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Digimarc Corp. (DMRC)
NASDAQ:DMRC
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Digimarc
(NASDAQ:DMRC)
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Rating:41Neutral
Price Target:
$6.50
▼(-5.93% Downside)
The overall stock score is primarily influenced by Digimarc's financial performance challenges, including consistent losses and negative cash flow. Technical analysis also indicates a bearish trend, further impacting the score. Valuation concerns, such as a negative P/E ratio, contribute to the low score. Despite some strategic progress noted in the earnings call, significant financial and operational improvements are needed.
Positive Factors
Operational Efficiency
The company's reorganization has significantly reduced operating expenses, enhancing operational efficiency and improving cash flow, which is crucial for long-term sustainability.
Strategic Growth in Digital Authentication
Strong positioning in digital authentication and AI advancements indicates potential for significant growth, enhancing competitive advantage and market relevance.
Gift Card Solution Adoption
Adoption by major brands like Target and Home Depot suggests strong market acceptance, potentially driving revenue growth and market penetration.
Negative Factors
Revenue Decline
A significant decline in revenue indicates challenges in maintaining sales momentum, which could impact long-term financial stability and growth prospects.
Annual Recurring Revenue (ARR) Decrease
A decrease in ARR suggests potential difficulties in retaining customers or contracts, which may affect future revenue predictability and cash flow.
Negative Cash Flow
Ongoing negative cash flow highlights liquidity issues, which could limit the company's ability to invest in growth opportunities and meet financial obligations.
Digimarc (DMRC) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$143.81M
Dividend YieldN/A
Average Volume (3M)144.75K
Price to Earnings (P/E)―
Beta (1Y)2.01
Revenue Growth-13.78%
EPS Growth12.76%
CountryUS
Employees215
SectorTechnology
Sector Strength88
IndustryInformation Technology Services
Share Statistics
EPS (TTM)-0.38
Shares Outstanding21,756,987
10 Day Avg. Volume161,879
30 Day Avg. Volume144,755
Financial Highlights & Ratios
PEG Ratio1.07
Price to Book (P/B)12.98
Price to Sales (P/S)20.73
P/FCF Ratio-29.73
Enterprise Value/Market Cap1.43
Enterprise Value/Revenue6.09
Enterprise Value/Gross Profit10.00
Enterprise Value/Ebitda-6.67
Forecast
1Y Price Target
$15.00Price Target Upside117.08% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
Digimarc Business Overview & Revenue Model
Company DescriptionDigimarc Corporation provides automatic identification solutions to commercial and government customers in the United States and internationally. The company offers Digimarc watermarks, a data carrier that provides a digital identity to media objects; Digimarc Discover, a software for computing devices and network interfaces that recognize and decode indicia of the identity of media; and Digimarc Verify, a suite of software tools used to inspect and verify that the identification and discovery of media. Its solutions are used in various application solutions, such as product authentication of physical products; sorting of consumer-packaged goods in recycling streams; track and trace of products within the supply chain; quality control in manufacturing processes; inventory management and planogram compliance; retail point of sale transaction processing; piracy deterrence of digital media objects; content identification and media management; and enhanced services in support of mobile commerce. The company offers its solutions through its sales personnel and business partners. Digimarc Corporation was incorporated in 2008 and is based in Beaverton, Oregon.
How the Company Makes MoneyDigimarc generates revenue primarily through licensing its technology and software solutions to various industries, including retail, consumer goods, and pharmaceuticals. The company offers subscription-based services that provide access to its digital identification platforms, which help clients improve traceability and product safety. Key revenue streams include direct sales of its software solutions, ongoing subscription fees for its services, and revenue from partnerships with large enterprises that integrate Digimarc's technology into their operations. Additionally, collaborations with major retailers and brands enhance its market presence and contribute to its earnings through increased adoption of its digital watermarking solutions.
Digimarc Earnings Call Summary
Earnings Call Date:Oct 30, 2025
(Q3-2025)
| % Change Since: |
Next Earnings Date:Mar 04, 2026
Earnings Call Sentiment Neutral
The earnings call highlighted strategic progress in gift card solutions and product authentication, along with improved operational efficiency. However, a decline in ARR and revenue, along with significant impacts from contract renegotiations, present challenges. The company remains optimistic about future growth in digital authentication.Q3-2025 Updates
Positive Updates
Gift Card Solution Progress
Significant progress towards widespread adoption of Digimarc's gift card solution, with major brands like Target and Home Depot participating. All KPIs were easily surpassed, indicating positive reception and effectiveness.
Expansion in Product Authentication
Closed multiple upsell opportunities in the product authentication space, including expansion to a sixth country with a global tobacco company, reflecting increased contract value and new geographies.
Operational and Financial Efficiency
Successful corporate reorganization led to meaningful reduction in operating expenses and cash usage. Subscription costs decreased by 13% year-over-year, contributing to a reduction in free cash flow usage by 58% compared to last year.
Digital Authentication Market Positioning
Exceeded annual targets in digital authentication within the first six months. Positioned to capitalize on AI advancements and content credentials, with expectations for significant contributions to growth in 2026 and beyond.
Negative Updates
Annual Recurring Revenue (ARR) Decrease
Ending ARR for Q3 was $15.8 million, down from $18.7 million the previous year, largely due to the lapse of a major DRS contract. Anticipated further ARR reduction by $3.1 million in Q4 due to renegotiation of a retailer contract.
Revenue Decline
Total revenue decreased by 19% from $9.4 million to $7.6 million year-over-year, with subscription revenue decreasing by 13% and service revenue decreasing by 27%.
Impact of Retailer Contract Renegotiation
Renegotiation of a retailer contract will lead to a significant reduction in ARR in Q4, despite maintaining other relationships with the retailer.
Company Guidance
During the Q3 2025 earnings call, Digimarc Corporation provided detailed guidance and updates on their strategic focus areas and financial metrics. The company highlighted their progress in advancing their gift card solution, which has begun to gain traction with major brands like Target and Home Depot, and is expected to drive ARR growth in 2026. They reported a Q3 ARR of $15.8 million, reflecting a decrease due to a lapsed DRS contract; however, excluding this, they experienced a $600,000 year-over-year ARR growth. Digimarc also expressed confidence in achieving positive free cash flow and non-GAAP net income in Q4 2025, despite a reduction in total revenue to $7.6 million and a decrease in subscription revenue to $4.6 million. Operationally, the reorganization completed earlier in the year has led to a 26% reduction in operating expenses, contributing to a significant improvement in free cash flow usage, which decreased by 58% year-over-year to $3.1 million. Looking forward, the company is strategically investing in retail loss prevention and digital authentication to accelerate growth, with plans to rebuild cash reserves through operational cash flow in 2026.Digimarc Financial Statement Overview
Summary
Digimarc faces significant financial challenges, with consistent losses impacting profitability and cash flow. Despite a low leverage, the company struggles with negative net income, declining revenue, and weak cash flow, necessitating improvements in revenue growth and operational efficiency.Income Statement
Digimarc's income statement reveals significant challenges with profitability. The company has consistently reported negative net income, resulting in negative net profit margins. The TTM (Trailing-Twelve-Months) data shows a decline in revenue, with a negative revenue growth rate of -5.12%. Despite a relatively stable gross profit margin, the EBIT and EBITDA margins remain negative, indicating operational inefficiencies. The company needs to address its cost structure and revenue generation strategies to improve its financial health.Balance Sheet
The balance sheet shows a low debt-to-equity ratio, suggesting a conservative approach to leveraging. However, the return on equity is negative, reflecting ongoing losses. The equity ratio is not explicitly calculated, but the company's equity position appears relatively stable compared to its assets. While the low leverage is a positive aspect, the inability to generate returns on equity remains a concern.Cash Flow
Cash flow analysis indicates persistent negative operating cash flow, which is concerning for liquidity. The free cash flow growth rate is negative, and the operating cash flow to net income ratio is also negative, highlighting cash flow challenges. Although the free cash flow to net income ratio is slightly above 1, indicating some alignment between cash flow and reported earnings, the overall cash flow position is weak and requires improvement.| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 33.66M | 38.42M | 34.85M | 30.20M | 26.52M | 23.99M |
| Gross Profit | 20.50M | 24.24M | 20.16M | 15.32M | 17.74M | 16.06M |
| EBITDA | -30.75M | -33.16M | -39.15M | -51.05M | -30.32M | -30.04M |
| Net Income | -36.75M | -39.01M | -45.96M | -59.80M | -34.76M | -32.54M |
Balance Sheet | ||||||
| Total Assets | 55.44M | 75.77M | 80.55M | 113.78M | 64.88M | 97.03M |
| Cash, Cash Equivalents and Short-Term Investments | 12.56M | 28.73M | 27.18M | 52.54M | 33.33M | 77.73M |
| Total Debt | 4.55M | 5.99M | 5.99M | 5.98M | 1.03M | 6.84M |
| Total Liabilities | 14.05M | 14.41M | 18.63M | 16.19M | 9.50M | 13.19M |
| Stockholders Equity | 41.39M | 61.36M | 61.93M | 97.59M | 55.38M | 83.84M |
Cash Flow | ||||||
| Free Cash Flow | -17.73M | -26.78M | -22.73M | -45.88M | -27.69M | -21.57M |
| Operating Cash Flow | -17.00M | -26.57M | -22.00M | -44.41M | -26.12M | -19.94M |
| Investing Cash Flow | 3.59M | -11.28M | 12.56M | 3.76M | 25.98M | -34.26M |
| Financing Cash Flow | -3.03M | 28.77M | -2.76M | 60.50M | -5.77M | 62.69M |
Digimarc Technical Analysis
Negative
6.91
Price Trends
7.87
Negative
8.56
Negative
10.58
Negative
Market Momentum
-0.41
Negative
43.59
Neutral
47.71
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DMRC, the sentiment is Negative. The current price of 6.91 is below the 20-day moving average (MA) of 7.22, below the 50-day MA of 7.87, and below the 200-day MA of 10.58, indicating a bearish trend. The MACD of -0.41 indicates Negative momentum. The RSI at 43.59 is Neutral, neither overbought nor oversold. The STOCH value of 47.71 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for DMRC.
Digimarc Risk Analysis
Digimarc disclosed 29 risk factors in its most recent earnings report. Digimarc reported the most risks in the "Tech & Innovation" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Digimarc Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | $1.34B | 33.69 | 14.36% | 2.92% | 12.65% | 14.80% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
57 Neutral | $115.49M | -806.85 | -0.27% | 0.95% | 6.36% | 73.88% | |
53 Neutral | $390.16M | -13.78 | -23.73% | ― | 17.44% | 41.97% | |
47 Neutral | $1.97B | -5.00 | -46.77% | ― | 1.84% | -27.74% | |
45 Neutral | $228.89M | -0.73 | ― | ― | -4.93% | 18.65% | |
41 Neutral | $143.81M | -4.06 | -65.89% | ― | -13.78% | 12.76% |
* Technology Sector Average
DMRC
Digimarc
6.91
-34.65
-83.37%
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.