Digimarc (DMRC) investor relations material

Executive summary

• Q2 2025 revenue declined 23% year-over-year to $8.0M, mainly due to the expiration of major commercial contracts and lower government service revenue.

• Annual recurring revenue dropped to $15.9M from $23.9M year-over-year, reflecting contract expirations and churn, partially offset by new and expanded commercial contracts.

• Net loss narrowed to $8.2M ($0.38/share) from $9.3M ($0.43/share) year-over-year; non-GAAP net loss improved to $2.3M ($0.11/share) from $4.9M ($0.23/share).

• Operating expenses fell 22% to $13.1M, driven by cost-saving initiatives and lower headcount.

• Significant progress made in product innovation and commercial execution, including the launch of a gift card fraud prevention solution and new ARR from a European packaging customer.

Financial highlights

• Q2 2025 revenue was $8.0M, down from $10.4M in Q2 2024; subscription revenue fell 28% to $4.6M, service revenue fell 15% to $3.4M.

• Gross profit margin for Q2 2025 was 59% (down from 66%); subscription gross margin was 85%, service gross margin was 59%.

• Free cash flow usage improved to $5.0M from $6.9M year-over-year; adjusted free cash flow was $3.8M, a 45% improvement.

• Cash, cash equivalents, and marketable securities totaled $16.1M at June 30, 2025, down from $28.7M at year-end 2024.

• Non-GAAP operating expenses reduced to $8.9M from $14.0M year-over-year.

Outlook and guidance

• Positive non-GAAP net income and free cash flow targeted for Q4 2025, with ARR expected to trough in Q3 or Q4 2025 and reacceleration anticipated in 2026.

• Cash flow usage expected to decrease further as cost savings from reorganization are realized; cash balance expected to rebuild via operating cash flow in 2026.

• Up to $3.1M in annual revenue at risk from contract renegotiations in 2H 2025; government service revenue expected to be $1.7M–$1.9M lower than 2024.

• Management believes current liquidity is sufficient for at least the next 12 months.