On Tuesday, Digimarc (NASDAQ:DMRC) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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The full earnings call is available at https://edge.media-server.com/mmc/p/gpffvgvb
Summary
Digimarc reported a 9% sequential growth in ARR for Q1 2026, with an expansion of subscription gross margin by 400 basis points year over year.
The company made significant strategic progress, including signing its first commercial order for a secure gift card solution and advancing rollout plans with 15 North American retailers.
Operating expenses were reduced by 36% to $11.7 million, leading to an improvement in non-GAAP net loss per share from $0.40 to $0.07 year over year.
Despite a decrease in total revenue to $7.6 million, Digimarc secured upsell deals for its anti-counterfeiting solution and continued to see market pull for its digital trust and integrity solutions.
Future outlook remains positive with expectations for significant ARR growth in 2026, driven by increased engagement in strategic areas like digital trust and AI security solutions.
Full Transcript
OPERATOR
Greetings and welcome to the Digimar Corporation First Quarter 2026 Financial Results Conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press Star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Charles Beck. Thank you. You may begin.
Charles Beck (Chief Financial Officer)
Welcome everyone to our first quarter earnings call. I’m Charles Beck, Digimarc CFO and I’m joined today by Riley McCormick, Digimarc CEO. On the call today, Riley will provide a business update and I will discuss first quarter 2026 financial results. This will be followed by a question and answer forum. We have posted our prepared remarks in the Investor Relations section of our website and we’ll archive this webcast there. For those of you dialing in, this is a reminder that we are simulcasting the presentation we will walk through today. If you would like to follow along with the slides, I would encourage you to join our webcast as referenced in our earnings press release shared earlier today. Before we begin, let me remind everyone that today’s discussion contains forward looking statements that have risks and uncertainties. Please refer to our press release for more information on the specific risk factors that could cause actual results to differ materially. Riley will now provide a business update.
Riley McCormick (Chief Executive Officer)
Thank you Charles and hello everyone. On this call we will walk through Digimarc’s Q1 performance, highlight our strategic progress across product innovation and commercial execution, share updates on financial metrics such as Annual Recurring Revenue and free cash flow and provide clarity on where we are focused in 2026. In Q1 we made significant progress in advancing adoption of our secure Gift card solution. As we shared on our Last call during Q1 we achieved a critical milestone by signing our first commercial order covering six closed loop and open loop brands. We also made headway in laying the rails for additional orders and are currently advancing initial rollout plans with 15 North American retailers including eight of the 20 largest as measured by sales, an increase from eight and four respectively since our call only two months ago. We secured upsells with three existing customers of our anti counterfeiting solution. We continue to execute against a large opportunity in digital trust and integrity, securing a six figure upsell with an existing customer while progressing a natural and exciting extension of our trust layer strategy that provides a critical unmet need for scalable autonomous AI. And we continue to add key talent across our company, especially in our go to market functions including the recent addition of two accomplished sales leaders who have hit the ground running. Touching on our financial highlights. In Q1 we grew ending AR 9% sequentially while also expanding our subscription gross margin 400 basis points year over year. We ended the quarter with $10 million of cash and investments and no debt and we expect to implement our new corporate structure shortly, allowing us to realize the benefits discussed on our last call. As a reminder, our three focus areas are retail loss prevention, product authentication and digital trust and integrity and we serve these markets with the seven solutions you see listed on this slide. In addition, we continue to selectively engage outside our three focus areas when the opportunities represent low distraction revenue and or advance our positioning in longer term strategic areas. Starting with an update on retail loss prevention, we continue to make progress towards gaining widespread adoption of our secure gift card solution aided by the industry’s hyper focus on finding an answer to the fraud that is creating an existential threat to their business. Results to date demonstrate the power of our solution significant fraud reduction, improved checkout experience and high scalability across printers, brands and retailers, all without any adverse impact on sales. As a reminder, we have posted a Gift Card Investor supplemental on the Investor Relations section of our website, a hyperlink to which can be found on this slide. We appreciate the feedback we have received regarding the benefit the supplemental has provided in helping investors better understand the opportunity ahead. We are experiencing a noticeable uptick in market pull for our solution as the level of retailer, brand and gift card network engagement has increased meaningfully. Meaningfully even from our last earnings call just two months ago. Before I provide more details on that increased engagement, I want to provide an update on the two rollouts we shared on our last call. First, the rollout to all Chinooks locations is underway. Next, the summer rollout with the other retailer mentioned will be more limited than originally planned with the full almost 600 location rollout now targeted for January 2020. As discussed in our March call, the greatest source of timing risk has been the scanner vendors shipping generally available versions of their firmware running our latest software. While eight scanner models were general availability in the requisite time frame we highlighted on that call, two were not, including one model critical to this retailer’s front end. This delay had nothing to do with our software. Instead it was related to base functionality, key to enabling the retailer to push any firmware update in a scalable fashion leading to the smaller summer launch. The scanner vendor has subsequently shipped the updated firmware which is currently undergoing normal acceptance testing by the retailer. Importantly, this retailer’s commitment to their customers and their belief that our solution will help protect those customers remains unchanged. We look forward to partnering with them in the months and years ahead. April is a busy month in the gift card industry as both large gift card networks host summits enabling their ecosystems to coordinate ahead of the holiday season. As a result of these summits as well as many other meetings, including an event at our headquarters attended by representatives from two very large retailers and a leading program manager, we are now advancing rollout plans with 15 North American retailers, including eight of the 20 largest. As measured by sales, this represents a meaningful increase in both metrics since our Q4 call only two months ago. This momentum is being driven not only by us but also by key industry participants and in the last few weeks alone we have heard about retailers proactively engaging with major brands to encourage their adoption of our solution as well as with other retailers to increase incentive for widely sold brands to speed their adoption. Similar momentum building actions are being undertaken by the networks and key brands and we are focused on orchestrating the multiple moving parts to ensure initial rollouts proceed as quickly and excellently as possible. As discussed on our Last call in Q1, we we closed our first secure gift card commercial order representing over $500,000 of Annual Recurring Revenue. This order included gift cards from six closed loop and open loop …
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