Digimarc(US:DMRC)2025-10-30 20:04Revenue 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].