Financial Data and Key Metrics Changes - Ending ARR for Q3 was $15.8 million compared to $18.7 million for Q3 last year, reflecting a decrease due to the DRS contract lapse [20] - Total revenue was $7.6 million, a decrease of $1.8 million, or 19%, from $9.4 million in Q3 last year [21] - Subscription revenue accounted for 60% of total revenue for the quarter, decreasing 13% from $5.3 million to $4.6 million [21] - Operating expenses were $12.8 million for the quarter, down $4.5 million, or 26%, from $17.3 million in Q3 last year [22] - Free cash flow usage was down from $7.3 million in Q3 last year to $3.1 million in Q3 this year, a decrease of 58% [24] Business Line Data and Key Metrics Changes - Significant progress was made in advancing the gift card solution and product authentication space, including upsell opportunities and a paid pilot with a major pharmaceutical company [4][14] - The company launched a new digitized security label solution to replace low-value holograms, enhancing product authentication capabilities [5][16] - The focus areas include retail loss prevention, product authentication, and digital authentication, with expectations for growth in these segments [6][19] Market Data and Key Metrics Changes - The global gift card industry is estimated to represent approximately $1 trillion of stored value, with increasing fraud impacting growth [8] - The company is positioned to help the gift card industry re-accelerate its growth by reducing fraud and improving marketing and merchandising [9] Company Strategy and Development Direction - The company aims to deliver positive free cash flow and positive non-GAAP net income in Q4 2025 while investing in growth areas [5][24] - The strategic focus is on scalable and repeatable business models, particularly in retail loss prevention and digital authentication [19] - The company is building a trust layer for the modern world, addressing the growing need for authenticity in both physical and digital interactions [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to re-accelerate ARR growth in 2026, driven by increased penetration of the gift card solution and growth in digital authentication [20] - The company remains focused on optimizing long-term potential rather than short-term revenue, particularly in the digital authentication space [17][31] Other Important Information - The company expects to rebuild its cash balance via operating cash flow throughout 2026 [24] - The reorganization has led to a meaningful reduction in operating expenses and cash usage [5][23] Q&A Session Summary Question: Update on Holy Grail - The company is progressing with recycling opportunities in Belgium and Germany, with Belgium being a full-country pilot [27] Question: Impact of retailer contract renegotiation - The company still maintains a relationship with the retailer, but the prior contract has led to a significant downsell [28] Question: Thoughts on California AI-related law - The law did not include digital watermarking language, and the company believes it does not go far enough in addressing trust and authenticity [29][30] Question: Ramp-up of retailers using Digimarc protected cards - The ramp-up will involve winning more partners, adding retailers, and expanding geographies [33] Question: Changes in Sales organization - There have been no personnel changes in the sales organization, and the team continues to move forward with their roles [34]