Announces Path to Positive Free Cash Flow
Digimarc Corporation (NASDAQ: DMRC) reported financial results
for the fourth quarter and fiscal year ended December 31, 2024.
“Digital watermarks excel at the identification and
authentication of physical goods and digital assets. Recent
invention and market development have opened exciting near-term
opportunities for us, concentrated around our authentication use
cases. In response, we are prioritizing our authentication
Go-To-Market efforts for the time being,” said Riley McCormack,
Digimarc CEO. “To ensure we fully capitalize on the opportunities
immediately in front of us, we have reorganized the company to
reflect this near-term focus. We expect these efforts will allow us
to achieve positive non-GAAP net income no later than the Fourth
Quarter of 2025 and set us up to deliver meaningfully positive free
cash flow in Fiscal Year 2026 and beyond.”
Fourth Quarter 2024 Financial Results
Annual recurring revenue (ARR)(1) as of December 31, 2024
decreased to $20.0 million compared to $22.3 million as of December
31, 2023. The $2.3 million decrease primarily reflects a $5.8
million decrease in ARR due to the expiration of a commercial
contract in June 2024, partially offset by an increase in ARR from
new and existing commercial contracts.
Subscription revenue for the fourth quarter of 2024 decreased to
$5.0 million compared to $5.6 million for the fourth quarter of
2023, primarily reflecting the expiration of a commercial contract
in June 2024, partially offset by higher subscription revenue from
new and existing commercial contracts.
Service revenue for the fourth quarter of 2024 decreased to $3.6
million compared to $3.7 million for the fourth quarter of 2023,
primarily reflecting $0.4 million of lower government service
revenue, partially offset by $0.3 million of higher service revenue
from HolyGrail 2.0 recycling projects.
Total revenue for the fourth quarter of 2024 decreased to $8.7
million compared to $9.3 million for the fourth quarter of
2023.
Gross profit margin for the fourth quarter of 2024 decreased to
61% compared to 63% for the fourth quarter of 2023. Excluding
amortization expense on acquired intangible assets, subscription
gross profit margin for the fourth quarter of 2024 decreased to 85%
from 87% for the fourth quarter of 2023, while service gross profit
margin for the fourth quarter of 2024 increased to 59% from 56% for
the fourth quarter of 2023.
Non-GAAP gross profit margin for the fourth quarter of 2024
decreased to 77% compared to 79% for the fourth quarter of
2023.
Operating expenses for the fourth quarter of 2024 decreased to
$14.4 million compared to $16.8 million for the fourth quarter of
2023, primarily reflecting lower cash compensation costs of $1.1
million and lower stock compensation costs of $0.8 million.
Non-GAAP operating expenses for the fourth quarter of 2024
decreased to $11.9 million compared to $13.4 million for the fourth
quarter of 2023.
Net loss for the fourth quarter of 2024 was $8.6 million or
($0.40) per share compared to $10.6 million or ($0.52) per share
for the fourth quarter of 2023.
Non-GAAP net loss for the fourth quarter of 2024 was $4.7
million or ($0.22) per share compared to $5.6 million or ($0.28)
per share for the fourth quarter of 2023.
Fiscal Year 2024 Financial Results
Subscription revenue for fiscal year 2024 increased to $22.4
million compared to $19.0 million for fiscal year 2023, primarily
reflecting higher subscription revenue from new and existing
commercial contracts, partially offset by the expiration of a
commercial contract in June 2024.
Service revenue for fiscal year 2024 increased to $16.0 million
compared to $15.9 million for fiscal year 2023, primarily
reflecting $0.6 million of higher service revenue from HolyGrail
2.0 recycling projects, partially offset by $0.4 million of lower
other commercial service revenue and $0.2 million of lower
government service revenue.
Total revenue for fiscal year 2024 increased to $38.4 million
compared to $34.9 million for fiscal year 2023.
Gross profit margin for fiscal year 2024 increased to 63%
compared to 58% for fiscal year 2023. Excluding amortization
expense on acquired intangible assets, subscription gross profit
margin for fiscal year 2024 increased to 87% from 84% for fiscal
year 2023, while service gross profit margin for fiscal year 2024
increased to 59% from 54% for fiscal year 2023.
Non-GAAP gross profit margin for the fiscal year 2024 increased
to 78% compared to 76% for fiscal year 2023.
Operating expenses for fiscal year 2024 decreased to $65.5
million compared to $68.4 million for fiscal year 2023, primarily
reflecting lower cash compensation costs of $1.5 million, lower
stock compensation costs of $0.7 million, lower depreciation and
amortization costs of $0.5 million, and lower lease impairment
costs of $0.3 million, partially offset by $0.5 million of higher
professional services and consulting costs.
Non-GAAP operating expenses for fiscal year 2024 decreased to
$53.8 million compared to $55.0 million for fiscal year 2023.
Net loss for fiscal year 2024 was $39.0 million or ($1.83) per
share compared to a net loss of $46.0 million or ($2.26) per share
for fiscal year 2023.
Non-GAAP net loss for fiscal year 2024 was $21.4 million or
($1.01) per share compared to a net loss of $26.4 million or
($1.30) per share for fiscal year 2023.
At December 31, 2024, cash, cash equivalents, and marketable
securities totaled $28.7 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.
Conference Call
Digimarc will hold a conference call today (Wednesday, February
26, 2025) 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: 13748469
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, and include, among others,
statements regarding the impact of business restructuring and cost
control initiatives and the estimated amounts and timing of
anticipated cost reductions. 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, including, without
limitation, the terms and timing of anticipated contract renewals.
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, Non-GAAP loss per share
(diluted), and free cash flow. 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
Twelve Months Ended
December 31,
December 31,
2024
2023
2024
2023
Revenue:
Subscription
$
5,024
$
5,599
$
22,418
$
18,973
Service
3,634
3,685
16,000
15,878
Total revenue
8,658
9,284
38,418
34,851
Cost of revenue:
Subscription (1)
754
711
2,959
2,975
Service (1)
1,490
1,631
6,628
7,252
Amortization expense on acquired
intangible assets
1,147
1,113
4,592
4,459
Total cost of revenue
3,391
3,455
14,179
14,686
Gross profit
Subscription (1)
4,270
4,888
19,459
15,998
Service (1)
2,144
2,054
9,372
8,626
Amortization expense on acquired
intangible assets
(1,147
)
(1,113
)
(4,592
)
(4,459
)
Total gross profit
5,267
5,829
24,239
20,165
Gross profit margin:
Subscription (1)
85
%
87
%
87
%
84
%
Service (1)
59
%
56
%
59
%
54
%
Total
61
%
63
%
63
%
58
%
Operating expenses:
Sales and marketing
4,378
5,639
21,167
22,409
Research, development and engineering
6,336
6,282
26,209
26,577
General and administrative
3,378
4,659
17,073
18,071
Amortization expense on acquired
intangible assets
274
265
1,097
1,065
Impairment of lease right of use assets
and leasehold improvements
—
—
—
250
Total operating expenses
14,366
16,845
65,546
68,372
Operating loss
(9,099
)
(11,016
)
(41,307
)
(48,207
)
Other income, net
473
582
2,341
2,452
Loss before income taxes
(8,626
)
(10,434
)
(38,966
)
(45,755
)
Provision for income taxes
(22
)
(139
)
(44
)
(204
)
Net loss
$
(8,648
)
$
(10,573
)
$
(39,010
)
$
(45,959
)
Loss per share:
Loss per share — basic
$
(0.40
)
$
(0.52
)
$
(1.83
)
$
(2.26
)
Loss per share — diluted
$
(0.40
)
$
(0.52
)
$
(1.83
)
$
(2.26
)
Weighted average shares outstanding —
basic
21,480
20,369
21,261
20,322
Weighted average shares outstanding —
diluted
21,480
20,369
21,261
20,322
_______________
(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
Twelve Months Ended
December 31,
December 31,
2024
2023
2024
2023
GAAP gross
profit
$
5,267
$
5,829
$
24,239
$
20,165
Amortization of acquired intangible
assets
1,147
1,113
4,592
4,459
Amortization and write-off of other
intangible assets
134
140
544
573
Stock-based compensation
143
260
706
1,126
Non-GAAP gross profit
$
6,691
$
7,342
$
30,081
$
26,323
Non-GAAP gross profit margin
77
%
79
%
78
%
76
%
GAAP operating
expenses
$
14,366
$
16,845
$
65,546
$
68,372
Depreciation and write-off of property and
equipment
(158
)
(210
)
(728
)
(1,121
)
Amortization of acquired intangible
assets
(274
)
(265
)
(1,097
)
(1,065
)
Amortization and write-off of other
intangible assets
(35
)
(117
)
(276
)
(393
)
Amortization of lease right of use assets
under operating leases
(95
)
(91
)
(358
)
(517
)
Stock-based compensation
(1,947
)
(2,752
)
(9,323
)
(10,032
)
Impairment of lease right of use assets
and leasehold improvements
—
—
—
(250
)
Non-GAAP operating expenses
$
11,857
$
13,410
$
53,764
$
54,994
GAAP net
loss
$
(8,648
)
$
(10,573
)
$
(39,010
)
$
(45,959
)
Total adjustments to gross profit
1,424
1,513
5,842
6,158
Total adjustments to operating
expenses
2,509
3,435
11,782
13,378
Non-GAAP net loss
$
(4,715
)
$
(5,625
)
$
(21,386
)
$
(26,423
)
GAAP loss per share
(diluted)
$
(0.40
)
$
(0.52
)
$
(1.83
)
$
(2.26
)
Non-GAAP net loss
$
(4,715
)
$
(5,625
)
$
(21,386
)
$
(26,423
)
Non-GAAP loss per share (diluted)
$
(0.22
)
$
(0.28
)
$
(1.01
)
$
(1.30
)
Free cash
flow
Cash flows from operating activities
$
(4,235
)
$
(5,316
)
$
(26,572
)
$
(21,995
)
Purchase of property and equipment
(13
)
(106
)
(212
)
(314
)
Capitalized patent costs
(118
)
(131
)
(431
)
(426
)
Free cash flow
$
(4,366
)
$
(5,553
)
$
(27,215
)
$
(22,735
)
Digimarc Corporation
Consolidated Balance Sheet
Information
(in thousands)
(Unaudited)
December 31,
December 31,
2024
2023
ASSETS
Current assets:
Cash and cash equivalents (1)
$
12,365
$
21,456
Marketable securities (1)
16,365
5,726
Trade accounts receivable, net
6,412
5,813
Other current assets
4,189
4,085
Total current assets
39,331
37,080
Property and equipment, net
1,040
1,570
Intangibles, net
22,191
28,458
Goodwill
8,532
8,641
Lease right of use assets
3,659
4,017
Other assets
1,013
786
Total assets
$
75,766
$
80,552
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:
Accounts payable and other accrued
liabilities
$
5,118
$
6,672
Deferred revenue
4,020
5,853
Total current liabilities
9,138
12,525
Long-term lease liabilities
5,213
5,994
Other long-term liabilities
56
106
Total liabilities
14,407
18,625
Shareholders’ equity:
Preferred stock
50
50
Common stock
21
20
Additional paid-in capital
415,049
376,189
Accumulated deficit
(350,778
)
(311,768
)
Accumulated other comprehensive loss
(2,983
)
(2,564
)
Total shareholders’ equity
61,359
61,927
Total liabilities and shareholders’
equity
$
75,766
$
80,552
_______________
(1) Aggregate cash, cash equivalents, and
marketable securities was $28.7 million and $27.2 million at
December 31, 2024 and 2023, respectively.
Digimarc Corporation
Consolidated Cash Flow
Information
(in thousands)
(Unaudited)
Year Ended
December 31,
2024
2023
Cash flows from operating activities:
Net loss
$
(39,010
)
$
(45,959
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and write-off of property and
equipment
728
1,121
Amortization of acquired intangible
assets
5,689
5,524
Amortization and write-off of other
intangible assets
820
966
Amortization of lease right of use assets
under operating leases
358
517
Stock-based compensation
10,029
11,158
Impairment of lease right of use assets
and leasehold improvements
—
250
Increase (decrease) in allowance for
doubtful accounts
17
20
Changes in operating assets and
liabilities:
Trade accounts receivable
(687
)
(335
)
Other current assets
(128
)
2,200
Other assets
(156
)
299
Accounts payable and other accrued
liabilities
(1,608
)
660
Deferred revenue
(1,838
)
1,627
Lease liability and other long-term
liabilities
(786
)
(43
)
Net cash provided by (used in) operating
activities
(26,572
)
(21,995
)
Cash flows from investing activities:
Purchase of property and equipment
(212
)
(314
)
Capitalized patent costs
(431
)
(426
)
Proceeds from maturities of marketable
securities
22,555
27,664
Purchases of marketable securities
(33,194
)
(14,363
)
Net cash provided by (used in) investing
activities
(11,282
)
12,561
Cash flows from financing activities:
Issuance of common stock, net of issuance
costs
32,218
—
Purchase of common stock
(3,416
)
(2,724
)
Repayment of loans
(37
)
(36
)
Net cash provided by (used in) financing
activities
28,765
(2,760
)
Effect of exchange rate on cash
(2
)
52
Net increase (decrease) in cash and cash
equivalents
$
(9,091
)
$
(12,142
)
Cash, cash equivalents and marketable
securities at beginning of period
27,182
52,542
Cash, cash equivalents and marketable
securities at end of period
28,730
27,182
Net increase (decrease) in cash, cash
equivalents and marketable securities
$
1,548
$
(25,360
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20250226021359/en/
Company Contact: Charles Beck Chief Financial Officer
Charles.Beck@digimarc.com +1 503-469-4721
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