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Digimarc Corp (NASDAQ:DMRC)
Q3 2019 Earnings Call
Oct 30, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon CEO of Digimarc. Mr. Davis, please proceed.

Bruce Davis -- Chief Executive Officer and Chairman

Thank you. Good afternoon. Welcome to our conference call. Charles Beck, our CFO is with me. On the call today, we will review Q3 financial results, discuss significant business developments and market conditions and provide an update on execution of strategy. We have posted these prepared remarks in the Investor Relations section of our website and will archive this webcast there.

Please note that we may make certain forward-looking statements in this call, and in the prepared remarks we filed with the SEC and posted on our website under the heading Safe Harbor Statement, regarding revenue recognition matters, results of operations, investments, initiatives, perspectives on business partners, customers, 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. We are providing this information as we understand it was represented to us. We do not verify nor vouch for such information. All such statements and information are subject to many assumptions, risk, 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 statements or other information that we provide during this call to reflect events or circumstances that may arise after the date of the 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-Q that we'll file shortly. Any links included in our prepared remarks are provided for general information and context only. The content referenced is not incorporated by reference and you should not consider part of this presentation, we do not verify nor vouch for such information.

Charles will now comment on the financial results, then I will discuss significant business developments, market conditions and execution of strategy. Charles?

Charles Beck -- Chief Financial Officer and Treasurer

Thanks Bruce. Good afternoon, everyone. Q3 revenue increased 19% to $5.8 million from $4.9 million in the third quarter of last year. The increase was largely due to higher subscription revenue, which increased 48%, reflecting the impact of increased Discover and Barcode bookings over the past four quarters. Service revenue was up $200,000 during the quarter reflecting the timing of program work with the Central Banks. License revenue was essentially flat.

Discover and Barcode bookings during the third quarter were roughly 95% higher than Q3 last year, coming in at $1.1 million. We expect to continue to experience lumpiness in quarterly bookings due to natural variations in timing and provisions of contracts during early market development, and expansion into adjacencies.

Gross margin for the quarter was 67%, up from 61% last year, primarily reflecting the impact of higher subscription revenue. Operating expenses increased by 3% from Q3 last year, primarily reflecting the impact of routine annual compensation adjustments for our employees. We have kept headcount relatively flat over the last two years. We plan to make 15 to 20 new hires in the next six months to address growing demand and delivery requirements.

Net loss for Q3 was $7.8 million or $0.65 per diluted share, versus a net loss of $8.3 million or $0.73 per diluted share in the third quarter last year, reflecting higher revenues partially offset by higher expenses. We ended the quarter with $42.8 million in cash and investments. We did not raise any capital under our ATM program during the third quarter. There is $9.7 million remaining on the $30 million authorized under the ATM program. We will exercise customary care in determining the best course of action regarding the remainder of the authorization should a change in relevant circumstances warrant resumption of sales under the program.

We invested $7.1 million of working capital during Q3, which is at the lower end of the range of $7 million to $8 million we provided on our last call. During the quarter, we used $5.8 million of cash to fund operations and $500,000 for capital expenditures. We anticipate cash usage will be between $6 million to $7 million in the fourth quarter. Cash usage is expected to be lower than Q3 largely due to timing of vendor payments and customer receipts, which is consistent with our history.

We have some preliminary views of planning assumptions for 2020 to share. We expect service revenue to be modestly higher and to vary quarter-to-quarter based on timing of when services are performed, with a higher proportion of the work to occur in the first half of the year. We expect license revenue to be flat. Guardian revenue may trend down modestly as we continue to focus on maximizing contribution margin from this area of the business.

Discover and Barcode bookings are expected to grow significantly in 2020 from both direct sales and channel sales. Although we expect growth to continue, a wide range of potential outcomes is possible for this area of the business. We think the most likely outcome is continuing acceleration in bookings consistent with our momentum theory of market development. When and how much bookings will accelerate due to tipping points in the market remains hard to predict. The range of potential outcomes is largely a function of the nature and timing of key account developments and the effect of adoption by market leaders on the rest of the industry.

Given our assumptions about revenue composition, we expect margins will continue to expand, reflecting a higher concentration of Discover and Barcode revenue. We expect operating expenses to be up high single digits to low double digits, reflecting the 15 to 20 new headcount positions I previously mentioned, plus routine cost-of-living adjustments for our existing employees. For further discussion of our financial results, and risks and prospects for our business, please see our Form 10-Q that we expect to file shortly.

Bruce will now provide his comments on significant business developments, market conditions, and execution of strategy.

Bruce Davis -- Chief Executive Officer and Chairman

Thanks Charles. Before I dig into my remarks this quarter, I'd recommend everyone that you get a copy of the script from our website in the Investor section. There are a lot of footnotes that are I think interesting and helpful context. So with that said, our application developer community is blossoming.

It is important to keep in mind that we are a platform provider. I will give you a flavor of the expanding uses of the Platform today. Our strategy has been, and continues to be, enabling a large community of developers to invest their capital to build applications on our Platform. This strategy is intended to provide us with tremendous financial and operational leverage as we scale. We had a very busy quarter, with lots of progress in many application areas and in advancement with key customers and suppliers. There is a great deal of innovation happening at the application layer. We are working hard to support our developers.

The theme of today's report is emergence of the Platform. We made substantial progress during the quarter in delivery under our multi-year contract with Walmart to enhance fresh product labels and private brand packaging, and provide enabling infrastructure to enjoy the benefits of our Platform based on enhancement of these media. Details of the onramp to production for fresh product labels must remain confidential for the time being.

The private brand program anticipates enhancement of all Private Label Brands. It began with Food & Consumable categories, with plans to extend into General Merchandise. Walmart's packaging suppliers are adding hundreds of enhanced items into Walmart's supply chain monthly. We expect a large number of enhanced packages on the Walmart's shelves by the end of the year. Products from global brand suppliers are beginning to arrive in stores as well. All these initiatives converge on improving store operations and the customer experience. A recent Kantar study indicated that the keys to success are making it simpler to shop and more cost effective. Walmart stands to gain in both these dimensions of performance with our Platform, fostering its continuing improvement of the customer experience.

Along these lines Walmart recently announced they're launching a Scannable Toy Catalog this holiday season. This is the first time customers will be able to interact with Walmart's Toy Catalog by using their smartphones, shop products directly from the pages.

As Digimarc continues to grow our partnership with Walmart, we will find more innovative ways to help improve the shopping experience for their customers. We envision many more opportunities for collaboration. In support of this and other engagement opportunities, Walmart has updated their mobile scanning, using Digimarc Mobile SDK into their flagship app for both iOS and Android.

We have another important catalog customer rolling out with our Platform. NewPoint Media is the parent of some of the most recognizable real estate publications across the US and Canada, including Homes & Land magazine. All the home images in the magazine are enabled for easy identification by the Homes & Land mobile application, giving readers easy and immediate access to additional information about homes of interest and agents representing the properties. Success in these endeavors could open the door to bringing digital experiences to the Free-standing Insert market. US production of these inserts in mail and Sunday papers is nearly 200 billion pages per year, containing over $500 billion of notional value in coupons.

We are also making excellent progress in enhancing the private brand portfolio of a leading European retailer. As with Walmart, we are discussing other uses of our Platform to improve operations and customer experience. More generally, with respect to packaging, a rapidly increasing share of package enhancement is being done by suppliers. As this transition matures, it gives more time to internal experts for research and development, and training. We have conducted more than fifty trainings so far this year.

Research activities have included advancements in marker-coder, dry offset, metal decoration, plastic molds, vending machines, and fabrics. There is a flurry of activity in recycling. HolyGrail won two sustainability awards at the Fachpack conference in September, including overall winner. Organization of HolyGrail 2.0 is under way. The initiative is making excellent progress, with leadership reporting that more than 60 industry stakeholders will be participating, including 20 brands and more than 10 retailers. There is a video showing a presentation by the leader of the original Holy Grail project available on the web providing a detailed update on progress of his work.

Digimarc enhanced product was shown in more than ten exhibits at the recent K Show, the leading trade show for the plastics industry, with over 200,000 visitors from 165 countries. The HolyGrail project leaders, from P&G, TOMRA and Suez, gave their perspectives on how they believe digital watermarking can revolutionize recycling in a video interview at the show. The segment runs for 20 minutes and is available through a link provided in the script.

TOMRA hosted an open house during the show on October 22, that drew 140 attendees. Executives from TOMRA, P&G, Verstraete, and Digimarc welcomed guests and made presentations, followed by demonstrations of sorting using Digimarc-enhanced labels and substrates, showing sorting according to many important parameters, like food versus nonfood. The demonstrations went very well, generating many questions about the path to commercialization.

Increasing momentum is also evidenced by the growing participation of HG2.0 leadership.You can track these events on our website. We are having many interesting conversations with stakeholders about the management structures that we best serve the industry and facilitate rapid progress in mitigating the plastics crisis. I don't have a clear direction for you yet, but we continue to prefer a long-term business model i which is administrator overseas development of global standards, regulatory frameworks and license administration. In this model, we would supply access to our Platform and development testing compliance and consulting services much as we've been doing for the last 20 years to deter bank note counterfeits.

Leading consumer brands are announcing ambitious programs to improve the circular economy. P&G's sustainability initiative is known as Ambition 2030. Key goals include making all package recyclable or reusable, keeping packaging from oceans, advancing recycling solutions for Absorbent Hygiene Products, and reducing the use of virgin petroleum plastic. Pepsico recently announced their first Chief Sustainability Officer and issued its first ever green bond yesterday, seeking to raise $1 billion to finance green initiatives laid out by the company's 2018 sustainability report.

Many other consumer brands are creating similar initiatives. P&G's CEO leads the industrywide Alliance to End Plastic Waste, that has 30 member companies. Senator Udall and Representative Lowenthal issued a press release yesterday, updating their perspective on government's role in tackling the plastic waste crisis and reaffirming their intention to introduce what they call landmark legislation prior to year-end that will turn up the heat on industry. An early draft, circulated in July, included a provision that industry can apply for grants to improve research in the development of sustainable and safe alternative products, litter reduction, waste minimization, and advanced methods for recycling and reuse.

There are many encouraging signs that are motivating us to increase resource allocation to this market opportunity. We are actively exploring sources of funding for market development. In other developments, Microsoft recently added a retail area to the newly renovated Tech Center in Munich, Germany, featuring multiple demonstrations of the capabilities of our Platform. The center provides a differentiated executive touchpoint that illustrates thought leadership and innovation across Microsoft's eight priority industries through immersive experiences and storytelling. The engagements at the center are designed to spark inspired conversations, creative ideas and new opportunities for customer and partners to work with Microsoft as their trusted industry advisor in digital partner.

The Digimarc area features Digimarc Barcode for easy checkout, consumer engagement, inventory management and a streamlined package journey. We are supporting developers applying our Platform to manufacturing quality control, supply chain management, and food safety.

In manufacturing, we published a case study in September describing the results of field trials of improved manufacturing quality control of TMG using Digimarc Barcode. This underscores a significant problem revealed in a packaging world survey that found 80% of manufacturers will report a problem with mislabeling this year.

We are making progress on supply chain initiative with a major produce supplier. There are many serious industry problems in food safety and logistics we believe our Platform could mitigate, one sixth of all Americans are victimized by food, contaminate, the American food industry has a $55 billion safety problem. 20% of seafood is mislabeled predominantly to trick consumers. 382 food recalls were required in 2018 alone in the US.

After years of contemplation and development, it looks like mobile driver licenses are making their debut. Idemia, supplier of most of the driver license issuance systems in America has developed the mobile driver license that incorporates our software. Oklahoma's beta testing the program. We estimate the TAM for Digimarc for US driver licenses to exceed $10 million annually.

In the audio visual space, Akamai, provider of the most pervasive highly distributed content delivery network has added edge-based watermarking to its content distribution network from Nagra, Verimatrix and Irdeto, three leading providers of watermarking services. Nagra and Verimatrix are Digimarc licensees. Akamai's watermarking solution provides a robust content security solution addressing significant piracy risk in the media and entertainment industry.

I noticed announcement, not so much for its immediate economic significance, but more as continuing evidence of the broadening relevance of our innovations. The long-term potential may be significant. We are seeing innovation in other areas as well. The Adobe Max conference is happening next week in Los Angeles. You may have noticed our Dress Up Your Design theme for the show highlighted on our website homepage. We, and several of our partners will showcase applications of our Platform for increasingly technology-centric textile and materials design community, the applications will span multiple media types, including sports and fashion apparel connected designs, supporting consumer and enterprise customers.

According to the IDC, the smart clothing market is predicted to surpass $4 billion in revenues by 2024. Please keep in mind that our model is for Digimarc to focus on increasing access to our platform for developers. Our job number one is to continue to improve the means to develop software and business processes to put data into all forms of media and efficiently and reliable extract the data. This is an unprecedented innovation that we believe will transform the landscape for auto identification into ubiquity, supporting applications benefiting many aspects of the global economy.

Environmental, social and governance factors are increasingly affecting investment decisions. ESG investing is estimated at $20 trillion under management. Higher ESG rated companies are being viewed as likely to generate higher profitability than lower-rated firms in the long term. Our relevance to ESG investors is becoming more obvious, as our Platform is used to reduce manufacturing defects, and plastics and food waste.

Northland Capital initiated coverage recently with a focus on these areas of our business. We are committed to sustainability in product offerings and corporate operations, and ever-more mindful of the likelihood that algorithmic investors like Blackrock and Vanguard, may have scoring mechanisms keyed to these metrics. We are implementing strategies to improve our positioning on this factor with active and passive investors.

Awareness of Digimarc has risen to high levels. Interest is strong. We are working our way up the IT priorities with retailers. Many CPGs are now engaged across the range of relevant applications in manufacturing, retail store operations, and recycling. The industry has still not gotten their arms around the Holy Grail, their words, not mine. No, it's not the recycling one of consumer engagement. We are not the lynch pin for that. The industry needs to deliver predictable high quality responses to scanning and a universal call to action.

The supply chain is becoming more receptive as we move to scale production with industry leaders. They should now begin to assume more responsibility for application development and maintenance, and system integration. We are evolving our organization to better serve them, tracking our significant progress in execution of strategy and concomitant market development. Our mission is to improve and expand basic functioning of the Platform and the quality of our support for these suppliers. This transition contemplated in our strategy, is key to effective globalization.

Our European customer is the seminal case study for such expansion, even though in one of the initial geographical focus areas. We are working with a supplier and retailer on potential adoption in a remote geography. In another market, we got a nice shout out from the Association of Vietnam Retailers. The beauty in our financial model is the operational and financial leverage of engaging and supporting these suppliers and other developers.

In terms of key takeaways, Q3 bookings were up 95% over last year. Revenues were up nearly 20% from the same quarter a year ago. Subscription revenue was up 50%. The bottom line improved by 7%. Cash usage was at the lower end of the projected range. Our business with Walmart has already expanded beyond the contract announced in April. The broad utility of our Platform is becoming more obvious as applications are being introduced across a wide range of media. Some recent examples include a second demonstration of Digimarc-enhanced plastic materials sorting that occurred in October with more product samples, 42 from 10 suppliers before a larger audience of 140 people.

Two high volume print publications adopted our Platform to facilitate e-commerce. Enhanced sports and fashion apparel will be showcased at Adobe Max. Akamai has integrated three watermarking suppliers into their content distribution network security architecture. Oklahoma began issuing mobile driver licenses that use our Platform for authentication.

Our end user focus is on earning the trust and respect to Walmart, facilitating enterprise wide adoption of our Platform and in the process spinning up massive capabilities in their supply chain. We have more openness to collaboration from suppliers than ever before. We have had a successful demonstration of our sorting capabilities in October, Holy Grail won two major awards and Holy Grail 2 formation is progressing very well.

We do our best to keep you all well-informed, not everything that is noteworthy is properly communicated via press releases. We recommend that you sign up for the Digimarc and Digest newsletter which features a monthly roundup of Digimarc news along with blog, articles, videos, partner highlights and other industry topics. If you haven't signed up for the newsletter yet, the link in the script will allow you to do that. You can also keep up with the Digimarc on social media, again a link is provided in the script.

You can read in the October newsletter from a link in the script, for recycling specific news, we've created a separate section on our website where you can find the latest information about our progress in that market. We welcome your suggestions about how to continue to foster greater transparency an in-depth understanding of our progress.

That's it for our prepared remarks and now we'll open the call to questions.

Questions and Answers:

Operator

Thank you, sir. [Operator Instructions] Our first question is from the line of Robin Knipp with Janney Montgomery.

Robin Knipp -- Janney Montgomery -- Analyst

Thanks very much for taking my question. Bruce, on the video from the case show you -- that you linked in the transcript, Gian De Belder from Procter & Gamble talked about the fact that they plan on announcing the new leadership Group for Holy Grail 2 sometime around Christmas time I think. How far behind -- after that, would you guys be able to talk about finalized pricing model and potential upfront payment from the Group to get you guys more involved or might that happen around the same time, and I just have one follow-up after that.

Bruce Davis -- Chief Executive Officer and Chairman

Okay. Thanks for the question. We are exploring a lot of different possibilities for financing our involvement and unfortunately I can't give you a timetable nor a clear outcome from that. I can only tell you that we're very vigorously pursuing strategies for financing involving lots of different opportunities. It's not linked specifically to the formation of the Group necessarily, although, as you know, that could be a source of funding or a source of organization of funding sources. So we're very supportive of the Holy Grail 2.0 leadership and their development, but there are a lot of moving parts right now. There is really been a flurry of activity. This year has been quite amazing and so we're hoping that it all aggregates into a conservative action as promptly as possible and then leadership has given their estimation of when they think they can get that done.

Robin Knipp -- Janney Montgomery -- Analyst

Okay, great. And just as a quick follow-up. On the same video, Gian De Belder talks about launching an in-country trial and it sounds like that would happen sometime in early Q4 2020. Assuming that we're using a three-meter scanner that basically takes care of gating issues, and works as well as the 1.5 meter scanner does now, and the trial is hopefully pretty quick. Does that mean you should be in a position to start signing recycling deals as early as -- early 2021?

Bruce Davis -- Chief Executive Officer and Chairman

Well, first, as we say in our safe harbor at the front of the script in all of our filings, we don't vouch for what others say. So Gian and the others have their plan in their prerogative and they're free to say what they like. So I'm not going to really comment on his view and I can see the same thing there.

With respect to commercialization, the primary goals of Holy Grail 2.0 include not becoming path to commercialization and I have outlined a couple of times of things that we think are involved in that. And so we're trying to up our resource allocation, so that we won't be on the critical path. So we're ready to go as fast as the industry wants to go and and there is again, this enormous hue and cry and everyone announcing programs and people raise the money and the Federal government say and they'll have some money with it. There's money out there, we just got to go find it. And we are determined to do so.

Robin Knipp -- Janney Montgomery -- Analyst

Very good. Thanks for the answer. Appreciate it.

Bruce Davis -- Chief Executive Officer and Chairman

You bet.

Operator

[Operator Instructions] And we do have a question from the line of Jeff Van Rhee with Craig-Hallum.

Jeff Van Rhee -- Craig-Hallum -- Analyst

Great. Thanks for taking my question. Bruce a couple from me. A lot of opportunities, a lot of directions, the Platform obviously has, I don't know if I'd say infinite but almost infinite potential use cases. If you boil it down in the pipeline, can you just talk to me about the funnel and how you see your revenue funnel and what are the top items in that funnel? I mean, I think prior questions from Robin was just talking about recycling, but you talked a lot about -- certainly you got a lot of things in there. What does the funnel look like at this point?

Bruce Davis -- Chief Executive Officer and Chairman

Yes. So our focus Jeff, remains on the primary investment thesis of retail and CPG, and packaging and thermal labels and there, we don't have a good surrogate that we might have in another market. So for instance in driver license Idemia, is the right supplier and primary supplier in that marketplace. And then that Adobe Max will be showcasing provider of embellishments for sports merchandise, it was an excellent supplier in that marketplace and we'll be taking the lead.

In the retail space, because of the success we've had in garnering opportunity at Walmart, we will continue substantial investment there. And so the pipeline and the funnel that we invest in heavily will focus there. The point of the developments that are are percolating everywhere here is that we are providing a Platform, it's -- I think of it like an operating system and it's meant to facilitate the development of lots of applications. We don't need to be involved in all of them and we don't want to be involved in all of them, we want to facilitate APIs that allow people to do those things.

And so when we're looking forward at the upside opportunities of revenues and the funnel, we will be having those kinds of things emerging as upside. You might think about surprises, we wouldn't, but they're difficult to project because we are not directly involved in the customer relationships where it's just there to receive income and occasionally provide support. So no change in the basic focus and user focus of our work right now. And again, over time we would like to be able to receive it the background. So I mentioned in my remarks that for the first time and by a substantial margin the suppliers are doing more enhancement than us, and that is the strategy. But as that continues to evolve, we should see acceleration in production and nice upside in our revenues, but we will not be on the front line in those engagements as we are today with some of the existing retailers. So I hope that's helpful.

Jeff Van Rhee -- Craig-Hallum -- Analyst

Is the -- the previous quarter, I think you commented that you were engaged with 12 retailers, I think on thermal at that point in time. How has that changed since your last set of comments?

Bruce Davis -- Chief Executive Officer and Chairman

I don't recall the specific number from the last call. But we're trying to not get as much engaged in pilots. We have many of them I think we have about 25 total pilots, not all of them are thermal. But we're focused instead, given that we've had enough pilots in my view, and certainly we're not interested in doing proof of concept anymore. We're trying to expedite movement to production in order to facilitate a more rapid increase in our revenues. And in order to bring the benefits to the customer quicker. So as everybody becomes more capable, and so suppliers become more capable, the timeline to volume should shorten. And so I would suggest it did not focus too much on pilots, but more on our customer acquisition and we'll try to do a better job of getting customers to confess to doing business with us earlier if we can.

But in the case of our European retailer who is well into production, they skipped the pilot phase altogether. And so I view that there is a necessary gate that we go through in market development. But we're at a stage now where we're recommending that wherever we can that those either be step on the way to production where they're doing a limited rollout. So I think of a more like a limited rollout, pilot implies they're trying it because they don't know if they like it or not we're hopeful past that with our value arguments to retailers.

Jeff Van Rhee -- Craig-Hallum -- Analyst

Okay and then with respect to the heads, I think you said 15 to 20 heads. What are you adding, where they are going to be within the business?

Bruce Davis -- Chief Executive Officer and Chairman

A lot of them are in development and delivery systems. So as the use of the platform expands, it's important for us to provide very high quality service to what we call a developer community, which are those suppliers typically more than the end users. And the suppliers are in the enhancement of media and the detection of Digimarc Barcode, those are the two classes of suppliers, if you like.

And so we expect that to grow significantly during 2020. And so most of the headcount changes are intended to support that development of the business.

Jeff Van Rhee -- Craig-Hallum -- Analyst

And I guess just lastly, it's sort of to the higher level seen if you will, in the script, I think you wanted -- you had the tag line, I don't see it here exactly, but essentially the emergence of the Platform, right. Why now why that theme and why now?

Bruce Davis -- Chief Executive Officer and Chairman

Well, you and I have talked about that and I talked about that with many of our shareholders that when we started the commercialization of the Platform, people thought we were in checkout business or made the consumer engagement business and I kept trying to tell everybody that we are trying to facilitate such things that we're necessarily doing some of the primary of the pump or the early work in the direct connection to customers on that. Sort of counting packages wasn't necessarily going to be the right measure.

What we've seen this year, particularly in Q3, is as I referred to in the blossoming of the platform that driver licenses, CDMs, payroll, all of these things are happening. We're not getting into those businesses. We're not in those businesses. They're using our Platform. And that's why often the expression of the emergence of platforms its like, are you guys, starting to get it now. Do you understand what I've been saying? This is -- the strategy is for us to build a platform of unprecedented value by being able to put a structured data into all forms of media and take it out again. And that then is the foundation of many modern concepts of growth of the IT industry, which I won't chronicle in answering the question here. But that's what I hope everyone we're starting to see, and that's what I thought was the most important, sort of theme of the quarter as I can organize my thoughts about the kinds of things to highlight for our shareholders.

Jeff Van Rhee -- Craig-Hallum -- Analyst

Got it. And then I guess just one last comment, I think you touched on the ATM you revisit under certain circumstances. When it does and doesn't makes sense to use it and then obviously prior quarter I mean, you had a little more emphasis on strategic and potentially strategic funding. Just any updated thoughts from a capital market standpoint about balancing ATM and other sources of capital tighter tie-ups some potential things that you're working on, maybe even just a sense of if you've shifted one direction or another since last conversations?

Bruce Davis -- Chief Executive Officer and Chairman

In our last call, we said that -- we had to put it on hold for a while and it wasn't merely pursuing strategic financing, but it was a much of circumstances that I didn't detail. And so the ATM is a wonderful vehicle, it is available and we've used it quite effectively and so we will continue to evaluate circumstances and use it when we think it's in the best interest of the shareholders. Obviously there's plenty of opportunity for investment in the system we find ourselves in now. And so we're -- in terms of the general financing picture, pursuing financing specifically in the recycling area because, we think that we could do much more work there to facilitate more rapid progress. And then in general our balance sheets in good shape and our cash usage in this past quarter was modest in relation to the range that we proposed. And so the ATM is just one of those opportunities for great and more working capital.

Jeff Van Rhee -- Craig-Hallum -- Analyst

Okay. Last one from me. Last quarter you called that you had added two new customers within the bookings number, but you wanted Liberty to talk about it, you would probably be able to talk about before year end, any ability to circle back and give a little more framework around who those two customers were or broadly what the use cases where?

Bruce Davis -- Chief Executive Officer and Chairman

I think without getting too specific, they are encompassed within the long list of developments in the quarter here. So, the contracts are in the general application areas outlined in the script.

Jeff Van Rhee -- Craig-Hallum -- Analyst

Okay. All right, great. Thank you.

Operator

[Operator Instructions] Your next question is from the line of Jeff Bernstein with Cowen.

Jeffrey Bernstein -- Cowen Inc. -- Analyst

Hey, Bruce, I had a few questions in no particular order. There was an article in the journal about the impact on the shopping experience of, I guess Pickers doing picking for curbside pickup in hurry in stores, they talked about the Whole Foods, but actually they also mentioned Wegmans as being impacted by having sort of Pickers filling up the isles. Is Digimarc Barcode having an impact on improving the ability of these folks to do their jobs or what's going on at Wegmans right now?

Bruce Davis -- Chief Executive Officer and Chairman

Well, I don't want to talk specifically about Wegmans figures, but I can say that generally Digimarc Barcode for packaging facilitates identification work for everybody, including store associates, customers and robots, and that all of the major retailers everywhere in the world are seeking to improve simultaneously the shopping experience on the store operations efficiency. And so in order to improve store operations efficiency and customer convenience lived up, store associates are doing things that didn't used to do before in the aisles and some of the larger retailers or robots wondering around. Well, all of that can contradict the ambition of having a great customer experience, if they get them the way of customers. So the mitigation of the tension is efficiency, getting more efficient makes all of that stuff the most tolerable it can be, because the stores also kind of move faster, the robots can be more effective and the consumers can actually do direct assessment products and even purchasing more effectively. So we think we're a really important element of the mix of what appears to be the future of physical retail that you just described.

Jeffrey Bernstein -- Cowen Inc. -- Analyst

Okay, that's great. Can you talk about Japan and what's going on there in terms of the group of retailers who I guess are of value and packaging companies that are evaluating technology?

Bruce Davis -- Chief Executive Officer and Chairman

Yeah, I didn't put Japan in the script this time because I had so much other stuff to go through and yet, we're actually making more progress in Japan than I thought we could with a very limited resources. So we have a number of programs ongoing there and we still have great support from the Group over there, but as I complained in the last couple of quarterly calls here, I feel serious resource constrained with respect to serving them better that frustrates me.

So there is some R&D going on over there. There are some limited deployments with some retailers. There is some innovation going on like into the motions embodied in the theme of this quarter or outside of those areas, and so I'm still trying to find the means to better serve our customers and supplier partners over there, but we are making progress.

Jeffrey Bernstein -- Cowen Inc. -- Analyst

Okay, great. And then you mentioned with regard to the Adobe Max show, apparel connected designs and I'm wondering if is the aim there for essentially personalized apparel, you take a picture of someone and it essentially their Facebook page or is it about recycling of textiles or both?

Bruce Davis -- Chief Executive Officer and Chairman

Both. Both and more. So there will be two exhibits there, both involving suppliers. And one will be sports jerseys, and the other will be fashion dress. And the applications range from consumer engagement that is the ability to see what indicate a particular and all of this in [Indecipherable] at some level in terms of the fashion piece of it. With respect to the jerseys, it would be able to engage the consumers -- all of the consumers the fans through the jerseys themselves to whatever benefits the teams and the players want to deliver to them. So it just becomes a beacon if you like a marketing beacon for the fans to engage in real-time with their favorite teams and players.

In the fashion side of things, our focus is on the supply chain. But the supply chain goes all the way through the emerging trend of resale of fashion and authentication. And so as people are now looking for ways to garner more value in the fashion supply chain, authentication is important so that someone seeing a particular fashion item could get exactly that items if they wanted to. Someone seeking to buy through a resale legitimate item can have comfort that it's authentic and not counterfeit. The -- all of the materials can be linked back to their source in the growing concern about where things come from.

And then if you need to do a repair of some kind of fix, again you might have the trail back through the supply chain, into the appropriate resources. So it is addressing the -- what appears to be a growing trend toward infusing technology into fashion, but the range of applications is anticipated to be quite broad. So we're going to show some things there, some ideas if you like. But it's an emerging market place. We're demonstrating there again for the application developer community. Hey, if you want to have structured data in all kinds of fabric, all kinds of apparel and other fabric products we can deliver. So get in touch. We'll be happy to license our Platform there.

Jeffrey Bernstein -- Cowen Inc. -- Analyst

Got you. And lastly, you had a press release out with bury plastics, talking about the Holy Grail efforts, but is there anything more that you can say about how you're working with them and how they're working with customers?

Bruce Davis -- Chief Executive Officer and Chairman

I don't think so, Berry [Phonetic] is a marvelous company, with much world-class plastics supplier and so they are quite concerned as everyone knows about the Circular Economy, but they're also a great partner in other areas. So they're working with us in packaging more generally, and there are many things we think we can do with them. So as those things emerge, most likely to emerge from them. And that's again for investors and analysts to appreciate that. I expect more news to come from third parties if you like, what I call end users or customers and suppliers, than from us. And it doesn't really make sense for us to reamplified through a press release and that's why signing up for all of our content we'll be happy to put everyone in the mailing list, you'll get a much better continuity and understanding of the business by those sources than you will be waiting for us to put out a press release on that.

So Berry's as already, as you have seen taking the lead on talking about what they're doing. We would expect them to continue to do that. And so they will provide news on us, but we won't be again necessarily putting out a press release to talk about it.

Jeffrey Bernstein -- Cowen Inc. -- Analyst

Okay, thanks for the help.

Operator

Your next question comes from Robin Knipp with Janney Montgomery.

Robin Knipp -- Janney Montgomery -- Analyst

Thanks for taking the follow-up. Just wanted to know if there was any update you can give us on the progress of your strategic that we've been talking about for a couple of quarters.

Bruce Davis -- Chief Executive Officer and Chairman

No, it's still not something confine that means comfortable news to talk about. We have engaged with lots of companies in discussions so far. But I'm trying to characterize them is not appropriate in so many ways including affecting negotiations and so forth. So we -- I continue to think it's a very good idea for us at the stage of development, and my thesis is that we don't want to have to build, what others have, but they have to be wanting to deploy it for our benefit on reasonable terms for it all to make sense, and I'm putting an investment requirement on that because we have very large and growing number of companies that we're doing business with, and I want to have some special relationships with those who have resources that I want deployed on our behalf.

So the notion of investment is to provide working capital for us. But most importantly to get them to have skin in the game. So, and you know, also I think that I don't want a single investor, I'm trying to coordinate multiple investors, which makes us much more complicated than trying to find one. So that's about all I think I can do in terms of update as of this date for you.

Robin Knipp -- Janney Montgomery -- Analyst

That's fair. Thanks. And just as a follow-up, what role do you see GS1 is having as Digimarc grows and its end markets and various applications?

Bruce Davis -- Chief Executive Officer and Chairman

We maintain an excellent relationships with the two largest GS1 number organizations, US and Germany. And they -- we adhere to their standards whenever they're available. One of the emerging opportunities for collaboration is in plastics recycling where the standards are not yet established. And so we're having lots of conversations and better ones with them about, OK, what kind of information do we put into the payloads in the Circular Economy. So they're great partners for that. They by their nature don't drive the business per se. They're not the marketing organization. They, however, are a very trusted supplier of integrity for data structures. So they are a key to the effective deployment of our data carrier in these new markets, in my view. I don't want us trying to figure out what they're experts in. And I'm very happy to have them on the team, so that they know what we're trying to do, what people are expecting us to do and their offering both advice and initiatives where appropriate to get those things squared away.

Robin Knipp -- Janney Montgomery -- Analyst

That's great, thanks for the clarification, Bruce.

Bruce Davis -- Chief Executive Officer and Chairman

Yes.

Operator

At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Bruce Davis. Sir, please proceed.

Bruce Davis -- Chief Executive Officer and Chairman

All right. Great. Thanks very much everyone for participating today. We appreciate your continuing support and look forward to talking to you again. I guess the next opportunity for us will be when we present at the Needham Conference, and I'm presuming that will be webcast hopefully. And then we'll have our next earnings call in February. So thanks very much.

Operator

[Operator Closing Remarks]

Duration: 49 minutes

Call participants:

Bruce Davis -- Chief Executive Officer and Chairman

Charles Beck -- Chief Financial Officer and Treasurer

Robin Knipp -- Janney Montgomery -- Analyst

Jeff Van Rhee -- Craig-Hallum -- Analyst

Jeffrey Bernstein -- Cowen Inc. -- Analyst

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