Digimarc Corp (DMRC) Reports 54% Increase in Annual Recurring Revenue in Q3 2023

Subscription Gross Profit Margin Expands to 85.5% with Total Revenue Rising to $9.0 Million

Summary
  • Digimarc Corp (DMRC) reports a 54% year-over-year increase in Annual Recurring Revenue (ARR) in Q3 2023.
  • Subscription gross profit margin expanded to 85.5%, reflecting a 1,000 basis point year-over-year increase.
  • Total revenue for Q3 2023 increased to $9.0 million, up from $7.8 million in Q3 2022.
  • Net loss for Q3 2023 was $10.7 million or $(0.53) per share, a significant decrease from $14.9 million or $(0.76) per share in Q3 2022.
Article's Main Image

On November 6, 2023, Digimarc Corp (DMRC, Financial) released its financial results for the third quarter ended September 30, 2023. The company reported a strong quarter with a 54% year-over-year increase in its ending Annual Recurring Revenue (ARR) and a 1,000 basis point year-over-year increase in subscription gross profit margin.

Financial Highlights

Subscription revenue for Q3 2023 increased to $4.8 million, up from $4.1 million in Q3 2022, primarily reflecting higher subscription revenue from new and existing commercial contracts. Service revenue also increased to $4.2 million, up from $3.7 million in Q3 2022, primarily reflecting higher service revenue from the Central Banks.

Total revenue for Q3 2023 increased to $9.0 million, up from $7.8 million in Q3 2022. Gross profit margin for Q3 2023 increased to 58%, up from 53% in Q3 2022. Excluding amortization expense on acquired intangible assets, subscription gross profit margin increased to 85% from 75%, while service gross profit margin decreased to 54% from 57% for Q3 2023 compared to Q3 2022.

Operating Expenses and Net Loss

Operating expenses for Q3 2023 decreased by $3.3 million, or 17%, to $16.4 million compared to $19.7 million for Q3 2022. This decrease primarily reflects $1.4 million of lower severance costs incurred for organizational changes, $1.1 million of lower compensation costs due to lower headcount, partially offset by annual compensation adjustments, and $0.6 million of lower contractor and consulting expenses.

Net loss for Q3 2023 was $10.7 million or $(0.53) per share, a significant decrease from $14.9 million or $(0.76) per share for Q3 2022. As of September 30, 2023, cash, cash equivalents, and marketable securities totaled $33.3 million, compared to $34.5 million at June 30, 2023.

CEO's Commentary

Digimarc CEO Riley McCormack commented on the results, stating,

Q3 was another strong quarter for Digimarc. We delivered a 54% year-over-year increase in our ending Annual Recurring Revenue (ARR) while driving a 1,000 basis point year-over-year increase in subscription gross profit margin. Our focus on being easy to begin doing business with and excellent at guiding customers along their product digitization journey is paying off."

McCormack also highlighted the company's recent expansion of Digimarc Validate to the digital domain, which he believes will significantly increase the company's Total Addressable Market (TAM) and strengthen its position across all areas of its business.

Explore the complete 8-K earnings release (here) from Digimarc Corp for further details.