increase our ability to act with agility and speed, powering a virtuous cycle of success. Important to note that most of the position reductions were in the areas one would expect with a simplified use case focus, namely R&D, product, and engineering, as well as various back-office support functions. Our quota- carrying headcount has actually recently increased. Before I turn the call over to Charles, there is one last topic on which I believe it is important to provide transparency. Being on the cusp of turning free cash flow positive opens strategic alternatives heretofore unavailable to the company. To that end, we have decided to partner with Goldman Sachs to explore a full range of potential options, up to and including going private. No decisions have been made on which, if any, path or paths we will ultimately pursue, nor have we set any deadlines for reaching any decisions. We are committed to maximizing shareholder value and optimizing any outcome for all of our investors. We do not plan on providing updates on this subject unless or until there is something relevant to share. I will now turn the call over to Charles to discuss our financial results. Thank you, Riley, and hello, everyone. Before I dive into our financial results, I want to highlight a couple of items that will impact future financial trends. First, as Riley already mentioned, we announced a corporate reorganization earlier today to better align our operations to the opportunities immediately ahead of us and to increase our ability to act with agility and speed. We expect the annualized cash savings from the reorganization to be approximately $16.5 million. We have also identified approximately $5.5 million in other annualized cash cost savings. We will recognize one-time reorganization costs of approximately $3 million this quarter. Second, Riley mentioned our increased go-to-market focus. With our tighter focus, we have been conservative in our forecasting by not just budgeting for a potential increase in churn, but also to allow us the ability to be strategically price-aggressive on a handful of renewals outside of our current focus areas. Moreover, and unrelated, due to a recent change in government requirements on the eve of program launch, we expect the $3.7 million per year DRS contract we signed two years ago to lapse in Q2 of this year. We share our partner's frustration with this development. To be clear, this has nothing to do with our technology or value-add to this use case. Not only do we expect to win additional business from this partner in 2025, but we also have another DRS opportunity in our pipeline that Riley mentioned earlier. Now onto our Q4 and full-year 2024 financial results. Ending ARR at the end of Q4 was $20 million compared to $22.3 million at the end of Q4 last year. Excluding the $5.8 million commercial contract that lapsed, we grew ARR $3.5 million during the year, representing year-on-year growth of 21%. As Riley mentioned earlier, we are still in discussions with the customer about renewing the contract this year. However, the rest of my prepared remarks assume that it does not, leaving the impact of any future renewal as potentially significant upside to our expectations. For the quarter, total revenue was $8.7 million, a decrease of $600,000, or 7% from $9.3 million in Q4 last year. Subscription revenue, which accounted for 58% of total revenue for the quarter, decreased 10% from $5.6 million to $5 million. The decrease reflects zero revenue recognized on the expired commercial contract I just referenced versus $1.1 million of revenue recognized in Q4 last year. Excluding the impact of the expired contract, subscription revenue would have increased $500,000, or 11%, reflecting revenue recognized on new contracts and upsells on existing contracts. Service revenue was essentially flat at $3.6 million, reflecting higher commercial service revenue from HolyGrail 2.0 recycling projects, partially offset by lower government service revenue. Subscription gross profit margin, excluding amortization expense, was 85% for the quarter, down 2 percentage points from Q4 last year, reflecting the impact of lower subscription revenue. Service gross profit margin was 59% for the quarter, up 3 percentage points from Q4 last year, reflecting a favorable change in service labor mix. We continue to expect to generate mid-50% service gross profit margins on a normalized basis with some fluctuation quarter to quarter. Operating expenses were $14.4 million for the quarter, down 15% from $16.8 million in Q4 last year. The decrease in operating expenses primarily reflects lower cash compensation costs due to lower headcount and incentive compensation earned and lower stock-based compensation. Non-GAAP operating expenses, which excludes non-cash and non-recurring items, were $11.9 million for the quarter, down 12% from $13.4 million in Q4 last year. The decrease in non-GAAP operating expenses primarily reflects lower cash compensation costs due to lower headcount and incentive compensation earned. Net loss per share for the quarter was $0.40 versus $0.52 in Q4 last year, while non-GAAP net loss per share for the quarter was $0.22 versus $0.28 in Q4 last year. Now turning to the full year. Total revenue was $38.4 million in fiscal 2024, an increase of $3.6 million, or 10% from $34.9 million in fiscal 2023. Subscription revenue, which accounted for 58% of total revenue for the year, increased 18% from $19 million to $22.4 million. The increase reflects revenue recognized on new contracts and upsells on existing contracts, partially offset by $2.1 million of less revenue recognized on the expired commercial contract I referenced earlier. Excluding the revenue from the expired contract in both 2023 and 2024, subscription revenue would have increased $5.6 million, or 38%. Service revenue was essentially flat at $16 million, reflecting higher commercial service revenue from HolyGrail 2.0 recycling projects, partially offset by lower other commercial service revenue and slightly lower government service revenue. While we generally do not provide forward-looking guidance, it is important to point out that we expect government service revenue to be 12%-14% lower in 2025 than 2024 due to a smaller approved budget for program work in 2025, driven in part by budget tightening across global central banks. This smaller 2025 budget is not a reflection of either our or the central bank's commitment to the CDS program. The floor for the 2026 budget has already been set at flat from 2025, and any additional work added to the program would lead to year-over-year growth. We also expect government service revenue to be spread out a little bit more evenly throughout 2025 than 2024. Subscription gross profit margin, excluding amortization expense, was 87% for the year, up 3 percentage points from last year, reflecting the impact of higher subscription revenue combined with a favorable mix of subscription revenue. Service gross profit was 59% for the year, up 5 percentage points from last year, reflecting a favorable change in service labor mix. Operating expenses decreased $2.8 million, or 4%, from fiscal 2023 to fiscal 2024. The decrease in operating expense primarily reflects lower cash compensation costs due to lower headcount, lower stock-based compensation, and lower depreciation and amortization, partially offset by higher professional services and consulting costs. Non-GAAP operating expenses decreased $1.2 million, or 2%, from fiscal 2023 to fiscal 2024. The decrease in non-GAAP operating expenses primarily reflects lower cash compensation costs due to lower headcount, partially offset by higher professional services and consulting costs. Net loss per share for the fiscal year was $1.83 versus $2.26 last fiscal year. Non-GAAP net loss per share for the fiscal year was $1.01 versus $1.30 last fiscal year. Now turning to cash flow. We ended the year with $28.7 million in cash and short-term investments. Free cash flow usage was $4.4 million for the quarter, compared to $5.6 million in Q4 last year. The improvement in free cash flow largely reflects a smaller net loss, although timing of customer receipts and payments also factor in. Looking ahead to Q1, we expect free cash flow usage to be between $5.7 million and $6.2 million, which includes approximately $3 million in reorganization-related costs, most of which we expect to be paid in Q1. Excluding these one-time reorganization costs, our normalized free cash flow usage for Q1 2025 of $2.7 million-$3.2 million would be down nearly 2/3 from Q1 2024. Looking beyond Q1, we expect to deliver material reduction in our free cash flow usage and to achieve positive non-GAAP net income by no later than Q4 2025, with final timing dependent on the trajectory of our ARR growth during the year. As a reminder, we use non-GAAP net income as a proxy for normalized free cash flow generation. Looking ahead to 2026, while it is still early, we currently expect to deliver significant top-line growth, the magnitude of which will ultimately be dictated by the trajectory of the realization of the opportunities Riley previously discussed. The combination of expecting to enter the year non-GAAP profitable and our best-in-class operating margin leverage should provide significant positive free cash flow per share, as a very high percentage of top-line growth would drop straight to the bottom line. For further discussion of our financial results and risks and prospects for our business, please see our Form 10-K that will be filed with the SEC. I'll now turn the call back over to Riley for final remarks. Thank you, Charles. Focus drives results, and today we took yet another step forward in the application of that powerful tool to our business. Recent breakthroughs in both invention and market development have allowed us to reorganize the company to focus on the exciting opportunities immediately in front of us, something we had been reluctant to do ahead of these breakthroughs despite always having a deep appreciation of the value in so doing. To avoid any possible confusion, I want to be clear: we are not permanently walking away from any opportunities. Instead, we are simply addressing our TAM sequentially. In addition to accelerating growth in the short term, this sequencing should allow us to maximize the shareholder metric upon which we apply our greatest focus: value per share. Six quarters ago, we transitioned from talking about optimizing our subscription gross margin to optimizing our overall contribution margin, not because we were or are any less focused on our product costs. Instead, it was because we were advancing our strategic focus from just our offerings to our overall business and taking the initial steps of building the incredible operating leverage into the business we know it is uniquely capable of delivering. While that work has been evident these past few quarters, we expect the next few quarters will highlight it even more. By both growing ARR and reducing costs, we expect to achieve non-GAAP profitability by no later than Q4 of this year, a milestone this company has not achieved in 12 years. Looking ahead to 2026, we expect to deliver significant top-line growth, the absolute level of which will be dictated by the trajectory of our penetration of our focus markets. Given the size of our markets, the operating leverage we have been hard at work building into the business, and our relatively low share count, it will not require much penetration of these markets to deliver dollars of free cash flow per share. Being on the cusp of turning free cash flow positive provides us options heretofore unavailable, and we have decided to partner with Goldman Sachs to explore that full range of options. We have set no deadlines, nor do we plan on providing any updates unless or until there is something relevant to share. We are committed to maximizing shareholder value and optimizing any outcome for all of our investors. Ryan, we'll now open the call up for questions. Thank you. Ladies and gentlemen, we will now begin the question- and- answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two 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. Ladies and gentlemen, we will wait for a moment while we poll for questions. The first question comes from the line of Joshua Reilly from Needham & Company. Please go ahead. Hey, Josh. All right. Thanks for taking my questions here. Maybe just starting off, if we look at the large commercial customer opportunity, in the prepared remarks, it appears the opportunity is still there. The timeline is a bit undefined, I would say, at this point. How are you thinking about allocating resources following the reorg to this opportunity, and can you still pursue this opportunity while pivoting to go-to-market as well? Yeah. Thanks, Josh, for the question. Absolutely accurate that the opportunity is still very much there. As I mentioned, we are still in conversations about potential next steps. As to how we will resource it, this is where I was saying it could be descoped. Obviously, our focus is on other areas for the time being. That is why I called out in my prepared remarks that it will likely be descoped. Do not take that to mean it will be less money. Without getting into exactly what we're doing with them and why this could have taken longer than both sides have thought to close, it's hard to really explain that. We are absolutely able to support this opportunity when the customer is ready. We are still having conversations about this opportunity. We're not building our business around it. We didn't do any 2025 planning. If this comes in this year, it is going to be significant upside. We'll see what happens. Got it. Understood. Maybe you can just help us level set here a bit. There's a lot of information in the prepared remarks. If we think about the opportunity for sequential ARR growth throughout 2025, what products and opportunities would you highlight as having the best chance to drive kind of this near-term sequential growth in ARR off the current base? Yeah. Gift cards, the one we talked about, that's going to be a significant contributor. The physical anti-counterfeit is another very large contributor. On that second portion, a lot of the truly exciting greenfield things we talked about, new types of watermark, new application watermarks, other things in the authentication space besides watermarks. We expect the real pig in the python in 2026. We expect significant growth in 2025 just on what we're currently going after. What is really exciting is prioritizing this and looking at this this year, what it could mean for 2026 and beyond. Those are the two biggest areas. We talked about we expect revenue from Engage, Digital Link, and DPP in the U.S., or sorry, in Europe. These are two macro drivers. We believe we've signed two of the largest digital link deals. It's going to help us take our fair share of this market, we believe. I mentioned our digital work. We do not have anything in our projections for 2025, even though we have a growing pipeline. We are trying to be conservative there. I mean, we still have wonderful partners. We have been very intentional about building out this center of expertise. It is not just a force multiplier. We have also been talking about the operating leverage we know this business can manage. They are a big part of that. Those are the areas. Again, it is nothing that I did not mention in my prepared remarks. If you are looking for the top two, it would be gift cards and the physical anti-counterfeit stuff. Got it. That is super helpful. Charles, as we think about the new run rate of operating expenses, maybe you can just help us think about the sequential step over the next several quarters to getting to that free cash flow break-even or potentially even positive figure. How much of that are you thinking is dependent on revenue growth versus cost cuts that are going to be coming into the model here? Yeah. It's clearly both. We don't give revenue guidance itself. I'm not going to give a specific number. Let me talk about some of the components here because people can kind of model it themselves. If you use Q3, Q4 as kind of a normalized level of operating expenses, you start to think about Q1. Q1 is always a little bit higher in the fact that there's a bunch of year-end costs. We're also going to have about $3 million of reorg costs. Q1 is not going to be reflective of a go-forward rate. If you use kind of Q3, Q4 as a baseline, what I said was we expect to take out about $22 million of annualized cash cost savings. Not all of those are going to kick in in Q1, but a significant portion of those will kick in starting in March. You can start to see that we're going to take out over $5 million a quarter in cash costs. That obviously is a massive driver in it. We also expect to see significant revenue growth, as Riley said. The trajectory of that is to be determined how quickly we get to a non-GAAP positive during the year. You can see just with the cost reduction that that gets us pretty close based off of kind of what the normalized run rate's been. Does that answer your question? Got it. There's a lot of pieces there. I tried to leave a lot of little breadcrumbs throughout as far as some of the numbers and stuff so that people could kind of model that stuff out themselves. Sure. Yep. Understood. Last one for me is, as we think about the Belgium license that you just signed, what is the timeline of this pilot project being implemented and evaluated? Maybe what are some of the proof points you would hope to show during the pilot to get really Europe to move towards a broader commercial use of the recycling product? Yeah. We believe our technology has proven to work. HolyGrail 2.0 has proven that. are some results that'll be coming out that I think independently validate that. The Belgium pilot is our central buyer. There is a central buyer in Belgium who wants to get going. We talked about our new go-to-market where we provided for less than $1 per capita unlimited access to Digimarc Recycle. What we have done here in Belgium, they were not ready to take all of that right now. We are doing a limited license. We think there are two massive pieces of value that our technology brings. The first is higher quality and quantity of recycling. That is a lot of the focus in Europe, at least, because they need that to comply with this upcoming regulation that is coming in the next couple of years. There is that. We also believe it is a lucky happenstance because our technology sits at the end of a product's life, right? Just because that's what it's helping to do is waste sortation. There is novel data, data that has never been captured. That end of life, once a product leaves the front of a store, it is a data desert. While there's always been value in novel data in the era of GenAI or any AI, but especially a lot of these LLMs, the ability to get the company that wins is the company who has the least amount of data deserts. The company who's got the biggest part of their end-to-end value prop with clean, novel data. That just so happens to be what Digimarc Recycle also. It's a byproduct of higher quality and quantity of recycling. Without getting into what our buyer is trying to do with our technology, what they're trying to prove, you could assume it is Europe. They're trying to prove out the higher quality and quantity of recycling to be compliant with PBWR right ahead of a broader adoption continent-wide. We think a byproduct of this test is going to be brands and retailers seeing the value of the data. That is where I was saying that could actually catalyze further adoption, as we would hope to see widespread adoption of Digimarc Recycle because it is really important for the planet. We have a single planet, and if we do not do something about plastic waste, we have real issues. If it ends up getting adopted because along the way, people realize, "Wow, there really is a ton of value in this data, data we have never had access to before." Okay. We will take it. You could assume that they are testing for the impact that we make on the higher quality and quantity of recycling. We believe that during this trial, it's the value of the data. We think it's both. We think that we'll prove that out, no problem. The data is going to be the shining star and perhaps a little bit underappreciated by the industry. I think the industry hears us say the value of the data. I think once they actually get their hands on it, it's going to be a little more obvious for them. Understood. Thank you, guys. Thanks, Josh. Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. The next question comes from the line of Jeff Van Rhee from Craig-Hallum Capital Group. Please go ahead. Hey, guys. Thanks for taking the questions. Just a few for me. On the Walmart contract, the $5.8 million ARR that lapsed in anticipation of signing of this transformational contract, just want to be clear, your expectations on that $5.8 million, does that come back into play now, or is that indefinitely shelved? Yeah. Jeff, we haven't talked about who this contract's with. The $5.8 million contract that lapsed in Q3 of last year, we were in conversations with this customer to expand that contract. That is what we're saying on this call, that we're still in conversations with them. Okay. I mean, I'm trying to understand the comments in the script about churn. There's also another $3.7 million with that same customer that is referenced in the Qs and Ks. It's a different customer that we signed a $32 million deal, I don't know, two years ago about. There were multiple. There were three products that that customer signed up for. One of them was DRS. As Charles mentioned, we're in the midst of that rolling out. Something has changed, not a result of our technology relationship with the partner. That contract has lapsed. Different customers. No, no, no, no, no. There was an original Walmart contract, which was a $3.2 million ARR. My question was. We don't talk about customers, but we have talked about the $3 million Walmart deal that is still in play. That's still live. We still have revenue. That contract that we signed for Walmart to Watermark their private label products, that's still in force. They're still Watermark their private label contract. You're putting me in a difficult conversation here, Jeff. I mean, I think you understand that. The other contract, the $5.8 million one, unrelated. We have customers that have multiple contracts with us. Yeah. I mean, I get it, Riley. Look, I'm not trying to be difficult, but these are big contracts that you do break out in the queue with this customer, and everybody knows that. So I'm just trying to get a sense of whether or not we should assume or believe that the $5.8 and the $3.2 are at risk. I'll leave that alone. You obviously don't want to go there. On the DRS contract, which is the one you just started to answer a second ago, the $3.7 million of DRS contract, can you just expand a little bit more? They're obviously pretty frustrated you're into that contract, and somehow they pulled the plug mid-contract. Can you just talk about that a little bit? Yeah. So Charles talked about it on the script. On the eve of rollout, the government changed the program. We talked about when we signed that deal that we were providing our technology to a company that was launching three of their own products. You can think of it. We were a sub, basically, on that deal. The government changed the program. I mean, does that mean the entire program is, I mean, are they going to be able to function without you? Or is this just a complete redirect on their part? I'm not going to get into somebody else's business. It impacts our relationship with that. It impacts our contract. Our contract with that customer had three products, right? This was one of them. They're no longer taking our technology. They do not have access to our platform for that product because they no longer need it. We did say a couple of quarters ago, and I reiterated on this call, that we expect to launch another product with this customer. This is not a relationship issue with our customer. It is their business changed with their customer, this government. Did I lose you there, Riley? No. I I do not know what else you want me to say, Jeff, but it is. Okay. Let's try a third here. In the script, you said, "We're not just budgeting for potential increase in churn, but also to allow us the ability to strategically price aggressively on a handful of renewals outside our current focus areas." Can you expand on that? Because I do not understand what that is pointing to. Yeah. All we are saying, Jeff, on that specifically, we are focusing a portion of our, we are focusing on the authentication use cases. We are being conservative when we're budgeting that we're going to reach break-even at no later than Q4 for a whole lot of things to happen. We are trying to be conservative in our budgeting. That's the churn part, the ability to be priced aggressive. There are a couple of areas that we are not focused on right now that we would like to keep our footprint. If it's not an area of focus, we might be a little more price aggressive than we would historically. That's all we're saying. The overall point, Charles was calling that out to give transparency to everybody, but also to everything that we've said, everything that Charles said in his prepared remarks is obviously incorporated in our punchline, which is we expect to be break-even no later than Q4 of 2025. Okay. I guess just last for me then on that topic, you obviously had pretty substantial sequential non-GAAP OpEx drop of roughly $2 million. Charles, you're talking $22 million in annual costs to come out. Just to be clear, it looks like you're down $2 million, and that probably took place mid-quarter in Q4. I am not sure how to read your comment. You've already got $2 million out. You had your call mid-quarter Q4. If you got $2 million out and you only had half a quarter, it seems like you might have taken out already $4 million. Just trying to understand what the baseline is, if you can just revisit your explanation there. Yeah. I think the way I would look at it, there were some unusual kind of fluctuations Q3, Q4. I would look at Q3, Q4 and kind of average as more of a normalized base. Okay. Average those two. And then use that as a base to which you'll take the cost out. Yeah. I mean, there were some in Q4, there was some lower headcount costs, but the reorganization itself happened today. And so none of those costs are reflected yet in the Q4 number. Got it. Okay. Great. That's helpful. Thanks so much. Thanks, Jeff. Thank you. The next question comes from the line of Jeff Bernstein from Silverberg Bernstein Capital. Please go ahead. Yeah. I was just curious on the contract that has not renewed yet, that still might be out there. Was there any complication from that customer making a divestiture and entering a new partnership with a big player in supply chain technology? Yeah. I really don't want to get into what's going on with any of our customers, Jeff. As we described on the Q3 call, what this customer—and they're still a very happy customer of two other—we subbed two other live contracts with them. Three other. Sorry. Three other live contracts with them. I was just reminded. Very happy customer. There was something that they wanted to do that would transform an industry. We've been partnering with them to do it. They have been wonderfully transparent. They've been wonderfully collaborative. We mentioned on the Q3 call that the biggest risk to this happening was we had a lot of other things we really wanted to focus on and how long do we wait. That was the conversation. It is still live. I don't want to get into what's taking them longer. I really do not want to say anything more than what I have said, but we are still in conversations about potential next steps. If we were to sign this, it would probably be descoped versus what it originally was. Do not take descoped to mean lower dollar amount. There is actually a reason to believe it could be a higher dollar amount. It is upside. We are not building our. Okay. No, that is great. Understand. Yeah. I get it. Just one thing. This is back to what Jeff Van Rhee was asking. Everything that we have said here all comes down to the punchline: we expect to be profitable no later than Q4 of 2025, even with all of this stuff. Not getting this deal to sign. If this deal is signed, this is a significant, significant deal. Gotcha. Understand. I just wanted to clarify a couple of other things. On the price look-up fraud application, I think you talked about a retailer, and then you talked about Piccadilly. I'm not sure if that's who you're talking about or etc. Could you just go back through the comments you made about price look-up fraud and just clarify what's going on there? 100%. Piccadilly is a partner of ours. Piccadilly is a salad bar provider. I think they're in north of 2,000 stores around the globe. That's a partnership we've announced publicly. We also have a retail customer. There is a retailer, a US-based retailer, rolling out our technology that is so we have two avenues to grow this, right? One, we have all of the untapped, wonderful Piccadilly customers that we could jointly delight together. We also have our first customer who's now live, who's to the point of making introductions to other retailers for us because it's wonderful. Nothing is more encouraging than when a customer becomes an evangelist, for no benefit to them except for the fact they just really love this technology and it's adding value to their business, and they want to share it with other retailers. Those are two. Piccadilly is not a customer of ours. They're a partner of ours. We do have a live retailer US-based who's a customer. Gotcha. Okay. Just to clarify this application, I think I hate to mention the name of your large partner again, but there was recently an article going around about how Walmart had barred a customer from every Walmart in the United States because of a fraud practice, which I think was price look-up fraud. Just want to clarify if that's your understanding. I don't know the deal. I don't know what you're talking about. I would say that one area, we talked about retail loss prevention. There are multiple use cases under retail loss prevention, right? We have the gift card. We have the PLU fraud. There are other use cases, right? We call those two because we think those will be the two biggest drivers of 2025 ARR. To your point and to Jeff's question, right, for example, there's been press from Walmart or out of Walmart and the use of our technology and their private label to help with shrink. That absolutely happens in terms of we add that value there as well. There are other use cases that a retailer can benefit from our technology, that shared stack sitting at the front of the store. The two that we called out on this call are PLU fraud and retail for the gift cards. That doesn't mean that there aren't others. Over time, that's what we want to do. We want to grow that suite of offerings because you have the same tech stack, right? Front of store, scanners. Our technology is already ubiquitous there. Selling into the same stakeholders at these retailers and the ability to add a creative value, right? The more solutions they take, the more value they each get. It's pretty powerful. Okay. A couple of times you guys referred to technology advancements, unlocking applications, etc. You also mentioned something about working with some of the major laser companies. Can you just flesh out the particulars of all that? Yeah, sure. There's a couple of things that have happened in their physical anti-counterfeit space in the last couple of quarters. We talked about it. When I was talking about in the Q3 call and again, this call in the prepared remarks, the incredible invention and market development. The invention was in the area of physical anti-counterfeit. There's been three areas of, I guess, growth or new greenfield opportunities. The first is technological breakthroughs. Copy deterrence, making it harder to copy something. Copy detection, which gives a deterministic outcome on whether this is a copy or not, or tamper evident. Those are three new ways of new technologies that we are excited, new use cases, new benefits that we currently we do not have to the level we have now. We put out a press release on the copy detection a couple of months ago. It is really, really impressive stuff and really, really meaningful and damn expanding stuff. That is one. Two is the new application. The other greenfield area is new ways of applying watermarks. I know, Jeff, this is something you have been focused on for a while, but working with some of the world's leading laser companies to apply our watermark. That is a whole brand new area. The third greenfield area for us in product authentication, physical product authentication, is not even related to the watermarks. We have a loyalty and reward program using serialized QR and some analytics we built in Illuminate to modernize loyalty and reward programs. A whole bunch of areas where Digimarc Validate historically, I think, was what most people knew what we had. There has been progress, new areas we can get into because of invention, because of new ways of applying watermark, and then either new solutions we have that have nothing to do with watermarks. Gotcha. Okay. Finally, you had some activities going on in factory automation. It sounds like that is another one of these categories that is going to kind of move to the side until there is customer pull that is greater and it does not take up the resources that you are now focusing on the areas you talked about on the call. Yeah. We call that out specifically. This is a specific product where we have a really robust ecosystem of both packaging companies and technology providers that are more than capable of advancing these deals without us. This was the whole idea of building the COE program out, is to make our partners experts. And on that use case, the Digimarc Automate use case, that's a very robust and influential ecosystem. Gotcha. Okay. That's great. Thank you. Again, Jeff, I would say beyond just that, right? Tried to make clear, and I realized the prepared remarks was there was a lot there. We were trying to give as much information as we possibly could. Even beyond that, just in general, we're always open for business with our partners. You have value-add and valuable partners existing and new. Where we're focused is in the three areas of Automate—I'm sorry, of Authenticate. That's where we're focused with our go-to-market efforts. We still have areas outside of that. You You mentioned Digimarc Engage. And then we have our partners, right? And our partners are powerful. And whether it's existing partners or whether it's new partners who say, "Hey, listen, can I get trained up as a COE for a specific use case?" Absolutely. Gotcha. Thank you. Thanks, Jeff. Thank you. As a runoff for the questions, I will now hand the conference over to Riley McCormack for his closing comments. Riley? Thanks, Ryan. And thank you, everybody, for dialing in today. I appreciate your attendance on the call. Have a good rest of your day. Thank you. Ladies and gentlemen, the conference of Digimarc Corporation has now concluded. Thank you for your participation. You may now disconnect your lines.