Good afternoon, and thank you for participating in today's conference call. Now I will turn the call over to Bruce Davis, Chairman and CEO of Digimarc. Mr. Davis, please proceed.

Thank you. Good afternoon. Welcome to our conference call. Mike McConnell, our CFO, is with me. On the call today, we'll review and discuss our financial results for 2012, talk about significant business developments and market conditions and provide an update on our strategy and operations. This webcast will be archived in the Investor Relations section of our website. Please note that during the call, we will be making certain forward-looking statements, including those regarding revenue recognition matters, results of operations, investments, initiatives and strategies. These statements are subject to many assumptions, risks, uncertainties and changes in circumstances. Any assumptions we share about future performance represent a point-in-time estimate. Actual results may vary materially from those expressed or implied by such statements. We expressly disclaim any obligation to revise or update any assumptions, projections or other forward-looking statements to reflect events or circumstances that may arise after the date of this call. For more information about risk factors that may cause actual results to differ from expectations, please see our filings with the SEC, including our latest Form 10-K. Mike will begin by commenting on our financial results. I will then discuss our execution of strategy and outlook. Mike?

Thanks, Bruce, and good afternoon, everyone. 2012 revenues increased by 23% to $44.4 million up from $36 million in 2011. Our net income improved 46% to $8.3 million or $1.12 per diluted share compared to $5.7 million and $0.76 per diluted share in 2011. The balance sheet remains in excellent shape with more than $39 million of cash and securities and no debt, and throughout the year we made a number of strategic investments in our company. We purchased Attributor late in the year for $5.4 million in cash, allowing us to extend our media management and security offerings into the book market. We continue to invest in growth including developing and marketing Digimarc Discover, audio and packaging research and development, and developing the second wave of retained patents, all in support of our vision of enabling computers, networks and other digital devices to see, hear, understand and respond to their surroundings. And we also purchased more than 200,000 shares of stock for about $4.8 million. Looking further into our 2012 financial results. We saw revenue growth was fueled by s payment of $8 million of past-due royalties from Verance, and from higher licensing revenues from both Intellectual Ventures and Verance, and these were partially offset by lower revenues from the suspension of operations of our joint ventures with Nielsen back in Q1 of 2012. Our gross margin at 85%, 4 points higher than the prior year, reflecting the greater mix of license revenues to the total. We experienced slightly higher operating expenses, the majority being associated with the fourth quarter acquisition of Attributor. Our operating expenses were -- I'm sorry, our operating profit was $14.6 million or 33% of revenues. And our tax provision came in at an estimated effective tax rate of 39%, yet our cash taxes for…

Thanks, Mike. 2012 was obviously a very good year in terms of financial performance, as revenues grew significantly, margins expanded and we delivered record profits and cash flow. Much of the profitability was due to resolving the dispute with Verance and getting them back into compliance with our licensing program. We employed the profits wisely, seeking maximum benefit for our shareholders and balancing short- and long-term returns. Our capital allocation strategy included long-term investment in new product initiatives and the acquisition of Attributor. The return of capital share -- to shareholders via institution of recurring cash dividends and improved leverage through share repurchases. We also made great progress in the execution strategy. In addition to favorably resolving the Verance dispute, we improved the Digimarc Discover experience for publishers and their audiences, expanded distribution, developed mobile-optimized audio watermarking, made great progress in basic research on invisible barcodes, increased our patent portfolio to more than 850 issued patents and 400 pending by adding 20 new patents and 86 applications, with retained patent assets now up to 36 patents and 296 applications pending. We negotiated the 12-year extension to our contract with the central banks and continued to develop, retain and add to our extremely talented and high-quality employee base. I believe that we're entering a phase of significant expansion of the commercialization of our R&D, both directly through the provision of software and services and through licensing. We anticipate a very busy and exciting year ahead. Our focus will be on consolidating the fruits of the last 15 years of our R&D into a robust software platform and associated services. We expect to continue to generate substantial patent assets from our increased R&D investments, as we increase commercialization of our investment around the core concept of pervasive and intuitive computing that has…

[Operator Instructions] You have a question from the line of Kevin Henrehan [ph] of KMH Capital Advisors.

Mike, I had a few questions for you. Can you tell us how many shares you repurchased in Q4?

Sure. We had about 44,000 shares in total for around $900,000.

Okay. Was some of that open market and some of that non-open market or was it all...

About a quarter of it was open market, which has been kind of our trend for the year. I think I mentioned we purchased over 200,000 shares for about $4.8 million, about 25% of that was the repurchase program and the balance relates to our program for exchanging stock for taxes for employee and stock compensation.

Sure. And on the tax rate, I was surprised to hear what you said. So let me see if I got this right, just to summarize, the NOLs have all been exhausted right?

In this year, yes.

And so the tax rate for this year, I just calculated it, I get a rough tax rate a little more than 39%?

Exactly.

And so next -- for '13, you think it will be negative?

Yes. We'll have a benefit. We'll be able to utilize some additional tax assets. We did acquire tax assets in the acquisition of Attributor, and those will be outlined in the 10-K that we file here in the next day or so. And we'll get the benefit of some of those. And then on top of that, we've got 2 years of research and development credits that will be showing in 2013.

Okay. So you haven't given any, like, numbers on how negative you think it will be?

No, we haven't.

Okay. That's all right. I had a question for Bruce. I just wanted to ask about consulting and legal, if you can break it out, that you spent for your discussions of -- with your differences with Intellectual Ventures?

We don't break it out, but it hasn't been terribly material yet. We're continuing to have our discussions with them. If we carry on, there'll be some expense, but I don't expect it to be very significant.

Consulting and legal?

Yes. Right.

I think the last time you -- on the last call, I think you mentioned it was mostly over costs and expenses, not a difference of opinion over revenues?

I don't believe that's what I said.

Is that still true?

I don't think that's what I said, Kevin, I don't have the script in front of me, but I don't think I said that. So we've got a difference of opinion about the accounting for costs. I don't mean by that statement to imply anything about all other aspects of the relationship. I think that's all I said, was that we have a difference of opinion about costs, which we do.

Would that imply you don't have a difference of opinion about revenues?

It doesn't imply that.

It doesn't imply that. I guess you need to be a lawyer to understand that.

No, what it means is I don't want to spend a lot of time commenting around the nuances of our relationship with them. We're focused on getting fair and accurate accounting, and we believe that if they will focus on monetization and we get proper accounting, that there's much more money to be made in the market and that we'll each profit from moving on and doing those things. But we have a difference of opinion right now.

Can you characterize for me -- I know, I think, you started it about 1.5 years ago in October. So obviously, what you thought you had going into it is not what you have -- or not what you've seen anyway in the reports you get from IV?

I wouldn't say that. Again, I don't want to -- much of what we talk about is intended to be private and I don't see any value to making in public. But we think that there is a -- we, Digimarc, think there is a substantial and growing monetization opportunity in the marketplace. We'd like them to exploit it under their exclusive license and we'd like them to pay us fairly. That's all.

[Operator Instructions] You have a question from Paul Sonz of Paul Sonz Partners.

I have two questions. One is sort of the standard ongoing question. Any movement on the government contracts?

No. I think we had said previously in terms of 2012 strategy and execution of strategy, that we had backed off trying to working in that area because it's too difficult and impossible to predict. So we're quite happy with our relationship with the central banks and we have a new long-term contract with them and we're excited to be in our 15th year of collaboration with them. But that's the government work that we're focused on. There's been a little bit of other government work, but not enough to have a lot of conversation about.

Okay. Great. And the second question is, in terms of the monetization, which I think is both the opportunity and the challenge in the business, as you developed all these wonderful technologies and now, of course, you want to have widespread adoption and usage. We have 2 sort of patent groups, one, being controlled by IV and then the second group, which is -- you're continuously building. And what I wanted to ask is, what are your plans to further the monetization of your products, both in the -- in terms of that controlled by Intellectual Ventures, whether you plan to do anything to sort of to assist them in getting adopted. And then what is your plan for the other groups of intellectual property that does not fall under the IV control?

First, just to state the obvious, that the patent licensing is one of our licensings, we have many others, but focusing on the patent licensing area, we were ready, willing and able to provide all the assistance that we can and then quite experts as to Intellectual Ventures and monetization. And so that's an ongoing outstanding offer. With respect to the second wave of patents, I've outlined for you what we're doing. I don't know what more I can add to that. We're quite focused on identifying target markets, specific targets within markets, expediting relevant claims, building the marketing materials and getting ready to propose our license terms to the targets. That is what we'll be doing throughout this year. We're not going to be ready until near the end of the year, probably.

All right. So that would be -- that the model then would be for you guys to do the -- in the sense of sales and marketing of the ideas yourself, as opposed to partnering with somebody again?

For the time being, that's the plan. That can change at any point if we find some means of gaining leverage from a relationship with some intermediary. But at this point in time, we plan to do it ourselves.

Okay. Last question, the Traction Report I thought was exciting, although the numbers were off a low base and I wondered if you could -- if you expect this to progress at a geometric pace.

What I said earlier, I would reiterate and moderate a little bit, not that -- a lot of people make the mistake of assuming trends from early data, early data tends to move around a fair amount. But I'm encouraged by continuing favorable trends. And so I was quite cautious in telling everybody, don't get too wound up, but I'm feeling like we're making good progress and so it does appear there is a favorable trend there. I don't know how to size it just yet and how to scale it. We'll continue to update that traction report periodically, I think. But we're involved with lots of publications, running numbers with publications. We have more services. We have more downloads. We're getting more activity. We're understanding the activity better, we're shaping our development and marketing to foster those successes and to teach the industry of those successes. So we're continuing the market development, but it looks like it's going pretty well.

[Operator Instructions] This concludes the allotted time for today's question-and-answer session. I would now like to turn the floor back over to Mr. Davis for any closing remarks.

Thanks, everyone, for joining the call and we look forward to talking to you again in the quarter, if not sooner. And thank you for your continuing support.

Thank you. This concludes your conference. You may now disconnect.