Digimarc Corporation (NASDAQ:DMRC) is one of the oversold tech stocks to invest in. On September 17, Digimarc Corporation officially launched digitally watermarked security labels designed to help brands combat product counterfeiting and restore consumer trust. The new labels move away from unreliable analog security features like foils and holograms, which are easily replicated by counterfeiters using widely available materials, towards interactive and machine-verifiable checks. Digimarc’s solution incor ...

Accessibility StatementSkip Navigation SAN DIEGO. Sept. 23, 2025 /PRNewswire/ -- The Shareholders Foundation. Inc. announces that an update in the lawsuit that is currently pending for certain investors in Digimarc Corporation (NASDAQ: DMRC) shares. Investors who purchased shares of Digimarc Corporation (NASDAQ: DMRC) prior to May 2024 and continue to hold any of thoseNASDAQ: DMRC shares have also certain options and should contact the Shareholders Foundation at [emailÂ_protected] or call +1(858) 779 - 1554 ...

BEAVERTON, Ore.--(BUSINESS WIRE)--Digimarc Corporation (NASDAQ: DMRC), a global leader in digital identification and authentication solutions, has launched digitally watermarked security labels for 100% verifiable product authentication. These labels bring together the latest in Digimarc's encrypted, covert, and highly copy-resistant watermarks and optimize them for different label material substrates. They can also be combined with QR codes for low-friction, two-step consumer interaction. The. ...

Financial Data and Key Metrics Changes - Ending ARR for Q2 was $15.9 million compared to $23.9 million for Q2 last year, reflecting a decrease due to lapsed contracts [21] - Total revenue was $8 million, a decrease of $2.4 million or 23% from $10.4 million in Q2 last year [23] - Subscription revenue accounted for 58% of total revenue for the quarter, decreasing 28% from $6.4 million to $4.6 million [23] - Operating expenses were $13.1 million for the quarter, down $3.7 million or 22% from $16.8 million in Q2 last year [24] - Free cash flow usage was down from $6.9 million in Q2 last year to $5 million in Q2 this year [27] Business Line Data and Key Metrics Changes - Significant progress was made in launching the gift card solution, with the first Digimarc Protected Gift Cards received by a retailer [9] - A multiyear committed deal was signed with a large European packaging company, expected to generate near 7 figures of ARR starting next year [12] - Upsell deals were signed with three existing Digimarc Validate customers, reflecting increased contract value and expansion into new geographies [13] Market Data and Key Metrics Changes - The company is focusing on three core areas: retail loss prevention, product authentication, and digital authentication, with strong demand in the gift card sector [7] - The company anticipates a reduction of up to $3 million in annual revenue due to contract renegotiations with a large retailer [18] Company Strategy and Development Direction - The company aims to build a scalable and repeatable business model, focusing on delivering trust in every interaction across physical and digital worlds [30] - The strategic shift allows the company to be less reliant on any one customer and to move more quickly with the market [19] - The company is committed to achieving positive free cash flow by Q4 2025 despite expected revenue impacts from contract renegotiations [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the opportunities provided in the key focus areas and the positive results from increased focus [19] - The company is well-positioned to lead in the digital trust space, especially with the rise of AI and the need for robust authentication solutions [29] - Management acknowledged the challenges posed by contract renegotiations but remains optimistic about future revenue growth from new products [20] Other Important Information - The company completed a corporate reorganization in Q2, resulting in a meaningful reduction in operating expenses and cash usage [6] - The company is seeing increased interest from brands not yet included in the initial rollout of the gift card solution [11] Q&A Session Summary Question: What is the GAAP OpEx run rate at the end of the quarter? - The non-GAAP operating expense run rate was $8.9 million for the quarter, with expectations for further reductions [33][34] Question: Do you have visibility into the forward year for the Central Bank business? - The company generally has at least twelve to eighteen months of forward-looking visibility but will not provide guidance unless there are material changes [36][37] Question: Was the European customer deal signed in the quarter, and did it impact reported ARR? - Yes, the deal was effective during Q2 and is included in ARR, with potential for growth in future years [40][41] Question: How many card vendors are there to work with for the gift card business? - The company will predominantly go to market through a relatively concentrated industry of gift card manufacturers, with significant collaboration with gift card networks [49][52]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited consolidated financial statements for Q2 2025 show decreased assets, a net loss, and declining revenues [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to $60.7 million from $75.8 million, driven by lower cash and marketable securities, while equity declined Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $10,109 | $12,365 | | Marketable securities | $5,979 | $16,365 | | Total current assets | $25,110 | $39,331 | | Total assets | $60,746 | $75,766 | | Total current liabilities | $9,425 | $9,138 | | Total liabilities | $14,263 | $14,407 | | Total shareholders' equity | $46,483 | $61,359 | [Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company reported a net loss of $8.2 million for Q2 2025 and $20.0 million for the six months, with revenues declining year-over-year Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $8,010 | $10,379 | $17,378 | $20,317 | | Gross Profit | $4,707 | $6,863 | $10,792 | $13,075 | | Operating Loss | $(8,426) | $(9,982) | $(20,505) | $(20,839) | | Net Loss | $(8,220) | $(9,270) | $(19,950) | $(19,608) | | Loss per Share (basic) | $(0.38) | $(0.43) | $(0.93) | $(0.93) | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities improved to $10.2 million, while investing activities provided cash, and financing activities used cash Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(10,174) | $(15,252) | | Net cash provided by (used in) investing activities | $9,925 | $(5,458) | | Net cash provided by (used in) financing activities | $(2,066) | $29,868 | | Net decrease in cash and cash equivalents | $(2,256) | $9,142 | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Details on Digimarc's digital watermarking business, revenue disaggregation, customer concentration, and a recent workforce reduction - Digimarc is a global leader in digital watermarking technologies, offering solutions through its Digimarc Illuminate SaaS cloud-based platform for identification and authentication of items[22](index=22&type=chunk)[23](index=23&type=chunk) Revenue by Market (in thousands) | Market | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Commercial | $4,363 | $6,257 | $10,173 | $11,976 | | Government | $3,647 | $4,122 | $7,205 | $8,341 | - The company has significant customer concentration, with **Customer A, B, and C accounting for 45%, 11%, and 10% of revenue**, respectively, in Q2 2025[53](index=53&type=chunk) - In February 2025, the company initiated a reorganization involving a global workforce reduction, incurring **$3.2 million in cash severance costs** during the first six months of 2025[99](index=99&type=chunk)[100](index=100&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes revenue decline to contract terminations and budget cuts, implementing cost-saving measures, and affirming liquidity [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Total revenue decreased by 23% due to contract expirations and lower government service revenue, while operating expenses decreased - Commercial subscription revenue was negatively impacted by the termination of a contract in April 2025 and the expiration of another in June 2024. Government service revenue is expected to be **$1.7 to $1.9 million lower** in fiscal 2025 due to a smaller approved budget from the Central Banks[121](index=121&type=chunk) - The company expects fiscal 2025 expenses to be significantly lower due to a reorganization announced in February 2025, which is projected to reduce annualized cash expenses by approximately **$16.5 million**, with an additional **$5.5 million** in other identified cost savings[124](index=124&type=chunk) Annual Recurring Revenue (ARR) (in thousands) | Date | ARR | YoY Change ($) | YoY Change (%) | | :--- | :--- | :--- | :--- | | June 30, 2025 | $15,881 | $(8,042) | (34)% | | June 30, 2024 | $23,923 | - | - | [Non-GAAP Financial Measures](index=33&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP net loss for Q2 2025 was $2.3 million, with operating expenses decreasing due to lower cash compensation from reduced headcount Reconciliation of GAAP to Non-GAAP Net Loss (in thousands) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | GAAP net loss | $(8,220) | $(9,270) | $(19,950) | $(19,608) | | Non-GAAP net loss | $(2,269) | $(4,937) | $(10,899) | $(10,407) | - Non-GAAP operating expenses for Q2 2025 decreased by **$5.2 million** compared to Q2 2024, mainly due to **$4.9 million** in lower cash compensation costs resulting from a smaller workforce[180](index=180&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity decreased to $16.1 million, but management believes current cash is sufficient for the next 12 months due to cost reductions Liquidity Metrics (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Working capital | $15,685 | $30,193 | | Cash, cash equivalents and short-term marketable securities | $16,088 | $28,730 | - Cash used in operating activities for the first six months of 2025 decreased to **$10.2 million** from **$15.3 million** in the prior year, reflecting favorable timing of customer receipts and vendor payments[186](index=186&type=chunk) - Management believes that current cash, cash equivalents, and marketable securities balances will be sufficient to satisfy projected working capital and capital expenditure requirements for at least the next 12 months[191](index=191&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable for the current reporting period - The company stated that Quantitative and Qualitative Disclosures About Market Risk are not applicable[202](index=202&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[204](index=204&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[205](index=205&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) A putative class action complaint was filed against Digimarc and two executives on July 7, 2025, alleging federal securities law violations - A putative class action complaint was filed against the company and certain officers on July 7, 2025, alleging violations of federal securities laws[208](index=208&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) A new risk factor highlights potential costs and disruptions from activist shareholders and related securities litigation - A new risk factor was added regarding the potential for activist shareholders to take actions that could be costly, disrupt operations, and divert management's attention[210](index=210&type=chunk) - Volatility in the stock price resulting from activist initiatives could make the company a target of securities litigation, leading to substantial costs[210](index=210&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Digimarc repurchased 37,397 shares in Q2 2025 at an average price of $13.45 to satisfy tax withholding obligations for employee awards Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 52 | $13.08 | | May 2025 | 37,345 | $13.45 | | June 2025 | 0 | $0.00 | | **Total** | **37,397** | **$13.45** | [Other Information](index=39&type=section&id=Item%205.%20Other%20Information) No officers or directors adopted, modified, or terminated Rule 10b5-1 trading arrangements during Q2 2025 - No officers or directors adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[213](index=213&type=chunk) [Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists key exhibits filed, including the amended 2018 Incentive Plan, Employee Stock Purchase Plan, and CEO/CFO certifications - Key exhibits filed include the Digimarc Corporation 2018 Incentive Plan (as amended), the Employee Stock Purchase Plan, and certifications from the CEO and CFO[214](index=214&type=chunk)

Financial Performance - Ending ARR at June 30, 2025, was $15.9 million, compared to $23.9 million in Q2 2024[23] - Q2 2025 non-GAAP net loss was $2.3 million, a 54% improvement from Q2 2024[26] - Q2 2025 free cash flow was negative $5.0 million, a 28% improvement from Q2 2024[28] Business Highlights - The first Digimarc-protected gift cards will appear on shelves next week[8] - A new ARR from a European packaging customer signing multi-year committed contract; ARR should be just under seven figures next year[8] - Reduced Q2 operating expenses by 22% and non-GAAP operating expenses by 37%, largely reflecting the impact of cost savings from the Q1 reorganization[8] Future Outlook - The company continues to believe it is likely that it will generate both positive non-GAAP net income and positive free cash flow in Q4 2025[8] - The company expects ARR to trough in Q3 or Q4 2025, and to re-accelerate thereafter into 2026, largely from increasing penetration of its gift card solution[25] - Annualized cash cost savings from the reorganization are expected to be approximately $16.5 million[27]

[Second Quarter 2025 Financial Results](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Results) [Executive Summary](index=1&type=section&id=Executive%20Summary) Digimarc reported a Q2 2025 revenue decrease to $8.0 million, yet improved its GAAP and non-GAAP net losses through lower operating expenses - Total revenue for Q2 2025 decreased to **$8.0 million** compared to $10.4 million for Q2 2024[4](index=4&type=chunk) - GAAP net loss improved to **$8.2 million** ($0.38 per share) in Q2 2025 from $9.3 million ($0.43 per share) in Q2 2024[8](index=8&type=chunk) - Non-GAAP net loss significantly decreased to **$2.3 million** ($0.11 per share) in Q2 2025 from $4.9 million ($0.23 per share) in Q2 2024[8](index=8&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) The CEO highlighted Digimarc's strategic focus on delivering verifiable trust and authenticity in an AI-accelerated world - Digimarc is focused on filling the vacuum of trust and authenticity created by the relentless acceleration of AI models and agents[2](index=2&type=chunk) - The company's mission is to deliver a future where humans and intelligent systems can verify what's real, protect what matters, and move forward with confidence, by making trust verifiable and authenticity scalable[2](index=2&type=chunk) - **Significant progress** was made in Q2 towards building the trust layer for the modern world[2](index=2&type=chunk) [Key Financial Highlights](index=1&type=section&id=Key%20Financial%20Highlights) Q2 2025 saw declining revenue and ARR due to contract expirations, but improved net loss and free cash flow from expense management [Revenue Performance](index=1&type=section&id=Revenue%20Performance) Revenue by Type | Revenue Type | Q2 2025 ($M) | Q2 2024 ($M) | Change ($M) | Change (%) | | :----------- | :----------- | :----------- | :---------- | :--------- | | Subscription | 4.6 | 6.4 | (1.8) | -28.1% | | Service | 3.4 | 4.0 | (0.6) | -15.0% | | Total | 8.0 | 10.4 | (2.4) | -23.1% | - Subscription revenue decrease primarily reflects the expiration of two commercial contracts that contributed **$1.9 million** in Q2 2024[3](index=3&type=chunk) - Service revenue decrease primarily reflects **$0.5 million** of lower government service revenue from the Central Banks[4](index=4&type=chunk) [Profitability](index=1&type=section&id=Profitability) Key Profitability Metrics | Metric | Q2 2025 | Q2 2024 | Change (pp) | | :-------------------------------------------- | :------ | :------ | :---------- | | GAAP Gross Profit Margin | 59% | 66% | -7 | | Non-GAAP Gross Profit Margin | 80% | 81% | -1 | | Subscription Gross Profit Margin (excl. amortization) | 85% | 89% | -4 | | Service Gross Profit Margin (excl. amortization) | 59% | 58% | +1 | [Operating Expenses](index=1&type=section&id=Operating%20Expenses) Operating Expenses Overview | Metric | Q2 2025 ($M) | Q2 2024 ($M) | Change ($M) | Change (%) | | :------------------------- | :----------- | :----------- | :---------- | :--------- | | GAAP Operating Expenses | 13.1 | 16.8 | (3.7) | -22.0% | | Non-GAAP Operating Expenses | 8.9 | 14.0 | (5.1) | -36.4% | - The decrease in GAAP operating expenses was primarily due to **$4.9 million** of lower cash compensation costs resulting from reduced headcount, partially offset by **$1.3 million** of higher stock compensation costs[7](index=7&type=chunk) [Net Loss and EPS](index=1&type=section&id=Net%20Loss%20and%20EPS) Net Loss and EPS Summary | Metric | Q2 2025 ($M) | Q2 2024 ($M) | Change ($M) | Q2 2025 EPS | Q2 2024 EPS | Change (EPS) | | :------------------- | :----------- | :----------- | :---------- | :---------- | :---------- | :----------- | | GAAP Net Loss | (8.2) | (9.3) | 1.1 | (0.38) | (0.43) | 0.05 | | Non-GAAP Net Loss | (2.3) | (4.9) | 2.6 | (0.11) | (0.23) | 0.12 | [Cash and Free Cash Flow](index=1&type=section&id=Cash%20and%20Free%20Cash%20Flow) Cash Position | Metric | As of June 30, 2025 ($M) | As of Dec 31, 2024 ($M) | Change ($M) | | :----------------------------------- | :----------------------- | :---------------------- | :---------- | | Cash, cash equivalents & marketable securities | 16.1 | 28.7 | (12.6) | Free Cash Flow | Metric | Q2 2025 ($M) | Q2 2024 ($M) | Change ($M) | | :----------------------------------- | :----------- | :----------- | :---------- | | Free Cash Flow Usage | 5.0 | 6.9 | (1.9) | | Free Cash Flow Usage (excl. severance) | 4.1 | N/A | N/A | - Free cash flow usage for Q2 2025 decreased to **$5.0 million**, and would have been **$4.1 million** excluding $0.9 million in previously accrued severance costs paid[9](index=9&type=chunk) [Annual Recurring Revenue (ARR)](index=1&type=section&id=Annual%20Recurring%20Revenue%20(ARR)) ARR Performance | Metric | As of June 30, 2025 ($M) | As of June 30, 2024 ($M) | Change ($M) | Change (%) | | :----- | :----------------------- | :----------------------- | :---------- | :--------- | | ARR | 15.9 | 23.9 | (8.0) | -33.5% | - The **$8.0 million decrease in ARR** primarily reflects the expiration of two commercial contracts that accounted for a total of **$9.3 million** of ARR, partially offset by increases from new and existing commercial contracts[5](index=5&type=chunk) - Annual Recurring Revenue (ARR) is defined as the aggregation of annualized subscription fees from all commercial contracts as of the measurement date[10](index=10&type=chunk) [Detailed Financial Statements](index=4&type=section&id=Detailed%20Financial%20Statements) [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported lower revenues but reduced its net loss for Q2 and YTD 2025 through significant operating expense reductions [Revenue Breakdown](index=4&type=section&id=Revenue%20Breakdown) Revenue by Type | Revenue Type | Q2 2025 ($K) | Q2 2024 ($K) | YTD 2025 ($K) | YTD 2024 ($K) | | :----------- | :----------- | :----------- | :------------ | :------------ | | Subscription | 4,624 | 6,380 | 9,938 | 12,142 | | Service | 3,386 | 3,999 | 7,440 | 8,175 | | Total Revenue| 8,010 | 10,379 | 17,378 | 20,317 | [Cost of Revenue and Gross Profit](index=4&type=section&id=Cost%20of%20Revenue%20and%20Gross%20Profit) Gross Profit Analysis | Metric | Q2 2025 ($K) | Q2 2024 ($K) | YTD 2025 ($K) | YTD 2024 ($K) | | :-------------------------------------- | :----------- | :----------- | :------------ | :------------ | | Total Cost of Revenue | 3,303 | 3,516 | 6,586 | 7,242 | | Total Gross Profit | 4,707 | 6,863 | 10,792 | 13,075 | | Total Gross Profit Margin | 59% | 66% | 62% | 64% | | Subscription Gross Profit Margin (excl. amortization) | 85% | 89% | 85% | 88% | | Service Gross Profit Margin (excl. amortization) | 59% | 58% | 63% | 57% | [Operating Expenses (GAAP)](index=4&type=section&id=Operating%20Expenses%20(GAAP)) GAAP Operating Expenses | Expense Type | Q2 2025 ($K) | Q2 2024 ($K) | YTD 2025 ($K) | YTD 2024 ($K) | | :-------------------------------- | :----------- | :----------- | :------------ | :------------ | | Sales and marketing | 3,231 | 5,616 | 8,309 | 11,152 | | Research, development and engineering | 4,536 | 6,644 | 12,170 | 13,385 | | General and administrative | 5,078 | 4,314 | 10,259 | 8,834 | | Amortization expense on acquired intangible assets | 288 | 271 | 559 | 543 | | Total Operating Expenses | 13,133 | 16,845 | 31,297 | 33,914 | [Net Loss and Per Share Amounts (GAAP)](index=4&type=section&id=Net%20Loss%20and%20Per%20Share%20Amounts%20(GAAP)) GAAP Net Loss and EPS | Metric | Q2 2025 ($K) | Q2 2024 ($K) | YTD 2025 ($K) | YTD 2024 ($K) | | :-------------------------------------- | :----------- | :----------- | :------------ | :------------ | | Net Loss | (8,220) | (9,270) | (19,950) | (19,608) | | Loss per share — basic | (0.38) | (0.43) | (0.93) | (0.93) | | Loss per share — diluted | (0.38) | (0.43) | (0.93) | (0.93) | | Weighted average shares outstanding — basic | 21,608 | 21,392 | 21,565 | 21,061 | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=5&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) This section details adjustments for non-cash items to reconcile GAAP results with non-GAAP measures for clearer core performance evaluation [Non-GAAP Gross Profit](index=5&type=section&id=Non-GAAP%20Gross%20Profit) Reconciliation of GAAP to Non-GAAP Gross Profit | Metric | Q2 2025 ($K) | Q2 2024 ($K) | YTD 2025 ($K) | YTD 2024 ($K) | | :-------------------------------------- | :----------- | :----------- | :------------ | :------------ | | GAAP gross profit | 4,707 | 6,863 | 10,792 | 13,075 | | Amortization of acquired intangible assets | 1,205 | 1,132 | 2,337 | 2,272 | | Amortization and write-off of other intangible assets | 219 | 209 | 438 | 421 | | Stock-based compensation | 253 | 156 | 390 | 409 | | Non-GAAP gross profit | 6,384 | 8,360 | 13,957 | 16,177 | | Non-GAAP gross profit margin | 80% | 81% | 80% | 80% | - In Q2 2025, management updated its definition of Non-GAAP gross profit to adjust for the amortization of patent maintenance costs, now reflected in 'amortization and write-off of other intangible assets'[21](index=21&type=chunk) [Non-GAAP Operating Expenses](index=5&type=section&id=Non-GAAP%20Operating%20Expenses) Reconciliation of GAAP to Non-GAAP Operating Expenses | Metric | Q2 2025 ($K) | Q2 2024 ($K) | YTD 2025 ($K) | YTD 2024 ($K) | | :-------------------------------------- | :----------- | :----------- | :------------ | :------------ | | GAAP operating expenses | 13,133 | 16,845 | 31,297 | 33,914 | | Depreciation and write-off of property and equipment | (138) | (198) | (284) | (391) | | Amortization of acquired intangible assets | (288) | (271) | (559) | (543) | | Amortization and write-off of other intangible assets | (227) | (31) | (201) | (164) | | Amortization of lease right of use assets under operating leases | (103) | (86) | (201) | (173) | | Stock-based compensation | (3,518) | (2,250) | (4,641) | (4,828) | | Non-GAAP operating expenses | 8,859 | 14,009 | 25,411 | 27,815 | [Non-GAAP Net Loss and EPS](index=5&type=section&id=Non-GAAP%20Net%20Loss%20and%20EPS) Reconciliation of GAAP to Non-GAAP Net Loss and EPS | Metric | Q2 2025 ($K) | Q2 2024 ($K) | YTD 2025 ($K) | YTD 2024 ($K) | | :-------------------------------------- | :----------- | :----------- | :------------ | :------------ | | GAAP net loss | (8,220) | (9,270) | (19,950) | (19,608) | | Total adjustments to gross profit | 1,677 | 1,497 | 3,165 | 3,102 | | Total adjustments to operating expenses | 4,274 | 2,836 | 5,886 | 6,099 | | Non-GAAP net loss | (2,269) | (4,937) | (10,899) | (10,407) | | GAAP loss per share (diluted) | (0.38) | (0.43) | (0.93) | (0.93) | | Non-GAAP loss per share (diluted) | (0.11) | (0.23) | (0.51) | (0.49) | [Free Cash Flow](index=5&type=section&id=Free%20Cash%20Flow) Reconciliation to Free Cash Flow | Metric | Q2 2025 ($K) | Q2 2024 ($K) | YTD 2025 ($K) | YTD 2024 ($K) | | :-------------------------------------- | :----------- | :----------- | :------------ | :------------ | | Cash flows from operating activities | (4,688) | (6,830) | (10,174) | (15,252) | | Purchase of property and equipment | (198) | (26) | (253) | (132) | | Capitalized patent costs | (120) | (90) | (208) | (196) | | Free cash flow | (5,006) | (6,946) | (10,635) | (15,580) | [Consolidated Balance Sheet Information](index=6&type=section&id=Consolidated%20Balance%20Sheet%20Information) Total assets decreased to $60.7 million as of June 30, 2025, driven by a reduction in cash and marketable securities [Assets](index=6&type=section&id=Assets) Key Asset Accounts | Asset Type | June 30, 2025 ($K) | Dec 31, 2024 ($K) | Change ($K) | Change (%) | | :------------------------------- | :----------------- | :---------------- | :---------- | :--------- | | Cash and cash equivalents | 10,109 | 12,365 | (2,256) | -18.2% | | Marketable securities | 5,979 | 16,365 | (10,386) | -63.5% | | Total current assets | 25,110 | 39,331 | (14,221) | -36.2% | | Total assets | 60,746 | 75,766 | (15,020) | -19.8% | - Aggregate cash, cash equivalents, and marketable securities decreased from **$28.7 million** at December 31, 2024, to **$16.1 million** at June 30, 2025[23](index=23&type=chunk) [Liabilities and Shareholders' Equity](index=6&type=section&id=Liabilities%20and%20Shareholders'%20Equity) Key Liability and Equity Accounts | Category | June 30, 2025 ($K) | Dec 31, 2024 ($K) | Change ($K) | Change (%) | | :------------------------------- | :----------------- | :---------------- | :---------- | :--------- | | Total current liabilities | 9,425 | 9,138 | 287 | 3.1% | | Total liabilities | 14,263 | 14,407 | (144) | -1.0% | | Total shareholders' equity | 46,483 | 61,359 | (14,876) | -24.2% | | Accumulated deficit | (370,728) | (350,778) | (19,950) | -5.7% | [Consolidated Cash Flow Information](index=7&type=section&id=Consolidated%20Cash%20Flow%20Information) For YTD 2025, the company saw improved operating cash flow and a significant inflow from investing activities [Operating Activities](index=7&type=section&id=Operating%20Activities) Cash Flow from Operations | Metric | YTD 2025 ($K) | YTD 2024 ($K) | Change ($K) | | :-------------------------------------- | :------------ | :------------ | :---------- | | Net cash provided by (used in) operating activities | (10,174) | (15,252) | 5,078 | - Net cash used in operating activities **decreased by $5.1 million** year-over-year for the six months ended June 30, 2025, indicating improved operational cash management[25](index=25&type=chunk) [Investing Activities](index=7&type=section&id=Investing%20Activities) Cash Flow from Investing | Metric | YTD 2025 ($K) | YTD 2024 ($K) | Change ($K) | | :-------------------------------------- | :------------ | :------------ | :---------- | | Proceeds from maturities of marketable securities | 13,741 | 9,623 | 4,118 | | Purchases of marketable securities | (3,355) | (14,753) | 11,398 | | Net cash provided by (used in) investing activities | 9,925 | (5,458) | 15,383 | - Net cash provided by investing activities significantly improved to **$9.9 million** in YTD 2025 from a usage of $5.5 million in YTD 2024, primarily due to higher proceeds from marketable securities maturities and lower purchases[25](index=25&type=chunk) [Financing Activities](index=7&type=section&id=Financing%20Activities) Cash Flow from Financing | Metric | YTD 2025 ($K) | YTD 2024 ($K) | Change ($K) | | :-------------------------------------- | :------------ | :------------ | :---------- | | Issuance of common stock, net of issuance costs | — | 32,218 | (32,218) | | Purchase of common stock | (2,048) | (2,332) | 284 | | Net cash provided by (used in) financing activities | (2,066) | 29,868 | (31,934) | - Net cash used in financing activities was **$2.1 million** in YTD 2025, a significant change from the $29.9 million provided in YTD 2024, mainly due to the absence of common stock issuance in 2025[25](index=25&type=chunk) [Company Information and Disclosures](index=2&type=section&id=Company%20Information%20and%20Disclosures) [Conference Call Details](index=2&type=section&id=Conference%20Call%20Details) Digimarc hosted a conference call on August 14, 2025, to discuss Q2 2025 financial results and provide a business update - A conference call was held on Thursday, August 14, 2025, at 5:00 p.m. Eastern time to discuss financial results and provide a business update[11](index=11&type=chunk) - The call was hosted by CEO Riley McCormack, CFO Charles Beck, and CLO George Karamanos[11](index=11&type=chunk) - The conference call and investor presentation were broadcast live and made available for replay on the company's website[12](index=12&type=chunk) [About Digimarc](index=3&type=section&id=About%20Digimarc) Digimarc is a global leader in digital watermarking technologies, specializing in identifying and authenticating physical and digital items - Digimarc Corporation is the pioneer and global leader in digital watermarking technologies, with nearly **30 years of innovation** and intellectual property[14](index=14&type=chunk) - Their technologies are deployed at massive scale for the identification and authentication of physical and digital items, including a partnership with central banks to deter counterfeiting of global currency[14](index=14&type=chunk) - Digimarc supports global industry standards efforts and was named to the **Fortune 2023 Change the World list** and honored as a 2023 Fast Company World Changing Ideas finalist[14](index=14&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements subject to various assumptions, risks, and uncertainties detailed in SEC filings - The release contains 'forward-looking statements' identified by terminology such as 'will,' 'should,' 'expects,' 'estimates,' and 'predicts,' which are statements of management's opinion[15](index=15&type=chunk) - These statements are subject to various assumptions, risks, uncertainties, and changes in circumstances, and actual results may vary materially due to changes in economic, business, and regulatory factors[15](index=15&type=chunk) - Readers are cautioned not to place undue reliance on these forward-looking statements, and Digimarc undertakes no obligation to publicly update or revise them, except as required by law[15](index=15&type=chunk) [Non-GAAP Financial Measures Disclosure](index=3&type=section&id=Non-GAAP%20Financial%20Measures%20Disclosure) The report includes supplemental non-GAAP financial measures to evaluate core operating results by removing non-cash and non-recurring activities - The release contains non-GAAP financial measures (e.g., Non-GAAP gross profit, operating expenses, net loss, free cash flow) to allow management, investors, and analysts to evaluate core operating results by removing non-cash and non-recurring activities[16](index=16&type=chunk) - Management uses these non-GAAP financial measures in evaluating financial and operational decision-making and for period-to-period comparisons[16](index=16&type=chunk) - Investors should examine non-GAAP financial measures in conjunction with historical GAAP financial information and not consider them in isolation or as substitutes for GAAP performance measures, as definitions may vary between companies[17](index=17&type=chunk)

Core Viewpoint - Rosen Law Firm is reminding investors who purchased securities of Digimarc Corporation during the specified class period of the upcoming lead plaintiff deadline for a class action lawsuit [1][2]. Group 1: Class Action Details - The class period for the Digimarc securities is from May 3, 2024, to February 26, 2025 [1]. - Investors may be entitled to compensation without any out-of-pocket fees through a contingency fee arrangement [1]. - A class action lawsuit has already been filed, and interested parties must move the Court to serve as lead plaintiff by July 8, 2025 [2]. Group 2: Law Firm Credentials - Rosen Law Firm has a strong track record in securities class actions, having achieved the largest settlement against a Chinese company at the time [3]. - The firm was ranked No. 1 by ISS Securities Class Action Services for the number of settlements in 2017 and has consistently ranked in the top 4 since 2013 [3]. - In 2019, the firm secured over $438 million for investors [3]. Group 3: Case Allegations - The lawsuit alleges that Digimarc made false and misleading statements regarding a large commercial partner's contract renewal and its impact on subscription and annual recurring revenue [4]. - The misleading statements led to investor damages when the true details were revealed [4].

Core Viewpoint - The Gross Law Firm has issued a notice to shareholders of Digimarc Corporation regarding a class action lawsuit due to alleged misleading statements and omissions that affected the company's stock value during a specified period [1][3]. Summary by Relevant Sections Class Period and Allegations - The class period for the lawsuit is from May 3, 2024, to February 26, 2025 [3]. - Allegations include that Digimarc's management failed to disclose that a significant commercial partner would not renew a large contract on the same terms, leading to a renegotiation that would adversely affect subscription revenue and annual recurring revenue [3]. Next Steps for Shareholders - Shareholders who purchased shares during the class period are encouraged to register for the class action by the deadline of July 7, 2025 [4]. - Once registered, shareholders will receive updates through a portfolio monitoring software regarding the case's progress [4]. Law Firm's Commitment - The Gross Law Firm aims to protect investors' rights and seeks recovery for those who suffered losses due to deceitful practices by companies [5].

Core Viewpoint - The Gross Law Firm is notifying shareholders of Digimarc Corporation regarding a class action lawsuit due to alleged misleading statements and failure to disclose critical information during a specified class period [1][2]. Group 1: Class Action Details - The class period for the lawsuit is from May 3, 2024, to February 26, 2025 [2]. - Allegations include that Digimarc's management failed to disclose that a significant commercial partner would not renew a major contract on the same terms, leading to a renegotiation that would adversely affect subscription and annual recurring revenue [2]. - The lawsuit claims that the positive statements made by the defendants about the company's business and prospects were materially misleading or lacked a reasonable basis [2]. Group 2: Shareholder Actions - Shareholders are encouraged to register for the class action by the deadline of July 7, 2025, to potentially be appointed as lead plaintiff [3]. - Once registered, shareholders will receive updates through a portfolio monitoring software regarding the case's status [3]. - Participation in the case incurs no cost or obligation for the shareholders [3]. Group 3: Law Firm Background - The Gross Law Firm is a nationally recognized class action law firm dedicated to protecting investors' rights against deceit and illegal business practices [4]. - The firm aims to ensure companies adhere to responsible business practices and seeks recovery for investors who suffered losses due to misleading statements or omissions [4].