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

Thanks. Good afternoon. Thank you for participating in today's Conference Call. Charles Beck, our CFO is with me. On the call today, we’ll review Q4 and fiscal year 2016 financial results, discuss significant business developments and market conditions, and provide an update on execution of strategy. This webcast will be archived in the Investor Relations' section of our website. Please note that during the course of this call, we'll be making certain forward-looking statements, including those regarding revenue recognition matters, results of operations, investments, initiatives, perspectives on business partners, customers and prospects, industry trends and growth strategies. We also will discuss from time to time information provided to us by channel partners and actual and potential customers about their business activities. Please appreciate that we're providing this information as we understand that it was represented to us by the customers, prospects, and partners and we do not verify nor vouch for such information. Such forward-looking statements and statements of our partners and customers 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 the company’s filings with the SEC, including the Form 10-K that we expect to file shortly. Charles will begin by commenting on our financial results, I’ll then discuss significant business developments, market conditions, and execution of strategy. Charles?

Thanks, Bruce. Good afternoon, everyone. Revenue for the quarter was $5.2 million, up from $5 million in the fourth quarter of last year. The increase was due to higher service revenue reflecting more program work for Central Banks. License revenue was lower primarily due to lower reported royalties from a large patent licensee which tend to fluctuate quarter-to-quarter. Subscription revenue was flat reflecting higher Barcode revenue offset by lower Guardian revenue. Revenue growth from Central Banks has been unusually high in the past two quarters. We expect this increased level of program work to continue through at least the first half of 2017. Digimarc Discover and Barcode bookings continue at a significantly higher level than a year ago coming in at $600,000 for Q4, twice last year's level. Discover and Barcode bookings for 2016 were $1.8 million, nearly three times 2015 levels. As a reminder, we define bookings as the non-cancelable fixed value of a contract. We expect a lumpy pattern to bookings, as we build out the revenue base in this area of our business. Gross margin was 60% in the fourth quarter, flat with Q4 of last year. Service margins were essentially flat, while subscription margins were up nine points, reflecting higher Digimarc Barcode revenue and lower operating cost. License margins were down five points reflecting lower license revenue. Operating expenses were $700,000, or 8% higher than the fourth quarter of last year. The increase reflects previously noted increases in staffing for sales, marketing, engineering, and operations to expand our capabilities and selling and delivering the Digimarc Barcode to retailers and brands. We hired 12 professional staff during the fourth quarter and anticipate hiring an additional 15 to 20 in the next six months. Net loss for the fourth quarter was $5.8 million, or $0.57 per diluted share…

Thanks Charles. This is stub period report given that my last update to the financial community was on January 11 at the Needham Conference. There I provide reviews 2016 performance, outlined 2017 priorities, and previewed our exhibition to messaging for NRF. If you missed that presentation, it's available on our website at www.digimarc.com/replay. My update today then will focus on what has transpired in the five weeks since then, my view of market conditions on our plans and expectations going forward. It's been a very busy month in market development. We've seen a significant increase in interest from existing prospects and customers as well as new prospects. These activities spend retailers and brands and non-core prospects involving applications across the full spectrum of operations and engagement. The 2016 financing gave us confidence to increase our marketing and delivery capabilities. As our share voice has been increasing along with our willingness to engage in Europe and Japan, opportunities have multiplied. We have some level of engagement with all of the top 10 retailers in the world and six of the top 10 CPGs. These relationships range from discussion of pilots to contract small volume production. For those of you attended NRF, you witnessed first-hand the unfolding of the platform and supportive applications from manufacturing to logistics store operations and consumer engagement. At NRF, all four leading POS scanner OEMs that had announced support last year demonstrated enabled products in our booth. We showed [Indiscernible] and Datalogic's support for variable data addressing many shortcomings and current solutions for fresh food labels, west-rock at everything, introduced to connected package program foreshadowing a persistent digital identity for products throughout their lifecycle and the critical role that reliable, efficient identification will play in the Internet of Things. ASP showcase serialization and track and trade solutions…

Thank you. Our first question comes from Rob Stone with Cowen & Company.

Hi, guys. Thanks for taking my question. We're going to start Bruce with sort of thinking about what controls the pace of adoption. You mentioned you got a good set of partners; it seems like certainly over the last year that system is really filled out and I know you're not prepared to name names, but you're engaged with some number of major retailers and some are deploying. So, for those who decided to deploy, what controls the pace right now? Is this still a do a little bit and try or is it based on how quickly they can convert label -- how we should we think about the pace of adoption?

Yes, it's good question Rob. The answer varies from company-to-company. So, there is a filter at every company for innovation and for the largest companies in the world, particularly the retailers, those filters don't work particularly well. So, the first gate is getting through that filter. The filter imposes a lot of conditions that take time and resources, largely revolving around proofs or proof-of-concept or feasibility studies or economic studies or business process reengineering studies. So, that's much of what we've been doing for some time now with some of the major players and we're in early stages with others. All of that is founded on an industry custom of being fast-followers, that's the expression that's used in the industry well known. It really doesn't mean what it says, it just means that most of them don't want be first and so the challenge here has been explicit in my strategy from inception and that is I got to get the big guys to move and I got to get them to move in a way that becomes noticeable to industry and then all of the process changes. Then they are buying because their competitor has it and they have to have it as oppose to who is going to be first. So, there's a kind of caution, if you like, at the stage of market development revolving around the acquisition technology and conversation I had at FMI, couple of -- CEO large retailer, he said as follows. As a matter of strategy I feel like what you're doing is inevitable and important to us. I need to feel comfortable about doing it. So, how can you work with my team to make me comfortable about it, because we're not good at technology? And that goes all the way to the top of the chain of retailers. And you've seen statements -- public statements and the transformational activities that the largest of retailers having to do with the organization's ability to innovate with technology. So, I think the industry is getting hip to the problem. They are trying to solve it. They have got some dysfunctional structures in place that seem like a good idea at the time they were put in place, but we're working our way through all of that and again, the process changes once we're established, -- established meaning that the competitor is known to be building scale with us. So, in my prepared remarks I noted that we got some small production going in some very important places and we need to scale it. And getting scale is competition for resources, so it's really passed the point of proof-of-concept and more trying to keep everyone focused.

So, specifically with the customers and partners that are passed studies and proof-of-concept and so forth and are starting to put product into the channel and there are a couple that have been named, Wegmans, and New Seasons, I guess there's a couple or three others that are in some stage of rolling out. But once they get past studying and start deploying what is it that controls the pace of deployment? Is it meant to be a measured thing or is it their ability to do so many new packages per month or per quarter, I'm thinking about the pace of the race once people leave the starting gate?

Yes, my presumption is that it moves faster at an industry level and a corporate level once there is scale production somewhere. So, Wegmans is at scale. Wegmans is quite far along. But they an $8 billion, 100-store operator and so they are not enough alone to loop the industry I think. However, within a large enterprise, there are typically many brands and so the way that we would normally begin be with one of the brands. So, then we've got to get that one brand along and then the other brands basically observe that brand and then we build scale within the enterprise brands by having the other brands join up.

My final question--

It’s a business process change. And it effects not only internal processes, but the supply chain because the big players mostly use what are known as pre-media companies, [Indiscernible] and their competitors so the change then is to have us become a, if you like a building materials checkbox on a package design. And that will not happen until we are conceived as a proven product within the enterprise.

Great. I wanted to ask about something else you said in the script which is that you're seeing I guess to paraphrase sort of tangential opportunities. And in the past you talked about, for instance, some supply chain opportunities that didn’t have to do with front house, retailer or consumer engagement. I wonder if you could just shed any more color on that. What are these other opportunities and are these things that you come across or things that came in over the trends to you?

Yes. And Rob I'll have to ask be able to move onto another questioner after answering this one. So, we don't take up too much of the queue, there are many other people in the queue. The answer in all cases that I'm referring to here are people coming to us based on understanding of platform's capabilities. And I stand by my frequent statement that everything we could do with a barcode, we can do better. And I think that's increasingly well understood. So, these are -- if you like, I'll call them modern barcode notions because some of them apply in media where on conventional barcode cannot be applied. But it's all the same principle of auto-identification of a structured data that is applied to the media.

Our next question comes from Jim Ricchiuti with Needham.

Hi, good afternoon. Bruce I just wanted to go back to that last comment you made about -- I think it was FMI where may have been in a discussion with the retailer, since you got is that this person felt the technology is inevitable, but how do you get comfortable with it? Is that the same mindset with the CPGs as well? Are they -- are you still having the same issue with them in terms of getting them comfortable with the technology? I'm trying to get a sense as to how -- since you need to get, it appears to you need to get at least one or two of the major brands to move on this, is that's a fair way to characterize it. What are you doing to accomplish that?

One of the important tweaks to strategy that were mid stuff is doing more of the work than I had anticipated on some of the most fundamental applications and so if you think about fast checkout with enabled the infrastructure, which is largely point-of-sale and then the package itself. In other areas, our model is that there's an application developer community that builds a bunch of stuff. What I'm finding is a desire for us to build some of that. And thus that may change the revenue composition and may be helpful in advancing our financial interest earlier. But I'll use my way of examples of smart label and so we have -- we think quite elegant means of implementation don't require QR, but we have to expect that solution and deliver it, because even through it might be obvious how it could be done by someone else, there's someone else to build. And so that's an example of us -- that we'll obviously license the solution add a premium to mere platform access. And there are others in the queue like that where I think we have an opportunity here to speed up the pace of growth of the market and also provide a better near-term financial result by some pretty modest investment in the specification of solutions and the testing and refinement of those solutions and then the packaging of them to the marketplace. So, we move through the year, I think you'll see some movement in that direction in my public communications and in our website.

Okay. Just to switch gears for a second, on the bookings number that Charles mentioned, I think it was $600,000 in the quarter. Is that a bookings number that consist of several different customers and as you look at the pipeline, as you look at retailers you're working with and the CPGs, what is your visibility into potential bookings as we go through 2017?

Well, let me handle the -- at least the last part of that. I continue to not want to rely on statements of intent and timing of new customers and prospects. It's just something can happen and a week can go by or month can go by. It's just the way these enterprises operate and so I would expect that for the foreseeable future that the quarterly bookings number will still be lumpy, it won't show a predictable progression. And so we've moving as quick as we kind of close as many deals as we can to make good sense and those all go into the bookings number when we finish them. But I wouldn’t get too far ahead on extrapolation from the patterns here, although they have been quite favorable, both of the annual level for 2016 in the last quarters here. So, we're doing all we can to make those numbers as large as we can. As to the composition we typically don't breakdown composition relatively small numbers like $600,000 and Charles has any comments regarding that.

Yes, it includes multiple contracts and we aren’t going to break that down any further. Last quarter we broke it down because we had one contract that accounted for the majority of it and it was a multiyear deal.

Right.

Not the case in Q4.

Got it. And Charles anything you can say that operating expense over the next quarter, you're adding staff, your OpEx actually -- at least in my model came in a little lower than expected, how should we think about OpEx over the next couple of quarters?

Yes, so we will be hiring 15 to 20 additional staff in the next six months. So, we'd expect that there will be a nice uptick in OpEx to account for that as well as additional support cost for having additional staff. Q1 always runs a little higher to as we have all the expense related to NRF as well. So, I would expect that there will be an uptick to account for those two factors.

Okay. Thanks. I'll jump back in the queue.

Our next question comes from Josh Nichols with B. Riley.

Yes, hi. Just thinking about adoption taking like 5,000 foot view here, how fast could major grocery or retailer, one the CPGs, practically adopt Barcode throughout their entire product offering portfolio, they really decided to take the dive?

It depends on how orderly their management of the package asset is and there is no standard for that. And in general we're finding less order than you might want to believe enterprises with sort of scale and sophistication that we're dealing with. So, the answer unfortunately is that it depends. It also depends on the management view of the business case. So, I'll give few examples of that. So, on the consumer product side of things, we're progressing more rapidly there than I had anticipated. And it revolves around largely things that have to do with informing consumers and their different names, so there's smart label which is a program there's digital transparency as consumer engagement. There's number of different ways of expressing the same concept, but the retailers are feeling a great deal of pressure to provide an improved engagement with consumers and they all believe that is going to move toward the smartphone. So, the question becomes then how urgent they feel that need and in the public statements of GMA, there are some brands who are saying they are going to do a whole lot of smart label. And whether they did or not, I can't say. This goes foreshowing of risk in the preamble, I don't know what pace they are actually going to do, but they commit to big numbers and they want to move quickly. Then one of the outcomes of participating in the FMI event was a greater appreciation for the enormous competitive pressure on the food marketing business. It’s a dogfight out there. It's really intense. And so we need to demonstrate our value within that competitive landscape and as we do, again, there's nothing like a competitor adopting to inspire somebody. So, we're pushing hard to get some of these guys going and once we do, I think everybody is going to move pretty fast. How fast can they move? I don't think there's any practical limit. I think the only limit is prioritization. And then with respect to very large private brands of retailers, similarly they can move as fast as they want to move if they get a clear sense of direction. And so one of our key strategic initiatives of 2017 is to really sort of run things out with Wegmans to make Wegmans a wonderful success. And hopefully use that as a showcase to inspire others. So, they are pretty far along. We need to expedite movement to large volumes on the shelf demonstrate the benefits to the Wegmans family and hopefully the industry will take notice.

Thank you. That's helpful. And then my last question. Any detail you could provide on what the company is doing to broaden the adoption of the SDK and progress regarding the GS1 collaboration?

Yes. On the mobile SDK, there's actually a lot of work going on there and I can't share some of it with you unfortunately, but we have been making progress and we have some collaborations going on that we think will result in broad adoption if we can pull them off. And so I don't know that there's much more I can say right now about that, but we did hire a licensing executives who is focused on it and so we'll sort of leave at that for now. In terms of -- just one relationship that's obviously a temple of strategy for us and the team there is very supportive that were present throughout the NRF Show and also participating what account planning for major accounts and continuing to develop programs that will help to increase awareness in the industry. And so that's -- continues to be incredibly important relationship for us. And a developing relationship as the industry get more involved, obviously, the ways in which GS1 can help its members become clearer. So, there is a bit of a cycle we undergo together here as we try to discern how to best apply the assets of just one for the benefits of its membership it's obviously our important class.

Thanks guys.

Yes.

Our next question comes from Jeff Van Rhee with Craig-Hallum.

Great. Thank you. Couple from me today. The -- I guess first with the deals that are working through the pipeline, you talked about a lot of hoops you've got to jump through to proven and reproof and sort of get the customers the finish line if you will. Can you just talk about the biggest of the big and what is it at this point you are proving -- you've seemingly been down a lot of these roads and demonstrated a lot of peace. I'd just be curious if there's any commonality with respect to the late-stage prospects and what it is that they are most focused on having you prove out? And along those lines if I could add a second question. I'm curious how the value proposition or these -- sort of the activating value proposition has changed for both the CPG and retailers, namely retailers is at front of store and other and same for CPGs. Just curious how the core driving force has shifted in terms of what they see as the most important value prop?

Okay. That's a complicated set of questions within the questions. So, let me see what I can do. In terms of late-stage versus early stage, the early stages are about technical feasibility, if you like, proof-of-concept. They are also exploratory with respect to effect on the business process and that effect is not sort of one-directional, it's not just the effect of Digimarc on the business process. But it's actually the surfacing of the intricacies or the workings of the process at the enterprise to the enterprise in some cases, because we are an important step in the late-stage design, but we implications in the early stages of the design and that designs can be made to work better with us or not. So, we then work with the supply chain and in the large enterprises, they have multiple suppliers. So, then we have to make sure that we provide adequate training and oversight quality assurance for the multiple suppliers in the supply chain. So, most of the work in the early stage is how does this thing effect the enterprise. The latter stage work then is embracing the change. Its okay, we're going to do this. So, why are we doing it? And there the motivating force differs from enterprise-to-enterprise and that's because we're actually pretty economical, but we're not yet fully developed on the application layer. And so there tends to be a champion who is driving a particular agenda that moves us along from that early technology study into production. Then as we go into production, other people go work and I now can see I've got a platform to work with let me then do a -- if you like, overlapping cycle of that technology assessment and adoption. And so the way this unfolds in an…

Our next question comes--

That's fine. Good, I'm good. Thank you.

Our next question comes from Glenn Mattson with Ladenburg Thalmann.

Hi, good afternoon. I'm not sure just building on that same last customer you -- referencing in the prior question, but in the last call you talked about top 10 retailer where you were just simply at this point discussing price and implementation plans. Perhaps you don't want to put a date on these things obviously because they move around as you said. But can you say if those discussions have advanced or have they stalled or retreated at all or any color on that?

They appear to be advancing. I obviously don't have any specific announcements, but yes, we're making progress. And not only we're making progress where I said we were in the last call, but I noted in the prepared remarks, we now have some level of negotiation with all of the top retailers in the world -- the top 10. So, our moment has expanded significantly since the last call in November.

Okay. And then with the emergence of Amazon in the physical retail space, have you seen -- has that increased any -- increased the urgency amongst these other more traditional retailers for some sort of digital engagement or more faster check out that kind of thing, any color on it if that's impacted the thought process of your potential customers?

Well, I guess I would clarify they haven't really emerged, they just sent out a vision statement that was targeted beautifully to the financial markets. And I believe that they are a great company and a great retailer, a great innovator. But the importance of that video was so grossly overstated. In that -- the technologies that were in play there are available to retailers today from a variety of sources. They just cobbled it together and pushed out before NRF. So, that they would get the extremely favorable review they got from financial markets. In industry there was already a sense here of the need for reshaping of strategies and is point out a loop a few minutes ago that Amazon is just one of wide range of competitive threats to classic retail. They are all trying to reshape their businesses and if you run across some research [Indiscernible] and so forth, there's a -- it's not just everyone is going to go to online and there's not going to be more physical retail. Physical retail needs to be a more enjoyable experience and so are there crosscurrents going on in the industry where some of the retailers are shutting down stores and others are investing in stores. Some are going total low cost, other are trying to upgrade their image. So, no one has found silver bullet right now, but Amazon represents the need for change and innovation. I talk about Amazon all the time with everybody else, like you should take a lesson from their playbook. So, I try my best to make a big deal out of what they do because I think that they represent a perspective on the market that should be shared by all retailers, but it's not. But I do know that our number of very large retailers now that we're getting in better communication with the world leaders are all really wound up about the general subject to transformation some retailer. So, not so much that Amazon video and not so much Amazon, but depending on the segment that they are in, so in sold products, for instance, they have worry about restaurants, about prepared meals from [Indiscernible] and guys like that, they have to worry about food trucks. They have a lot of worries. The answer to the worries is in creating more satisfying shopping experience, which I think we're all over. I think we can do so much for them and that's where we need to build the trusted supplier relationship from any toehold that they want to give us to help them to transform their businesses to address the growing competition.

Okay. That's insightful Bruce. Thanks for the color.

Our next question comes from Jeff Bernstein with Cowen Advisors.

Hi, guys. Thanks for taking my questions. Couple of quick ones. Apparently I guess a fair amount of the store brands are actually manufactured by the CPGs, is there any kind of cross-pollination with store brand efforts and the CPGs as a result of that?

Yes. There's also the clearly acknowledged competition between store brands and national brands. And so if either one of them moves in a direction that's competitive threat in that paradigm that I often talk about, if well they are doing, I have to do it. So, we can influence from either direction.

Got you. And then just on the changes in nutritional labels, are you seeing any kind of movement as a result of that?

Yes, that's been an ambiguous phenomenon for us. I talked to some of our shareholders and analysts about this that we have clearly a point of resistance in our strategy around the design teams -- the packaging design teams. I have yet to find one that doesn't feel overworked and underpaid. And so they will try to find reasons not to do more things. And so in some cases, they -- by the efficiency arguments, like well, I'm doing redesign, let me do as much as I can to be efficient. In other cases, while doing -- I'm already doing nutrition facts, so I needed Digimarc too. We hear both of those things. So, there isn’t any -- it's not a problem for us, but it's also not always a virtue for us. So, it's just a factor if you like. There are lots of redesigns going on and much of the redesign is around a broader concept the nutrition facts being a symptom of this desire for improving the information flow on the pack. And there just isn’t any more room for human discernible information on the packs, so it has to go off-pack which we think should mean us. And so nutrition facts is just symptom if you like of a larger phenomenon. And I was just listening this morning to a discussion on CNBC with a represented from Coca-Cola in Australia talking about sugar taxes. And there's already rumblings in Congress about what are we going to do about sugar. Well, plug another QR code on the package for sugar. The answer has to be in having an intuitive and reliable interface like we provide to allow the pack to talk to the consumer with up-to-date information about things the consumer cares about. It has to be the answer. The question is pace. So, we're trying to make it happen as quickly as possible. There are many brands who are pressured to get there and that's why we have I think an unusually robust group of CPGs interested in doing business with us because they too believe we may be inevitable and may be a very important aspect of their entire relationship with their consumer. Ranging from helping to sell competitively, helping to be more satisfied with the product and helping to keep the regulators off their back. So, all these things kind of flow around in the same general theme of can I pack the more informative?

Okay. And then lastly I just want to follow-up on Rob Stone's a question about kind of gating factors, so if a bunch customers decided they wanted to go ahead full bore right now what are the gating factors for you, Digimarc, internally at this point to being able to take that business?

It depends on this budget. So, who is their precipice [ph] is the first question in the answer to your question. So, and the subsidiary question is what is the state of the inventory of designs? And what is the process for redesign? And what will be the cost of redesign? So, that's the answer -- the honest answer to your question as its most likely not do we internally here at Digimarc have enough capacity.

Got you.

It's more likely who was their supplier? What's their negotiation with their supplier? How prepared is their supplier to do the work? What is the schedule that the client wants to impose? How much are they willing to paying to impose that schedule?

Okay. So, that is not on the list of issues for somebody pulling the trigger. Can you handle our business? That's not an issue now.

I don't believe so.

Great. Thanks very much.

You bet.

Our next question comes from John [Indiscernible] with PJW Capital.

Hi, Bruce, just two quick questions. One on pricing, I know the market, $600,000 million GTINs, $30 billion market opportunity at $50. On these enterprise deals, should we still be using $50, is that the right number per SKU or how should we be thinking about pricing on the enterprise side?

Yes. It’s a good question John. I think where I'm anticipating things will go in the near-term here is that these solutions will add another layer onto the revenue model. And so whereas we've been modeling just sort of access to the platform, I think we're going to do some solution-based pricing too which is additive to that. And so we're building matrices, if you like, of solutions to offer into enterprises. And so when we talk about an enterprise agreement, actually in our world here in the early stages of market development, that's like a Chinese menu. So, it's not all you can eat of everything, it's what do you want to do when we'll price that on an annual basis. And so the $50 is a fundamental tenet of that modeling, but it kind of depends on what they want to do.

Got it. And that -- those -- the menu will grow over time obviously as the ecosystem builds and as you guys start to integrate digital barcodes, there will be other opportunities along the way, is that the right way to think about it?

Yes.

Okay.

And most of the focus -- and let me just add something John to help you out here. So, the most of the focus of the financial is as your premise stated on packaging. But we do a lot for the enhancement of all media and Shazam is enjoying quite a lot of success in support of brands using media, including packaging, but not limited to packaging. And so when we talk about it, enterprise agreement, it could encompass all of their marketing as well as their supply chain. We have also companies -- big companies interested in logistics and manufacturing applications. And so the $50 per package may not be relevant in those applications, those could be starting points for some of those enterprises and it could be that they start there in the form of an enterprise agreement that does not encompass a license to do all their packaging $50 per design.

Got it. So, that's like warehouses and things like that?

Yes. So, we've talked vaguely about this suitably, but quality control and manufacturing and inventory management for materials. We can do a better job than a number of existing systems for doing those things. And so our goal is to establish a trusted supply relationship with the world leaders. And we'll start wherever they want to start, because we think once that we've established that relationship that we can grow the share wallet from that customer by delivering more applications themselves and by encouraging the development of the application development community.

Got it. Okay. And the other question, at some point, obviously we'll start seeing more stuff on show, when -- can we assume that based on the checks I've been doing over the years, it just seems -- and I didn’t appreciate this a couple of years ago, but these large retailers are really logistics company more than anything else and their supply chain is really important. Should we assume once you're on the show, that some of these large retailers that they have already done that ROI work, signed-off on the ROI that it makes sense to invest if they are willing to the through work, they put it through the supply chain and see stuff on shelves.

Yes, I don't know enough to answer that question John. So, I'll have to pass because I just don't -- I don't know the answer to that from any individual direct experience.

Okay, great. Thanks Bruce.

You bet.

We have a follow-up from the line of Jim Ricchiuti with Needham.

The staffing increases that you're talking about is that -- can it be in split evenly in sales and marketing and engineering or there are going to be more folks in sales and marketing?

Actually probably -- Charles is here to correct me if I got it wrong in terms of actual open racks. But this client services area, we hired a new Executive and moved another Executive into. You can assume there's a lot of stuff going on. So, I think about substantial number of the recruits will go into that area -- basically delivery systems, because in order to scale this, we got to do a really good job of delivering to the early clients and if you like defining best practices, defining the business processes that will work well for them. So, there's a lot of work to do in that area now that we have sufficient interest to going on a work.

Bruce, as one way to think about this increased resources that you're putting in these areas, is it really geared toward getting you over the finish line as opposed to maybe getting coverage in areas may be that you aren't addressing that you should have been?

No, I hinted [ph] that in my prepared remarks. I think we have enough evidence of the demand Jim. So, what do we get done, well we got close sales, deliver well and expense share wallet, very straightforward stuff. And so it's really the evolution of the strategy, it’s a different stage of execution that we've reached and so we need to modify the organization to accommodate that. And so I'm not looking to generating a lot more demand, look into close sales and deliver. So, that's where most of the resources will go.

Okay. And Charles just getting back to the outlook that you I think kind of reaffirming, you had talked I believe in the Q3 call that you expect some meaningful increase in subscription revenue is that still the way we should think about the year and kind of mid-single-digit growth in service and generally a stable license revenue line, is that the right way to think about the year?

I think that's fair. We really haven't made any material changes to our 2017 budget assumptions that we went through during the Q3 call.

Okay. Thank you.

Thanks Jim.

This does conclude our question-and-answer session. I would now like to turn the call back over to Bruce Davis. Sir, please proceed.

All right. That's it for today then. Thank you all for your continued support and confidence in Digimarc. We'll report back to you again in April.