Core Insights - Digimarc Corporation is a leader in digital identity and authentication solutions, focusing on combating fraud, counterfeiting, and misinformation in an increasingly AI-driven world [3]. Company Participation - Digimarc will attend the 28th Annual Needham Growth Conference in New York on January 13, 2026, with President and CEO Riley McCormack and CFO Charles Beck hosting meetings [1]. Company Overview - Digimarc is dedicated to building a trust layer for modern interactions, providing scalable and secure solutions for consumers, businesses, and intelligent systems to verify authenticity and protect important transactions [3]. - The company’s solutions are designed to address the challenges posed by AI-enabled threats, and it is trusted by central banks globally to prevent currency counterfeiting [3].

Core Insights - Digimarc Corporation and Honeywell have partnered to combat gift card fraud, which is a growing issue in the retail sector [1] - The global gift card market is projected to grow from $1.24 trillion in 2024 to $2.31 trillion by 2030, indicating a significant opportunity for investment in security solutions [1] - Gift card fraud losses increased by 364% from 2018 to 2021, highlighting the urgency for enhanced security measures [1] - 23% of U.S. consumers have experienced issues with gift cards that had no funds, underscoring the prevalence of fraud [1] Company Insights - Digimarc's new digital security layer for gift cards is integrated into Honeywell's handheld scanners, allowing for automated detection of tampered cards [1] - The end-to-end solution provided by Digimarc is reported to be over three times more secure than traditional card-only security features [1] - Retailers utilizing this solution have experienced a significant reduction in fraud incidents and improved scanning efficiency, enhancing customer experience and operational security [1]

Revenue Performance - Total revenue for the three months ended September 30, 2025, decreased by $1.8 million to $7.6 million, compared to $9.4 million for the same period in 2024, representing a 19% decline [124]. - Subscription revenue for the three months ended September 30, 2025, decreased by $0.7 million, primarily due to a $0.8 million decrease from the expiration of a commercial contract in April 2025 [131]. - Service revenue for the three months ended September 30, 2025, decreased by $1.1 million, reflecting $0.7 million lower government service revenue from Central Banks and $0.4 million lower commercial service revenue [124]. - Total revenue for the nine months ended September 30, 2025, decreased by $4.8 million to $25.0 million, compared to $29.8 million for the same period in 2024, a 16% decrease [125]. - Subscription revenue for the nine months ended September 30, 2025, decreased by $2.9 million, primarily due to a $3.5 million decrease from the expiration of commercial contracts [132]. - Total revenue decreased by $1.8 million (19%) for the three months ended September 30, 2025, with domestic revenue increasing by $0.3 million (15%) and international revenue decreasing by $2.1 million (28%) [136]. - Annual Recurring Revenue (ARR) decreased by $2.9 million (15%) from September 30, 2024, to September 30, 2025, reflecting the expiration of a commercial contract that accounted for $3.5 million of ARR [145]. - Commercial subscription revenue decreased by $0.7 million (14%) for the nine months ended September 30, 2025, compared to the same period in 2024 [141]. - Government service revenue decreased by $1.9 million (20%) for the three months ended September 30, 2025, primarily due to lower revenue from Central Banks [144]. Operating Expenses - Total operating expenses for the three months ended September 30, 2025, decreased by $4.5 million to $12.8 million, compared to $17.3 million for the same period in 2024 [127]. - Total operating expenses for the nine months ended September 30, 2025, decreased by $7.1 million to $44.1 million, compared to $51.2 million for the same period in 2024 [128]. - The company anticipates expenses in fiscal 2025 to be significantly lower than in fiscal 2024, with cash expenses reduced by approximately $16.5 million on an annualized basis due to a reorganization [126]. - Sales and marketing expenses decreased by $2.8 million (49%) for the three months ended September 30, 2025, compared to the same period in 2024, representing 37% of total revenue [156]. - Sales and marketing expenses decreased by $2.8 million for the three months ended September 30, 2025, and by $5.6 million for the nine months ended September 30, 2025, compared to the same periods in 2024 [157]. - Research, development, and engineering expenses decreased by $2.2 million (33%) for the three months and by $3.4 million (17%) for the nine months ended September 30, 2025, compared to the same periods in 2024 [161]. - General and administrative expenses increased by $0.5 million (10%) for the three months and by $1.9 million (14%) for the nine months ended September 30, 2025, compared to the same periods in 2024 [164]. - Stock-based compensation expense increased by $1.2 million (43%) for the three months and by $1.0 million (12%) for the nine months ended September 30, 2025, compared to the same periods in 2024 [166]. - Cash compensation costs decreased by $2.5 million for the three months and by $5.4 million for the nine months ended September 30, 2025, largely due to lower headcount [158]. Profitability Metrics - Gross profit decreased by $1.5 million (25%) for the three months ended September 30, 2025, primarily due to lower revenue, partially offset by lower cost of service revenue [150]. - Total gross profit margin decreased from 62% in 2024 to 58% in 2025 for the three months ended September 30 [149]. - Non-GAAP gross profit for Q3 2025 decreased by $1.2 million to $6.213 billion compared to Q3 2024, primarily due to lower revenue [182]. - Non-GAAP gross profit margin for Q3 2025 increased to 81% from 79% in Q3 2024, reflecting a more favorable mix of service revenue [183]. - Non-GAAP operating expenses for Q3 2025 decreased by $5.5 million to $8.611 billion compared to Q3 2024, mainly due to lower cash compensation costs [185]. - Non-GAAP net loss for Q3 2025 was $2.186 billion, a decrease from $6.040 billion in Q3 2024 [181]. Cash Flow and Financial Position - Cash used in operating activities for the nine months ended September 30, 2025, decreased by $9.6 million to $12.770 billion compared to the same period in 2024 [191]. - Working capital as of September 30, 2025, was $12.319 billion, down from $30.193 billion at December 31, 2024 [187]. - Cash, cash equivalents, and short-term marketable securities decreased by $16.2 million to $12.562 billion from December 31, 2024 [188]. Future Outlook and Financing - The company expects government service revenue in fiscal 2025 to be $1.7 million to $1.8 million lower than in fiscal 2024 due to a smaller approved budget by Central Banks [123]. - The reorganization announced on February 26, 2025, is expected to reduce cash expenses by approximately $16.5 million on an annualized basis [199]. - The company may seek additional financing to support growth initiatives and fund acquisitions, although future financing may not be available on satisfactory terms [204]. - Forward-looking statements indicate expectations regarding future revenue trends and anticipated expenses, which are subject to uncertainties [205]. - The company does not undertake any obligation to publicly update or revise forward-looking statements after the filing date of the Quarterly Report [207]. Stock and Securities - The company issued 929 thousand shares of common stock at $35.00 per share, resulting in gross cash proceeds of $32.5 million from the registered direct offering [200]. - The 2025 Employee Stock Purchase Plan allows eligible employees to contribute up to 15% of their salary for purchasing common stock at a discounted price, with 250 thousand shares reserved for this plan [201]. - An amendment to the 2018 Stock Incentive Plan was approved, increasing the number of shares authorized for issuance by 950 thousand shares [202]. - A new shelf registration statement was filed, allowing the company to sell securities up to $100.0 million, with $67.5 million remaining available as of September 30, 2025 [203].

Core Insights - BERO Brewing has partnered with Digimarc Corporation to launch a unique loyalty program aimed at enhancing customer engagement and retention [1] Company Overview - BERO Brewing is recognized as a leading premium non-alcoholic beer brand [1] - Digimarc Corporation specializes in digital identity and authentication solutions [1] Partnership Details - The collaboration focuses on creating a seamless and fraud-resistant rewards experience for consumers [1] - This initiative is expected to deepen brand-consumer connections and drive long-term growth for BERO Brewing [1]

Group 1 - The article does not provide any specific content related to a company or industry [1]

Financial Data and Key Metrics Changes - Ending ARR for Q3 was $15.8 million compared to $18.7 million for Q3 last year, reflecting a decrease due to the DRS contract lapse [20] - Total revenue was $7.6 million, a decrease of $1.8 million, or 19%, from $9.4 million in Q3 last year [21] - Subscription revenue accounted for 60% of total revenue for the quarter, decreasing 13% from $5.3 million to $4.6 million [21] - Operating expenses were $12.8 million for the quarter, down $4.5 million, or 26%, from $17.3 million in Q3 last year [22] - Free cash flow usage was down from $7.3 million in Q3 last year to $3.1 million in Q3 this year, a decrease of 58% [24] Business Line Data and Key Metrics Changes - Significant progress was made in advancing the gift card solution and product authentication space, including upsell opportunities and a paid pilot with a major pharmaceutical company [4][14] - The company launched a new digitized security label solution to replace low-value holograms, enhancing product authentication capabilities [5][16] - The focus areas include retail loss prevention, product authentication, and digital authentication, with expectations for growth in these segments [6][19] Market Data and Key Metrics Changes - The global gift card industry is estimated to represent approximately $1 trillion of stored value, with increasing fraud impacting growth [8] - The company is positioned to help the gift card industry re-accelerate its growth by reducing fraud and improving marketing and merchandising [9] Company Strategy and Development Direction - The company aims to deliver positive free cash flow and positive non-GAAP net income in Q4 2025 while investing in growth areas [5][24] - The strategic focus is on scalable and repeatable business models, particularly in retail loss prevention and digital authentication [19] - The company is building a trust layer for the modern world, addressing the growing need for authenticity in both physical and digital interactions [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to re-accelerate ARR growth in 2026, driven by increased penetration of the gift card solution and growth in digital authentication [20] - The company remains focused on optimizing long-term potential rather than short-term revenue, particularly in the digital authentication space [17][31] Other Important Information - The company expects to rebuild its cash balance via operating cash flow throughout 2026 [24] - The reorganization has led to a meaningful reduction in operating expenses and cash usage [5][23] Q&A Session Summary Question: Update on Holy Grail - The company is progressing with recycling opportunities in Belgium and Germany, with Belgium being a full-country pilot [27] Question: Impact of retailer contract renegotiation - The company still maintains a relationship with the retailer, but the prior contract has led to a significant downsell [28] Question: Thoughts on California AI-related law - The law did not include digital watermarking language, and the company believes it does not go far enough in addressing trust and authenticity [29][30] Question: Ramp-up of retailers using Digimarc protected cards - The ramp-up will involve winning more partners, adding retailers, and expanding geographies [33] Question: Changes in Sales organization - There have been no personnel changes in the sales organization, and the team continues to move forward with their roles [34]

Financial Performance - Q3'25 ending Annual Recurring Revenue (ARR) was $15.8 million, compared to $18.7 million in Q3'24[29] - Q3'25 non-GAAP net loss was $2.2 million, a 64% improvement from Q3'24's $6.0 million loss[32] - Q3'25 free cash flow was -$3.1 million, a 58% improvement from Q3'24's -$7.3 million[34] - Operating expenses in Q3'25 decreased by 26% year-over-year, while non-GAAP operating expenses decreased by 39%[10] Business Strategy & Outlook - The company expects ARR to trough in Q4'25 and re-accelerate into 2026, driven by gift card solutions and digital authentication growth[31] - The company remains on track to generate positive non-GAAP net income and positive free cash flow in Q4'25[10] - The first Digimarc-protected gift cards reached shelves in August, and multiple major retailers are expected to start selling them within the next two quarters[10] - The company is in discussions with 8 gift card manufacturers to support the broader rollout of Digimarc-protected gift cards[18] Market Focus - An estimated 5+ billion gift cards are printed each year in the US alone[18] - The company closed multiple upsell opportunities in the product authentication space, including expansion to the 6th country of a global tobacco company[10] - The company has narrowed its focus in digital authentication to four use cases: leak detection, internal compliance, piracy prevention, and royalty monitoring[22]

Revenue Performance - Subscription revenue for Q3 2025 decreased to $4.6 million, down from $5.3 million in Q3 2024, primarily due to the expiration of a commercial contract contributing $0.8 million [3]. - Service revenue for Q3 2025 decreased to $3.1 million from $4.2 million in Q3 2024, reflecting a $0.7 million decline in government service revenue and a $0.4 million decrease in commercial service revenue [4]. - Total revenue for Q3 2025 was $7.6 million, a decrease from $9.4 million in Q3 2024 [4]. - Annual recurring revenue (ARR) as of September 30, 2025, was $15.8 million, down from $18.7 million as of September 30, 2024, primarily due to the expiration of a commercial contract worth $3.5 million [5]. Profitability Metrics - Gross profit margin for Q3 2025 decreased to 58% from 62% in Q3 2024, with subscription gross profit margin remaining flat at 86% [6]. - GAAP gross profit for Q3 2025 was $4,446 million, down from $5,897 million in Q3 2024, representing a decrease of 24.6% [20]. - Non-GAAP gross profit margin improved to 81% in Q3 2025 compared to 79% in Q3 2024 [20]. - Net loss for Q3 2025 was $8.2 million, or ($0.38) per share, compared to a net loss of $10.8 million, or ($0.50) per share, in Q3 2024 [8]. - GAAP net loss for the nine months ended September 30, 2025, was $28,102 million, a slight improvement from a loss of $30,362 million in the same period of 2024 [24]. - Non-GAAP net loss for the nine months ended September 30, 2025, was $13,085 million, compared to $16,524 million in the same period of 2024, indicating a reduction of 20.5% [20]. - The company reported a GAAP loss per share (diluted) of $(1.30) for the nine months ended September 30, 2025, compared to $(1.43) for the same period in 2024 [20]. Cash Flow and Expenses - Operating expenses for Q3 2025 decreased to $12.8 million from $17.3 million in Q3 2024, mainly due to a $5.4 million reduction in cash compensation costs [7]. - Free cash flow usage for Q3 2025 decreased to $3.1 million from $7.3 million in Q3 2024 [9]. - Free cash flow for the nine months ended September 30, 2025, was $(13,709) million, compared to $(22,849) million in the same period of 2024 [24]. Assets and Liabilities - Total current assets decreased to $21,756 million as of September 30, 2025, from $39,331 million at December 31, 2024 [22]. - Cash and cash equivalents, along with marketable securities, totaled $12,562 million at the end of Q3 2025, down from $33,686 million at the end of Q3 2024 [24]. - Total liabilities decreased slightly to $14,048 million as of September 30, 2025, from $14,407 million at December 31, 2024 [22]. - Stock-based compensation increased to $8,896 million for the nine months ended September 30, 2025, compared to $7,939 million in the same period of 2024 [24]. Strategic Initiatives - The company launched a new digitized security label solution aimed at replacing low-value holograms and signed a pilot with a major pharmaceutical company for product authentication [2]. - Digimarc is positioning itself to capitalize on the digital authentication market in 2026 and beyond, with a growing pipeline of opportunities [2].

Group 1 - Digimarc Corporation has launched digitally watermarked security labels aimed at combating product counterfeiting and restoring consumer trust [1][3] - The new labels utilize advanced encrypted, covert, and highly copy-resistant watermarks that are optimized for various label material substrates [2] - The security labels offer an affordable and scalable method of authentication, supporting both single and two-factor authentication options [3] Group 2 - The labels can be scanned with a mobile device, either through an app or without one, enhancing accessibility for consumers [2] - Digimarc Corporation operates in the digital watermarking solutions sector, both in the US and internationally [4] - While Digimarc shows potential as an investment, there are other AI stocks that may offer greater upside potential and less downside risk [4]

Core Points - A lawsuit is currently pending for investors in Digimarc Corporation (NASDAQ: DMRC) regarding alleged securities law violations [2][3] - The lawsuit claims that Digimarc failed to disclose that a major commercial partner would not renew a significant contract on the same terms, which would negatively impact the company's subscription and annual recurring revenue [2] - The court has appointed a lead plaintiff for the case as of September 2, 2025 [3] Summary by Sections Lawsuit Details - Investors who purchased shares of Digimarc prior to May 2024 and continue to hold those shares have options to pursue [1] - The plaintiff alleges that the company's positive statements about its business and prospects were materially misleading due to undisclosed contract renegotiations [2] Legal Representation - The Shareholders Foundation, Inc. is facilitating communication for affected investors and is not a law firm [3]