Digimarc(US:DMRC)2019-10-31 02:34Financial Data and Key Metrics Changes - Q3 revenue increased by 19% to $5.8 million from $4.9 million in the same quarter last year, primarily driven by a 48% increase in subscription revenue [7][10] - Gross margin for the quarter improved to 67%, up from 61% in the previous year, mainly due to higher subscription revenue [8] - Net loss for Q3 was $7.8 million or $0.65 per diluted share, compared to a net loss of $8.3 million or $0.73 per diluted share in Q3 last year [10] Business Line Data and Key Metrics Changes - Subscription revenue rose by 48%, reflecting increased Discover and Barcode bookings [7] - Service revenue increased by $200,000, while license revenue remained flat [7] - Discover and Barcode bookings were approximately 95% higher than Q3 last year, totaling $1.1 million [8] Market Data and Key Metrics Changes - The company anticipates cash usage to be between $6 million to $7 million in Q4, lower than Q3 due to timing of vendor payments and customer receipts [12] - The company has $9.7 million remaining on its $30 million ATM program authorization [11] Company Strategy and Development Direction - The company aims to enable a large community of developers to build applications on its platform, providing financial and operational leverage as it scales [19] - The strategy includes focusing on enhancing partnerships with major retailers like Walmart, with ongoing projects to improve store operations and customer experience [21][24] - The company is exploring various financing strategies to support its involvement in initiatives like HolyGrail 2.0 [65][67] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the acceleration of bookings and the potential for significant growth in Discover and Barcode bookings in 2020 [14][15] - The company expects service revenue to be modestly higher in 2020, with license revenue anticipated to remain flat [13] - Management highlighted the importance of collaboration with industry leaders to address challenges in recycling and sustainability [36][38] Other Important Information - The company has made substantial progress in enhancing private brand packaging for Walmart and is expanding its partnerships with other retailers [22][27] - The company is actively involved in sustainability initiatives, with a focus on reducing manufacturing defects and plastics waste [50][51] Q&A Session Summary Question: Update on HolyGrail 2.0 leadership group and pricing model - Management is exploring various financing options but cannot provide a specific timetable for the pricing model or upfront payments [65][67] Question: Potential for signing recycling deals in early 2021 - Management refrained from commenting on specific timelines but emphasized readiness to support commercialization efforts [70][72] Question: Overview of the revenue funnel and top items - The focus remains on retail, CPG, and packaging, with a significant number of pilots in progress, aiming to expedite movement to production [76][81] Question: Update on headcount additions - New hires will primarily be in development and delivery systems to support the expanding use of the platform [84][85] Question: Progress in Japan and ongoing programs - Management noted progress in Japan despite resource constraints, with ongoing R&D and limited deployments [100][102] Question: Applications showcased at Adobe Max - The company will demonstrate applications related to consumer engagement and supply chain management in the apparel sector [103][107] Question: Collaboration with Berry Plastics on HolyGrail efforts - Management highlighted Berry Plastics as a key partner in the circular economy and packaging initiatives [108][110] Question: Update on strategic discussions - Management is engaged in discussions with multiple companies but cannot provide specific details at this time [112][115] Question: Role of GS1 in Digimarc's growth - Management maintains a strong relationship with GS1 and is collaborating on standards for plastics recycling [116][118]