Annual Recurring Revenue(1) Increases 71%
Subscription Gross Profit Margin(2) Expands to 87%
Beaverton, Ore. – February 28, 2024 – Digimarc Corporation (NASDAQ: DMRC) reported financial results for the fourth quarter and fiscal year ended December 31, 2023.
“Q4 was another strong quarter for Digimarc. On a year-over-year basis, we accelerated our ARR growth to 71%, accelerated our subscription revenue growth to 37%, and expanded our subscription Gross Profit Margins more than 1,000 basis points to 87%,” said Digimarc CEO Riley McCormack. “These results were made possible by the team’s execution on multiple important initiatives we have been pursuing since we began our transformation in the second quarter of 2021, and with an ethos of never settling for the status quo and always planting the seeds for future growth, we remain excited for what is ahead.”
Fourth Quarter 2023 Financial Results
Subscription revenue for the fourth quarter of 2023 increased to $5.6 million compared to $4.1 million for the fourth quarter of 2022, primarily due to higher subscription revenue from new and existing commercial contracts.
Service revenue for the fourth quarter of 2023 increased to $3.7 million compared to $3.1 million for the fourth quarter of 2022, primarily due to higher service revenue from a consortium of the world’s central banks (the “Central Banks”).
Total revenue for the fourth quarter of 2023 increased to $9.3 million compared to $7.2 million for the fourth quarter of 2022.
Gross profit margin for the fourth quarter of 2023 increased to 63% compared to 53% for the fourth quarter of 2022. Excluding amortization expense on acquired intangible assets, subscription gross profit margin for the fourth quarter of 2023 increased to 87% from 77% for the fourth quarter of 2022 , while service gross profit margin was flat at 56% .
Non-GAAP gross profit margin for the fourth quarter of 2023 increased to 79% compared to 72% for the fourth quarter of 2022.
Operating expenses for the fourth quarter of 2023 decreased to $16.8 million compared to $17.1 million for the fourth quarter of 2022 .
Non-GAAP operating expenses for the fourth quarter of 2023 decreased to $13.4 million compared to $14.3 million for the fourth quarter of 2022.
Net loss for the fourth quarter of 2023 was $10.6 million or ($0.52) per share compared to $12.4 million or ($0.62) per share for the fourth quarter of 2022.
Non-GAAP net loss for the fourth quarter of 2023 was $5.6 million or ($0.28) per share compared to $8.2 million or ($0.41) per share for the fourth quarter of 2022.
Fiscal Year 2023 Financial Results
Subscription revenue for fiscal year 2023 increased to $19.0 million compared to $15.2 million for fiscal year 2022, primarily due to $4.9 million of higher subscription revenue from new and existing commercial contracts, partially offset by $0.9 million of lower subscription revenue as a result of sunsetting our Piracy Intelligence product in 2022.
Service revenue for fiscal year 2023 increased to $15.9 million compared to $15.0 million for fiscal year 2022 , primarily due to $1.9 million of higher service revenue from the Central Banks, reflecting a larger annual budget for program work, partially offset by $0.8 million of lower service revenue from the timing of HolyGrail 2.0 recycling projects.
Total revenue for fiscal year 2023 increased to $34.9 million compared to $30.2 million for fiscal year 2022 .
Gross profit margin for fiscal year 2023 increased to 58% compared to 51% for fiscal year 2022 . Excluding amortization expense on acquired intangible assets, subscription gross profit margin for fiscal year 2023 increased to 84% from 75% for fiscal year 2022 , while service gross profit margin decreased from 56% for fiscal year 2022 to 54% for fiscal year 2023 .
Non-GAAP gross profit margin for the fiscal year 2023 increased to 76% compared to 70% for fiscal year 2022 .
Operating expenses for fiscal year 2023 decreased to $68.4 million compared to $77.1 million for fiscal year 2022 , primarily due to $4.2 million of lower compensation costs due to lower headcount, partially offset by annual compensation adjustments, $1.5 million of lower contractor and consulting costs, $1.1 million of lower travel and training costs, $0.9 million of lower legal costs, $0.8 million of lower facility costs, and $0.7 million of lower lease impairment expense, partially offset by higher severance costs of $0.7 million incurred for organizational changes.
Non-GAAP operating expenses for fiscal year 2023 decreased to $55.0 million compared to $61.8 million for fiscal year 2022 , primarily due to $4.1 million of lower cash compensation costs due to lower headcount, partially offset by annual compensation adjustments, $1.5 million of lower contractor and consulting costs, $1.1 million of lower travel and training costs, and $0.9 million of lower legal costs, partially offset by higher cash severance costs of $0.7 million incurred for organizational changes.
Net loss for fiscal year 2023 was $46.0 million or ($2.26) loss per common share compared to a net loss of $59.8 million or ($3.12) loss per common share for fiscal year 2022 .
Non-GAAP net loss for fiscal year 2023 was $26.4 million or ($1.30) loss per common share compared to a net loss of $38.6 million or ($2.02) loss per common share for fiscal year 2022 .
At December 31, 2023 , cash, cash equivalents, and marketable securities totaled $27.2 million compared to $52.5 million at December 31, 2022 .
(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.
(2) Subscription G ross Profit Margin excludes amortization expense on acquired intangible assets.
Conference Call
Digimarc will hold a conference call today (Wednesday, February 28, 2024) to discuss these financial results and to provide a business update. 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 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: 13740292
Company Contact :
Charles Beck
Chief Financial Officer
Charles.Beck@digimarc.com
+1 503-469-4721
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