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]
Digimarc(DMRC) - 2023 Q1 - Earnings Call Transcript