--Subscription Gross Profit Margin(2) Expands to 87%
Digimarc Corporation reported financial results for the first quarter ended March 31, 2024.
"Q1 was another strong quarter for Digimarc. Compared to the first quarter of 2023, we grew quarter-ending Annual Recurring Revenue (ARR) 85%, grew commercial subscription revenue 52%, and expanded subscription gross profit margin 7.5 percentage points to 87.0%," said Digimarc CEO Riley McCormack. "We are focused on positioning ourselves to convert our large Total Addressable Market (TAM) into substantial free cash flow by delivering high and long-lasting growth at world class operating margins. Q1 provided multiple tangible examples of our progress against this focus."
First Quarter Financial Results
Subscription revenue for the first quarter of 2024 increased to $5.8 million compared to $3.9 million for the first quarter of 2023, primarily reflecting higher subscription revenue from new and existing commercial contracts.
Service revenue for the first quarter of 2024 increased to $4.2 million compared to $4.0 million for the first quarter of 2023, primarily reflecting the timing of government program work.
Total revenue for the first quarter of 2024 increased to $9.9 million compared to $7.8 million for the first quarter of 2023.
Gross profit margin for the first quarter of 2024 increased to 63% compared to 54% for the first quarter of 2023. Excluding amortization expense on acquired intangible assets, subscription gross profit margin increased to 87% from 80% while service gross profit margin slightly decreased to 56% from 57% for the first quarter of 2024 compared to the first quarter of 2023.
Non-GAAP gross profit margin for the first quarter of 2024 increased to 78% compared to 73% for the first quarter of 2023.
Operating expenses for the first quarter of 2024 decreased to $17.1 million compared to $19.0 million for the first quarter of 2023.
Non-GAAP operating expenses for the first quarter of 2024 decreased to $13.8 million compared to $15.5 million for the first quarter of 2023.
Net loss for the first quarter of 2024 was $10.3 million or ($0.50) per share compared to $14.0 million or ($0.70) per share for the first quarter of 2023.
Non-GAAP net loss for the first quarter of 2024 was $5.5 million or ($0.27) per share compared to $9.0 million or ($0.45) per share for the first quarter of 2023.
At March 31, 2024, cash, cash equivalents and marketable securities totaled $48.9 million compared to $27.2 million at December 31, 2023.
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(1) Annual Recurring Revenue (ARR) is a company performance metric calculated as the aggregation of annualized subscription fees from all of our commercial contracts as of the measurement date.
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Conference Call
Digimarc will hold a conference call today (Thursday, May 2, 2024) to discuss these financial results and to provide a business update. CEO Riley McCormack, CFO Charles Beck and CLO George Karamanos will host the call starting at 5:00 p.m. Eastern time (2:00 p.m. Pacific time). A question and answer session will follow management's prepared remarks.
The conference call will be broadcast live and available for replay here and in the investor section of the company's website. The conference call script will also be posted to the company's website shortly before the call.
For those who wish to call in via telephone to ask a question, please dial the number below at least five minutes before the scheduled start time:
Toll Free number: 877-407-0832
International number: 201-689-8433
Conference ID number: 13743902
About Digimarc
Digimarc Corporation (NASDAQ: DMRC) is the pioneer and global leader in digital watermarking technologies. For nearly 30 years, Digimarc innovations and intellectual property in digital watermarking have been deployed at a massive scale for the identification and the authentication of physical and digital items. A notable example is our partnership with a consortium of the world's central banks to deter counterfeiting of global currency. Digimarc is also instrumental in supporting global industry standards efforts spanning both the physical and digital worlds. In 2023, Digimarc was named to the Fortune 2023 Change the World list and honored as a 2023 Fast Company World Changing Ideas finalist. Learn more at Digimarc.com.
Forward-Looking Statements
Except for historical information contained in this release, the matters described in this release contain various "forward-looking statements." These forward-looking statements include statements identified by terminology such as "will," "should," "expects," "estimates," "predicts" and "continue" or other derivations of these or other comparable terms. These forward-looking statements are statements of management's opinion and are subject to various assumptions, risks, uncertainties and changes in circumstances. Actual results may vary materially from those expressed or implied from the statements in this release as a result of changes in economic, business and regulatory factors. More detailed information about risk factors that may affect actual results are outlined in the company's Form 10-K for the year ended December 31, 2023, and in subsequent periodic reports filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date of this release. Except as required by law, Digimarc undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this release.
Non-GAAP Financial Measures
This release contains the following non-GAAP financial measures: Non-GAAP gross profit, Non-GAAP gross profit margin, Non-GAAP operating expenses, Non-GAAP net loss, and Non-GAAP loss per share (diluted). See below for a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure. These non-GAAP financial measures are an important measure of our operating performance because they allow management, investors and analysts to evaluate and assess our core operating results from period-to-period after removing non-cash and non-recurring activities that affect comparability. Our management uses these non-GAAP financial measures in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparisons.
Digimarc believes that providing these non-GAAP financial measures, together with the reconciliation to GAAP, helps management and investors make comparisons between us and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measures and the corresponding GAAP measures provided by each company under applicable SEC rules. These non-GAAP financial measures are not measurements of financial performance or liquidity under GAAP. In order to facilitate a clear understanding of its consolidated historical operating results, investors should examine Digimarc's non-GAAP financial measures in conjunction with its historical GAAP financial information, and investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to, GAAP financial measures. Non-GAAP financial measures may not be indicative of the historical operating results of the Company nor are they intended to be predictive of potential future results.
| Digimarc Corporation
Consolidated Income Statement Information
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended March 31,
------------------------------------------------------------------------------------------------------------------------
2024 2023
-------------------------------------------------- --------------------------------------------------
Revenue:
$ 5,762 $ 3,885
Subscription
4,176 3,958
Service
-------------------- ---------- -------------------- -------------------- ---------- --------------------
9,938 7,843
Total revenue
Cost of revenue:
747 795
Subscription (1)
1,839 1,715
Service (1)
1,140 1,089
Amortization expense on acquired intangible assets
-------------------- ---------- -------------------- -------------------- ---------- --------------------
3,726 3,599
Total cost of revenue
Gross profit
5,015 3,090
Subscription (1)
2,337 2,243
Service (1)
(1,140 ) (1,089 )
Amortization expense on acquired intangible assets
-------------------- ---------- -------------------- -------------------- ---------- --------------------
6,212 4,244
Total gross profit
Gross profit margin:
87 % 80 %
Subscription (1)
56 % 57 %
Service (1)
63 % 54 %
Total
Operating expenses:
5,536 6,298
Sales and marketing
6,741 7,826
Research, development and engineering
4,520 4,627
General and administrative
272 260
Amortization expense on acquired intangible assets
-------------------- ---------- -------------------- -------------------- ---------- --------------------
17,069 19,011
Total operating expenses
Operating loss (10,857 ) (14,767 )
Other income, net 528 745
-------------------- ---------- -------------------- -------------------- ---------- --------------------
Loss before income taxes (10,329 ) (14,022 )
Provision for income taxes (9 ) (18 )
-------------------- ---------- -------------------- -------------------- ---------- --------------------
$ (10,338 ) $ (14,040 )
Net loss
-------------------- ---------- -------------------- -------------------- ---------- --------------------
Loss per share:
Loss per share -- basic $ (0.50 ) $ (0.70 )
Loss per share -- diluted $ (0.50 ) $ (0.70 )
20,730 20,093
Weighted average shares outstanding -- basic
20,730 20,093
Weighted average shares outstanding -- diluted
______________
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| Digimarc Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended March 31,
------------------------------------------------------------------------------------------------------------------------
2024 2023
-------------------------------------------------- --------------------------------------------------
GAAP gross profit $ 6,212 $ 4,244
1,140 1,089
Amortization of acquired intangible assets
138 144
Amortization and write-off of other intangible assets
253 238
Stock-based compensation
-------------------- ---------- -------------------- -------------------- ---------- --------------------
$ 7,743 $ 5,715
Non-GAAP gross profit
78 % 73 %
Non-GAAP gross profit margin
GAAP operating expenses $ 17,069 $ 19,011
(193 ) (428 )
Depreciation and write-off of property and equipment
(272 ) (260 )
Amortization of acquired intangible assets
(133 ) (39 )
Amortization and write-off of other intangible assets
(87 ) (166 )
Amortization of lease right of use assets under operating leases
(2,578 ) (2,638 )
Stock-based compensation
-------------------- ---------- -------------------- -------------------- ---------- --------------------
$ 13,806 $ 15,480
Non-GAAP operating expenses
GAAP net loss $ (10,338 ) $ (14,040 )
1,531 1,471
Total adjustments to gross profit
3,263 3,531
Total adjustments to operating expenses
-------------------- ---------- -------------------- -------------------- ---------- --------------------
$ (5,544 ) $ (9,038 )
Non-GAAP net loss
GAAP loss per share (diluted) $ (0.50 ) $ (0.70 )
$ (5,544 ) $ (9,038 )
Non-GAAP net loss
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| Digimarc Corporation
Consolidated Balance Sheet Information
(in thousands)
(Unaudited)
March 31, December 31,
-------------------------------------------------- --------------------------------------------------
2024 2023
-------------------------------------------------- --------------------------------------------------
ASSETS
Current assets:
$ 36,414 $ 21,456
Cash and cash equivalents (1)
12,511 5,726
Marketable securities (1)
5,215 5,813
Trade accounts receivable, net
3,802 4,085
Other current assets
-------------------- ---------- -------------------- -------------------- ---------- --------------------
57,942 37,080
Total current assets
Property and equipment, net 1,445 1,570
Intangibles, net 26,720 28,458
Goodwill 8,576 8,641
Lease right of use assets 3,930 4,017
Other assets 1,106 786
-------------------- ---------- -------------------- -------------------- ---------- --------------------
$ 99,719 $ 80,552
Total assets
-------------------- ---------- -------------------- -------------------- ---------- --------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
$ 4,100 $ 6,672
Accounts payable and other accrued liabilities
5,256 5,853
Deferred revenue
-------------------- ---------- -------------------- -------------------- ---------- --------------------
9,356 12,525
Total current liabilities
Long-term lease liabilities 5,812 5,994
Other long-term liabilities 80 106
-------------------- ---------- -------------------- -------------------- ---------- --------------------
15,248 18,625
Total liabilities
Shareholders' equity:
50 50
Preferred stock
21 20
Common stock
409,473 376,189
Additional paid-in capital
(322,106 ) (311,768 )
Accumulated deficit
(2,967 ) (2,564 )
Accumulated other comprehensive loss
-------------------- ---------- -------------------- -------------------- ---------- --------------------
84,471 61,927
Total shareholders' equity
-------------------- ---------- -------------------- -------------------- ---------- --------------------
$ 99,719 $ 80,552
Total liabilities and shareholders' equity
-------------------- ---------- -------------------- -------------------- ---------- --------------------
_______________
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| Digimarc Corporation
Consolidated Cash Flow Information
(in thousands)
(Unaudited)
Three Months Ended March 31,
----------------------------------------------------------------------------------------------------------------------------
2024 2023
-------------------------------------------------- ------------------------------------------------------
Cash flows from operating activities:
$ (10,338 ) $ (14,040 )
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
193 428
Depreciation and write-off of property and equipment
1,412 1,349
Amortization of acquired intangible assets
271 183
Amortization and write-off of other intangible assets
87 166
Amortization of lease right of use assets under operating leases
2,831 2,876
Stock-based compensation
(17 ) --
Decrease in allowance for doubtful accounts
Changes in operating assets and liabilities:
600 631
Trade accounts receivable
273 1,766
Other current assets
(323 ) (191 )
Other assets
(2,624 ) (910 )
Accounts payable and other accrued liabilities
(600 ) (925 )
Deferred revenue
(187 ) (77 )
Lease liability and other long-term liabilities
-------------------- ---------- -------------------- -------------------- -------------- --------------------
(8,422 ) (8,744 )
Net cash provided by (used in) operating activities
Cash flows from investing activities:
(106 ) (51 )
Purchase of property and equipment
(106 ) (112 )
Capitalized patent costs
3,501 10,247
Proceeds from maturities of marketable securities
(10,320 ) (1,975 )
Purchases of marketable securities
-------------------- ---------- -------------------- -------------------- -------------- --------------------
(7,031 ) 8,109
Net cash provided by (used in) investing activities
Cash flows from financing activities:
32,218 --
Issuance of common stock, net of issuance costs
(1,781 ) (656 )
Purchase of common stock
(15 ) (26 )
Repayment of loans
-------------------- ---------- -------------------- -------------------- -------------- --------------------
30,422 (682 )
Net cash provided by (used in) financing activities
Effect of exchange rate on cash (11 ) 20
-------------------- ---------- -------------------- -------------------- -------------- --------------------
$ 14,958 $ (1,297 )
Net increase (decrease) in cash and cash equivalents (2)
-------------------- ---------- -------------------- -------------------- -------------- --------------------
Cash, cash equivalents and marketable securities at beginning of period 27,182 52,542
Cash, cash equivalents and marketable securities at end of period 48,925 43,025
-------------------- ---------- -------------------- -------------------- -------------- --------------------
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View source version on businesswire.com: https://www.businesswire.com/news/home/20240502576461/en/
SOURCE: Digimarc Corporation
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|
Charles Beck
Chief Financial Officer
Charles.Beck@digimarc.com
+1 503-469-4721
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COMTEX_451797391/1006/2024-05-02T16:05:02 |
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