Beaverton, Ore. – March 1 , 2023 – Digimarc Corporation (NASDAQ: DMRC) reported financial results for the fourth quarter and fiscal year ended December 31, 2022.
Fourth Quarter 2022 Financial Results
Subscription revenue for the fourth quarter of 2022 increased 13% to $4.1 million compared to $3.6 million in the fourth quarter of 2021, primarily reflecting subscription revenue from new commercial contracts and the contribution of subscription revenue post acquisition from EVRYTHNG, partially offset by $1.0 million of revenue from the sale of 10 non-core patents in the fourth quarter of 2021, and $0.6 million of lower subscription revenue as a result of sunsetting our Piracy Intelligence product.
Service revenue for the fourth quarter of 2022 decreased 11% to $3.1 million compared to $3.5 million in the fourth quarter of 2021, primarily reflecting lower service revenue from HolyGrail 2.0 recycling projects, partially offset by the contribution of service revenue post acquisition from EVRYTHNG.
Total revenue for the fourth quarter of 2022 increased 1% to $7.2 million compared to $7.1 million in the fourth quarter of 2021.
Gross profit for the fourth quarter of 2022 was $3.8 million compared to $5.0 million in the fourth quarter of 2021, primarily reflecting $1.1 million of amortization expense recognized in the fourth quarter of 2022 on the developed technology intangible asset acquired in the EVRYTHNG acquisition.
Non-GAAP gross profit for the fourth quarter of 2022 was $5.2 million compared to $5.3 million in the fourth quarter of 2021.
Operating expenses for the fourth quarter of 2022 increased 30% to $17.1 million compared to $13.2 million in the fourth quarter of 2021, primarily reflecting $2.9 million of operating expenses from EVRYTHNG post acquisition, $1.2 million of higher compensation costs due to annual compensation adjustments and higher headcount, and $0.3 million in non-cash lease impairment charges, partially offset by a reduction in other expenses.
Non-GAAP operating expenses for the fourth quarter of 2022 increased 38% to $14.3 million compared to $10.3 million in the fourth quarter of 2021.
Net loss for the fourth quarter of 2022 was $12.4 million or $(0.62) loss per common share compared to $8.2 million or $(0.50) loss per common share in the fourth quarter of 2021.
Non-GAAP net loss for the fourth quarter of 2022 was $8.2 million or $(0.41) loss per common share compared to $5.0 million or $(0.30) loss per common share in the fourth quarter of 2021.
Fiscal Year 2022 Financial Results
Subscription revenue for fiscal year 2022 increased 32% to $15.2 million compared to $11.5 million in fiscal year 2021, primarily reflecting the contribution of subscription revenue post acquisition from EVRYTHNG and subscription revenue from new commercial contracts, partially offset by $1.5 million of lower subscription revenue as a result of sunsetting our Piracy Intelligence product, $1.0 million of revenue from the sale of 10 non-core patents in 2021, and $0.4 million of upfront subscription revenue on a two-year contract signed in 2021.
Service revenue was flat year-over-year at $15.0 million, primarily reflecting the contribution of service revenue post acquisition from EVRYTHNG offsetting lower service revenue from HolyGrail 2.0 recycling projects.
Total revenue for fiscal year 2022 increased 14% to $30.2 million compared to $26.5 million in fiscal year 2021.
Gross profit for fiscal year 2022 was $15.3 million compared to $17.7 million in fiscal year 2021, primarily reflecting $4.4 million of amortization expense recognized in fiscal year 2022 on the developed technology intangible asset acquired in the EVRYTHNG acquisition, partially offset by gross profit contribution from higher subscription revenue.
Non-GAAP gross profit for the fiscal year 2022 was $21.3 million compared to $19.0 million in fiscal year 2021.
Operating expenses for fiscal year 2022 increased 34% to $77.1 million compared to $57.6 million in fiscal year 2021, primarily reflecting $15.8 million of EVRYTHNG operating expenses post acquisition, $6.6 million of higher compensation costs due to annual compensation adjustments and higher headcount, and $0.9 million in non-cash lease impairment charges, partially offset by $6.2 million of costs recognized in the second quarter of 2021 associated with the Separation Agreement we entered into with our former chief executive officer.
Non-GAAP operating expenses for fiscal year 2022 increased 43% to $61.8 million compared to $43.3 million in fiscal year 2021.
Net loss for fiscal year 2022 was $59.8 million or $(3.12) loss per common share compared to a net loss of $34.8 million or $(2.11) loss per common share in fiscal year 2021.
Non-GAAP net loss for fiscal year 2022 was $38.6 million or $(2.02) loss per common share compared to a net loss of $24.2 million or $(1.47) loss per common share in fiscal year 2021.
At December 31, 2022, cash, cash equivalents, short- and long-term marketable securities totaled $52.5 million compared to $41.6 million at December 31, 2021.
Conference call
Digimarc will hold a conference call today (Wednesday, March 1, 2023) to discuss these results and provide an update on market conditions and its execution of strategy. CEO Riley McCormack, CFO Charles Beck and CLO Joel Meyer 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 presentation.
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: +1 201-689-8433
Conference ID: 13734719
Company contact:
Charles Beck
Chief Financial Officer
Charles.Beck@digimarc.com
+1 503-469-4721
About Digimarc
Digimarc Corporation (NASDAQ: DMRC) is a global leader in product digitization, delivering business value across industries through unique identifiers and cloud-based solutions. A trusted partner in deterring digital counterfeiting of global currency for more than 20 years, Digimarc reveals a product's journey to provide intelligence and promote a prosperous, safer, and more sustainable world. With Digimarc, you can finally see everything. And when you see everything, you can achieve anything. For more information, visit us 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, 2021, 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 press 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 common 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.
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