Digimarc Corporation (NASDAQ:DMRC) Q2 2023 Earnings Conference Call August 2, 2023 5:00 PM ET Company Participants Joel Meyer - Chief Legal Officer Riley McCormack - Chief Executive Officer Charles Beck - Chief Financial Officer Conference Call Participants Chris Grenga - Needham & Company Jeff Bernstein - Silverberg Bernstein Capital Robin Knipp - Janney Montgomery Scott Operator Ladies and gentlemen, greetings, and welcome to the Digimarc Corporation Second Quarter 2023 Earnings Conference Call. [Operator ...

Financial Data and Key Metrics Changes - Total revenue for Q1 2023 was $7.8 million, an increase of $400,000 or 6% from $7.4 million in Q1 2022 [44] - Subscription revenue accounted for 50% of total revenue, growing 2% from $3.8 million to $3.9 million, with an adjusted increase of 21% when excluding the former Piracy Intelligence product [44][45] - Net loss per common share improved to $0.70 from $1.03 in Q1 2022, while non-GAAP net loss per share decreased to $0.45 from $0.69 [48] - Operating expenses decreased to $19 million from $21.4 million in Q1 2022, with a significant reduction in cash usage expected to continue [21][48] Business Line Data and Key Metrics Changes - Service revenue grew 9% from $3.6 million to $4 million, driven by a larger annual budget from Central Banks [19] - Service gross profit margin improved from 49% in Q1 2022 to 57% in Q1 2023 due to lower professional services costs [20] - First-year commercial bookings were $2.3 million, down from $3.8 million in Q1 2022, impacted by the completion of specific projects [18] Market Data and Key Metrics Changes - The company signed a $32 million, 5-year contract to protect the authenticity of precious metals and critical building materials, marking entry into the security printing market [6][7] - The contract includes potential upsides from increased capacity needs and additional product launches [14] Company Strategy and Development Direction - The company aims to digitize the world's products and is focused on building a scalable and high-margin revenue model through partnerships with value-added resellers (VARs) [4][36] - The Digimarc Illuminate Platform is foundational to the company's strategy, allowing for the development of accretive products that enhance customer value [5][11] - The company is pursuing a restructuring plan that is expected to yield approximately $8 million in annual expense savings [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the momentum across all business areas and the potential for significant growth in the product digitization market [25] - The company anticipates continued growth in service revenue from Central Banks, projecting over 10% growth for the year [19] Other Important Information - The company is evaluating additional metrics to better capture underlying growth rates due to the impact of multi-year contracts on reported bookings [17] - Cash usage during the quarter was $9.5 million, a reduction from $16.7 million in Q1 2022, with expectations for continued decline in cash usage [48] Q&A Session Summary Question: Can you elaborate on the use cases for the new contract? - Management indicated that the Digimarc Illuminate Platform is being used to protect packaging for precious metals and critical building materials, as well as for digitizing items in a deposit return system [54] Question: How will revenue recognition work for the new contract? - Revenue recognition will be ratable, but due to the staggered start dates of the products, the $6 million will not be recognized evenly [58] Question: What is the enthusiasm level among VARs for the Digimarc products? - Enthusiasm is growing as VARs recognize the value of the Digimarc Illuminate Platform for product digitization, with many seeing it as a necessary tool to remain competitive [78] Question: What are the expectations for cash burn for the remainder of the year? - Management noted that with growing revenue and reduced operating expenses, cash burn is expected to decrease significantly [85]

Revenue Performance - Total revenue for the three-month period ended March 31, 2023, increased by $0.4 million, or 6%, to $7.8 million compared to $7.4 million in the same period in 2022[120] - Subscription revenue for the three-month period ended March 31, 2023, was $3.885 million, a 2% increase from $3.791 million in 2022[122] - Service revenue for the same period increased by $0.338 million, or 9%, to $3.958 million compared to $3.620 million in 2022[122] - Domestic revenue increased by $0.404 million, or 17%, to $2.767 million in Q1 2023 compared to $2.363 million in Q1 2022[126] - International revenue saw a slight increase of $0.028 million, or 1%, totaling $5.076 million in Q1 2023 compared to $5.048 million in 2022[126] - The government segment's total revenue increased by $0.388 million, or 11%, to $3.960 million in Q1 2023 compared to $3.572 million in Q1 2022[129] Profitability Metrics - Gross profit margin improved to 54% in Q1 2023 from 45% in Q1 2022[119] - Total gross profit for the three months ended March 31, 2023, increased by $0.9 million to $4.244 billion, a 27% increase compared to the same period in 2022[132] - Subscription gross profit rose by $0.3 million, reflecting higher subscription revenue and a favorable mix, resulting in a gross profit margin of 80%, up from 73%[131][133] - Service gross profit increased by $0.5 million, with a gross profit margin of 57%, up from 49%, due to higher service revenue and lower professional services costs[131][134] - Non-GAAP gross profit for the three months ended March 31, 2023, increased by $0.8 million to $5.715 million compared to $4.880 million for the same period in 2022[156] - Non-GAAP gross profit margin improved to 73% for the three months ended March 31, 2023, up from 66% in the same period in 2022[157] Operating Expenses - Total operating expenses decreased by $2.3 million, or 11%, to $19.0 million in Q1 2023 compared to $21.4 million in Q1 2022[121] - Sales and marketing expenses decreased by $1.647 million to $6.298 billion, a 21% reduction, representing 80% of total revenue[135][136] - Research, development, and engineering expenses increased by $1.735 million to $7.826 billion, accounting for 100% of total revenue[136][137] - General and administrative expenses decreased by $1.781 million to $4.627 billion, representing 59% of total revenue[140][142] - Non-GAAP operating expenses decreased by $1.6 million to $15.480 million for the three months ended March 31, 2023, compared to $17.042 million for the same period in 2022[158] Net Loss and Cash Flow - The company reported an operating loss of $188 thousand for Q1 2023, an improvement from a loss of $243 thousand in Q1 2022[119] - The net loss for the three months ended March 31, 2023, was $14.040 million, a reduction of 21% from the net loss of $17.781 million in the same period in 2022[162] - Cash, cash equivalents, and short-term marketable securities totaled $43.025 million as of March 31, 2023, down from $52.542 million as of December 31, 2022[159] - Net cash used in operating activities decreased by $3.112 million to $8.744 million for the three months ended March 31, 2023, compared to $11.856 million for the same period in 2022[162] - Cash flows provided by investing activities increased by $6.217 million for the three months ended March 31, 2023, compared to the same period in 2022[163] Future Outlook and Risks - The company anticipates incurring an additional $21.576 million in stock-based compensation expense through March 31, 2027, for outstanding awards[146] - A significant portion of the company's revenue is concentrated among a few customers, which poses a risk to future revenue stability[171] - The company believes it has one of the world's most extensive patent portfolios in digital watermarking and related fields, which could enhance its competitive advantage[171] - Future investments in research, development, and engineering of products and technology are anticipated to drive growth and market opportunities[171] - The company is participating in the HolyGrail 2.0 initiative, which is expected to demonstrate the utility of its products in the recycling industry[171] - The company is focused on international growth opportunities and plans to invest in these markets in the future[172] - The company anticipates variability in contracted arrangements due to changes in circumstances, which could affect revenue projections[172] - Future financial obligations are expected to be met within the coming fiscal year, indicating a stable liquidity position[172] - The company is monitoring capital market conditions and credit risk exposure, which could impact its cost of capital[172] - The company does not undertake any obligation to publicly update or revise forward-looking statements, emphasizing the uncertainty of future performance[174]

Digimarc Corp (NASDAQ:DMRC) Q4 2022 Earnings Conference Call March 1, 2023 5:00 PM ET Company Participants Joel Meyer - EVP, Chief Legal Officer, Compliance Officer & Corporate Secretary Riley McCormack - CEO, President & Director Charles Beck - EVP, CFO & Treasurer Conference Call Participants James Ricchiuti - Needham & Company Operator Greetings, and welcome to the Digimarc Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recor ...

Acquisition and Partnerships - Digimarc completed the acquisition of EVRYTHNG Limited on January 3, 2022, enhancing its product cloud capabilities[17] - The partnership with Sealed Air aims to deliver smart packaging solutions across multiple markets, combining Digimarc's digitization platform with Sealed Air's digital packaging innovations[24] Revenue and Contracts - In 2022, 46% of Digimarc's revenue was generated from a long-term contract with Central Banks, which has been extended through December 31, 2029[37][38] - The company anticipates a minimum of $44 million in future revenue from current contracts as of December 31, 2022, up from $29 million in 2021, with approximately $24 million expected to be recognized in 2023[44] - Digimarc's backlog may not guarantee actual revenue due to potential modifications or cancellations of contracts included in the backlog[49] Technology and Innovation - Digimarc's technology achieved a 99% detection rate in a semi-industrial trial for digital watermarks, demonstrating effectiveness across various plastic packaging materials[23] - Digimarc Recycle technology demonstrated 99% accuracy in sorting flexible plastics, facilitating the creation of new end-markets for recycled materials[27] - The company has approximately 950 U.S. and foreign patents granted and pending, positioning it as a leader in digital watermarking technology[40] Employee Engagement and Development - The wellness program through Regence Empower has a participation rate of 45%, which is an increase of 10% from the previous year[66] - The company has implemented a performance management system to support continuous learning and development, with strong participation in employee surveys[64] - Compensation and benefits are reviewed against the market annually, ensuring competitive base salaries and restricted stock units for outstanding performance[60] - The company promotes internal mobility and transparency in leveling and promoting employees, with salary ranges posted for new positions[61] - The company provides various training and development programs, including tuition reimbursement and online training platforms[65] Diversity, Equity, and Inclusion (DEI) - The Digimarc Methodology for organizational health has been adopted to foster diversity, equity, and inclusion (DEI) within the company culture[55] - The Board of Directors oversees the company's ESG efforts, including DEI programs, through the Governance, Nominating, and Sustainability Committee[56] - The Chief People Officer is responsible for developing and advancing the company's human capital strategy, which includes DEI initiatives[67] Employee Benefits and Community Engagement - The company has a Self-Managed Paid Time Off (PTO) program for exempt employees, allowing flexibility in time off[62] - The company supports community outreach through a matching program for employee donations to charities[63] Employee Turnover - Digimarc's employee turnover rate increased to 14% in 2022, attributed to a more competitive labor market[51] Environmental, Social, and Governance (ESG) - The company has formed an internal ESG team to manage its environmental, social, and governance impacts, aligning with industry standards[32][34]

Digimarc Corporation (NASDAQ:DMRC) Q3 2022 Earnings Conference Call November 3, 2022 5:00 PM ET Company Participants Joel Meyer – Chief Legal Officer Charles Beck – Chief Financial Officer Riley McCormack – Chief Executive Officer Conference Call Participants Matt Collard – PCB Advisory Jeff Bernstein – Cowen Jeff Van Rhee – Craig-Hallum Capital Group Operator Good day, and welcome to the Digimarc Q3 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | |-------------------------------------------------------------------------------------------------------|-----------------------------------------------------| | | | | For ...

Start Time: 17:00 January 1, 0000 5:18 PM ET Digimarc Corporation (NASDAQ:DMRC) Q2 2022 Earnings Conference Call August 03, 2022, 17:00 PM ET Company Participants Riley McCormack - President and CEO Charles Beck - EVP, CFO and Treasurer Joel Meyer - EVP, Chief Legal Officer and Corporate Secretary Conference Call Participants Operator Greetings, and welcome to the Digimarc Corporation Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answe ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | |-------------------------------------------------------------------------------------------------------|-----------------------------------------------------| | | | | For the ...

Financial Data and Key Metrics Changes - First year commercial bookings were $3.8 million, up 50% from Q1 2021, with EVRYTHNG contributing $600,000 [9] - Revenue for Q1 was $7.4 million, an 11% increase from $6.7 million in Q1 last year, with EVRYTHNG contributing $1.5 million [11] - Gross profit margin for Q1 was 45%, down from 65% in Q1 last year, primarily due to $1.2 million of amortization expense from the EVRYTHNG acquisition [14] - Operating expenses for the quarter were $21.4 million, up $8.8 million from Q1 last year, with EVRYTHNG adding $4.6 million [15] - Net loss per common share for the quarter was $1.03 compared to $0.50 in Q1 last year [18] - Non-GAAP net loss per common share was $0.69 versus $0.34 in Q1 last year [19] Business Line Data and Key Metrics Changes - Subscription revenue increased 30% from $2.9 million to $3.8 million, with EVRYTHNG contributing $1.2 million [12] - Service revenue decreased 4% from $3.8 million to $3.6 million, with EVRYTHNG contributing $300,000 [13] Market Data and Key Metrics Changes - Organic first year commercial bookings growth was 28% versus the prior period a year ago, increasing to 42% when excluding the Piracy Intelligence bookings [23] Company Strategy and Development Direction - The company is focused on becoming a product-led organization, emphasizing the importance of long-term transformation over short-term distractions [25][28] - The launch of integrated products, such as Digimarc Recycle and Digimarc Brand Integrity, is a key part of the company's strategy moving forward [24][30] - The company aims to leverage the success of Digimarc Recycle to drive adoption across various geographies and substrates beyond plastic [46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, indicating that the current bookings growth is just the beginning of a longer-term S-curve of growth [75] - The Phase 2 results of the Holy Grail project were described as eye-opening, leading to increased interest from stakeholders [53] Other Important Information - The acquisition of EVRYTHNG closed on January 3, 2022, and has had a significant impact on both revenue and expenses [4] - The company ended the quarter with $24.9 million in cash and investments, having raised $58.3 million in early April through a registered direct offering [19][20] Q&A Session Summary Question: What are the next phases of the test underway in Europe? - Management indicated that the Holy Grail project is not their trial, and they can only share results once they are public [51] Question: Can you elaborate on leveraging this in other geographies and substrates? - Management noted that the Phase 2 results have led to more serious conversations with stakeholders interested in exploring solutions beyond Europe and plastic [52] Question: How do you feel about accelerating the process with other initiatives? - Management confirmed that the EVRYTHNG acquisition has benefited other products and that they are focused on accelerating bookings growth [57][61] Question: Can you provide color on the final acquisition cost for EVRYTHNG? - The transaction costs paid on behalf of EVRYTHNG shareholders were $4 million, with no expectation of a second payout as the Product ARR minimum was not hit [71] Question: What is the target for bookings growth? - Management expects multiple years of high enduring revenue growth, indicating that they are at the beginning of their growth S-curve [75]