0:05 Good afternoon, and thank you for participating in today's conference. I'll now turn the call over to Chief Legal Officer, Bob Chamness. Please go ahead.

0:16 Welcome 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 will discuss Q4 financial results and provide a business update, including an update on the integration of the EVERYTHING acquisition that closed on January 3rd. This will be followed by question-and-answer forum. We have posted our prepared remarks in the Investor Relations section of our website and will archive this webcast there. 0:49 Before we begin, let me remind everyone that today's discussions contain 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. 1:08 Charles will now comment on our Q4 financial results.

1:14 Thank you, Bob, and hello everyone. First off, I want to provide an overview of Q4 financial results for legacy Digimarc. Please keep in mind these results do not include the financial results of EVERYTHING as the acquisition closed on January 3rd. The financial results for EVERYTHING will be included on a prospective basis starting in the first quarter of 2022. 1:36 Revenue for the fourth quarter was $7.1 million, up 28% from $5.6 million in Q4 last year. Subscription revenue increased 37% from $2.7 million to $3.6 million, reflecting the sale of 10 noncore patents for a onetime fee of $1.0 million during the quarter. Service revenue increased 21% from $2.9 million to $3.5 million reflecting higher commercial services related to HolyGrail 2.0 projects. 2:07 Total commercial bookings in Q4 were $2.6 million, up slightly from Q4 last year. First year commercial bookings in the quarter were up 39% year-over-year. For fiscal 2021, total commercial bookings were $10.9 million, up 20% from fiscal 2020. First year commercial bookings were up 27% over the same time period. 2:32 Operating expenses for the quarter were $13.2 million, up $1.5 million from Q4 last year. The increase reflects $1.0 million of non-recurring legal and accounting costs incurred during the quarter associated with the EVRYTHNG acquisition. Excluding these costs, operating expenses were up 4% reflecting higher consulting, travel, and marketing costs. 2:54 Net loss for Q4 was $8.2 million or $0.50 per common share versus a net loss of $7.8 million or $0.51 per common share in Q4 last year, on a comparative basis. We ended the year with $41.6 million in cash and investments. We used $10.9 million of cash and investments during the fourth quarter, including a $2.0 million loan to EVRYTHNG and we paid $600,000 of nonrecurring costs related…

8:22 Thanks, Charles. Over the past few quarters, you have heard us repeatedly say that we are undergoing a transformation. Most of this work has been internally focused, as we questioned and reimagined every element of our company, starting with the basics of what we do and how we do it. More recently, we started mapping that work to how we will re-engage the outside world post transformation. And while this work will never truly be complete, as tech companies that stagnate quickly atrophy, I am thrilled to share with you today that the foundational work of our transformation is largely complete. Our being on the cusp of re-engaging as a transformed company is best captured by two words that are now driving activity across our company, Hello World. 9:04 Our transformation took a giant step forward with the acquisition of EVRYTHNG, which closed on January 3rd. I won't repeat what I said on our last earnings call and then expanded upon at the Needham Conference about why this deal is so important to where we are going, but I do want to note that even here, our focus hasn't been just on integration, but also on transformation. Functional group by functional group, we are taking the opportunity to not only align people, processes and technology, but are also being intentional that in doing so we are diligently carrying forward the best of from each business. 9:36 We will emerge not just as one company, but one company better than either was standalone. As Charles mentioned, while the numbers are not yet finalized, we believe legacy EVRYTHNG's Feb 28th product ARR will be slightly less than $5.0 million. Important to note, this is exactly why we structured the deal the way we did. 9:56 As I mentioned a few quarters…

24:05 Thank you, ladies and gentlemen [Operator Instructions] And our first question is going to come from the line of Chris Grenga with Needham & Company.

24:24 Hey, Chris.

24:26 Hi. Hi, thanks and congrats on the results. Just on HolyGrail 2, it was my understanding that, that Phase two was going to wrap at the end of Q4, and then there was going to be an expansion into Germany with TOMRA, the TOMRA machine. Just wondering if you could provide any color on how that's proceeding? And I think there's actually perhaps one more country as well that – they were going to expand into. But just any additional highlights or color you could provide there would be great? Thank you.

24:58 I wish we could. As we mentioned before, HolyGrail 2 is not our trial. So if you go back to the Needham presentation, we try to include as much publicly available information as we can. This is -- there is a wonderful just thinking back on 25 years of technology, I can't think of any other time, where 160 organizations have gotten together to do a POC on one software program, right? So there's wonderfulness. The problem is, it's not our program. We can't talk about it. So unfortunately, you're going to just stay tuned for updates from the group themselves.

25:34 Okay, thanks. And do you expect incremental investment and OpEx in the near term to support the rollout of the brand integrity and recycle later this year?

25:47 Yes. Again, I encourage you that we did a pretty big refresh at the Needham Conference, I encourage you to go back there and listen to that. But we're going to be investing for the next 10 years, if not longer, with the opportunity ahead of us. In or we -- one of the areas, we do need to invest is product. We have a wonderful product team. There's just not enough of them. So I don't know if that answers your question. But yes, we're -- probably near term and for the next two decades, we're going to be investing in our team.

26:18 Got it. And on the brand integrity when with the CPG customer, what other technologies do they consider and what set Digimarc apart for that win?

26:29 We have a unique offering, right? I mean there aren't any other covert invisible codes that can scale like we can. We have -- now we're -- and again, this was just on a legacy Digimarc Brand Integrity offering, right? Now we're going to bundle this with our -- that functionality we got for the product cloud from the EVRYTHNG acquisition, which is a whole another level of functionality and value, right? And legacy EVRYTHNG had Brand Integrity customers of their own, where they were market agnostic, but using the back of the product cloud. We're going to have -- we already had a front-end differentiator with the watermark. Now we're going to able to bundle that with a differentiated product cloud. I mean not -- what I would say is one of the upcoming deliverables will be product marketing, and you can see a lot of the differentiation versus the other competitive technologies. But I don't know -- I'm trying to not say this because I'm sure I'm going to get some grief tomorrow when -- by saying this, but I don't think we -- we have a wonderfully unique offering. And I guess, the question is why people would consider other offerings.

27:48 Great, thanks very much. I will hop back in the queue. Appreciated.

27:51 Of course.

27:52 And our next question is going to come from the line of Harvey [Indiscernible] private investor.

28:00 Hey, Harvey.

28:01 Hi, Riley.

28:02 Good [Indiscernible].

28:04 Good, thank you. On the EVERYTHING transaction. How many shares did they get for their 50 million?

28:13 Charles, you have that number? I have an estimate, but I don't know the exact number.

28:16 Okay. I believe it was 770,000 [Indiscernible].

28:25 I'm sorry, repeat that, please.

28:29 And then there was also the 230,000 words.

28:33 Okay, and I might to understand that the September, 15 million may not occur.

28:39 It won't occur.

28:40 We will not so that's a dead issue at this point. Okay. Servicing…

28:45 Anyway, let me just caveat that. We have not -- we don't have the final numbers. February 28 was a couple of days ago. But our best guess as of right now, it's going to be slightly below $5 million. So if there is any additional payment, Harvey, it's going to be tiny, but our best -- our belief right now without having the time to have a final audit on those numbers is no -- there will not be a second payment.

29:10 Okay, last time we spoke income was 61% was from banknote counterfeiting and 39% was from commercial sale of which Walmart was 13% as Walmart's percentage gone up or down?

29:27 You got away for our 10k, Harvey.

29:29 Okay. On our partnerships, it looks like between collaborating and strategic partner, there's about 80 of them. Has that which half of them are global companies. Has that changed at all? Are they still roughly 80 partners and strategic partners?

29:55 Where are you getting a number from?

29:56 One of your lists that are published, it showed all of your strategic partners, so I added them up and…

30:05 See, I don't have a current -- I don't have a current list or a number for partners across the organization Harvey.

30:10 Okay, and one was called a platinum strategic partner. What does that designation indicate?

30:19 Bob, do you want to that? I think – I assume Harvey is talking about pack or…

30:24 Okay.

30:25 Thank you.

30:28 Yeah, that was a partner designation for someone that invested heavily in the research and co-development.

30:41 Okay, great. There have been three announcements.

30:41 Hey, Harvey, can you get back in the queue? I wanted to start this a lot of questions. I just want to get it over to them.

30:48 Yes, I'm sorry. Happy to get back in the queue. Thank you.

30:51 Thanks, Harvey.

30:53 And our next question will come from the line of Robin Knipp with Janney Montgomery Scott.

31:01 Thanks, looking and this is back in the envelope math, so bear with me on this. But looking at cash balances, at the end of September, we were at $52.5 million at the end of this year, we're now -- end of the year, we're now at $41.6 million. So called roughly $10 million burn per quarter, which means we have basically one year's worth of cash left, help me get comfortable with how you're going to address that?

31:26 Yeah, well, you don't need to do the back of the envelope. Right. We -- Charles gave you some numbers about backing out one time things from Q4…

31:34 Yes.

31:33 And what EVERYTHING is going to do. But let's get to your I think your bigger question, which is -- what are our options for cash and hasn't changed Robin over the last couple of quarters? There's three options, right? We have extremely high contribution margins. It doesn't take that much of an inflection of the business to decrease the cash burn to the point, where that doesn't become an issue. Secondly, there's other ways that we can raise capital outside of accessing the capital markets. And then third, we can access the capital markets. I am the largest shareholder of this company. I will be, by definition, most impacted by dilution. It doesn't keep me up at night. It's not something I spend a lot of time worrying about. So those are the three options that -- and they haven't changed in the last couple of quarters.

32:13 Okay, and then can you -- can you dial in on option two a little bit more when you say other things outside of the typical equity financing -- debt financing markets, what would you be referring to?

32:24 Yes. I mean that's something we can really be talking about. But I mean, I'll give you a very -- this is not what I'm thinking about. I will give you a very small example. We sold 10 non-core patents. Now $1 million is not going to move the needle, right? But there's a lot of things in this company that have a lot of value there. So without getting into specifics, there are things being contemplated. But again, that hasn't changed the same answer for the last couple of quarters, Robin.

32:50 Okay. Fair enough. Thanks.

32:52 Yep.

32:53 [Operator Instructions] Our next question will come from Jeff Van Rhee with Craig Hallum Capital.

33:03 This is Aaron on for Jeff. Quick -- couple of quick questions for me. So you mentioned on the last conference call kind of the areas of focus and use cases going forward, anti-counterfeit, online brand protection, digital cloud -- or product cloud and then recycling. Just curious, you gave a lot of good data points there. But anything you're seeing on the online brand protection side that's encouraging so far?

33:26 Yes. I mean I told you what we're focused on for Q2, right, which is the Brand Integrity and Digimarc Recycle, so that's where we're -- we're focused on for Q2. As I also have mentioned in the past, and I think it's important, so online brand protection is a product we have. It's not a go-to-market focus. It doesn't mean that it's not a focus. It's not a go-to-market focus in Q2. But there's also a pipeline of other products, right? And this is the wonderful thing about the universal applicability of our technology is, I think that's going to be the case for years. And the reason I bring that up is, it's purely a sequencing issue for product, right? So this product has this wonderful technology. They have this wonderful way of inbound interest to vet potential ideas. So it's just purely a matter of sequencing. One of the things that I believe legacy Digimarc is doing different or what we're doing differently today than I think legacy Digimarc has done in the past is focus on focus. Let's start with a few things, start with some things, and eventually, we can get to EVERYTHING.

34:30 Fair enough. That's helpful. And then, as far as you know, pipeline also gives some good commentary there. But seeing any synergistic effects so far as – as far as you know, the pipeline of EVERYTHING plus Digimarc, being greater than just those two individual components together?

34:47 Yes. And there's a lot of excitement across the industry for the combination of these two companies, right? I mean this is something that we had joint customers and joint sales processes in place before the acquisition. This makes a lot of sense to people to have a one-stop shop, makes the customers' life easier, right? Because in essence, what we're going to do is do the integration work once, so that -- so a 1,000 customers don't need to do it themselves. And especially, when also attorneys have begun Digimarc Recycle, right? We spent some time at the Needham Conference talking about this, but this really completes the offering. And I think I said it there, I forget this was there in the last conference call, where it must have been Needham because it was soon after the acquisition closed, we started engaging with some of the thought leaders and saying, this is what we got now, and they got it makes a lot of sense, so…

35:40 Helpful and then last one for me and maybe there's a question for Charles and I appreciate the Q1 kind of modeling inputs on EVERYTHING. But anyway, to think about the growth rate of EVERYTHING throughout the fiscal year and then does that margin profile kind of optics profile is going to be sustainable throughout the year for EVERYTHING?

36:00 Yes. I don't want to get into forward guidance on bookings and revenue for the reasons that Riley already laid out with the impact of small n and timing and all of that. But yes, I would expect that at our current level that we can support a fair amount of growth there. And obviously, growth will help on the margin front. There may be some incremental investment with growth around OpEx, but I don't anticipate significant needs there.

36:29 Perfect, that's helpful. That's it for me, guys.

36:32 Thanks, Aaron.

36:34 Thank you. And our next question is a follow up from [Indiscernible] Private Investor.

36:40 Hi, again. What kind of patents -- what kinds of patents did EVERYTHING bring to the table? And how many are we talking about?

36:49 I don't know the specific number. I think it was between patents and patent pending, it was low double digits. Did I answer your question?

36:59 Yes. I had seen recently several announcements, Walmart came out saying that they were going to be doing four stores that are e-commerce laboratories, Republic Services said that they're going to do the first integrated plastic recycling in the US and [Indiscernible] just came out with something saying plastic labeling for a sustainability scale. Do you have anything to do with any of those 3?

37:32 Harvey, we don't talk about customers. We don't talk about prospects. We don't talk about people by name. And I don't even follow the last one you mentioned, so.

37:46 Okay. Thank you.

37:46 Thanks, Harvey.

37:49 You bet. Bye bye. 37:50 Thank you. And with that, I see no further questions. I would like to turn the call over to Riley McCormick for closing comments.

37:58 Well, thank you everybody for your time. Any questions, how to follow up with us and until we speak again. Thanks a lot.

38:08 Thank you for participating on today's conference call. You may now disconnect.