Annual Recurring Revenue(1) Increases
44%
Subscription Gross Profit Margin(2) Expands
to 89%
Digimarc Corporation (NASDAQ: DMRC) reported financial results
for the second quarter ended June 30, 2024.
“Digimarc made significant progress on multiple fronts in Q2,
highlighted by three exciting developments likely to have a
profound impact on the second half of this year and beyond,” said
Digimarc CEO Riley McCormack. “This progress provides further
evidence that we believe Digimarc will not only unlock the massive
total addressable markets (‘TAMs’) on which we are focused today,
but also that new TAMs can develop incredibly rapidly based on our
ability to identify and authenticate physical and digital assets
where other means of identification and authentication don’t work
well, or don’t work at all.”
Second Quarter Financial Results
Annual recurring revenue(1) as of June 30, 2024 increased to
$23.9 million compared to $16.7 million as of June 30, 2023.
Subscription revenue for the second quarter of 2024 increased to
$6.4 million compared to $4.7 million for the second quarter of
2023, primarily reflecting higher subscription revenue from new and
existing commercial contracts.
Service revenue for the second quarter of 2024 decreased to $4.0
million compared to $4.1 million for the second quarter of 2023,
primarily reflecting lower service revenue from commercial
customers.
Total revenue for the second quarter of 2024 increased to $10.4
million compared to $8.7 million for the second quarter of
2023.
Gross profit margin for the second quarter of 2024 increased to
66% compared to 56% for the second quarter of 2023. Excluding
amortization expense on acquired intangible assets, subscription
gross profit margin increased to 89% from 84% and service gross
profit margin increased to 58% from 51% for the second quarter of
2024 compared to the second quarter of 2023.
Non-GAAP gross profit margin for the second quarter of 2024
increased to 80% compared to 74% for the second quarter of
2023.
Operating expenses for the second quarter of 2024 increased to
$16.8 million compared to $16.1 million for the second quarter of
2023.
Non-GAAP operating expenses for the second quarter of 2024
increased to $14.0 million compared to $12.9 million for the second
quarter of 2023.
Net loss for the second quarter of 2024 was $9.3 million or
($0.43) per share compared to $10.6 million or ($0.53) per share
for the second quarter of 2023.
Non-GAAP net loss for the second quarter of 2024 was $5.0
million or ($0.23) per share compared to $5.8 million or ($0.29)
per share for the second quarter of 2023.
At June 30, 2024, cash, cash equivalents and marketable
securities totaled $41.5 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 (Tuesday, August 13,
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: 13743903
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 June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Revenue:
Subscription
$
6,380
$
4,678
$
12,142
$
8,563
Service
3,999
4,052
8,175
8,010
Total revenue
10,379
8,730
20,317
16,573
Cost of revenue:
Subscription (1)
723
771
1,470
1,566
Service (1)
1,661
1,968
3,500
3,683
Amortization expense on acquired
intangible assets
1,132
1,122
2,272
2,211
Total cost of revenue
3,516
3,861
7,242
7,460
Gross profit
Subscription (1)
5,657
3,907
10,672
6,997
Service (1)
2,338
2,084
4,675
4,327
Amortization expense on acquired
intangible assets
(1,132
)
(1,122
)
(2,272
)
(2,211
)
Total gross profit
6,863
4,869
13,075
9,113
Gross profit margin:
Subscription (1)
89
%
84
%
88
%
82
%
Service (1)
58
%
51
%
57
%
54
%
Total
66
%
56
%
64
%
55
%
Operating expenses:
Sales and marketing
5,616
5,106
11,152
11,404
Research, development and engineering
6,644
6,161
13,385
13,987
General and administrative
4,314
4,352
8,834
8,979
Amortization expense on acquired
intangible assets
271
268
543
528
Impairment of lease right of use assets
and leasehold improvements
—
250
—
250
Total operating expenses
16,845
16,137
33,914
35,148
Operating loss
(9,982
)
(11,268
)
(20,839
)
(26,035
)
Other income, net
723
647
1,251
1,392
Loss before income taxes
(9,259
)
(10,621
)
(19,588
)
(24,643
)
Provision for income taxes
(11
)
(2
)
(20
)
(20
)
Net loss
$
(9,270
)
$
(10,623
)
$
(19,608
)
$
(24,663
)
Loss per share:
Loss per share — basic
$
(0.43
)
$
(0.53
)
$
(0.93
)
$
(1.23
)
Loss per share — diluted
$
(0.43
)
$
(0.53
)
$
(0.93
)
$
(1.23
)
Weighted average shares outstanding —
basic
21,392
20,162
21,061
20,128
Weighted average shares outstanding —
diluted
21,392
20,162
21,061
20,128
_______________
(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 June
30,
Six Months Ended June
30,
2024
2023
2024
2023
GAAP gross profit
$
6,863
$
4,869
$
13,075
$
9,113
Amortization of acquired intangible
assets
1,132
1,122
2,272
2,211
Amortization and write-off of other
intangible assets
136
146
274
290
Stock-based compensation
156
318
409
556
Non-GAAP gross profit
$
8,287
$
6,455
$
16,030
$
12,170
Non-GAAP gross profit margin
80
%
74
%
79
%
73
%
GAAP operating expenses
$
16,845
$
16,137
$
33,914
$
35,148
Depreciation and write-off of property and
equipment
(198
)
(260
)
(391
)
(688
)
Amortization of acquired intangible
assets
(271
)
(268
)
(543
)
(528
)
Amortization and write-off of other
intangible assets
(31
)
(9
)
(164
)
(48
)
Amortization of lease right of use assets
under operating leases
(86
)
(166
)
(173
)
(332
)
Stock-based compensation
(2,250
)
(2,260
)
(4,828
)
(4,898
)
Impairment of lease right of use assets
and leasehold improvements
—
(250
)
—
(250
)
Non-GAAP operating expenses
$
14,009
$
12,924
$
27,815
$
28,404
GAAP net loss
$
(9,270
)
$
(10,623
)
$
(19,608
)
$
(24,663
)
Total adjustments to gross profit
1,424
1,586
2,955
3,057
Total adjustments to operating
expenses
2,836
3,213
6,099
6,744
Non-GAAP net loss
$
(5,010
)
$
(5,824
)
$
(10,554
)
$
(14,862
)
GAAP loss per share (diluted)
$
(0.43
)
$
(0.53
)
$
(0.93
)
$
(1.23
)
Non-GAAP net loss
$
(5,010
)
$
(5,824
)
$
(10,554
)
$
(14,862
)
Non-GAAP loss per share (diluted)
$
(0.23
)
$
(0.29
)
$
(0.50
)
$
(0.74
)
Digimarc Corporation
Consolidated Balance Sheet
Information
(in thousands)
(Unaudited)
June 30,
December 31,
2024
2023
ASSETS
Current assets:
Cash and cash equivalents (1)
$
30,598
$
21,456
Marketable securities (1)
10,863
5,726
Trade accounts receivable, net
8,071
5,813
Other current assets
3,649
4,085
Total current assets
53,181
37,080
Property and equipment, net
1,259
1,570
Intangibles, net
25,261
28,458
Goodwill
8,587
8,641
Lease right of use assets
3,844
4,017
Other assets
1,238
786
Total assets
$
93,370
$
80,552
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:
Accounts payable and other accrued
liabilities
$
5,689
$
6,672
Deferred revenue
4,806
5,853
Total current liabilities
10,495
12,525
Long-term lease liabilities
5,617
5,994
Other long-term liabilities
90
106
Total liabilities
16,202
18,625
Shareholders’ equity:
Preferred stock
50
50
Common stock
21
20
Additional paid-in capital
411,331
376,189
Accumulated deficit
(331,376
)
(311,768
)
Accumulated other comprehensive loss
(2,858
)
(2,564
)
Total shareholders’ equity
77,168
61,927
Total liabilities and shareholders’
equity
$
93,370
$
80,552
_______________
(1) Aggregate cash, cash equivalents, and
marketable securities was $41.5 million and $27.2 million at June
30, 2024 and December 31, 2023, respectively.
Digimarc Corporation
Consolidated Cash Flow
Information
(in thousands)
(Unaudited)
Six Months Ended June
30,
2024
2023
Cash flows from operating activities:
Net loss
$
(19,608
)
$
(24,663
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and write-off of property and
equipment
391
688
Amortization of acquired intangible
assets
2,815
2,739
Amortization and write-off of other
intangible assets
438
338
Amortization of lease right of use assets
under operating leases
173
332
Stock-based compensation
5,237
5,454
Impairment of lease right of use assets
and leasehold improvements
—
250
Decrease in allowance for doubtful
accounts
(17
)
—
Changes in operating assets and
liabilities:
Trade accounts receivable
(2,236
)
(6,492
)
Other current assets
426
1,827
Other assets
(456
)
(268
)
Accounts payable and other accrued
liabilities
(992
)
(839
)
Deferred revenue
(1,037
)
4,106
Lease liability and other long-term
liabilities
(386
)
38
Net cash provided by (used in) operating
activities
(15,252
)
(16,490
)
Cash flows from investing activities:
Purchase of property and equipment
(132
)
(121
)
Capitalized patent costs
(196
)
(198
)
Proceeds from maturities of marketable
securities
9,623
19,984
Purchases of marketable securities
(14,753
)
(8,664
)
Net cash provided by (used in) investing
activities
(5,458
)
11,001
Cash flows from financing activities:
Issuance of common stock, net of issuance
costs
32,218
—
Purchase of common stock
(2,332
)
(1,280
)
Repayment of loans
(18
)
(16
)
Net cash provided by (used in) financing
activities
29,868
(1,296
)
Effect of exchange rate on cash
(16
)
12
Net increase (decrease) in cash and cash
equivalents (2)
$
9,142
$
(6,773
)
Cash, cash equivalents and marketable
securities at beginning of period
27,182
52,542
Cash, cash equivalents and marketable
securities at end of period
41,461
34,542
(2) Net (decrease) increase in cash, cash
equivalents and marketable securities
$
14,279
$
(18,000
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240813180867/en/
Company Contact: Charles Beck Chief Financial Officer
Charles.Beck@digimarc.com +1 503-469-4721
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