Good afternoon, and thank you for participating in today's conference call. Now, I will turn our call over to Bruce Davis, Chairman and CEO of Digimarc. Mr. Davis, please proceed.

Thank you and good afternoon. Welcome to our conference call. Charles Beck, our CFO, is with me. On the call today, we'll review Q2 financial results, discuss significant business developments and market conditions, and provide an update on execution of strategy. This webcast will be archived in the Investor Relations section of our website. Please note that during the course of this call, we will be making certain forward-looking statements, including those regarding revenue recognition matters, results of operations, investments, initiatives, and growth strategies. These statements are subject to many assumptions, risks, uncertainties, and changes in circumstances. Any assumptions we share about future performance represent a point-in-time estimate. Our actual results may vary materially from those expressed or implied by such statements. We expressly disclaim any obligation to revise or update any assumptions, projections, or other forward-looking statements to reflect events or circumstances that may arise after the date of this 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 our latest Form 10-Q we expect to file shortly. Charles will begin by commenting on the Q2 financial results. I’ll then discuss significant business developments, market conditions, and execution of strategy. Charles?

Thanks, Bruce. Good afternoon everyone. Total revenue for the quarter was $5.8 million, roughly flat with the $5.7 million of revenue in the second quarter of last year. Service and subscription revenues grew by $700,000, more than offsetting the $600,000 reduction in license revenue. Service revenue was up largely due to the timing and amount of program work. Subscription work was up largely due to increased Digimarc Discover and Barcode revenue. License revenue declined as expected, primarily due to the completion of the quarterly royalty payments from Verance during 2014. Gross margin was 58% for the quarter, 8 points lower than the second quarter of 2014, reflecting the impact of lower license revenue. Operating expenses were lower than Q2 of last year by $800,000, or 9%, primarily reflecting lower spending in research and development, partially offset by higher investment in sales and marketing as we shifted focus and execution of strategy to market development and delivery for Digimarc Discover and Barcode. Legal and third-party consulting costs were also lower year over year due to nonrecurring costs incurred in 2014. We are in the process of adding staff in sales, marketing, and operations to stimulate and respond to demand, which will lead to growth in operating expenses in these areas in the second half of the year. The operating loss of $4 million was $400,000 lower than last year. The net loss for the quarter, however, was higher at $4 million or $0.50 per diluted share, versus a net loss of $2.7 million or $0.38 per diluted share in the same quarter last year. The larger net loss was due to $1.8 million of nonrecurring income tax benefits recognized during the second quarter of 2014. Overall, financial results were in line with our expectations. As noted on our Q1 report, license revenues were down year over year due to the expiration of license payments from Nielsen and Verance. Growth in subscription revenue is not yet adequate to compensate for the decline in license revenue. The payments area of our business continues to perform well. While we suspect that some of the year over year growth is due to timing of program work, we nevertheless expect a good year in our payments business. Bookings for our Guardian antipiracy service are longer than anticipated in our annual operating plan, as noted in our last call, leading to a softening of the forecast for the full year for this area of our business. In response, we’ve taken steps to improve management of this area of the business. Digimarc Discover and Barcode are not yet generating material revenues. As we noted entering the year, we are intensely focused on efficient use of capital, avoiding nonessential spending, and focusing on selling what we have, both in the legacy and new areas of our business. The only material variance to this investment thesis is the expected shortfall in growth projections for Guardian that we noted previously. The balance sheet is in excellent shape, with roughly $34 million of cash and marketable securities and no debt. We did not raise any capital under the aftermarket offering during the quarter. 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.

Thanks, Charles. It’s been a pretty remarkable 2015 so far. We’ve made very good progress on our execution strategy for Digimarc Discover and Barcode, producing some extraordinary evidence of market interest and involvement. Before we get into a more detailed discussion of Discover and Barcode, let me briefly comment on other areas of our business. We lost confidence in the Guardian growth forecast after a detailed review near the end of Q1 and discussed on our last call the need for remedial action. Since then, we’ve developed and implemented a plan to improve management, business practices, and financial performance in that area of our business. The initial focus has been on improving variable costs of service delivery, and we’re carefully scrutinizing margin prospects for new business opportunities. Our goal is to get the cash flow run rate to breakeven or better within the next two or three quarters for this area of the business. We want the area to contribute, not consume capital. At this point, we think there’s a pretty good chance that Guardian can turn the corner without undue management distraction. Everything’s fine in the payments area. We have an approved budget from the central banks for next year. That should reflect historical financial trends in the growth of that business. And there’s no new IP licensing activity worth noting. Moving on to Digimarc Discover and Barcode, everyone’s probably aware by now of the consumer packaging proof of concept demonstration at the Emerging Trends conference in Arkansas, followed by favorable remarks in social media by Walmart’s CEO. We remain true to our legacy of being a discreet and trusted supplier built on 20 years of service at central banks, and respect our customers’ desire to manage messaging about our work together. Thus, we have nothing to add on the subject. Elsewhere in retail, production for Wegmans private label products has ramped significantly. I’m pleased to report that we have a second retailer who has begun pilot production. This is the same retailer I referenced in my last call as expressing intent to begin pilot production and integrate our software into their mobile app. A third retailer is in the process of selecting the initial group of products to begin encoding. Several brands are contemplating entering production to support various proof of concept studies. The supplier network for retailers and brands is developing nicely. Our existing partners are active in market development. We continue working with leading retail scanner vendors to implement our software in their imaging products and hope to have all the leading vendors showing product at, or before, the National Retail Federation show in January. Retail solutions supplier SAM Group joined our partner program during the quarter and has already participated in numerous meetings with prospective customers. The goals of our channel partner program are to put in place multiple sources of supply for all critical elements of infrastructure and amplify our sales and marketing via the client relations capabilities of these partners. The key elements of infrastructure for Digimarc Discover and Barcode are the registration of eligible media objects, the discovery of these objects by relevant computer interfaces, and the provision of applications based on that discovery. We anticipate several additional partners will join the program later this year. Expansion and elaboration of infrastructure via our channel partner program allows Digimarc to focus on our core competence in identification and discovery processes, consistent with our goal of making efficient use of working capital. Our market development focus remains on retailers and brands. However, the breadth of application of our transformative technology platform will become more obvious as the market continues to develop. We introduced the overarching concept of the barcode of everything in our communications during the quarter, seeking to communicate two profoundly important propositions. One, that whatever barcodes can do, we can do better, and two, that we can provide the functional equivalent of traditional barcodes in all media. The traditional barcode has a transformative effect on the global economy. We expect the Digimarc barcode to provide an efficient, reliable, scalable, and economical successor to the barcode, providing significant benefits to multiple industries. The Digimarc barcode is an essential ingredient in our patented, intuitive platform that efficiently combines discovery via Digimarc barcode with other discovery means, including traditional barcodes. Our work will continue to focus on our core competence in identification and discovery of media, the fruits of which we believe will enliven an application developer community to build expansive value on the platform. Many applications have been built on the foundation of our inventions over the years, including banknote counterfeit deterrence, authentication of government issued credentials, copyright protection for movies and digital images, television and radio audience measurement, broadcast monitoring, copyright protection for digital cinema and Blu-Ray movies, and mobile print to internet for publishing, for example. We expect a significant expansion of the application developer community going forward. In our market development for retail and brands, Datalogic led the way in improving scan performance at checkout. Other scanner vendors are incorporating our software. In the first half of this year, Shazam and Source Audio have demonstrated the ease with which application developers can integrate our plan into their service offerings. Availability of mobile engagement based on Digimarc Discover expanded dramatically during the quarter, with Shazam’s launch of visual Shazam-ing, less than six months after the announcement of our collaboration. They’re now actively marketing the new opportunities enabled by our platform to their clients. Source Audio launched a beta release of broadcast performance monitoring less than three months after the announcement of our collaboration. Many other applications are in the works, applications not explicitly contemplated in our articulation of strategy at the start of the year. As word is spreading among global brands about our innovations, we are witnessing an unfolding of appreciation for the broad potential relevance of Digimarc Barcode and Discover in supply chain management and customer engagement. Several proof of concept studies for applications, other than improving scanning rates at checkout and improving ease of consumer engagement are in the works. For instance, we have been cleared for production with a leading consumer brand for a manufacturing quality control study. We recently learned that another major brand has received budget approval for proof of concept work involving shelf compliance and field inventory management. General market conditions are favorable and getting better in all material respects. Enabling infrastructure continues to develop in a supportive manner. For example, industry analysts recently reported regarding handheld industrial scanners, that although the global handheld scanner market grew very little between 2013 and 2014, there was a sharp increase of 12% in camera based imager revenues, which made up for an identical decline in laser scanner sales, just as I had been hypothesizing in describing our strategy beginning a few years back. More importantly, the more we learn about the role of packaging labels in the modern supply chain and retail, the more confident we become that the needs of the modern marketplace are rapidly outstripping the historical model of static data, supported by the traditional barcode. There’s an ever-increasing demand for efficient and reliable access to dynamic data to deal with the nuances of complex packaging and label requirements, regulations, and consumer preferences. Our platform provides unprecedented performance and flexibility to meet these growing needs. There have been recent announcements of some remarkable advances in general market infrastructure that I believe bode well for Discover related to the direct-to-consumer sales models of Facebook, Google, Pinterest, and others. You’ll appreciate that our platform is designed to provide reliable and specific identification of all brand impressions in the modern mobile-centric shopper’s journey. Well, all the major social networks and search providers appear ready to put “buy” buttons everywhere. The buttons won’t work very well if the product the consumer thinks they’re buying is not the one they actually by. Digimarc Discover and Barcode gives the right product identification 100% of the time. We all understand that it will take time to encode a significant share of the market. In the meantime, no one should underestimate our capabilities in efficient multimodal identification of media. We anticipate significant product announcements along these lines later this year. We are investing in improvements to our web interfaces to customers, developers, and channel partners to accommodate growth and foster economies of scale. As we demonstrate that our patented platform can do everything a conventional barcode does, but more reliably, much faster, and with no human artifacts, we continue to build the sustainable competitive advantage embodied in our patent portfolio, in which we now have more than 850 issued patents and 400 pending, fed by significant ongoing investments in R&D and patent development. We’re very excited to have a retail veteran, Dick King, join our board of directors at this meeting. He augments our understanding of target markets, brings other wisdom to bear to help guide our growth, and serves as a voice of the customer in the boardroom. We’ll be participating in a number of financial market and trade events during the third quarter. We are presenting at the Needham Interconnect Conference at the Westin Grand Central Hotel in New York City on August 5 at 3:40 p.m., at the Canaccord Genuity Growth Conference in Boston on August 12 at 5 p.m., and at the Liolios Group annual Gateway Conference in San Francisco September 9 to 10. The time for the presentation at the Liolios conference has not been published yet. Hosting investment banks will be arranging one on ones on the days of the presentations. We’re also participating in a number of trade events in the coming months. The first includes a presentation and demonstration as a featured lunchtime speaker at MediaPost’s internet of things shopping conference in New York on August 6 at 1 p.m. We also intend to participate in the Shopper Marketing Expo in Minneapolis October 13 to 15. Our experience year to date is inspiring greater confidence in realization of our vision. There’s a great deal of potential that appears within reach, [flowing] from growing awareness of our potential relevance in various industries. We understand we must convert that awareness into adoption, leading to profitable growth and significant appreciation of value of our company. There’s obviously much more to be done to meet our goals for this year. However, we’re in great shape at midyear and look forward to bringing more evidence of progress to the public view as the year progresses. That’s it for our prepared remarks. Now we’ll open the call to questions.

[Operator instructions.] Our first question comes from Josh Nichols with B. Riley.

Now that I was looking at Shazam and that’s been enabled with watermarks, anything you could mention about the growth trajectory that you might see with additional Digimarc Barcode and Discover revenues that might come along with that in the near future?

Yeah, it’s a bit too early to tell, Josh. They launched five weeks ago, about five or six weeks ago, so we’re just getting up and running in terms of the customer activity. So I don’t think I have enough basis to give you an answer on that.

But scans are going a lot higher. You’re noticing a lot more reads from barcodes now that it’s accessible to such a wider, diverse population of users?

We’re seeing a lot of activity in terms of market development. And again if you think about timelines for delivery of campaigns and media, and they began their launch less than six weeks ago, again, I don’t know that we have reliable data to extrapolate from, but they’re engaged in a lot of activity.

And you mentioned that you’re looking to add a couple partners in the second half of this year, additional channel partners. Anything you could mention as far as the types of industries or space that you may be looking to add some partners that could add some value to the business, and scale?

You used the expression a couple. It’s actually more than that. But I’m not sure of the timing, so I’d prefer just to announce them when they become partners, as opposed to speculating when I’ll get them into the program. But I do expect there to be more prior to year-end. And they’re all consistent with the strategy. They’re all sort of filling in blanks on what I think of as friction in the marketplace. That is, having multiple sources of supply everywhere that matters, in order to give people greater access to the platform.

Our next question comes from Rob Stone with Cowen & Company.

I wanted to ask a question first on the planned increase in headcount and expenses in the second half of the year, if you could help us calibrate that a little bit?

As you know, we’ve been reading the market to try to be as efficient as we can in the use of working capital, and our read right now is that it warrants increased investment. How quickly that ramps is not yet entirely clear, but we do have a dozen or so open reqs posted on our website, for instance, as an indicator. And anyone that’s curious, you can go take a look at the composition. You’ll sort of see what we’re trying to get done. But it’s sales, marketing, and operations. We need a little help in R&D and engineering as well. And there are still some contingencies that will affect the pace at which we increase the spending, but I think you can be confident we will increase the rate of spending in the second half of the year over the first half of the year.

So can say roughly a quarterly run rate in dollars that you’re budgeting for that?

We don’t generally give detailed financial guidance, and we’d like to keep it that way. But we will be increasing the opex in the second half of the year.

My second is on retailers two and three that you mentioned. I wanted to make sure I was correctly understanding at what stage… I thought I heard one was going into production and the other was a pilot or something like that, but I wanted to make sure I got the details right in terms of what stage of barcode deployment each one is in, and how we might think about the timeline there.

Yeah, for some period of time, we will probably refer to every new client as in pilot production. The exception to that at this stage of market development is Wegmans. Wegmans is not in pilot production. They’re in real production. And so what I mean by pilot production is the retailer or brand says, let’s get started. We’ll try a few products or we’ll try X number of products, more than a few, but they’re not signing up to do all of their private label, or in the case of a brand, all of their products. They’re saying, let’s get started, let’s see how it goes, kind of thing. So that’s what I mean by pilot, whether an official label is applied or not.

So if they’re only going to do a few products, how would a retailer be able to measure that? Are they maybe setting aside a few things and trying a selected basket scanning speed or something like that?

It depends on whether it’s a retailer or a brand, and what their objective is. So in the case of a retailer, we have done some work on statistical models of the percentage of universe of products that would need to be encoded to provide a statistically reliable result. It depends on your experimental model, how complex you want to make it. And so if they’re doing retail scanner speed studies, it’s not two or three, but it might be 100 or two. And again, that doesn’t necessarily give you a large enough sample to do all the experiments you want to do, but it may be enough to do a basic study. In the case of a brand, there’s a legacy that we’ll need to overcome of campaign-centric thinking. So in the case of brands, they might begin with hey, I want to try a campaign for X, which might be one SKU or a range of SKUs of a single product, or a product line, or a new product launch. I would call all of those, in my conversations with you, pilots, whether they used the word or not. Alternatively, hey, I’m all in, I see this as the future. I want to get a discount by offering volume. I’m going to do all my products. So that I wouldn’t call a pilot. But it’s too early for people really to embrace that notion, generally, because the market proofs are not yet sufficient to warrant that kind of behavior by brands and retailers, generally. So they’re all going to start with, I’m gonna do X number of products.

So just to be clear, you’ve got two retailers in addition to Wegmans that are at the pilot stage, and it sounded like there were additional brand and other customers who are evaluating or maybe one step further out in the funnel. Is that fair?

I’ll try to be a bit more precise. There are two more retailers, one of whom is in production for a selected range of products. Another is choosing products to go into production, hopefully within the next couple of weeks, if everything keeps going the way it’s going. On the brand side, we have at least a handful of brands that appear to be ready to get going, and we have some of the materials already in house. They’re already in production. And I would say in the case of the brands, that there a bunch of things driving that interest. As I alluded to in my prepared remarks, we have one brand that’s doing manufacturing quality control proof of concept, and we have a proof of concept for field inventory management in shelf compliance, and we also have a marketing proof of concept underway. Those are all the brand activities. So one layer up from that, we have an absolute ton of discussions going on with brands and retailers who have not yet reached those stages.

I’m trying to picture in my mind how a watermark barcode is used for manufacturing quality control. Can you elaborate?

Yeah, I can. Actually, it’s a very big problem in manufacturing. Today, it’s addressed largely through machine vision techniques. Let’s use food for example, because that’s the easiest one. So, a food products manufacturer will change the recipe from time to time, and when they change the recipe, they have regulatory compliance issues, because they’re supposed to describe the ingredients on the label. Or they have to assure it doesn’t have certain ingredients like peanut oil. Or they’re running a special run of product for some kind of marketing campaign. Or they've decided to reduce the amount of product in the same package, from 8 ounces to 7.5 ounces. In all of those cases, it’s really important to get the right package with the right material, the right food. And so you might think that’s kind of easy. Well, if you’re running a thousand units a minute of packaging across the line, and you’ve got all kinds of material, both packaging material and food material, in your facility, it’s really dangerous to mix them wrong. And it happens more often than you want to believe. And so whereas the traditional robotics machine vision approach will reduce risk materially, perhaps as much as 98% to 99%, the use of our Digimarc Barcode can reduce it 100%, because we can always identify not only the entire package, but if the manufacturer wants to do it, the components of packaging. So we also make sure that the pieces fit together. So that’s the study. The study is whether we can sufficiently improve upon the legacy means of quality control to warrant the adoption of Digimarc Barcode just because of manufacturing quality control. Forget all the other benefits. And that’s, in fact, at the heart of the pricing model of our business, which is the $50 per code annual fee ensures a global unique identifier for a thing, and then all of the applications that are built on it do not result in any surcharge to Digimarc. They’re merely absorbed in the application layer by either custom development or by third-party development of applications that add value based on the code.

My next question is I was very intrigued when you talked about the buy buttons everywhere concept. It certainly seems to me that it would be more efficient pointing a smartphone at a package of laundry detergent in your pantry and say I need to order more of those than to have one of these IOT doodads hanging on the shelf that’s there, just so you can press the button for it. And you said a multimodal media product announcement later this year. I wonder if you could elaborate on that a little bit without feeling [unintelligible].

They’re somewhat separable. Let me address the buy button first. There’s some theories going around in the trades that I’ve been privy to that particularly what are called national brands, the global brands, have a pretty tough go of it in general as an industry. And they’re competing with private brands and they’re competing for business in the online and place based channels. And one concept that Facebook and Google began advancing just within the last quarter is who the hell cares who is in the middle of this thing? If you found a brand impression, and you wanted to buy it, and it shows up on your doorstep, you’re a happy camper, cutting out Amazon and Walmart. And it’s like whoa, okay, interesting thought, particularly as logistics becomes more sophisticated and computer systems become more sophisticated and auction models proliferate, and Amazon’s getting into the logistics business. You know, any old truck, including the U.S. Postal Service, could come up and unload your groceries at the front door someday, and you don’t really care whether there was a branded retailer in the middle of it. That’s direct-to-consumer marketing. That’s what those guys are getting excited about, and it’s really interesting, because of the proliferation and ubiquity of mobile devices and the ability to just find something, push the buy button, and it goes off into some big data processor and it spits out the least cost means of delivering it to you on the timetable you specify. So I think it’s going to be a part of retail. It’s going to be really interesting to see how it unfolds. I would expect a lot of the attention focused on it in the next year or so in particular, as those guys spread their wings a bit. The second thing that you mentioned, the multimodal recognition, some people think of as the watermarking guys. And I caution everyone against that all the time, but I believe we’ll be offering some proof that the caution was well founded pretty soon, hopefully later this year. That’s what I was referring to in my other remark. So it’s multimodal recognition. It’s not just Digimarc Barcode, but using other stuff more effectively than anyone has in the past.

Our next question is from Jeff Kessler from Imperial Capital.

You mentioned that by the end of this year or the beginning of next year, when NRF comes around, you expect all of the major scanner manufacturers to be integrated with you. That brings up the question with regard to the migration path that you’re going to take with them, and more importantly, beyond just the scanners, the entire support ecosystem that you are part of, how are you going to get them to migrate with you so that when you do start up at scale, all of these players are going to be starting up with you? Will those scanner guys be ready? Will the marketing? Obviously, will folks like Shazam and Source Audio be ready with regard to their interaction with the other parts of the support mechanisms that you’re going to need?

That’s a complicated question. I’ll try to give you a good answer to it. So, with respect to what I call industrial scanners or front of store operations, the reason they’ll do it is the customers tell them to do it. It’s not anything that we tell them. So when the customers tell them to adopt Digimarc Barcode software, they will. And then it will take some time for them to do the integration. I’ve been pointing out, we’ve had several successful, very quick integrations. They’ll just get quicker as we improve our interface to the development community. But one of the things that we try to make the brands understand is that they shouldn’t wait for the scanners. They should be there when the scanners arrive. And the supply chain for any product involves weeks or months of time for a replacement cycle. And so we’ve just had a few meetings in the last four or five business days where the prospects were getting it, they’re going, okay, we should get started right now, so that when the enabled scanners arrive, we’re ready to get the benefits. And so that’s the way the process should work. And again, we’re still educating the market. But there isn’t any cart and horse problem here, unless you believe it’s not happening. The time to enable the packages is now, and the sooner the brands adopt, whether it’s private brand or national brand, the technology, the sooner it can become part of the design process, which greatly simplifies everything, because the hardest work we do is the post-processing of an existing brand to create fidelity with the prior brand image and make the brand manager happy. So that’s a step we can skip if we’re in the design process. Now, with the central bank business, which is where we have already done everything I’m talking about doing in a government security context, bank notes are designed with Digimarc in mind now, and it’s a much different, easier, more effective process than post-processing a design or trying to make the brand owner happy. So with respect to consumer software, the mobile software, [unintelligible] a piece of cake to get it integrated. So there are no issues involved with adoption, other than choosing to adopt. Again, to the extent the brands adopt the technology, it gives more reason for the mobile application suppliers to adopt. And there we see leverage from stepping up and encoding. So the encoding should always precede the infrastructure enablement, unless you don’t think it’s going to happen, and at this point in time, I find basically no one who doesn’t think it’s going to happen. I haven’t yet heard anyone say it looks like a passing fancy, I don’t think it’s going to happen. So it’s really just a question of when everyone gets involved. And the resistance, as I put in my risk profiles, in all of my investor presentations, for the first year or so of market development, is inertia. I mean, that’s the competition. But it’s real. It takes a while to move the ships here. And we always need champions within organizations. And where we’ve made the most progress has been where there’s been a champion who’s willing to put extra time and effort into getting the organization to embrace this transformative technology. So I hope that answers your questions.

Yes. One other question, and that is you mentioned that you had 400 patents pending. Are any of those patents, can you describe any of those patents, in a general way, in which they are protective or critical to what you’ve just been talking about?

There’s too many of them for me to do that. It is in fact a portfolio that has an enduring strategic focus. I’ve been the boss for 18 years. It isn’t exactly like we just came upon this notion. So you could assume the intellectual property protects the strategy in every way possible, and we do all of our work internally with an IP group that had no turnover among the lawyers in the last 15 years. So we are intensely focused on building a sustainable competitive advantage in the strategy that we’re talking about. And you can find on our website links to all the issued patents and the patent office in the U.S. has a publication process. I think probably our published patents may be there as well. I haven’t looked in a while, so I’m not sure. But they’re easy to find. If they’re not there, you can find them elsewhere using Google patent search. So you can go have a browse if you like, but they cover every aspect of everything we’re doing, to the extent that the subject matter is claimable, subject matter under the patent law.

Our final question comes from Glenn Mattson with Ladenburg Thalmann.

Retailers two and three, would you be willing to perhaps say what size they are, if they’re top 50 retailers, anything along those lines?

No, all I can do is get in trouble if I do that, Glenn. I was trying to hint earlier in my script. And I hope all of you guys will respect this, that we’re a little company, and we’re dealing with very big companies, and they don’t expect us to be speaking for them. So we’re just going to let our customers talk about whatever they want to talk about, whenever they want to talk about it. We’ll be supportive.

And on the last topic that you kind of brushed on, the Facebook, Google, Pinterest as kind of other retail outlets, I guess have you had any discussions with any of these players? And if not, would you say as you look across the industry, are there any other reasonable solutions that you would theoretically compete against to become the solution provider for this application? Or you know, do you think this is something that fits to what you’re doing pretty well?

I don’t want to provide a lot more detail in those areas just yet, because I want to assure everyone that our organization is focused on the objectives we set at the beginning of the year, and that we’re not sort of getting ahead of ourselves, if you like. What I was pointing out here is boy, it looks really like a juicy opportunity. And you could assume that as part of the strategy… I think you understand from our conversations that my ambition is to have what we do be a routine function of all mobile devices. And so you would assume that must include those kind of guys at some point, in execution of strategy. So rest assured that we’re very cognizant of what they’re doing and how we might fit. Now, the competition, interestingly, varies depending on who you’re talking about. So the search guys, the competition is their legacy business model. So it’s a bit of a tough sell, trying to explain to them that we have a better way of doing things. And someone like Facebook, for instance, who doesn’t make a living off of search, might be a little more open to having a different approach. But you could imagine Google might say, hey, we do a great job of giving the right answer. But I would offer to everyone the obvious, glaring example of need, Amazon’s debacle last summer. So we do it the right way. We give the right answer, and we’re patient and persistent and skilled, and we’re going to get to the point where we can deliver what everyone needs. And hopefully, Amazon might find a way to work with us someday and help them to do a better job of what they clearly wanted to do, that they didn’t do a very good job of last year.

On the increased spend in opex in the second half, I guess last quarter you kind of walked that number down a little bit, and then now you’re taking it back up. In my mind, I view it as a good sign of increased activity and so I guess is the activity in the field that you’re seeing happening faster than you saw three months ago?

Yeah. We had a couple of publicly disclosed positive events in the quarter. Things are going very well in terms of execution of strategy, and I feel that we can justify the higher rate of investment. And in fact, doing so will improve both the timeliness and the odds of success. And so it’s a little bit of pedal to the metal here. Not to slam it all the way down, but I do feel like we can afford to invest more and that it’s a wise investment.

Can you say how far or how much Guardian fell in the quarter year over year?

We don’t give guidance by specific…

It’s not guidance, it’s historical.

You can imagine. We were projecting double digit growth in that business. Now we see it being more flat to marginal growth.

Right. I’m just wondering, was Guardian worse? Because you downticked it last quarter. Was it worse than you expected, or was it about in line?

Oh, from last quarter? Marginally worse from last quarter. The big change was last quarter.

And then can you also talk about the deferred revenue? It was flat or down a tick sequentially. Can you say what that was a result from?

Yeah, from 331. So we had four contracts that we entered into, so we booked and invoiced in Q4. And the decrease is basically the revenue recognition on those contracts. The revenue gets recognized ratably and so each quarter a portion of that deferred revenue falls off. And that’s partially offset by new bookings.

So that’s mostly related to Discover, then, right?

It’s not all Discover. There is some license revenue in there. One of the contracts is a license, three of them are subscription revenue products.

So theoretically, there may be a lull in between customer one and then some of these other guys that you intend to pick up on in the second half, and so that’s part of the downtick there?

That’s not unfair.

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

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