Digimarc(DMRC) - 2024 Q3 - Quarterly Report

Revenue Performance - Total revenue for the three-month period ended September 30, 2024, increased by $0.4 million to$ 9.4 million, compared to $9.0 million for the same period in 2023, primarily driven by a$ 0.4 million increase in subscription revenue [106]. - Subscription revenue for the nine-month period ended September 30, 2024, increased by $4.0 million to$ 17.4 million, reflecting a 30% increase compared to $13.4 million for the same period in 2023 [113]. - Subscription revenue accounted for 56% of total revenue for the three-month period ended September 30, 2024, up from 53% in the same period in 2023 [105]. - Total revenue for the three months ended September 30, 2024, was$ 9.443 billion, reflecting a $449 million (5%) increase compared to the same period in 2023 [121]. - Total commercial revenue for the three months ended September 30, 2024, was$ 5.382 billion, reflecting a $658 million (14%) increase compared to the same period in 2023 [121]. Operating Expenses - Total operating expenses for the three-month period ended September 30, 2024, increased by$ 0.9 million to $17.3 million, compared to$ 16.4 million for the same period in 2023 [108]. - Total operating expenses for the nine-month period ended September 30, 2024, decreased by $0.3 million to$ 51.2 million, compared to $51.5 million for the same period in 2023 [109]. - Sales and marketing expenses increased by$ 0.3 million (5%) for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to cash severance costs of $0.6 million [136]. - Research, development, and engineering expenses rose by$ 0.2 million (3%) for the three months ended September 30, 2024, compared to the same period in 2023, mainly due to higher cash headcount costs [139]. - General and administrative expenses increased by $0.4 million (10%) for the three months ended September 30, 2024, compared to the same period in 2023, driven by higher professional services and consulting costs [142]. Profitability Metrics - Gross profit margin for the three-month period ended September 30, 2024, improved to 62%, compared to 58% for the same period in 2023 [104]. - Total gross profit for the three months ended September 30, 2024, increased by$ 0.7 million (13%) to $5.897 billion, primarily from higher subscription revenue [129]. - Subscription gross profit margin increased to 86% for the three months ended September 30, 2024, compared to 85% in the same period of 2023 [128]. - Non-GAAP gross profit for the three months ended September 30, 2024, increased by$ 0.5 million, primarily reflecting higher subscription revenue [162]. - Non-GAAP gross profit margin for the three months ended September 30, 2024, increased to 78% compared to 76% for the same period in 2023 [163]. Revenue Sources - Service revenue for the three-month period ended September 30, 2024, remained flat at $4.2 million compared to the same period in 2023 [115]. - Domestic revenue decreased by$ 0.9 million (31%) for the three months ended September 30, 2024, primarily due to $0.7 million lower subscription revenue [117]. - International revenue increased by$ 1.4 million (22%) for the three months ended September 30, 2024, driven by $1.1 million higher subscription revenue from international customers [119]. - Government service revenue decreased by$ 0.2 million (5%) for the three months ended September 30, 2024, due to timing of program work with Central Banks [123]. Financial Position - The company reported a net loss of $30.36 million for the nine months ended September 30, 2024, compared to a net loss of$ 35.39 million for the same period in 2023, reflecting a decrease of 14% [170]. - Cash flows used in operating activities for the nine months ended September 30, 2024, increased by $5.7 million compared to the same period in 2023, primarily due to unfavorable timing of changes in operating assets and liabilities [170]. - The company’s working capital as of September 30, 2024, was$ 35.41 million, up from $24.56 million as of December 31, 2023 [165]. - Total cash, cash equivalents, and marketable securities increased by$ 6.5 million from December 31, 2023, to September 30, 2024, primarily due to net proceeds from the issuance of common stock [166]. - Cash flows from financing activities for the nine months ended September 30, 2024, increased by $31.4 million, mainly due to$ 32.2 million of net cash proceeds from a registered direct stock offering [172]. Future Outlook and Risks - The company may seek additional financing to support growth initiatives, acquisitions, or investments in complementary businesses and technologies [175]. - The company anticipates that its future performance could be affected by various risk factors, including concentration of revenue among few customers and market growth opportunities [178]. - The company believes it has one of the world's most extensive patent portfolios in digital watermarking and related fields, which may impact future revenue [176]. Compliance and Controls - The company conducted an evaluation of its disclosure controls and procedures, concluding they were effective as of the end of the reporting period [181]. - There were no changes in internal control over financial reporting that materially affected the company during the three-month period ended September 30, 2024 [182]. - The company does not expect any ongoing legal proceedings to have a material adverse effect on its financial position or results of operations [183].