Digimarc(US:DMRC)2019-07-25 03:00Financial Data and Key Metrics Changes - Q2 revenue increased by 14% to $6.2 million from $5.4 million in the same quarter last year, primarily driven by a 45% increase in subscription revenue [6][10] - Gross margin improved to 65%, up from 59% year-over-year, reflecting higher subscription revenue [9][17] - Net loss for Q2 was $7.9 million or $0.68 per diluted share, compared to a net loss of $8 million or $0.71 per diluted share in Q2 last year [10] - Working capital position improved significantly with $19.6 million raised under the ATM program [11][14] Business Line Data and Key Metrics Changes - Subscription revenue rose by 45%, while service revenue increased by $200,000, and license revenue decreased by $100,000 due to lower royalty reporting [6][7] - Discover and Barcode bookings surged by approximately 750%, reaching $1.7 million from $200,000 in Q2 last year [7][17] Market Data and Key Metrics Changes - The company signed a significant contract with Walmart, contributing $750,000 to bookings, and is focused on enhancing fresh product labels and private brand packaging [8][18] - The company is experiencing increased interest from retailers and CPGs, with ongoing discussions for pilot programs with several retailers in North America and Europe [21][27] Company Strategy and Development Direction - The company aims to leverage its partnership with Walmart to enhance its market presence and drive adoption of Digimarc Barcode across the retail sector [18][22] - There is a focus on expanding into the plastics recycling market, with ongoing initiatives to improve sorting and recycling processes [28][32] - The company is exploring equity-based strategic partnerships to accelerate growth and enhance its platform capabilities [46] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing significant growth in bookings and working capital, and emphasized the importance of executing on existing contracts [17][46] - The company is cautious about the timing of new initiatives and is prioritizing securing funding before accelerating projects [77][79] Other Important Information - The company plans to make 5 to 10 new hires in the second half of the year to meet growing demand [9] - Management highlighted the importance of establishing governance structures for recycling initiatives to ensure long-term success [80] Q&A Session Summary Question: Inquiry about Walmart suppliers' engagement - Management noted that many suppliers are becoming aware of the need to integrate Digimarc Barcode, but specific numbers are not available due to the broad nature of Walmart's supplier base [49][50] Question: Momentum in potential revenue impact areas - Management indicated that engagement with industry-leading retailers is increasing, and there are several supply chain projects in development that could have financial impacts [55][56] Question: Update on ATM program and strategic funding - Management confirmed that there are no plans to resume the ATM program at this time, focusing instead on strategic funding opportunities [61][62] Question: Relationship with Adobe - Management stated that the relationship with Adobe has been longstanding and is expected to grow, particularly in areas related to digital image protection [68][70] Question: Update on hangtags opportunity - Management confirmed ongoing deliveries to Costco and suggested that discussions with other general merchandisers are in progress [71] Question: Clarification on pilot production - Management explained that products found in stores are part of limited production pilots, which serve as a step towards full production [73] Question: Timeline for HolyGrail 2.0 project - Management emphasized that while there is pressure to increase recycling rates, the timeline for project completion is uncertain and dependent on securing funding [76][78]