Digimarc(US:DMRC)2025-11-13 21:07Revenue 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].