Digimarc Corp (DMRC) Q2 2024 Earnings Call Highlights: Strong Subscription Growth and New ...

GuruFocus.com10-10

Ending ARR: Increased 44% from $16.7 million to $23.9 million year-over-year. Total Revenue: $10.4 million, up 19% from $8.7 million in Q2 last year. Subscription Revenue: Grew 36% from $4.7 million ...

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GuruFocus has detected 3 Warning Signs with DMRC.\n\nRelease Date: August 13, 2024\nFor the complete transcript of the earnings call, please refer to the full earnings call transcript.\n Positive Points \n\nDigimarc Corp (NASDAQ:DMRC) reported a 44% increase in Annual Recurring Revenue (ARR) year-over-year, indicating strong growth in their subscription model.\nThe company achieved a 39% growth in commercial subscription revenue, showcasing the effectiveness of their SaaS and PaaS offerings.\nSubscription gross profit margin improved to 89%, a 5-percentage point increase, reflecting efficient cost management and favorable revenue mix.\nDigimarc Corp (NASDAQ:DMRC) successfully closed its first Center of Expertise (CoE)-sourced contract, demonstrating the potential of their new partner engagement model.\nThe company is exploring a significant new market opportunity in the gift card industry, with a potential US market TAM ranging from $900 million to $1.5 billion of ARR.\n\n Negative Points \n\nQuarterly net ARR growth was negatively impacted by churn, primarily due to the transition to the new CoE program, which offset gross additions.\nThe company's business is expected to remain 'lumpy' until it reaches a larger scale, indicating potential volatility in financial performance.\nOperating expenses increased by 4% year-over-year, partly due to lower costs being allocated from operating expenses to cost of revenue.\nDespite progress, the Digimarc Recycle initiative faces elongated sales cycles and ecosystem dependencies, making timing unpredictable.\nThe company reported a non-GAAP net loss, although it decreased by 14% year-over-year, indicating ongoing challenges in achieving profitability.\n\n Q & A Highlights \nQ: Can you provide details on customer churn in the quarter and how the Center of Expertise (CoE) program impacted net new ARR? A: Charles Beck, CFO, explained that most churn was related to the transition to the CoE program. Riley McCormack, CEO, added that the CoE program focuses on building a larger group of partners with lower upfront costs, leading to higher ARR over time.\nQ: What updates can you provide on legislation in Europe and Canada regarding plastic recycling, and how might it impact your projects? A: Riley McCormack, CEO, mentioned that the first partner in their new go-to-market motion expects to sign a deal in the second half of the year for a European country. He emphasized that while regulation is a tailwind, they are focused on driving their own urgency in these conversations.\nQ: Can you elaborate on the statement about demonstrating the ability to carry a heavy load in a multi-signal future with your largest commercial customer? A: Riley McCormack, CEO, highlighted two key developments: the customer now understands the value of digitizing more items with Digimarc's technology and the importance of Digimarc delivering more software capabilities for their points of detection.\nQ: How should we think about operating expense growth for the rest of the year? A: Charles Beck, CFO, stated that they do not expect a significant ramp-up in expenses. Generally, expenses are higher in the first half of the year, and they anticipate maintaining operational leverage as revenue grows.\nQ: Can you provide more details on the gift card opportunity and its potential impact on ARR? A: Riley McCormack, CEO, explained that gift cards face multiple attack vectors, and Digimarc's solution addresses these effectively. The opportunity is significant, with a US market TAM ranging from $900 million to $1.5 billion of ARR, and the industry engagement has been remarkable.\nFor the complete transcript of the earnings call, please refer to the full earnings call transcript.This article first appeared on \nGuruFocus.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2474789134"}