**Digimarc Reports Fourth Quarter and Fiscal Year 2024 Financial Results** **Overview:** Digimarc Corporation (NASDAQ: DMRC), a global leader in digital watermarking technologies, reported its financial results for the fourth quarter and fiscal year ended December 31, 2024. The company has reorganized its operations to focus on authentication use cases, aiming to achieve positive non-GAAP net income by the fourth quarter of 2025 and positive free cash flow from fiscal year 2026 onwards. Despite a decrease in annual recurring revenue (ARR) and subscription revenue in the fourth quarter, Digimarc showed improved performance in gross profit margins and reduced operating expenses over the fiscal year. **Key Financial Highlights:** **Fourth Quarter 2024:** - **Annual Recurring Revenue (ARR):** Decreased to $20.0 million from $22.3 million in the fourth quarter of 2023, primarily due to the expiration of a commercial contract in June 2024, which resulted in a $5.8 million decrease. - **Subscription Revenue:** Dropped to $5.0 million from $5.6 million in the fourth quarter of 2023, also largely due to the June 2024 contract expiration. - **Service Revenue:** Slightly decreased to $3.6 million from $3.7 million in the fourth quarter of 2023, reflecting a $0.4 million reduction in government service revenue but a $0.3 million increase from HolyGrail 2.0 recycling projects. - **Total Revenue:** Decreased to $8.7 million from $9.3 million in the fourth quarter of 2023. - **Gross Profit Margin:** Decreased to 61% from 63% in the fourth quarter of 2023. Subscription gross profit margin (excluding amortization) decreased to 85% from 87%, while service gross profit margin increased to 59% from 56%. - **Non-GAAP Gross Profit Margin:** Decreased to 77% from 79% in the fourth quarter of 2023. - **Operating Expenses:** Reduced to $14.4 million from $16.8 million in the fourth quarter of 2023, mainly due to lower cash and stock compensation costs. - **Non-GAAP Operating Expenses:** Decreased to $11.9 million from $13.4 million in the fourth quarter of 2023. - **Net Loss:** Decreased to $8.6 million ($0.40 per share) from $10.6 million ($0.52 per share) in the fourth quarter of 2023. - **Non-GAAP Net Loss:** Decreased to $4.7 million ($0.22 per share) from $5.6 million ($0.28 per share) in the fourth quarter of 2023. - **Cash, Cash Equivalents, and Marketable Securities:** Totaled $28.7 million at the end of 2024, compared to $27.2 million at the end of 2023. **Fiscal Year 2024:** - **Subscription Revenue:** Increased to $22.4 million from $19.0 million in fiscal year 2023, driven by higher subscription revenue from new and existing commercial contracts, despite the June 2024 contract expiration. - **Service Revenue:** Slightly increased to $16.0 million from $15.9 million in fiscal year 2023, with a $0.6 million boost from HolyGrail 2.0 recycling projects, offset by lower commercial and government service revenue. - **Total Revenue:** Increased to $38.4 million from $34.9 million in fiscal year 2023. - **Gross Profit Margin:** Improved to 63% from 58% in fiscal year 2023. Subscription gross profit margin (excluding amortization) increased to 87% from 84%, and service gross profit margin rose to 59% from 54%. - **Non-GAAP Gross Profit Margin:** Increased to 78% from 76% in fiscal year 2023. - **Operating Expenses:** Decreased to $65.5 million from $68.4 million in fiscal year 2023, reflecting lower cash and stock compensation costs, lower depreciation and amortization, and reduced lease impairment costs. - **Non-GAAP Operating Expenses:** Decreased to $53.8 million from $55.0 million in fiscal year 2023. - **Net Loss:** Decreased to $39.0 million ($1.83 per share) from $46.0 million ($2.26 per share) in fiscal year 2023. - **Non-GAAP Net Loss:** Decreased to $21.4 million ($1.01 per share) from $26.4 million ($1.30 per share) in fiscal year 2023. - **Free Cash Flow:** Decreased to $(27.215 million) from $(22.735 million) in fiscal year 2023, reflecting higher net cash used in operating activities and lower net cash provided by investing activities. **Business Strategy:** CEO Riley McCormack emphasized the company's strategic reorganization to focus on authentication use cases, particularly in the identification and authentication of physical goods and digital assets. This shift is intended to capitalize on recent market developments and inventions, with the goal of achieving positive financial outcomes in the near future. The company's efforts include prioritizing its Go-To-Market strategies in the authentication sector. **Conference Call:** Digimarc will host a conference call on February 26, 2025, at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) to discuss the financial results and provide a business update. The call will be hosted by CEO Riley McCormack, CFO Charles Beck, and CLO George Karamanos, followed by a Q&A session. The call can be accessed via the company's website or by dialing the provided telephone numbers. **About Digimarc:** Digimarc Corporation is a pioneer and global leader in digital watermarking technologies, with a 30-year history of innovation. The company's technologies are widely used for the identification and authentication of physical and digital items, including a notable partnership with central banks to combat currency counterfeiting. In 2023, Digimarc was recognized on the Fortune Change the World list and as a Fast Company World Changing Ideas finalist. **Forward-Looking Statements:** The press release includes forward-looking statements regarding the impact of business restructuring and cost control initiatives, as well as the estimated amounts and timing of anticipated cost reductions. These statements are subject to various assumptions, risks, and uncertainties, and actual results may differ materially. For more detailed information on these risks, refer to the company's Form 10-K for the year ended December 31, 2023, and subsequent periodic reports filed with the SEC. **Non-GAAP Financial Measures:** Digimarc provides non-GAAP financial measures to enhance the understanding of its core operating results. These measures exclude non-cash and non-recurring activities, such as amortization expenses and stock-based compensation, and are intended to facilitate period-to-period comparisons. However, investors are cautioned to consider these non-GAAP measures alongside GAAP financial information and not to rely on them in isolation. **Conclusion:** Despite a challenging fourth quarter, Digimarc Corporation demonstrated overall improvement in fiscal year 2024, with increased revenue and improved gross profit margins. The company's strategic reorganization to focus on authentication is expected to drive positive financial performance in the coming years. The conference call will provide further insights into the company's plans and progress.