Annual Recurring Revenue(1) Increases
85%
Subscription Gross Profit Margin(2) Expands
to 87%
Digimarc Corporation reported financial results for the first
quarter ended March 31, 2024.
“Q1 was another strong quarter for Digimarc. Compared to the
first quarter of 2023, we grew quarter-ending Annual Recurring
Revenue (ARR) 85%, grew commercial subscription revenue 52%, and
expanded subscription gross profit margin 7.5 percentage points to
87.0%,” said Digimarc CEO Riley McCormack. “We are focused on
positioning ourselves to convert our large Total Addressable Market
(TAM) into substantial free cash flow by delivering high and
long-lasting growth at world class operating margins. Q1 provided
multiple tangible examples of our progress against this focus.”
First Quarter Financial Results
Subscription revenue for the first quarter of 2024 increased to
$5.8 million compared to $3.9 million for the first quarter of
2023, primarily reflecting higher subscription revenue from new and
existing commercial contracts.
Service revenue for the first quarter of 2024 increased to $4.2
million compared to $4.0 million for the first quarter of 2023,
primarily reflecting the timing of government program work.
Total revenue for the first quarter of 2024 increased to $9.9
million compared to $7.8 million for the first quarter of 2023.
Gross profit margin for the first quarter of 2024 increased to
63% compared to 54% for the first quarter of 2023. Excluding
amortization expense on acquired intangible assets, subscription
gross profit margin increased to 87% from 80% while service gross
profit margin slightly decreased to 56% from 57% for the first
quarter of 2024 compared to the first quarter of 2023.
Non-GAAP gross profit margin for the first quarter of 2024
increased to 78% compared to 73% for the first quarter of 2023.
Operating expenses for the first quarter of 2024 decreased to
$17.1 million compared to $19.0 million for the first quarter of
2023.
Non-GAAP operating expenses for the first quarter of 2024
decreased to $13.8 million compared to $15.5 million for the first
quarter of 2023.
Net loss for the first quarter of 2024 was $10.3 million or
($0.50) per share compared to $14.0 million or ($0.70) per share
for the first quarter of 2023.
Non-GAAP net loss for the first quarter of 2024 was $5.5 million
or ($0.27) per share compared to $9.0 million or ($0.45) per share
for the first quarter of 2023.
At March 31, 2024, cash, cash equivalents and marketable
securities totaled $48.9 million compared to $27.2 million at
December 31, 2023.
_______________
(1) Annual Recurring Revenue (ARR) is a
company performance metric calculated as the aggregation of
annualized subscription fees from all of our commercial contracts
as of the measurement date.
(2) Subscription Gross Profit Margin
excludes amortization expense on acquired intangible assets.
Conference Call
Digimarc will hold a conference call today (Thursday, May 2,
2024) to discuss these financial results and to provide a business
update. CEO Riley McCormack, CFO Charles Beck and CLO George
Karamanos will host the call starting at 5:00 p.m. Eastern time
(2:00 p.m. Pacific time). A question and answer session will follow
management’s prepared remarks.
The conference call will be broadcast live and available for
replay here and in the investor section of the company’s website.
The conference call script will also be posted to the company’s
website shortly before the call.
For those who wish to call in via telephone to ask a question,
please dial the number below at least five minutes before the
scheduled start time:
Toll Free number: 877-407-0832
International number: 201-689-8433
Conference ID number: 13743902
About Digimarc
Digimarc Corporation (NASDAQ: DMRC) is the pioneer and global
leader in digital watermarking technologies. For nearly 30 years,
Digimarc innovations and intellectual property in digital
watermarking have been deployed at a massive scale for the
identification and the authentication of physical and digital
items. A notable example is our partnership with a consortium of
the world’s central banks to deter counterfeiting of global
currency. Digimarc is also instrumental in supporting global
industry standards efforts spanning both the physical and digital
worlds. In 2023, Digimarc was named to the Fortune 2023 Change the
World list and honored as a 2023 Fast Company World Changing Ideas
finalist. Learn more at Digimarc.com.
Forward-Looking Statements
Except for historical information contained in this release, the
matters described in this release contain various “forward-looking
statements.” These forward-looking statements include statements
identified by terminology such as “will,” “should,” “expects,”
“estimates,” “predicts” and “continue” or other derivations of
these or other comparable terms. These forward-looking statements
are statements of management’s opinion and are subject to various
assumptions, risks, uncertainties and changes in circumstances.
Actual results may vary materially from those expressed or implied
from the statements in this release as a result of changes in
economic, business and regulatory factors. More detailed
information about risk factors that may affect actual results are
outlined in the company’s Form 10-K for the year ended December 31,
2023, and in subsequent periodic reports filed with the SEC.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management’s opinions
only as of the date of this release. Except as required by law,
Digimarc undertakes no obligation to publicly update or revise any
forward-looking statements to reflect events or circumstances that
may arise after the date of this release.
Non-GAAP Financial Measures
This release contains the following non-GAAP financial measures:
Non-GAAP gross profit, Non-GAAP gross profit margin, Non-GAAP
operating expenses, Non-GAAP net loss, and Non-GAAP loss per share
(diluted). See below for a reconciliation of each non-GAAP
financial measure to the most directly comparable GAAP financial
measure. These non-GAAP financial measures are an important measure
of our operating performance because they allow management,
investors and analysts to evaluate and assess our core operating
results from period-to-period after removing non-cash and
non-recurring activities that affect comparability. Our management
uses these non-GAAP financial measures in evaluating its financial
and operational decision making and as a means to evaluate
period-to-period comparisons.
Digimarc believes that providing these non-GAAP financial
measures, together with the reconciliation to GAAP, helps
management and investors make comparisons between us and other
companies. In making any comparisons to other companies, investors
need to be aware that companies use different non-GAAP measures to
evaluate their financial performance. Investors should pay close
attention to the specific definition being used and to the
reconciliation between such measures and the corresponding GAAP
measures provided by each company under applicable SEC rules. These
non-GAAP financial measures are not measurements of financial
performance or liquidity under GAAP. In order to facilitate a clear
understanding of its consolidated historical operating results,
investors should examine Digimarc’s non-GAAP financial measures in
conjunction with its historical GAAP financial information, and
investors should not consider non-GAAP financial measures in
isolation or as substitutes for performance measures calculated in
accordance with GAAP. Non-GAAP financial measures should be viewed
as supplemental to, and should not be considered as alternatives
to, GAAP financial measures. Non-GAAP financial measures may not be
indicative of the historical operating results of the Company nor
are they intended to be predictive of potential future results.
Digimarc Corporation
Consolidated Income Statement
Information
(in thousands, except per
share amounts)
(Unaudited)
Three Months Ended March
31,
2024
2023
Revenue:
Subscription
$
5,762
$
3,885
Service
4,176
3,958
Total revenue
9,938
7,843
Cost of revenue:
Subscription (1)
747
795
Service (1)
1,839
1,715
Amortization expense on acquired
intangible assets
1,140
1,089
Total cost of revenue
3,726
3,599
Gross profit
Subscription (1)
5,015
3,090
Service (1)
2,337
2,243
Amortization expense on acquired
intangible assets
(1,140
)
(1,089
)
Total gross profit
6,212
4,244
Gross profit margin:
Subscription (1)
87
%
80
%
Service (1)
56
%
57
%
Total
63
%
54
%
Operating expenses:
Sales and marketing
5,536
6,298
Research, development and engineering
6,741
7,826
General and administrative
4,520
4,627
Amortization expense on acquired
intangible assets
272
260
Total operating expenses
17,069
19,011
Operating loss
(10,857
)
(14,767
)
Other income, net
528
745
Loss before income taxes
(10,329
)
(14,022
)
Provision for income taxes
(9
)
(18
)
Net loss
$
(10,338
)
$
(14,040
)
Loss per share:
Loss per share — basic
$
(0.50
)
$
(0.70
)
Loss per share — diluted
$
(0.50
)
$
(0.70
)
Weighted average shares outstanding —
basic
20,730
20,093
Weighted average shares outstanding —
diluted
20,730
20,093
______________
(1) Cost of revenue, Gross profit and
Gross profit margin for Subscription and Service excludes
amortization expense on acquired intangible assets.
Digimarc Corporation
Reconciliation of GAAP to
Non-GAAP Financial Measures
(in thousands, except per
share amounts)
(Unaudited)
Three Months Ended March
31,
2024
2023
GAAP gross profit
$
6,212
$
4,244
Amortization of acquired intangible
assets
1,140
1,089
Amortization and write-off of other
intangible assets
138
144
Stock-based compensation
253
238
Non-GAAP gross profit
$
7,743
$
5,715
Non-GAAP gross profit margin
78
%
73
%
GAAP operating expenses
$
17,069
$
19,011
Depreciation and write-off of property and
equipment
(193
)
(428
)
Amortization of acquired intangible
assets
(272
)
(260
)
Amortization and write-off of other
intangible assets
(133
)
(39
)
Amortization of lease right of use assets
under operating leases
(87
)
(166
)
Stock-based compensation
(2,578
)
(2,638
)
Non-GAAP operating expenses
$
13,806
$
15,480
GAAP net loss
$
(10,338
)
$
(14,040
)
Total adjustments to gross profit
1,531
1,471
Total adjustments to operating
expenses
3,263
3,531
Non-GAAP net loss
$
(5,544
)
$
(9,038
)
GAAP loss per share (diluted)
$
(0.50
)
$
(0.70
)
Non-GAAP net loss
$
(5,544
)
$
(9,038
)
Non-GAAP loss per share (diluted)
$
(0.27
)
$
(0.45
)
Digimarc Corporation
Consolidated Balance Sheet
Information
(in thousands)
(Unaudited)
March 31,
December 31,
2024
2023
ASSETS
Current assets:
Cash and cash equivalents (1)
$
36,414
$
21,456
Marketable securities (1)
12,511
5,726
Trade accounts receivable, net
5,215
5,813
Other current assets
3,802
4,085
Total current assets
57,942
37,080
Property and equipment, net
1,445
1,570
Intangibles, net
26,720
28,458
Goodwill
8,576
8,641
Lease right of use assets
3,930
4,017
Other assets
1,106
786
Total assets
$
99,719
$
80,552
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:
Accounts payable and other accrued
liabilities
$
4,100
$
6,672
Deferred revenue
5,256
5,853
Total current liabilities
9,356
12,525
Long-term lease liabilities
5,812
5,994
Other long-term liabilities
80
106
Total liabilities
15,248
18,625
Shareholders’ equity:
Preferred stock
50
50
Common stock
21
20
Additional paid-in capital
409,473
376,189
Accumulated deficit
(322,106
)
(311,768
)
Accumulated other comprehensive loss
(2,967
)
(2,564
)
Total shareholders’ equity
84,471
61,927
Total liabilities and shareholders’
equity
$
99,719
$
80,552
_______________
(1) Aggregate cash, cash equivalents, and
marketable securities was $48.9 million and $27.2 million at March
31, 2024 and December 31, 2023, respectively.
Digimarc Corporation
Consolidated Cash Flow
Information
(in thousands)
(Unaudited)
Three Months Ended March
31,
2024
2023
Cash flows from operating activities:
Net loss
$
(10,338
)
$
(14,040
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and write-off of property and
equipment
193
428
Amortization of acquired intangible
assets
1,412
1,349
Amortization and write-off of other
intangible assets
271
183
Amortization of lease right of use assets
under operating leases
87
166
Stock-based compensation
2,831
2,876
Decrease in allowance for doubtful
accounts
(17
)
—
Changes in operating assets and
liabilities:
Trade accounts receivable
600
631
Other current assets
273
1,766
Other assets
(323
)
(191
)
Accounts payable and other accrued
liabilities
(2,624
)
(910
)
Deferred revenue
(600
)
(925
)
Lease liability and other long-term
liabilities
(187
)
(77
)
Net cash provided by (used in) operating
activities
(8,422
)
(8,744
)
Cash flows from investing activities:
Purchase of property and equipment
(106
)
(51
)
Capitalized patent costs
(106
)
(112
)
Proceeds from maturities of marketable
securities
3,501
10,247
Purchases of marketable securities
(10,320
)
(1,975
)
Net cash provided by (used in) investing
activities
(7,031
)
8,109
Cash flows from financing activities:
Issuance of common stock, net of issuance
costs
32,218
—
Purchase of common stock
(1,781
)
(656
)
Repayment of loans
(15
)
(26
)
Net cash provided by (used in) financing
activities
30,422
(682
)
Effect of exchange rate on cash
(11
)
20
Net increase (decrease) in cash and cash
equivalents (2)
$
14,958
$
(1,297
)
Cash, cash equivalents and marketable
securities at beginning of period
27,182
52,542
Cash, cash equivalents and marketable
securities at end of period
48,925
43,025
(2) Net increase (decrease) in cash, cash
equivalents and marketable securities
$
21,743
$
(9,517
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240502576461/en/
Charles Beck Chief Financial Officer Charles.Beck@digimarc.com
+1 503-469-4721
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