Digimarc Corporation

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

Welcome to our Q4 conference call. Riley McCormick, 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 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. Charles will now comment on our Q4 financial results.

Thank you, Bob, and hello, everyone. First off, I want to provide an overview of Q4 financial results for Legacy DigiMark. 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. 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 non-core patents for a one-time fee of $1 million during the quarter. Service revenue increased 21% from 2.9 million to 3.5 million, reflecting higher commercial services related to Holy Grail 2.0 projects. 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 period. Operating expenses for the quarter were 13.2 million, up 1.5 million from Q4 last year. The increase reflects $1 million of non-recurring legal and accounting costs incurred during the quarter associated with the everything acquisition. Excluding these costs, operating expenses were up 4% reflecting higher consulting, travel, and marketing costs. Net loss for Q4 was 8.2 million or 50 cents per common share versus a net loss of 7.8 million or 51 cents 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 million loan to Everything, and we paid $600,000 of non-recurring costs related to the Everything acquisition. Backing out these costs, during the fourth quarter, we used $7.1 million to fund operations and another $300,000 to fund capital expenditures. We also have 231,000 warrants outstanding with a strike price of $36.56 that expire on March 27th. As a reminder, these warrants were issued in lieu of shares to cover Everything's cash closing costs related to the acquisition. If all of the warrants are exercised by Everything shareholders, it would result in $8.5 million of additional cash to DigiMark. If none of them are exercised, it would have the effect of reducing our purchase price by $2.5 million. 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. Next, I wanted to provide some inputs to help you with your modeling of our business, giving the effect of closing the everything deal. We expect the acquisition to add approximately $1.3 million in Q1 subscription revenue and approximately $200,000 in Q1 service revenue. We expect everything standalone subscription gross margins to be around 70%, and service gross margins to be around 55%. As a reminder, we believe that we will be able to increase Everything's standalone product gross margins over time into the high 70s at current revenue levels and higher still as our product cloud revenue grows. On the operating expense side, we expect Everything to add approximately $3.5 million in operating expenses in Q1. Finally, the Everything business is currently using around $2 million of cash per quarter. Both the operating expense and cash usage numbers are before any non-recurring legal and other deal costs, which will add approximately $800,000 to operating expenses and cash usage in the first quarter. As is the case with the standalone DigiMark business, with the extremely high product gross margins in the everything business, if we were able to increase product subscription revenue from current levels, cash usage should decline significantly. Before I turn the call over to Riley, I want to cover three more things. First, I wanted to provide a preliminary update on everything's projected product annual recurring revenue, or product ARR, as of February 28, 2022. We are working to close the books for February, so we do not have a final number yet. However, we anticipate the product ARR will end up slightly under $5 million. If product ARR is $5 million or less, then there would be no second consideration payment in September under the terms of the share purchase agreement. Second, as we have mentioned is a key tenant of our transformation, we are applying an intense focus to every part of our business. After careful thought and consideration, we have decided to sunset our piracy intelligent product offering for e-book publishers. The market opportunity is just too small, isn't growing fast enough, and doesn't provide enough high margin opportunity to justify allocating any of our valuable resources to this market. In 2021, the Piracy Intelligence product generated $2.2 million in bookings and $2.5 million of subscription revenue and was neutral to cash flow. We expect to complete the wind-down of the Piracy Intelligence product by December 2022. To provide visibility into historical bookings and revenues for this product line, we have included a table within the script showing 2020 and 2021 Piracy Intelligence bookings and revenues by quarter. Lastly, we opportunistically took advantage of the future of work uncertainty caused by COVID and entered into a sublease and lease extension for new corporate office space less than one mile from our existing office in Beaverton, Oregon. The new space was recently completely redone by the previous tenant in order to provide the functional and collaborative benefits modern office space allows. It is also 40% larger than our existing space, providing optionality on our future needs. We were able to negotiate this lease with no incremental cost to us for the next 26 months, and moreover, this move eliminates the multi-million dollars of capital expenditures that would have been required to update our existing office space. We intend to market our existing office for sublease once we move out in March, and depending on our success with that, this move could actually end up being cash flow positive over the next two years before giving any benefits from the CapEx costs we have now avoided. The new lease will run through September, 2030. We will record a large asset liability on our balance sheet starting in Q1, reflecting the net present value of the contractual lease payments. Additionally, our non-cash lease expense will increase given the 26-month free rent period, as lease expense is required to be recognized radically over the lease term. Riley will now provide a business update.

Thanks, Charles. Over the past few quarters, you've 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 reengage 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 reengaging as a transformed company is best captured by two words that are now driving activity across our company, hello world. Our transformation took a giant step forward with the acquisition of everything, which closed on January 3rd. I won't repeat what I said on our last earnings call and then expand it 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 just been 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. 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 Everything's February 28th product ARR will be slightly less than $5 million. Important to note, this is exactly why we structured the deal the way we did. As I mentioned a few quarters ago, it is extremely difficult for a company so early in its S-curve of growth to try to predict specific revenue levels at a specific moment in time because, by definition, the number of deals is relatively small and the average size of those deals, when compared to existing revenue, is relatively large. Accurate forecasting requires a smooth distribution curve of both current customers and future customers, something pre-inflection companies just simply don't enjoy. Add in our concern about signing delays caused by the acquisition announcement itself, especially coming so close to year-end, you can see why we insisted the results themselves decide the price. There were three major headwinds that impacted everything's headline ARR growth. These headwinds almost perfectly offset the ARR growth gained from new signings, and in the interest of context and transparency, I believe they are worth sharing. First, one customer terminated an internal initiative as a result of larger organizational changes, and as a result, terminated their contract with everything. While we can't get into the details of the specific situation, it is instructive to note that we are in talks with another division of this very same customer for our product cloud offering. Second, A contract we knew was unlikely to continue for reasons completely unrelated to the Everything platform did, in fact, end. And third, upon our deeper dive into the nuances of every deal, we have concluded the ARR previously attributed to one contract was overstated due to an extended term of use clause that extends the potential duration of the deal and thus lowers the amount of revenue we can recognize in each year. Important to note, this change in ARR is purely an accounting matter. The timing and amount of cash payments that we will receive are unchanged. Moreover, as this is an engagement we know very well, since everything in DigiMark were partners on this deal pre-acquisition, we feel comfortable in stating this clause will likely end up being irrelevant, as it is highly likely this customer will be back for more product cloud capacity, as well as more watermarks, well before that clause kicks in. This customer still represents mid six figures of annually recurring revenue, even with the lower ARR accounting. Much more importantly, Based on what the customer itself has shared with us, we are only in the very low single digit percentage points of penetration of the ultimate opportunity this customer represents. So while the headline ARR number looks flat over these past five months, the reality is much different. More importantly, looking at everything's total pipeline instead of just the portion that had the potential to close by February 28th, less than 5% of the total dollar value has dropped out of the funnel since the end of September. which is a low number in general, let alone for a company that has been acquired. The remaining 95% plus of the September 30th everything pipeline is still progressing towards close, just not on the tight timeline everything originally envisioned. In addition, new deals have entered the funnel. And one final data point worth sharing, this total pipeline number is multiples larger than the 5 million of ARR that would have taken everything to the high end of their earn-out range. The fact we have gained the people, the product, and the standalone, as well as a combined, opportunities that this acquisition has provided us without any further material payout is thus not only the result of a thoughtfully constructed deal, but just another example of the vagaries of forecasting based on a small N. In this case, and because of the way we constructed the deal, those vagaries will work to the benefit of existing DigiMark shareholders. This theme of a small end skewing results is present in Legacy Digimark's Q4 bookings as well. While Q4 was our third highest commercial bookings quarter ever, albeit aided by the patent deal Charles mentioned in his remarks, if you move the beginning and ending dates out a few weeks to the right, the bookings result would have been much higher still. I offer this not as an excuse, but simply an illustration. A few weeks into 2022, we had already closed well over a million dollars of bookings that we had originally expected to close before year end. Moreover, One of these deals closed with a higher ARR than we had internally forecasted, but as a trade-off came with a smaller than forecasted day one booking. Thus, a few weeks into the new year, we were better off than we would have been if things had played out as originally thought. And frankly, we consider that a win because that's where our focus is and always will be. Dates come and go, creating enduring shareholder value is a continuous journey. One of the deals that closed early in Q1 was a six-figure contract related to our recycling efforts in Europe. While we and some other participants believe recent results from Holy Grail 2 have proven beyond a reasonable doubt that our technology works, it's also important to note that in addition to this very public validation of our technology, Holy Grail 2.0 has helped the industry realize that saving the planet is only one of the benefits that adoption of our Digimark Recycle product will enable. Moreover, and very recently, stakeholders from an industry outside of plastics are also waking up to the benefits our technology can provide to their products and have taken our suggestion to engage in Holy Grail 2.0 as a means to potentially obviate the need to run their own industry-wide trial. This is a suggestion we are carrying to other interested stakeholders as well. But despite all the positive momentum from Holy Grail 2, we know it is incumbent upon us to at all times own our own future, and we believe that however fast one can move drifting with the current, one can move that much faster paddling like mad and using that current as a tailwind. As I will mention a bit later, in Q2 we will begin to engage with budget holders at brands and retailers, as well as their suppliers, to finally get the Digimark Recycle flywheel going. Our plan is to lean in against any potential industry inertia that might result from waiting for HD 2.0's conclusion. We no longer see any valid reason for delay, and thus we want to get started immediately on helping to save the planet, as well as unlocking the other benefits the industry will get from Digimark Recycle. Another win that came in Q1 instead of Q4 was a $300,000 plus ARR DigiMark brand integrity deal. As an aside, and as you will see shortly very publicly, DigiMark brand integrity is a product name for what we were internally calling our product authentication anti-counterfeiting or PAC offering. This deal is with a single division of a top 20 CPG that has well over 100 different divisions. We expect our second divisional win with the CPG to occur in Q2 and are currently engaging with still other divisions at this global brand. Important to note, as all of this activity involves just a legacy DigiMark brand integrity offering, and this doesn't yet include the much improved functionality that our combined product will offer, the opportunity to accelerate penetration of this single customer with our combined offering, as well as to revisit these early divisions we have already signed up, is huge. Moreover, There is more brand integrity business to be won, even with the products we are already, or soon will be, protecting, which will not only provide better protection for this brand and their consumers, but will of course be another lever of monetization for us. Interestingly, a completely different division of the same CPG became a product cloud customer in Q1, utilizing other functionality of our platform besides brand integrity. For those of you who listened to our Needham presentation, one of the guiding principles of our transformation is that we need to be easy to begin doing business with and an excellent at guiding customers along their DigiMark journey to the adoption of additional DigiMark products. This large multinational CPG might end up being a wonderful case study as we have entree across different divisions on multiple continents with both watermarks in the product cloud for two different use cases. We now have the opportunity to cross-sell and up-sell across not only the divisions we have already landed, but the 100 plus we have not. This single customer could end up being a very large customer for Digimark and outside of its size, as I mentioned, it's a top 20 CPG. There's nothing one-off about this opportunity. Sticking with brand integrity, another six figure ARR deal that closed early in Q1 is a followup deal we signed with a large pharmaceutical company that was already a brand integrity customer, albeit for a limited number of SKUs. Importantly, The second contract also includes a framework that would allow for quick and easy adoption of brand integrity to even more SKUs besides those covered in the first two contracts. We estimate the first and second contracts combined cover less than 1% of this company's products. As this customer, like the CPG customer I just mentioned, is also rolling out our legacy brand integrity solution, our focus will be on gaining further penetration as well as circling back with our soon-to-be-released combined brand integrity offerings. Besides also having the potential to be a very large customer even just using one of our products, which is not where we believe any customer should end their DigiMark journey, this customer represents a vertical outside of where we have historically had success. As we continue to expand from our very early foothold at this customer, it could also act as a foothold into a giant industry as well. One last deal worth mentioning is different than those than these previous three, because while we expect it to close any day, it hasn't closed quite yet. And it is a deal from the legacy everything pipeline. And that's an example of the timing vagaries in which I'd already mentioned. I've already touched. While the initial deal is in the low six figure ARR range, this customer could easily represent $500,000 of ARR in the next few months as legacy everything has two contracts in front of this one customer. Unlike the previous deals mentioned, the customer is a channel partner who would in turn be reselling our technology to its end customers. And this soon-to-be product cloud channel partner is a customer Legacy Digimark also knows well. It is a partner of ours in servicing a large CPG customer that just recently passed the 100 million unit per year milestone of Watermark products, a figure which represents low single-digit percentages of the CPG's annual productions. Based on the expected ramp of adoption by the CPG, this partner should represent around $500,000 of ARR by year end on the watermarking side of our business, too, with more growth expected in 2023. While the combined $1 million per year ARR this partner would thus represent is, of course, great business, it is important to note it is also one of the largest companies in its space. The upselling and cross-selling we will be able to do via this partner as well as the many other channel partners we are in much earlier stages of monetizing, should keep our channel teams as busy as our direct teams will be. The fruit of a lot of hard, thoughtful work is coming together, and even before we officially transition this work to Hello World, we're already seeing signs of something we've constantly reminded each other as we've taken all the time necessary, but not a second more, to perfect our transformation. The world is waiting for our solutions. We are finishing up our combined Digimark brand integrity offering as we speak, and this product, along with select European engagements with Digimark Recycle, will be the beneficiary of our new company-wide focus on focus in Q2, as these two products will be the products the sales team will be focused on selling starting April 1st. Our newly combined sales team is nearing the end of its integration and organizational work in order to hit the ground running hard in Q2, and I can't wait to see the results. They will, of course, be supported by a lot of foundational inspired work from marketing, including a thorough messaging refresh, a website relaunch, and of course revamped and targeted collateral and campaigns, all of which we will be rolling out over the next few months. And these will just be the more obvious outputs as we near the conclusion of the internally heavy part of our transformation work and get ready to say hello world by actively reengaging as a company transformed in so many ways. Across the company, the work has been just as profound and just as amazing. I want to give a shout out to my 300 teammates whose work continues to be as inspired as it is inspirational. If it were easy to change the world, anyone could do it. It is time to ascend the mountain. There is one last point I want to cover before opening up the call to questions. And like previous calls, we will be taking any and all questions. You have all heard me say multiple times we expect you to do nothing but judge us on our results. A results-focused culture is necessary to truly impact profound change. And compensation is a key tool that allows companies to reinforce and reward the right performance and behaviors. And like everything, that starts at the top. So in a break from over 25 years of tradition, in the upcoming proxy you will notice a marked change to executive compensation at DigiMark. All executives will have a large percentage of their compensation at risk if we don't perform against the aggressive goals we have set for ourselves. but they will also enjoy an upside if we outperform. These targets measure a few different outputs over both a one and three-year period, but by far the two biggest drivers are ARR product subscription revenue and TSR as compared to a group of almost 200 software and services companies. This is a change from how things have been historically, and a bet the executive team is happily making, not just on the massive opportunity ahead of us, but on the 300-person team that will drive our company to crazy high heights. The question I am most often asked is, now that I've been CEO for 10 months, am I more excited or less excited than I was on the outside looking in? You will soon notice in the proxy I've chosen to put 100% of my compensation at risk, and if it pays out, I'm going to take 100% in stock. I, like the executive team, believe actions speak louder than words. But we also know an even more basic truth. Results speak loudest of all. We can't wait to show you all why we're so excited by what we've been up to. Hello, world. Holly, we're now ready for Q&A.

Thank you. Ladies and gentlemen, if you would like to ask a question, please press star then one on your telephone keypad. Once again, that is star one to join the question queue. And our first question is going to come from the line of Chris Grengo with Needham & Company.

Hey, Chris.

Hi.

Hi. Thanks and congrats on the results. Um, just on, on Holy grail too. Um, it was my understanding that, that phase two was going to wrap at the end of Q4. And then, uh, there was going to be, uh, an expansion into Germany with, uh, Tamra, the Tamra machine. Just wondering if you could provide any color on, on how the that's proceeding. And, and I think there's actually perhaps one more country as well that there was going to expand into, but, um, Just any additional highlights or color you could provide there would be great. Thank you.

I wish we could. As we mentioned before, Holy Grail 2 is not our trial. So if you go back to the Needham presentation, we tried to include as much publicly available information as we can. 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 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 know, um, you have to stay tuned for, for updates from, from the group themselves.

Okay. Thanks. And, uh, do you expect, um, incremental investment in OpEx in the near term to support, uh, the, the, the rollout of the brand integrity and recycle later, later this year?

Yeah. Again, I, I, I encourage you, you know, that, um, we did a, pretty big refresh of the needle conference. I would 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 out 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. Um, so I don't know if that answers your question, but, but yeah, we'll probably near term. And for the next two decades, we're going to be investing in our team.

Got it. Um, And on the brand integrity win with the CPG customer, what other technologies did they consider and what set DigiMark apart for that win?

Yeah, we have a unique offering, right? I mean, there aren't any other covert, invisible codes that can scale like we can. And again, this was just on a legacy DigiMark brand integrity offering, right? Now we're going to bundle this with the functionality we got for the product cloud from the everything acquisition, which is a whole other level of functionality and value, right? And legacy everything had brand integrity customers of their own where they were market agnostic, but using the back end of the product cloud. We're going to have, we already had a front end differentiator with the watermark. Now we're going to be able to bundle that with a differentiated product cloud. 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. I'm trying to not say this because I'm sure I'm going to get some grief tomorrow by saying this, but I don't think we have a wonderfully unique offering, and I guess the question is why people would consider other offerings.

Great. Thanks very much. I'll hop back in, too. Appreciate it.

Of course.

And our next question is going to come from the line of Harvey Mordkow, private investor.

Hey, Harvey.

Hi, Riley.

How are you doing? Good, yourself? Good, thank you. On the Everything transaction, how many shares did they get for their $50 million?

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

I believe it was $770,000. And it might understand that the 20,000 warrants.

I'm sorry, repeat that please.

And then there was also the 230,000 warrants. Okay.

And it might understand that the September 15 million may not occur.

It won't occur.

It will not. So that's a dead issue at this point. Okay. servicing.

Let me just let me just caveat that we have not we don't have the final numbers February 28 was a couple 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 but our best, our belief right now without having the time to, you know, to have a final audit on those numbers is no, there will not be a second payment.

Okay. Last time we spoke, income was 61% was from bank note counterfeiting, and 39% was from commercial sale, of which Walmart was 13%. Has Walmart's percentage gone up or down?

You've got to wait for our 10K, Harvey.

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

Where are you getting that number from?

One of your lists that are published. It showed all of your strategic partners, so I added them up in the

Yeah, I don't have a current list or a number for partners across the organization, Harvey.

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

Bob, do you want to – I assume Harvey's talking about PACOR. Correct. Thank you.

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

Okay, great. There have been three announcements.

Hey, Harvey, can you get back in the queue? That's a lot of questions. I just want to get it over to other people.

Yes, I'm sorry. I'm happy to get back in the queue. Thank you.

Thanks, Harvey.

And our next question will come from the line of Robin Knipp with Jannie Montgomery Scott.

Thanks. Riley, looking, and this is back at the end of math, so bear with me on this, but looking at cash balances at the end of September, we're at $52.5 million. At the end of the year, we're now at $41.6. So call it 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.

Yeah, well, you don't need to do the back of the envelope, right? Charles gave you some numbers about backing out one-time things from Q4 and what everything's going to do. But let's get to, I think, your bigger question, which is what are our options for cash? And it 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, and they haven't changed in the last couple of quarters.

Okay, and then 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?

Yeah, I mean, not 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'll give you a very small example. We sold 10 non-core patents. Now, a million dollars is not, you know, going to move the needle, right? But there's a lot of things at this company that have a lot of value. So Without getting into specifics, there are things being contemplated, but, you know, again, that hasn't changed the same answer for the last couple quarters, Robin.

Okay. Fair enough. Thanks.

Yep.

Once again, to come into the queue, press star 1. Our next question will come from Jeff Ben-Henry with Craig Hallam Capital.

Hey, guys. Aaron on for Jeff. A couple 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 know, 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?

Yeah, I mean, I told you what we're focused on for Q2, right, which is the brand integrity in Digimark Recycle. So that's what 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. 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 Digimark is doing different or what we're doing differently today than I think Legacy Digimark 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.

Fair enough. That's helpful. And then as far as pipeline, also gave some good commentary there, but seeing any synergistic effects so far as far as the pipeline of everything plus Digimark being greater than just those two individual components together?

Yeah, 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 customer's life easier, right? Because in essence, what we're going to do is do the integration work once so 1,000 customers don't need to do it themselves. And, you know, especially when also turning to the Digimark 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 if it was there on 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. I'm like, ah, it makes a lot of sense.

Helpful. And then the last one for me, and maybe this is a question for Charles, and I appreciate the Q1 kind of modeling inputs on everything, but any way to think about growth rate of everything throughout the fiscal year, and then is that margin profile kind of OPEX profile going to be sustainable throughout the year for everything?

Yeah, 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, yeah, I would expect that at our current level that we can support a fair amount of growth there. And, you know, 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.

Perfect. That's helpful. That's it for me, guys.

Thanks, Erin.

Thank you. And our next question is a follow-up from Harvey Morka, private investor.

Hi, again. What kind of patents did everything bring to the table? How many are we talking about?

I don't know the specific number. I think it was between patents and pending. It was low double digits to answer your question.

Yeah, 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 U.S. And Science Digest came out with something saying plastic labeling for a sustainability scale. Do you have anything to do with any of those three?

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

Okay. Thank you. Thanks, Harvey. You bet.

Thank you. And with that, I see no further questions. I would like to turn the call over to Riley McCormick for closing comments.

Well, thank you, everybody, for your time. Any questions, you know how to follow up with us. And until we speak again, thanks a lot.

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