DMRC
All dollar amounts are in thousands except per share amounts or unless otherwise noted. The percentages within the tables may not sum to 100% due to rounding.
Digimarc, Digimarc Barcode, The Barcode of Everything, Barcode of Everything, and the circle-d logo are registered trademarks of Digimarc Corporation. EVRYTHNG and EVRYTHNG PRODUCT CLOUD are registered trademarks of EVRYTHNG Limited.
Overview
Digimarc Corporation is a global leader in product digitization, delivering business value across industries through unique identifiers and cloud-based solutions. Our technology illuminates a product's journey to provide complete visibility into all relevant product data, allowing companies to make intelligent business decisions.
The Digimarc Platform is a unique software as a service to manage digital identities, connect physical items using most existing data carriers, and provide a digital twin to help connected physical items interact with machines, devices, and applications. The Digimarc Platform is underpinned by:
• Digital Watermarks: Built on a patented foundation, these data carriers
provide an imperceptible digital identity and make scanning much more
efficient than traditional visual barcodes as they are repeated many times
throughout product packaging.
• Detection Software: A software program for computing devices and network
interfaces that recognizes and decodes Digimarc watermarks and easily
scans most digital identifiers.
• Verification/QC Software: Verification and quality control software that
offers detailed reports enabling printers and premedia professionals to
validate Digimarc watermarks and assess the expected performance.
• EVRYTHNG Product Cloud: The Product Cloud assigns products a unique
digital identity, making products trackable, intelligent, and interactive
by applying analytics and real-time intelligence to a company's data.
By enabling customers to create digital identities for physical and digital media objects, Digimarc's technologies provide many benefits, including:
• Brand Integrity: Our technology can verify product authenticity, provide
more in-depth insight into products, and pinpoint the location of
counterfeit goods. Because Digimarc watermarks are covert, they can easily
confirm the credibility of real products without attracting attention.
• Recycling Accuracy: Digimarc watermarks create a digital identity in any
plastic or other packaging product that overcomes existing challenges in
• Supply Chain Traceability: Our technology provides unique, serialized
inventory scanning, unique consumer experiences, and easier checkout.
Digimarc has also maintained a relationship with a consortium of central banks for over 20 years, providing trusted technology to help deter digital counterfeiting of currency. The relationship was the first commercially successful large-scale use of our technologies and protects billions of banknotes in circulation globally.
We seek patent protection for our inventions to differentiate our products and technologies, mitigate infringement risks, and develop opportunities for licensing. Our broad patent portfolio covers a wide range of methods, applications, system architectures and processes.
Critical Accounting Policies and Estimates
Results of Operations
(1) Cost of revenue for Service and Subscription excludes amortization expense on acquired intangible assets.
Domestic. The increase in domestic revenue for the three month period ended March 31, 2022, compared to the corresponding three month period ended March 31, 2021, included $0.7 million of domestic revenue from EVRYTHNG for the three months ended March 31, 2022. Excluding the domestic revenue from EVRYTHNG, domestic revenue decreased $0.1 million.
Cost of revenue
Service. Cost of service revenue primarily includes:
• compensation, benefits, incentive compensation in the form of stock-based
• depreciation for equipment and software directly used by customers; and
• travel costs that are billed to customers.
Subscription. Cost of subscription revenue primarily includes:
• internet cloud hosting costs and image search data fees to support our
subscription products;
• license fees paid to technology solution providers when we sell a combined
Amortization expense on acquired intangible assets. Includes:
• amortization expense recognized on the developed technology intangible
asset acquired in the EVRYTHNG acquisition.
(1)Gross Profit and Gross Profit Margin for Service and Subscription excludes amortization expense on acquired intangible assets.
Sales and marketing expenses consist primarily of:
• compensation, benefits, incentive compensation in the form of stock-based
• travel and market research costs, and costs associated with marketing
programs, such as trade shows, public relations and new product launches;
• professional services, consulting and outside contractor costs for sales
and marketing and product initiatives; and
• charges for infrastructure and centralized costs of facilities and
information technology.
• EVRYTHNG sales and marketing expenses of $2.2 million post acquisition;
Research, development and engineering
Research, development and engineering expenses consist primarily of:
• compensation, benefits, incentive compensation in the form of stock-based
compensation and related costs of our software and hardware developers and
• charges for infrastructure and centralized costs of facilities and
• EVRYTHNG research, development and engineering expenses of $0.7 million
post acquisition;
• increased compensation costs of $0.9 million reflecting higher headcount
General and administrative expenses consist primarily of:
• third party and professional fees associated with legal, accounting and
• third party costs, including filing and governmental regulatory fees and
• charges to write off previously capitalized patent costs for patent assets
we abandon; and
• charges for infrastructure and centralized costs of facilities and
information technology.
• increased legal, accounting and tax costs of $0.7 million related to the
• increased facilities costs of $0.3 million reflecting non-cash rent
expense on new corporate headquarters and office moving costs; and
• increased operating taxes of $0.2 million reflecting the stamp tax due in
the United Kingdom for the EVRYTHNG acquisition; partially offset by
Amortization expense on acquired intangible assets
Amortization expense on acquired intangible assets relates to amortization expense recognized on the customer relationships intangible asset acquired in the EVRYTHNG acquisition.
Impairment of lease right of use assets and leasehold improvements
The provision for income taxes reflects current taxes, deferred taxes, and withholding taxes. The effective tax rate for the three month periods ended March 31, 2022 and 2021 was 1% and 0%, respectively. Our effective tax rate is significantly lower than our
The valuation allowance against deferred tax assets as of March 31, 2022, was $67,452, an increase of $3,179 from $64,273 as of December 31, 2021.
Non-GAAP Financial Measures
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. Our management recognizes that the non-GAAP financial measures have inherent limitations because of the described excluded items.
We define 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) excluding the adjustments in the table below. 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 can affect comparability.
69 %
315
2,353
$ (5,554 )
$ (0.34 )
Liquidity and Capital Resources
Cash, cash equivalents and short-term
Long-term marketable securities $ 5,709 $ 8,292 Total cash, cash equivalents and
(1) The current (liquidity) ratio is calculated by dividing total current assets
by total current liabilities.
The $16.7 million decrease in cash, cash equivalents and marketable securities at March 31, 2022, from December 31, 2021, resulted primarily from:
• purchases of common stock related to tax withholding in connection with
the vesting of restricted stock, restricted stock units, and performance
Operating Cash Flow
The components of cash flows used in operating activities were:
Future Cash Expectations
Registered Direct Offering
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
• our expectations regarding the acquisition of EVRYTHNG and its impact on
our business, including our expectations regarding no additional shares
• our beliefs regarding the possible effects of the COVID-19 pandemic on
general economic conditions, public health, and consumer demand, and the
Company's results of operations, liquidity, capital resources, and general
performance in the future;
• the possible impact of COVID-19 on our ability to obtain financing through
our Equity Distribution Agreement and the availability of any alternative
• the potential impact of COVID-19 on projects with our Commercial customers
• our beliefs regarding potential outcomes of participating in the HolyGrail
2.0 initiative and the utility of our products in the recycling industry;
• our future level of investment in our business, including investment in
• anticipated expenses, costs, margins, provision for income taxes and
• our expectations regarding the impact of accounting pronouncements issued
but not yet adopted;
• anticipated revenue to be generated from current contracts, renewals, and
as a result of new programs;
• our estimates, judgments and assumptions related to impairment testing;
• the size and growth of our markets and our assumptions and beliefs related
to those markets;
• the existence of international growth opportunities and our future
investment in such opportunities;
• our capital expenditure and working capital requirements and our ability
availability of capital, which could have an impact on our cost of capital
and our ability to access the capital markets;
• our use of cash, cash equivalents and marketable securities in upcoming
quarters and the possibility that our deposits of cash and cash
equivalents with major banks and financial institutions may exceed insured
limits;
• the strength of our competitive position and our ability to innovate and
• protection, development and monetization of our intellectual property
portfolio;
• our beliefs related to our relationship with our employees and the effect
• our beliefs related to certain provisions in our bylaws and articles of
incorporation; and
• our beliefs related to legal proceedings and claims arising in the
ordinary course of business.
Evaluation of Disclosure Controls and Procedures
Changes in Controls
--------------------------------------------------------------------------------
© Edgar Online, source Glimpses