Annual Recurring Revenue(1) Increases
71%
Subscription Gross Profit Margin(2) Expands
to 87%
Digimarc Corporation (NASDAQ: DMRC) reported financial results
for the fourth quarter and fiscal year ended December 31, 2023.
“Q4 was another strong quarter for Digimarc. On a year-over-year
basis, we accelerated our ARR growth to 71%, accelerated our
subscription revenue growth to 37%, and expanded our subscription
Gross Profit Margins more than 1,000 basis points to 87%,” said
Digimarc CEO Riley McCormack. “These results were made possible by
the team’s execution on multiple important initiatives we have been
pursuing since we began our transformation in the second quarter of
2021, and with an ethos of never settling for the status quo and
always planting the seeds for future growth, we remain excited for
what is ahead.”
Fourth Quarter 2023 Financial Results
Subscription revenue for the fourth quarter of 2023 increased to
$5.6 million compared to $4.1 million for the fourth quarter of
2022, primarily due to higher subscription revenue from new and
existing commercial contracts.
Service revenue for the fourth quarter of 2023 increased to $3.7
million compared to $3.1 million for the fourth quarter of 2022,
primarily due to higher service revenue from a consortium of the
world’s central banks (the “Central Banks”).
Total revenue for the fourth quarter of 2023 increased to $9.3
million compared to $7.2 million for the fourth quarter of
2022.
Gross profit margin for the fourth quarter of 2023 increased to
63% compared to 53% for the fourth quarter of 2022. Excluding
amortization expense on acquired intangible assets, subscription
gross profit margin for the fourth quarter of 2023 increased to 87%
from 77% for the fourth quarter of 2022, while service gross profit
margin was flat at 56%.
Non-GAAP gross profit margin for the fourth quarter of 2023
increased to 79% compared to 72% for the fourth quarter of
2022.
Operating expenses for the fourth quarter of 2023 decreased to
$16.8 million compared to $17.1 million for the fourth quarter of
2022.
Non-GAAP operating expenses for the fourth quarter of 2023
decreased to $13.4 million compared to $14.3 million for the fourth
quarter of 2022.
Net loss for the fourth quarter of 2023 was $10.6 million or
($0.52) per share compared to $12.4 million or ($0.62) per share
for the fourth quarter of 2022.
Non-GAAP net loss for the fourth quarter of 2023 was $5.6
million or ($0.28) per share compared to $8.2 million or ($0.41)
per share for the fourth quarter of 2022.
Fiscal Year 2023 Financial Results
Subscription revenue for fiscal year 2023 increased to $19.0
million compared to $15.2 million for fiscal year 2022, primarily
due to $4.9 million of higher subscription revenue from new and
existing commercial contracts, partially offset by $0.9 million of
lower subscription revenue as a result of sunsetting our Piracy
Intelligence product in 2022.
Service revenue for fiscal year 2023 increased to $15.9 million
compared to $15.0 million for fiscal year 2022, primarily due to
$1.9 million of higher service revenue from the Central Banks,
reflecting a larger annual budget for program work, partially
offset by $0.8 million of lower service revenue from the timing of
HolyGrail 2.0 recycling projects.
Total revenue for fiscal year 2023 increased to $34.9 million
compared to $30.2 million for fiscal year 2022.
Gross profit margin for fiscal year 2023 increased to 58%
compared to 51% for fiscal year 2022. Excluding amortization
expense on acquired intangible assets, subscription gross profit
margin for fiscal year 2023 increased to 84% from 75% for fiscal
year 2022, while service gross profit margin decreased from 56% for
fiscal year 2022 to 54% for fiscal year 2023.
Non-GAAP gross profit margin for the fiscal year 2023 increased
to 76% compared to 70% for fiscal year 2022.
Operating expenses for fiscal year 2023 decreased to $68.4
million compared to $77.1 million for fiscal year 2022, primarily
due to $4.2 million of lower compensation costs due to lower
headcount, partially offset by annual compensation adjustments,
$1.5 million of lower contractor and consulting costs, $1.1 million
of lower travel and training costs, $0.9 million of lower legal
costs, $0.8 million of lower facility costs, and $0.7 million of
lower lease impairment expense, partially offset by higher
severance costs of $0.7 million incurred for organizational
changes.
Non-GAAP operating expenses for fiscal year 2023 decreased to
$55.0 million compared to $61.8 million for fiscal year 2022,
primarily due to $4.1 million of lower cash compensation costs due
to lower headcount, partially offset by annual compensation
adjustments, $1.5 million of lower contractor and consulting costs,
$1.1 million of lower travel and training costs, and $0.9 million
of lower legal costs, partially offset by higher cash severance
costs of $0.7 million incurred for organizational changes.
Net loss for fiscal year 2023 was $46.0 million or ($2.26) loss
per common share compared to a net loss of $59.8 million or ($3.12)
loss per common share for fiscal year 2022.
Non-GAAP net loss for fiscal year 2023 was $26.4 million or
($1.30) loss per common share compared to a net loss of $38.6
million or ($2.02) loss per common share for fiscal year 2022.
At December 31, 2023, cash, cash equivalents, and marketable
securities totaled $27.2 million compared to $52.5 million at
December 31, 2022.
(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 (Wednesday, February
28, 2024) to discuss these financial results and to provide a
business update. CEO Riley McCormack, CFO Charles Beck and CLO Joel
Meyer 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: 13740292
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 massive scale for the
identification and the authentication of physical and digital
items. A notable example of this 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,
2022, 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 December
31,
Twelve Months Ended December
31,
2023
2022
2023
2022
Revenue:
Subscription
$
5,599
$
4,098
$
18,973
$
15,219
Service
3,685
3,120
15,878
14,978
Total revenue
9,284
7,218
34,851
30,197
Cost of revenue:
Subscription (1)
711
944
2,975
3,878
Service (1)
1,631
1,380
7,252
6,557
Amortization expense on acquired
intangible assets
1,113
1,077
4,459
4,439
Total cost of revenue
3,455
3,401
14,686
14,874
Gross profit
Subscription (1)
4,888
3,154
15,998
11,341
Service (1)
2,054
1,740
8,626
8,421
Amortization expense on acquired
intangible assets
(1,113
)
(1,077
)
(4,459
)
(4,439
)
Total gross profit
5,829
3,817
20,165
15,323
Gross profit margin:
Subscription (1)
87
%
77
%
84
%
75
%
Service (1)
56
%
56
%
54
%
56
%
Total
63
%
53
%
58
%
51
%
Operating expenses:
Sales and marketing
5,639
6,016
22,409
29,718
Research, development and engineering
6,282
6,759
26,577
26,490
General and administrative
4,659
3,918
18,071
18,945
Amortization expense on acquired
intangible assets
265
100
1,065
1,064
Impairment of lease right of use assets
and leasehold improvements
—
341
250
915
Total operating expenses
16,845
17,134
68,372
77,132
Operating loss
(11,016
)
(13,317
)
(48,207
)
(61,809
)
Other income, net
582
894
2,452
2,108
Loss before income taxes
(10,434
)
(12,423
)
(45,755
)
(59,701
)
Provision for income taxes
(139
)
(25
)
(204
)
(97
)
Net loss
$
(10,573
)
$
(12,448
)
$
(45,959
)
$
(59,798
)
Loss per share:
Loss per share — basic
$
(0.52
)
$
(0.62
)
$
(2.26
)
$
(3.12
)
Loss per share — diluted
$
(0.52
)
$
(0.62
)
$
(2.26
)
$
(3.12
)
Weighted average shares outstanding —
basic
20,369
19,921
20,322
19,140
Weighted average shares outstanding —
diluted
20,369
19,921
20,322
19,140
(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 December
31,
Twelve Months Ended December
31,
2023
2022
2023
2022
GAAP gross
profit
$
5,829
$
3,817
$
20,165
$
15,323
Amortization of acquired intangible
assets
1,113
1,077
4,459
4,439
Amortization and write-off of other
intangible assets
140
146
573
576
Stock-based compensation
260
177
1,126
913
Non-GAAP gross profit
$
7,342
$
5,217
$
26,323
$
21,251
Non-GAAP gross profit margin
79
%
72
%
76
%
70
%
GAAP operating
expenses
$
16,845
$
17,134
$
68,372
$
77,132
Depreciation and write-off of property and
equipment
(210
)
(336
)
(1,121
)
(1,372
)
Amortization of acquired intangible
assets
(265
)
(100
)
(1,065
)
(1,064
)
Amortization and write-off of other
intangible assets
(117
)
(100
)
(393
)
(163
)
Amortization of lease right of use assets
under operating leases
(91
)
(197
)
(517
)
(965
)
Stock-based compensation
(2,752
)
(1,802
)
(10,032
)
(10,376
)
Impairment of lease right of use assets
and leasehold improvements
—
(341
)
(250
)
(915
)
Acquisition-related expenses
—
—
—
(447
)
Non-GAAP operating expenses
$
13,410
$
14,258
$
54,994
$
61,830
GAAP net
loss
$
(10,573
)
$
(12,448
)
$
(45,959
)
$
(59,798
)
Total adjustments to gross profit
1,513
1,400
6,158
5,928
Total adjustments to operating
expenses
3,435
2,876
13,378
15,302
Non-GAAP net loss
$
(5,625
)
$
(8,172
)
$
(26,423
)
$
(38,568
)
GAAP loss per share
(diluted)
$
(0.52
)
$
(0.62
)
$
(2.26
)
$
(3.12
)
Non-GAAP net loss
$
(5,625
)
$
(8,172
)
$
(26,423
)
$
(38,568
)
Non-GAAP loss per share (diluted)
$
(0.28
)
$
(0.41
)
$
(1.30
)
$
(2.02
)
Digimarc Corporation
Consolidated Balance Sheet
Information
(in thousands)
(Unaudited)
December 31,
December 31,
2023
2022
ASSETS
Current assets:
Cash and cash equivalents (1)
$
21,456
$
33,598
Marketable securities (1)
5,726
18,944
Trade accounts receivable, net
5,813
5,427
Other current assets
4,085
6,172
Total current assets
37,080
64,141
Property and equipment, net
1,570
2,390
Intangibles, net
28,458
33,170
Goodwill
8,641
8,229
Lease right of use assets
4,017
4,720
Other assets
786
1,127
Total assets
$
80,552
$
113,777
LIABILITIES AND
SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued
liabilities
$
6,672
$
5,989
Deferred revenue
5,853
4,145
Total current liabilities
12,525
10,134
Long-term lease liabilities
5,994
5,977
Other long-term liabilities
106
76
Total liabilities
18,625
16,187
Shareholders’ equity:
Preferred stock
50
50
Common stock
20
20
Additional paid-in capital
376,189
367,692
Accumulated deficit
(311,768
)
(265,809
)
Accumulated other comprehensive loss
(2,564
)
(4,363
)
Total shareholders’ equity
61,927
97,590
Total liabilities and shareholders’
equity
$
80,552
$
113,777
(1)
Aggregate cash, cash equivalents, and
marketable securities was $27,182 and $52,542 at December 31, 2023
and 2022, respectively.
Digimarc Corporation
Consolidated Cash Flow
Information
(in thousands)
(Unaudited)
Twelve Months Ended December
31,
2023
2022
Cash flows from operating activities:
Net loss
$
(45,959
)
$
(59,798
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and write-off of property and
equipment
1,121
1,372
Amortization of acquired intangible
assets
5,524
5,503
Amortization and write-off of other
intangible assets
966
739
Amortization of lease right of use assets
under operating leases
517
965
Stock-based compensation
11,158
11,289
Impairment of lease right of use assets
and leasehold improvements
250
915
Increase in allowance for doubtful
accounts
20
89
Changes in operating assets and
liabilities:
Trade accounts receivable
(335
)
2,232
Other current assets
2,200
(1,933
)
Other assets
299
(520
)
Accounts payable and other accrued
liabilities
660
(3,856
)
Deferred revenue
1,627
(371
)
Lease liability and other long-term
liabilities
(43
)
(1,034
)
Net cash used in operating activities
(21,995
)
(44,408
)
Cash flows from investing activities:
Net cash paid for acquisition
—
(3,512
)
Purchase of property and equipment
(314
)
(934
)
Capitalized patent costs
(426
)
(533
)
Proceeds from maturities of marketable
securities
27,664
21,425
Purchases of marketable securities
(14,363
)
(12,689
)
Net cash provided by investing
activities
12,561
3,757
Cash flows from financing activities:
Issuance of common stock, net of issuance
costs
—
62,890
Purchase of common stock
(2,724
)
(2,356
)
Repayment of loans
(36
)
(35
)
Net cash (used in) provided by financing
activities
(2,760
)
60,499
Effect of exchange rate on cash
52
(39
)
Net (decrease) increase in cash and cash
equivalents (2)
$
(12,142
)
$
19,809
Cash, cash equivalents and marketable
securities at beginning of period
52,542
41,618
Cash, cash equivalents and marketable
securities at end of period
27,182
52,542
(2) Net (decrease) increase in cash, cash
equivalents and marketable securities
$
(25,360
)
$
10,924
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240228080364/en/
Charles Beck Chief Financial Officer Charles.Beck@digimarc.com
+1 503-469-4721
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