Greetings, and welcome to the Digimarc Corporation Fourth Quarter Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Charles Beck, Chief Financial Officer. Please go ahead.

Welcome, everyone, to our Q4 earnings call. I am Charles Beck, Digimarc Corporation's CFO, and I am joined today by Riley McCormack, Digimarc Corporation's CEO. On the call today Riley will provide a business update and I will discuss Q4 2025 financial results. We 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. For those of you dialing in, this is a reminder that we are simulcasting the presentation we will walk through today. If you would like to follow along with the slides, I would encourage you to join our webcast as referenced in our earnings press release shared earlier today. Before we begin, let me remind everyone that today's discussion contains forward-looking statements that have risks and uncertainties. Please refer to our press release for more information on the specific risk factors that could cause actual results to differ materially. Riley will now provide a business update.

Thank you, Charles, and hello, everyone. On this call, we will walk through Digimarc Corporation's Q4 performance, highlight our strategic progress across product innovation and commercial execution, share updates on our financial metrics such as ARR and free cash flow, and provide clarity on where we are focused in 2026. Since our last call, we have made significant progress in advancing adoption of our secure gift card solution. Achieved a critical milestone by signing our first commercial order, and are laying the rails for future orders by advancing initial rollout plans with eight North American retailers, including four of the largest. You signed IP licensing agreements with two of the world's largest and most respected technology companies, providing validation of the relevance and value of our inventions by two companies widely regarded as leaders in the new era of AI. We secured an upsell with an existing customer to expand their use of our anti-counterfeiting solution to allow for the authentication of tax stamps, a new application for our solution. We added two new logos in the digital space, one a global consumer goods company and the other an AI-powered content generation company, demonstrating a business model or vertical does not impact the need for digital trust and integrity solutions. And we signed a deal with another major CPG to enable their participation in end-to-end market demonstrations of Digimarc Corporation Recycle in Germany, the second European country running a scale validation of our solution's real-world ability to create higher quality and quantity of plastic recyclate. We achieved both positive non-GAAP net income touching on our financial highlights in Q4 and positive free cash flow in the quarter, two milestones Digimarc Corporation has not achieved in over twelve years. We ended the year with just under $13 million of cash and…

Thank you, Riley. Ending ARR for Q4 was $13.7 million compared to $20 million for Q4 last year. The decrease reflects the loss of two large customer contracts outside of our focus areas, the $3,500,000 DRS contract in Q2 and the $3.1 million retailer contract that I stated on the last call would lapse in Q4. Excluding these two items, ARR grew $400,000 year over year. That growth, however, was largely muted by higher other customer churn and choosing to be strategically price aggressive on solutions outside of our focus areas. As I have stated previously, we expected higher churn as we sharpened our go-to-market focus. For 2026, we expect to deliver significant ARR growth, with contributions from all focus areas but the largest single driver being our secured gift card solution. On that front, our goal is to progress our targeted retailers and brands toward meaningful adoption for holiday 2026, which we would expect orders in summer and early fall. We also expect there to be continued ramp for the spring 2027 refresh cycle and beyond, which we would expect orders in late fall and early winter. Time is of the essence as we work to maximize holiday orders, and we are singularly focused on hitting the necessary deadlines to do exactly that. As we begin to penetrate the large opportunity ahead of us in the gift card space, we will be transparent with the percentage of our ARR generated from gift card orders. At least initially, we do not believe these deals will have our typical annual contract terms, but will instead have a shorter duration. As I alluded to earlier, the gift card market is characterized by the presence of two recurring orders that occur at least two times a year, if not more frequently, which provides…

Thank you, Charles. In the wake of the relentless acceleration of AI models and agents, a vacuum of trust and authenticity is being created. Trust is fast becoming the only currency that matters; the future will belong to companies that make that currency scalable. We believe Digimarc Corporation is ideally positioned to lead that charge. We are focused on delivering a future where humans and intelligent systems alike can verify what is real, protect what matters, and move forward with confidence. We are focused on filling the ever-expanding vacuum by positioning ourselves to deliver trust in every interaction spanning both the physical and digital worlds. We are building the trust layer for the modern world, a foundation that is needed more now than ever and is emerging as a significant opportunity we were created to lead. We are capitalizing on the convergence of key trends driving increased demand for our solutions, positioning ourselves as one of the select software companies to benefit from, not be a casualty of, the relentless advance of AI. We are advancing our secure gift card solution by aligning key industry partners as we progress toward widespread adoption of our solution. We signed our first commercial order and are advancing initial rollout plans with eight retailers, including four of the largest in North America. ARR from our anti-counterfeiting solution continues to grow, driven by customer upsells and new customer wins. We also continue to grow the universe of form factors to which our authentication solution is applicable, securing an upsell for tax stamps and entering print trials for tipping paper, which continues to grow our TAM. We believe our decision to prioritize the long-term opportunity in digital trust and integrity is paying off. We exceeded our conservative 2025 ARR assumptions in the space and look to accelerate our traction through 2026 as early results show the near-universal need for solutions in this greenfield area. We continue to be well positioned to address very large problems outside of our current focus areas when the markets are ripe. We signed IP licensing agreements with two of the world's largest and most respected technology companies, providing validation of the relevance and value of our inventions by two companies widely regarded as leaders in the new era of AI. We signed a deal with a major CPG to enable the participation in end-to-end market demonstrations of Digimarc Corporation Recycle in Germany, the second European country running a scaled validation of our solution's real-world impact. We achieved both positive non-GAAP net income and positive free cash flow in Q4 2025, two milestones Digimarc Corporation has not achieved in over twelve years. We expect to generate significant ARR growth in 2026. We will now open for questions. Paul will now open the call for questions.

Hello, Paul? Paul, can you hear us?

Apologies. There may be some technical difficulties here. We apologize, but it appears that there may be an issue on the tech side with our conference call service here.

So we are unable to reach anybody at the call center service. We think their service is down. We apologize for this technical difficulty. Obviously, any investors who want to reach out to Charles and me, please do so. Have a great rest of your day. Thanks.